Use these links to rapidly review the documentBROADWIND ENERGY, INC. FORM 10-K TABLE OF CONTENTS INDEX TO FINANCIAL STATEMENTS



SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K



(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                  to


Commission File Number 0-31313

GRAPHIC



BROADWIND ENERGY, INC.

(Exact name of Registrant as specified in its charter)

Delaware(State of or other jurisdiction of
incorporation or organization)

88-0409160(I.R.S. Employer
Identification No.)47 East Chicago Avenue, Suite 332
Naperville, Illinois

60540(Address of principal executive offices)

(zip code)


Registrant's
telephone number, including area code:(630) 637-0315

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

Securities
registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value



Indicate
by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of
1933. Yes o    No ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. Yes o    No ý

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes o    No o

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the Registrant is a shell company, as defined in Rule 12b-2 of the Securities Exchange Act of
1934. Yes o    No ý

The aggregate market value of the Registrant's voting common stock held by non-affiliates of the Registrant, based upon the $11.32 per share closing
sale price of the Registrant's common stock on June 30, 2009 (the last business day of the Registrant's most recently completed second quarter) was approximately $386,816,829. For purposes of
this calculation, the Registrant's directors and executive officers and holders of 10% or more of the Registrant's outstanding shares of voting common stock have been assumed to be affiliates, with
such affiliates holding an aggregate of 62,430,684 shares of the Registrant's voting common stock on June 30, 2009, and shares held by such affiliates are not included in this calculation.

Number
of shares of Registrant's common stock, par value $0.001, outstanding as of March 9, 2010, was 106,701,127.

DOCUMENTS INCORPORATED BY REFERENCE

Portions
of the Registrant's Proxy Statement for the Registrant's 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report.



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Table of Contents



BROADWIND ENERGY, INC.    FORM 10-K    TABLE OF CONTENTS



PagePART IITEM 1.

BUSINESS

1ITEM 1A.

RISK FACTORS

11ITEM 1B.

UNRESOLVED STAFF COMMENTS

21ITEM 2.

PROPERTIES

22ITEM 3.

LEGAL PROCEEDINGS

22ITEM 4.

RESERVED

22PART IIITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

23ITEM 6.

SELECTED FINANCIAL DATA

24ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

27ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

48ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

49ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

50ITEM 9A.

CONTROLS AND PROCEDURES

50ITEM 9B.

OTHER INFORMATION

54PART IIIITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

54ITEM 11.

EXECUTIVE COMPENSATION

54ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

54ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

55ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

55PART IVITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

55


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Table of Contents

PART I

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains "forward-looking statements"that is,
statements related to future, not past, eventsas defined in Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that reflect our current
expectations regarding our future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available
to, our management. Forward-looking statements include any statement that does not directly relate to a current or historical fact. We have tried to identify forward-looking statements by using words
such as "anticipate," "believe," "expect," "intend," "will," "should," "may," "plan" and similar expressions, but these words are not the exclusive means of identifying forward-looking statements.
These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Item 1A
"Risk Factors" in Part I of this Annual Report on
Form 10-K that could cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from
those expressed in, or implied by, these statements. Our forward-looking statements may include or relate to the following: (i) our plans to continue to grow our business through organic growth
and integration of previous and future acquisitions; (ii) our beliefs with respect to the sufficiency of our liquidity and our plans to evaluate alternate sources of funding if necessary;
(iii) our expectations relating to the extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards; (iv) our expectations relating to
construction of new facilities, expansion of existing facilities and sufficiency of our existing capacity to meet the demands of our customers and support expectations regarding our growth;
(v) our plans with respect to the use of proceeds from financing activities; (vi) our beliefs and expectations relating to the economic downturn and the potential impact it may have on
our business, including our customers; (vii) the anticipated benefits of our remediation efforts on the strength of our internal control processes and our plans with respect to future
remediation efforts; and (viii) our beliefs regarding the state of the wind energy market generally. You should not consider any list of such factors to be an exhaustive statement of all of the
risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Except as expressly required by the federal securities laws, we undertake no
obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for
any other reason.

ITEM 1.    BUSINESS

As used in this Annual Report on Form 10-K, the terms "we," "us," "our," "Broadwind," and the "Company" refer to
Broadwind Energy, Inc., a Delaware incorporated company headquartered in Naperville, Illinois, and its wholly-owned subsidiaries.

Business Overview

Broadwind Energy provides technologically advanced high-value products and services to the U.S. wind energy industry. We
believe we are the only independent company that offers our breadth of products and services to the market. Our product and service portfolio provides our customers, including wind turbine
manufacturers, wind farm developers and wind farm operators, with access to a broad array of wind component and service offerings, which we believe is becoming increasingly important in today's wind
market. We also provide technical service and precision repair and engineering and specialized logistics to the wind industry in the United States, a highly-fragmented market in which we hold a
significant position. We have long standing relationships with our primary customers, who include several leading participants in the U.S. wind sector.

We
believe we are well positioned to capture market opportunities associated with the anticipated growth in the wind farm development business in the United States. We believe this
turn-around will be

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driven
by: (i) macroeconomic factors, including a broad economic recovery, an increase in overall energy prices and federal and state-level wind development incentives, (ii) broad
upgrades to existing transmission infrastructure and increasing proliferation of smart grid technology, and (iii) the maturation of technologies and services within the wind industry, including
increased turbine efficiencies, a coordinated global supply chain and improved equipment maintenance and reliability. Given our installed capital base, we believe we will be able to substantially grow
revenues prior to investing in additional capital equipment.

As
of December 31, 2009, we had four subsidiaries which consisted of Brad Foote Gear Works, Inc. ("Brad Foote"), Tower Tech Systems Inc. ("Tower Tech"), Energy
Maintenance Service, LLC ("EMS") and Badger Transport, Inc. ("Badger"). In December 2009, we merged the operations of our R.B.A., Inc. ("RBA") subsidiary into Tower Tech.

In
December 2009, we revised our reporting segment presentation into four reportable operating segments: Towers, Gearing, Technical and Engineering Services, and Logistics. Accordingly,
all current and prior period financial results have been revised to reflect these changes. For additional financial information related to our segments, please refer to Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and Note 19 "Segment Reporting" in Item 15 in the notes to our consolidated financial statements for a
discussion of summary financial information by segment.

The
following is a description of our product and service offerings:

Towers

We manufacture structural towers for wind turbines. We specialize in heavier "next generation" wind towers that are larger, more
technically advanced towers, designed for 2 megawatt ("MW") and larger wind turbines. Since starting commercial production in 2005, we have produced over 500 towers. Our production facilities are
strategically located in close proximity to the primary U.S. wind resource regions, sited in Wisconsin, Texas and South Dakota. When our Brandon, South Dakota facility becomes operational, our three
tower production facilities will have a combined annual tower production capacity sufficient to support turbines generating more than 1,500 MW of power.

Our
structural towers for wind turbines are predominantly sold to wind turbine manufacturers who utilize our products in the assembly of wind turbines. Due to the highly specialized
nature of our products, they are generally sold through our direct sales force following an evaluation, qualification and testing period, which may occur over a number of months. We compete based on
product performance, quality, price, location and available capacity. We have periodically entered into multi-year framework agreements under which we expect to provide products to certain
key customers over multi-year periods. Our principal wind tower customers include Gamesa, Vestas and Nordex. We also manufacture specialty fabrications and heavy weldments for wind energy
and other industrial customers.

Gearing

We manufacture high precision gearing systems for wind turbines. We also manufacture custom-engineered gearing systems for the mining,
energy and other industrial sectors.

We
produce to the highest industry quality standards, and we were the first U.S. gear manufacturer to achieve ISO 9001 certification. We use an integrated manufacturing process,
which includes our machining process in Cicero, Illinois, our heat treatment process in Neville Island, Pennsylvania and our finishing process in our Cicero factory. These complex production processes
allow us to manufacture custom products to meet the stringent tolerances and high quality standards of our wind

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turbine
customers. Our precision gearing manufacturing facilities have the production capacity to support turbines producing more than 4,000 MW of power annually.

Due
to the highly specialized nature of our gearing, it is generally sold through our direct sales force following an evaluation, qualifying, prototyping and testing period, which may
occur over a number of months. We compete based on product performance, quality, price and available capacity. We have periodically entered into multi-year framework agreements under which
we expect to provide products to certain key customers over multi-year periods. Our principal customers include General Electric and Clipper Windpower, both of whom have been
long-standing customers. We are currently in discussions with large global gear drive original equipment manufacturers with the aim of becoming a gearing system supplier to one or more of
these companies.

We
also manufacture gearing for industrial markets including mining and oilfield equipment. We target niche markets and applications that require the strict tolerances and high quality
standards of our
processes. These products serve to diversify our customer and product portfolio and balance our plant loadings.

Technical and Engineering Services

We offer technical and precision repair and engineering services to developers and operators of wind farms and manufacturers of wind
turbines. Our technical services business provides construction support and operations and maintenance services to the wind industry. Our engineering services include precision repair and
refurbishment of the complex systems and components of wind turbines. Sales contacts are typically initiated through a small direct sales force, or through operating unit managers located in our
geographically dispersed service locations. Sales are generally made under individual purchase orders, although we have blanket purchase orders or framework agreements in place with select key
customers. Our Technical and Engineering Services business competes with a number of independent service providers in a highly-fragmented but growing industry. Our principal Technical and Engineering
Services segment customers include Bluarc, NexGen Energy Partners, NextEra Energy Resources, Siemens Energy and Suzlon Wind Energy. Our service locations are in Illinois, California, South Dakota,
Texas and Colorado. Our vision is to become the most comprehensive service provider to the United States and Canadian wind industry by expanding the number of our service centers and product
offerings.

Our
specialty services include oil change-out, up-tower tooling for gearing systems, drive-train and blade repairs and component replacement. Our construction
support capabilities include assembly of towers, nacelles, blades and other components. We also provide customer support, preventive maintenance and wind technician training. Our technicians utilize
our regional service centers for storage and repair of parts as well as our training offerings.

Through
our precision repair and engineering services, we repair and refurbish complex wind components, including control systems, gearboxes and blades. We also conduct warranty
inspections, commission turbines and provide technical assistance. Additionally, we build replacement control panels for kilowatt ("kW") class wind turbines and repair both kW and MW blades. A large
portion of the approximately 35,000 MW installed base of wind turbines in the United States is now coming out of warranty, creating a growing need for MW gearbox refurbishment. We plan to develop
during 2010 the first independent gearbox refurbishing center and gearbox test stand to perform full-load testing for MW class wind turbine units.

Logistics

We offer specialized transportation, permitting and logistics management to the wind industry for oversize and overweight machinery and
equipment. We deliver complete turbines to the installation site, including blades, nacelles and tower sections for final erection. We focus on the project

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management
of the delivery of complete wind turbine farms. We have a fleet of over 60 specialized heavy haul trailers supporting annual delivery of 500 MW of full turbine components. We primarily
compete based on the availability of our trailer asset base, our service, price and reliability. Sales contracts are typically initiated through a small direct sales force, under discrete purchase
orders issued by a turbine manufacturer or wind farm developer. Although we predominantly focus on wind energy customers, we also periodically haul other oversized equipment such as large pressure
vessels or other industrial equipment, in order to maintain utilization of our heavy haul fleet. Our principal customers include Gamesa and Suzlon Wind Energy.

Competitive Strengths

We believe our business model offers a number of competitive strengths that have contributed to our commercial success and will enable
us to capitalize on significant opportunities for growth. These competitive strengths include the following:



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Business and Operating Strategy

We intend to capitalize on the anticipated growth of the wind sector in the United States and Canada by providing our technologically
advanced, highly reliable, value-added products and components and customized services across the wind supply chain to enhance our leadership position.

Our
strategic objectives include the following:



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As
the North American wind industry matures and the complexity of wind turbines increases, complex product offerings, advanced supply chain management and specialized services will be
critical for wind turbine manufacturers and wind farm developers and owners, and we intend to pursue our

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business
strategies and maintain and enhance our established platform to more deeply penetrate our target markets and further diversify our customer base.

Wind Turbine Components

A wind turbine and its components represent approximately 65% of the costs of new wind farms. The manufacture and production of wind
energy-related infrastructure involves over 8,000 components. The five most significant components, each of which generally accounts for more than 10% of the overall cost of a turbine, are the tower,
blade system, nacelle, gearbox and pitch systems and bearings. Additional key components include the generator and the controller. The following illustration shows the key components of a wind
turbine.

GRAPHIC

Towers

A wind tower accounts for approximately 18-27% of the total capital cost of a wind turbine. A tower's cost is proportional
to its height and diameter. Taller towers give access to stronger winds and more even wind flow, both of which lead to a higher electrical output. Industry research indicates that for tower sizes
between 80 and 100 meters, each additional meter delivers 0.9% more yield. Doubling the height of the tower generally requires doubling its diameter and increasing the amount of material needed by a
factor of eight, which results in a trade-off between the additional yields delivered by increasing tower height versus the additional cost of the tower. We manufacture wind towers in our
Manitowoc, Wisconsin and Abilene, Texas facilities and have a recently constructed, but not yet operational wind tower manufacturing facility in Brandon, South Dakota.

Nacelle

The nacelle houses most of the wind turbine's components including the generator, gearbox and control systems as well as thousands of
smaller components and accounts for approximately 12-22% of

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a
wind turbine's cost. Due to the decrease in global foundry capacity since World War II, only a relatively few suppliers are capable of the precision production required for the large size and
thinness of nacelle components. Some European wind turbine manufacturers have tried to identify cast product suppliers in India and China; however, it has been difficult finding the necessary
standards and quality. We do not manufacture nacelles but we do service and repair nacelle components.

Blade System

The blade and hub system (rotor) is attached to the nacelle via the rotor shaft and rotates at an angular speed dependent on the power
of the wind. Blades account for approximately 20-25% of the cost of a wind turbine and are typically made out of fiberglass and epoxy resin. Blades are currently the focus of significant
research and development both at national research institutions and also at wind turbine manufacturers. With lengths upwards of 60 meters, blades can be difficult and expensive to manufacture and
transport. The risk of damage in transit requires careful logistics planning and creates a demand for blade production sites near the end-market. We do not manufacture blade systems but we
do service and repair blade systems.

Gearbox

The gearbox is made almost entirely of steel and is the heaviest component in the wind turbine's nacelle. The gearbox accounts for
approximately 11-15% of a wind turbine's cost. The gearbox connects the low-speed shaft driven by the rotor blade to the high-speed shaft that drives the generator,
increasing the rotational speeds from about 30 to 60 rotations per minute ("rpm") to about 1,200 to 1,500 rpm, which is the rotational speed required by most generators to produce electricity.
Contained
in the gearbox is a highly precise gearing system. We manufacture gearing systems in our Cicero, Illinois and Neville Island, Pennsylvania facilities.

Pitch Systems and Bearings

Pitch systems maximize a wind turbine's energy converting efficiency by optimizing the positioning of the machine housing and blades in
relation to the wind direction. Pitch systems and bearings account for approximately 11-15% of a wind turbine's cost. We do not manufacture pitch systems or bearings.

COMPANY HISTORY

We are a Delaware corporation. We were incorporated in Nevada in 1996 as Blackfoot Enterprises Inc. ("Blackfoot"). In February
2006, Blackfoot completed a reverse shell transaction with Tower Tech, whereupon Blackfoot became a holding company for Tower Tech, and subsequently changed its name to Tower Tech Holdings Inc.
In 2008, Tower Tech Holdings Inc. reincorporated in Delaware and changed its name from Tower Tech Holdings Inc. to Broadwind Energy, Inc. Through our October 2007 acquisitions of
RBA and Brad Foote and acquisitions of EMS and Badger in January and June of 2008, respectively, we expanded upon our core platform as a wind tower component manufacturer and established our gearing
systems, industrial products, technical services, precision repair and engineering and logistics businesses.

