<PAGE>

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 2000


                                            REGISTRATION STATEMENT NO. 333-43386

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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


                                AMENDMENT NO. 1
                                       TO
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

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

                            BEACON POWER CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                                       <C>                                       <C>
                DELAWARE                                   491102                                  04-3372365
    (State or Other Jurisdiction of             (Primary Standard Industrial                     (IRS Employer
     Incorporation or Organization)             Classification Code Number)                  Identification Number)
</TABLE>

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

                                 6D GILL STREET
                                WOBURN, MA 01801
                                 (781) 938-9400
              (Address, including zip code, and telephone number,
        including area code, of Registrant's principal executive office)
                         ------------------------------

                               WILLIAM E. STANTON
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                            BEACON POWER CORPORATION
                                 6D GILL STREET
                                WOBURN, MA 01801
                                 (781) 938-9400
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)
                         ------------------------------

                                   COPIES TO:

<TABLE>
<S>                                                   <C>
              LAURA N. WILKINSON, ESQ.                            WILLIAM P. ROGERS, JR., ESQ.
               Edwards & Angell, LLP                                Cravath, Swaine & Moore
               2800 BankBoston Plaza                                   825 Eighth Avenue
           Providence, Rhode Island 02903                           New York, New York 10019
                  (401) 274-9200                                        (212) 474-1270
</TABLE>

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

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /


    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  / /


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

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
                  SUBJECT TO COMPLETION, DATED          , 2000

PROSPECTUS


                                8,000,000 SHARES


                                     [LOGO]

                            BEACON POWER CORPORATION

                                  COMMON STOCK
                                   ---------


    We are selling 8,000,000 shares of our common stock. The underwriters named
in this prospectus may purchase up to 1,200,000 additional shares of common
stock from us to cover over-allotments.



    This is an initial public offering of our common stock. We currently expect
the initial public offering price to be between $11.00 and $13.00 per share. We
have applied to have our common stock included for quotation on the Nasdaq
National Market under the symbol "BCON."


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


    INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.


    Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

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

<TABLE>
<CAPTION>
                                                              PER SHARE    TOTAL
                                                              ---------   --------
<S>                                                           <C>         <C>
Initial Public Offering Price                                 $           $

Underwriting Discount                                         $           $

Proceeds to Beacon (before expenses)                          $           $
</TABLE>

    The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about   , 2000.

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

SALOMON SMITH BARNEY

                         BANC OF AMERICA SECURITIES LLC

                                                              CIBC WORLD MARKETS

         , 2000
<PAGE>
    [The figure consists of a cutaway of the Beacon flywheel in the center and
surrounded by potential market applications of Communications, Industrial
Manufacturing, Commercial Facilities, Distributed Generation, and Computer
Networks. Communications is the initial market and the other applications are
future markets.]
<PAGE>
    YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS PROSPECTUS.

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

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Prospectus Summary..........................................      1
Risk Factors................................................      5
Special Note Regarding Forward-Looking Statements...........     13
Use of Proceeds.............................................     14
Dividend Policy.............................................     14
Capitalization..............................................     15
Dilution....................................................     16
Selected Financial Data.....................................     18
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................     19
Business....................................................     24
Management..................................................     36
Certain Relationships and Related Transactions..............     43
Principal Stockholders......................................     48
Description of Capital Stock................................     51
Shares Eligible for Future Sale.............................     56
Underwriting................................................     58
Legal Matters...............................................     61
Experts.....................................................     61
Where You Can Find More Information.........................     61
Index to Financial Statements...............................    F-1
</TABLE>


    In this prospectus, "Beacon," the "company," "we," "us" and "our" each
refers to Beacon Power Corporation and its subsidiaries.

    Until          , 2000, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

                                       i
<PAGE>
                               PROSPECTUS SUMMARY


    THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE SECTION ENTITLED
"RISK FACTORS."


                            BEACON POWER CORPORATION


OVERVIEW



    We design and develop flywheel energy storage systems that we believe will
provide highly reliable, high-quality, uninterruptible electric power for
communications networks, computers, the Internet, industrial manufacturing,
commercial facilities and distributed generation products that allow the user to
bypass the electric utility grid by generating power locally.



    Flywheel systems draw electrical energy from a primary power source such as
the electric grid or a fuel cell, store that energy, and then convert that
energy to immediately provide uninterruptible electric power when the primary
power source fails or is disrupted. We believe our flywheels will offer
significant advantages over conventional back-up power systems that primarily
use lead-acid batteries. The expected advantages include higher reliability,
longer life, lower life-cycle cost, improved recharging capability, reduced
maintenance, more reliable monitoring, and environmental friendliness. We also
believe that our flywheel systems will be used in conjunction with distributed
power products such as gasoline or diesel generators, fuel cells, microturbines
and other distributed power generators to provide benefits that are not
available from these products alone, such as an instant-on capability and the
ability to manage sudden changes in power.



OUR PRODUCTS



    We have designed our initial products to specifically address the back-up
powering needs of the communications markets. We believe we are the only company
to have developed a proprietary composite flywheel that can store and deliver
the requisite energy demanded by communications customers and can efficiently
provide back-up power for long periods of time. In addition, our flywheel
systems can be installed in the ground to address cost, permit, environmental
and aesthetic concerns and our commercial product will have a built-in,
long-life, low-cost vacuum system that will automatically restart if power is
lost.



    Bell Atlantic, now part of Verizon Communications, WinDBreak Cable and
Telcordia Technologies Inc. have provided us with application requirements that
have helped us with the definition, development and testing of our 2
kilowatt-hour (kWh) product. Our field trials have provided back-up power for
operating sites at Verizon Communications, Century Communications Corporation,
now part of Adelphia Communications, and WinDBreak Cable, and we have
demonstrated our product at our plant to AT&T Broadband, Cox
Communications, Inc., Asea Brown Boveri, Kobe Steel and GTE, now part of Verizon
Communications, among others. We have sales commitments for 117 of our 2kWh
commercial units, with deliveries expected to begin in early 2001, and expect
that our product demonstrations will lead to additional, significant orders. We
are a development stage company that has not yet begun to manufacture flywheels
in large quantities and to date have not received any revenue from our existing
sales commitments.


INDUSTRY DYNAMICS


    The growing use of digital electronics and computers and the proliferation
of telecommunications networks is causing a dramatic increase in the demand for
more reliable, higher quality power. For example, Internet related power
requires a much higher level of reliability than that provided by the electric
grid. At the same time, deregulation and aging transmission and distribution
lines are leading to reduced reliability in electric power that is supplied
through the grid. Lead-acid battery and generator back-up power is proving to be
inadequate to meet the high power quality and reliability


                                       1
<PAGE>

needs of technology-oriented applications. In addition to deregulation of the
utility industry, we expect these trends to accelerate the adoption of
alternative power technology products such as flywheels.


MARKET OPPORTUNITIES FOR OUR FLYWHEEL PRODUCTS


    The Electric Power Research Institute, or EPRI, estimated that electric
power reliability problems cost the U.S. more than $50 billion annually.
Approximately $12 billion was spent worldwide in 1999 on power quality and
reliability equipment to address these problems. Mark Mills, one of the authors
of THE HUBER-MILLS DIGITAL POWER REPORT, has estimated that sales of power
reliability products will expand at a market growth rate of approximately 30%
per year for the next 15 years. We believe that significant growth in demand for
our flywheels will come from our targeted markets, including:



    COMMUNICATIONS MARKETS.  The SKYLINE MARKETING GROUP estimated that power
quality and reliability equipment sold into the communications markets in 1999
totaled $4 billion globally. If flywheels completely displaced batteries in the
North American communications powering market, that market would require
approximately 2 million flywheels per year.



    OTHER MARKET OPPORTUNITIES.  Over the longer term, we intend to capitalize
on our strengths in the communications market to expand into other markets.
These markets include products that would be designed to:



    - address the high-quality power and reliability needs of the growing
      Internet and computer markets;



    - be used in industrial manufacturing facilities to protect against downtime
      caused by power quality and reliability problems;



    - provide higher quality and more reliable and cost-effective back-up power
      at commercial facilities such as data processing centers, call centers,
      telecommunications switching facilities, emergency services, hospitals,
      hotels and universities; and



    - be used in conjunction with distributed generation products such as diesel
      generators, fuel cells and microturbines to provide operational advantages
      that cannot be delivered by these products alone.


OUR STRATEGY


    Our goal is to become the leading provider of flywheel energy storage
systems. To accomplish our objective, we are pursuing the following key
strategies:



    - initially target communications markets with superior product offerings;



    - over the longer term, expand into other segments of the power quality and
      reliability markets;



    - leverage key customer and strategic relationships with Verizon
      Communications and others to enhance our product development and reduce
      product costs;



    - establish key strategic relationships to aid in our marketing and
      distribution efforts; and



    - protect our intellectual property.


                                       2
<PAGE>
                                  THE OFFERING


<TABLE>
<S>                                            <C>
Common stock offered.........................  8,000,000 shares
Common stock to be outstanding after the
  offering...................................  38,517,042 shares
Use of proceeds..............................  For general corporate purposes, including
                                               research and product development, sales and
                                               marketing expenses, working capital, capital
                                               expenditures and potential acquisitions. See
                                               "Use of Proceeds."
Proposed Nasdaq National Market symbol.......  BCON
</TABLE>


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


Unless otherwise indicated, all information in this prospectus, including the
outstanding share information above, is based on the number of shares
outstanding as of September 22, 2000 and:



    - assumes no exercise of the underwriters' option to purchase up to
      1,200,000 additional shares of common stock to cover over-allotments;



    - excludes 4,733,290 shares of common stock which may be issued at a
      weighted average exercise price of $2.48 per share upon exercise of
      options outstanding as of September 22, 2000 under our stock incentive
      plan;



    - excludes 5,126,070 shares of common stock which may be issued at a
      weighted average exercise price of $2.18 per share upon exercise of
      outstanding warrants and 70,000 shares of common stock which may be issued
      at an exercise price equal to the initial offering price upon exercise of
      outstanding warrants;



    - excludes a number of shares of common stock which may be issued at an
      exercise price of 37.5% of the initial public offering price upon exercise
      of warrants issued as part of our class F financing equal to $14,250,000
      divided by 37.5% of the initial public offering price, or
      3,166,666 shares assuming a $12.00 initial public offering price;



    - reflects the automatic conversion of all of our outstanding preferred
      stock into 29,359,530 shares of common stock upon the completion of the
      offering;



    - reflects the issuance of 820,162 shares of common stock upon consummation
      of the offering as a dividend on our class D preferred stock;



    - reflects the issuance of 39,168 shares of common stock upon consummation
      of the offering as a dividend on our class E preferred stock;



    - reflects the issuance of 100,000 shares of common stock to be issued on
      the closing date of the offering as payment of consulting fees accrued
      through August 31, 2000; and



    - gives effect to a 1.125-for-1 stock split of our common stock effective in
      October 1998 and a 2-for-1 stock split to be effective immediately prior
      to consummation of this offering.


                             CORPORATE INFORMATION

    We are incorporated in Delaware. Our executive offices are located at 6D
Gill Street, Woburn, Massachusetts and our telephone number is (781) 938-9400.

                                       3
<PAGE>
                             SUMMARY FINANCIAL DATA

    The following tables set forth our summary financial data. You should read
this information together with our financial statements and the notes to those
statements beginning on page F-1 of this prospectus, the information under
"Selected Financial Data," "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


    The pro forma basic and diluted net loss per share gives effect to the
conversion at the beginning of the period of each share of class A, C and D
preferred stock into two shares of common stock for all periods presented and
the conversion into two shares of common stock on January 1, 2000 of each share
of class E and F preferred stock for the period ended June 30, 2000, including
in each case shares payable for consulting services, as though they were common
stock in all periods for which such shares were outstanding, the issuance upon
conversion of our class D preferred stock of 820,162 shares of common stock as
payment of accrued dividends on the class D preferred stock and the issuance of
39,168 shares of common stock upon consummation of the offering as a dividend on
the class E preferred stock.



<TABLE>
<CAPTION>
                                      PERIOD FROM DATE                               SIX MONTHS ENDED
                                        OF INCEPTION      YEAR ENDED DECEMBER 31,        JUNE 30,
                                      (MAY 8, 1997) TO    -----------------------   -------------------
                                      DECEMBER 31, 1997     1998         1999         1999       2000
                                      -----------------   ---------   -----------   --------   --------
                                                                                        (UNAUDITED)
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>                 <C>         <C>           <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................      $    232        $     --    $      269    $     66   $     --
Loss from operations................        (3,228)         (4,790)       (5,340)     (2,570)    (5,189)
Net loss............................      $ (3,111)       $ (4,793)   $   (5,672)   $ (2,566)  $ (5,545)
                                          ========        ========    ==========    ========   ========
Loss to common shareholders.........      $ (3,111)       $ (4,912)   $   (6,630)   $ (2,896)  $ (7,452)
                                          ========        ========    ==========    ========   ========
Pro forma net loss per share, basic
  and diluted.......................                                  $    (0.42)              $   (.18)
                                                                      ==========               ========
Shares used in computing pro forma
  net loss per share, basic and
  diluted...........................                                      13,492                 30,220
</TABLE>



    The balance sheet data on a pro forma as adjusted basis reflect the
conversion of our preferred stock upon consummation of this offering, the
issuance upon conversion of our class D preferred stock of 820,162 shares of
common stock as a dividend payable on the class D preferred stock, the issuance
of 39,168 shares of common stock to be issued upon consummation of the offering
as a dividend on the class E preferred stock, issuance of shares payable for
consulting services, and the sale of 8,000,000 shares of common stock in this
offering at an assumed initial public offering price of $12.00 per share, after
deducting the estimated underwriting discounts and commissions and our estimated
offering expenses.



<TABLE>
<CAPTION>
                                                         AS OF JUNE 30, 2000
                                                     ----------------------------
                                                      ACTUAL          AS ADJUSTED
                                                     --------         -----------
                                                             (UNAUDITED)
                                                            (IN THOUSANDS)
<S>                                                  <C>              <C>                 <C>
BALANCE SHEET DATA:
Cash and cash equivalents..........................  $ 25,043          $113,147
Working capital....................................    22,642           110,746
Total assets.......................................    26,279           114,383
Redeemable convertible preferred stock.............    36,660                --
Total stockholders' (deficit) equity...............   (14,621)          111,625
</TABLE>


                                       4
<PAGE>
                                  RISK FACTORS

    INVESTING IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IF
ANY OF THE FOLLOWING RISKS OCCUR, THE MARKET PRICE OF OUR SHARES OF COMMON STOCK
COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.


BECAUSE OUR SHORT OPERATING HISTORY MAKES YOUR BASIS FOR EVALUATING US LIMITED,
OUR FUTURE FINANCIAL PERFORMANCE MAY DISAPPOINT INVESTORS AND RESULT IN A
DECLINE IN OUR STOCK PRICE.



    We have a limited operating history and you should not rely on our recent
results as an indication of our future results in making your investment
decision. We were formed in May 1997 to commercialize electrical power systems
based on flywheel energy storage. We are a development stage company making the
transition to the manufacturing of new products in a new and developing sector.
We have only recently begun to market our products. Unless we can achieve
significant increases in market acceptance of our product, we may never advance
beyond our start-up phase. In light of the foregoing, it is difficult or
impossible for us to predict future results and you should not expect future
revenue growth based on our recent results. Our future results may disappoint
investors and cause our stock price to decline. See "Business," "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."


WE HAVE INCURRED LOSSES SINCE OUR INCEPTION AND ANTICIPATE CONTINUED LOSSES
THROUGH AT LEAST 2002.


    We have incurred operating losses and negative cash flows since our
inception in May 1997. We had net losses of $4,793,398 in 1998, $5,671,493 in
1999 and $5,545,663 for the first six months of 2000. We expect to continue to
incur net losses through at least 2002. We also anticipate that our expenses
will continue to increase substantially in the foreseeable future as we expand
our sales and marketing, research and development and general and administrative
operations. Our efforts may prove even more expensive than we currently
anticipate. Our revenue must grow substantially if we are to offset these higher
expenses and become profitable. Even if we do achieve profitability, we may be
unable to sustain or increase our profitability in the future. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."



WE HAVE LIMITED EXPERIENCE MANUFACTURING FLYWHEEL ENERGY STORAGE SYSTEMS ON A
COMMERCIAL BASIS, AND WE MAY BE UNABLE TO ACHIEVE PROFITABILITY.


    We may not achieve profitability if we cannot develop efficient, low-cost
manufacturing capability, processes and suppliers that will enable us to meet
the quality, price, engineering, design and production standards or production
volumes required to timely meet our product commercialization schedule or to
satisfy the requirements of our distributors or customers. To date, we have
focused primarily on research and development and have limited experience
manufacturing flywheel energy storage systems on a commercial basis. See
"Business--Our Products," "--Our Technology" and "--Manufacturing."


IF WE ARE UNABLE TO MEET OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION
MILESTONES, WE COULD LOSE SALES.


    Failure to meet product development and commercialization milestones could
impair our relationships with our potential customers, cause us to lose business
and/or cause the capital markets to devalue our common stock. We have
established internal product development and commercialization milestones and
dates for achieving our goals. If we experience delays in meeting our goals or
if our systems exhibit technical defects or are unable to meet cost or
performance goals, including energy output, useful life and reliability, our
commercialization schedule could be delayed. In that event, potential purchasers
of our commercial systems may choose competing products or alternative

                                       5
<PAGE>
technologies. We cannot guarantee that we will successfully achieve our future
milestones. See "Business--Product Milestones."


WE CANNOT ASSURE COMMERCIAL VIABILITY OF OUR PRODUCTS, AND IF THEY ARE NOT
ACCEPTED COMMERCIALLY, OUR COMPETITIVE POSITION AND PROFITABILITY WOULD DECLINE.


    Our future success is dependent upon our ability to develop and market a
commercially acceptable product. The market for highly reliable, uninterruptible
electric power is rapidly evolving and it is difficult to predict its potential
size or future growth rate. We cannot assure you that our flywheel energy
storage based products will achieve market acceptance, that they will meet the
technical demands of our potential communications customers or that they will
offer cost-effective advantages over competing technologies. Most of the
organizations that may purchase our products have invested substantial resources
in their existing power systems and, as a result, may be reluctant or slow to
adopt a new approach. Moreover, our products are alternatives to existing power
back-up systems and may not be accepted by our customers. To date we have only
had field trials of our products in commercial applications. We have received
only 117 commercial orders for our products and have made no commercial
deliveries to date. See "Business--Sales and Marketing" and "--Competition."


OUR FAILURE TO MEET THE SIGNIFICANT TECHNOLOGICAL CHALLENGES TO DEVELOP A
COMMERCIALLY VIABLE PRODUCT COULD CAUSE US TO LOSE REVENUES.



    The successful development of a commercially viable flywheel energy storage
system for an uninterruptible power supply involves significant technological
challenges including:



    - reducing manufacturing costs for the wheel shaft, hub and rim, and
      bearings to achieve commercial viability for our current products; and



    - developing new products with increased energy storage capacity to expand
      our market share.


    We cannot assure you that our technologies will be suitable for specific
commercial applications, including communications applications. Design
modifications may be required or demanded by our potential customers, and we may
be unable to make those adjustments at all or to make them as well or as
cost-effectively as our competitors. See "Business--Our Technology" and
"Business--Manufacturing."


BECAUSE WE DEPEND ON THIRD PARTY SUPPLIERS FOR THE DEVELOPMENT AND SUPPLY OF KEY
COMPONENTS FOR OUR PRODUCTS, AND BECAUSE WE DO NOT HAVE CONTRACTS WITH THESE
SUPPLIERS, WE COULD EXPERIENCE DISRUPTIONS IN SUPPLY THAT COULD DELAY OR
DECREASE OUR REVENUES.



    Our business, prospects, results of operations, or financial condition could
be harmed if we are unable to maintain satisfactory relationships with
suppliers. To accelerate development time and reduce capital investment, we rely
on third party suppliers for several of our key components. We do not have any
contracts with these suppliers. If these suppliers should fail to timely deliver
components that meet our quality, quantity, or cost standards, then we could
experience production delays or cost increases and our financial performance
could be adversely affected. Because the components with limited sources are key
components that are complex, difficult to manufacture and require long lead
times, we may have difficulty finding alternative suppliers on a timely basis.
As a result, we could experience shortages in supply. See
"Business--Manufacturing."



WE FACE INTENSE COMPETITION AND OUR REVENUE COULD DECLINE IF WE ARE UNABLE TO
COMPETE SUCCESSFULLY.


    The markets for highly reliable, uninterruptible electric power are
intensely competitive. There are a number of companies located in the United
States, Canada, and abroad that are developing flywheel storage technology. We
also compete with companies that are developing applications using other types
of alternative energy storage. In addition, if large, established companies
decide to focus on the

                                       6
<PAGE>
development of flywheel storage systems for sale to communications service
providers, they may have the manufacturing, marketing, and sales capabilities to
complete research, development and commercialization of commercially viable
alternative energy storage systems that could be more competitive than our
systems and could be brought to market more quickly than ours. To the extent
they already have name recognition, their products may enjoy greater initial
market acceptance among our potential customers. These competitors may also be
better able than ourselves to adapt quickly to customers' changing demands and
to changes in technology. See "Business--Competition."

    Technological advances in alternative energy products or other alternative
energy technologies may render our systems obsolete and could therefore cause
your investment in our company to suffer. We do not presently have any products
or technologies other than flywheel systems under development, nor do we have
any plans to pursue other products or technologies either through internal
development or through acquisitions. Our system is, however, only one of a
number of alternative energy products being developed by potential competitors
as supplements to the electric grid that have potential commercial applications,
including microturbines, solar power and wind power, advanced batteries, fuel
cells and other types of alternative energy technologies. See "Business--Our
Product" and "--Our Technology."

GOVERNMENT REGULATION MAY IMPAIR OUR ABILITY TO MARKET OUR PRODUCT.

    Government regulation of our product, whether at the federal, state or local
level, including any regulations relating to installation and servicing of our
products, may increase our costs and the price of our systems, and may have a
negative impact on our revenue and profitability. We cannot assure you that our
products will not be subject to existing or future federal and state regulations
governing traditional electric utilities and other regulated entities. We expect
that our products and their installation will be subject to oversight and
regulation at the local level in accordance with state and local ordinances
relating to building codes, safety, pipeline connections and related matters. We
do not know the extent to which any existing or new regulations may impact our
ability to distribute, install and service our products. Once our products reach
the commercialization stage and we begin distributing our systems to our early
target markets, federal, state or local government entities or competitors may
seek to impose regulations.


PRODUCT LIABILITY CLAIMS AGAINST US COULD RESULT IN SUBSTANTIAL EXPENSES AND
NEGATIVE PUBLICITY WHICH COULD IMPAIR SUCCESSFUL MARKETING OF OUR PRODUCTS.


    Our business exposes us to potential product liability claims that are
inherent in the manufacturing, marketing and sale of electro-mechanical
products, and as such, we may face substantial liability for damages resulting
from the faulty design or manufacture of products or improper use of products by
end users. We cannot assure you that our product liability insurance will
provide sufficient coverage in the event of a claim. Also, we cannot predict
whether we will be able to maintain such coverage on acceptable terms, if at
all, or that a product liability claim would not materially adversely affect our
business, financial condition or the price of our common stock. In addition,
negative publicity in connection with the faulty design or manufacture of our
products would adversely affect our ability to market and sell our products.

SAFETY FAILURES BY OUR PRODUCTS OR THOSE OF OUR COMPETITORS COULD REDUCE MARKET
DEMAND OR ACCEPTANCE FOR FLYWHEELS IN GENERAL.

    A serious accident involving either our flywheels or our competitors'
flywheels could be a significant deterrent to customer acceptance and adversely
affect our financial performance. With any form of energy storage, including
machinery, chemicals, fuel or other means of energy storage, there is the
possibility of accident. If a flywheel fails and the energy stored is released,
the flywheel could break apart and the pieces could be ejected at a high rate of
speed. A consortium of government, academic, and industry representatives has
been formed to address containment in the event of this kind of

                                       7
<PAGE>
flywheel failure. At this early stage of commercialization, there are differing
approaches to containment with disagreement in the community on the most
effective means.


IF WE NEED ADDITIONAL FINANCING IT MAY NOT BE AVAILABLE TO US ON ACCEPTABLE
TERMS OR AT ALL, WHICH COULD CAUSE US TO FAIL TO REACH OUR FUTURE GOALS.


    We may need to raise additional funds if we are unable to achieve positive
cash flow sufficient to fund our business plan. We may also need additional
financing for a variety of reasons including:

    - expanding research and development;

    - expanding manufacturing equipment and facilities faster than currently
      planned;

    - funding additional working capital; or

    - acquiring complementary products, businesses or technologies.


    We cannot assure you that we will be able to raise additional funds on terms
acceptable to us, or at all. If future financing is not available or is not
available on acceptable terms, our business, results of operations and financial
condition would be materially adversely effected. See "Selected Historical
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."



THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE IN THE EVENT THAT WE OBTAIN
ADDITIONAL FINANCING.



    If we raise additional funds by issuing additional equity securities, our
existing stockholders will experience dilution which may dilute the value of the
common stock outstanding if the equity is sold at a price less than you paid.
Furthermore, the newly issued securities could have rights superior to the
rights of the common stock sold in this offering.



WE MAY HAVE DIFFICULTY MANAGING THE EXPANSION OF OUR OPERATIONS AND OUR BUSINESS
OPERATIONS COULD BE INTERRUPTED.


    Our business, prospects, results of operations or financial condition could
be harmed if we encounter difficulties in effectively managing our rapid
expansion. We are undergoing rapid growth in the number of our employees, the
size of our physical plant and the scope of our operations. Rapid expansion is
difficult to maintain and is likely to place a significant strain on our senior
management team and other resources. In addition, if we are successful in
obtaining rapid market penetration of our products, we will be required to
continue to expand and improve our operational, management and financial systems
and controls to meet anticipated growth. See "Business--Employees."


OUR FINANCIAL PERFORMANCE COULD BE ADVERSELY AFFECTED BY OUR NEED TO HIRE AND
RETAIN KEY EXECUTIVE OFFICERS AND SKILLED TECHNICAL PERSONNEL.



    Because our future success depends largely on the success of our technology,
our competitiveness will depend significantly on whether we can attract and
retain skilled technical personnel, especially engineers, and can retain members
of our executive team. We currently do not have employment agreements with any
of our employees. Based on our planned expansion, we will require a significant
increase in the number of employees, including skilled personnel. Competition
for skilled personnel is intense, and we may not be successful in attracting and
retaining the personnel or executive managers necessary to develop our product
and operate profitably. Because a large portion of our expenses relates to
skilled technical personnel that cannot be easily reduced without adversely
affecting our business prospects and strategic plan, we may not be able to
effectively adjust spending to compensate for revenue shortfalls. Accordingly,
any significant shortfall in revenues in relation to our planned expenditures
would reduce, and possibly eliminate, operating income and could materially
adversely affect our business, operating results and financial condition.


                                       8
<PAGE>

WE WILL RELY ON A LIMITED NUMBER OF LARGE CUSTOMERS AND OUR BUSINESS MAY BE
ADVERSELY AFFECTED BY THE LOSS OF, OR REDUCED PURCHASES BY, ANY ONE OF THOSE
CUSTOMERS.



    Our initial intent is to focus on selling directly to a small number of
large communications companies and to original equipment manufacturers that
serve the communications markets. If we are successful in this strategy, the
loss of, or reduced purchases by, one customer could have a material adverse
effect on our operating results. In addition, if we do not perform
satisfactorily for a customer, that customer could further harm our future
business if the customer communicates its dissatisfaction or does not recommend
our services to other communications customers.



WE FACE ADDITIONAL BUSINESS, LEGAL AND ECONOMIC RISKS ASSOCIATED WITH OUR PLANS
TO MARKET, DISTRIBUTE AND SERVICE OUR PRODUCTS INTERNATIONALLY, WHICH COULD
LIMIT OUR ABILITY TO SUCCESSFULLY CARRY OUT OUR GROWTH STRATEGY.



    An important part of our business strategy is to expand our customer base by
marketing, distributing and servicing our products internationally through
distributors. We have limited experience developing, and no experience
manufacturing, our products to comply with the commercial and legal requirements
of international markets. Our success in those markets will depend, in part, on
our ability to secure foreign customers and our ability to manufacture products
that meet foreign regulatory and commercial requirements. In addition, our
planned international operations are subject to other inherent risks, including
potential difficulties in establishing distributorship relationships and
enforcing contractual obligations and intellectual property rights in foreign
countries, fluctuations in currency exchange rates and entering into
satisfactory foreign distributorship arrangements.


ANY FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY COULD SERIOUSLY IMPAIR OUR
COMPETITIVE POSITION.

    We cannot assure you that we have or will be able to maintain a significant
proprietary position on the basic technologies used in our flywheel systems. Our
ability to compete effectively against alternative technologies will depend on
our ability to protect our proprietary technology, systems designs and
manufacturing processes. We do not know whether any of our pending or future
patent applications under which we have rights will issue or, in the case of
patents issued or to be issued, that the claims allowed are or will be
sufficiently broad to protect our technology or processes, or will protect us
from competitors. Even if all our patent applications are issued and are
sufficiently broad, they may be challenged or invalidated. We could incur
substantial costs in prosecuting or defending patent infringement suits, and
such suits would divert funds and resources that could be used in our business.
We do not know whether we have been or will be completely successful in
safeguarding and maintaining our proprietary rights.

    Further, our competitors may independently develop or patent technologies or
processes that are substantially equivalent or superior to ours. If we are found
to be infringing on third party patents, we do not know whether we will be able
to obtain licenses to use such patents on acceptable terms, if at all. Failure
to obtain needed licenses could delay or prevent the development, manufacture or
sale of our systems.