SALES AND MARKETING

Our sales and marketing strategy is to develop and maintain long-term relationships with our customers and to offer a
comprehensive suite of products and services to them. We pursue this strategy by working closely with our customers in developing and designing customized product, manufacturing, and service
solutions. We also intend for our offerings to fulfill needs that our customers may consider non-core and do not desire to provide for within their organizations. We attempt to
base-load our manufacturing facilities by negotiating long-term agreements, under which we supply our customers

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with
gearing, towers or industrial products. Similarly, we seek to establish long-term relationships to provide logistics or technical and engineering services to our customers, which may
be subject to framework agreements or undertaken on a project by project basis. Our customer base consists of wind turbine manufacturers who supply end-users and wind turbine developers
with completed wind turbines, as well as wind farm developers and wind farm operators themselves. Within the wind industry, we have long-standing relationships with customers, engaging
them at various levels from key account management, site management, research and development, product design and manufacturing up to senior management.

COMPETITION

We do not believe that any competitors exist that have developed a similar suite of products and services for the North American wind
industry as those offered by our businesses. However, competition within each of our subsidiaries' niches exists and some of our customers maintain internal capabilities that compete with our
offerings. Several domestic and international wind tower manufacturers compete in the United States, including Ameron International Corporation, DMI Industries, Dong Kuk, Hendricks, Trinity
Industries, Inc. and Win&P. We are a major North American supplier of wind energy gear sets. Approximately five companies worldwide have the proven ability and capacity to compete with us to
supply gear sets for the wind industry. Two of the major European suppliers are owned or affiliated with wind turbine manufacturers: Hansen Transmissions (affiliated with Suzlon energy) and
Winergy/Flender (owned by Siemens). The competitor group participating to provide industrial gearing is slightly more fragmented. These companies compete based upon price, quality, location, available
capacity, and several other factors. Anderson Trucking Service and Lonestar Trucking are our main logistics competitors, while additional competition within the market for technical and engineering
services market is highly fragmented.

ENVIRONMENTAL REGULATION AND COMPLIANCE

Our operations are subject to numerous federal, state, and local environmental laws and regulations. While it is our objective to
maintain compliance with these respective laws and regulations, it may not be possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly
remediation and other compliance efforts that we may undertake in the future. Many of our facilities have a history of industrial operations and contaminants have been detected at some of our
facilities. We do not currently anticipate any material capital expenditures for environmental control facilities in the near term.

BACKLOG

The majority of our products are sold under long-term supply agreements and our services are typically sold under purchase
orders and service contracts. Some of these supply agreements are structured as framework agreements, whereby we are required to reserve a specified percentage of our production capacity based upon
mutually agreed production volumes. Under these framework agreements, we receive purchase orders on a monthly basis or based upon our customer's forecast of production volume levels. These
long-term agreements have various terms, but generally range from several months to three years with some contracts carrying automatic renewal provisions. As of December 31, 2009,
the dollar amount of our backlog believed to be firm under our supply agreements, purchase orders and service contracts was approximately $247.3 million, of which $119.3 million is
expected to be delivered during 2010. Deliveries during 2010 may be subject to change as a result of any future modifications to our existing customer framework agreements or purchase orders.

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SEASONALITY

The majority of our business is not affected by seasonality, although the provision of logistical and technical services can be
negatively affected by weather-related constraints.

EMPLOYEES

We had 690 employees at December 31, 2009, of which 552 were in manufacturing, service, and field support related functions and
138 were in administrative functions. Approximately 21% of our employees are covered by two collective bargaining agreements with local unions in Cicero, Illinois and Neville Island, Pennsylvania.
Collective bargaining agreements with our Neville Island and Cicero unions were ratified by local unions in the fourth quarter of 2009 and the first quarter of 2010, respectively, and are scheduled to
remain in effect through October 2012 and February 2014, respectively. We consider our union and employee relations to be satisfactory.

RAW MATERIALS

The primary raw material used in the construction of wind towers and gearing products is steel in the form of steel plate, forgings,
and castings. Additionally, some agreements may allow customers to independently provide steel for the construction of wind towers.

We
operate a multiple sourcing strategy and source our raw materials through various suppliers located throughout the United States and abroad. We do not generally have
long-term supply agreements with any of our raw materials suppliers and closely match terms with those of our customers to limit our exposure to price fluctuations. We believe that we will
be able to obtain an adequate supply of steel and other raw materials to meet our manufacturing requirements.

QUALITY CONTROL

We have a long-standing focus on processes for ensuring the manufacture of high quality products. To achieve high standards
of production and operational quality, we implement strict and extensive quality control and inspection throughout our production processes. We maintain internal quality controls over all core
manufacturing processes and carry out quality assurance inspections at the completion of each major manufacturing step to ensure the quality of our products. The manufacturing process at our Gearing
operation, for example, involves transforming forged steel into highly technical specification gears through rough machining, hobbing, reinforcing thermal treatment, fine machining and fine grinding.
We inspect and test raw materials before they enter the assembly process, re-test the raw materials after rough machining, test the functioning of gear teeth and cores after thermal
treatment and accuracy test final outputs for product specifications. We believe our investment in industry-leading heat treatment, high precision machining, specialized grinding technologies, and
cutting edge welding has contributed to our high product reliability and consistent performance of our products under varying operating conditions once installed.

Our
Gearing segment is ISO 9001:2000 certified and our other companies have certification programs in various stages of completion.

CUSTOMERS

We manufacture products for and provide logistics, technical and engineering services to a variety of customers in the wind energy, oil
and gas, mining and other industries. The majority of our customer base consists of wind turbine manufacturers, who supply wind farm operators and wind farm developers with completed wind turbines. In
the other industrial sectors, we sell our products through our trained sales force or through manufacturers' representatives to a wide variety of customers. The wind turbine market is very
concentrated. According to AWEA's 2009 industry data, the top eight wind turbine

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manufacturers
constituted over 97% of the North American market. As a result, our concentration with a limited number of customers accounted for the majority of our revenues. Sales to each of Gamesa,
Clipper Windpower, Nordex and General Electric represented an amount greater than 10% of our consolidated revenues for the year ended December 31, 2009 and the loss of one of these customers
could have a material adverse effect on our business. Despite these significant customers, our customer concentration declined in 2009. In 2008, four customers accounted for greater than 75% of our
total revenues compared to six customers in 2009. We intend to continue to diversify our customer base as we grow our business.

Our
current portfolio of key customers includes: Clipper Windpower, Gamesa, General Electric, Nordex, Siemens Energy, Suzlon Wind Energy, Vestas and Bluarc.

WORKING CAPITAL

Our primary customers are wind turbine manufacturers and wind farm developers. The industry has historically entered into customized
contracts with varying terms and conditions between suppliers and customers, depending on the specific objectives of each party. Our practices mirror this historical industry practice for negotiating
agreements on a case-by-case basis. As a result, working capital needs, including levels of accounts receivable and inventory, can vary significantly from quarter to quarter
based on the contractual terms associated with that quarter's sales, such as whether we are required to purchase and supply steel pursuant to such contractual terms.

CORPORATE INFORMATION

Our principal executive office is located at 47 East Chicago Avenue, Suite 332, Naperville, IL 60540. Our phone number is
(630) 637-0315 and our website address iswww.broadwindenergy.com.

OTHER INFORMATION

On our website atwww.broadwindenergy.com, we make available under the "Investors" menu
selection, free of charge, our Annual Reports on Form 10-K and Form 10-KSB, Quarterly Reports on Form 10-Q and Form 10-QSB,
Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
such reports or amendments are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"). Materials that we file or furnish to the SEC may also be read and copied at
the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Also, the SEC maintains an Internet site atwww.sec.govthat contains reports, proxy and information
statements, and other information that we file electronically with SEC.

ITEM 1A.    RISK FACTORS

Risks Related to Our Business

Our businesses, and therefore our results of operations and financial condition, may continue to be adversely affected by dislocation in the global credit markets and
economic uncertainty.

The disruption in the global credit markets, the re-pricing of credit risk and the deterioration of the financial and real
estate markets generally, particularly in the United States and Europe, have all contributed to a reduction in consumer spending and a contraction in global economic growth including the wind energy
sector. The recession has had negative effects on demand for alternative sources of energy and consequently for our product and service offerings. Although there is a growing confidence that the
global economies have resumed growth, there remains risk that the recovery will be short-lived, such recovery may not include the industries or markets in which we conduct our business or the

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downturn
may resume. In addition, because there is a long lead-time between orders for wind products and delivery, there is generally a lag before the impact of changed economic conditions
affects our results, and an improvement in economic conditions may not be reflected in our financial results of operations in a corresponding manner. Any deterioration in economic conditions could
have a material adverse effect on our business in a number of ways, including lower sales and extended renewal cycles if there is a reduction in demand for wind energy and such deterioration could
have a material adverse effect on our liquidity, results of operations and financial condition.

In
particular, risks we might face could include: potential declines in revenues in our business segments due to reduced orders or other factors caused by economic challenges faced by
our customers and prospective customers, and an inability to finance our operating needs on reasonable terms.

The U.S. wind industry is reliant on tax and other economic incentives and political and governmental policies. A significant change in these incentives and policies could
negatively impact our results of operations and growth.

Our business segments are focused on supplying products and services to wind turbine manufacturers and owners and operators of wind
energy generation facilities. The wind industry is dependent upon federal tax incentives and state renewable portfolio standards and may not be economically viable absent such incentives. The federal
government provides economic incentives to the owners of wind energy facilities, including a federal production tax credit, an investment tax credit and a cash grant equal in value to the investment
tax credit. The production tax credit was extended by the American Recovery and Reinvestment Act ("ARRA") in February 2009 and provides the owner of a qualifying wind energy facility placed in service
before the end of 2012 with a ten-year tax credit against the owner's federal income tax obligations based on the amount of electricity generated by the qualifying wind energy facility and
sold to unrelated third parties. Alternatively, wind project owners may (i) elect to receive an investment tax credit equal to 30% of the qualifying basis of facilities placed in service before
the end of 2012 or (ii) for facilities placed in service in 2009 or 2010
(or, if construction begins before the end of 2010, placed in service before the end of 2012), apply to receive a cash grant from the Department of Treasury, equal in value to the investment tax
credit.

These
programs provide material incentives to develop wind energy generation facilities and thereby impact the demand for our manufactured products and services. The increased demand for
our products and services resulting from the credits and incentives may continue until such credits or incentives lapse. The failure of Congress to extend or renew these incentives beyond their
current expiration dates could significantly delay the development of wind energy generation facilities and the demand for wind turbines, towers, gearing and related components. In addition, we cannot
assure you that any subsequent extension or renewal of the production tax credit, investment tax credit or cash grant program will be enacted prior to its expiration or, if allowed to expire, that any
extension or renewal enacted thereafter would be enacted with retroactive effect. It is possible that these federal incentives will not be extended beyond their current expiration dates. Any delay or
failure to extend or renew the federal production tax credit, investment tax credit or cash grant program in the future could have a material adverse impact on our business, results of operations,
financial performance and future development efforts.

State
renewable energy portfolio standards generally require or encourage state-regulated electric utilities to supply a certain proportion of electricity from renewable energy sources
or devote a certain portion of their plant capacity to renewable energy generation. Typically, utilities comply with such standards by qualifying for renewable energy credits evidencing the share of
electricity that was produced from renewable sources. Under many state standards, these renewable energy credits can be unbundled from their associated energy and traded in a market system allowing
generators with insufficient credits to meet their applicable state mandate. These standards have spurred significant growth in the wind energy industry and a corresponding increase in the demand for
our manufactured

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products.
Currently, the majority of states and the District of Colombia have renewable energy portfolio standards in place and certain states have voluntary utility commitments to supply a specific
percentage of their electricity from renewable sources. The enactment of renewable energy portfolio standards in additional states or any changes to existing renewable energy portfolio standards, or
the enactment of a federal renewable energy portfolio standard or imposition of other greenhouse gas regulations may impact the demand for our products. We cannot assure you that government support
for renewable energy will continue. The elimination of, or reduction in, state or federal government policies that support renewable energy could have a material adverse impact on our business,
results of operations, financial performance and future development efforts.

We could incur substantial costs to comply with environmental, health and safety laws and regulations and to address violations of or liabilities under these requirements.

Our operations are subject to a variety of environmental laws and regulations in the jurisdictions in which we operate and sell
products governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous materials, soil and groundwater contamination, employee health and safety, and
product content, performance and packaging. We cannot guarantee that we will at all times be in compliance with such laws and regulations and if we fail to comply with these laws and regulations or
our permitting and other requirements, we may be required to pay fines, limit production at our facilities or be subject to other sanctions. Also, certain environmental laws can impose the entire or a
portion of the cost of investigating and cleaning up a contaminated site, regardless of fault, upon any one or more of a number of parties, including the current or previous owner or operator of the
site. These environmental laws also impose liability on any person who arranges for the disposal or treatment of hazardous substances at a contaminated site. Third parties may also make claims against
owners or operators of sites and users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites. Many of our facilities have a
history of industrial operations and contaminants have been detected at some of our facilities.

Changes
in existing environmental laws and regulations, or their application, could cause us to incur additional or unexpected costs to achieve or maintain compliance. Our facilities
emit greenhouse gases which may be subject to pending or future environmental laws or regulations, which could cause us to incur additional or unexpected costs to achieve and maintain compliance. The
assertion of claims relating to on- or off-site contamination, the discovery of previously unknown environmental liabilities, or the imposition of unanticipated investigation
or cleanup obligations, could result in potentially significant expenditures to address contamination or resolve claims or liabilities. Such costs and expenditures could have a material adverse effect
on our business, financial condition or results of operations.

Our financial and operating performance is subject to certain factors which are out of our control, including prevailing economic conditions and the state of the wind energy
market in North America.

As a supplier of products and services to wind turbine manufacturers and owners and operators of wind energy generation facilities, our
results of operations (like those of our customers) are subject to general economic conditions and specifically, to the state of the wind energy market. In addition to the state and federal government
policies supporting renewable energy described above, the growth and development of the larger wind energy market in North America is subject to a number of factors, including, among other
things:



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In
addition, while some of the factors listed above may only affect individual wind project developments or portions of the market, in the aggregate they may have a significant effect on
the successful development of the wind energy market, and thus affect our operating and financial results.

We are substantially dependent on a few significant customers.

The wind turbine market in the United States is very concentrated, with eight manufacturers controlling in excess of 97% of the market.
Like us, these customers were adversely affected by the downturn in the economy and we have seen, and may continue to see, a decrease in order volume from such customers. During 2009, we were affected
by the global economic downturn, particularly with respect to the economic impact that it had on our customers. Historically, the majority of our revenues are highly concentrated with a limited number
of customers. In 2009, four customersGamesa, Nordex, General Electric and Clipper Windpowereach accounted for more than 10% of our consolidated revenues and our six largest
customers accounted for 75% of our consolidated revenues. During 2009, several of our customers expressed their intent to scale back, delay or restructure existing customer agreements, which led to
reduced revenues from these customers. As a result, our operating profits and gross margins were negatively affected by a decline in production levels during 2009, which created production volume
inefficiencies in our operations and cost structures.

Additionally,
if our relationships with significant customers should change materially, it could be difficult for us to immediately and profitably replace lost sales in a market with
such concentration, which would materially adversely affect our results. We could be adversely impacted by decreased customer demand for our products and services due to (1) the impact of
current or future economic conditions on our customers, (2) our customers' loss of market share to competitors of theirs that do not use our products, and (3) our loss of market share
with our customers. We could lose market share with our customers to competitors or to our customers themselves, should they decide to become more vertically integrated and produce our products and
services internally. Finally, most of our customers do not purchase all of our products and services, so if some of our customers gain market share, it could impact our mix of services and products
among our segments.

In
addition, even if our customers continue to do business with us, we can be adversely affected by a number of other potential developments with our customers. For
example:



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Our customers may be significantly affected by disruptions and volatility in the markets.

Current market disruptions and regular market volatility may have adverse impacts on our customers' ability to pay when due the amounts
payable to us and could cause related increases in our working capital or borrowing needs. In addition, our customers have in the past and may attempt in the future to renegotiate the terms of
contracts or reduce the size of orders with us as a result of disruptions and volatility in the markets. Our backlog is substantial, but we cannot predict with any degree of certainty the amount of
our backlog that we will be successful in collecting from our customers.

Market
disruptions and regular market volatility may also result in an increased likelihood of our customers bringing warranty or remediation claims in connection with our products or
services that they would not ordinarily bring in a more stable economic environment. In the event of such a claim, we may incur costs if we decide to compensate the affected customer or to engage in
litigation against the affected customer regarding the claim. We maintain product liability insurance, but there can be no
guarantee that such insurance will be available or adequate to protect against such claims. A successful claim against us could result in a material adverse effect on our business.

We may have difficulty raising additional financing when needed or on acceptable terms and there can be no assurances that our operations will generate sufficient cash flows
in an amount sufficient to enable us to pay our indebtedness.

We rely on access to both short- and long-term capital markets as a source of liquidity for capital requirements not
satisfied by cash flows from operations. While we anticipate that our current cash resources, cash generated through our operations, and cash proceeds from our January 2010 common stock offering will
be adequate to meet our liquidity needs for at least the next twelve months, we do not have any significant committed sources of liquidity. If we are not able to access capital at competitive rates,
the ability to implement our business plans may be adversely affected. In the absence of access to capital resources, we could face substantial liquidity problems and might be required to dispose of
material assets or operations at times when the prices for such assets are depressed. We may not be able to consummate those dispositions. Furthermore, these proceeds may not be adequate to meet our
debt service obligations then due.

Additionally,
our ability to make scheduled payments on our existing or future debt obligations and fund operations will depend on our future financial and operating performance. While
we have repaid approximately $19.1 million in outstanding indebtedness to Bank of America and Investors Community Bank in January 2010, and we believe we will continue to have sufficient cash
flows to operate our businesses, there can be no assurances that our operations will generate sufficient cash flows to enable us to pay our remaining indebtedness or to fund our other liquidity needs.
If we cannot make scheduled payments on our debt, we will be in default and, as a result, among other things, our debt holders could declare all outstanding principal and interest to be due and
payable and we could be forced into bankruptcy or liquidation or required to substantially restructure or alter our business operations or debt obligations. Moreover, if we are unable to obtain
additional capital or if our current

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sources
of financing are reduced or unavailable, we will likely be required to delay, reduce the scope of, or eliminate our plans for expansion and growth and this could affect our overall operations.

Growth and diversification through acquisitions and internal expansion may not be successful, and could result in poor financial performance.

To execute our business strategy, we may seek to acquire new businesses. We may not be able to identify appropriate acquisition
candidates or successfully negotiate, finance or
integrate acquisitions. If we are unable to make acquisitions, we may be unable to realize the growth we anticipate. Future acquisitions could involve numerous risks including difficulties in
integrating the operations, services, products and personnel of the acquired business, and the potential loss of key employees, customers and suppliers of the acquired business. If we are unable to
successfully manage these acquisition risks, future earnings may be adversely affected.

We
may also grow our existing business through increased production levels at existing facilities and through expansion to new manufacturing facilities and locations, such as the tower
manufacturing facility in Abilene, Texas that we completed in January 2009 and our constructed but not yet operational tower manufacturing facility in Brandon, South Dakota. In addition, we intend to
utilize funds raised in our recently completed equity offering to establish a MW gearbox test stand and refurbishment facility during 2010. Such expansion and any future expansion will require
coordinated efforts across the Company and continued enhancements to our current operating infrastructure, including management and operations personnel, systems and equipment, and property.
Difficulties or delays in acquiring and effectively integrating any new facilities may adversely affect future performance. For example, we recorded higher costs in 2008 to handle a higher volume of
orders, and in 2009 in connection with the startup of production at our Abilene facility. Moreover, if our expansion efforts do not adequately predict the demand of our customers and our potential
customers, our future earnings may be adversely affected.

We face competition from industry participants who may have greater resources than we do.

Our businesses are subject to risks associated with competition from new or existing industry participants who may have more resources
and better access to capital. Many of our competitors and potential competitors may have substantially greater financial, customer support, technical and marketing resources, larger customer bases,
longer operating histories, greater name recognition and more established relationships in the industry than we do. Among other things, these industry participants compete with us based upon price,
quality, location and available capacity. We cannot be sure that we will have the resources or expertise to compete successfully in the future. Some of our competitors may also be able to provide
customers with additional benefits at lower overall costs to increase market share. We cannot be sure that we will be able to match cost reductions by our competitors or that we will be able to
succeed in the face of current or future competition. In addition, we may face competition from our customers as they seek to be more vertically integrated and offer full service packages. Some of our
customers are also performing more services themselves.

We have generated net losses and negative cash flows since our inception.

We have experienced operating losses, as well as net losses, for each of the years during which we have operated. In addition, in light
of current economic conditions, we anticipate that losses and negative cash flow are possible for the foreseeable future. We have incurred significant costs in connection with the development of our
businesses and there is no assurance that we will achieve sufficient revenues to offset anticipated operating costs. Although we anticipate deriving revenues from the sale of our products and
services, no assurance can be given that these products can be sold on a profitable basis. If we achieve profitability, we cannot give any assurance that we would be able to sustain or increase
profitability on a quarterly or annual basis in the future.

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We may not be able to effectively utilize the additional production capacity at our new wind tower manufacturing facility in Brandon, South Dakota.

We recently completed construction of a third wind tower manufacturing facility in Brandon, South Dakota and we anticipate that the
facility will become operational as business warrants and pending the installation of certain additional equipment. If there is insufficient market demand for the towers we intend to produce at this
facility, it could be difficult or impossible for us to operate the facility in a profitable or cost-effective manner. If we elected not to commence operations at the facility, we would
continue to incur significant fixed costs associated with ownership of the facility, and there can be no assurance that we would be able to sell or otherwise dispose of the facility on terms deemed to
be commercially reasonable by us if we sought to do so in the future.

Our future operating results and the market price of our common stock could be materially adversely affected if we are required to take additional write downs to the
carrying value of goodwill or intangible assets associated with any of our operating segments in the future.

We review our goodwill balances for impairment on at least an annual basis through the application of a fair-value-based
test. We perform our review of goodwill based on the carrying value of these assets as of October 31 of each year and the estimate of fair-value for each of our operating segments
is based primarily on projected future results, cash flows and other assumptions. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including
goodwill. In performing the first step, we determine the fair value of our reporting units using a combination of an income approach by preparing a discounted cash flow analysis and a market-based
approach based on our market
capitalization. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not
necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill
impairment test compares the implied fair value of the reporting unit's goodwill with its carrying amount to measure the amount of impairment loss, if any. The implied fair value of goodwill is
determined in the same manner as the amount of goodwill recognized in a business combination. As a result, the estimated fair value of the reporting unit is allocated to all of the assets and
liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase
price paid. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

We
did not identify a triggering event during 2009 which would require an early assessment of impairment, however, in connection with our annual goodwill impairment analysis as of
October 31, 2009 which was completed in March 2010, we determined that the goodwill balance attributable to our Gearing segment was impaired due to a deterioration in financial performance
during 2009 and as a result of the subsequent fourth quarter revision in our projection of future operating results and cash flows in light of the continued economic downturn on the wind gearing
industry.

We
review our intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be
recoverable. Due to the revision in our projections of operating results and cash flows within our Gearing segment, we deemed this a triggering event, and subsequently tested all of our intangible
assets for impairment. The completion of our impairment analysis during February 2010 indicated that the customer relationship intangibles associated with our Gearing segment were impaired as a result
of a decline in projected future operating results. The decline in our estimates of future operating results and corresponding discounted cash flows indicated that the fair value of these customer
relationships was less than the carrying value of these assets. Additionally, we determined that the carrying value of our RBA trade name was impaired as a result of the merger of RBA's operations
into our Towers segment in

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December
2009 and that RBA's customer relationship intangible was impaired due to a revision in projected revenues and cash flows associated with this customer relationship. Accordingly, we recorded
goodwill and intangible impairment charges of $24.3 million and $57.9 million, respectively. In the future, if our projected discounted cash flows associated with our operating segments
do not exceed the carrying value of their net assets, we may be required to record additional write downs of the carrying value of goodwill, intangible assets or other long-lived assets
associated with any of our operating segments and our operating results and the market price of our common stock may be materially adversely affected.

As
of December 31, 2009, our goodwill and intangible balances were $9.7 million and $37.2 million, respectively. The 2008-2009 recession has impacted our
financial results and has reduced near-term purchases from certain of our key customers and may continue to do so in
the future. We may determine that our expectations of future financial results and cash flows from one or more of our businesses has decreased or a decrease in our stock valuation may occur, which
could result in a review of our goodwill and intangible assets associated with these businesses. Since a large portion of the value of our intangibles has been ascribed to projected revenues from
certain key customers, a change in our expectation of future cash from one or more of these customers could indicate potential impairment to the carrying value of our assets.

Disruptions in the supply of parts and raw materials, or changes in supplier relations, may negatively impact our operating results.

We are dependent upon the supply of certain raw materials used in our production process and these raw materials are exposed to price
fluctuations on the open market. Raw material costs for items such as steel, the primary raw material used by us, has fluctuated significantly and may continue to fluctuate. To reduce price risk
caused by market fluctuations, we have generally incorporated price adjustment clauses in our sales contracts. However, limitations on availability of raw materials or increases in the cost of raw
materials (including steel), energy, transportation and other necessary services may impact our operating results if our manufacturing businesses are not able to fully pass on the costs associated
with such increases to their respective customers. Alternatively, we will not realize material improvements from declines in steel prices as the terms of many of our contracts provide that we pass
through these costs to our customers.

In
addition, we may encounter supplier constraints, be unable to maintain favorable supplier arrangements and relations or be affected by disruptions in the supply chain caused by such
events as natural disasters, power outages and the effect of labor strikes. In the event of significant increases or decreases in the price of raw materials, particularly steel, our margins and
profitability could be negatively impacted.

If our projections regarding the future market demand for our products are inaccurate, our operating results and our overall business may be adversely affected.

We have made significant capital investments in anticipation of rapid growth in the U.S. wind energy market. The expansion of our
internal manufacturing capabilities has required significant up-front fixed costs. If market demand for our products does not increase as quickly as we have anticipated and align with our
expanded manufacturing capacity, we may be unable to offset these costs and to achieve economies of scale, and our operating results may continue to be adversely affected as a result of high operating
expenses, reduced margins and underutilization of capacity. Alternatively, if we experience rapid demand for our products in excess of our estimates, our installed capital equipment and existing
workforce may be insufficient to support higher production volumes, which could harm our customer relationships and overall reputation. In addition, we may not be able to expand our workforce and
operations in a timely manner, procure adequate resources, or locate suitable third-party suppliers, to respond effectively to changes in demand for our existing products or to the demand for new

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products
requested by our customers, and our business could be adversely affected. Our ability to meet such excess customer demand could also depend on our ability to raise additional capital and
effectively scale our manufacturing operations.

If our estimates for warranty expenses differ materially from actual claims made, or if we are unable to reasonably estimate future warranty expense for our products and
services, our business and financial results could be negatively affected.

We provide warranty terms generally ranging between two and seven years to our tower and gearing customers depending upon the specific
product and terms of the customer purchase agreement. We reserve for warranty claims based on industry experience and estimates made by management based upon a percentage of our product sales
revenues. From time to time, customers have submitted warranty claims against us. However, we have a limited history on which to base our warranty estimates for certain products which we manufacture.
Our assumptions could be materially different from the actual performance of our products in the future and could exceed the levels against which we have reserved. In some instances our customers have
interpreted the scope and coverage of certain of our warranty provisions differently from our interpretation of such provisions. The expenses associated with remediation activities in the wind energy
industry can be substantial and if we are required to pay such costs in connection with a customer's warranty claim we could be subject to additional unplanned cash expenditures. If our estimates
prove materially incorrect, or if we are required to cover remediation expenses in addition to our regular warranty coverage, we could be required to accrue additional expenses and could face a
material unplanned cash expenditure, which could harm our financial and operating results.

Material weaknesses or other deficiencies in our internal controls over financial reporting, including potential failure to prevent or detect errors or fraud, could affect
the accuracy of our reported financial results.

Management identified a material weakness in internal controls over financial reporting in 2009, relating to non-routine
revenue transactions, as referenced in Item 9A, "Controls and Procedures" of this Annual Report on Form 10-K. Internal control weaknesses or deficiencies may continue to
affect our ability to close our financial reporting on a timely basis or report accurate numbers. In addition, acquisitions of companies lacking sufficient financial and internal control expertise may
affect our ability to comply with public company reporting requirements in the future, including meeting filing deadlines established by the SEC, and ensuring that our Company-wide
controls and procedures are adequate to provide financial information in a timely and reliable matter. We may incur substantial additional costs to bring acquired companies' systems into compliance
with Section 404 of the Sarbanes-Oxley Act of 2002, as amended ("Sarbanes-Oxley"). Our ability to attract and retain qualified financial experts will also impact our ability to comply with
financial reporting and Sarbanes-Oxley regulations. If we are not able to maintain the requirements of Section 404 of Sarbanes-Oxley in a timely manner or with adequate compliance, we may be
subject to sanctions or investigation by regulatory authorities. This type of action could adversely affect our financial results or investors' confidence in our company and our ability to access
capital markets and could cause our stock price to decline.

Trade restrictions may present barriers to entry in certain international markets.

Restrictions on trade with certain international markets could affect our ability to expand into those markets. In addition, the
existence of government subsidies available to our competitors in certain countries may affect our ability to compete on a price basis.

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We may be unable to keep pace with rapidly changing technology in wind turbine component manufacturing.

The global market for wind turbines is rapidly evolving technologically. Our component manufacturing equipment and technology may not
be suited for future generations of products being developed by wind turbine companies. To maintain a successful business in our field, we must keep pace with technological developments and changing
standards of our customers and potential customers and meet their constantly evolving demands. If we fail to adequately respond to the
technological changes in our industry, or are not suited to provide components for new types of wind turbines, our net worth, financial condition and operating results may be adversely affected.

We rely on unionized labor, the loss of which could adversely affect our future success.

We are dependent on the services of unionized labor and have collective bargaining agreements with certain of our operations workforce
at our Cicero and Neville Island gearing facilities. The loss of the services of these and other personnel, whether through terminations, attrition, labor strike, or otherwise, or a material change in
our collective bargaining agreements, could have a material adverse impact on us and our future profitability. Collective bargaining agreements have been ratified by collective bargaining units in
place at our Cicero and Neville Island facilities and expire in October 2012 and February 2014, respectively. As of December 31, 2009, our collective bargaining units represented approximately
21% of our workforce.