    We rely, in part, on contractual provisions to protect our trade secrets and
proprietary knowledge. These agreements may be breached, and we may not have
adequate remedies for any breach. Our trade secrets may also be known without
breach of such agreements or may be independently developed by competitors. Our
inability to maintain the proprietary nature of our technology and processes
could allow our competitors to limit or eliminate any competitive advantages we
may have and prevent us from being the first company to commercialize highly
reliable electrical power products, thereby harming our business prospects. See
"Business--Intellectual Property."

                                       9
<PAGE>

OUR EXISTING STOCKHOLDERS WILL CONTROL ALL MATTERS REQUIRING A STOCKHOLDER VOTE,
WHICH WILL LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF MATTERS REQUIRING
STOCKHOLDER APPROVAL.



    Upon the completion of this offering, our existing stockholders will retain
approximately 79.2% of our outstanding stock. If a sufficient number of these
stockholders were to vote together as a group, they would have the ability to
control our board of directors and its policies. For instance, these
stockholders would be able to control the outcome of all stockholder votes,
including votes concerning director elections, charter and by-law amendments and
possible mergers, corporate control contests and other significant corporate
transactions. These stockholders may use their influence to approve actions that
are adverse to your interest, which could depress our stock price. See "Certain
Relationships and Related Transactions," "Principal Stockholders" and
"Description of Capital Stock."


THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK.

    Before this offering, there has been no public market for our common stock.
Although we expect our common stock to be quoted on the Nasdaq National Market,
an active trading market for our shares may not develop or may not be sustained
following this offering. Purchasers in this offering may not be able to resell
their shares at prices equal to or greater than the initial public offering
price. The initial public offering price will be determined through negotiations
between us and the underwriters and may not be indicative of the market price
for these shares following this offering. See "Underwriting."


THE SHARE PRICES OF COMPANIES IN OUR SECTOR HAVE BEEN HIGHLY VOLATILE AND OUR
SHARE PRICE COULD BE SUBJECT TO EXTREME PRICE FLUCTUATIONS.



    The markets for equity securities of high technology companies, including
companies in the power reliability and power quality markets, have been highly
volatile recently and the market price of our common stock may be subject to
significant fluctuations. This could be in response to operating results,
announcements of technological innovations or new products by us or our
competitors, patent or proprietary rights developments and market conditions for
high technology stocks in general. In addition, stock markets, in particular the
Nasdaq National Market, in recent years have experienced extreme price and
volume fluctuations that often have been unrelated or disproportionate to the
operating performance of individual companies. These market fluctuations, as
well as general economic conditions, may adversely affect the market price of
our common stock. There can be no assurance that the trading price of our common
stock will remain at or near the initial public offering price.



OUR INITIAL TARGET MARKET, THE COMMUNICATIONS INDUSTRY, MAY NOT BE ABLE TO
SUSTAIN ITS CURRENT GROWTH RATE, WHICH MAY AFFECT INVESTORS' EXPECTATIONS
REGARDING OUR FINANCIAL PERFORMANCE AND ADVERSELY AFFECT OUR STOCK PRICE.



    We are initially targeting the communications markets for the sale of our
products. The communications industry recently has sustained high rates of
infrastructure build-out and we cannot assure you that these rates will be
maintained. If there are substantial period-to-period fluctuations in the
conditions of the communications markets, it may also have a material adverse
effect on our business, operating results and financial condition.


PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER AND BY-LAWS MAY INHIBIT A TAKEOVER
THAT STOCKHOLDERS CONSIDER FAVORABLE.


    Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt that is opposed by
our management and board of directors. Public stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. We also
have a staggered board of directors that makes it difficult for stockholders to
change the composition of the


                                       10
<PAGE>

board of directors in any one year. Additionally, our board of directors may
authorize issuances of "blank check" preferred stock that could be used to
increase the number of outstanding shares and discourage a takeover attempt.
These anti-takeover provisions could substantially impede the ability of public
stockholders to benefit from a change in control or change our management and
Board of Directors. See "Description of Capital Stock."



YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION AND, AS A RESULT, YOU MAY NOT
RECEIVE THE FULL AMOUNT OF YOUR INVESTMENT IF WE ARE LIQUIDATED.



    The initial public offering price per share will be substantially higher
than the net tangible book value per share immediately after the offering. If
you purchase common stock in this offering, you will incur dilution of $10.25
per share from the price per share you would have paid based on our net book
value at June 30, 2000. We also have a large number of outstanding warrants and
stock options to purchase our common stock with exercise prices significantly
below the initial public offering price of our common stock. To the extent these
warrants and options are exercised, you will be further diluted. See "Dilution,"
"Certain Relationships and Related Transactions" and "Principal Stockholders."


FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE.


    Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower our stock price or make it difficult for us to raise additional equity
capital in the future. After this offering, we will have 38,517,042 shares of
common stock outstanding. Of these shares, 7,600,000 of the shares sold in this
offering and an additional 13,488 shares owned by six investors will be freely
tradable. The 400,000 shares sold in this offering through the directed share
program are subject to 30-day lock-up agreements. 30,346,220 of the remaining
shares of common stock are subject to 180-day lock-up agreements with the
underwriters. Up to 74,000 and 30,346,220 shares may be available for sale in
the public market 90 and 180 days after the date of this prospectus,
respectively, subject, in some cases, to the holding period, volume limitations
and other requirements of Rule 144 under the Securities Act.



    Beginning 180 days after the closing of this offering, the holders of
approximately 30,346,220 shares of our common stock, warrants to purchase
5,126,070 shares of common stock and warrants to purchase a number of shares
equal to $14,250,000 divided by 37.5% of the initial public offering price, or
3,166,666 shares assuming a $12.00 initial public offering price, or their
transferees, will be entitled to cause us to register those shares. In addition,
after this offering, we also intend to register 9,000,000 shares of common stock
for issuance under our stock incentive plan. As of September 22, 2000, options
to purchase 4,733,290 shares of common stock were issued and outstanding, of
which options to purchase 1,107,208 shares have vested.



    We also have outstanding warrants to purchase 5,196,070 shares of our common
stock, plus warrants to purchase a number of shares equal to $14,250,000 divided
by 37.5% of the initial offering price, or 3,166,666 shares assuming a
$12.00 initial public offering price. The shares purchased upon exercise of
these warrants may be sold 180 days after the date of this prospectus, subject
to the holding period, volume limitation and other requirements of Rule 144
under the Securities Act.


    We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will harm the market price for our common stock or
our ability to raise capital by offering equity securities.

    See "Shares Eligible for Future Sale" and "Underwriting."

                                       11
<PAGE>
WE DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE
AND AS A RESULT STOCKHOLDERS WILL NEED TO SELL SHARES IN ORDER TO REALIZE A
RETURN ON THEIR INVESTMENTS IN US.

    We have not paid dividends to the holders of our common stock since our
inception and do not anticipate paying cash dividends in the foreseeable future.
We intend to reinvest earnings, if any, in the development and expansion of our
business. Declaration of dividends on our common stock or preferred stock will
depend upon, among other things, future earnings, our operating and financial
condition, our capital requirements and general business conditions. See
"Dividend Policy" and "Description of Capital Stock."

                                       12
<PAGE>
               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" contains forward-looking information. This
forward-looking information is subject to risks and uncertainties including the
factors listed under "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," as well as
elsewhere in this prospectus. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "intends,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue," or the negative of these terms or other comparable terminology.
These statements are only predictions and may be inaccurate. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined under "Risk
Factors." These factors may cause our actual results to differ materially from
any forward-looking statement. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.

                                       13
<PAGE>
                                USE OF PROCEEDS


    We estimate our net proceeds from the sale of 8,000,000 shares of our common
stock in this offering will be $88.1 million, at an assumed initial public
offering price of $12.00 per share, after deducting the estimated underwriting
discounts and commissions and our estimated offering expenses. If the
underwriters exercise their over-allotment option in full, our net proceeds will
be approximately $101.5 million.



    The principal purposes of this offering are to increase our equity capital,
create a public market for our common stock under market conditions that we
believe are favorable, facilitate future access by us to public equity markets
and provide us with increased credibility with our customers and suppliers. We
will use $39 million of the net proceeds of the offering for product research
and development, and expanding manufacturing capacity, $17 million for capital
expenditures, and the remainder for general corporate purposes, working capital
and potential acquisitions. While we have from time to time engaged in
acquisition discussions with other parties, we are not party to any agreement or
letter of intent with respect to a potential acquisition.


    Our management will have significant flexibility in applying the net
proceeds of this offering. For example, we may use a portion of the net proceeds
to acquire businesses, products or technologies that complement our current or
future business and product lines.

    Pending their use, we will invest the proceeds in government securities and
other short-term, investment-grade securities.

                                DIVIDEND POLICY

    We have never declared or paid cash dividends on shares of our common stock.
We expect to retain any future earnings to finance the expansion of our
business, and therefore we do not expect to pay cash dividends in the
foreseeable future.


    Payment of future cash dividends, if any, will be at the discretion of our
board of directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs and
plans for expansion.


                                       14
<PAGE>
                                 CAPITALIZATION


    The following table sets forth our capitalization as of June 30, 2000:



    - on an actual basis (giving effect to the 2-for-1 split of our common stock
      to be effected immediately prior to the consummation of this offering);
      and



    - on an as adjusted basis to reflect the conversion of each share of our
      outstanding preferred stock upon consummation of this offering into two
      shares of common stock, the issuance upon conversion of our class D
      preferred stock of 820,162 shares of common stock as a dividend payable on
      the class D preferred stock, the issuance of 39,168 shares of common stock
      to be issued upon consummation of the offering as a dividend on the
      class E preferred stock, a charge of $30,000,000 representing the value of
      the warrants issued as part of our class F financing assuming a $12.00
      initial offering price, the issuance of shares payable for consulting
      services and the sale of 8,000,000 shares of common stock in this offering
      at an assumed initial public offering price of $12.00 per share.



<TABLE>
<CAPTION>
                                                               AS OF JUNE 30, 2000
                                                              ----------------------
                                                               ACTUAL    AS ADJUSTED
                                                              --------   -----------
                                                              (IN THOUSANDS, EXCEPT
                                                                   SHARE DATA)
<S>                                                           <C>        <C>
Cash and cash equivalents...................................  $ 25,043     $113,147
                                                              ========     ========
Dividends payable (1).......................................     1,086           --
Capital lease obligations...................................       176          176
Redeemable convertible preferred stock:
  Class D Preferred Stock, $0.01 par value per share;
    6,000,000 shares authorized, 1,900,000 shares issued and
    outstanding.............................................     4,556           --
  Class E Preferred Stock, $0.01 par value per share;
    2,000,000 shares authorized, 1,226,141 shares issued and
    outstanding.............................................     3,697           --
  Class F Preferred Stock, $0.01 par value per share;
    7,500,000 shares authorized, 6,785,711 shares issued and
    outstanding.............................................    28,407           --
Redeemable preferred stock warrants.........................       344           --
Stockholders' (deficit) equity:
  Class A Preferred Stock, $0.01 par value per share;
    6,000,000 shares authorized, 4,767,907 shares issued and
    outstanding.............................................     5,741           --
  Class C Preferred Stock, $0.01 par value per share; six
    shares authorized, six shares issued and outstanding....        30           --
  Common Stock, $0.01 par value per share; 30,000,000 shares
    authorized, and 80,848 shares issued and outstanding,
    actual; and 110,000,000 shares authorized and 38,399,708
    shares issued and outstanding, as adjusted..............         1          384
  Deferred prepaid consulting expense, net..................        89           --
  Deferred stock compensation...............................      (378)        (378)
  Paid-in capital...........................................     2,069      163,992
  Deficit accumulated during the development stage..........   (22,173)     (52,373)
                                                              --------     --------
    Total stockholders' (deficit) equity....................   (14,621)     111,625
                                                              --------     --------
      Total capitalization..................................  $ 23,645     $111,801
                                                              ========     ========
</TABLE>


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


(1) Represents dividends payable in shares of class D preferred stock and
    class E preferred stock.


                                       15
<PAGE>
                                    DILUTION


    Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of our common stock in this offering and the
net tangible book value per share as adjusted of our common stock immediately
after completion of the offering. Net tangible book value per share, on a pro
forma basis, represents the amount of our total assets less total liabilities,
divided by 33,986,794 shares of common stock outstanding as of June 30, 2000,
determined on a pro forma basis assuming conversion on that date of each share
of our outstanding preferred stock into two shares of common stock, giving
effect to the issuance upon conversion of our class D preferred stock of 820,162
shares of common stock as a dividend payable on the class D preferred stock,
39,168 shares of common stock to be issued upon consummation of the offering as
a dividend on the class E preferred stock, the issuance of 100,000 shares of
common stock to be issued on the closing date of the offering as payment of
consulting fees accrued through August 31, 2000, the issuance of 4,710,696
shares of common stock issuable to our executive officers, directors and other
affiliates upon the exercise of options and warrants exercisable within 60 days
of the date of this prospectus and the issuance of a number of shares of common
stock issuable upon exercise of warrants issued in connection with the class F
financing equal to $14,250,000 divided by 37.5% of the initial public offering
price, or 1,777,776 shares assuming a $12.00 initial public offering price.



    As of June 30, 2000, on a pro forma basis, we had a net tangible book value
of $(14,620,988), or $(0.43) per share of common stock. After giving effect to
the sale of the 8,000,000 shares of common stock offered by this prospectus at
an assumed initial public offering price of $12.00 per share, and after
deducting the estimated underwriting discounts and commissions and our estimated
offering expenses, our net tangible book value on a pro forma as adjusted basis,
as of June 30, 2000, would have been $73,483,152 million, or $1.75 per share of
common stock on a pro forma as adjusted basis. This represents an immediate
increase in net tangible book value on a pro forma as adjusted basis of $2.18
per share to our existing stockholders and an immediate dilution of $10.25 per
share to new investors in this offering. If the initial public offering price is
higher or lower than $12.00 per share, the dilution to new investors will be
higher or lower, respectively. The following table illustrates this per share
dilution:



<TABLE>
<S>                                                           <C>        <C>
Assumed initial public offering price per share.............              $12.00
  Pro forma net tangible book value per share at June 30,
    2000....................................................   $(0.43)
  Increase in pro forma net tangible book value per share
    attributable to this offering...........................     2.18
                                                               ------
Pro forma net tangible book value per share after this
  offering..................................................                1.75
                                                                          ------
Dilution in pro forma net tangible book value per share to
  new investors.............................................              $10.25
                                                                          ======
</TABLE>



    The following table sets forth, as of June 30, 2000 after giving effect to
the offering, the number of shares of common stock issued by us, the total
consideration paid in cash or other consideration for those shares and the
average price per share paid in cash or other consideration by existing
stockholders and by new investors. The table is presented assuming that all of
the transactions described in the first paragraph of this section occurred on
June 30, 2000.



<TABLE>
<CAPTION>
                                            SHARES PURCHASED        TOTAL CONSIDERATION
                                          ---------------------   -----------------------   AVERAGE PRICE
                                            NUMBER     PERCENT       AMOUNT      PERCENT      PER SHARE
                                          ----------   --------   ------------   --------   -------------
<S>                                       <C>          <C>        <C>            <C>        <C>
Existing stockholders...................  33,986,794     80.9%    $ 53,784,497     35.9%       $ 1.58
New investors...........................   8,000,000     19.1       96,000,000     64.1         12.00
                                          ----------     ----     ------------     ----
    Total...............................  41,986,794      100%    $149,784,497      100%
                                          ==========     ====     ============     ====
</TABLE>


                                       16
<PAGE>
    Each of the above tables excludes:


    - up to 1,200,000 shares that may be issued by us pursuant to the
      underwriters' overallotment option;



    - 4,401,956 shares of common stock issuable upon exercise of stock options
      outstanding as of September 22, 2000 at a weighted average exercise price
      of $2.60 per share (other than those held by our executive officers that
      are exercisable within 60 days of the date of this prospectus);



    - an aggregate of 1,429,818 shares of common stock issuable upon exercise of
      outstanding warrants held by stockholders other than our affiliates; and



    - 4,109,376 shares of common stock available as of September 22, 2000 for
      future grant under our stock incentive plan.


    To the extent these shares are issued, you will be further diluted. See
"Management" and the notes to our financial statements included elsewhere in
this prospectus.

                                       17
<PAGE>
                            SELECTED FINANCIAL DATA

    The following selected financial data should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements, including the related notes, found
elsewhere in this prospectus.


    The following tables present selected historical financial data for the
period from May 8, 1997, the date of our inception, through December 31, 1997,
the years ended December 31, 1998 and 1999 and the six month periods ended
June 30, 1999 and 2000. The balance sheet data as of December 31, 1997, 1998 and
1999 and the statement of operations data for the period from inception through
December 31, 1997 and for the years ended December 31, 1998 and 1999 have been
derived from our audited financial statements that have been audited by
Deloitte & Touche LLP, our independent auditors, which are included elsewhere in
this prospectus. The statement of operations data for the six month periods
ended June 30, 1999 and 2000 and the balance sheet data as of June 30, 2000 are
derived from our unaudited financial statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of our results of operations and
financial condition for those periods. Results for any interim period are not
necessarily indicative of the results that may be expected for any other interim
period or for a full year.



    The pro forma basic and diluted net loss per share gives effect to the
conversion at the beginning of the period of all shares of class A, C and D
preferred stock into two shares of common stock for all periods presented and
the conversion into two shares of common stock on January 1, 2000 of all shares
of class E and F preferred stock for the period ended June 30, 2000, including
in each case shares payable for dividends and consulting services, as though
they were common stock in all periods for which such shares were outstanding.



<TABLE>
<CAPTION>
                                                      PERIOD FROM DATE         YEAR ENDED          SIX MONTHS ENDED
                                                        OF INCEPTION          DECEMBER 31,             JUNE 30,
                                                      (MAY 8, 1997) TO    ---------------------   -------------------
                                                      DECEMBER 31, 1997     1998        1999        1999       2000
                                                      -----------------   --------   ----------   --------   --------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>                 <C>        <C>          <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................      $    232        $     --   $      269   $     66   $     --
Operating expenses:
  Selling, general and administrative...............         1,168           1,188        1,559        812      1,396
  Research and development..........................         2,292           3,524        3,506      1,731      2,763
  Loss on sales commitments.........................            --              --          325         --        880
  Depreciation and amortization.....................            --              78          219         93        150
                                                          --------        --------   ----------   --------   --------
Total operating expenses............................         3,460           4,790        5,609      2,636      5,189
                                                          --------        --------   ----------   --------   --------
Loss from operations................................        (3,228)         (4,790)      (5,340)    (2,570)    (5,189)
Interest and other income (expense), net............           117              (3)        (331)         4       (357)
                                                          --------        --------   ----------   --------   --------
Net loss............................................        (3,111)         (4,793)      (5,671)    (2,566)    (5,546)
Preferred stock dividends...........................            --            (112)        (917)      (309)    (1,876)
Accretion of redeemable convertible preferred
  stock.............................................            --              (7)         (42)       (21)       (30)
                                                          --------        --------   ----------   --------   --------
Loss to common shareholders.........................      $ (3,111)       $ (4,912)  $   (6,630)  $ (2,896)  $ (7,452)
                                                          ========        ========   ==========   ========   ========
Net loss per share, basic and diluted...............      $(369.35)       $(583.15)  $  (787.04)  $(171.87)  $(396.12)
                                                          ========        ========   ==========   ========   ========
Shares used in computing net loss per share, basic
  and diluted.......................................            17              17           17         17         19
Pro forma net loss per share, basic and diluted.....                                 $    (0.42)             $  (0.25)
                                                                                     ==========              ========
Shares used in computing pro forma net loss per
  share, basic and diluted..........................                                     13,492                30,220
</TABLE>



<TABLE>
<CAPTION>
                                                                    AS OF DECEMBER 31,
                                                              ------------------------------   AS OF JUNE 30,
                                                                1997       1998       1999          2000
                                                              --------   --------   --------   --------------
                                                                              (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................   $  30     $ 2,491    $   234       $ 25,043
Working capital.............................................     (29)      1,481       (878)        22,642
Total assets................................................     112       2,992        974         26,279
Redeemable convertible preferred stock......................      --       4,493      4,535         36,660
Total stockholders' (deficit) equity........................      (1)     (2,720)    (8,591)       (14,621)
</TABLE>


                                       18
<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements, the
notes to those financial statements and other financial information appearing
elsewhere in this prospectus. In addition to historical information, the
following discussion and other parts of this prospectus contain forward-looking
statements that reflect our plans, estimates, intentions, expectations and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. See "Special Note Regarding Forward-Looking
Statements." Factors that could cause or contribute to such differences include,
but are not limited to, those set forth in the "Risk Factors" section and
contained elsewhere in this prospectus.

OVERVIEW


    We design and develop flywheel energy storage systems that we believe will
provide highly reliable, high-quality, uninterruptible electric power for
communications networks, computers, the Internet, industrial manufacturing,
commercial facilities and distributed generation products.



    As a former division of SatCon Technology Corporation, we were founded in
May 1997. Since our inception, we have raised $41,800,000 in private equity.
These investments allowed us to develop and test field-trial flywheel units and
to continue development of our first commercial product. These funds, plus the
proceeds from this offering of common stock, will allow us to complete our
product design, increase manufacturing capacity and begin production.



    From our inception through June 30, 2000 we have incurred losses of
approximately $22.1 million. We expect to continue to incur losses as we expand
our product development and commercialization program and prepare for the
commencement of full manufacturing operations. We expect that losses will
fluctuate from quarter to quarter and that such fluctuations may be substantial
as a result of, among other factors, the number of systems we produce and sell
to our customers.


    REVENUES

    To date our revenues have been the result of development contracts with
government entities focused on the design of flywheel technologies. We have
placed several development prototypes with potential customers and are currently
shipping pre-production units. These products have been provided to potential
customers without charge to allow us access to field test information and to
demonstrate the application of our technologies. We believe that through the
performance of these field units we will obtain commercial orders.

    OPERATING EXPENSES

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Our sales and marketing
expenses consist primarily of compensation and benefits for our sales and
marketing personnel and related business development expenses. We are emerging
from research and development to introduction of commercial products through
manufacturing. To date, our historical sales and marketing expenses have not
been material. We have relied on engineering personnel to provide technical
specifications and product overviews to our potential customer base. We expect
sales and marketing expenses to increase significantly as we continue to grow.

    Our general and administrative expenses consist primarily of compensation
and benefits related to our corporate staff, professional fees, and related
travel. We expect our general and administrative expenses to increase
significantly as we continue to grow.


    RESEARCH AND DEVELOPMENT.  Our cost of research and development consists
primarily of the cost of compensation and benefits for research and development,
manufacturing and support staff, as well


                                       19
<PAGE>

as materials and supplies used in the engineering design process. We expect our
cost of research and development to continue to increase as we develop
additional product designs, refine existing products and expand our analytic
capabilities. We will be significantly expanding our research and manufacturing
capacity as we move to a new facility during the fourth quarter of 2000.



    LOSS ON SALES COMMITMENTS.  We have sales commitments for a limited number
of units. We have established reserves for anticipated loss on these commitments
when our cost estimates indicate a loss will be incurred. We expect our losses
to continue until we are able to expand unit volumes and achieve planned product
cost reductions. We expect to decrease our cost per unit through engineering
design changes, operating efficiencies, and volume purchasing discounts.


    DEPRECIATION AND AMORTIZATION.  Our depreciation and amortization is
primarily related to depreciation on capital expenditures and the amortization
of lease and leasehold costs related to our facilities.

    INTEREST AND OTHER INCOME/EXPENSE, NET

    Our non-operating income and expenses are primarily attributable to interest
income attributable to cash on hand from our private financings and interest
expense associated with our notes payable to investors.


RESULTS OF OPERATIONS



COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 2000


    REVENUE


    We recorded no revenues for the six months ended June 30, 2000 compared to
approximately $66,000 for the six months ended June 30, 1999. In the first six
months of 1999 we recorded revenues for work performed on research contracts to
demonstrate applications of our technologies.


    OPERATING EXPENSES


    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses for the six months ended June 30, 2000 were
approximately $1,395,000, compared to approximately $812,000 for the six months
ended June 30, 1999. This increase of $583,000 is primarily the result of
increased compensation and benefit costs.



    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses for
the six months ended June 30, 2000 were approximately $2,763,000, compared to
approximately $1,731,000 for the six months ended June 30, 1999. This increase
of $1,032,000 is primarily the result of increased compensation and benefit
costs related to increased engineering personnel and materials used for product
development.



    LOSS ON SALES COMMITMENTS.  Loss on sales commitments for the six months
ended June 30, 2000 was approximately $880,000 compared to no sales commitment
losses for the six months ended June 30, 1999. We have accrued these losses
based on our estimated costs to complete delivery commitments entered into
during the first two quarters of this fiscal year.



    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization for the six
months ended June 30, 2000 were approximately $150,000 compared to approximately
$93,000 for the six months ended June 30, 1999. This increase of $57,000 is
attributable to increases in capital lease costs and capital equipment
expenditures.


                                       20
<PAGE>
    INTEREST AND OTHER INCOME/EXPENSE, NET


    Our net non-operating expenses for the six months ended June 30, 2000 were
approximately $357,000, compared to net non-operating income of approximately
$4,000 for the six months ended June 30, 1999. This increase of $361,000 is
attributable to costs associated with notes payable to investors.


COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1999

    REVENUE

    Revenues were approximately $269,000 in 1999 while we did not record
revenues in the prior year. These revenues resulted from work performed on
research contracts to demonstrate applications of our technologies.

    OPERATING EXPENSES

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses were approximately $1,559,000 in 1999 compared to
approximately $1,188,000 for 1998. This increase of approximately $371,000
reflects the expansion of our infrastructure to support sales growth and the
commercialization of our products.

    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses in
1999 were approximately $3,506,000, compared to approximately $3,524,000 in
1998. Research and development expenses, while essentially flat over the
two-year period, is indicative of our ongoing efforts to develop and improve our
technologies and product potentials.


    LOSS ON SALES COMMITMENTS.  Loss on sales commitments of approximately
$325,000 were recorded in 1999 compared to no sales commitment losses in 1998.
We accrued these losses in 1999 based on estimates of costs to complete these
delivery commitments.


    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization were
approximately $219,000 in 1999 compared to approximately $78,000 in 1998. This
increase of approximately $141,000 reflects increased capital expenditures for
development and production equipment as well as increased facilities related
lease costs.

    INTEREST AND OTHER INCOME/EXPENSE, NET

    Other expenses were approximately $332,000 for 1999 compared to
approximately $3,000 in 1998. This increase is related to a higher level of
indebtedness in 1999.

COMPARISON OF PERIOD FROM MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
AND YEAR ENDED DECEMBER 31, 1998

    REVENUE

    We recorded no revenues in 1998 compared to approximately $232,000 in 1997.
The 1997 revenues resulted from a contract to demonstrate applications of our
technologies.

    OPERATING EXPENSES

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses of $1,188,000 and $1,168,000 in 1998 and 1997,
respectively were essentially equal as we focused our expenditures on furthering
our technology development efforts.

                                       21
<PAGE>
    RESEARCH AND DEVELOPMENT.  Research and development expenses were
approximately $3,524,000 in 1998, compared to approximately $2,292,000 in 1997.
The increase in expenditures of approximately $1,232,000 reflects our increased
developmental effort on our emerging flywheel technologies.


    LOSS ON SALES COMMITMENTS.  There were no sales commitments in 1998 or 1997.


    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization were
approximately $78,000 in 1998 compared to zero in 1997. This was primarily
attributable to lease expenditures as we established our own facilities in 1998.
In 1997, we were located in SatCon's facilities.

    INTEREST AND OTHER INCOME/EXPENSE, NET


    Interest and other income/expenses in 1998 totaled approximately $3,000 of
expense compared to approximately $117,000 of interest income in 1997. This
decrease was primarily due to lower cash balances in reduced interest income in
1998 and an increase in interest expense related to new capital leases in 1998.


LIQUIDITY AND CAPITAL RESOURCES


    Our cash requirements depend on many factors, including our research and
development activities, expansion of our manufacturing facilities and efforts to
commercialize our products. Over the next two years we expect to make
significant expenditures to develop our technologies and expand manufacturing
capabilities. Our total facilities will more than double in the fourth quarter
of 2000 growing to over 52,000 square feet of space with options to more than
double this square footage during 2001. During 2001 and 2002 the lease and
utilities on this new facility will total approximately $1,200,000 and leasehold
improvements will be approximately $1,000,000. We expect to exercise our option
to expand our square footage in the second half of 2001 which will require
additional lease and utilities and leasehold improvements of approximately
$800,000. Capital investments for equipment and tooling will be approximately
$17,000,000. In conjunction with these investments, we expect to incur costs for
salaries, benefits, consultants and other overhead for development of our
technologies and expanding manufacturing capabilities of approximately
$32,000,000. We also expect to spend approximately $7,000,000 on materials and
supplies used in the engineering design process. We believe that our current
cash balances and the net proceeds from this offering will provide us with
sufficient capital to fund our operations through the next 24 months.