We need to hire additional qualified personnel, including management personnel, and the loss of our key personnel could harm our business.

Our future success will depend largely on the skills, efforts and motivation of our executive officers and other key personnel. Our
success also depends, in large part, upon our ability to attract and retain highly qualified management and key personnel throughout our organization. During 2010, we will likely need to hire
additional personnel, including management personnel, to fill in our organization. We face competition in the attraction and retention of personnel who possess the skill sets that we seek. In
addition, key personnel may leave our company and subsequently compete against us. The loss of the services of any of our key personnel, or our failure to attract and retain other qualified and
experienced personnel on acceptable terms, could have a material adverse effect on our business, results of operations, or financial condition.

Our ability to comply with regulatory requirements is critical to our future success and our current level of controls cannot guarantee that we are in compliance with all
such requirements.

As a manufacturer and distributor of wind and other energy industry products we may be or become subject to the requirements of
federal, state and local or foreign regulatory authorities. In addition, we are subject to a number of industry standard-setting authorities, such as the American Gear Manufacturers Association and
the American Welding Society. Changes in the standards and requirements imposed by such authorities could have a material adverse effect on us. In the event we are unable to meet any such standards
when adopted, our business could be adversely affected. We may not be able to obtain all regulatory approvals, licenses and permits that may be
required in the future, or any necessary modifications to existing regulatory approvals, licenses and permits, or maintain all required regulatory approvals, licenses and permits.

There
can be no guarantee that our businesses are in full compliance with such standards and requirements. We continue to develop our internal controls with a goal of providing a greater
degree of certainty that our businesses are in compliance with applicable governmental and regulatory requirements, but our current level of internal control may fail to reveal to us material
instances of non-compliance with such requirements, and such non-compliance could have a material adverse effect on our business.

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Our principal stockholder holds a large percentage of our common stock and influences our affairs significantly.

Tontine Capital Partners, L.P. ("TCP"), Tontine Capital Overseas Master Fund, L.P. ("TMF"), Tontine Partners, L.P.
("TP"), Tontine Overseas Fund, Ltd. ("TOF"), Tontine 25 Overseas Master Fund, L.P. ("T25"), TCP Overseas Master Fund II, L.P. ("TCP2" and collectively with TP, TOF, TCP, TMF, T25
and their affiliates, "Tontine") owned approximately 47.7% of our outstanding common stock as of December 31, 2009 and owns approximately 37.5% of our common stock after completion of our
equity offering in January 2010. Tontine has, and will continue to have the right to designate three individuals on our Board of Directors pursuant to a Securities Purchase Agreement entered into with
Broadwind in August 2007. As a result, Tontine has, and will continue to have, the voting power to significantly influence our policies, business and affairs, and the outcome of any corporate
transaction or other matter, including mergers, consolidations and the sale of all, or substantially all, of our assets. Tontine's significant ownership level may have the effect of delaying,
deterring, or preventing a change in control that otherwise could result in a premium in the price of our common stock. Tontine and its affiliates may invest in entities that directly or indirectly
compete with us or companies in which they currently invest may begin competing with us. As a result of these relationships, when conflicts between the interests of Tontine and the interests of our
other stockholders arise, the Tontine-designated directors may have conflicts of interest. Although our directors and officers will have a duty of loyalty to us under Delaware law and our certificate
of incorporation, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible, if done in compliance with Delaware law. The actions of Tontine
may have the effect of influencing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best
interest.

We may not have the technical expertise and we may be unable to secure the necessary patents or other intellectual property rights needed to successfully market new products
that we may develop.

A key element of our business and operating strategy is to exploit our technological ability to design new manufacturing processes and
products to take advantage of the anticipated growth in the North American wind market. Historically, we have not developed patented technology or engaged in technical design work on a significant
scale. If we are unable to develop new manufacturing processes and products that are attractive to our customers and potential customers, or if we are unable to secure the necessary patents or other
intellectual property rights needed to prevent our competitors from developing and marketing substantially similar products, we could experience a material adverse effect on our business and results
of operations.

We cannot insure against all potential risks and may have difficulty insuring our business activities or become subject to increased insurance premiums.

Our business is subject to a number of risks, including inherent risks associated with manufacturing, heavy-haul transport,
and service and construction support for wind turbines. To mitigate the risks associated with our business, we have obtained various insurance policies. However, our insurance policies have high
deductibles in certain instances and do not cover losses as a result of certain events such as terrorist attacks. In addition, our insurance policies are subject to annual review by our insurers and
these policies may not be renewed at all or on similar or favorable terms. If we were to incur a significant uninsured loss or a loss in excess of the limits of our insurance policies, the results
could have a material adverse effect on our business, financial condition and results of operations.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.    PROPERTIES

Our corporate headquarters is located in Naperville, Illinois, which is a suburb located west of Chicago, Illinois. In addition, our
subsidiaries own or lease operating facilities, which are presented by operating segment as follows:

Operating Segment and
Facility Type

Location

Owned /
Leased

Approximate
Square FootageTowersTower Manufacturing

Manitowoc, WI

Leased


200,000Tower Manufacturing

Abilene, TX

Owned


146,000Tower Manufacturing

Brandon, SD(1)

Owned


146,000Specialized Welding

Manitowoc, WI

Leased


45,000Specialized Welding

Clintonville, WI

Owned


63,000GearingGearing System ManufacturingFinishing

Cicero, IL

Owned


198,000Gearing System ManufacturingMachining

Cicero, IL

Leased


301,000Gearing System ManufacturingHeat Treatment

Neville Island, PA

Owned


70,000Technical and Engineering ServicesService and Maintenance

Gary, SD

Leased


25,000Service and Maintenance

Abilene, TX

Leased


297,000Service and Maintenance

Howard, SD

Owned


25,000Service and Maintenance

Tehachapi, CA

Leased


5,000LogisticsLogistics Headquarters

Clintonville, WI

Leased


7,000CorporateAdministrative

Naperville, IL

Leased


6,800


---

We
consider that our facilities are in good condition and are adequate for our present and future needs.

ITEM 3.    LEGAL PROCEEDINGS

From time to time, Broadwind and its subsidiaries are involved in litigation relating to claims arising out of our operations in the
normal course of business. As of December 31, 2009, we are not aware of material pending legal proceedings or threatened litigation that would have a material adverse effect on our financial
condition or results of operations, although no assurance can be given with respect to the ultimate outcome of pending actions.

ITEM 4.    RESERVED

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Prior to April 9, 2009, our common stock was quoted on the OTC Bulletin Board ("OTCBB") under the symbol "BWEN.OB." Our common
stock began trading on the NASDAQ Global Select Market ("NASDAQ") on April 9, 2009 under the symbol "BWEN."

The
following table sets forth the range of high and low bid quotations as reported by the OTCBB for each quarter during 2008, the first quarter of 2009 and for the second quarter for
the period of April 1 through April 8, 2009. Quotations on the OTCBB reflect inter-dealer prices, which do not include retail
mark-up, mark-down or commissions, and may not represent actual sale prices. For the second quarter of 2009 since April 9, 2009 and for the third and fourth quarters of
2009, the table sets forth the high and low bid prices of our common stock traded on the NASDAQ Global Select Market.

Common StockHigh

Low2009First quarter

$
5.45

$
2.60Second quarter


11.45


4.05Third quarter


12.49


7.18Fourth quarter


9.92


5.01




High

Low2008First quarter

$
14.45

$
8.45Second quarter


29.00


8.40Third quarter


22.00


8.41Fourth quarter


14.40


4.25


The
most recent closing price for our common stock as of March 9, 2010 was $5.44. As of March 9, 2010, there were 61 holders of record of our common stock.

We
have never paid cash dividends on our common stock and have no current plan to do so in the foreseeable future. The declaration and payment of dividends on our common stock are
subject to the discretion of our Board of Directors and are further limited by our credit agreements and other contractual agreements we may have in place from time to time. The decision of our Board
of Directors to pay future dividends will depend on general business conditions, the effect of a dividend payment on our financial condition, and other factors the Board of Directors may consider
relevant. The current policy of our Board of Directors is to reinvest earnings in our operations to promote future growth and to fund potential acquisitions.

Performance Graph

The following Performance Graph and related information shall not be deemed "soliciting material" or "filed"
under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, nor shall such information be incorporated by reference by any general statement incorporating by reference
this Annual Report on Form 10-K into any filing under such Acts, except to the extent that the Company specifically incorporates it by reference into such filing.

The
following graph compares cumulative shareholder returns for our common stock as compared with the S&P 500 and the PowerShares Global Wind Energy Index for the period from
April 9, 2009

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(the
date our common stock began trading on the NASDAQ Global Select Market) to December 31, 2009. The graph assumes an investment of $100 as of April 9, 2009 and that dividends were
reinvested.

GRAPHIC

Repurchases

We did not engage in any repurchases of our common stock during the fourth quarter of 2009.

Unregistered Sales of Equity Securities

All unregistered sales of equity securities during the fourth quarter or for the year ended December 31, 2009 have been
previously disclosed on our Current Reports on Form 8-K.

Securities Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of
this Annual Report on Form 10-K for information as of December 31, 2009 with respect to shares of our common stock that may be issued under our existing share-based
compensation plans.

ITEM 6.    SELECTED FINANCIAL DATA

The following selected historical consolidated financial and other data are qualified in their entirety by reference to, and should be
read in conjunction with, our consolidated financial statements and the related notes thereto appearing elsewhere herein and Part II, Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Our selected statement of operations and statement of cash flows data set forth below for each of the years ended December 31, 2009, 2008, 2007,
2006 and 2005, and the balance sheet data as of December 31, 2009, 2008, 2007, 2006 and 2005, are derived from our consolidated financial statements.

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Table of Contents

(In thousands, except per share data)

For the Year Ended December 31,2009

2008

2007

2006

2005Selected Statement of Operations DataRevenues

$
197,830

$
217,321

$
29,804

$
4,023

$
1,967Cost of sales


186,027


183,951


25,865


4,822


4,009Gross profit (loss)


11,803


33,370


3,939


(799
)

(2,042
)Gross profit (loss) percentage


6.0
%

15.4
%

13.2
%

(19.9
)%

(103.8
)%Selling, general and administrative expenses


34,825


41,545


5,724


1,501


845Goodwill and intangible impairment(1)


82,211


2,409








Intangible amortization


10,404


11,159


1,750


21


Operating loss


(115,637
)

(21,743
)

(3,535
)

(2,321
)

(2,887
)Operating loss margin percentage


(58.5
)%

(10.0
)%

(11.9
)%

(57.7
)%

(146.8
)%Total other income (expense), net


3,929


(2,480
)

(866
)

(414
)

(235
)(Benefit) provision for income taxes


(1,589
)

1,062


(1,039
)




Net loss

$
(110,119
)
$
(25,285
)
$
(3,362
)
$
(2,735
)
$
(3,122
)Net loss per sharebasic and diluted

$
(1.14
)
$
(0.28
)
$
(0.07
)
$
(0.08
)
$
(0.14
)Weighted average shares outstandingbasic and diluted


96,574


89,899


51,535


33,772


22,750




As of December 31,2009

2008

2007

2006

2005Selected Balance Sheet DataAssets:Cash and cash equivalents

$
4,829

$
15,253

$
5,782

$
125

$
166Accounts receivable, net


21,920


36,709


13,541


161


180Inventories


9,039


41,895


12,983


288


283Total current assets


43,486


98,219


34,752


588


638Property and equipment, net


136,249


144,707


58,890


2,799


2,676Goodwill and intangibles, net


46,963


136,547


111,633





Total assets


230,036


379,748


205,818


3,895


3,330Liabilities:Accounts payable and accrued liabilities

$
21,675

$
50,611

$
22,593

$
3,149

$
1,754Total current liabilities


52,742


85,742


62,449


8,402


5,858Total long-term debt, net of current maturities


15,778


25,792


17,620


807


897Total liabilities


74,441


117,592


81,282


9,209


6,755Total stockholders' equity (deficit)

$
155,595

$
262,156

$
124,536

$
(5,314
)
$
(3,425
)


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For the Year Ended December 31,2009

2008

2007

2006

2005Selected Statement of Cash Flows DataNet cash provided by (used in) operating activities

$
1,987

$
(2,359
)
$
521

$
(711
)
$
(1,535
)Net cash used in investing activities


(12,520
)

(106,696
)

(82,828
)

(408
)

(1,098
)Net cash provided by financing activities


109


118,526


87,964


1,078


2,798Proceeds from the issuance of common stock


751


117,389


65,400





Capital expenditures


11,836


83,720


5,854


408


1,098Cash paid for acquisitions, net of acquired cash





23,016


76,474










For the Year Ended December 31,2009

2008

2007

2006

2005Selected Other DataNon GAAP Financial MeasuresAdjusted EBITDA(2)

$
1,558

$
4,327

$
103

$
(1,643
)
$
(2,656
)Adjusted EBITDA margin percentage(3)


0.8
%

2.0
%

0.3
%

(40.8
)%

(135.0
)%


---

For the Year Ended December 31,2009

2008

2007

2006

2005Net loss

$
(110,119
)
$
(25,285
)
$
(3,362
)
$
(2,735
)
$
(3,122
)(Benefit) provision for income taxes


(1,589
)

1,062


(1,039
)




Interest expense, net


2,525


2,276


839


411


222Goodwill and intangible impairment


82,211


2,409








Depreciation and amortization


25,725


21,866


3,523


328


244Share-based compensation


2,805


1,999


142


353


Adjusted EBITDA

$
1,558

$
4,327

$
103

$
(1,643
)
$
(2,656
)


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

The discussion below contains "forward-looking statements," as defined in Section 21E of the Exchange
Act, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by, and
information currently available to, our management. We have tried to identify forward-looking statements by using words such as "anticipate," "believe," "plan," "expect," "intend," "will," and similar
expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to us and are subject to various
risks, uncertainties, and other factors, including, but not limited to, those matters discussed in Item 1A "Risk Factors" in Part I of this Annual Report on Form 10-K,
that could cause our actual growth, results of operations, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these
statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements
contained herein to reflect future events, developments, or changed circumstances, or for any other reason.

As used in this Annual Report on Form 10-K, the terms "we," "us," "our," "Broadwind," and the "Company" refer to Broadwind Energy, Inc.
and its wholly-owned subsidiaries.

(Dollars are presented in thousands unless otherwise stated)

Business Overview

Broadwind Energy provides technologically advanced high-value products and services to the U.S. wind energy industry. We
believe we are the only independent company that offers our breadth of products and services to the market. Our product and service portfolio provides our customers, including wind turbine
manufacturers, wind farm developers and wind farm operators, with access to a broad array of wind component and service offerings, which we believe is becoming increasingly important in today's wind
market. We manufacture gearing systems and structural towers for the wind industry. We also provide technical service and precision repair and engineering and specialized logistics to the wind
industry in the United States, a highly-fragmented market in which we hold a significant position. We have long standing relationships with our primary customers, who include several leading
participants in the U.S. wind sector.

The
adverse impact of the global economic downturn, which we began to experience during the latter half of 2008, continued during 2009. The continued global economic downturn coupled
with a re-pricing of credit risk and a lack of adequate liquidity in the capital markets presented a number of challenges for us. On a year-over-year basis, our
revenues declined by approximately 9%. While revenues within our Towers segment increased by approximately 29%, revenues within our other operating segments declined compared to the prior year. The
decline in our other operating segments reflects the broader economic condition of the wind energy market, which resulted in the delay or scaling-back of production volumes under some of
our key customer agreements, a decline in wind farm installation and maintenance service contracts and declining logistics business due to pricing pressures from our competition. Accordingly, the
decline in production levels across our business units has created production volume inefficiencies within our operations and cost structures, which has had a negative effect on our operating profits
and gross margins.