    Historically, we have financed our operations primarily through cash from
private offerings. We have raised approximately $41.8 million through the sale
of our capital stock. Our primary cash requirements have been to fund research
and development, establish low rate production capabilities, make capital
expenditures and fund infrastructure costs. Net cash used in operating
activities was approximately $4,840,000 and $3,722,000 for 1999 and 1998,
respectively and $3,455,000 for the six months ended June 30, 2000. Net cash
used in investing activities was approximately $461,000 and $237,000 for 1999
and 1998, respectively and $480,000 for the six months ended June 30, 2000, and
was primarily used for the purchase of property and equipment, the payment of
security deposits pursuant to obtaining additional facility space and the
payment of costs associated with fund raising activities. Proceeds from the
sales of preferred shares are currently held in short-term, interest-bearing
investment grade securities to provide liquidity for operations. Our capital
requirements will be affected by many factors, including the success of our
product offerings, the ability to enhance our products and our ability to
develop and introduce new products that keep pace with technological
developments in the marketplace. We intend to use the proceeds of this offering
for general corporate purposes including continued research and product
development, capital expenditures and infrastructure to support our business
plan. Additionally, we may use a portion of the net proceeds to fund
acquisitions of, or investments in, businesses, products or technologies that
expand, complement or are otherwise related to our current business. Pending our
use of proceeds as described above, we intend to invest the proceeds of this
offering in short-term, interest-bearing investment grade securities.


                                       22
<PAGE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET IMPLEMENTED

    For United States generally accepted accounting principles, or GAAP,
reporting purposes we will be required to adopt SFAS 133 "Accounting for
Derivative Instruments and Hedging Activities" for the 2001 fiscal year. We have
not yet determined the impact that the adoption of SFAS 133 will have on our
financial reporting. However, as we do not use derivative financial instruments
for trading purposes and do not have any current intention to enter into any
hedging transactions, we expect that any such impact would not be material.

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition" (SAB 101). SAB 101
established guidelines for revenue recognition and is effective for periods
beginning no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. We do not expect that the adoption of SAB 101 will have
a material impact on our financial condition or results of operations.

DISCLOSURE ABOUT MARKET RISK


    Our cash equivalents and investments, all of which have maturities of less
than one year, may expose us to interest rate risk. At the end of our most
recent fiscal year, we had approximately $234,000 of cash equivalents which were
held in a non-interest bearing checking account. At June 30, 2000, we had
approximately $22,000,000 invested in an interest-bearing money market account.
The fair value of this investment approximates its cost. We believe that the
effect, if any, of near-term changes in interest rates on our financial
position, results of operations and cash flows will not be material.


                                       23
<PAGE>
                                    BUSINESS

OVERVIEW


    We design and develop flywheel energy storage systems that we believe will
provide highly reliable, high-quality, uninterruptible electric power for
communications networks, computers, the Internet, industrial manufacturing,
commercial facilities and distributed generation products that allow the user to
generate power locally by converting fuel to electricity. The broad use of
digital electronics and computers throughout the information economy is causing
a dramatic increase in the demand for more reliable, higher quality power.
Alternative powering technologies, including flywheel energy storage, are
emerging to meet this need.



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



    We have designed our initial products to specifically address the back-up
powering needs of the communications markets. Bell Atlantic, now part of Verizon
Communications, WinDBreak Cable and Telcordia Technologies Inc. have provided us
with application requirements that have helped with the definition, development
and testing of our 2kWh product. We have sales commitments for 117 of our 2kWh
commercial units, with deliveries expected to begin in early 2001, and expect
that our product demonstrations will lead to additional, significant orders.



    Over the longer term, we intend to capitalize on our strengths in the
communications markets to expand into other markets such as back-up power for
computers, the Internet, industrial manufacturing and commercial facilities. We
will also target our future products toward enhancing the performance of
distributed generation products, such as gasoline or diesel generators, fuel
cells and microturbines. We believe that our flywheel systems will be used in
conjunction with these generators to provide benefits that are not available
from these products alone, such as an instant-on capability and the ability to
manage sudden changes in power.



    Since our inception, we have raised $41,800,000 in cash from third-party
investors, including GE Capital Equity Investments, Inc., Penske Corporation,
Mechanical Technology Incorporated, SatCon Technology Corporation, DQE
Enterprises, Inc., Perseus Capital, L.L.C., Micro-Generation Technology Fund,
LLC and The Beacon Group Energy Investment Fund II, L.P. Through these
relationships, we expect to improve our technology, operations and manufacturing
practices, as well as our marketing, sales and distribution capabilities.


INDUSTRY DYNAMICS

    INCREASING DEMANDS FOR MORE RELIABLE, HIGHER QUALITY POWER


    Decentralized communications networks, the Internet and the information
economy are driving the increased demand for electricity, particularly the need
for electricity that is of higher quality, meaning fewer variations in voltage
and current, and reliability. The HUBER MILLS DIGITAL REPORT describes this kind
of power as that requiring reliability of 99.99999999%, or ten nines, which is
equivalent to outages of 3/1000 of a second per year. To put this into
perspective, the electric grid provides power at roughly 99.9%, or three nines,
of reliability, or equivalent to outages of about eight hours per year. The
traditional approach to providing high reliability power is to use batteries to
provide back-up powering when the utility power is lost either partially
(brown-outs) or completely (black-outs). For many applications, particularly
outdoor uses by communications providers, this approach does not meet the


                                       24
<PAGE>

reliability requirements, is costly, and is subject to the environmental hazards
of lead and acid contamination of soil and water.


    DISADVANTAGES OF CONVENTIONAL LEAD-ACID BATTERY-BASED SYSTEMS

    Lead-acid batteries provide back-up energy for most high reliability power
applications, including those in communications, and are viewed as the weakest
component of conventional power quality and reliability products. Lead-acid
batteries have numerous problems, including:

    LIMITED BATTERY LIFE AND CAPACITY

    - TEMPERATURE SENSITIVITY: Battery life rapidly degrades when batteries are
      exposed to extreme cold or heat. Batteries used for communications
      applications typically are not placed in climate-controlled environments
      and are therefore subject to extreme temperatures.

    - USAGE AND ENVIRONMENTAL SENSITIVITY: The capacity of a battery to store
      and supply energy is reduced by frequent discharging and recharging and
      exposure to hot and cold temperatures.


    LOW RELIABILITY


    - RELATIVELY HIGH FAILURE RATE: Batteries exposed to the environment,
      particularly hot climates, are prone to high failure rates.

    - INCREASED UNCERTAINTY BASED ON USAGE: When batteries are repeatedly
      discharged, their energy capacity can rapidly decrease, increasing the
      uncertainty that batteries can provide power when needed.

    HIGHER COST

    - HIGH MAINTENANCE: Batteries require regular inspections and periodic
      testing to determine problems and power output capacity, which lessens
      over time. Remote and decentralized powering has made the performance of
      maintenance and inspection very difficult, if not impossible.

    - FREQUENT REPLACEMENT REQUIRED: Batteries have a limited useful life and
      must be replaced every two to six years, on average, regardless of usage.
      Batteries that are used in non-controlled environments may need to be
      replaced more frequently. For example, in southern regions, where
      batteries are exposed to extreme, prolonged heat, some communications
      companies replace batteries within a year.

    ENVIRONMENTAL ISSUES

    - TOXICITY: Batteries contain chemicals of varying degrees of toxicity.

    - DISPOSAL: Disposal of dead batteries is governed by state and federal
      environmental regulations which are becoming increasingly rigorous and
      costly.

    - PERMITTING: State and local governments are increasingly requiring
      distributed equipment to be installed in the ground. However, most state
      and local governments do not permit in-ground installation of batteries
      because of concerns about spills of toxic substances.

MARKET OPPORTUNITIES FOR OUR FLYWHEEL PRODUCTS


    The Electric Power Research Institute, or EPRI, estimated that electric
power reliability problems cost the U.S. more than $50 billion annually.
Approximately $12 billion was spent worldwide in 1999 on power quality and
reliability equipment to address these problems. Mark Mills, one of the authors
of


                                       25
<PAGE>

THE HUBER-MILLS DIGITAL POWER REPORT, has estimated that sales of power
reliability products will expand at a market growth rate of approximately 30%
per year for the next 15 years. We believe that significant growth in demand for
power quality and reliability equipment will come from our targeted markets,
including:


    COMMUNICATIONS MARKETS

    Communications systems, which include telephony, broadband, cable and
wireless networks, must remain functional even during power outages or
disruptions. Most wire-line telephony providers design and equip their systems
to meet a goal of 100% reliability. Until recently, power was often provided
from central stations where lead-acid batteries typically provided back-up power
until a generator could be engaged. With the onset of the Internet and the
increased demand for telephone lines came an expanding demand for communications
bandwidth by customers. Recently, as fiber cables were used to provide the
increased bandwidth, powering began to be decentralized into suburban and rural
areas where the batteries are unattended and exposed to the environment. Because
batteries are less reliable and have a dramatically reduced life when used in a
non-climate controlled environment, the large-scale deployment of lead-acid
batteries in these areas is proving to be unsatisfactory.


    The SKYLINE MARKETING GROUP estimated that power quality and reliability
equipment sold into the North American communications markets in 1999 totaled
$1.6 billion. They further estimated that the North American market is 40% of
the global market. According to the SKYLINE MARKETING GROUP, the North American
communications powering market grew at a 19% annual rate in 1999 and is
projected to grow at a 13% to 14% compound annual rate over the next five years.



    According to THE ADVANCED LEAD-ACID BATTERY CONSORTIUM, in excess of
4 billion watt-hours of valve-regulated lead-acid batteries were sold to the
communications markets in the U.S. in 1997. At this rate, if flywheels displaced
these batteries, the U.S. communications powering market would require at least
2 million 2kWh-flywheels per year.


    COMPUTERS AND THE INTERNET MARKET

    To support the growth in the Internet economy, Internet service providers,
or ISPs, are building new computer and communication system facilities. As
24-hour operations have become a necessity, ISPs must be able to provide their
customers with continuous, uninterrupted operations. To meet this goal, ISPs are
adding power quality and power reliability equipment to protect these systems.
We will develop products to address the high power quality and reliability needs
of the new technology economy.

    INDUSTRIAL MANUFACTURING


    The growing reliance on automation equipment means that even a split-second
deviation in the voltage of electricity serving a manufacturing plant can cause
sensitive equipment to fail. This downtime can damage equipment and cause missed
deliveries and lost production, which can result in significant costs.


    COMMERCIAL FACILITIES

    Power instabilities are a threat to data processing centers, call centers,
telecommunication switching facilities, emergency services, hospitals and other
mission critical commercial facilities. Also, many commercial facilities such as
office buildings, hotels and universities have extensive computer, server and
data center operations to maintain corporate records and information. Flywheel
storage systems create the opportunity to provide more reliable and
cost-effective back-up power at these facilities.

                                       26
<PAGE>
    DISTRIBUTED GENERATION


    The combination of the reduction in the reliability of grid-provided
electricity, the need for higher reliability electrical power for the
information economy, and the demand for off-grid powering is expected to result
in a significant market for distributed generation products, including gasoline
or diesel generators, fuel cells and microturbines. Whether distributed
generation technologies are connected to the grid or are used off-grid, we
believe these technologies represent a significant potential market for our
next-generation flywheel energy storage products. For grid connected systems,
our flywheel systems will be designed to eliminate the inherent lag in
transferring a customer from utility power to fuel cell or microturbine stand-by
power in the event of a utility outage. For off-grid applications, our systems
will be designed to maintain power and voltage constancy.


OUR STRATEGY

    Our goal is to become the leading provider of flywheel energy storage
systems. To accomplish our objective, we are pursuing the following key
strategies:

    INITIALLY TARGET COMMUNICATIONS MARKETS WITH SUPERIOR PRODUCT OFFERINGS.  We
believe we are the only company to have designed, demonstrated and received
orders for a flywheel product for distributed communications sites. Our products
are specifically designed for the needs of the communications markets because
they store and deliver larger amounts of energy than other available flywheel
systems, have integrated low-cost vacuum systems, have bearings designed for
long life without maintenance, can be buried in the ground, and have reliable,
easy monitoring. We will similarly design our future products and solutions for
specific market applications.


    OVER THE LONGER TERM, EXPAND INTO OTHER SEGMENTS OF THE POWER QUALITY AND
RELIABILITY MARKETS.  We believe we can leverage our design, development and
manufacturing expertise in the communications markets to expand into other
markets, including back-up power flywheel systems for computers, the Internet,
industrial manufacturing, commercial facilities and distributed generation
products.



    LEVERAGE KEY CUSTOMER AND STRATEGIC RELATIONSHIPS TO ENHANCE OUR PRODUCT
DEVELOPMENT AND REDUCE PRODUCT COSTS.  We intend to leverage the relationships
we developed with potential customers including Bell Atlantic, now part of
Verizon Communications, WinDBreak Cable and Telcordia, during the definition,
development and testing of our 2kWh product. We will continue to work with our
other field trial partners to enhance our products and reduce costs.



    ESTABLISH KEY STRATEGIC RELATIONSHIPS TO AID IN OUR MARKETING AND
DISTRIBUTION EFFORTS.  We intend to expand our alliances with potential
distributors for installation and support throughout North America and the rest
of the world. We have an agreement with DQE Enterprises, Inc., one of our
investors, to act as a distributor of our flywheel products in certain
mid-Atlantic states. DQE Enterprises, Inc. is a subsidiary of DQE, Inc., one of
the leading utilities engaged in the development and commercialization of new
energy technologies. We intend to explore possible relationships with other
potential strategic partners.



    PROTECT OUR INTELLECTUAL PROPERTY.  We hold a perpetual, exclusive,
royalty-free, worldwide right and license to use SatCon's existing flywheel
technologies and patents for stationary terrestrial flywheel applications. Those
rights include 8 issued U.S. patents and 13 U.S. and foreign patent applications
that expire on various dates between 2012 and 2018. We also have one pending
U.S. patent application and 10 other applications being prepared for filing. Our
patent and trade secret rights are of material importance to us, and to our
future prospects. We are actively pursuing both national and foreign patent
protection. At the direction of our board of directors, our management has
formed a patent committee that is charged with identifying and seeking patent
protection for our intellectual property. We also aggressively protect our trade
secrets and technical know-how.


                                       27
<PAGE>
OUR COMPETITIVE ADVANTAGES

    We intend to capitalize on our competitive advantages, including:

    PRODUCTS UNIQUELY DESIGNED FOR THE COMMUNICATIONS MARKETS.  We believe that
we are the only flywheel energy storage company focusing on the needs of
communications customers, particularly for remote and distributed applications.
We believe that our flywheel products are a unique fit to be used for back-up
powering for distributed locations in the communications markets for a number of
reasons, including:

    - We believe that we are the only company to have developed a product with
      an adequate level of energy storage to meet the needs for back-up powering
      of communications sites. Our composite flywheels provide a minimum of 2kWh
      of energy. Most communications sites require at least that level of
      energy.

    - Our flywheels have very low operating power losses which make it possible
      to efficiently provide back-up power for long periods of time.

    - Our flywheel units can be installed in the ground. State and local
      governments, as well as customers, increasingly are requiring
      communications and other equipment to be installed in the ground for cost,
      environmental and aesthetic reasons. However, most do not permit in-ground
      installation of batteries because of the potentially harmful releases of
      substances into the environment.

    - Our systems have a built-in, long-life, low-cost vacuum system that
      automatically restarts if the power is completely lost.

    - We expect our units to operate for many years, possibly for more than a
      decade, without planned maintenance.


    SUCCESSFUL PRODUCT DEMONSTRATIONS.  We believe that our field trial
demonstrations at Verizon Communications, Century Communications, now part of
Adelphia Communications, WinDBreak Cable and Telcordia were the first to
demonstrate the potential effectiveness of flywheel energy storage systems as an
alternative to lead-acid batteries in the communications industry. We expect
that these and future on-site demonstrations will lead to additional,
significant commercial orders from those and other customers.


    TECHNOLOGICAL LEADER.  We believe that our flywheels store and deliver more
energy than those of other flywheel companies. Compared to other flywheel
systems, our flywheel systems also have integrated vacuum systems, very low
stand-by operating losses, and bearing systems designed for long life without
maintenance. We believe that we have assembled a superior engineering team that
will expand our technical know-how, patents, and trade secrets that in turn will
provide us with the following significant advantages over our competition:

    - Expertise in the design of high-speed rotating machinery, in the analysis
      and synthesis of structural and rotational mechanical components, and in
      the design and manufacture of composite technology that we believe will
      lead to low-cost flywheels;

    - Unique bearing technology that we believe will result in very low-cost,
      long-life bearing systems;

    - Applications for patents on our vacuum apparatus that our test results
      indicate will provide a vacuum life of up to 20 years;

    - Engineering and manufacturing team skilled in aircraft engine safety
      design which we utilize in development of our flywheels; and

                                       28
<PAGE>
    - Our composite flywheels have significant advantages over flywheels made of
      other materials such as steel.


    EXPERTISE IN DESIGN AND MANUFACTURING PROCESSES.  We have recruited and
attracted experienced, top quality manufacturing management and engineering
personnel to develop low-cost, high quality manufacturing processes. In
addition, we have supply relationships with established companies and are
working closely with them to provide design drawings and processes in order to
maintain tight control over the manufacturing process.


    STRONG AND EXPERIENCED MANAGEMENT TEAM.  We have a very capable and
experienced management team. Our management and engineering personnel
collectively have extensive experience working for high technology companies,
including The Charles Stark Draper Laboratory, Inc., General Electric Company,
International Business Machines Corporation, Textron Inc. and United
Technologies Corporation. We believe that this managerial and technical
knowledge and expertise gives us advantages over our competition.

    WE DESIGN AND TEST OUR SYSTEMS WITH SAFETY IN MIND.  All storage of energy
and the operation of any machinery involves some risk. In order to efficiently
store energy, a flywheel rotates at high speeds. To assure safe operation of our
flywheels, we have developed proprietary technology designed to ensure that the
flywheel will never spin faster than intended. In addition, we take special
design and manufacturing precautions to assure that failure of the composite rim
within operating speed is very improbable. In the very unlikely event of a
rotating metal component failure, we have designed our flywheel system to slowly
release energy in rotation in a manner analogous to the crumpling of a car in an
accident. We use a design, fabricate, test and redesign program to assure that
our flywheels meet the most stringent safety criteria. Our flywheel safety
concept has been successfully demonstrated in failure testing. In addition,
during the early years of installation, our flywheels will be installed in the
ground. There, even the extremely low probability of failure of the rotating
elements will be contained by the earth.

    OUR FLYWHEEL SYSTEMS HAVE ADVANTAGES OVER OTHER TECHNOLOGIES.  We believe
our flywheels will offer significant advantages over conventional back-up power
systems used by communications service providers, such as those with lead-acid
batteries. We expect these technological advantages to include higher
reliability, longer life, lower life-cycle cost, improved recharging capability,
reduced maintenance, more reliable monitoring and environmental-friendliness. We
also believe that our flywheel systems will be used in conjunction with gasoline
and diesel generators, fuel cells, microturbines and other distributed power
generators to provide benefits that are not available from these products alone,
such as an instant-on capability and the ability to manage sudden changes in
power.

OUR PRODUCTS

    Our initial product will provide 2kWh of energy at up to 1 kilowatt of
power. Our 2kWh flywheel would provide back-up power for 10 hours to a
telecommunications site that requires 200 watts of power. For a site using the
full 1 kilowatt capacity of the conversion electronics, the flywheel would
back-up a site for 2 hours. At Verizon Communications, Century Communications,
now part of Adelphia Communications, and WinDBreak Cable, we have successfully
maintained power during loss of utility power with no degradation of service in
planned and unplanned tests. The amount of power and time can be increased by
paralleling flywheels as was done at the Verizon Communications site.


    To meet a broad set of applications, we intend to build a set of powering
modules ranging from 20W to 250kW of power and a set of flywheel modules ranging
from 200W to 20kWh of energy. By combining a relatively small set of powering
modules with a similarly small set of energy modules, we intend to create a
broad set of products to meet a variety of application requirements. We are
currently developing a 4kWh flywheel product and intend to deliver our first
demonstration units in 2001.


                                       29
<PAGE>

Beyond that we intend to produce an 8kWh flywheel and then a 20kWh flywheel. We
developed a laboratory version of a 30kW system for the U.S. Marine Corps on our
2kWh flywheel that provides four minutes of back-up power. The intended future
application of that product is to maintain power until the diesel generator
starts and to meet peak power requirements that exceed the capability of the
generator. Our product vision also includes a 200 watt-hour unit to maintain the
powering interface device for fiber or wireless to the home and a 250kW, 2kWh
device that will provide power for generator starts and short-term transient
protection. The following table indicates the expected characteristics and the
potential applications for each of these products:



<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
<S>                        <C>              <C>                      <C>
                              POWER RELIABILITY AND POWER QUALITY FLYWHEEL PRODUCTS

<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                             MAXIMUM
ENERGY OUTPUT              POWER OUTPUT      MINIMUM BACK-UP TIME                     TARGET MARKETS
-------------------------------------------------------------------------------------------------------------------
<S>                        <C>               <C>                       <C>
    2kWh                    1kW                  2 hours               Communications

-------------------------------------------------------------------------------------------------------------------
    4kWh                    1kW                  4 hours               Communications

-------------------------------------------------------------------------------------------------------------------
    8kWh                    1kW                  8 hours               Communications

-------------------------------------------------------------------------------------------------------------------
    20kWh                   10kW                 2 hours               Communications
                                                                       Computers and the Internet
                                                                       Commercial Facilities
                                                                       Industrial Manufacturing
                                                                       Distributed Generation

-------------------------------------------------------------------------------------------------------------------
    200 watt-               25 watts             8 hours               Communications
      hours

-------------------------------------------------------------------------------------------------------------------
    2kWh                    30kW                 4 minutes             Computers and the Internet
                                                                       Industrial Manufacturing
                                                                       Commercial Facilities
                                                                       Distributed Generation
                                                                       Communications

-------------------------------------------------------------------------------------------------------------------
    2kWh                    250kW                30 seconds            Computers and the Internet
                                                                       Industrial Manufacturing
                                                                       Commercial Facilities
                                                                       Communications

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


                                       30
<PAGE>
PRODUCT MILESTONES


    We plan to continue to refine our product design and assembly processes over
the remainder of 2000. To do this, we intend to produce and test 25 to 50 of our
2kWh flywheel energy storage systems during 2000. We have achieved and intend to
achieve the following major milestones:



<TABLE>
<CAPTION>
DATE                                   MILESTONE
----                                   ---------
<S>                                    <C>
June 1997............................  Began developing 2kWh demonstration units

September 1997.......................  Received first order for two demonstration units from San
                                       Diego Gas & Electric Company (SDGE)

September 1998.......................  Installed first demonstration unit at WinDBreak Cable

December 1998........................  Operated a demonstration unit via the Internet at Century
                                       Communications, now part of Adelphia Communications, for the
                                       Western Cable show

January 1999.........................  Installed two units at Verizon Communications

December 1999-June 2000..............  Received orders from TLER Associates, Ltd., Cox, and EPRI
                                       for 115 commercial units

June 2000............................  Began development of 4kWh system

Fourth quarter of 2000...............  Relocate to new facility

2001.................................  Begin production in new facility

                                       Begin deliveries to TLER and other customers

                                       Deliver prototype 4kWh systems
</TABLE>



    As discussed under "Our Products" on the prior pages, our business plan
contemplates the development of higher and lower energy products and of higher
power products. We may experience delays in the development and
commercialization of those products if our systems exhibit technical defects or
are unable to meet cost or performance goals, which could have a material
adverse effect on the success of our business.


OUR TECHNOLOGY

    Since our formation, we have been developing a flywheel energy storage
system to offer customers superior reliability and performance at a lower life
cycle cost. The flywheel is a rotating wheel on magnetic bearings that operates
in a near frictionless vacuum environment. Energy is stored as mechanical or
kinetic energy in the rotating flywheel rim. The flywheel is powered up to its
operational speed, like a motor, using electricity from a power source. The
flywheel is able to spin for extended periods with great efficiency, because the
friction and drag are virtually eliminated by employing magnetic bearings and a
vacuum in the container. Because it has very low friction, little power is
required to maintain the flywheel's operating speed. When the power source is
eliminated, the spinning flywheel drives a motor or generator, and its
bi-directional inverter converts the kinetic energy into electrical energy,
providing it to an end-user just as a battery back-up system would do. This
conversion continues, and the flywheel slows, until the electricity is
discharged.

                                       31
<PAGE>

[This figure shows how a flywheel fits into the process of delivering
electricity from a power source to an end-user. Specifically, the figure shows
electricity being generated by a power source, the elimination of the power
source due to a catastrophic environmental event, the immediate conversion of
kinetic energy into electrical energy by the flywheel and the continuous
delivery of electricity to an end user.]



    Flywheels have been used in commercial applications since the industrial
revolution. Recent attempts at commercializing flywheel systems have been based
on technology developed for aerospace applications that attempt to maximize the
amount of stored energy with the minimum system weight. Compact high-energy
flywheels that can be commercially cost competitive are a recent development. We
are using new enabling materials and products such as high-strength fiber,
efficient electric drives, and high performance magnetic bearings to create new
generations of flywheel products. Our flywheels are fabricated from
high-strength, lightweight fiber composites, such as graphite and fiberglass,
which allow the flywheel to rotate at high speeds and store large amounts of
energy relative to similar size and weight machines made from metals. For
example, a 600-pound steel flywheel running at 8,000 revolutions per minute, or
RPM, will store approximately 900 watt-hours of energy. In contrast, our
150-pound, composite flywheel running at 22,500 RPM stores 2,700 watt-hours of
energy and delivers 2,000 watt-hours of energy to the load. On a per pound
basis, storing more energy with steel flywheels is difficult. We believe we can,
over time, nearly double the speed of our composite flywheel product.
Composites, which already have superior energy storage per pound to steel, have
the potential for significant increases in energy storage per pound.


RESEARCH AND DEVELOPMENT


    We believe that our research and development efforts are essential to our
ability to successfully deliver our products to our targeted communications
customers, as well as our next generation of products to customers in the
computer, Internet, industrial manufacturing, commercial facilities and
distributed generation markets. Our research and development team has worked
closely with potential communications customers to define product features and
performance to address specific needs. Our research and development expenses,
including engineering expenses, were $3,523,572 in 1998, $3,506,031 in 1999 and
$2,762,998 in the first six months of 2000. We anticipate maintaining
significant levels of research and development expenditures in the future. At
June 30, 2000, we employed 31 engineers and technicians who were engaged in
research and development.


MANUFACTURING

    We will initially have most components of our flywheel systems contract
manufactured to our design drawings and processes in order to facilitate more
rapid growth by taking advantage of installed manufacturing capacity. For a
limited number of non-proprietary components, we will generate performance
specifications and obtain either standard or custom components. We will perform
the final assembly and testing. Many of our manufacturing staff have been
trained in and are skilled in six sigma quality control techniques. Six sigma is
a strategic implementation of total quality management principles. We expect to
make these skills a key element of our manufacturing strategy to develop and
maintain production processes that result in high-quality, low-cost products.

    The energy storage portion of our flywheels, the rim, is made from
composites, a combination of fibers and resins, as an alternative to
conventional metals. The rim is the most expensive component in our system.
While we outsource the manufacture of the composite rims, we will continuously
evaluate whether to continue this outsourcing or to manufacture the rims
ourselves. To this end, we are building a state-of-the-art composite
flywheel-manufacturing laboratory to:

    - accelerate the rate of cost reduction;

    - assume increased control over composites, intellectual property and the
      associated manufacturing processes; and

                                       32
<PAGE>
    - enable us to manufacture the rim if that proves to be the most efficient
      course.

    To manage cost and supplier risk, we are positioning ourselves so that we
will be able to manufacture composite rims beginning in 2002. To accomplish
this, we have hired personnel skilled in business management, design, and the
manufacturing of composites. These people, using our composite laboratory and
suppliers, are evaluating manufacturing processes and developing both the
equipment and personnel skills required to manufacture the rims ourselves.


    We currently rely on outside suppliers for the supply of several of the key
components for our products, including the composite rim, the electronics and
housing. We have not entered into any formal or informal agreements with any of
our suppliers. While the loss of supply from any one of our suppliers could
impact our ability to produce and sell our systems and thus our financial
results, we believe that we can replace any supplier with a new supplier. As
timing and volume merit, we will develop long-term supply contracts with certain
of our suppliers.


SALES AND MARKETING

    We intend to market our products as highly reliable power systems that
exceed our customers' requirements. By combining superior products with
excellent customer service, we intend to become the market leader in the
communications markets for flywheel energy storage products.


    In the communications markets, we expect to sell directly to our customers.
Our initial sales and marketing strategy is to identify key prospects in the
communications markets, and to work with those companies to formulate our
product plan, pricing, initial installation and service strategies. We have
conducted on-site demonstration testing at four of these companies, Verizon
Communications, Century Communications, now part of Adelphia Communications,
WinDBreak Cable and Telcordia, in order to begin the buying cycle and to
accelerate sales volume. We plan to expand these activities with other potential
customers beginning in the fourth quarter of 2000.



    Since the communications markets consist of a relatively small number of
customers, initial sales will be made directly by means of our sales force. As
sales volume expands, this sales force will be expanded as appropriate. We will
also consider the use of manufacturer's representative organizations and
strategic alliances with original equipment manufacturers.


CUSTOMER SERVICE

    We intend to use customer service to meet and exceed our customers'
requirements. We will intensively support installation and operation of our
flywheel systems. We intend to develop superior installation, operation, and
maintenance manuals for our customers and to provide them with excellent
training in all aspects of using flywheel systems. During the first few years we
will perform monitoring and diagnostics on our installed systems.

COMPETITION

    Back-up power is provided today by lead-acid batteries or generators. We may
compete with:

    - manufacturers and developers of battery technologies, such as Exide
      Corporation, C&D Technologies Inc., Yuasa, Inc. and Fiamm;

    - developers of flywheel technology such as Active Power, Inc., Trinity
      Flywheel Power, U.S. Flywheel Systems and Acumentrics;

    - developers of fuel cell products such as Ballard Power Systems, Inc., Plug
      Power, Inc., Hydrogenics Corporation, H Power Corporation and Proton
      Energy Systems, Inc.;

                                       33
<PAGE>
    - manufacturers of internal combustion generators such as
      Caterpillar, Inc., Cummins, Inc. and Generac Power Systems, Inc.; and

    - developers of microturbine products such as Capstone Turbine Corporation
      and Honeywell Inc.

    The power quality and power reliability markets are intensely competitive,
with the principal bases for competition being system reliability and quality,
price, including the initial cost of the system to the customer and the total
cost of ownership, and brand recognition.

INTELLECTUAL PROPERTY

    Our success and ability to compete are dependent on our ability to develop
and maintain the proprietary aspects of our technology and operate without
infringing on the proprietary rights of others. We rely on a combination of
patent, trademark, trade secret and copyright law and contract restrictions to
protect the proprietary aspects of our technology. We seek to limit disclosure
of our intellectual property by requiring employees, consultants, and any third
parties with access to our proprietary information to execute confidentiality
agreements and by restricting access to that information. These legal
protections afford only limited protection for our technology.


    We hold a perpetual, exclusive, royalty-free, worldwide right and license to
use SatCon's flywheel technologies and patents for stationary terrestrial
flywheel applications. Those rights include 8 issued U.S. patents and 13 U.S.
and foreign patent applications that expire on various dates between 2012 and
2018. This license covers SatCon's technologies and patents and all improvements
made by SatCon through the date of this offering. We will not be entitled to any
future improvements to its flywheel technology that SatCon develops after the
offering. We also have one pending U.S. patent application, and 10 other
applications being prepared for filing. Our patent and trade secret rights are
of material importance to us, and to our future prospects. We are actively
pursuing both national and foreign patent protection. At the direction of our
board of directors, management has established a patent committee that is
charged with pursuing the protection of intellectual property.


GOVERNMENT REGULATION

    We do not believe that we will be subject to existing federal and state
regulatory commissions governing traditional electric utilities and other
regulated entities. We do believe that our products and their installation will
be subject to oversight and regulation at the local level in accordance with
state and local ordinances relating to building codes, safety, pipeline
connections and related matters. We intend to encourage the standardization of
industry codes to avoid having to comply with differing regulations on a
state-by-state or locality-by-locality basis.

FACILITIES

    Our principal executive offices, laboratory and manufacturing facilities are
located at a single location in Woburn, Massachusetts. These three facilities,
that in combination are approximately 20,000 square feet, operate under leases
that expire on January 31, 2001. We have signed a lease and expect to move into
a larger, approximately 52,000-square foot facility in the Wilmington,
Massachusetts area in the second half of 2000 in order to house our growing
engineering, research and development, sales and marketing, and management
personnel and to provide adequate space for manufacturing and the composites
laboratory. If our production growth meets our expectations, we will not require
additional space until 2003. At that time, we could require an additional 50,000
to 70,000 square feet in order to expand our production capacity for assembly
and testing of units.

                                       34
<PAGE>
EMPLOYEES

    As of June 30, 2000, we had a total staff of 62 full-time employees and one
independent contractor, of which approximately 46 were engineers, scientists,
and other degreed professionals. Our plan is to add another 20 to 30 employees
by the end of 2000. None of our employees are represented by a union. We
consider our relations with our employees to be excellent.

LEGAL PROCEEDINGS

    We may from time to time be involved in legal proceedings in the ordinary
course of our business. We have not been and are not currently involved in any
legal proceedings.

                                       35
<PAGE>
                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS


    Our executive officers and directors, their positions and their ages as of
September 22, 2000, are as follows:



<TABLE>
<CAPTION>
NAME                                     AGE      POSITION
----                                   --------   --------
<S>                                    <C>        <C>
William E. Stanton...................     57      President and Chief Executive Officer, Director
Matthew L. Lazarewicz................     50      Vice President of Engineering
Maureen A. Lister....................     38      Vice President of Operations Management and Chief
                                                  Administrative Officer
Robert D. French.....................     60      Vice President of Manufacturing
James M. Spiezio.....................     52      Vice President of Finance and Chief Financial Officer
Kenneth M. Socha(1)..................     54      Director
Philip J. Deutch.....................     35      Director
David B. Eisenhaure..................     54      Director
Eric R. Stoltz(1)....................     42      Director
Hans Kobler(2).......................     35      Director
Alan P. Goldberg(2)..................     55      Director
</TABLE>


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


(1) Member of the Compensation Committee.



(2) Member of the Audit Committee.


EXECUTIVE OFFICERS


    WILLIAM E. STANTON.  Mr. Stanton has served as our President and Chief
Executive Officer since January 1998 and our director since 1997. Prior to
January 1998, he served as our general manager. Prior to joining Beacon,
Mr. Stanton was the Chief Operating Officer of SatCon from September 1995 to May
1997, where he managed operations and the strategy development to convert SatCon
from a contract research and development company to a commercial product
organization. This strategy included the formation of Beacon Power. Prior to
joining SatCon, Mr. Stanton was one of two Vice Presidents of Operations at the
Charles Stark Draper Laboratory where he managed between $50,000,000 and
$75,000,000 of contract research and development annually. At Draper, he had
also served as the Vice President of Corporate Development, where he led
strategic planning, developed and managed a $25,000,000 annual corporate
research and development program, and helped create new business units that were
generating over $30,000,000 in software and avionics products annually.
Mr. Stanton received a Bachelor's Degree in Electrical Engineering from the
University of Maine, a Master's Degree in Instrumentation and Control from the
Massachusetts Institute of Technology, and an Master's in Business
Administration from the Harvard Business School. Mr. Stanton's term of office as
director expires in 2004.



    MATTHEW L. LAZAREWICZ.  Mr. Lazarewicz has served as our Vice President of
Engineering since February 1999. Prior to joining us, Mr. Lazarewicz worked for
General Electric Company in various capacities. He started his 25-year career
with the General Electric Company in the gas turbine division as a design
engineer. After a transfer to GE Aircraft Engines, he progressed through a
variety of positions in design, manufacturing, quality, marketing, and product
support in both military and commercial applications. Most recently he served as
a manager of program independent analysis from 1996 to 1999, and he was the
mechanical design manager for the F414 engine used in the Navy front line F/A18
fighter using concurrent engineering practices from 1991 to 1996. This included
the development through production phases. He won the GE Aircraft Engines
"Engineer of the Year" and the Department of Defense "Excellence in Acquisition"
Awards for his leadership of this project.


                                       36
<PAGE>

Mr. Lazarewicz is a Registered Professional Engineer in the Commonwealth of
Massachusetts and received both Bachelor's and Master's Degrees in Mechanical
Engineering from the Massachusetts Institute of Technology. Mr. Lazarewicz also
completed his Master's Degree in Management at the Massachusetts Institute of
Technology Sloan School of Management.



    MAUREEN A. LISTER.  Ms. Lister serves as our Vice President of Operations
Management and Chief Administrative Officer. She joined us as Vice President,
Chief Financial Officer, Treasurer and Secretary, in March 1998 responsible for
all aspects of finance including fund raising and investor relations. Prior to
joining us, Ms. Lister was Vice President and Chief Financial Officer at
Priscilla of Boston, Inc., a manufacturing and retail operation with $10,000,000
in annual revenues, from November 1996 to February 1998, where she was
responsible for all aspects of financial and treasury management. Prior to
joining Priscilla of Boston, Inc., Ms. Lister served as Chief Financial Officer
at Cahners Direct Marketing Systems, a $35,000,000 direct mail business, from
August 1995 to November 1996, where she was responsible for all aspects of the
business including financial reporting and mergers and acquisitions. Prior to
Cahners, she held the position of Vice President of Finance and Operations with
Rigby, a $32,000,000 publisher and distributor, from August 1991 to August 1995,
where Ms. Lister was responsible for joint venture activity, warehouse and
distribution as well as the establishment of an employee run retail store.
Ms. Lister holds a Bachelor of Science in Finance (with Honors) from
Northeastern University and an Master's of Business Administration from DePaul
University.



    ROBERT D. FRENCH.  Mr. French joined us in April 2000 as Vice President of
Manufacturing at Beacon and is responsible for the definition and growth of all
phases of production. His most recent position was with General Electric
Aircraft Engines, where he worked from 1995 to 2000, and involved transitioning
the U.S. Navy's newest fighter engine, the F414, from development to full
production. Prior to this, Mr. French was part of GE Aircraft Engines in the
building and operating of an automated factory for jet engine components and
held positions as Manager of Engine Assembly and Flight Support and as
Manufacturing Program Manager for several engine product lines. His professional
career began with the U.S. Army Materials and Mechanics Research Center,
progressing from Metallurgist to Director of the Metals and Ceramics Laboratory
and transitioning technology from basic research through manufacturing process
development. Dr. French received his Bachelor's and Master's Degrees in
Mechanical Engineering from Northeastern University and his Ph.D. in
Engineering, with a major in Materials Science, from Brown University.



    JAMES M. SPIEZIO.  Mr. Spiezio joined us in May 2000. He has served as our
Vice President of Finance and Chief Financial Officer since July 2000 and our
corporate controller from May 2000 to July 2000. He worked as a financial
consultant from November 1999 to May 2000. He has over twenty-five years of
diversified manufacturing and financial management experience. Prior to acting
as an independent financial consultant, Mr. Spiezio was the Chief Financial
Officer at Starmet Corporation, a diversified metallurgical manufacturing
company, from January 1993 to November 1999. While at Starmet he also served as
President of a wholly-owned manufacturing facility for five years and held
additional financial management positions including Corporate Controller and
Manager Planning and Analysis. Prior to joining Starmet, Mr. Spiezio held
financial management positions with United Technologies Corporation, Pratt &
Whitney Aircraft Group in accounting, cost and business analysis. Prior to
Pratt & Whitney, Mr. Spiezio held financial management positions with General
Electric Company in both the Power Systems and Apparatus Services business
groups. Mr. Spiezio is a graduate of the Indiana University School of Business.


NON-MANAGEMENT DIRECTORS


    KENNETH M. SOCHA.  Mr. Socha has served as Senior Managing Director of
Perseus Capital since 1992. He practiced corporate and securities law from 1970
to 1992, and was one of the founders of The Clarion Securities Group
Incorporated, a registered broker-dealer and a NASD member. He resigned


                                       37
<PAGE>

as President of Clarion Securities in 1985 to return to the practice of law full
time as a partner of the New York office of Lane & Edson, and became a partner
of Dewey Ballantine LLP in New York City in 1988. Mr. Socha left Dewey
Ballantine LLP in February 1992 to devote additional time to Rappahannock
Investment Company, which he had joined in May 1991 as Executive Vice President.
Mr. Socha serves on the board of directors of MGI Software. Mr. Socha is a
graduate of the University of Notre Dame and the Duke University School of Law.
Mr. Socha has served as a Director since October 1998 and serves as Chairman of
our Compensation Committee. Mr. Socha's term of office expires in 2004.



    PHILIP J. DEUTCH.  Mr. Deutch has served as a Managing Director of Perseus
since 1997. In this position, Mr. Deutch has led Perseus' investments in
numerous energy technology companies. From 1991 to 1997, Mr. Deutch was an
attorney at Williams & Connolly LLP. Mr. Deutch worked in the Mergers and
Acquisitions Department of Morgan Stanley Dean Witter & Co. in New York City. In
this position, Mr. Deutch was a member of execution teams for acquisitions,
divestitures, and leveraged buyouts. Mr. Deutch is a graduate, with distinction,
of Stanford Law School and of Amherst College where he was elected a member of
Phi Beta Kappa.   Mr. Deutch is a term member of the Council of Foreign
Relations and a Trustee of the Washington Performing Arts Society. Mr. Deutch
has served as a Director since October 1998. Mr. Deutch's term of office expires
in 2002.



    DAVID B. EISENHAURE.  Mr. Eisenhaure has served as President, Chief
Executive Officer, and Chairman of the board of directors of SatCon since 1985.
Prior to founding SatCon, Mr. Eisenhaure was associated with the Charles Stark
Draper Laboratory from 1974 to 1985, and with its predecessor, the Massachusetts
Institute of Technology's Instrumentation Laboratory, from 1967 to 1974.
Mr. Eisenhaure holds S.B. and S.M. degrees in Mechanical Engineering, as well as
a Mechanical Engineering degree, from the Massachusetts Institute of Technology.
In addition to his duties at SatCon, Mr. Eisenhaure holds an academic position
at M.I.T., serving as a lecturer in the Department of Mechanical Engineering.
Mr. Eisenhaure also has served on the board of directors of Mechanical
Technology, Incorporated since 1997. Mr. Eisenhaure has served as a director
since our inception in May 1997. Mr. Eisenhaure's term of office expires in
2004.



    ERIC R. STOLTZ.  Mr. Stoltz serves as a Vice President and as Treasurer of
DQE Enterprises, Inc., a wholly owned subsidiary of DQE, Inc., which acquires
and develops businesses involved in energy services and technologies,
communications and electronic commerce. Mr. Stoltz is responsible for
identifying and managing strategic investment opportunities. Mr. Stoltz has
served in various management positions within DQE since 1988, including business
development, marketing and real estate. Mr. Stoltz has served as Vice President
of DQE Enterprises, Inc. since February 1999 and as Treasurer of DQE
Enterprises, Inc. since July 1999. He has also served as President of Property
Ventures Ltd., a wholly-owned subsidiary of DQE Enterprises, Inc., since
February 1999. Previously, he had served as Vice President of Property Ventures
Ltd. and as a Director of DQE Enterprises, Inc. from January 1998 to January
1999. He also served as a Director of Property Ventures Ltd. from January 1994
to December 1997. Mr. Stoltz holds a Master's in Business Administration from
Carnegie Mellon University. Mr. Stoltz has served as a Director since
October 1999 and currently serves as a member of the Compensation Committee.
Mr. Stoltz's term of office expires in 2003.



    HANS KOBLER.  Mr. Kobler has served as Vice President at GE Equity since
February 1999. As head of the Energy Technology Group, he oversees GE Equity's
investment efforts in New Energy Technologies. Before that, Mr. Kobler served as
Chief Quality Officer for GE Equity from July 1997 to January 1999. From July
1993 to July 1997 Mr. Kobler was a strategy consultant with Bain & Company in
their Boston, Munich and Sydney offices. Mr. Kobler holds a Master's degree in
Aerospace Engineering from the Technical University of Munich as well as a
Master's in Business Administration from the University of Texas at Austin and
the I.N.S.E.A.D. in Fontainebleau. Mr. Kobler has served as


                                       38
<PAGE>

a director since June 2000 and currently serves as a member of the Audit
Committee. Mr. Kobler's term of office expires in 2003.



    ALAN P. GOLDBERG.  Mr. Goldberg joined us as a director in June 2000.
Mr. Goldberg has served as President and Co-Chief Executive Officer of First
Albany Companies Inc., an investment bank, since 1993 and as a Director of First
Albany Companies Inc. since 1985. Mr. Goldberg also has served on the board of
directors of Mechanical Technology, Incorporated since 1996 and of SatCon since
1999. Mr. Goldberg is active in industry and civic organizations and serves on
the board of several non-profit institutions. He received a B.A. degree in
Government from Tufts University. Mr. Goldberg has served as a director since
June 2000 and currently serves as a member of the Audit Committee.
Mr. Goldberg's term of office expires in 2002.


BOARD COMPOSITION

    Our board of directors currently consists of seven members, six of whom are
outside directors. By agreement of our stockholders, two members are currently
designated by Perseus Capital, one member is designated by DQE Enterprises, one
member is designated by SatCon, one member is designated by GE Equity and one
member is designated by Mechanical Technology. The seventh member of Beacon's
board of directors is Mr. Stanton, our President and Chief Executive Officer.
The agreement among stockholders to vote for these directors terminates upon
consummation of the offering.

    There are no family relationships among any of our directors or executive
officers.

BOARD COMMITTEES

    The members of the audit committee are responsible for recommending to the
board of directors the engagement of our independent auditors and reviewing our
accounting controls and the results and scope of audits and other services
provided by our auditors. The current members of the audit committee are
Messrs. Deutch and Stoltz.

    The compensation committee is responsible for reviewing and recommending to
the board of directors the amount and type of non-stock and stock compensation
to be paid to senior management and establishing and reviewing general policies
relating to compensation and benefits of employees. The current members of the
compensation committee are Messrs. Socha and Stoltz.

DIRECTOR COMPENSATION

    Directors who are employees receive no additional compensation for their
services as directors. Following consummation of this offering, we intend to
compensate our outside directors in a manner that is competitive with comparable
public companies.

EXECUTIVE COMPENSATION

    The following table sets forth the total compensation paid in the years
ended December 31, 1999 and 1998 and for the period beginning on the date of our
inception through December 31, 1997 to our chief executive officer and our other
executive officers whose aggregate compensation exceeded $100,000.


TERM OF OFFICE FOR OUR EXECUTIVE OFFICERS



    Our officers serve until their successors are appointed by our board of
directors.


                                       39
<PAGE>
                         SUMMARY COMPENSATION TABLE (1)


<TABLE>
<CAPTION>
                                                               ANNUAL COMPENSATION
                                                               --------------------       SECURITIES
NAME AND PRINCIPAL POSITION                           YEAR     SALARY($)   BONUS($)   UNDERLYING OPTIONS
---------------------------                         --------   ---------   --------   ------------------
<S>                                                 <C>        <C>         <C>        <C>
William E. Stanton................................    1999     $157,769      -0-            190,000
  President and Chief Executive Officer               1998      157,500      -0-                -0-
                                                      1997      105,000      -0-            180,000
Matthew L. Lazarewicz(2)..........................    1999     $113,723      -0-            250,000
  Vice President of Engineering
</TABLE>


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

(1) Columns required by the rules and regulations of the Securities and Exchange
    Commission that contain no entries have been omitted.

(2) We hired Mr. Lazarewicz in February 1999.

STOCK INCENTIVE PLAN

    SECOND AMENDED AND RESTATED 1998 STOCK INCENTIVE PLAN


    Our Second Amended and Restated 1998 Stock Incentive Plan was adopted by our
board of directors and shareholders on June 5, 2000 as an amendment and
restatement of our Amended and Restated 1998 Stock Incentive Plan. A total of
9,000,000 shares of our common stock are authorized and reserved for issuance
under the stock incentive plan.


    The stock incentive plan was adopted to advance the interests of our
shareholders by enhancing our ability to attract, retain and motivate employees,
officers, directors, consultants and advisors who make important contributions
to us by providing such persons with equity ownership. The plan permits our
board of directors or a committee of the board of directors to make various
long-term incentive awards as described below, generally equity-based, to
eligible persons.

    Our board of directors or a committee of our board of directors administers
the stock incentive plan. The administrator has the authority, consistent with
the terms of the plan, to determine the persons to whom awards are granted and
all the terms and conditions of those awards. The administrator has the
authority to construe and interpret the terms of the plan and the awards granted
under it, and has the power to amend and terminate the plan at any time without
shareholder approval except to the extent that the law requires shareholder
approval. Unless terminated sooner by the board of directors, the stock
incentive plan will terminate automatically in 2008, on the tenth anniversary of
its adoption by our shareholders.


    The stock incentive plan authorizes the administrator to grant awards in the
form of incentive stock options, within the meaning of Section 422 of the United
States tax code, nonstatutory stock options, restricted stock purchase rights
and other awards of our common stock having such terms and conditions as the
board of directors determines, including grants of shares of our common stock
upon certain conditions, grants of securities convertible into shares of common
stock and grants of stock appreciation rights. While incentive stock options may
be granted only to employees, including officers and employee directors, all
other awards may be granted to employees, consultants and non-employee
directors. No participant will be granted an award to purchase more than 900,000
shares of common stock per calendar year.


    The exercise price per share of incentive stock options granted under the
stock incentive plan must be at least equal to the fair market value of a share
of our common stock on the date of grant, while the exercise price per share of
nonstatutory stock options will be determined by our board of directors.
However, the exercise price per share of an incentive stock option granted to
any participant who owns stock possessing more than 10% of the voting power of
all classes of our outstanding capital stock or that of any subsidiary
corporation must equal at least 110% of the fair market value of a share of our

                                       40
<PAGE>
common stock on the grant date, and the term of that incentive stock option must
not exceed five years. The terms of all other options granted under the stock
incentive plan may not exceed ten years. The aggregate fair market value
(determined as of the date of grant) of our common stock for which incentive
stock options may become exercisable for the first time by any optionee may not
exceed $100,000 in any calendar year. The administrator has the discretion to
determine the vesting provisions and exercise requirements, if any, of all
options granted under the plan.

    Unless longer periods are authorized by the administrator, options granted
under the equity incentive plan generally must be exercised, if at all, within
one year after an optionee's termination of service due to death or disability
and otherwise within three months after an optionee's termination of service,
but in no event later than the expiration of the option's term. Options granted
under the plan generally are not transferable by an optionee other than by will
or the laws of descent and distribution, except that, with the consent of the
administrator, an optionee may transfer a nonstatutory stock option to certain
entities established for the benefit of family members.

    In the case of restricted stock purchase rights, unless the administrator
determines otherwise, the restricted stock purchase agreement will grant us a
repurchase option exercisable in the event that the conditions specified in the
award are not satisfied prior to the end of the restriction period. Awards of
restricted stock may be made subject to vesting restrictions and other
conditions as established by the administrator and are not transferable by the
participant until vested.

    The stock incentive plan provides that in the event of our merger or
consolidation with or into another entity, a sale of all or substantially all of
our assets or our complete liquidation, the board of directors may take any one
or more of the following actions with respect to the options, restricted stock
purchase rights and other awards:

    - Provide that all outstanding options, restricted stock purchase rights and
      other stock based awards will be assumed, or equivalent options be
      substituted for, by the successor corporation;

    - Provide, with written notice to participants, that all unexercised options
      will become exercisable in full as of a specified time and will terminate
      immediately prior to the consummation of the merger, consolidation, sale
      of assets or liquidation unless otherwise exercised by the participant;

    - Provide that, in the event of a merger, consolidation, sale of assets or
      liquidation in which holders of our common stock will receive a cash
      payment for each share of our common stock surrendered ("Acquisition
      Price"), all options will terminate and each participant will receive, in
      exchange, a cash payment equal to the amount (if any) by which (1) the
      Acquisition Price multiplied by the number of shares of our common stock
      subject to such outstanding options (whether or not exercisable) exceeds
      (2) the aggregate exercise price of such options; and

    - Provide that all restricted stock purchase rights become free of all
      restrictions and that all other stock-based awards shall become
      exercisable, realizable or vested in full, or be free of all conditions or
      restrictions.

OPTION GRANTS IN LAST FISCAL YEAR


    The following table sets forth information regarding stock options granted
during 1999 to our executive officers listed in the Summary Compensation Table.
During 1999, we granted options to purchase an aggregate of 1,305,000 shares of
common stock to employees and 162,000 shares of common stock to consultants. The
exercise price per share for these options was equal to the fair market value of
the common stock as of the grant date as determined by our board of directors.


                                       41
<PAGE>
                       OPTION GRANTS IN LAST FISCAL YEAR


<TABLE>
<CAPTION>
                                                        INDIVIDUAL GRANTS                        POTENTIAL REALIZABLE
                                      ------------------------------------------------------   VALUE AT ASSUMED ANNUAL
                         NUMBER OF                                                               RATES OF STOCK PRICE
                         SECURITIES    PERCENT OF TOTAL                                        APPRECIATION FOR OPTION
                         UNDERLYING   OPTIONS GRANTED TO                                               TERM(1)
                          OPTIONS     EMPLOYEES IN FISCAL   EXERCISE PRICE                     ------------------------
NAME                      GRANTED            YEAR             ($/SHARE)      EXPIRATION DATE     5%($)        10%($)
----                     ----------   -------------------   --------------   ---------------   ----------   -----------
<S>                      <C>          <C>                   <C>              <C>               <C>          <C>
William E. Stanton.....   190,000            14.6%               $0.89          10/19/09        $275,446     $438,601
Matthew L.
  Lazarewicz...........   250,000            19.1                 0.89          10/19/09         362,429      577,108
</TABLE>


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

(1) The dollar amounts under these columns represent the potential realizable
    value of each grant assuming that the market value of our stock appreciates
    from the date of grant to the expiration of the option at annualized rated
    of 5% and 10%. These assumed rates of appreciation have been specified by
    the SEC for illustrative purposes only and are not intended to forecast
    future financial performance or possible future appreciation in the price of
    our stock. The actual amount the executive officer may realize will depend
    on the extent to which the stock price exceeds the exercise price of the
    options on the date the option is exercised.

FISCAL YEAR-END OPTION VALUES


    The following table sets forth information concerning the number and value
of unexercised options to purchase common stock held as of December 31, 1999 by
our executive officers listed in the Summary Compensation Table. There was no
public trading market for our common stock as of December 31, 1999. Accordingly,
the values of the unexercised in-the-money options have been calculated on the
basis of an assumed initial public offering price of $12.00 per share less the
applicable exercise price multiplied by the number of shares that may be
acquired on exercise. None of the executive officers listed in the Summary
Compensation Table exercised any stock options in 1999.


                         FISCAL YEAR-END OPTION VALUES


<TABLE>
<CAPTION>
                                       NUMBER OF SECURITIES UNDERLYING
                                           UNEXERCISED OPTIONS AT        VALUE OF UNEXERCISED IN-THE-MONEY
                                             FISCAL YEAR-END(#)            OPTIONS AT FISCAL YEAR-END($)
                                       -------------------------------   ----------------------------------
                                        EXERCISABLE     UNEXERCISABLE      EXERCISABLE      UNEXERCISABLE
                                       -------------   ---------------   ---------------   ----------------
<S>                                    <C>             <C>               <C>               <C>
William E. Stanton...................     120,000          250,000         $1,333,200         $2,777,500
Matthew L. Lazarewicz................           0          250,000                  0          2,777,500
</TABLE>


                                       42
<PAGE>
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


GENERAL





    We intend to effect a 2-for-1 stock split of our common stock immediately
prior to the consummation of this offering. Each outstanding share of our
preferred stock will be converted simultaneously with the consummation of this
offering into two shares of common stock as a result of this split. The issued
and outstanding preferred stock referred to in this section is not adjusted for
this conversion.


DQE ENTERPRISES DISTRIBUTION AGREEMENT


    In connection with our May 1997 formation, DQE Enterprises, a subsidiary of
DQE, Inc., entered into a letter agreement with us pursuant to which, among
other things, we have agreed to appoint DQE Enterprises or one of its affiliates
as our exclusive distributor of our flywheel products for stationary energy
storage applications in the states of Pennsylvania, New York, Ohio, West
Virginia, Maryland, Delaware, Virginia and the District of Columbia, the
"territory". Under this agreement, we retained the right to make sales in the
territory to cable and telephone companies and to electric utilities for their
internal use. DQE Enterprises also has a nonexclusive right to distribute the
products outside the territory, which we have the right to terminate at any
time. The distribution rights have a term of 20 years from the commencement of
commercial production of our products, provided that the rights may be
terminated earlier if DQE Enterprises does not meet sales targets to be agreed
upon in the future. We have agreed to sell our products to DQE Enterprises at
the lower of (i) cost of goods sold (including certain overhead expenses) plus
30% and (ii) the lowest price at which the products are sold to others. DQE
Enterprises is a shareholder in our company. Eric Stoltz, a Vice-President of
DQE Enterprises, serves as a member of our board of directors. The terms of the
license agreement were determined on the basis of arms-length negotiations.


LICENSES WITH SATCON


    SatCon has granted us a perpetual, exclusive, royalty-free, worldwide right
and license to all patents, patent applications, technical knowledge,
information and know-how in existence in May 1997 and any improvements on that
intellectual property developed by SatCon prior to the completion of this
offering which relate to the field of flywheel energy storage products, systems
and processes for stationary terrestrial (in or on ground or affixed to
structures on ground) applications, but not for satellite or other
non-terrestrial, stationary applications. We do not have the right to sublicense
this technology other than in connection with our manufacturing and distribution
operations. We will not have any rights to future improvements to its flywheel
technology that SatCon develops after the offering. We have granted SatCon a
perpetual, worldwide, royalty-free, exclusive right and license to use any
improvements upon the flywheel energy storage technology for any applications
made by us other than stationary terrestrial applications. SatCon's rights to
further improvements made by us in our flywheel technology terminate upon the
consummation of this offering. The license from SatCon is terminable by SatCon
in certain limited circumstances, including our bankruptcy, upon the material
breach of our obligations under the license, the exercise of certain put rights
granted by SatCon to certain of our investors and upon notice by SatCon that the
license agreement infringes upon the rights of a third party. SatCon is a
shareholder in our company. David Eisenhaure, SatCon's president, serves as a
member of our board of directors. See "Risk Factors--Any failure to protect our
intellectual property could seriously impair our competitive position."


INITIAL FORMATION


    SatCon formed us on May 8, 1997 and funded our initial operations on
May 28, 1997, using an investment in SatCon of $5,000,000 made by DQE
Enterprises. Pursuant to the terms of a securities


                                       43
<PAGE>

purchase agreement dated May 28, 1997 among us, SatCon and DQE Enterprises, DQE
Enterprises made an initial investment in SatCon totaling $5,000,000 in cash to
fund flywheel product development and received a warrant to purchase 1,125,500
shares of our common stock, at a purchase price of $2.67 per share. These
warrants expired unexercised on May 28, 1999. We granted DQE Enterprises
registration rights which were terminated by the registration rights agreement
entered into in connection with the class E preferred stock financing described
below. As part of the agreement, SatCon invested $5,000,000 in cash in us and
received 6,750,000 shares of our common stock and 1,125,000 shares of our
class A preferred stock and granted us the perpetual, exclusive, royalty-free
right and license described above.