We
responded by initiating cost-cutting measures throughout our operations as well as reducing our capital spending, amending existing credit agreements and entering into new
debt agreements and sale-leaseback transactions. In October 2009, we announced our intent to sell shares of our common stock in a public offering. We completed this offering in January
2010, and raised approximately $53,900 in net proceeds through the sale of 10,000,000 shares of our common stock. A portion of the

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proceeds
from this offering was used to repay outstanding indebtedness under the BOA Debt Facilities and the ICB Line (each such term as defined below) and to settle our interest rate swap agreements.
We intend to use the remainder of these proceeds for general operating purposes and specific capital expenditures to help us grow our business, including the anticipated establishment of a MW gearbox
test stand and refurbishment center. We believe that these initiatives enable us to better manage our operating and liquidity needs and will facilitate investing in capital expenditures that will
successfully grow our business along with establishing adequate liquidity to support our working capital needs if and when the wind energy industry rebounds. We also intend to strengthen our liquidity
and operating position through the establishment of a senior credit facility.

We
review our goodwill balances for impairment on at least an annual basis and review our intangible and other long-lived assets for impairment whenever events or changes in
circumstances indicate that the asset's carrying value amount may not be recoverable. We performed our review of goodwill based on the carrying value of these assets as of October 31, 2009, and
the estimate of fair-value for each of our operating segments was based primarily on projected future results, cash flows and other assumptions. We did not identify a triggering event
during 2009 which would require an early assessment of impairment, however, in connection with our annual goodwill impairment analysis as of October 31, 2009 which we completed in March 2010,
we determined that the goodwill balance attributable to our Gearing segment was impaired due to a deterioration in financial performance during 2009 and as a result of the subsequent fourth quarter
revision in our projection of future operating results and cash flows in light of the effect of the continued economic downturn on the wind gearing industry. Additionally, we determined that the
carrying value of our RBA trade name was impaired as a result of the merger of RBA's operations into our Towers segment in December 2009 and that RBA's customer relationship intangible was impaired
due to a revision in projected revenues and cash flows associated with this customer relationship. Accordingly, we recorded goodwill and intangible impairment charges of $24,269 and $57,942,
respectively, to properly reflect the carrying value of these assets. In the future, if our projected discounted cash flows associated with our operating segments do not exceed the carrying value of
their net assets, we may be required to record additional write downs of the carrying value of goodwill, intangible assets or other long-lived assets associated with any of our operating
segments and our operating results, and the market price of our common stock may be materially adversely affected.

Although
we have recently seen signals that the wind energy industry and the broader U.S. economy may be recovering from the worst of the economic downturn that began in the latter half
of 2008 and continued throughout 2009, we expect that the economic conditions we experienced in 2009 will continue to negatively affect our business through at least the first half of 2010. Based on
our current expectations regarding our backlog of firm commitments, increased quoting activity, scheduled 2010 wind farm development and installation projects, and leading market indicators in the
wind energy industry, we anticipate an upward trend in our production volumes. Although we anticipate that the
wind energy market will improve during the second half of 2010, we cannot provide any assurance that improved conditions will occur or that we will be able to capitalize on those improved conditions.
Below is a summary of recent key events that occurred during 2009:

Summary of Recent Events



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RESULTS OF OPERATIONS

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our
results of operations for the year ended December 31, 2009 compared to the year ended December 31, 2008.

For the Year Ended December 31,2009 vs. 2008% of Total
Revenue



% of Total
Revenue2009

2008

$ Change

% ChangeRevenues

$
197,830


100.0
%
$
217,321


100.0
%
$
(19,491
)

(9.0
)%Cost of sales


186,027


94.0
%

183,951


84.6
%

2,076


1.1
%Gross profit


11,803


6.0
%

33,370


15.4
%

(21,567
)

(64.6
)%Operating expensesSelling, general and administrative expenses


34,825


17.6
%

41,545


19.1
%

(6,720
)

(16.2
)%Goodwill and intangible impairment


82,211


41.6
%

2,409


1.1
%

79,802


3312.7
%Intangible amortization


10,404


5.3
%

11,159


5.1
%

(755
)

(6.8
)%Total operating expenses


127,440


64.5
%

55,113


25.3
%

72,327


131.2
%Operating loss


(115,637
)

(58.5
)%

(21,743
)

(9.9
)%

(93,894
)

431.8
%Other income (expense)Interest expense, net


(2,525
)

(1.3
)%

(2,276
)

(1.0
)%

(249
)

10.9
%Other, net


6,454


3.3
%

(204
)

(0.1
)%

6,658


(3263.7
)%Other income (expense), net


3,929


2.0
%

(2,480
)

(1.1
)%

6,409


(258.4
)%Net loss before provision for income taxes


(111,708
)

(56.5
)%

(24,223
)

(11.0
)%

(87,485
)

361.2
%(Benefit) provision for income taxes


(1,589
)

(0.8
)%

1,062


0.5
%

(2,651
)

249.6
%Net loss

$
(110,119
)

(55.7
)%
$
(25,285
)

(11.5
)%
$
(84,834
)

335.5
%


Consolidated

Total revenues decreased $19,491 or 9%, from $217,321 during the year ended December 31, 2008, to $197,830 during the year ended
December 31, 2009. The decrease in revenues was primarily attributable to a 38% decline in gearing revenues, which was the result of a reduction in wind turbine gearing production as compared
to the prior year. Revenues in our Technical and Engineering Services segment decreased 12% due to the completion of a large blade refurbishment project that did not recur during 2009. These declines
were partially offset by a 29% increase in wind turbine structural tower revenues as a result of new customer orders and increased manufacturing capacity associated with the addition of a new wind
structural tower facility in Abilene, Texas in January 2009.

Total
cost of sales increased $2,076 from $183,951 during the year ended December 31, 2008, to $186,027 during the year ended December 31, 2009. The change in cost of sales
was primarily the result of an increase in costs of sales of 49% and 56% in our Towers and Logistics segments, respectively. The increase in cost of sales within our Towers segment was primarily
attributable to a higher percentage of steel included in the selling price of wind turbine structural towers manufactured, an increase in production costs related to higher production volumes and the
inclusion of start-up and production costs for our new wind tower manufacturing facility in Abilene, Texas. The increase in cost of sales within our Logistics segment was attributable to
higher depreciation expense related to capital

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expenditures
made during 2008. The increase in cost of sales was partially offset by 30% and 10% declines in cost of sales within our Gearing and Technical and Engineering Services segments,
respectively. The decrease in cost of sales in our Gearing segment was primarily attributable to the 38% decline in revenues as compared to the prior year. The decrease in cost of sales in our
Technical and Engineering Services segment was due to lower direct labor costs for field technicians as a result of a 12% decline in revenues as compared to the prior year.

Selling,
general and administrative expenses decreased from $41,545 during the year ended December 31, 2008, to $34,825 during the year ended December 31, 2009. The
decrease was primarily attributable to cost reduction initiatives implemented during 2009 across all reportable segments to mitigate the effects of an overall decline in production volumes. These cost
reduction initiatives were partially offset by an $806 increase in share-based compensation expense as a result of an increase in restricted stock units granted and professional fees and costs of
$1,201 associated with amendments to our credit agreement with Bank of America.

We
perform our annual test of goodwill impairment using a testing date as of October 31 of each year. Due to the continuing effects of the economic downturn on the wind energy
industry, we revised our projected revenues and associated cash flows. The results of these revised projections indicated that the
fair value of our goodwill and intangible assets related to our Gearing segment was less than the carrying value of these assets. Our analysis also indicated impairment to our trade name and customer
relationship intangible assets in our Towers segment as a result of the merger of our industrial weldment business into our Towers segment in December 2009 and due to a revision in projected revenues
and cash flows associated with this customer relationship. Accordingly, we recorded goodwill and intangible impairment charges of $24,269 and $57,942, to properly reflect the carrying value of these
assets.

Intangible
amortization expense decreased from $11,159 during the year ended December 31, 2008, to $10,404 during the year ended December 31, 2009. The decrease was
primarily due to a $1,203 reduction in amortization expense in our Gearing segment as a result of the impairment to its customer relationship intangibles. This decrease in amortization expense was
partially offset by increases in trademark and customer relationship amortization expense of $367 and $99 in our Logistics segment and our Technical and Engineering Services segment, respectively,
resulting from full year amortization expense associated with the acquisitions of EMS and Badger, which we acquired in January 2008 and June 2008, respectively.

Total
other expense, net, was $2,480 during the year ended December 31, 2008, compared to other income, net, of $3,929 during the year ended December 31, 2009. The increase
was primarily attributable to the recognition of $5,082 in income related to an escrow agreement settlement with the former owners of Brad Foote during the second quarter of 2009.

During
the year ended December 31, 2008, we reported a provision for income taxes of $1,062 compared to a benefit for income taxes of $1,589 during the year ended
December 31, 2009. The decrease in income taxes was primarily attributable to a reduction in our deferred income tax liabilities in connection with the goodwill impairment charge recorded
during 2009.

Net
loss increased from $25,285 during the year ended December 31, 2008, to $110,119 during the year ended December 31, 2009, primarily as a result of the factors as
described above.

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Towers Segment

The following table summarizes the Towers segment operating results for the year ended December 31, 2009 and 2008:

Twelve Months Ended
December 31,2009

2008Revenues

$
93,316

$
72,561Operating (loss) income


(500
)

5,813Operating margin


(0.5
)%

8.0
%


Towers
segment revenues increased $20,755 from $72,561 during the year ended December 31, 2008, to $93,316 during the year ended December 31, 2009. Approximately 21% of the
increase in revenues was attributable to an increase in materials included in the selling price of wind turbine structural towers manufactured. Additionally, revenues increased by approximately 28% in
connection with new customer agreements and the corresponding increase in production volumes at our Manitowoc, Wisconsin and Abilene, Texas facilities

Despite
higher revenues, the segment incurred an operating loss of $500 due in part to the impairment charge with respect to a customer relationship and trade name intangible in the
aggregate of $1,916. The trade name intangible impairment charge was attributable to the merger of our specialty weldment operations into our Towers segment in December 2009 and the customer
relationship intangible impairment was due to a revision in projected revenues and cash flows associated with this customer relationship. The decrease in operating income and operating margin was also
due to production
inefficiencies and increased travel and administrative expenses of approximately $3,350 associated with the start-up of our second wind structural tower manufacturing facility in Abilene,
Texas and our operating margins were negatively impacted by approximately $4,200 due to less profitable customer contracts as compared to the prior year.

Gearing Segment

The following table summarizes the Gearing segment operating results for the year ended December 31, 2009 and 2008:

Twelve Months Ended
December 31,2009

2008Revenues

$
64,518

$
104,553Operating loss


(97,059
)

(6,614
)Operating margin


(150.4
)%

(6.3
)%


Gearing
segment revenues decreased $40,035 from $104,553 during the year ended December 31, 2008, to $64,518 during the year ended December 31, 2009. The decrease in
revenues was primarily attributable to 46% and 27% declines in wind gearing and industrial revenues, respectively. The manufacture of wind turbine gearing, which typically accounts for the majority of
our gearing revenues, continued to be negatively affected by reduced or delayed production orders from our key gearing customers.

Gearing
operating loss increased $90,445 from $6,614 during the year ended December 31, 2008, to $97,059 during the year ended December 31, 2009. The increase in operating
loss was largely attributable to goodwill and intangible impairment charges of $80,295 recorded during 2009. The impairment charges were the result of a revision in our estimates of future results of
operations and associated cash flows due to a decline in production volumes. Additionally, the increase in operating

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loss
was also the result of a continued decline in wind gearing production volumes, which resulted in direct labor and manufacturing overhead inefficiencies and an under absorption of fixed operating
costs. Material costs were $3,972 higher due to additional product rework costs and scrap associated with specification adjustments for new wind gearing production orders. The increase in operating
loss was also impacted by higher depreciation expense of $1,792 associated with capital investments made in 2008, and expenses and fees of $1,201 incurred in connection with the negotiation of
amendments to our credit facility with Bank of America, partially offset by lower outside service expenses associated with a reduced level of activity and lower selling, general and administrative
expenses due to cost
reduction initiatives. Gearing operating margins worsened from (6.3%) during the year ended December 31, 2008 to (150.4%) during the year ended December 31, 2009, as a result of these
factors.

Technical and Engineering Services Segment

The following table summarizes the Technical and Engineering Services segment operating results for the year ended December 31,
2009 and 2008:

Twelve Months Ended
December 31,2009

2008Revenues

$
27,575

$
31,249Operating loss


(610
)

(1,822
)Operating margin


(2.2
)%

(5.8
)%


Technical
and Engineering Services segment revenues decreased $3,674 from $31,249 during the year ended December 31, 2008, to $27,575 during the year ended December 31,
2009. The decrease in revenues was primarily the result of 9% and 16% declines in our technical services and precision repair and engineering service revenues, respectively, during the current year.
The decline in our technical services revenues was the result of a continued slowdown in operations and maintenance services performed for wind farm owners and operators, particularly in the fourth
quarter of the year. The decline in engineering services revenues primarily relates to a decision by one of our large service customers to in-service work which was previously contracted
to us.

Technical
and Engineering Services segment operating loss improved $1,212 from $1,822 during the year ended December 31, 2008, to $610 during the year ended December 31,
2009. The operating margin improved from (5.8%) in 2008 to (2.2%) in 2009. The improvement in operating loss and operating loss margin were primarily attributable to cost reduction initiatives to
align our administrative and field technicians cost structures as a result of the reduction in service contracts during the current year.

Logistics Segment

The following table summarizes the Logistics segment operating results for the year and period ended December 31, 2009 and 2008:

Twelve Months
Ended
December 31,
2009

Period
Ended
December 31,
2008Revenues

$
13,258

$
10,253Operating (loss) income


(3,382
)

131Operating margin


(25.5
)%

1.2
%


Logistics
segment revenues increased $3,005 from $10,253 during the period ended December 31, 2008, to $13,258 during the year ended December 31, 2009. The increase in
revenues was primarily

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attributable
to full year financial results for Badger, which we acquired in June 2008, compared to seven months of financial results during 2008. During the latter half of 2009, revenues were
negatively affected by the impact of the economic downturn on the wind energy industry and competitive pricing pressure during 2009.

Logistics
segment operating income decreased $3,513 from operating income of $131 during the period ended December 31, 2008, to an operating loss of $3,382 during the year ended
December 31, 2009. The operating margin decreased similarly, from 1.2% in 2008 to (25.5%) in 2009. These decreases were primarily attributable to higher fixed overhead costs of $1,959 due to
higher depreciation and lease expense associated with an expansion of the heavy haul fleet in 2008 and increased selling, general and administrative expenses of $1,373 which were primarily related to
full year financial results.

Corporate and Other

Corporate and Other operating loss improved $5,165 from $19,251 during the year ended December 31, 2008, to $14,086 during the
year ended December 31, 2009. The decrease in operating loss was primarily attributable to a $4,279 reduction in professional fees associated with due diligence and acquisition-related costs
incurred in connection with acquisitions we did not complete during 2008 and also related to Sarbanes-Oxley and other compliance initiatives in addition to a $882 reduction in bad debt expense.

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Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our
results of operations for the year ended December 31, 2008 compared to the year ended December 31, 2007.