1997 RECAPITALIZATION


    On December 19, 1997, we issued 13,476 shares of our common stock and six
shares of our class C preferred stock to six individuals none of whom were or
are affiliates of our company. In connection with this investment, SatCon
exchanged 6,746,626 shares of our common stock for 3,373,313 shares of our
class A preferred stock.


    In connection with that transaction, the six investors and SatCon entered
into a voting agreement under which the stockholders agreed to vote to elect
designated directors and as to certain other matters. This agreement, as
amended, will terminate upon consummation of this offering.

CLASS D PREFERRED STOCK SECURITIES PURCHASE AGREEMENT

    Pursuant to the terms of a securities purchase agreement dated October 23,
1998, among us, Perseus Capital, DQE Enterprises, Micro-Generation and SatCon:


    - the purchasers purchased from us 1,900,000 shares of our class D preferred
      stock at a purchase price of $2.50 per share; and



    - we were contractually obligated to issue to the purchasers warrants to
      purchase in the aggregate 4,455,000 shares of our common stock if we did
      not meet certain financing goals by October 23, 1999 and April 23, 2000.



    The aggregate consideration we received was $4,750,000. The terms of the
securities purchase agreement were determined on the basis of arms-length
negotiations. Prior to the execution of the securities purchase agreement,
neither we nor SatCon had any material relationship with Perseus Capital or
Micro-Generation. Perseus Capital and Micro-Generation are shareholders in our
company. Philip Deutch, a Managing Director of Perseus Capital, and Kenneth
Socha, Senior Managing Partner of Perseus, serve as members of our board of
directors.


CLASS E BRIDGE LOANS

    On June 22, 1999, SatCon, Perseus Capital, DQE Enterprises and
Micro-Generation made bridge loans to us in the respective principal amounts of
$250,000, $250,000, $50,000 and $50,000. These loans accrued interest at a rate
of 12.5% per annum increasing to 15% per annum in the event the loans went into
default or were not paid in full by September 23, 1999.


    On August 2, 1999, SatCon, Perseus Capital, DQE Enterprises and
Micro-Generation committed to make, and on or subsequent to that date made,
bridge loans to us in the respective principal amounts of $1,000,000,
$1,350,000, $500,000 and $300,000. As consideration for these loans, we received
$2,550,000 in cash and cancelled the loans in the principal amount of $600,000
made to us on June 22, 1999 by the same participants. These loans accrued
interest at a rate of 12.5% per annum, increasing to 15% per annum in the event
we had not sold $5,000,000 or more of our class E preferred stock by
February 2, 2000.


                                       44
<PAGE>
    On January 7, 2000, SatCon, Perseus Capital, DQE Enterprises and Micro
Generation made similar bridge loans to us in the respective principal amounts
of $200,000, $250,000, $90,000 and $60,000. These loans accrued interest at a
rate of 12.5% per annum, increasing to 15% per annum in the event we had not
sold $5,000,000 or more of our class E preferred stock by May 7, 2000. The
principal and interest on these loans was payable in cash or, in the event the
bridge loans were converted into shares of class E preferred stock, in shares of
class E preferred stock at the price per share at which the class E preferred
stock was issued.


    As part of these transactions, SatCon, Perseus Capital, DQE Enterprises and
Micro-Generation received warrants to purchase shares of our class E preferred
stock. In the August bridge financing, these investors received warrants to
purchase shares in an aggregate amount equal to $787,500 divided by the per
share price equal to the price we sold at least $5,000,000 of our class E
preferred stock, or, if such transaction was not consummated within 6 months,
$2.50 per share. No such transaction was consummated and as a result these
warrants were exercisable for an aggregate of 315,000 shares of our class E
preferred stock at an exercise price of $2.50 per share. In the January bridge
financing, these investors received the right to be issued a warrant under their
notes in the event there was a sale of at least $5,000,000 of our class E
preferred stock by February 2, 2000 and the investors demanded that either the
notes be paid in full or the investors purchased class E preferred stock. No
such sale occurred and these warrants were never issued.


    All of these bridge loans and warrants were converted into the class E
preferred stock and class E warrants described below, except for the principal
and interest accrued on the SatCon $200,000 loan made on January 7, 2000 which
was repaid in full prior to the consummation of the class E preferred stock
financing.


    The terms of the bridge loan agreements were determined on the basis of
arms-length negotiations.


CLASS E PREFERRED STOCK SECURITIES PURCHASE AGREEMENT

    Pursuant to the terms of a securities purchase agreement, dated April 7,
2000, by and among us, SatCon, Perseus Capital, DQE Enterprises and
Micro-Generation:

    - the purchasers purchased from us 1,226,141 shares of our class E preferred
      stock at a purchase price of $3.12 per share; and

    - we issued warrants to purchase 306,535 shares of our class E preferred
      stock at an exercise price of $2.50 per share.


    The class E preferred stock and these warrants were issued in consideration
of the cancellation of $3,550,000 principal amount of the bridge loans and
$275,559 accrued interest on those bridge loans and cancellation of the warrants
issued in connection with the bridge loans. The terms of the securities purchase
agreement were determined on the basis of arms-length negotiations.


FEBRUARY AND MARCH, 2000 INTERIM FINANCINGS

    During February and March, 2000 we borrowed $600,000 from Perseus Capital,
$300,000 from SatCon, $300,000 from DQE Enterprises and $200,000 from
Micro-Generation under demand promissory notes convertible into our class F
preferred stock. The loans accrued interest at a rate of 6% per annum.

    The principal on the Perseus Capital, DQE Enterprises and Micro-Generation
notes was converted into class F preferred stock upon consummation of the
class F preferred stock financing and accrued interest paid in cash. The
principal and interest accrued on the SatCon note was repaid in full prior to
the consummation of the class F preferred stock financing.

                                       45
<PAGE>

    The terms of these interim financings were determined on the basis of
arms-length negotiations.


CLASS F BRIDGE LOAN

    On April 21, 2000, Perseus Capital, Micro-Generation, Mechanical Technology
Incorporated, The Beacon Group, Energy Investment Fund II, L.P. and Penske
Corporation made bridge loans to us in the respective principal amounts of
$1,200,000, $400,000, $1,200,000, $900,000 and $400,000. These loans accrued
interest at a rate of 6% per annum. The principal and interest on these loans
were payable in cash or, in the event the bridge loan was converted into shares
of class F preferred stock, in shares of class F preferred stock at the price
per share at which the class F preferred stock was issued.


    As part of these transactions, Perseus Capital, Micro-Generation, Mechanical
Technology, Beacon Group and Penske Corporation received warrants to purchase in
the aggregate 82,000 shares of our common stock. These bridge warrants expire on
April 21, 2005 and have an exercise price of $2.10 per share.



    The principal and interest accrued on these bridge loans were converted into
the class F preferred stock described below. Mechanical Technology and Penske
Corporation are shareholders of our company. Alan Goldberg, a representative of
Mechanical Technology, serves as a member of our board of directors.



    The terms of the class F bridge loan were determined on the basis of
arms-length negotiations.


CLASS F PREFERRED STOCK SECURITIES PURCHASE AGREEMENT

    Pursuant to the terms of a securities purchase agreement, dated May 23,
2000, by and among us, Perseus Capital, DQE Enterprises, Micro-Generation,
Mechanical Technology, Beacon Group, Penske and GE Capital Equity
Investments, Inc.:

    - the purchasers purchased from us 6,785,711 shares of our class F preferred
      stock at a purchase price of $4.20 per share; and


    - we issued warrants to purchase a number of shares of our common stock
      equal to $14,250,000 divided by 37.5% of the initial offering price at an
      exercise price of 37.5% of the initial offering price.


    The class F preferred stock and these warrants were issued in consideration
of an aggregate of $23,300,000 in cash and the cancellation of $5,200,000
principal amount of the bridge loans. We also repaid the interest on the bridge
loans at the closing of the class F preferred stock financing. The terms of the
securities purchase agreement were determined on the basis of arms-length
negotiations.


    In connection with the class F preferred stock financing, we entered into an
investors rights agreement. Also as part of this financing, we granted the
purchasers and SatCon rights to demand registration of their shares of our
capital stock under certain circumstances and to participate as selling
stockholders in any offering registered by us. See "Description of Capital
Stock--Registration Rights Agreement." The shareholders have waived the right to
participate as selling stockholders in this offering.


CONSULTING AGREEMENTS

    We are party to Amended/Restated Consulting Agreements with each of DQE
Enterprises, Micro-Generation and Perseus, each dated as of November 1, 1999
under which they act as independent contractors and provide us with consulting
and advisory services with respect to:

    - Flywheel applications in utility and related markets;

    - Economic analysis of product opportunities in utility and related markets;

                                       46
<PAGE>
    - Energy market trends and developments; and

    - Other matters relating to our business that we shall reasonably request.


    The terms of these consulting agreements were determined on the basis of
arms-length negotiations.


    DQE ENTERPRISES CONSULTING AGREEMENT.  Our Amended/Restated Consulting
Agreement with DQE Enterprises replaced a consulting agreement with them entered
into in 1997.


    Under this agreement, we issued DQE Enterprises 60,000 shares of our
class A preferred stock as of May 1998, 60,000 shares of our class A preferred
stock as of May 1999 and 25,000 shares of our class A preferred stock as of
November 1999. In addition, if not terminated prior to issuance, we would be
obligated to issue 60,000 shares of class A preferred stock on October 31 of
each year, commencing October 31, 2000. This agreement terminates by its terms
immediately prior to the effective date of this offering. Under this agreement,
we would be required to issue DQE Enterprises 50,000 shares of our class A
preferred stock representing the amount due and owing under the agreement
prorated to August 31, 2000. These shares will convert into 100,000 shares of
common stock upon consummation of this offering.


    MICRO-GENERATION CONSULTING AGREEMENT.  Our Amended/Restated Consulting
Agreement with Micro-Generation replaced a consulting agreement with them
entered into in 1998.


    Under this agreement, we issued Micro-Generation 24,000 shares of our
class A preferred stock in November 1999 in replacement of common stock to which
they were entitled as of October 1998 and October 1999. In addition, if not
terminated prior to issuance, we would be obligated to issue 12,000 shares of
class A preferred stock on October 31 of each year, commencing October 31, 2001.
This agreement terminates by its terms immediately prior to the effective date
of this offering. Upon termination, we will not be required to issue
Micro-Generation any additional shares of our class A preferred stock. Each of
these shares will convert into two shares of common stock upon consummation of
this offering.


    PERSEUS CAPITAL CONSULTING AGREEMENT.  Our Amended/Restated Consulting
Agreement with Perseus replaced a consulting agreement with them entered into in
1998.


    Under this agreement, we issued Perseus 96,000 shares of our class A
preferred stock in November 1999 in replacement of common stock to which they
were entitled as of October 1998 and October 1999. In addition, if not
terminated prior to issuance, we would be obligated to issue 48,000 shares of
class A preferred stock on October 31 of each year, commencing October 31, 2001.
This agreement terminates by its terms immediately prior to the effective date
of this offering. Upon termination, we will not be required to issue Perseus
Capital any additional shares of our class A preferred stock. Each of these
shares will convert into two shares of common stock upon consummation of this
offering.


SATCON SERVICES


    During 1997, 1998, 1999 and 2000, SatCon performed research and development,
administrative and other services on our behalf. Amounts paid to SatCon for
these services amounted to approximately $1,351,000, $443,000, $59,000 and
$202,000 during the period from inception to December 31, 1997, the year ended
December 31, 1998, the year ended December 31, 1999 and to June 30, 2000,
respectively.


                                       47
<PAGE>
                             PRINCIPAL STOCKHOLDERS


    The following table sets forth information regarding the beneficial
ownership of our common stock (1) prior to the offering, assuming the issuance
of 29,359,530 shares of common stock upon consummation of this offering upon
conversion of our preferred stock, and (2) after the offering, assuming the
issuance of 820,162 shares of common stock to be issued upon consummation of
this offering as a dividend on the class D preferred stock, 39,168 shares of
common stock to be issued upon consummation of this offering as a dividend on
the class E preferred stock, 100,000 shares accrued as of August 31, 2000 to be
issued on the closing date of this offering under a consulting agreement, and
the sale of 8,000,000 shares of common stock in this offering, by:


    - our institutional stockholders and all other persons known by us to own
      beneficially 5% or more of our voting securities;

    - each of our directors;

    - the executive officers listed in the Summary Compensation Table; and

    - all directors and executive officers as a group.

    Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the voting securities beneficially owned by the
stockholder.


<TABLE>
<CAPTION>
                                                                        PERCENTAGE OF COMMON STOCK
                                                         NUMBER OF      BENEFICIALLY OWNED(2)(3)(4)
                                                           SHARES       ---------------------------
                                                        BENEFICIALLY      PRIOR TO        AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                OWNED(2)(3)(4)     OFFERING       OFFERING
---------------------------------------                --------------   ------------   ------------
<S>                                                    <C>              <C>            <C>
William E. Stanton...................................       243,334            *              *
Matthew L. Lazarewicz................................        83,334            *              *
Philip J. Deutch(5)..................................    10,931,694         32.2%          25.8%
David B. Eisenhaure(6)...............................     9,879,614         33.2%          25.5%
Alan P. Goldberg(7)..................................     3,547,808         11.7%           9.1%
Hans Kobler(8).......................................     3,523,808         11.7%           9.0%
Kenneth M. Socha(9)..................................    10,931,694         32.2%          25.8%
Eric R. Stoltz(10)...................................     3,964,990         12.8%          10.0%
SatCon Technology Corporation(11)....................     9,879,614         33.2%          25.5%
Perseus Capital, L.L.C.(12)..........................    10,931,694         32.2%          25.8%
DQE Enterprises, Inc.(13)............................     3,964,990         12.8%          10.0%
Mechanical Technology, Incorporated(14)..............     3,547,808         11.7%           9.1%
GE Capital Equity Investments, Inc.(15)..............     3,523,808         11.7%           9.0%
Micro-Generation Technology Fund, L.L.C.(16).........     2,947,582          9.6%           7.5%
The Beacon Group Energy Investment Fund II,
  L.P.(17)...........................................     2,660,856          8.8%           6.8%
Penske Corporation(18)...............................     1,182,602          4.0%           3.1%
All directors and executive officers as a group
  (12 persons).......................................    31,734,804         86.1%          70.6%
</TABLE>


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

*   Less than 1%.

(1) The address for all executive officers and directors is c/o Beacon Power
    Corporation, 6D Gill Street, Woburn, Massachusetts 01801.


(2) The number of shares beneficially owned by each stockholder is determined
    under rules issued by the Securities and Exchange Commission and includes
    voting or investment power with respect to those securities. Under these
    rules, beneficial ownership includes any shares as to which the individual
    or entity has sole or shared voting power or investment power and includes
    any shares


                                       48
<PAGE>

    as to which the individual or entity has the right to acquire beneficial
    ownership within 60 days after September 22, 2000 through the exercise of
    any warrant, stock option or other right. The inclusion in this prospectus
    of these shares, however, does not constitute an admission that the named
    stockholder is a direct or indirect beneficial owner of those shares. The
    number of shares of common stock outstanding used in calculating the
    percentage for each listed person includes the shares of common stock
    underlying warrants, options or convertible preferred stock held by that
    person that are exercisable or convertible within 60 days of September 22,
    2000, but excludes shares of common stock underlying warrants, options or
    convertible preferred stock held by any other person. Percentage of
    beneficial ownership prior to the offering is based on 29,577,712 shares of
    common stock outstanding as of September 22, 2000 after giving effect to the
    conversion of our preferred stock, plus, after the offering, 820,162 shares
    of common stock to be issued upon consummation of this offering as a
    dividend on the class D preferred stock, 39,168 shares of common stock to be
    issued upon consummation of this offering as a dividend on the class E
    preferred stock, 100,000 shares accrued as of August 31, 2000 to be issued
    on the closing date of the offering as common stock under a consulting
    agreement, and the 8,000,000 shares of common stock being sold in this
    offering assuming no exercise of the underwriters' overallotment option.



(3) Includes the following number of shares of common stock issuable upon the
    exercise of stock options which may be exercised on or before November 21,
    2000: Mr. Stanton, 243,334; Mr. Lazarewicz, 0; Ms. Lister, 88,000;
    Mr. French, 0; and Mr. Spiezio, 0.


(4) Assumes conversion of all shares of preferred stock into common stock upon
    consummation of this offering. The percentage of common stock beneficially
    owned after the offering also assumes that the underwriters have not
    exercised their over-allotment option.

(5) Mr. Deutch is a Director of Beacon. Includes the shares and warrants held by
    Perseus Capital of which Mr. Deutch is a Managing Director. Mr. Deutch
    disclaims beneficial ownership of these shares.

(6) Mr. Eisenhaure is a Director of Beacon. Includes the shares and warrants
    held by SatCon of which Mr. Eisenhaure is the President, Chief Executive
    Officer and Chairman of the Board of Directors. Mr. Eisenhaure disclaims
    beneficial ownership of these shares.

(7) Mr. Goldberg is a Director of Beacon. Includes the shares and warrants held
    by Mechanical Technology of which Mr. Goldberg is a member of the Board of
    Directors. Mr. Goldberg disclaims beneficial ownership of these shares.

(8) Mr. Kobler is a Director of Beacon. Includes the shares and warrants held by
    GE Equity of which Mr. Kobler is Vice President. Mr. Kobler disclaims
    beneficial ownership of these shares.

(9) Mr. Socha is a Director of Beacon. Includes the shares and warrants held by
    Perseus Capital of which Mr. Socha is the Senior Managing Director.
    Mr. Socha disclaims beneficial ownership of these shares.

(10) Mr. Stoltz is a Director of Beacon. Includes the shares and warrants held
    by DQE Enterprises, Inc. of which Mr. Stoltz is a Vice President.
    Mr. Stoltz disclaims beneficial ownership of these shares.


(11) Includes shares of common stock issuable upon exercise of warrants to
    purchase 173,704 shares of common stock. SatCon's address is 161 First
    Street, Cambridge, MA 02142.



(12) Includes shares of common stock issuable upon exercise of warrants to
    purchase 3,179,260 shares of common stock and 535,586 shares of common stock
    to be issued upon consummation of this offering as dividends on the class D
    and E preferred stock. Also includes shares of common stock issuable upon
    exercise of warrants issued in connection with the class F financing to
    purchase a number of shares of common stock equal to $3,000,000 divided by
    37.5% of the initial offering


                                       49
<PAGE>

    price, or 666,666 shares assuming a $12.00 initial public offering price.
    Perseus Capital's address is The Army and Navy Club Building, 1627 I Street,
    N.W., Suite 610, Washington, DC 20006.



(13) Includes shares of common stock issuable upon exercise of warrants to
    purchase 1,002,398 shares of common stock, 179,208 shares of common stock to
    be issued upon consummation of this offering as dividends on the class D and
    E preferred stock and 100,000 shares accrued through August 31, 2000 to be
    issued in payment of consulting fees. Also includes shares of common stock
    issuable upon exercise of warrants issued in connection with the class F
    financing to purchase a number of shares of common stock equal to $1,000,000
    divided by 37.5% of the initial offering price, or 222,222 shares assuming a
    $12.00 initial public offering price. DQE Enterprises' address is One
    Northshore Center, Suite 100, 12 Federal Street, Pittsburgh, PA 15212.



(14) Also includes shares of common stock issuable upon exercise of warrants
    issued in connection with the class F financing equal to $3,000,000 divided
    by 37.5% of the initial offering price, or 666,666 shares assuming a
    $12.00 initial public offering price. Mechanical Technology's address is 30
    South Pearl Street, Albany, NY 12207.



(15) Also includes shares of common stock issuable upon exercise of warrants
    issued in connection with the class F financing equal to $3,000,000 divided
    by 37.5% of the initial offering price, or 666,666 shares assuming a
    $12.00 initial public offering price. GE Equity's address is 120 Long Ridge
    Road, Stamford, CT 06927.



(16) Includes shares of common stock issuable upon exercise of warrants to
    purchase 744,708 shares of common stock and 133,438 shares of common stock
    to be issued upon consummation of this offering as dividends on the class D
    and E preferred stock. Also includes shares of common stock issuable upon
    exercise of warrants issued in connection with the class F financing to
    purchase a number of shares of common stock equal to $1,000,000 divided by
    37.5% of the initial offering price, or 222,222 shares assuming a
    $12.00 initial public offering price. Micro-Generation's address is c/o
    Arete Corporation, P.O. Box 1299, Center Harbor, NH 03226.



(17) Includes shares of common stock issuable upon exercise of warrants to
    purchase 18,000 shares of common stock. Also includes shares of common stock
    issuable upon exercise of warrants issued in connection with the class F
    financing equal to $2,250,000 divided by 37.5% of the initial offering
    price, or 500,000 shares assuming a $12.00 initial public offering price.
    Beacon Group's address is 399 Park Avenue, New York, NY 10022.



(18) Includes shares of common stock issuable upon exercise of warrants to
    purchase 8,000 shares of common stock. Also includes shares of common stock
    issuable upon exercise of warrants issued in connection with the class F
    financing equal to $1,000,000 divided by 37.5% of the initial offering
    price, or 222,222 shares assuming a $12.00 initial public offering price.
    Penske's address is 13400 Outer Drive West, B41, Detroit, MI 48239.


                                       50
<PAGE>
                          DESCRIPTION OF CAPITAL STOCK

COMMON STOCK


    Immediately prior to the consummation of this offering, we will increase our
authorized common stock to 110,000,000. As of September 22, 2000, 198,182 shares
were issued and outstanding. The following summary description of the common
stock is qualified in its entirety by reference to our certificate of
incorporation.


    VOTING RIGHTS

    The holders of our common stock have one vote per share. Holders of our
common stock are not entitled to vote cumulatively for the election of
directors. Generally, all matters to be voted on by stockholders must be
approved by a majority, or, in the case of election of directors, by a
plurality, of the votes entitled to be cast at a meeting at which a quorum is
present by all shares of common stock present in person or represented by proxy,
voting together as a single class, subject to any voting rights granted to
holders of any then outstanding preferred stock.

    DIVIDENDS

    Holders of common stock will share ratably in any dividends declared by our
Board of Directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid to
holders of shares of common stock.

    OTHER RIGHTS

    All holders of common stock are entitled to share ratably in any assets
available for distribution to holders of shares of common stock upon our
liquidation, dissolution or winding up. No shares of common stock are subject to
redemption or have preemptive rights to purchase additional shares of common
stock. The outstanding common stock is, and the common stock to be outstanding
upon completion of the offering will be, validly issued, fully paid and
nonassessable.

WARRANTS




    We have outstanding four series of warrants to purchase our common stock
that were issued in connection with our class D and F preferred stock financings
and to certain of our consultants. We also issued a series of warrants to
purchase our class E preferred stock in connection with our class E preferred
stock financing. Upon consummation of this offering, these warrants will be
exercisable for shares of our common stock.


    The exercise price and the number of shares of common stock to be issued
upon exercise of the warrants will be adjusted under certain circumstances,
including:

    - subdivisions, stock dividends or combinations of our common stock;

    - reclassifications, exchanges, substitutions, or in-kind distributions that
      results in a change in the number and/or class of the securities issuable
      upon exercise of the warrants;

    - reorganizations, mergers and similar transactions; and

    - the issuance of additional common stock or securities convertible into
      common stock at a price per share less than the exercise price in effect
      immediately prior to the issuance of the additional securities.

    Holders of the warrants are not entitled to receive dividends, vote, receive
notice of any meetings of stockholders or otherwise have any right as
stockholders.

                                       51
<PAGE>

    CLASS D PREFERRED STOCK FINANCING WARRANTS.  Of the 4,455,000 warrants
issued in connection with the class D preferred stock financing, one-third have
an exercise price of $1.67, one-third have an exercise price of $2.25 and
one-third have an exercise price of $3.00. Holders of these warrants may
exercise their warrants at any time prior to their expiration on December 31,
2004.



    CLASS E PREFERRED STOCK FINANCING WARRANTS.  The warrants issued in
connection with the class E preferred stock financing are exercisable for
306,535 shares of our class E preferred stock at an exercise price of $2.50 per
share. The warrants will convert upon consummation of this offering into
warrants to receive shares of our common stock on a 2-for-1 basis. Holders of
these warrants may exercise their warrants at any time prior to their expiration
on April 7, 2005.



    CLASS F PREFERRED STOCK BRIDGE LOAN WARRANTS.  The warrants issued in
connection with the class F preferred stock bridge loan are exercisable for
82,000 shares of our common stock at an exercise price of $2.10 per share.
Holders of these warrants may exercise their warrants at any time prior to their
expiration on April 21, 2005.



    CLASS F PREFERRED STOCK WARRANTS.  The warrants issued in connection with
the class F preferred stock financing are exercisable for a number of shares of
our common stock equal to $14,250,000 divided by 37.5% of the initial public
offering price, or 3,166,666 shares assuming a $12.00 initial public offering
price. The exercise price is 37.5% of the initial public offering price, or
$4.50, assuming a $12.00 initial public offering price. Holders of these
warrants may exercise their warrants at any time after this offering prior to
their expiration on May 23, 2005.



    CONSULTANT WARRANTS.  The warrants issued to two of our consultants are
exercisable for an aggregate of 70,000 shares of our common stock at an exercise
price equal to the initial public offering price. The holder of one of these
warrants exercisable for 50,000 shares of common stock may exercise its warrant
at any time prior to January 31, 2001. The holder of the other warrant
exercisable for 20,000 shares of common stock may exercise its warrant at any
time prior to August 2, 2005.


PREFERRED STOCK


    We are authorized to issue 21,500,007 shares of preferred stock. No
description of any of our outstanding classes of preferred stock is included
because all outstanding shares of preferred stock will automatically convert
into shares of common stock upon consummation of this offering and our
certificate of incorporation will be amended to remove these classes of stock.



    As of the date of consummation of this offering, we will authorize a new
class of preferred stock consisting of 10,000,000 shares of preferred stock. The
preferred stock may be issued in one or more classes, the terms of which may be
determined at the time of issuance by our board of directors, without further
action by stockholders and may include voting rights (including the right to
vote as a series on particular matters), preferences as to dividends and
liquidation, conversion and redemption rights. The issuance of preferred stock
could reduce the rights, including voting rights, of the holders of common
stock, and, therefore, reduce the value of your common stock. In particular,
specific rights granted to future holders of preferred stock could be used to
restrict our ability to merge with or sell our assets to a third party, thereby
preserving the control of us by our existing stockholders.



REGISTRATION RIGHTS AGREEMENT



    Beginning 180 days after the closing of this offering, Perseus Capital,
DQE Enterprises, Micro-Generation, Mechanical Technology, Beacon Group, Penske,
SatCon and GE Capital Equity Investments, Inc., who will hold in the aggregate
approximately 30,346,220 shares of our common stock and outstanding warrants to
purchase 5,126,070 shares of common stock and warrants to purchase a number of
shares of common stock equal to $14,250,000 divided by 37.5% of the initial
public offering price, or 3,166,666 shares of common stock assuming a $12.00
initial offering price, or their transferees,


                                       52
<PAGE>

will have the right to demand that we register their shares on up to two
occasions, provided the anticipated aggregate offering is at least $500,000. In
addition, these holders may require us to file additional registration
statements on Form S-3. These holders will also have the right to include the
shares of common stock they hold or acquire upon the exercise of the warrants in
any registration statements we file with the Securities Exchange Commission,
other than registration statements filed with respect to employee benefit plans
or in connection with an acquisition. We are not required to file more than one
registration statement in any six-month period. We are required to bear the
costs of the exercise of these registration rights.



INDEMNIFICATION MATTERS


    Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors, officers and
trustees for monetary damages for breaches of their fiduciary duty, so long as
the person was acting in good faith and in a manner the person reasonably
believed to be in or not opposed to our best interest and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which the person shall have been adjudged to be liable to us unless and only to
the extent that the court in which action was brought determines otherwise. This
provision does not alter a director's liability under the federal securities
laws and does not affect the availability of equitable remedies, such as an
injunction or rescission, for breach of fiduciary duty. We have entered into
indemnification agreements with our directors and certain of our officers to the
same effect. We also have directors' and officers' insurance against certain
liabilities that insures those persons against the cost of defense, settlement
or payment of a judgment under certain circumstances.

    Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us as described
above, we have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. At present, there is no pending
material litigation or proceeding involving any of our directors, officers,
employees or agents in which indemnification will be required or permitted.

PROVISIONS OF CERTIFICATE OF INCORPORATION AND BY-LAWS WHICH MAY HAVE
  ANTI-TAKEOVER EFFECT


    A number of provisions of our certificate of incorporation and by-laws which
will be effective upon completion of this offering concern matters of corporate
governance and the rights of stockholders. These provisions, as well as the
ability of our board of directors to issue shares of preferred stock and to set
the voting rights, preferences and other terms, may be deemed to have an
anti-takeover effect and may discourage takeover attempts not first approved by
our board of directors, including takeovers which stockholders may deem to be in
their best interests. If takeover attempts are discouraged, temporary
fluctuations in the market price of our common stock, which may result from
actual or rumored takeover attempts, may be inhibited. These provisions,
together with our classified board of directors and the ability of our board of
directors to issue preferred stock without further stockholder action, also
could delay or frustrate the removal of incumbent directors or the assumption of
control by stockholders, even if the removal or assumption would be beneficial
to our stockholders. These provisions also could discourage or make more
difficult a merger, tender offer or proxy contest, even if favorable to the
interests of stockholders, and could depress the market price of our common
stock. Our board of directors believes that these provisions are appropriate to
protect our interests and those of our stockholders. Our board of directors has
no present plans to adopt any further measures or devices which may be deemed to
have an "anti-takeover effect."


                                       53
<PAGE>
MEETINGS OF STOCKHOLDERS


    Our by-laws provide that a special meeting of stockholders may be called
only by the President or our board of directors unless otherwise required by
law. Our by-laws provide that only those matters included in the notice of the
special meeting may be considered or acted upon at that special meeting unless
otherwise provided by law. In addition, our by-laws include notice and
informational requirements and time limitations on any director nomination or
any new proposal which a stockholder wishes to make at an annual meeting of
stockholders.


DIRECTOR VACANCIES AND REMOVAL


    Our by-laws provide that vacancies in our board of directors may be filled
only by the affirmative vote of a majority of the remaining directors. Our
by-laws provide that directors may be removed from office with or without cause
and only by the affirmative vote of holders of a majority of the shares then
entitled to vote at an election of directors.


ABILITY TO ADOPT STOCKHOLDER RIGHTS PLAN


    Our board of directors may in the future resolve to issue shares of
preferred stock or rights to acquire such shares in order to implement a
stockholder rights plan. A stockholder rights plan typically creates voting or
other impediments to discourage persons seeking to gain control of Beacon by
means of a merger, tender offer, proxy contest or otherwise if our board of
directors determines that such change in control is not in the best interests of
Beacon and our stockholders. Our board of directors has no present intention of
adopting a stockholder rights plan and is not aware of any attempt to effect a
change in control of Beacon.


AMENDMENT OF BY-LAWS


    Our certificate of incorporation and by-laws provide that our by-laws may be
amended or repealed by our board of directors or by the stockholders. Such
action by the board of directors requires the affirmative vote of a majority of
the directors then in office. Such action by the stockholders requires the
affirmative vote of at least two-thirds of the shares present in person or
represented by proxy at an annual meeting of stockholders or a special meeting
called for such purpose unless our board of directors recommends that the
stockholders approve such amendment or repeal at such meeting, in which case
such amendment or repeal shall only require the affirmative vote of a majority
of the shares present in person or represented by proxy at the meeting.


STATUTORY BUSINESS COMBINATION PROVISION

    Following the offering, we will be subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly held Delaware corporation
from consummating a "business combination," except under certain circumstances,
with an "interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless:

    - before such person became an interested stockholder, the board of
      directors of the corporation approved the transaction in which the
      interested stockholder became an interested stockholder or approved the
      business combination;

    - upon the closing of the transaction that resulted in the interested
      stockholder's becoming an interested stockholder, the interested
      stockholder owned at least 85% of the voting stock of the corporation
      outstanding at the time the transaction commenced, excluding shares held
      by directors who are also officers of the corporation and shares held by
      employee stock plans; or

    - following the transaction in which such person became an interested
      stockholder, the business combination is approved by the board of
      directors of the corporation and authorized at a

                                       54
<PAGE>
      meeting of stockholders by the affirmative vote of the holders of 66 2/3%
      of the outstanding voting stock of the corporation not owned by the
      interested stockholder.

    The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned, 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, asset sales and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of a least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contains any such exclusion.

TRADING ON THE NASDAQ NATIONAL MARKET SYSTEM

    We intend to apply to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "BCON."

TRANSFER AGENT AND REGISTRAR


    The name and address of the transfer agent and registrar for our common
stock is EquiServe Trust Company, 150 Royall Street, Canton, Massachusetts
02021.


                                       55
<PAGE>
                        SHARES ELIGIBLE FOR FUTURE SALE

    Before this offering, there has been no public market for our common stock,
and no prediction can be made as to the effect, if any, that sales of common
stock or the availability of common stock for sale will have on the market price
of our common stock prevailing from time to time. Nonetheless, substantial sales
of common stock in the public market following this offering, or the perception
that sales could occur, could lower the market price of our common stock or make
it difficult for us to raise additional equity capital in the future.

SALES OF RESTRICTED SHARES


    Following this offering, there will be 38,517,042 shares of our common stock
outstanding. Of these shares, the 8,000,000 shares which are being sold in this
offering generally will be freely transferable without restriction or further
registration under the Securities Act, except that any shares held by our
"affiliates" as defined in Rule 144 under the Securities Act may be sold only in
compliance with the limitations described below.


    All of the remaining shares of common stock which will be outstanding after
the offering will be "restricted securities" as defined in Rule 144, and may be
sold in the future without registration under the Securities Act subject to
compliance with the provisions of Rule 144 or any other applicable exemption
under the Securities Act. Generally, restricted securities that have been owned
for a period of at least two years may be sold immediately after the completion
of this offering, and restricted securities that have been owned for at least
one year may be sold immediately after the completion of this offering but
subject to the volume limitations of Rule 144.


    At our request, the underwriters have reserved up to 5% of the shares of
common stock in the offering for sale at the initial public offering price to
our directors, officers and employees as well as to clients and vendors who have
advised us of their desire to purchase the shares. All of the shares purchased
through the directed share program will be subject to lock-up agreements for a
period of 30 days from the date of this prospectus and for a period of 180 days
from the date of this prospectus if they are purchased by shareholders subject
to the lock-up agreements described separately below.



    In connection with this offering, our existing officers, directors, and
certain stockholders who will own an aggregate of 30,346,220 shares of common
stock after this offering, have agreed with the underwriters that, subject to
exceptions, they will not sell or dispose of any of their shares for 180 days
after the date of this prospectus. Salomon Smith Barney, Inc. may, in its sole
discretion and at any time without notice, release all or any portion of the
shares subject to such restrictions. Subject to these lock-up agreements, the
shares of common stock outstanding upon the closing of the offering will be
available for sale in the public market as follows:



<TABLE>
<CAPTION>
        APPROXIMATE
      NUMBER OF SHARES                                 DESCRIPTION
----------------------------                           -----------
<C>                            <S>
                     13,488    These shares will be immediately saleable under Rule 144.
                  7,600,000    After the date of this prospectus, freely tradable shares
                               sold in the offering.
                    400,000    After 30 days from the date of this prospectus, these shares
                               will be freely tradable, unless purchased by shareholders
                               who are subject to 180-day lock-up agreements.
                     74,000    After 90 days from the date of this prospectus, these shares
                               will be saleable under Rule 701.
                     83,334    After 180 days from the date of this prospectus, the lock-up
                               period will expire and these shares will be saleable under
                               Rule 701.
                 12,929,186    After 180 days from the date of this prospectus, the lock-up
                               period will expire and these shares will be saleable under
                               Rule 144 without regard to holding period limitations but
                               subject, in some cases, to volume limitations.
                 17,417,034    After 180 days from the date of this prospectus, the lock-up
                               period will expire and these shares will be saleable under
                               Rule 144, subject to holding period and volume limitations.
</TABLE>


                                       56
<PAGE>

    In general, under Rule 144 as currently in effect, assuming we are current
in our public filings with the Securities Exchange Commission, a person or
persons whose shares are required to be aggregated, including an affiliate of
ours, and who has beneficially owned shares for at least one year is entitled to
sell through a brokers transaction or in a transaction directly with a market
maker, within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of 1% of the
then outstanding shares of common stock, which is expected to be 385,170 shares
upon the completion of this offering, or the average weekly trading volume of
the common stock during the four calendar weeks preceding the date on which
notice of such sale is filed, subject to certain restrictions. In addition, a
person who is not deemed to have been an affiliate of ours at any time during
the 90 days preceding a sale and who has beneficially owned the shares proposed
to be sold for at least two years would be entitled to sell those shares under
Rule 144(k) without regard to the requirements described above. To the extent
that shares were acquired from an affiliate of ours, that person's holding
period for the purpose of effecting a sale under Rule 144 commences on the date
of transfer from the affiliate.


WARRANTS


    We have outstanding warrants to purchase 5,196,070 shares of our common
stock, plus outstanding warrants to purchase a number of shares equal to
$14,250,000 divided by 37.5% of the initial offering price, or 3,166,666 shares
assuming a $12.00 initial public offering price. The shares purchased upon
exercise of these warrants may be sold 180 days after the date of this
prospectus, subject to the holding period, volume limitation and other
requirements of Rule 144 under the Securities Act.


STOCK INCENTIVE PLAN


    Under our stock incentive plan, as of September 22, 2000, options to
purchase 4,733,290 shares of common stock were issued and outstanding, of which
options to purchase 1,107,208 shares have vested. We intend to file a
registration statement on Form S-8 with respect to the aggregate of shares of
common stock issuable under our stock incentive plan promptly following the
consummation of this offering. Shares issued upon the exercise of stock options
after the effective date of the Form S-8 registration statement will be eligible
for resale in the public market without restriction, subject to Rule 144
limitations applicable to affiliates and the lock-up agreements described above.


ISSUANCE OF ADDITIONAL SHARES

    We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under our stock
incentive plan.


REGISTRATION RIGHTS



    After this offering, holders of 30,346,220 shares of our common stock and
the common stock issuable upon exercise of outstanding warrants to purchase
5,126,070 shares of common stock and warrants to purchase a number of shares of
common stock equal to $14,250,000 divided by 37.5% of the initial public
offering price, or 3,166,666 shares of common stock assuming a $12.00 initial
offering price will be entitled to cause us to register those shares. See
"Description of Capital Stock--Registration Rights." Registration of these
shares would result in them becoming freely tradable without restriction under
the Securities Act of 1933.


                                       57
<PAGE>
                                  UNDERWRITING

    Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to each underwriter, the number of shares
set forth opposite the name of that underwriter.

<TABLE>
<CAPTION>
NAME                                                          NUMBER OF SHARES
----                                                          ----------------
<S>                                                           <C>
Salomon Smith Barney Inc....................................
Banc of America Securities LLC..............................
CIBC World Markets Corp.....................................
                                                                    ----
    TOTAL...................................................
                                                                    ====
</TABLE>

    The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to the
approval of particular legal matters by the underwriters' counsel and to other
conditions. The underwriters are obligated to purchase all the shares, other
than those covered by their over-allotment option described below, if they
purchase any of the shares.

    The underwriters, for whom Salomon Smith Barney Inc., Banc of America
Securities LLC, and CIBC World Markets Corp. are acting as representatives,
propose to offer some of the shares directly to the public at the public
offering price set forth on the cover page of this prospectus and some of the
shares to particular dealers at the public offering price less a concession not
in excess of $           per share. The underwriters may allow, and such dealers
may reallow, a concession not in excess of $           per share on sales to
other dealers. If all the shares are not sold at the initial offering price, the
underwriters may change the public offering price and other selling terms. The
representatives have advised us that the underwriters do not intend to confirm
any sales to any accounts over which they exercise discretionary authority.


    We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 1,200,000 additional shares of
our common stock at the public offering price less the underwriting discount.
The underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent this
option is exercised, each underwriter will be obligated, subject to some
conditions, to purchase a number of additional shares approximately
proportionate to that underwriter's initial purchase commitment.



    At our request, the underwriters have reserved up to 5% of the shares of
common stock in the offering for sale at the initial public offering price to
our directors, officers and employees and certain of their friends and family
members as well as to clients and vendors who have advised us of their desire to
purchase the shares. All of the shares purchased through the directed share
program will be subject to lock-up agreements for a period of 30 days from the
date of this prospectus and for a period of 180 days from the date of this
prospectus if they are purchased by shareholders subject to the lock-up
agreements described separately below. The number of shares of common stock
available for sale to the general public will be reduced to the extent that
these individuals purchase reserved shares. Any reserved shares that are not
purchased through this directed share program will be offered by the
underwriters to the general public on the same basis as all other shares of
common stock offered by this prospectus. We have agreed to indemnify the
underwriters against certain liabilities and expenses, including liabilities
under the Securities Act of 1933, in connection with the sales of the directed
shares.


    We and our officers, directors and major shareholders have agreed that, for
a period of 180 days from the date of this prospectus, we will not, without the
prior written consent of Salomon Smith Barney Inc., dispose of or hedge any
shares of our common stock or any securities convertible into, or exercisable or
exchangeable for, our common stock. Salomon Smith Barney Inc., in its sole
discretion, may release any of the securities subject to these lock-up
agreements at any time without notice.

                                       58
<PAGE>
    Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering for the shares was determined
by negotiation between us and the representatives. Among the factors considered
in determining the initial public offering price were:

    - our record of operations;

    - our current financial condition;

    - our future prospects;

    - our markets;

    - the economic conditions in and future prospects for the industry in which
      we compete;

    - our management; and

    - currently prevailing general conditions in the equity securities markets,
      including current market valuations of publicly traded companies
      considered comparable to us.

The prices at which the shares will sell in the public market after this
offering may, however, be lower than the price at which they are sold by the
underwriters. Additionally, an active trading market in our common stock may not
develop and continue after this offering.

    We intend to apply to have our common stock included for quotation on the
Nasdaq National Market under the symbol "BCON".

    The following table shows the underwriting discounts and commissions that we
will pay to the underwriters in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.

<TABLE>
<CAPTION>
                                                       NO EXERCISE   FULL EXERCISE
                                                       -----------   -------------
<S>                                                    <C>           <C>
Per Share............................................     $              $
Total................................................     $              $
</TABLE>

    In connection with this offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell shares of common stock in the open
market. These transactions may include short sales, syndicate covering
transactions and stabilizing transactions. Short sales involve syndicate sales
of common stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
"Covered" short sales are sales of shares made in an amount up to the number of
shares represented by the underwriters' over-allotment option. In determining
the source of shares to close out the covered syndicate short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which they may
purchase shares through the over-allotment option. Transactions to close out the
covered syndicate short involve either purchases of the common stock in the open
market after the distribution has been completed or the exercise of the
over-allotment option. The underwriters may also make "naked" short sales of
shares in excess of the over-allotment option. The underwriters must close out
any naked short position by purchasing shares of common stock in the open
market. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price of the shares in
the open market after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of bids for or purchases of
shares in the open market while the offering is in progress.

    The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member while
Salomon Smith Barney Inc., in covering a syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

                                       59
<PAGE>

    A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters. The underwriters may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to underwriters that
may make Internet distributions on the same basis as other allocations.


    Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common stock. They may also cause the price
of the common stock to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions on the Nasdaq National Market or in the
over-the-counter market, or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.


    We estimate that our total expenses for this offering, excluding the
underwriting discount, will be $1,175,860.


    We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of any of those liabilities.

                                       60
<PAGE>
                                 LEGAL MATTERS

    The validity of the shares of common stock offered hereby will be passed
upon for us by Edwards & Angell, LLP, Boston, Massachusetts. Various legal
matters related to this offering will be passed upon for the underwriters by
Cravath, Swaine & Moore, New York, New York.

                                    EXPERTS


    The financial statements as of December 31, 1998 and 1999 and for the years
then ended and the period from May 8, 1997 (date of inception) to December 31,
1997 and the period from May 8, 1997 (date of inception) to December 31, 1999
included in this prospectus, and the financial statements from which the
Selected Financial Data included in this prospectus have been derived and have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein. Such financial statements and Selected Financial Data
have been included herein in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.


                      WHERE YOU CAN FIND MORE INFORMATION


    We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including the exhibits and schedules thereto) under the
Securities Act and the rules and regulations thereunder, for the registration of
the common stock offered hereby. This prospectus is part of the registration
statement. This prospectus does not contain all the information included in the
registration statement because we have omitted certain parts of the registration
statement as permitted by the Securities and Exchange Commission's rules and
regulations. For further information about us and our common stock, you should
refer to the registration statement. Statements made in this prospectus as to
the contents of any contract, agreement or other document are necessarily
summaries of these documents and are qualified in their entirety by reference to
each such contract, agreement or other document which is filed as an exhibit to
the registration statement.


    You can inspect and copy all or any portion of the registration statements
or any reports, statements or other information we file at the public reference
facility maintained by the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information about the
operation of the public reference rooms. Copies of all or any portion of the
registration statement can be obtained from the Public Reference Section of the
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the registration statement is publicly
available through the Securities and Exchange Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov.

    We will also file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You can also
request copies of these documents, for a copying fee, by writing to the
Securities and Exchange Commission. We intend to furnish to our stockholders
annual reports containing audited financial statements for each fiscal year.

                                       61
<PAGE>
                            BEACON POWER CORPORATION


                         (A DEVELOPMENT STAGE COMPANY)



                         INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
INDEPENDENT AUDITORS' REPORT................................     F-2

FINANCIAL STATEMENTS:
</TABLE>


AUDITED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS
THEN ENDED AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31,
1997 AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999.



<TABLE>
<CAPTION>

<S>                                                           <C>
  Balance Sheets............................................     F-3

  Statements of Operations..................................     F-4

  Statements of Stockholders' Deficiency....................     F-5

  Statements of Cash Flows..................................     F-6

  Notes to Financial Statements.............................     F-7
</TABLE>



UNAUDITED FINANCIAL STATEMENTS AS OF JUNE 30, 2000 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1999 AND JUNE 30, 2000 AND THE PERIOD FROM MAY 8, 1997 (DATE OF
INCEPTION) TO JUNE 30, 2000.



<TABLE>
<CAPTION>

<S>                                                           <C>
  Balance Sheets............................................    F-20

  Statements of Operations..................................    F-21

  Statements of Stockholders' Deficiency....................    F-22

  Statements of Cash Flows..................................    F-23

  Notes to Financial Statements.............................    F-24
</TABLE>


                                      F-1
<PAGE>

    The accompanying financial statements give effect to the completion of a
2-for-1 split of the Company's common stock which will take place on the
effective date of the offering. The following report is in the form which will
be furnished by Deloitte & Touche LLP upon the completion of the 2-for-1 split
of the Company's common stock described in Note 16 to the financial statements
and assuming that from September 28, 2000 to the date of such completion no
other material events have occurred that would affect the accompanying financial
statements or require disclosure therein.


                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
Beacon Power Corporation:

    We have audited the accompanying balance sheets of Beacon Power Corporation
(the "Company")(a development stage company) as of December 31, 1998 and 1999,
and the related statements of operations, stockholders' deficiency and cash
flows for the years then ended and for the period from May 8, 1997 (date of
inception) through December 31, 1997 and the period from May 8, 1997 (date of
inception) through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Beacon Power Corporation as
of December 31, 1998 and 1999, and the results of its operations and its cash
flows for the years then ended and the period from May 8, 1997 (date of
inception) through December 31, 1997 and the period from May 8, 1997 (date of
inception) through December 31, 1999 in conformity with accounting principles
generally accepted in the United States of America.



Boston, Massachusetts
May 25, 2000 (September 22, 2000 as to the last two paragraphs of Note 15 and
October   , 2000 as to Note 16)



/s/ Deloitte & Touche LLP
Boston, Massachusetts
September 28, 2000


                                      F-2
<PAGE>
                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                                 BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                              -------------------------
                                                                 1998          1999
                                                              ----------   ------------
<S>                                                           <C>          <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $2,491,151   $    234,350
  Prepaid expenses and other current assets.................      20,307         15,987
                                                              ----------   ------------
      Total current assets..................................   2,511,458        250,337
PROPERTY AND EQUIPMENT, Net.................................     433,726        566,013

PREPAID FINANCING COSTS.....................................          --         81,934

DEPOSITS....................................................      42,595         57,150

OTHER ASSETS................................................       4,375         18,066
                                                              ----------   ------------
TOTAL ASSETS................................................  $2,992,154   $    973,500
                                                              ==========   ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
  Accounts payable..........................................  $  822,723   $    413,146
  Accrued compensation and benefits.........................      68,183        109,206
  Accrued interest..........................................          --        164,140
  Accrued loss on sales commitments.........................          --        325,000
  Due to related party......................................      18,611             --
  Other accrued expenses....................................      15,622         43,222
  Current portion of capital lease obligations..............     105,406         73,291
                                                              ----------   ------------
      Total current liabilities.............................   1,030,545      1,128,005
                                                              ----------   ------------
DIVIDENDS PAYABLE...........................................     112,153        749,005
                                                              ----------   ------------
NOTES PAYABLE TO INVESTORS..................................          --      3,150,000
                                                              ----------   ------------
CAPITAL LEASE OBLIGATIONS, Net of current portion...........      76,166          2,875
                                                              ----------   ------------
COMMITMENTS (Note 6)

CLASS D REDEEMABLE CONVERTIBLE
PREFERRED STOCK (Liquidation preference of $4,750,000)......   4,493,145      4,534,816
                                                              ----------   ------------
STOCKHOLDERS' (DEFICIENCY) EQUITY:
  Preferred stock:
    Class A Convertible, $.01 par value; 6,000,000, shares
     authorized 4,622,907, and 4,767,907 shares issued and
     outstanding in 1998 and 1999 respectively, (liquidation
     preference, $20,571,936, and $21,217,186,
     respectively)..........................................   5,378,951      5,741,451
    Class B Convertible, $.01 par value; 1 share authorized;
     no shares issued and outstanding.......................          --             --
    Class C Convertible, $.01 par value; 6 shares
     authorized, issued and outstanding.....................      29,866         29,866
    Common stock, $.01 par value; 110,000,000 shares
     authorized; 16,848 shares issued and outstanding.......         168            168
  Deferred consulting expense, net..........................     (37,500)      (100,000)
  Deferred stock compensation...............................          --        (56,648)
  Additional paid-in capital................................          --        515,318
  Deficit accumulated during the development stage..........  (8,091,340)   (14,721,356)
                                                              ----------   ------------
      Total stockholders' deficiency........................  (2,719,855)    (8,591,201)
                                                              ----------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY..............  $2,992,154   $    973,500
                                                              ==========   ============
</TABLE>


SEE NOTES TO FINANCIAL STATEMENTS.

                                      F-3
<PAGE>
                            BEACON POWER CORPORATION

                         (A DEVELOPMENT STAGE COMPANY)


                            STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                               PERIOD FROM                                   CUMULATIVE FROM
                                                               MAY 8, 1997                                     MAY 8, 1997
                                                                (DATE OF                                         (DATE OF
                                                              INCEPTION) TO    YEAR ENDED     YEAR ENDED    INCEPTION) THROUGH
                                                              DECEMBER 31,    DECEMBER 31,   DECEMBER 31,      DECEMBER 31,
                                                                  1997            1998           1999              1999
                                                              -------------   ------------   ------------   ------------------
<S>                                                           <C>             <C>            <C>            <C>
REVENUE.....................................................   $   232,316    $        --    $   268,868       $    501,184
                                                               -----------    -----------    -----------       ------------

OPERATING EXPENSES:
  Selling, general and administrative.......................     1,168,471      1,188,165      1,558,985          3,915,621
  Research and development..................................     2,291,874      3,523,572      3,506,031          9,321,477
  Loss on sales commitments.................................            --             --        325,000            325,000
  Depreciation and amortization.............................            --         78,208        218,594            296,802
                                                               -----------    -----------    -----------       ------------
    Total operating expenses................................     3,460,345      4,789,945      5,608,610         13,858,900
                                                               -----------    -----------    -----------       ------------

LOSS FROM OPERATIONS........................................    (3,228,029)    (4,789,945)    (5,339,742)       (13,357,716)
                                                               -----------    -----------    -----------       ------------

OTHER INCOME (EXPENSE):
  Interest income...........................................       116,648         11,277         25,118            153,043
  Interest expense..........................................            --        (14,730)      (356,869)          (371,599)
                                                               -----------    -----------    -----------       ------------
    Total other income (expense), net.......................       116,648         (3,453)      (331,751)          (218,556)
                                                               -----------    -----------    -----------       ------------

NET LOSS....................................................    (3,111,381)    (4,793,398)    (5,671,493)       (13,576,272)

PREFERRED STOCK DIVIDENDS...................................            --       (112,153)      (916,852)        (1,029,005)

ACCRETION OF REDEEMABLE CONVERTIBLE PREFERRED STOCK.........            --         (6,908)       (41,671)           (48,579)
                                                               -----------    -----------    -----------       ------------

LOSS TO COMMON SHAREHOLDERS.................................   $(3,111,381)   $(4,912,459)   $(6,630,016)      $(14,653,856)
                                                               ===========    ===========    ===========       ============

LOSS PER SHARE--BASIC AND DILUTED...........................   $   (184.67)   $   (291.58)   $   (393.52)
                                                               ===========    ===========    ===========

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING..................        16,848         16,848         16,848
                                                               ===========    ===========    ===========

PRO FORMA LOSS PER SHARE....................................                                 $      (.42)
                                                                                             ===========

PRO FORMA WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING--BASIC
  AND DILUTED...............................................                                  13,492,674
                                                                                             ===========
</TABLE>



SEE NOTES TO FINANCIAL STATEMENTS.


                                      F-4
<PAGE>
                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                     STATEMENTS OF STOCKHOLDERS' DEFICIENCY


<TABLE>
<CAPTION>

                                                                CLASS A                  CLASS C
                                                            PREFERRED STOCK          PREFERRED STOCK          COMMON STOCK
                                                         ----------------------   ---------------------   ---------------------
                                                          SHARES       AMOUNT       SHARES      AMOUNT      SHARES      AMOUNT
                                                         ---------   ----------   ----------   --------   ----------   --------
<S>                                                      <C>         <C>          <C>          <C>        <C>          <C>
BALANCE AT MAY 8, 1997 (DATE OF INCEPTION).............         --   $       --           --   $    --            --   $     --
  Issuance of founder's shares.........................         --           --           --        --     6,750,000     67,500
  Issuance of Class A preferred stock..................  1,125,000    5,000,000           --        --            --         --
  Recapitalization.....................................  3,373,313       67,466           --        --    (6,746,626)   (67,466)
  Rounding for fractional shares.......................         --           --           --        --            (2)        --
  Issuance of Class C preferred and common stock.......         --           --            6    29,866        13,476        134
  Repayment of subscription receivable.................
  Accrual of consulting expense........................         --           --           --        --            --         --
  Net loss.............................................         --           --           --        --            --         --
                                                         ---------   ----------   ----------   -------    ----------   --------
BALANCE, DECEMBER 31, 1997.............................  4,498,313    5,067,466            6    29,866        16,848        168
  Issuance of Class A preferred stock for services.....    120,000      300,000           --        --            --         --
  Issuance of Class A preferred stock for services and
    interest on loans..................................      4,594       11,485           --        --            --         --
  Dividend on Class D preferred stock..................         --           --           --        --            --         --
  Repayment of subscription receivable.................         --           --           --        --            --         --
  Amortization of deferred consulting expense, net.....         --           --           --        --            --         --
  Accretion of redeemable preferred stock to redemption
    value..............................................         --           --           --        --            --         --
  Net loss.............................................         --           --           --        --            --         --
                                                         ---------   ----------   ----------   -------    ----------   --------
BALANCE, DECEMBER 31, 1998.............................  4,622,907    5,378,951            6    29,866        16,848        168
  Issuance of Class A preferred stock for services.....    145,000      362,500           --        --            --         --
  Dividend on Class D preferred stock..................         --           --           --        --            --         --
  Deferred stock compensation..........................         --           --           --        --            --         --
  Amortization of deferred stock compensation..........         --           --           --        --            --         --
  Amortization of deferred consulting expense, net.....         --           --           --        --            --         --
  Issuance of warrants to holders of Class D shares....         --           --           --        --            --         --
  Issuance of warrants for bridge loans................         --           --           --        --            --         --
  Accretion of redeemable preferred stock to redemption
    value..............................................         --           --           --        --            --         --
  Net loss.............................................         --           --           --        --            --         --
                                                         ---------   ----------   ----------   -------    ----------   --------
BALANCE, DECEMBER 31, 1999.............................  4,767,907   $5,741,451            6   $29,866        16,848   $    168
                                                         =========   ==========   ==========   =======    ==========   ========

<CAPTION>
                                                                                                                    DEFICIT
                                                          DEFERRED                                                ACCUMULATED
                                                         CONSULTING     DEFERRED      ADDITIONAL      STOCK        DURING THE
                                                          EXPENSE,        STOCK        PAID-IN     SUBSCRIPTION   DEVELOPMENT
                                                            NET       COMPENSATION     CAPITAL      RECEIVABLE       STAGE
                                                         ----------   -------------   ----------   ------------   ------------
<S>                                                      <C>          <C>             <C>          <C>            <C>
BALANCE AT MAY 8, 1997 (DATE OF INCEPTION).............  $      --      $     --      $      --    $        --    $        --
  Issuance of founder's shares.........................         --            --             --             --        (67,500)
  Issuance of Class A preferred stock..................         --            --             --     (5,000,000)            --
  Recapitalization.....................................         --            --             --             --             --
  Rounding for fractional shares.......................         --            --             --             --             --
  Issuance of Class C preferred and common stock.......         --            --             --             --             --
  Repayment of subscription receivable.................                                              2,992,492             --
  Accrual of consulting expense........................     87,500            --             --             --             --
  Net loss.............................................         --            --             --             --     (3,111,381)
                                                         ---------      --------      ----------   -----------    ------------
BALANCE, DECEMBER 31, 1997.............................     87,500            --             --     (2,007,508)    (3,178,881)
  Issuance of Class A preferred stock for services.....   (150,000)           --             --             --             --
  Issuance of Class A preferred stock for services and
    interest on loans..................................         --            --             --             --             --
  Dividend on Class D preferred stock..................         --            --             --             --       (112,153)
  Repayment of subscription receivable.................         --            --             --      2,007,508             --
  Amortization of deferred consulting expense, net.....     25,000            --             --             --             --
  Accretion of redeemable preferred stock to redemption
    value..............................................         --            --             --             --         (6,908)
  Net loss.............................................         --            --             --             --     (4,793,398)
                                                         ---------      --------      ----------   -----------    ------------
BALANCE, DECEMBER 31, 1998.............................    (37,500)           --             --             --     (8,091,340)
  Issuance of Class A preferred stock for services.....   (125,000)           --             --             --             --
  Dividend on Class D preferred stock..................         --            --             --             --       (636,852)
  Deferred stock compensation..........................         --       (65,318)        65,318             --             --
  Amortization of deferred stock compensation..........         --         8,670             --             --             --
  Amortization of deferred consulting expense, net.....     62,500            --             --             --             --
  Issuance of warrants to holders of Class D shares....         --            --        280,000             --       (280,000)
  Issuance of warrants for bridge loans................         --            --        170,000             --             --
  Accretion of redeemable preferred stock to redemption
    value..............................................         --            --             --             --        (41,671)
  Net loss.............................................         --            --             --             --     (5,671,493)
                                                         ---------      --------      ----------   -----------    ------------
BALANCE, DECEMBER 31, 1999.............................  $(100,000)     $(56,648)     $ 515,318    $        --    $(14,721,356)
                                                         =========      ========      ==========   ===========    ============

<CAPTION>

                                                             TOTAL
                                                         STOCKHOLDERS'
                                                          DEFICIENCY
                                                         -------------
<S>                                                      <C>
BALANCE AT MAY 8, 1997 (DATE OF INCEPTION).............  $         --
  Issuance of founder's shares.........................            --
  Issuance of Class A preferred stock..................            --
  Recapitalization.....................................            --
  Rounding for fractional shares.......................            --
  Issuance of Class C preferred and common stock.......        30,000
  Repayment of subscription receivable.................     2,992,492
  Accrual of consulting expense........................        87,500
  Net loss.............................................    (3,111,381)
                                                         ------------
BALANCE, DECEMBER 31, 1997.............................        (1,389)
  Issuance of Class A preferred stock for services.....       150,000
  Issuance of Class A preferred stock for services and
    interest on loans..................................        11,485
  Dividend on Class D preferred stock..................      (112,153)
  Repayment of subscription receivable.................     2,007,508
  Amortization of deferred consulting expense, net.....        25,000
  Accretion of redeemable preferred stock to redemption
    value..............................................        (6,908)
  Net loss.............................................    (4,793,398)
                                                         ------------
BALANCE, DECEMBER 31, 1998.............................    (2,719,855)
  Issuance of Class A preferred stock for services.....       237,500
  Dividend on Class D preferred stock..................      (636,852)
  Deferred stock compensation..........................            --
  Amortization of deferred stock compensation..........         8,670
  Amortization of deferred consulting expense, net.....        62,500
  Issuance of warrants to holders of Class D shares....            --
  Issuance of warrants for bridge loans................       170,000
  Accretion of redeemable preferred stock to redemption
    value..............................................       (41,671)
  Net loss.............................................    (5,671,493)
                                                         ------------
BALANCE, DECEMBER 31, 1999.............................  $ (8,591,201)
                                                         ============
</TABLE>



SEE NOTES TO FINANCIAL STATEMENTS.