For the Year Ended December 31,2008 vs. 2007% of
Total Revenue



% of
Total Revenue2008

2007

$ Change

% ChangeRevenues

$
217,321


100.0
%
$
29,804


100.0
%
$
187,517


629.2
%Cost of sales


183,951


84.6
%

25,865


86.8
%

158,086


611.2
%Gross profit


33,370


15.4
%

3,939


13.2
%

29,431


747.2
%Operating expensesSelling, general and administrative expenses


41,545


19.1
%

5,724


19.2
%

35,821


625.8
%Goodwill and intangible impairment


2,409


1.1
%




0.0
%

2,409


100.0
%Intangible amortization


11,159


5.2
%

1,750


5.9
%

9,409


537.7
%Total operating expenses


55,113


25.4
%

7,474


25.1
%

47,639


637.4
%Operating loss


(21,743
)

(10.0
)%

(3,535
)

(11.9
)%

(18,208
)

515.1
%Other income (expense)Interest income


584


0.3
%

400


1.3
%

184


46.0
%Interest expense


(2,860
)

(1.3
)%

(1,239
)

(4.1
)%

(1,621
)

130.8
%Other, net


(204
)

(0.1
)%

(27
)

(0.1
)%

(177
)

655.6
%Other expense, net


(2,480
)

(1.1
)%

(866
)

(2.9
)%

(1,614
)

186.4
%Net loss before benefit for income taxes


(24,223
)

(11.1
)%

(4,401
)

(14.8
)%

(19,822
)

450.4
%Provision (benefit) for income taxes


1,062


0.5
%

(1,039
)

(3.5
)%

(2,101
)

202.2
%Net loss

$
(25,285
)

(11.6
)%
$
(3,362
)

(11.3
)%
$
(21,923
)

652.1
%


Consolidated

Total revenues increased $187,517 or 629%, from $29,804 during the year ended December 31, 2007 to $217,321 during the year
ended December 31, 2008. The increase in revenues was primarily attributable to the addition of full year operating results at Brad Foote, our subsidiary that we acquired in October 2007, which
represented an increase in revenues of $87,578, increases in wind structural tower revenues of $59,672 and an increase in revenues of $31,249 and $10,253, respectively, due to the acquisitions of EMS
and Badger in January 2008 and June 2008, respectively.

Total
cost of sales increased $158,086 from $25,865 during the year ended December 31, 2007 compared to cost of sales of $183,951 during the year ended December 31, 2008.
The change in cost of sales was primarily attributable to increases in the Gearing segment of $78,543, the Towers segment of $49,213, the Technical and Engineering Services segment of $22,043 and the
Logistics segment of $8,579. The increase in cost of sales was primarily attributable to the inclusion of full year operating results at Brad Foote, in 2008, higher cost of sales from our wind turbine
towers related to volume increases, the inclusion of steel in the selling price of certain wind towers during the second half of 2008 and the inclusion of cost of sales associated with our
acquisitions of EMS and Badger in January 2008 and June 2008, respectively.

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Selling,
general and administrative expenses increased from $5,724 during the year ended December 31, 2007 to $41,545 during the year ended December 31, 2008. The change in
selling, general and administrative expenses was primarily attributable to increases in Corporate and Other of $18,417, the Technical and Engineering Services segment of $8,567, the Towers segment of
$3,187, the Gearing segment of $4,620 and the Logistics segment of $1,030. The increase was due to the addition of full year expenses at Brad Foote, which we acquired in October 2007, plus the
addition of selling, general and administrative expenses associated with the acquisitions of EMS and Badger in January 2008 and June 2008, respectively.

During
2008, we recorded a goodwill impairment charge of $2,409 to our Towers segment. During the fourth quarter of 2008, we performed our annual impairment test. Our analysis indicated
that the goodwill attributable to our RBA subsidiary was impaired because projected discounted cash flows from RBA's results of operations did not exceed the carrying value of its net assets.

Intangible
amortization increased from $1,750 during the year ended December 31, 2007 to $11,159 during the year ended December 31, 2008. The increase in intangible
amortization was primarily attributable to higher amortization expense of customer relationship intangibles as a result of our acquisitions of Brad Foote and EMS.

Other
expense, net increased from $866 during the year ended December 31, 2007 to $2,480 during the year ended December 31, 2008. The increase in other expense, net was
primarily due to higher interest expense on outstanding debt at Brad Foote and interest expense incurred during the first quarter of 2008 with respect to a related party note payable.

We
recorded a provision for income taxes of $1,062 during the year ended December 31, 2008 as compared to a benefit for income taxes of $1,039 during the year ended
December 31, 2007. The increase in income tax expense was primarily attributable to higher state income taxes and temporary timing differences related to our indefinite-lived intangibles.

Net
loss for the year ended December 31, 2008 was $25,285, an increase of $21,923 compared to a net loss of $3,362 during the year ended December 31, 2007, as a result of
the factors as described above.

Towers Segment

The following table summarizes the Towers segment operating results for the twelve months ended December 31, 2008 and 2007:

Twelve Months Ended
December 31,2008

2007Revenues

$
72,561

$
12,889Operating income


5,813


1,030Operating margin


8.0
%

8.0
%


Towers
segment revenues increased $59,672 from $12,889 during the year ended December 31, 2007, to $72,561 during the year ended December 31, 2008. The increase in revenues
was primarily attributable to volume increases and the inclusion of materials in the selling price of certain wind towers during the second half of 2008. During the year ended December 31,
2008, approximately 51% of revenue was attributable to the inclusion of steel in the selling price of wind turbine structural towers compared to 0% during the year ended December 31, 2007.
Additionally, wind turbine structural tower revenues increased 149% compared to the prior year as a result of new contracts.

Towers
operating income increased $4,783 from $1,030 during the year ended December 31, 2007, to $5,813 during the year ended December 31, 2008. The increase in operating
income was primarily

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attributable
to the increase in revenues which was partially offset by increases in selling, general and administrative expenses, primarily attributable to start-up costs relating to our
new wind tower manufacturing facilities being constructed in 2008. The operating margin was unchanged at 8.0%.

Gearing Segment

The following table summarizes the Gearing segment operating results for the twelve months ended December 31, 2008 and 2007:

Twelve Months Ended
December 31,2008

2007Revenues

$
104,553

$
16,975Operating loss


(6,614
)

(4,579
)Operating margin


(6.3
)%

(27.0
)%


Gearing
segment revenues increased $87,578 from $16,975 during the year ended December 31, 2007, to $104,553 during the year ended December 31, 2008. The increase in
revenues was primarily attributable to increases in wind gearing revenues and industrial revenues of approximately 676% and 398%, respectively, relating to the inclusion of full year operating results
at Brad Foote, which we acquired in October 2007.

Gearing
operating loss increased $2,035 from $4,579 during the year ended December 31, 2007, to $6,614 during the year ended December 31, 2008. During 2008, Brad Foote
ramped up production and increased capital expenditures in response to strong wind energy demand, and accordingly the operating loss increased due to higher depreciation associated with capital
additions and intangible amortization expense of $12,435, which more than offset the benefit to gross profit related to higher sales volumes.
The operating margin improved from (27%) in 2007 to (6.3%) in 2008 due to higher operating margin associated with strong wind energy demand.

Technical and Engineering Services Segment

The following table summarizes the Technical and Engineering Services segment operating results for the twelve months ended
December 31, 2008 and 2007:

Twelve Months Ended December 31,2008

2007Revenues

$
31,249

N/AOperating loss


(1,822
)
N/AOperating margin


(5.8
)%
N/A


Technical
and Engineering Services segment revenues were $31,249 during the year ended December 31, 2008 as a result of the inclusion of full year operating results of EMS, which
we acquired in January 2008. The operating loss of ($1,822) included $2,461 of intangible amortization expense resulting from the acquisition of EMS.

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Logistics Segment

The following table summarizes the Logistics segment operating results for the twelve months ended December 31, 2008 and 2007:

Twelve Months Ended December 31,2008

2007Revenues

$
10,253


N/AOperating income


131


N/AOperating margin


1.2
%

N/A


Logistics
segment revenues were $10,253 during the year ended December 31, 2008 as the result of the inclusion of partial year operating results of Badger, which we acquired in
June 2008. Operating income was $131, which included $513 of intangible amortization expense as a result of our acquisition of Badger in June 2008.

Corporate and Other

Corporate and Other selling, general and administrative expenses increased from ($90) during the year ended December 31, 2007,
to $18,327 during the year ended December 31, 2008. During 2008, we centralized our corporate functions by staffing additional senior management, professional and administrative positions. As a
percentage of selling, general and administrative expenses, professional fees, salaries and benefits and share based compensation accounted for approximately three quarters of the total increase in
expenses. In addition, we incurred higher professional fees related to Sarbanes-Oxley compliance initiatives, due diligence and acquisition-related costs related to potential acquisitions that we did
not complete during 2008 and expenses associated with being a public reporting company.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on the results
that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters
that are inherently uncertain.

We
have identified the accounting policies listed below to be critical to obtain an understanding of our consolidated financial statements. This section should also be read in
conjunction with Note 1 "Description of Business and Summary of Significant Accounting Policies" in Part IV, Item 15 in the notes to our consolidated financial statements for
further discussion of these and other significant accounting policies.

Revenue Recognition

We recognize revenue when the earnings process is complete and when persuasive evidence of an arrangement exists, transfer of title has
occurred or services have been rendered, the selling price is fixed or determinable, collectability is reasonably assured, and delivery has occurred per the terms of the contract. Customer deposits
and other receipts are deferred and recognized when the revenue is realized and earned.

In
some instances, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition. Assuming the required revenue
recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.

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Warranty Liability

We provide warranty terms that range from two to seven years for various products relating to workmanship and materials supplied by us.
From time to time, customers may submit warranty claims to us. In certain contracts, we have recourse provisions for items that would enable recovery from third parties for amounts paid to customers
under warranty provisions. As of December 31, 2009 and 2008, our estimated product warranty liability was $918 and $890, respectively, and is recorded within accrued liabilities in our
consolidated balance sheets.

Inventories

Inventories are stated at the lower of cost or market. We have recorded a reserve for excess of cost over market value in our inventory
allowance. Market value of inventory, and management's judgment of the need for reserves, encompasses consideration of other business factors including physical condition, inventory holding period,
contract terms, and usefulness. Inventories are valued based on an average cost method that approximates the first-in, first-out (FIFO) basis.

Inventories
consist of raw materials, work-in-process, and finished goods. Raw materials consist of components and parts for general production use.
Work-in-process consists of labor and overhead, processing costs, purchased subcomponents, and materials purchased for specific customer orders. Finished goods consist of
components purchased from third parties as well as components manufactured by us that will be used to produce final customer products.

Goodwill and Intangible Assets

Goodwill represents the excess of cost over fair market value of identifiable net assets acquired through business purchases. We
perform our annual goodwill impairment test during the fourth quarter of each year, or more frequently when events or circumstances indicate that the carrying value of our assets may not be recovered.
We test intangible assets for impairment when events or circumstances indicate that the carrying value of our assets may not be recovered. In evaluating the recoverability of the carrying value of
goodwill and other intangible assets, we must make assumptions regarding the fair value of our reporting units. Our method of determining the fair value is based upon our estimate of the projected
future discounted cash flows of our reporting units.

If
our fair value estimates or related assumptions change in the future, we may be required to record additional impairment charges related to goodwill and intangible assets.

Long-Lived Assets

We review property and equipment and other long-lived assets for impairment whenever events or circumstances indicate that
carrying amounts may not be recoverable. If such events or changes in circumstances occur, we will recognize an impairment loss if the undiscounted future cash flows expected to be generated by the
asset are less than the carrying value of the related asset. The impairment loss would adjust the asset to its fair value.

In
evaluating the recoverability of long-lived assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of such
assets. If our fair value estimates or related assumptions change in the future, we may be required to record impairment charges related to property and equipment and long-lived assets.

Income Taxes

We account for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the future tax
consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this

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method,
deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary
differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.

In
connection with the preparation of our consolidated financial statements, we are required to estimate our income tax liability for each of the tax jurisdictions in which we operate.
This process
involves estimating our actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for income tax reporting and
financial reporting purposes. We also recognize the expected future income tax benefits of net operating loss carryforwards as deferred income tax assets. In evaluating the realizability of deferred
income tax assets associated with net operating loss carryforwards, we consider, among other things, expected future taxable income, the expected timing of the reversals of existing temporary
reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Changes in, among other things, income
tax legislation, statutory income tax rates, or future taxable income levels could materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary
significantly among financial reporting periods.

We
also account for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. We follow the
applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition related to the uncertainty in these income tax
positions.

Recent Accounting Pronouncements

Fair Value Measurements

In January 2009, we adopted guidance related to fair value measurements pertaining to non-financial assets and liabilities
on a prospective basis. This guidance establishes the authoritative definition of fair value, sets out a framework for measuring fair value and expands the required disclosures about fair value
measurement.

The
majority of our non-financial assets, which include goodwill, intangible assets and property and equipment, are not required to be carried at fair value on a recurring
basis. However, if certain triggering events occur (or at least annually for goodwill) such that a non-financial asset is required to be evaluated for impairment, a resulting asset
impairment would require that the non-financial asset be recorded at the lower of historical cost or fair value. The adoption of this standard did not have a material impact on our
financial position, results of operations, or cash flows.

Business Combinations

In January 2009, we adopted the guidance related to the accounting for business combinations and applying such provisions prospectively
to business combinations that will have an acquisition date on or after January 1, 2009. This guidance establishes principles and requirements for how an acquirer in a business combination
(i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and
measures goodwill acquired in a business combination or a gain from a bargain purchase and (iii) determines what information to disclose to enable users of financial statements to evaluate the
nature and financial effects of the business combination. In addition, changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after purchase accounting
is completed will be recognized in earnings rather than as an adjustment to the cost of an acquisition.

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This
accounting treatment for deferred tax asset valuation allowances and acquired income tax uncertainties is applicable to acquisitions that occurred both prior and subsequent to the adoption of
this guidance. The adoption of this standard did not have any impact on our financial position, results of operations, or cash flows.

Derivative Instruments and Hedging Activities

In January 2009, we adopted the guidance related to disclosure about derivative instruments and hedging activities. This guidance is
intended to enhance required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments;
(b) derivative instruments and related hedged items are accounted for; and (c) derivative instruments and related hedged items affect an entity's financial position, financial
performance and cash flows. The adoption of this standard did not have a material impact on our financial position, results of operations, or cash flows.

Subsequent Events

In June 2009, we adopted the guidance related to the accounting for subsequent events. This guidance establishes the accounting for and
disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.
This guidance requires that subsequent events be evaluated through the date that the financial statements are issued. The adoption of this standard did not have a material impact on our financial
position, results of operations, or cash flows.

Accounting Standards Codification

The Financial Accounting Standards Board (the "FASB") implemented the FASB Accounting Standards Codification (the "Codification")
effective July 1, 2009. The Codification became the source of authoritative GAAP recognized by FASB to be applied to nongovernmental entities. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of the Codification, the Codification superseded all then-existing
non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became
non-authoritative. Following the effective date of the Codification, FASB will not release new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force
abstracts, but instead will issue Accounting Standards Updates ("ASU's"). ASU's are not considered authoritative in their own right, but serve only to update the Codification, provide background
information about the guidance and provide the basis for conclusions on the changes in the Codification. The ASU's issued by FASB that are applicable to us are as follows:

In
October 2009, FASB issued ASU 2009-13Revenue Recognition (Topic 605). ASU 2009-05 provides accounting and
financial reporting disclosure amendments for multiple-deliverable revenue arrangements. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010. The adoption of this ASU is not anticipated to have a material impact on our financial position or results of operations.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

At December 31, 2009, cash and cash equivalents totaled $4,829, compared to our cash and cash equivalents which totaled $15,253
at December 31, 2008. In light of the weak economic conditions, in particular with respect to the wind and energy related markets, we implemented a number of initiatives to monitor and conserve
our liquidity to ensure that we have adequate internal and external cash resources available to meet current and future operating requirements. Among these initiatives, we are

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continuing
to focus our efforts on cash management, which has included more stringent controls on capital spending, improvements in our collection of accounts receivable, renegotiating or extending
credit terms for firm purchase commitments and trade payables, and entering into new financing or debt agreements. We also undertook a series of workforce reduction initiatives throughout the
organization to better align our resources to the current production demands from our customers.

In
October 2009, we filed a registration statement on Form S-1 to issue an additional 10,000,000 shares of our common stock. On January 21, 2010, we completed
our public offering of Company common stock at an offering price of $5.75 per share, raising net proceeds of approximately $53,900. In the offering we sold 10,000,000 newly issued shares. After the
completion of this offering, we repaid all outstanding indebtedness under the BOA Debt Facilities and the ICB Line in the aggregate amount of $19,142. The repayment of the indebtedness due to Bank of
America released us from the related financial covenants and debt service requirements, eliminated the costs and professional fees associated with future amendments to the related debt agreements and
improved our liquidity. We also intend to establish a senior credit facility in 2010 to enable us to support our working capital requirements as the wind market recovers and our sales increase

During
2009, we entered into several financing arrangements to improve our liquidity and cash positions. In April 2009, Tower Tech entered into a sale-leaseback agreement
with Varilease Finance, Inc. ("Varilease") under which Varilease agreed to provide equipment financing in the amount of $2,935 (the "Varilease Financing"). Proceeds from the Varilease Financing
are being used for working capital and other general corporate operating needs. In addition, Tower Tech obtained construction financing from Great Western in the amount of up to $10,000 under the
Construction Loan (defined below), of which borrowings of $5,503 were outstanding at December 31, 2009. Proceeds from the Construction Loan were used to finance construction of our new wind
tower manufacturing facility in Brandon, South Dakota. In September 2009, Badger obtained from General Electric Capital Corporation a term loan in the principal amount of approximately $1,000.
Proceeds from this loan were used for working capital and other general operating needs. In addition, we made several favorable amendments to our credit facility with Bank of America.

As
of February 28, 2010, debt credit agreements and capital lease obligations totaled $18,722, of which $3,842 represents our minimum debt service and capital lease payments for
2010. Additionally, we have cash balances of approximately $31,701 as of February 28, 2010. Our ability to make scheduled payments on our debt and other financial obligations will depend on our
future financial and operating performance. While we believe that we will continue to have sufficient cash flows to operate our businesses, there can be no assurances that our operations will generate
sufficient cash flows or that credit facilities will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

Sources and Uses of Cash

Operating Cash Flows

During the year ended December 31, 2009, net cash flows provided by operating activities totaled $1,987, compared to net cash
used in operating activities for the year ended December 31, 2008, which totaled $2,359. The increase in net cash provided by operating activities as compared to the prior year was attributable
to a reduction in our accounts receivable and inventory balances, which was partially offset by a reduction in our accounts payable and customer deposits. The reduction in inventories was the result
of the completion of contracts requiring a significant amount of raw materials and work-in-process on hand at the end of the prior year. The conversion during the current year
of these inventory components into finished goods primarily within our Towers and Gearing segments resulted in higher collections of our accounts receivable balances and release of customer deposit
balances. The reduction in accounts payable balances was the result of higher cash collections on accounts receivable, which we used to pay a significant amount of outstanding trade payables and
accrued operating expenditures.

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Investing Cash Flows

During the years ended December 31, 2009 and 2008, net cash flows used in investing activities totaled $12,520 and $106,696,
respectively. The decrease in net cash used in investing activities as compared to the prior year was primarily attributable to a $71,884 reduction in capital expenditures and the absence of
acquisitions during the current year. This reduction in capital expenditures was primarily the result of the completion in 2008 of a number of capital expansion projects associated with the
construction and equipment purchases for our new wind tower manufacturing facility in Abilene, Texas, gearing equipment purchases, and the purchase of additional tractor trailers and transport
vehicles for our Logistics segment. Capital expenditures of $11,836 during the year ended December 31, 2009 were primarily associated with construction and equipment purchases related to our
Abilene, Texas and Brandon, South Dakota wind tower manufacturing facilities. Restricted cash increased $1,510 during the current year as a result of granting Great Western a security interest in a
$2,000 collateral account in connection with the Construction Loan and the lapsing of $500 in restricted cash from a prior debt agreement.

Cash
paid for acquisitions was zero during the year ended December 31, 2009, compared to $23,016 during the year ended December 31, 2008. In January 2008, we acquired EMS
for $32,250, exclusive of $536 in acquisition related costs. The purchase price consisted of $18,429 in cash and 1,629,834 in unregistered shares of our common stock at a price per share of $8.48. In
June 2008, we acquired
Badger for $11,811, exclusive of $184 in acquisition related costs. The purchase price consisted of $5,811 in cash and 581,959 in unregistered shares of our common stock at a price per share of
$10.31.

Financing Cash Flows

During the year ended December 31, 2009, net cash provided by financing activities totaled $109 compared to $118,526 during
2008. The amount in 2008 included approximately $117,389 in private equity placements completed. To finance the purchase price of the EMS acquisition, we completed a private equity placement offering
in January 2008 with TP and T25 for an aggregate amount of $17,225, or 2,031,250 shares of our unregistered common stock at a price per share of $8.48, pursuant to a previously disclosed Amended and
Restated Securities Purchase Agreement. In addition, we completed transactions resulting in the sale of an aggregate of $100,500 of our unregistered common stock, of which $500, or 62,814 shares, was
purchased by Charles H. Beynon, a member of our Board of Directors and an aggregate of $100,000, or 12,562,814 shares, were purchased by TCP, TP, T25 and TOF.

Contributing
to the decrease in financing cash flows was a $5,622 increase in payments made on lines of credit and notes payable during the current year. Payments made on lines of credit
and notes payable increased from $7,702 during the year ended December 31, 2008, to $13,324 during the year ended December 31, 2009 as a result of higher debt payments made on the BOA
Debt Facilities as required by amendments to these agreements in 2009. Proceeds from lines of credit and notes payable decreased from $9,315 during the year ended December 31, 2008 to $8,480
during the year ended December 31, 2009.

Credit Facilities

Brad Foote

In connection with our acquisition of Brad Foote in October 2007, we assumed outstanding debt and available lines of credit totaling
approximately $25,500 under various secured debt facilities (the "BOA Debt Facilities") with Bank of America. The BOA Debt Facilities were governed by a Loan and Security Agreement dated as of
January 17, 1997 (as amended and/or restated, the "Loan Agreement"). On August 7, 2009, Brad Foote and Bank of America entered into the Third Omnibus

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Amendment
of the Loan Agreement. Pursuant to this amendment, Bank of America waived Brad Foote's violation of the financial covenants for the second quarter of 2009 and reset the covenants for the
remainder of 2009 and 2010. Bank of America also waived certain administrative breaches related to record keeping, timely delivery of financial information and other matters. The interest rate was
increased to the London Interbank Offered Rate ("LIBOR") plus 5%, with a 7% floor. On December 22, 2009, Brad Foote and Bank of America further amended the Loan Agreement so that the quarterly
debt to EBITDA ratio for the quarter ended December 31, 2009, the cumulative revenue threshold for December 2009 and the cumulative EBITDA thresholds for January and February 2010 would no
longer apply. As of December 31, 2009, the total principal amount outstanding under the BOA Debt Facilities was approximately $15,964 and the effective interest was 7%.

On
January 22, 2010, (i) Brad Foote repaid all of the outstanding principal and interest under the BOA Debt Facilities in the aggregate amount of approximately $16,076 from
proceeds of our recently completed public offering of common stock; and (ii) the BOA Debt Facilities were terminated.

Tower Tech

ICB Line and ICB Notes

In October 2007, Tower Tech obtained a secured line of credit (the "ICB Line") from Investors Community Bank in the amount of $2,500,
which was increased to $5,500 on March 21, 2008. The ICB Line is secured by substantially all of the assets of Tower Tech. Draws on the
ICB Line bear interest at a variable rate equal to the greater of (A) 6.0% or (B) 0.50% above prime. Pursuant to a Commercial Debt Modification Agreement dated as of October 22,
2008, Tower Tech and Investors Community Bank extended the maturity date of the ICB Line to April 22, 2009. In connection with the extension, we provided re-executed guaranties to
Investors Community Bank for all debt owed by each of Tower Tech and RBA to Investors Community Bank. In addition, Tower Tech re-executed its guaranty for debts owed to Investors Community
Bank by RBA, and RBA re-executed its guaranty for debts owed to Investors Community Bank by Tower Tech. We anticipated that each of Tower Tech and RBA would be in violation of certain
financial covenants relating to net worth and debt to net worth ratio as of December 31, 2008. Tower Tech and RBA each received waivers on December 29, 2008 from Investors Community Bank
for the anticipated violations. On March 13, 2009, Investors Community Bank agreed to extend the maturity date of the ICB Line to March 13, 2010 (the "ICB Line Extension Agreement").
Pursuant to the ICB Line Extension Agreement, Tower Tech agreed to establish new financial covenants with respect to minimum debt service coverage ratio and minimum tangible net worth. Tower Tech also
agreed to maintain its primary deposit accounts with Investors Community Bank and that no additional loans or leases would be entered into by Tower Tech without the prior approval of Investors
Community Bank.

On
April 7, 2008, RBA executed four (4) promissory notes in favor of Investors Community Bank (the "ICB Notes"), in the aggregate principal amount of approximately $3,781,
as follows: (i) a term note in the maximum principal amount of approximately $421, bearing interest at a per annum rate of 6.85%, with a maturity date of October 5, 2012; (ii) a
term note in the maximum principal amount of $700, bearing interest at a per annum rate of 5.65%, with a maturity date of April 25, 2013; (iii) a term note in the maximum principal
amount of $928, bearing interest at a per annum rate of 5.65%, with a maturity date of April 25, 2013; and (iv) a line of credit note in the maximum principal amount of $1,732, bearing
interest at a per annum rate of 4.48% until May 1, 2008 and thereafter at LIBOR plus 1.75%, with a maturity date of April 5, 2009 (the "Line of Credit Note"). The ICB Notes provide for
multiple advances, and were secured by substantially all of the assets of RBA.

Pursuant
to the merger of RBA into Tower Tech on December 31, 2009, Tower Tech became the successor by merger to RBA's interest in the loans from Investors Community Bank to RBA
evidenced by the ICB Notes (other than the Line of Credit Note, which was repaid in full). In addition, pursuant

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to
a Master Amendment dated as of December 30, 2009 (the "ICB Master Amendment") among Investors Community Bank, Tower Tech and Broadwind (as guarantor), the amount of the ICB Line was
increased to $6,500, subject to borrowing base availability. After giving effect to the merger of RBA into Tower Tech and the increase in the amount of the ICB Line, as of December 31, 2009:
(i) Tower Tech had $1,402 available for additional borrowing under the ICB Line; (ii) the total amount of outstanding indebtedness under the ICB Line was $5,098 and the effective
interest rate thereunder was 6%; (iii) the total amount of outstanding indebtedness under the ICB Notes was $1,625; and (iv) we were in compliance with all financial debt covenants. The
Line of Credit Note was subsequently modified on March 13, 2009 to extend the maturity date to March 13, 2010 and to change the interest rate to the greater of (A) 5.0% or
(B) prime.

Pursuant
to the Master Amendment, among other provisions:



net
profit before taxes+depreciation and amortization+interest+impairment of goodwill



principal
payments and interest payments+capital lease obligations



December 31, 2009

$5.5 millionJanuary 31, 2010

$5 millionFebruary 28, 2010

$5 million




On
January 26, 2010, Tower Tech repaid all of the outstanding indebtedness under the ICB Line in the amount of $3,066. The ICB Line is scheduled to expire on March 13,
2010, and Tower Tech does not intend to request an extension of the ICB Line prior to its expiration.

Great Western Construction Loan

On April 28, 2009 (the "Construction Loan Closing Date"), Tower Tech entered into a Construction Loan Agreement with Great
Western, pursuant to which Great Western agreed to provide up to $10,000 in financing (the "Construction Loan") to fund construction of Tower Tech's wind tower manufacturing facility in Brandon, South
Dakota (the "Facility"). On the Construction Loan Closing Date, Great Western agreed to advance $3,703 under the Construction Loan, representing amounts previously paid by Tower Tech relating to
construction of the Facility. Subsequently, Tower Tech made additional draws under the Construction Loan relating to construction of the Facility. As of December 31, 2009, Tower Tech had
received proceeds of approximately $5,503 under the Construction Loan and had the availability to borrow an additional $4,497.

On
December 22, 2009, Tower Tech and Great Western agreed to extend the maturity date of the Construction Loan to March 5, 2010, and on February 16, 2010, Tower Tech
and Great Western agreed to further extend the maturity date of the Construction Loan to April 5, 2010. We intend to convert the Construction Loan to a term loan on or before that date,
pursuant to the conversion right described below.

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The
Construction Loan bears interest at a rate of 7.5% per annum on all advances. Tower Tech is required to make monthly payments of accrued and unpaid interest beginning June 5,
2009 and on the fifth day of each month thereafter, and must pay the outstanding principal and all accrued and unpaid interest on the maturity date, unless the Construction Loan is converted to a term
loan as described below. Tower Tech was also required to pay a $100 origination fee on the Construction Loan Closing Date.

The
Construction Loan is secured by a first mortgage on the Facility and all fixtures, accounts and proceeds relating thereto, pursuant to a Mortgage and a Commercial Security Agreement,
each between Tower Tech and Great Western and entered into on the Construction Loan Closing Date. In addition, pursuant to an Assignment of Deposit Account entered into on the Construction Loan
Closing Date, Tower Tech granted Great Western a security interest in a $2,000 deposit account. The Company also executed a Commercial Guaranty and entered into a Subordination Agreement in connection
with the Construction Loan, under which it has agreed to guarantee Tower Tech's performance and to subordinate all intercompany debt with Tower Tech to the Construction Loan.

The
Construction Loan may be accelerated under certain events of default (subject to applicable notice and cure provisions), including but not limited to: (i) failure to make any
payment on the Construction Loan when due; (ii) failure to comply with or perform any covenants or conditions under the Construction Loan; (iii) failure to construct the Facility in
accordance with the plans and specifications approved by Great Western or in accordance with the construction contracts relating to the Facility; and (iv) cessation of construction of the
Facility. The Construction Loan contains representations, warranties and covenants that are customary to a construction financing arrangement and contains no financial covenants.

Pursuant
to a Letter Agreement dated as of the Construction Loan Closing Date among Great Western, Tower Tech and the Company (as amended, the "Letter Agreement"), Tower Tech may, any
time prior to April 5, 2010, convert the Construction Loan into a term loan for up to $6,500, with an interest rate not to exceed 8.5% per annum (the "Great Western Term Loan"). Tower Tech
would be required to pay a 1.0% origination fee upon the conversion, and would be required to make monthly payments of principal and accrued interest over the life of the Great Western Term Loan,
which would be not less than seventy-eight months. Following the conversion to the Great Western Term Loan, Great Western would retain its security position in the collateral given as security for the
Construction Loan, except for the deposit account assigned pursuant to the Assignment of Deposit Account, which would be released upon conversion. All other customary terms and conditions would be
mutually agreed upon by Great Western and Tower Tech at the time of conversion.