                                      F-5
<PAGE>
                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                            PERIOD FROM                                   CUMULATIVE FROM
                                                            MAY 8, 1997                                     MAY 8, 1997
                                                             (DATE OF                                         (DATE OF
                                                           INCEPTION) TO    YEAR ENDED     YEAR ENDED    INCEPTION) THROUGH
                                                           DECEMBER 31,    DECEMBER 31,   DECEMBER 31,      DECEMBER 31,
                                                               1997            1998           1999              1999
                                                           -------------   ------------   ------------   ------------------
<S>                                                        <C>             <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss...............................................   $(3,111,381)   $(4,793,398)   $(5,671,493)      $(13,576,272)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization........................            --         78,208        218,594            296,802
    Interest expense relating to issuance of warrants....            --             --        170,000            170,000
    Amortization of deferred consulting expense, net.....        87,500        175,000        300,000            562,500
    Amortization of deferred stock compensation..........            --             --             --                 --
    Services and interest expense paid in preferred
      stock..............................................            --         11,485             --             11,485
    Accrued loss on sales commitments....................            --             --        325,000            325,000
    Changes in operating assets and liabilities:
      Accounts receivable................................       (14,487)        14,487             --                 --
      Prepaid expenses and other current assets..........            --        (20,307)         4,320            (15,987)
      Accounts payable...................................        50,000        772,723       (409,577)           413,146
      Accrued compensation and benefits..................        31,042         37,141         41,023            109,206
      Accrued interest...................................            --             --        164,140            164,140
      Due to related party...............................            --         18,611        (18,611)                --
      Other accrued expenses and current liabilities.....        31,981        (16,359)        36,270             51,892
                                                            -----------    -----------    -----------       ------------
        Net cash used in operating activities............    (2,925,345)    (3,722,409)    (4,840,334)       (11,488,088)
                                                            -----------    -----------    -----------       ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Increase in other assets...............................       (27,147)       (19,823)      (110,180)          (157,150)
  Repayment (issuance) of note receivable from officer...       (40,000)        40,000             --                 --
  Purchases of property and equipment....................            --       (257,423)      (350,881)          (608,304)
                                                            -----------    -----------    -----------       ------------
        Net cash used in investing activities............       (67,147)      (237,246)      (461,061)          (765,454)
                                                            -----------    -----------    -----------       ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of subscription receivable...................     2,992,492      2,007,508             --          5,000,000
  Issuance of Class C preferred stock....................        30,000             --             --             30,000
  Issuance of Class D redeemable preferred stock.........            --      4,486,237             --          4,486,237
  Repayment of capital leases............................            --        (72,939)      (105,406)          (178,345)
  Proceeds from notes payable issued to investors........            --             --      3,150,000          3,150,000
                                                            -----------    -----------    -----------       ------------
  Net cash provided by financing activities..............     3,022,492      6,420,806      3,044,594         12,487,892
                                                            -----------    -----------    -----------       ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........        30,000      2,461,151     (2,256,801)           234,350

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...........            --         30,000      2,491,151                 --
                                                            -----------    -----------    -----------       ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................   $    30,000    $ 2,491,151    $   234,350       $    234,350
                                                            ===========    ===========    ===========       ============
SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES:
  Issuance of Class A Preferred Stock for subscription
    receivable...........................................   $ 5,000,000    $        --    $        --       $  5,000,000
                                                            ===========    ===========    ===========       ============
  Acquisition of assets with capital leases..............   $        --    $   254,411    $        --       $    254,411
                                                            ===========    ===========    ===========       ============
  Issuance of warrants in conjunction with financing.....   $        --    $        --    $   450,000       $    450,000
                                                            ===========    ===========    ===========       ============
  Issuance of non-qualified stock options to
    consultants..........................................   $        --    $        --    $    65,318       $     65,318
                                                            ===========    ===========    ===========       ============
</TABLE>



SEE NOTES TO FINANCIAL STATEMENTS.


                                      F-6
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                         NOTES TO FINANCIAL STATEMENTS


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


1.  NATURE OF BUSINESS AND OPERATIONS

    NATURE OF BUSINESS--Beacon Power Corporation (the "Company" or "Beacon") (a
development stage company) was incorporated on May 8, 1997 as a wholly owned
subsidiary of SatCon Technology Corporation ("SatCon"). Since its inception,
Beacon has been engaged in the development of flywheel devices for storing and
transmitting kinetic energy. As of December 31, 1999, the Company has not yet
commenced its planned principal activities of marketing and manufacturing such
devices and accordingly is accounted for as a development stage company under
Statement of Financial Accounting Standards No. 7. As of December 31, 1999, a
majority of the Company's outstanding shares is owned by SatCon. However, in
conjunction with the October 1998 Class D preferred stock offering, the
Company's minority investors were granted the right to appoint a majority of the
members of the Company's Board of Directors.

    The Company has a single operating segment, manufacturing alternative power
sources. The Company has no organizational structure dictated by product lines,
geography or customer type.

    OPERATIONS--The Company has experienced net losses since its inception and,
as of December 31, 1999, had an accumulated deficit of approximately
$14.7 million. The Company is currently facing the challenge of finalizing
development of a viable commercial product and raising adequate capital to
sustain operations. As discussed in Note 15, during the period during
January 1, 2000 to May 25, 2000, the Company secured additional financing of
approximately $32 million. Management believes that this funding is sufficient
to continue its operations as a going concern through at least December 31,
2000.

2.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


BASIS OF PRESENTATION


    ACCOUNTING PRINCIPLES--The accompanying financial statements have been
prepared using accounting principles generally accepted in the United States of
America.


    RECAPITALIZATION--The accompanying financial statements reflect a
recapitalization of the Company in 1997 when one shareholder exchanged shares of
common stock for Class A preferred stock.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    USE OF ESTIMATES--The preparation of financial statements in accordance 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 date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

    CASH AND CASH EQUIVALENTS--Cash and cash equivalents include demand deposits
and highly liquid investments with a maturity of three months or less when
acquired. Cash equivalents are stated at cost, which approximates market value.

    PROPERTY AND EQUIPMENT--Property and equipment, including leasehold
improvements, are stated at cost and depreciated using the straight-line method
over the estimated useful lives of the assets.

                                      F-7
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


2.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (CONTINUED)

    PREPAID FINANCING COSTS--Prepaid financing costs consist of legal, financing
and other related expenses incurred in connection with the Class E financing
completed during the year ending December 31, 2000 and will be amortized over
the terms of the obligations using the effective interest method.


    OTHER ASSETS--Other assets consist of unamortized legal expenses related to
patents.


    LOSSES ON SALES COMMITMENTS--Substantially all of the Company's sales
commitments are firm and have fixed-prices. Revenue and cost of revenue on such
sales commitments are recorded as deliveries are made. The direct costs to
manufacture products covered by the Company's firm sales commitments are in
excess of the fixed selling prices. These excess costs have been estimated and
accrued as losses on sales commitments in the period in which the sales
commitment is made. Estimates of costs to manufacture products are reviewed and
revised periodically and accruals for estimated losses from such revisions are
recorded in the accounting period in which the revisions are made.


    LONG-LIVED ASSETS--At the occurrence of certain events or changes in
circumstances, the Company reviews the carrying value of its long-lived assets
to determine if impairment has occurred and, if necessary, adjusts the carrying
value accordingly. No adjustments have been required to date.

    REVENUE RECOGNITION--Revenue relates to work performed under research and
development contracts. Revenue is recognized as services are performed.

    STOCK-BASED COMPENSATION--Compensation expense associated with awards of
stock or options to employees is measured using the intrinsic-value method.
Compensation expense associated with awards to nonemployees is measured using
the fair-value method and is amortized over the vesting period of three years.

    INCOME TAXES--Deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and tax loss and credit carryforwards using the currently
enacted tax rates and laws. A valuation allowance is provided to the extent
realization of deferred tax assets is not considered more likely than not.

    RESEARCH AND DEVELOPMENT--Research and development costs are expensed as
incurred.

    FINANCIAL INSTRUMENTS--The carrying amount of cash and cash equivalents,
accounts payable, accrued expenses, notes payable to investors and capital lease
obligations approximate their fair values.

    CONCENTRATION OF CREDIT RISK--Financial instruments that potentially subject
the Company to significant concentration of credit risk consist primarily of
cash and cash equivalents. Substantially all of the Company's cash and cash
equivalents are managed by one financial institution. At December 31, 1998 and
1999, the Company had cash balances at a financial institution in excess of
federally insured limits. However, the Company does not believe that it is
subject to unusual credit risk beyond the normal credit risk associated with
commercial banking relationships.

    COMPREHENSIVE LOSS--Comprehensive loss is the same as net loss for all
periods presented.

                                      F-8
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


2.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (CONTINUED)
    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS--In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The statement, as amended, is effective
for fiscal years beginning after June 15, 2000. Management is currently
evaluating the effect of adopting SFAS No. 133 on the financial statements.


    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition" (SAB 101). SAB 101
established guidelines for revenue recognition and is effective for periods
beginning no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. Management does not expect that the adoption of SAB 101
will have a material impact on the Company's financial condition or results of
operations.


    HISTORICAL LOSS PER SHARE--Historical loss per share has been computed using
the weighted-average number of shares of common stock outstanding during each
period. Diluted loss per share was computed in the same manner. The impact of
the Company's outstanding potential common shares, such as options and warrants
(computed using the treasury stock method) and convertible preferred stock, were
excluded from the calculation because such items were antidilutive.


    The weighted average number of shares of common stock issuable during the
years ended December 31, 1999, and 1998, the period from May 8, 1997 to
December 31, 1997 and the period from May 8, 1997 through December 31, 1999
aggregated 16,298,920, 14,495,538, and 3,700,956, and 10,676,036, respectively,
upon the exercise of options and warrants and the conversion of preferred stock
outstanding.


3.  PROPERTY AND EQUIPMENT

    Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
                                              ESTIMATED
                                                USEFUL
                                                LIVES        1998       1999
                                              ----------   --------   --------
<S>                                           <C>          <C>        <C>
Machinery and equipment.....................     5 years   $214,635   $298,180
Furniture and fixtures......................     7 years     19,423     41,521
Office equipment............................     3 years     10,904    159,894
Leasehold improvements......................  lease term     12,561    108,809
Equipment under capital lease obligations...  lease term    254,411    254,411
                                                           --------   --------
  Total.....................................                511,934    862,815
Less accumulated depreciation and
  amortization..............................                (78,208)  (296,802)
                                                           --------   --------
  Property and equipment, net...............               $433,726   $566,013
                                                           ========   ========
</TABLE>

                                      F-9
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


4.  NOTES PAYABLE TO INVESTORS

    At December 31, 1999, notes payable to investors consists of Senior Secured
Convertible Promissory Notes (the "Senior Notes") held by the Company's primary
investors. The Senior Notes bear interest, which is payable upon conversion, at
an annual rate of 12.5%, increasing to 15% after six months if the Class E
redeemable convertible preferred stock ("Class E Stock") funding had not
occurred at that time. The notes are secured by substantially all of the assets
of the Company. In connection with the issuance of the Senior Notes, the
investors received warrants to purchase shares of the Company's common stock
(see Note 10).

    On April 7, 2000, the Senior Notes and accrued interest were converted into
Class E Stock (see Note 15).

5.  CAPITAL LEASE OBLIGATIONS

    The Company leases equipment under capital lease agreements expiring through
2001. Future obligations under such capital leases as of December 31, 1999 are
as follows:

<TABLE>
<S>                                                           <C>
2000........................................................  $77,530
2001........................................................    3,067
                                                              -------
                                                               80,597
Less amount representing interest...........................    4,431
                                                              -------
                                                               76,166
Less current portion of capital lease obligations...........   73,291
                                                              -------
Capital lease obligations, excluding current portion........  $ 2,875
                                                              =======
</TABLE>

6.  COMMITMENTS

    The Company leases office and light manufacturing space under operating
leases expiring through January 30, 2001 and an operating lease for office
equipment expiring October 2001.

    Future minimum annual lease payments under noncancelable operating leases as
of December 31, 1999 are as follows:

<TABLE>
<S>                                                           <C>
2000........................................................  $241,506
2001........................................................    25,449
</TABLE>

    Total rent expense was $146,255 and $199,405, during 1998 and 1999, and
$345,660 for the period from inception to December 31, 1999.

                                      F-10
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


7.  PREFERRED STOCK


    CLASS A CONVERTIBLE PREFERRED STOCK--Each share of Class A convertible
preferred stock ("Class A Stock") is convertible into two shares of common stock
at the option of the holder (see Note 2). The Class A Stock is nonvoting. Upon
liquidation, holders of Class A Stock are entitled to receive, out of funds then
generally available prior to any payment with respect to the holders of common
stock, $4.45 per share, plus any declared and unpaid dividends thereon. Holders
of the Class A Stock have the right to receive the same dividends as declared by
the Board of Directors on common shares on an "as-if-converted" basis. The
Class A Stock will automatically be converted into shares of common stock upon
the closing of a public offering of common stock of the Company, upon a vote of
the Board of Directors or upon the automatic conversion of the Class D preferred
stock (see Note 8). Class A Stock is subordinate to Class D, E and F preferred
stock and has parity with Class B and C preferred stock. The Class A stock does
not have redemption features.



    CLASS B AND C CONVERTIBLE PREFERRED STOCK--The Company has authorized both
Class B and C convertible preferred stock. Only Class C shares are outstanding.
Class B shares were never issued. Class B and C shares have identical conversion
and voting rights. Class C convertible preferred stock ("Class C Stock") is
convertible into two shares of common stock at the option of the holder (see
Note 2). The holders of the Class C Stock have voting rights equivalent to the
number of shares of common stock into which their shares of Class C Stock
convert. The Class C Stock has the right to receive the same dividends as
declared by the Board of Directors on common shares on an "as-if-converted"
basis. The Class C Stock will automatically be converted into shares of common
stock upon the closing of a public offering of common stock of the Company, upon
a vote of the Board of Directors, upon the automatic conversion of the Class D
preferred Stock (see Note 8), or upon conversion of the Class A Stock. Class B
and C Stock have parity with Class A in liquidation and are subordinate to
Class D, E and F preferred stock. The Class B and C Stock do not have redemption
features.


8.  REDEEMABLE PREFERRED STOCK


    CLASS D REDEEMABLE CONVERTIBLE PREFERRED STOCK--The Company has authorized
6,000,000 shares of Class D convertible preferred stock ("Class D Stock") with a
par value of $.01 per share. On October 23, 1998, the Company issued 1,900,000
shares of Class D Stock and received net proceeds of approximately $4,486,000.
Issuance costs totaled approximately $264,000 and are being accreted to the
carrying value of the Class D Stock over the period to the stock's earliest
redemption date. Each share of Class D Stock is convertible into two shares of
common stock at the option of the holder (see Note 2). The holders of the
Class D Stock have voting rights equivalent to the number of shares of common
stock into which their shares of Class D Stock convert. Holders of the Class D
Stock are also entitled to appoint representatives to the Board of Directors.
The Class D Stock earns cumulative dividends at an annual rate of 12.5% through
May 23, 2000 and 6% on and after this date, payable quarterly. Dividends can be
paid in shares of Class D Stock through May 23, 2000 and after this date, are
payable only in cash. Cumulative dividends not paid on Class D Stock total
$112,153 and $749,005 as of December 31, 1998 and 1999, respectively. Upon
liquidation, holders of Class D Stock are entitled to receive, out of funds then
generally available, unpaid dividends previously declared or


                                      F-11
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


8.  REDEEMABLE PREFERRED STOCK (CONTINUED)
accrued and a per share amount of $2.50. The Class D Stock is redeemable by the
holder at any time after December 31, 2004 for the stated value of $2.50 per
share plus accrued, but unpaid, dividends. The Class D Stock will automatically
be converted into shares of common stock upon a change in ownership of 50% of
the Company's outstanding voting stock, upon a merger or consolidation of the
Company or upon the sale of significant assets of the Company, or upon the
closing of a qualified public offering.

    Pursuant to the Stock Purchase Agreement related to the Class D Stock (the
"Class D Agreement"), the Company is bound by certain covenants. The Class D
Stock is senior to the Class A, B and C Stock, subordinate to Class F preferred
stock and has parity with Class E preferred Stock (see Note 15).

9.  COMMON STOCK

    DIVIDENDS--Dividends may be declared and paid on the common stock as and
when determined by the Board of Directors subject to any preferential dividend
rights of any then outstanding shares of preferred stock.


    RESERVED SHARES--At December 31, 1999, 18,260,840 shares of common stock
were reserved for issuance under the Company's stock option plan, outstanding
warrants and for the potential conversion of preferred stock.


10.  STOCK WARRANTS


    At its inception in 1997, the Company issued a warrant to purchase
1,125,000 shares of common stock to an investor at the price of $2.67 per share
(the "1997 warrant"). The warrant expired unexercised on May 28, 1999. Value
ascribed to this warrant was not material.



    Under the conditions of the Class D Stock offering, the Company issued
warrants in October 1999 to three investors to purchase 772,500 shares of common
stock at $1.67, 772,500 shares of common stock at $2.25, and 772,500 shares of
common stock at $3.00 (the "October 1999 warrants"). The estimated fair value of
the warrants at the date of their issuance was $280,000. This amount has been
recorded as a dividend to the holders of the Class D Stock and credited to
additional paid-in-capital. These warrants expire December 31, 2004. Additional
warrants were issued under the Class D agreement during April 2000 (see
Note 15).



    In conjunction with the issuance of the Senior Notes in August 1999, the
Company issued warrants to four investors to purchase 315,000 shares of Class E
Stock (see Note 15) at an exercise price of $2.50 per share (the "August 1999
warrants"). The estimated fair value of the warrants at the date of grant was
$170,000. This amount has been recorded as a discount on the Senior Notes and
was charged to interest expense in 1999 as the Senior Notes are demand notes.
These warrants expire on August 2, 2004.


                                      F-12
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


10.  STOCK WARRANTS (CONTINUED)
    In conjunction with the Class E conversion in April 2000 (see Note 15), the
August 1999 warrants were cancelled.

    All warrants were valued on the date of grant using the Black-Scholes
(common stock) or the Binary Option Pricing Model (preferred stock). The
assumptions used to value these warrants were as follows:

<TABLE>
<CAPTION>
                                                                            AUGUST      OCTOBER
                                                                 1997         1999         1999
                                                              WARRANT     WARRANTS     WARRANTS
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Risk-free interest rate..................................      6.25%        5.62%        5.86%
Expected life of warrant.................................  24 months    30 months    27 months
Expected dividend payment rate, as a percentage of the
  stock price on the date of grant.......................         0%         0.0%           0%
Assumed volatility.......................................        48%          60%          60%
</TABLE>

11.  STOCK OPTIONS


    The Company's option plans provide for the granting of stock options to
purchase up to 9,000,000 shares of the Company's common stock. Options may be
granted to employees, officers, directors and consultants of the Company with
terms of up to 10 years. Under the terms of the option plans, incentive stock
options ("ISOs") are to be granted at fair market value of the Company's stock
at the date of grant, and nonqualified stock options ("NSOs") are to be granted
at a price determined by the Board of Directors. ISOs and NSOs generally vest
ratably over 36 months from the grant date and have contractual lives of up to
10 years.


    Stock option activity since inception is as follows:


<TABLE>
<CAPTION>
                                                                           WEIGHTED-   WEIGHTED-
                                                                            AVERAGE     AVERAGE
                                                              NUMBER OF    EXERCISE      FAIR
                                                                SHARES       PRICE       VALUE
                                                              ----------   ---------   ---------
<S>                                                           <C>          <C>         <C>
Outstanding at inception....................................          --
  Granted...................................................     647,874     $.89        $0.35
                                                              ----------
Outstanding, December 31, 1997..............................     647,874      .89
  Granted...................................................     199,126      .89         0.38
  Canceled, forfeited or expired............................     (10,000)     .89
                                                              ----------
Outstanding, December 31, 1998..............................     837,000      .89
  Granted...................................................   1,467,000      .89         0.40
  Canceled, forfeited or expired............................    (295,688)     .89
                                                              ----------     ----
Outstanding, December 31, 1999..............................   2,008,312     $.89
                                                              ==========     ====
</TABLE>


                                      F-13
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


11.  STOCK OPTIONS (CONTINUED)

    The following table summarizes information about stock options outstanding
at December 31, 1999:



<TABLE>
<CAPTION>
                                                                                          VESTED
                                               WEIGHTED-                        --------------------------
                                                AVERAGE         WEIGHTED-                        WEIGHTED-
                              NUMBER           REMAINING         AVERAGE                          AVERAGE
                            OF OPTIONS        CONTRACTUAL       EXERCISE          NUMBER         EXERCISE
EXERCISE PRICE              OUTSTANDING          LIFE             PRICE         OF OPTIONS         PRICE
--------------              -----------       -----------       ---------       ----------       ---------
<S>                         <C>               <C>               <C>             <C>              <C>
     .89$                   2,008,312           8.64              $.89           378,244           $.89
        =====                =========            ====            =====           =======          =====
</TABLE>



    Included in the above schedules are grants of 162,000 options made to
non-employee consultants in 1999.


    As described in Note 2, the Company uses the intrinsic-value method to
measure compensation expense associated with grants of stock options to
employees. If the Company had used the fair value method to measure
compensation, reported net loss would have been as follows:


<TABLE>
<CAPTION>
                                          PERIOD FROM                                       CUMULATIVE FROM
                                          MAY 8, 1997                                         MAY 8, 1997
                                      (DATE OF INCEPTION)                                 (DATE OF INCEPTION)
                                              TO             YEAR ENDED     YEAR ENDED            TO
                                         DECEMBER 31,       DECEMBER 31,   DECEMBER 31,      DECEMBER 31,
                                             1997               1998           1999              1999
                                      -------------------   ------------   ------------   -------------------
<S>                                   <C>                   <C>            <C>            <C>
Net loss to common shareholders as
  reported..........................      $(3,111,381)      $(4,912,459)   $(6,630,016)       $(14,653,856)
Net loss pro forma..................       (3,336,722)       (4,987,251)    (7,154,362)        (15,478,335)
Loss per share--as reported.........          (184.67)          (291.58)       (393.52)
Loss per share--pro forma...........          (198.05)          (296.01)       (424.64)
</TABLE>


    The fair value of the options on their grant date was measured using the
Black-Scholes option-pricing model. Key assumptions used to apply this
option-pricing model are as follows:

<TABLE>
<CAPTION>
                                                                1997       1998       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Risk-free interest rate.....................................     5.5%      5.75%       6.0%
Expected life of option.....................................  3 years    3 years    3 years
Expected dividend payment rate, as a percentage of the stock
  price on the date of grant................................       0%         0%         0%
Assumed volatility..........................................      50%        58%        60%
</TABLE>


    The option-pricing model used was designed to value readily tradable stock
options with relatively short lives. However, management believes that the
assumptions used to value the options and the model applied yield a reasonable
estimate of the fair value of the grants made under the circumstances (see also
Note 15).


                                      F-14
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


12.  INCOME TAXES

    The components of the provision (benefit) for income taxes consisted of the
following:


<TABLE>
<CAPTION>
                                          PERIOD FROM                                       CUMULATIVE FROM
                                          MAY 8, 1997                                         MAY 8, 1997
                                      (DATE OF INCEPTION)                                 (DATE OF INCEPTION)
                                              TO             YEAR ENDED     YEAR ENDED            TO
                                         DECEMBER 31,       DECEMBER 31,   DECEMBER 31,      DECEMBER 31,
                                             1997               1998           1999              1999
                                      -------------------   ------------   ------------   -------------------
<S>                                   <C>                   <C>            <C>            <C>
Federal--deferred...................      $(1,037,870)      $(1,594,955)   $(1,995,158)       $(4,627,983)
State--deferred.....................         (181,683)         (282,933)      (352,087)          (816,703)
Increase in valuation allowance.....        1,219,553         1,877,888      2,347,245          5,444,686
                                          -----------       -----------    -----------        -----------
Provision (benefit) for income
  taxes.............................      $        --       $        --    $        --        $        --
                                          ===========       ===========    ===========        ===========
</TABLE>


    Taxes during interim periods are computed using the estimated rate effective
for the entire year. Changes to the estimated rate are reflected in periods in
which the estimated charge occurs.

    A reconciliation of the statutory federal rate to the effective rate for all
periods is as follows:

<TABLE>
<S>                                                           <C>
Statutory federal rate benefit..............................    (34)%
State, net of federal effect................................     (6)
Valuation allowance provided................................     40
                                                                ---
Effective rate..............................................     --%
                                                                ===
</TABLE>

    The components of the Company's deferred tax assets and liabilities
consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                        1998          1999
                                                     -----------   -----------
<S>                                                  <C>           <C>
Long-term assets:
  Net operating loss carryforwards.................  $ 2,643,962   $ 4,728,408
  Research and development credits.................      444,513       524,958
  Loss on contracts................................           --       130,000
  Other............................................        8,966        61,320
                                                     -----------   -----------
Net deferred tax assets before valuation
  allowance........................................    3,097,441     5,444,686
Less valuation allowance...........................   (3,097,441)   (5,444,686)
                                                     -----------   -----------
Net deferred tax assets............................  $        --   $        --
                                                     ===========   ===========
</TABLE>

    The valuation allowance increased by $1,877,888 in 1998 and $2,347,245 in
1999, primarily due to the generation of net operating loss carryforwards and
credits for which realization is not reasonably assured.

                                      F-15
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


12.  INCOME TAXES (CONTINUED)
    The Company has available for future periods federal and state tax net
operating loss carryforwards for federal and state purposes of approximately
$11,850,000 and $11,616,000, respectively, as of December 31, 1999. In addition,
the Company has business credits of approximately $524,958 as of December 31,
1999. The net operating loss carryforwards expire beginning in 2012 and 2002 for
federal and state tax purposes, respectively. The federal research and
development credits begin to expire in 2012. The Company did not pay any income
taxes from inception to December 31, 1999.

    Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may have limited, or may limit in the future,
the amount of net operating loss carryforwards which could be utilized annually
to offset future taxable income and income tax liabilities. The amount of any
annual limitation is determined based upon the Company's value prior to an
ownership change.

13.  BENEFIT PLAN

    In 1998, the Company created a 401(k) Profit Sharing Plan (the "Plan") for
its full-time employees. Each participant in the Plan may elect to contribute a
percentage of his or her annual compensation to the Plan on a pre-tax basis up
to the annual limit established by the Internal Revenue Service ($10,200 for
1999). The Company matches employee contributions at a rate of 50% up to the
first 6% of the employee's contributions. The Company may also elect to make a
profit-sharing contribution based on the discretion of the Board of Directors.
Employee contributions are fully vested. Company matching and profit sharing
contributions vest 20% after two years of service consisting of at least
1,000 hours per calendar year and 20% annually thereafter. Company contributions
were $19,376, $41,963 and $61,339 during 1998, 1999, and the Period from
Inception to December 31, 1999, respectively.

14.  RELATED-PARTY TRANSACTIONS

    CONSULTING AGREEMENTS--The Company entered into consulting agreements with
three investors in 1998 and 1997. The contracts are seven-year agreements,
renewable annually thereafter, for consulting services to be provided by the
investors in exchange for annual issuances of shares of the Company's Class A
Stock. During 1997, 1998, 1999 and the period from inception, $87,500, $175,000,
$300,000, and $562,500, respectively, was recorded as consulting expense
relating to these agreements, and 120,000 and 145,000 shares of Class A Stock in
1998 and 1999, respectively, were issued or issuable as compensation under these
contracts. Prepaid and accrued consulting expenses have been recorded annually,
based on the terms and dates of the consulting agreements. The services provided
by the investors were recorded based upon the value of the securities issued.
These contracts all expire immediately upon an initial public offering of the
Company's common stock.

    PATENTS--The Company has entered into an agreement with SatCon whereby
SatCon granted the Company a perpetual license to use the technology patented by
SatCon relating to the field of flywheel energy storage products, systems and
processes for stationary terrestrial applications.

                                      F-16
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


14.  RELATED-PARTY TRANSACTIONS (CONTINUED)
    SERVICES AGREEMENTS--SatCon performs certain research and development,
administrative and other services for the Company. Amounts paid to SatCon for
such services rendered amounted to approximately $1,351,000, $443,000, $59,000
and $1,853,000 during 1997, 1998, 1999 and the period from inception to
December 31, 1999, respectively. As of December 31, 1998, there was $18,611 due
to SatCon relating to such services.

    DISTRIBUTION AGREEMENT--In 1997, the Company signed a 20-year agreement
which granted an investor (DQE Enterprises, Inc.) exclusive rights to distribute
certain of the Company's products in a territory comprised of seven Mid-Atlantic
states and the District of Columbia. However, the Company retained the right to
distribute products directly to cable television and telephone companies.

15.  SUBSEQUENT EVENTS

    BRIDGE FINANCING--On January 7, 2000, the Company received $600,000 of
bridge loans bearing annual interest at a rate of 12.5%; $200,000 of these loans
were repaid in February 2000 and the remaining loans were converted into
Class E redeemable convertible preferred stock (the "Class E Stock") in
conjunction with the Class E conversion (see below).

    In February, March and April 2000, the Company received additional bridge
financing of $1,400,000 from previous investors and $4,100,000 from new and
previous investors (the "Class F Bridge Loans"). The Class F Bridge Loans bear
annual interest at a rate of 6%. $5,200,000 of these loans were converted into
Class F redeemable convertible preferred stock ("Class F Stock") in May 2000,
(see below). The remaining $300,000 plus interest was repaid in April 2000.


    In conjunction with the April bridge loans, investors were granted warrants
to purchase 82,000 shares of the Company's common stock at $2.10 per share.
These warrants expire April 21, 2005. The estimated fair value of such warrants
is $27,000 based on the Black-Scholes Pricing Model.



    WARRANTS ISSUED UNDER CLASS D AGREEMENT--Under the conditions of the
Class D Stock offering, the Company issued warrants in April 2000 to three
investors to purchase 712,500 shares of common stock at $1.67, 712,500 shares of
common stock at $2.25, and 712,500 shares of common stock at $3.00. Upon
issuance of these warrants the Company recorded a dividend of approximately
$1,300,000 for the fair market value of these warrants based on the
Black-Scholes Pricing Model. These warrants expire December 31, 2004.



    CLASS E CONVERSION--During April 2000, the Company authorized 2,000,000
shares of $.01 par value per share Class E Stock. On April 7, 2000, the Company
converted $3,550,000 of bridge loans plus interest of $275,559 into 1,226,141
shares of Class E Stock (the "Class E conversion"). Each share of Class E Stock
is convertible into two shares of common stock at the option of the holder (see
Note 2). Holders of the Class E Stock have voting rights equivalent to the
number of shares of common stock into which their shares of Class E Stock
convert. Holders of the Class E Stock also share with the Class D Stock
shareholders the right to appoint representatives to the Board of Directors. The
Class E Stock earns cumulative dividends at an annual rate of 12.5% through
May 23, 2000 and 6% on and after this date, payable quarterly. Dividends are
payable in shares of Class E Stock through May 23,


                                      F-17
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


15.  SUBSEQUENT EVENTS (CONTINUED)
2000 and after this date, are payable in cash. Upon liquidation, holders of
Class E Stock are entitled to receive, out of funds then generally available
unpaid dividends previously declared or accrued and a per share amount of $3.12.
The Class E Stock is redeemable by the holder at any time after December 31,
2004 for the stated value of $3.12 per share plus accrued but unpaid dividends.
The Class E Stock will automatically be converted into shares of common stock
upon a change in ownership of 50% of the Company's outstanding voting stock,
upon a merger or consolidation of the Company, upon the sale of significant
assets of the Company, or upon consummation of a qualified public offering.

    Class E Stock is senior to Class A, B and C Stock, on parity with Class D
Stock and subordinate to Class F Stock.

    In conjunction with the Class E conversion, warrants totaling 315,000,
issued in conjunction with the issuance of the Senior Notes in August 1999
(Note 10), were cancelled. In exchange, warrants to purchase 306,535 shares of
Class E Stock at $2.50 per share were issued. These warrants expire April 7,
2005. The estimated fair market value of these warrants is approximately
$344,000 based on the Binary Option Pricing Model.

    Pursuant to the stock purchase agreement related to the Class E Stock, the
Company is bound by certain covenants.

    CLASS F ISSUANCE--During May 2000 the Company authorized 7,500,000 shares of
$.01 par value Class F Stock. On May 23, 2000, the Company sold 6,785,711 shares
of Class F Stock for a total of $28.5 million, and accordingly, the outstanding
Class F Bridge Loans of $5,200,000 were converted to Class F Stock.


    Each share of Class F Stock is convertible into two shares of common stock
at the option of the holder (see Note 2). Holders of the Class F Stock have
voting rights equivalent to the number of shares of common stock into which
their shares of Class F Stock convert. The Class F Stock earns cumulative
dividends at an annual rate of 6%, payable quarterly. Dividends are payable in
cash. The Class F Stock will automatically be converted into shares of common
stock immediately prior to a merger or consolidation of the Company or upon the
sale of significant assets of the Company, or the consummation of a qualified
public offering. The Class F shareholders are entitled to appoint
representatives to the Board of Directors. The Class F stock is redeemable by
the holder at any time after May 23, 2005 at a price per share equal to the sum
of the Class F stated value, initially $4.20 per share, multiplied by the number
of shares to be redeemed, plus all accrued but unpaid dividends.


    The Class F Stock is senior to all other classes of preferred stock.

    Upon liquidation, holders of the Class F stock are entitled to receive, out
of funds then generally available, unpaid dividends previously paid or accrued
and a per share amount equal to the Class F stated value.

    Pursuant to the Stock Purchase Agreement related to the Class F Stock (the
"Class F Agreement"), the Company is bound by certain covenants.

                                      F-18
<PAGE>

                            BEACON POWER CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


         AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE YEARS THEN ENDED
    AND FOR THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
      AND THE PERIOD MAY 8, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999


15.  SUBSEQUENT EVENTS (CONTINUED)

    Under the conditions of the Class F Agreement, the Company has a contingent
obligation to issue warrants for shares of common stock equal to $14,250,000
divided by the warrant price. The warrant price is defined as 37.5% of the lower
of: (i) the effective price per share of common stock paid by the acquirer in a
sale transaction as determined by a nationally recognized banking firm chosen by
the Company and approved by a majority of the purchasers that hold a majority of
the aggregate preferred shares and conversion shares (shares of common stock
issuable upon conversion of the Class F Stock) as of the date of consummation of
such sale transaction and (ii) the initial price in the first qualified offering
of the Company's common stock. These warrants expire on May 23, 2005 and no
warrants have been issued at this time.



    STOCK OPTIONS--During the period from January 1, 2000 to September 22, 2000,
the Company issued 1,808,988 ISOs with exercise prices from $.89 to $6.10,
1,157,200 NSOs to employees at exercise prices from $2.10 to $7.50, and 160,000
NSOs to consultants at an exercise price of $4.10.



    AUTHORIZATION OF PREFERRED STOCK--Upon consummation of the Company's initial
public offering, the Company will authorize a new class of preferred stock
consisting of 10,000,000 shares.



16.  STOCK SPLIT



    STOCK SPLIT--The accompanying financial statements reflect a 2-for-1 split
of the Company's common stock which is expected to occur immediately prior to
the effectiveness of the Company's proposed public offering. All share and per
share information herein has been retroactively restated to reflect this split.


                                  * * * * * *

                                      F-19
<PAGE>
     [The back cover consists of a collage of pictures showing field trial
                              installation sites.]
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                       SHARES
                            BEACON POWER CORPORATION
                                  COMMON STOCK

                                     [LOGO]
                                     ------

                                   PROSPECTUS

                                          , 2000

                                   ---------

                              SALOMON SMITH BARNEY
                         BANC OF AMERICA SECURITIES LLC
                               CIBC WORLD MARKETS

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

    The following table sets forth all expenses to be paid by the Registrant,
other than the underwriting discounts and commissions payable by the Registrant
in connection with the sale of the common stock being registered. All amounts
shown are estimates except for the registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
                                                              AMOUNT TO
                                                               BE PAID
                                                              ----------
<S>                                                           <C>
Registration fee............................................  $   30,360
NASD filing fee.............................................      10,500
Nasdaq National Market......................................     100,000
Printing and engraving expenses.............................     300,000
Legal fees and expenses.....................................     400,000
Accounting fees and expenses................................     300,000
Transfer agent and registrar fees...........................      10,000
Miscellaneous expenses......................................      25,000
                                                              ----------
  Total.....................................................  $1,175,860
                                                              ==========
</TABLE>

ITEM 14.  INDEMNIFICATION OF OFFICERS AND DIRECTORS.


    Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent not prohibited by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law.


    The Registrant has obtained a policy of directors' and officers' liability
insurance that insures the Registrant's directors and officers against the cost
of defense, settlement or payment of a judgment under certain circumstances.

    The underwriting agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES.

    Since our incorporation in May, 1997, we have issued the following
securities:


1.  In May 1997, we granted a warrant to purchase 1,125,000 shares of our common
    stock at an exercise price of $2.67 per share to one investor and issued
    6,750,000 shares of our common stock and 1,125,000 shares of our class A
    preferred stock to another investor all in exchange for $5,000,000 in cash.
    The shares of common stock are not convertible into any other security of
    ours. The shares of class A stock are convertible into shares of our common
    stock. The warrant has expired.



2.  In December 1997, we sold 13,476 shares of our common stock and 6 shares of
    our class C preferred stock to six investors in exchange for an aggregate
    purchase price of $30,000. The shares of common stock are not convertible
    into any other security of ours. The shares of class C preferred stock are
    convertible into our common stock.



3.  In December 1997, we exchanged 3,373,313 shares of our class A preferred
    stock for 6,746,626 shares of our common stock with one of our shareholders.
    The shares of class A preferred stock are convertible into shares of our
    common stock.


                                      II-1
<PAGE>
4.  In October 1998, we effected a 1.125 for 1 stock split on all classes of our
    capital stock.


5.  In October 1998, we sold 1,900,000 shares of our class D preferred stock to
    one of our existing shareholders and three new investors at a purchase price
    of $2.50 per share. The aggregate purchase price of the securities was
    $4,750,000. In connection with this issuance, we granted the purchasers the
    right to receive warrants to purchase in the aggregate 4,455,000 shares of
    our common stock, 2,317,500 of which were issued in October 1999 and
    2,137,500 of which were issued in April 2000. The shares of class D
    preferred stock are convertible into shares of our common stock.



6.  In connection with the October 1998 sale of our class D preferred stock, we
    issued 4,594 shares of our class A preferred stock in exchange for
    transaction related services valued at $11,485 provided by one of the
    purchasers of our class D preferred stock. The shares of class A preferred
    stock are convertible into shares of our common stock.



7.  In December 1998, we issued 120,000 shares of our common stock to one of our
    existing shareholders in exchange for consulting services rendered valued at
    $300,000. These shares were later replaced in November 1999 with shares of
    our class A preferred stock.



8.  In June 1999, we sold senior secured convertible promissory notes to four of
    our existing shareholders in an aggregate principal amount of $600,000. The
    aggregate purchase price of the securities was $600,000. These notes were
    convertible on a dollar for dollar basis into convertible promissory notes
    to be issued at a subsequent date.



9.  In August, September and October 1999, we sold senior secured convertible
    promissory notes to four of our existing shareholders in an aggregate
    principal amount of $3,150,000. The aggregate purchase price of the
    securities was the return of the $600,000 in notes issued in June 1999 plus
    $2,550,000 in cash. We also issued warrants to these purchasers to purchase
    315,000 shares of our class E preferred stock which were subsequently
    cancelled. These notes were convertible into shares of our class E preferred
    stock.



10. In November 1999, we issued an aggregate of 265,000 shares of our class A
    preferred stock to three of our existing shareholders in exchange for
    consulting services rendered valued at $662,500. The shares of class A
    preferred stock are convertible into shares of our common stock.



11. In January 2000, we sold senior secured convertible promissory notes to four
    of our existing shareholders in an aggregate principal amount of $600,000.
    The aggregate purchase price of the securities was $600,000. These notes
    were convertible into class E preferred stock at the same price at which the
    class E preferred stock was to be issued.



12. In April 2000, we sold to four of our existing shareholders an aggregate of
    1,226,141 shares of our class E preferred stock at a purchase price of $3.12
    per share and warrants to purchase 306,535 shares of our class E preferred
    stock at an exercise price of $2.50 per share. The aggregate consideration
    for the securities was the cancellation of $3,550,000 principal amount of
    bridge notes and $275,559 accrued interest on those bridge notes and
    cancellation of the warrants issued in connection with the bridge notes. The
    shares of class E preferred stock are convertible into shares of our common
    stock.



13. In February 2000, we issued demand promissory notes to two of our existing
    shareholders for an aggregate principal amount of $600,000. The aggregate
    purchase price of these securities was $600,000. These notes were
    convertible into shares of our class F preferred stock at the same price at
    which the class F preferred stock was to be issued.


14. In March 2000, we issued demand promissory notes to three of our existing
    shareholders for an aggregate principal amount of $800,000. These notes were
    convertible into shares of our class F preferred stock.


15. In April 2000, we issued demand promissory notes to two of our existing
    shareholders and three new investors for an aggregate principal amount of
    $4,100,000 and warrants to purchase 82,000


                                      II-2
<PAGE>

    shares of our common stock. These notes were convertible into shares of our
    class F preferred stock at the same price at which the class F preferred
    stock was to be issued.



16. In May 2000, we sold to three of our existing shareholders and four new
    investors 6,785,711 shares of our class F preferred stock at a purchase
    price of $4.20 per share and warrants to purchase a number of shares of our
    common stock equal to $14,250,000 divided by 37.5% of the initial offering
    price at an exercise price of 37.5% of the initial offering price. The
    aggregate purchase price of the securities was $23,300,000 in cash and the
    cancellation of $5,200,000 principal amount of convertible notes. The shares
    of class F preferred stock are convertible into shares of our common stock.



17. In June-September 2000, we issued 157,334 shares of our common stock upon
    the exercise of stock options by four employees in exchange for a per share
    consideration of $0.89 or an aggregate consideration of $140,027.



18. In August 2000 we issued warrants to purchase 70,000 shares of our common
    stock to two consultants currently providing consulting services to our
    company in the areas of sales, marketing, strategic planning and research
    and development. These services were valued at $490,000.



19. In September 2000 we issued 24,000 shares of our common stock upon the
    exercise of a warrant by one of our investors in exchange for a per share
    consideration of $2.10 or an aggregate consideration of $50,400.



20. Effective immediately prior to this offering, we will effect a 2-for-1 stock
    split of our common stock. As a result, each oustanding share of our
    preferred stock will be converted into two shares of our common stock.



21. Since our inception, we have granted options to purchase common stock to our
    executive officers, employees and consultants. The following table sets
    forth information regarding these grants.



<TABLE>
<CAPTION>
                                                       NUMBER OF   EXERCISE PRICE
                                                        SHARES       PER SHARE
                                                       ---------   --------------
<S>                                                    <C>         <C>
May 8, 1997 to April 1, 2000.........................  2,325,438        $0.89
April 5, 2000 to May 10, 2000........................    872,188         2.10
June 5, 2000.........................................    799,000         2.50
June 5, 2000.........................................    300,000         3.10
June 5, 2000.........................................    300,000            *
June 26, 2000........................................     90,000         3.10
July 24, 2000........................................    250,000         4.10
August 21, 2000......................................    198,000         5.10
September 7, 2000....................................     58,000         6.10
</TABLE>


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

*   The exercise price of these options will be equal to the initial public
    offering price.

    There were no underwriters employed in connection with any of the
transactions set forth in this Item 15.


    The issuances of securities described in Paragraphs 1-2 and 5-17 were exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving a public offering. We
reasonably believe that each of the investors who received securities in these
issuances was an accredited investor as such term is defined in Rule 501(a)
promulgated under the Securities Act. The issuances of the securities described
in Paragraphs 3, 4, 19 and 20 were exempt from registration in reliance on
Section 3(a)(9) of the Securities Act. The issuances of the securities described
in Paragraphs 18 and 21 were exempt from registration under the Securities Act
in reliance on Section 4(2) or Rule 701 promulgated thereunder as transactions
pursuant to compensatory benefit plans and contracts relating to compensation.
Each of the individuals who received securities in these issuances pursuant to
Rule 4(2) were accredited investors, as such term is defined in Rule 501(a)
promulgated under the Securities Act. The recipients of securities in each such
transaction represented


                                      II-3
<PAGE>

their intention to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates and other instruments issued in
such transactions. All recipients either received adequate information about the
Registrant or had access, through employment or other relationships, to such
information.


ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS.


<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                             DESCRIPTION OF DOCUMENT
---------------------   ------------------------------------------------------------
<C>                     <S>
           1.1**        Form of Underwriting Agreement

           3.1          Form of Fifth Amended and Restated Certificate of
                        Incorporation

           3.2          Form of Amended and Restated Bylaws

           4.1          Form of Specimen Stock Certificate

           5.1          Opinion of Edwards & Angell, LLP, regarding legality of the
                        securities being issued

        10.1.1*         Securities Purchase Agreement by and among SatCon Technology
                        Corporation, Duquesne Enterprises (n/k/a
                        DQE Enterprises, Inc.) and Beacon Power Corporation dated
                        May 28, 1997

        10.1.2*         Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., Duquesne Enterprises
                        (n/k/a DQE Enterprises, Inc.), Micro-Generation Technology
                        Fund, L.L.C. and SatCon Technology Corporation dated October
                        23, 1998

        10.1.3*         Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., Duquesne Enterprises
                        (n/k/a DQE Enterprises, Inc.), Micro-Generation Technology
                        Fund, L.L.C. and SatCon Technology dated April 7, 2000

        10.1.4*         Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., Micro-Generation
                        Technology Fund, L.L.C., Mechanical Technology Incorporated,
                        The Beacon Group Energy Investment Fund II, L.P. and Penske
                        Corporation dated April 21, 2000

        10.1.5*         Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C.,
                        DQE Enterprises, Inc., Micro-Generation Technology
                        Fund, L.L.C., Mechanical Technology Incorporated,
                        GE Capital Equity Investments, Inc., The Beacon Group Energy
                        Investment Fund II, L.P. and Penske Corporation dated
                        May 23, 2000.

        10.1.6*         Investor Rights Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., DQE Enterprises, Inc.,
                        Micro-Generation Technology Fund, L.L.C., Mechanical
                        Technology Incorporated, GE Capital Equity Investments,
                        Inc., The Beacon Group Energy Investment Fund II, L.P.,
                        Penske Corporation, SatCon Technology Corporation, James S.
                        Bezreh, Russel S. Jackson, Russell A. Kelley, Stephen J.
                        O'Connor, Jane E. O'Sullivan and Robert G. Wilkinson dated
                        May 23, 2000

        10.1.7*         Form of Warrant of Beacon Power Corporation issued pursuant
                        to class D financing and list of holders thereof

        10.1.8*         Form of Warrant of Beacon Power Corporation issued pursuant
                        to class E financing and list of holders thereof

        10.1.9*         Form of Warrant of Beacon Power Corporation issued pursuant
                        to class F bridge financing and list of holders thereof

       10.1.10*         Form of Warrant of Beacon Power Corporation issued pursuant
                        to class F financing and list of holders thereof
</TABLE>


                                      II-4
<PAGE>


<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                             DESCRIPTION OF DOCUMENT
---------------------   ------------------------------------------------------------
<C>                     <S>
       10.1.11          Warrant of Beacon Power Corporation issued to Cox
                        Communications, Inc. dated August 2, 2000

       10.1.12          Warrant of Beacon Power Corporation issued to Kaufman-Peters
                        dated August 2, 2000

       10.1.13*         Second Amended and Restated 1998 Stock Incentive Plan of
                        Beacon Power Corporation

       10.1.14*         Form of Incentive Stock Option Agreement of Beacon Power
                        Corporation

       10.1.15*         Form of Non-Qualified Stock Option Agreement of Beacon Power
                        Corporation

       10.1.16          Form of Non-Qualified Stock Option Agreement of Beacon Power
                        Corporation issued to certain consultants on July 24, 2000
                        and list of holders thereof

       10.1.17*         Amended and Restated License Agreement by and between Beacon
                        Power Corporation and SatCon Technology Corporation dated
                        October 23, 1998

       10.1.18*         Letter Agreement between Beacon Power Corporation and
                        Duquesne Enterprises (n/k/a/ DQE Enterprises, Inc.) dated
                        May 28, 1997

       10.1.19*         Lease between Beacon Power Corporation and BCIA New England
                        Holdings LLC dated July 14, 2000

       10.1.20*         Commercial Lease by and between Beacon Power Corporation and
                        Cummings Properties Management, Inc. dated November 19, 1997

       10.1.21*         Distribution Agreement between Beacon Power Corporation and
                        TLER dated January 6, 2000

       10.1.22          Purchase Order and Agreement for the Sale of Goods between
                        TLER and Beacon Power Corporation dated January 10, 2000

       10.1.23**        Form of Director and Officer Indemnification Agreements and
                        list of parties thereto

       10.1.24**        Form of Employment Agreement and list of parties thereto

          11.1          Statement of Computation of Earnings per Share (This exhibit
                        has been omitted because the information is shown in the
                        financial statements or notes thereto.)

          23.1          Consent of Deloitte & Touche LLP

          23.2          Consent of Edwards & Angell, LLP (contained in Exhibit 5.1)

          24.1*         Power of Attorney

          27.1          Financial Data Schedule
</TABLE>


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


*   Previously filed



**  To be filed by amendment


(B) FINANCIAL STATEMENT SCHEDULE.

    Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

ITEM 17.  UNDERTAKINGS.

    The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

    Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that

                                      II-5
<PAGE>
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

    The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
    information omitted from the form of Prospectus filed as part of this
    Registration Statement in reliance upon Rule 430A and contained in a form of
    prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
    497(h) under the Securities Act shall be deemed to be part of this
    Registration Statement as of the time it was declared effective; and

(2) For the purpose of determining any liability under the Securities Act, each
    post-effective amendment that contains a form of Prospectus shall be deemed
    to be a new Registration Statement relating to the securities offered
    therein, and the Offering of such securities at the time shall be deemed to
    be the initial bona fide offering thereof.

                                      II-6
<PAGE>
                                   SIGNATURES


    Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Form S-1 Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Woburn,
Massachusetts, on the 28th day of September, 2000.


<TABLE>
<S>                                                    <C>  <C>
                                                       BEACON POWER CORPORATION

                                                       By:            /s/ WILLIAM E. STANTON
                                                            -----------------------------------------
                                                                        William E. Stanton
                                                              PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>


    Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 28th day of September, 2000:


<TABLE>
<CAPTION>
                      SIGNATURE                                            TITLE
                      ---------                                            -----
<C>                                                    <S>
               /s/ WILLIAM E. STANTON
     -------------------------------------------       President and Chief Executive Officer, and
                 William E. Stanton                      Director (PRINCIPAL EXECUTIVE OFFICER)

                /s/ JAMES M. SPIEZIO                   Vice President of Finance and Chief Financial
     -------------------------------------------         Officer (PRINCIPAL FINANCIAL AND ACCOUNTING
                  James M. Spiezio                       OFFICER)

                          *
     -------------------------------------------       Director
                  Kenneth M. Socha

                          *
     -------------------------------------------       Director
                  Philip J. Deutch

                          *
     -------------------------------------------       Director
                 David B. Eisenhaure

                          *
     -------------------------------------------       Director
                   Eric R. Stoltz

                          *
     -------------------------------------------       Director
                     Hans Kobler

                          *
     -------------------------------------------       Director
                  Alan P. Goldberg
</TABLE>


<TABLE>
<S>   <C>                                      <C>
              /s/ WILLIAM E. STANTON
      --------------------------------------
                William E. Stanton
*By:             ATTORNEY-IN-FACT
</TABLE>


                                      II-7
<PAGE>
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                             DESCRIPTION OF DOCUMENT
---------------------   ------------------------------------------------------------
<C>                     <S>
            1.1**       Form of Underwriting Agreement

            3.1         Form of Fifth Amended and Restated Certificate of
                        Incorporation

            3.2         Form of Amended and Restated Bylaws

            4.1         Form of Specimen Stock Certificate

            5.1         Opinion of Edwards & Angell, LLP, regarding legality of the
                        securities being issued

         10.1.1*        Securities Purchase Agreement by and among SatCon Technology
                        Corporation, Duquesne Enterprises (n/k/a
                        DQE Enterprises, Inc.) and Beacon Power Corporation dated
                        May 28, 1997

         10.1.2*        Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., Duquesne Enterprises
                        (n/k/a DQE Enterprises, Inc.), Micro-Generation Technology
                        Fund, L.L.C. and SatCon Technology Corporation dated October
                        23, 1998

         10.1.3*        Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., Duquesne Enterprises
                        (n/k/a DQE Enterprises, Inc.), Micro-Generation Technology
                        Fund, L.L.C. and SatCon Technology dated April 7, 2000

         10.1.4*        Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., Micro-Generation
                        Technology Fund, L.L.C., Mechanical Technology Incorporated,
                        The Beacon Group Energy Investment Fund II, L.P. and Penske
                        Corporation dated April 21, 2000

         10.1.5*        Securities Purchase Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C.,
                        DQE Enterprises, Inc., Micro-Generation Technology
                        Fund, L.L.C., Mechanical Technology Incorporated,
                        GE Capital Equity Investments, Inc., The Beacon Group Energy
                        Investment Fund II, L.P. and Penske Corporation dated
                        May 23, 2000.

         10.1.6*        Investor Rights Agreement by and among Beacon Power
                        Corporation, Perseus Capital, L.L.C., DQE Enterprises, Inc.,
                        Micro-Generation Technology Fund, L.L.C., Mechanical
                        Technology Incorporated, GE Capital Equity Investments,
                        Inc., The Beacon Group Energy Investment Fund II, L.P.,
                        Penske Corporation, SatCon Technology Corporation, James S.
                        Bezreh, Russel S. Jackson, Russell A. Kelley, Stephen J.
                        O'Connor, Jane E. O'Sullivan and Robert G. Wilkinson dated
                        May 23, 2000

         10.1.7*        Form of Warrant of Beacon Power Corporation issued pursuant
                        to class D financing and list of holders thereof

         10.1.8*        Form of Warrant of Beacon Power Corporation issued pursuant
                        to class E financing and list of holders thereof

         10.1.9*        Form of Warrant of Beacon Power Corporation issued pursuant
                        to class F bridge financing and list of holders thereof

        10.1.10*        Form of Warrant of Beacon Power Corporation issued pursuant
                        to class F financing and list of holders thereof

        10.1.11         Warrant of Beacon Power Corporation issued to Cox
                        Communications, Inc. dated August 2, 2000

        10.1.12         Warrant of Beacon Power Corporation issued to Kaufman-Peters
                        dated August 2, 2000

        10.1.13*        Second Amended and Restated 1998 Stock Incentive Plan of
                        Beacon Power Corporation

        10.1.14*        Form of Incentive Stock Option Agreement of Beacon Power
                        Corporation

        10.1.15*        Form of Non-Qualified Stock Option Agreement of Beacon Power
                        Corporation
</TABLE>


<PAGE>


<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                             DESCRIPTION OF DOCUMENT
---------------------   ------------------------------------------------------------
<C>                     <S>
        10.1.16         Form of Non-Qualified Stock Option Agreement of Beacon Power
                        Corporation issued to certain consultants on July 24, 2000
                        and list of holders thereof

        10.1.17*        Amended and Restated License Agreement by and between Beacon
                        Power Corporation and SatCon Technology Corporation dated
                        October 23, 1998

        10.1.18*        Letter Agreement between Beacon Power Corporation and
                        Duquesne Enterprises (n/k/a/ DQE Enterprises, Inc.) dated
                        May 28, 1997

        10.1.19*        Lease between Beacon Power Corporation and BCIA New England
                        Holdings LLC dated July 14, 2000

        10.1.20*        Commercial Lease by and between Beacon Power Corporation and
                        Cummings Properties Management, Inc. dated November 19, 1997

        10.1.21*        Distribution Agreement between Beacon Power Corporation and
                        TLER dated January 6, 2000

        10.1.22         Purchase Order and Agreement for the Sale of Goods between
                        TLER and Beacon Power Corporation dated January 10, 2000

        10.1.23**       Form of Director and Officer Indemnification Agreements and
                        list of parties thereto

        10.1.24**       Form of Employment Agreement and list of parties thereto

           11.1         Statement of Computation of Earnings per Share (This exhibit
                        has been omitted because the information is shown in the
                        financial statements or notes thereto.)

           23.1         Consent of Deloitte & Touche LLP

           23.2         Consent of Edwards & Angell, LLP (contained in Exhibit 5.1)

           24.1*        Power of Attorney

           27.1         Financial Data Schedule
</TABLE>


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


*   Previously filed



**  To be filed by amendment