Badger

On March 13, 2009, Badger obtained a term loan (the "FNB Term Loan") from First National Bank ("FNB") in the principal amount of
approximately $1,538. A portion of the proceeds from the FNB Term Loan was used to pay off Badger's existing term loan and revolving line of credit with FNB, with the remainder available for working
capital. The FNB Term Loan is secured by the inventory, accounts receivable and certain equipment of Badger, and is guaranteed by the Company. The FNB Term Loan bears interest at a rate of 6.75% per
annum, matures on March 13, 2013, and requires monthly payments of principal and interest. The FNB Term Loan contains no financial covenants. As of December 31, 2009, the total amount of
outstanding indebtedness under the FNB Term Loan was $1,280.

On
September 30, 2009, Badger obtained a term loan (the "GE Capital Term Loan") from General Electric Capital Corporation in the principal amount of approximately $1,000. The GE
Capital Term Loan is secured by certain equipment of Badger, and is guaranteed by the Company. The GE Capital Term Loan bears interest at a rate of 7.76% per annum, matures on September 30,
2014, and

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requires
monthly payments of principal and interest. The GE Capital Term Loan contains no financial covenants. As of December 31, 2009, the total amount of outstanding indebtedness under the GE
Capital Term Loan was $949.

Selling Shareholder Notes

On May 26, 2009, we entered into a settlement agreement (the "Settlement Agreement") with the former owners of Brad Foote (the
"Selling Shareholders"), including J. Cameron Drecoll, our Chief Executive Officer and a member of our Board of Directors, related to the post-closing escrow established in connection with
our acquisition of Brad Foote. Under the terms of the Settlement Agreement, among other terms, we issued three promissory notes to the Selling Shareholders in the aggregate principal amount of $3,000
(the "Selling Shareholder Notes"). The Selling Shareholder Notes mature on May 28, 2012 and bear interest at a rate of 7% per annum, with interest payments due quarterly. The Selling
Shareholder Note issued to Mr. Drecoll in the principal amount of $2,320 and pursuant to the terms of the Settlement Agreement is deemed by us to be a related party transaction. As of
December 31, 2009, principal of $3,000 and accrued interest of $53 were outstanding under the Selling Shareholder Notes. We have accounted for the Selling Shareholder Notes as
long-term debt in our consolidated balance sheets as of December 31, 2009.

Contractual Obligations

The following table sets forth, as of December 31, 2009, minimum future cash payments due under contractual obligations,
including, among others, our debt and credit agreements, non-cancelable operating and capital lease agreements and purchase commitments. Minimum future cash payments due under our debt and
credit agreements reflect the repayment of outstanding indebtedness in the aggregate amount of $19,142 to Bank of America and Investors Community Bank in January 2010. In addition, outstanding
indebtedness of $5,503 scheduled to mature on April 5, 2010 related to the Construction Loan is scheduled to be converted into a term loan on or before such maturity date, as described above.

2010

2011

2012

2013

2014

2015 &
Thereafter

TotalDebt and credit agreements(1)

$
28,337

$
1,584

$
4,124

$
1,297

$
174

$


$
35,516Estimated interest payments(2)


750


466


237


27


9





1,489Operating lease obligations


5,161


4,982


4,358


2,615


2,060


5,159


24,335Capital lease obligations (3)


1,482


1,385


1,349


983








5,199Purchase commitments


4,572

















4,572Total contractual cash obligations

$
40,302

$
8,417

$
10,068

$
4,922

$
2,243

$
5,159

$
71,111


---

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Debt and Credit Agreements.Debt and credit agreements include outstanding borrowings under our lines of credit, term notes related to
vehicle and
equipment purchases, and notes payable related to an escrow agreement settlement and a purchase agreement for manufacturing equipment. See Note 10 "Debt and Credit Agreements" in
Part IV, Item 15 in the notes to our consolidated financial statements for further discussion of our outstanding indebtedness and credit agreements.

Operating Lease Obligations.We lease the majority of our facilities and certain equipment under operating leases expiring at various
dates through
2023. Lease terms generally range from two to 15 years with renewal options for extended terms. The amounts in the table above represent future minimum lease payments for
non-cancelable operating leases.

Capital Lease Obligations.We have capital lease obligations related to certain manufacturing equipment and vehicles expiring at various
dates
through 2013. As of December 31, 2009, the balance of our outstanding capital lease obligations was approximately $5,199, which includes accrued interest of approximately $783.

Purchase Commitments.Purchase commitments represent remaining payments due on building purchase contracts related to the construction
of our
Brandon, South Dakota wind tower manufacturing facility and gearing equipment purchases.

Off-Balance Sheet Arrangements

During April 2009, Tower Tech entered into a sale-leaseback agreement with Varilease as described above, whereby Tower Tech
sold certain equipment to Varilease in exchange for $2,935 in cash and agreed to lease the equipment back from Varilease for a certain period of time. The primary purpose of this arrangement was to
provide additional liquidity for meeting working capital requirements. The lease agreement is for a three-year period with rental payments of $85 due monthly. In addition, the sale of the
assets resulted in a gain on disposition of $40, which is being amortized to other income in our statement of operations over the life of the operating lease.

During
March 2009, Badger entered into two sale-leaseback agreements, which consisted of one capital lease and one operating lease. As part of these agreements, Badger sold
certain equipment to a third party financing company in exchange for $570 in cash and agreed to lease the equipment back from the purchaser for a certain period of time. The primary purpose of these
arrangements was to provide additional liquidity for meeting working capital requirements. Each lease agreement is for a four-year period with rental payments due monthly. In addition, the
sale of the assets resulted in a gain on disposition of $38, which is being amortized to other income in our statement of operations over the life of the operating lease.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risks, which primarily include changes in interest rates on our variable rate obligations. We use
various techniques to manage our market risk, including the use of derivative financial instruments. We do not use derivative financial instruments for speculative purposes.

Interest Rate Exposure

As of December 31, 2009, the majority of our third party borrowings under our debt and credit agreements bear annual interest at
fixed interest rates as compared to higher outstanding borrowings under variable rate obligations in the prior year. The outstanding borrowings under these variable rate

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obligations
were $10,601 and $31,377 as of December 31, 2009 and 2008, respectively. Our potential interest rate exposure over a one year period that would result from a hypothetical,
instantaneous and unfavorable change of 100 basis points in the interest rate of our variable rate obligations would be approximately $106 on a pre-tax basis.

In
order to minimize our exposure to interest rate fluctuations related to certain of our variable interest rate obligations, we utilized two interest rate swap agreements. Our interest
rate swap agreements involved the exchange of variable for fixed interest rates over the life of the debt obligation without the exchange of the underlying notional amounts. We did not elect hedge
accounting treatment, and accordingly, the change in the fair value of the swap agreements was recognized in our consolidated results of operations. We reported an unrealized gain of $330 for the year
ended December 31, 2009 compared to an unrealized loss of $194 and $153 for the years ended December 31, 2008 and 2007, respectively, and the fair market value of the swap agreements of
$253 and $582 is recorded as a long-term liability in our consolidated balance sheets as of December 31, 2009 and 2008, respectively. Our potential derivative financial instrument
exposure over a one year period that would result from a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate associated with these respective swap agreements
would be approximately $57 on a pre-tax basis.

In
February 2010, subsequent to the repayment of our outstanding indebtedness to Bank of America, we settled both interest rate swap agreements for $270. See Note 13 "Interest
Rate Swap Agreements" in Part IV, Item 15 in the notes to our consolidated financial statements for further discussion.

We
estimate that the book value of our debt instruments and derivative financial instruments approximated their fair values as of December 31, 2009 and 2008. We believe that the
exposure of our consolidated financial position and results of operations and cash flows to adverse changes in interest rates is not significant. Additionally, we believe that there are no significant
counter party risks associated with our interest rate swap agreements.

Credit Risk Exposure

We are exposed to credit risk on our accounts receivable balances. Historically, our accounts receivable are highly concentrated with a
select number of customers. During the years ended December 31, 2009, 2008 and 2007, sales to three or fewer customers accounted for approximately 50%, 72% and 70%, respectively, of
consolidated revenues. Additionally, as of December 31, 2009, 2008 and 2007, three or fewer customers comprised approximately 21%, 61% and 63%, respectively, of our outstanding accounts
receivable balances.

Commodity Risk Exposure

We are dependent upon the supply of certain raw materials used in our production processes, and these raw materials are exposed to
price fluctuations on the open market. The primary raw material we use is steel. To reduce price risk caused by market fluctuations, we have incorporated price adjustment clauses in certain sales
contracts. Management believes a hypothetical 10% change in the price of steel and other raw materials would not have a significant effect on our consolidated results of operations or cash flows
because these costs are generally passed through to its customers.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial information required by Item 8 is contained in Part IV, Item 15 of this Annual Report on
Form 10-K.

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

None.

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. This information is also accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of our disclosure controls and procedures as of the end of the most recent fiscal quarter reported on herein. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2009 because of the material weakness discussed in the Report of Management
on Internal Control Over Financial Reporting below.

Changes in Internal Control over Financial Reporting

We have made enhancements to our internal control structure to address our previously disclosed material weaknesses. We hired
additional experienced and qualified financial professionals to strengthen our accounting and financial controls functions, implemented enhancements to our monthly financial reporting, developed
enhancements to our overall reporting procedures and
continued to enhance our control environment. The following enhancements were made to address our material weaknesses previously disclosed:

Inventory and Cost Accounting

As of December 31, 2008, material weaknesses with respect to inventory and cost accounting existed at our Brad Foote subsidiary.
In response, management enhanced the control structure to remediate these material weaknesses, we hired additional personnel to assist in enhancing controls around cost accounting, performed quarterly
physical inventory counts, enhanced procedures regarding timely reporting of inventory variances and continued to strengthen the internal controls over inventory and cost accounting. These changes
were tested during the fourth quarter of 2009 and the controls were found to be effective.

Information Technology ("IT") Controls

As of December 31, 2008, we did not maintain effective internal control over information systems at Brad Foote. To remediate
this weakness, enhancements were made to the control environment, including hiring a corporate IT manager and improving general computing controls. The enterprise resource planning ("ERP") system at
Brad Foote is scheduled to be upgraded in 2010, which will continue to strengthen its internal controls. The ERP upgrade will allow better visibility into costing and inventory production planning.
Based on testing during the fourth quarter of 2009, we believe that this material weakness has been remediated through the enhancements made in the inventory and cost accounting in addition to
enhancements made to the IT controls.

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Income Taxes

In conjunction with the filing of Amendment No. 2 on Form 10-Q/A for the quarter ended September 30,
2008, we identified a material weakness with respect to income taxes. In response, management enhanced the control structure to
remediate this material weakness, whereby we conducted an independent review of our income tax provision, hired a tax professional to eliminate the outsourcing of this function and established
enhanced interim controls surrounding our tax provision calculation. This remediation was tested during the fourth quarter of 2009 and found to be effective.

Badger Subsidiary

As of December 31, 2008, we identified material weaknesses with respect to internal financial expertise, accounting policies and
procedures, IT environment and segregation of duties at our Badger subsidiary. In response, we enhanced the internal control structure to remediate these material weaknesses. We integrated Badger into
our financial reporting structure, hired additional accounting and financial professionals, and integrated Badger's IT systems. As part of the new IT system integration, access controls were limited
and are supplemented by other compensating controls where necessary. Where possible, we have established compensating controls to mitigate the risk presented by inadequate segregation of duties. In
addition, we realigned certain personnel and security access rights, which remediated this material weakness.

Report of Management on Internal Control Over Financial Reporting

The management of the Company, including the Company's Chief Executive Officer and Chief Financial Officer, is responsible for
establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

The
management of the Company, including the Company's Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company's internal control over financial
reporting as of December 31, 2009. Management based this assessment on criteria for effective internal control over financial reporting described in "Internal ControlIntegrated
Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In
conjunction with the filing of Amendment No. 2 on Form 10-Q/A for the quarter ended September 30, 2008, we identified a material weakness associated
with the controls over non-routine revenue transactions, and the related accounting treatment of those transactions was appropriately reviewed to ensure compliance with GAAP. In response,
management continued to enhance the control structure to address these material weaknesses; however, at our Brad Foote subsidiary, the controls implemented were not sufficient to fully remediate this
material weakness as it related to our fourth quarter interim monthly financial statements.

Based
on this assessment, management determined that, as of December 31, 2009, we did not maintain effective internal control over financial reporting due to the previously
reported material weakness related to non-routine revenue transactions discussed above, which remained outstanding at December 31, 2009.

Grant
Thornton LLP, an independent registered public accounting firm, who audited our consolidated financial statements included in this Annual Report on
Form 10-K, has also audited the effectiveness of our internal control over financial reporting as stated in its report appearing below.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and
Stockholders of Broadwind Energy, Inc.

We
have audited Broadwind Energy, Inc.'s (a Delaware Corporation) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Broadwind
Energy, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Broadwind Energy, Inc.'s internal
control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A
material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in
management's assessment. The Company did not maintain effective internal control over accounting for non-routine revenue transactions.

In
our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Broadwind Energy, Inc., has not
maintained effective internal control over financial reporting as of December 31, 2009, based on criteria established inInternal ControlIntegrated
Frameworkissued by COSO.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Broadwind Energy, Inc.
as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders'

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equity
and cash flows for each of the three years in the period ended December 31, 2009. The material weakness identified above was considered in determining the nature, timing, and extent of
audit tests
applied in our audit of the 2009 consolidated financial statements, and this report does not affect our report dated March 12, 2010, which expressed an unqualified opinion on those financial
statements.

/s/
GRANT THORNTON LLP

Milwaukee,
Wisconsin
March 12, 2010

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ITEM 9B.    OTHER INFORMATION

None.

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

With the exception of the description of our Code of Ethics below, the information required by this item is incorporated herein by
reference from the discussion under the headings "Directors and Director Compensation," "Corporate Governance" and "Other MattersSection 16(a) Beneficial Ownership Reporting
Compliance" in our definitive Proxy Statement to be filed in connection with our 2010 Annual Meeting of Stockholders (the "2010 Proxy Statement").

Code of Ethics

We have adopted a Code of Ethics and Business Conduct that applies to all of our directors, executive officers and senior financial
officers (including our chief executive officer, chief financial officer, chief accounting officer, controller, and any person performing similar functions). The Code of Ethics and Business Conduct is
available on our website atwww.broadwindenergy.comunder the caption "Investors" and is available in print, free of charge, to any stockholder who
sends a request for a paper copy to Broadwind Energy, Inc., Attn: Investor Relations, 47 East Chicago Avenue, Suite 332, Naperville, IL 60540. Broadwind intends to include on our website
any amendment to, or waiver from, a provision of our Code of Ethics and Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K.

ITEM 11.    EXECUTIVE COMPENSATION

Information regarding director and executive compensation is incorporated by reference from the discussion under the headings
"Directors and Director Compensation" and "Compensation Discussion and Analysis" in the 2010 Proxy Statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Certain of the information required by this item is incorporated herein by reference from the discussion under the heading "Principal
Stockholders and Management Stockholdings" in the 2010 Proxy Statement.

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The
following table provides information as of December 31, 2009, with respect to shares of our common stock that may be issued under our existing equity compensation plans:

EQUITY COMPENSATION PLAN INFORMATION

(a)

(b)

(c)Plan Category

Number of securities
to be issued upon
exercise of outstanding options,
warrants, and rights

Weighted-average
exercise price of
outstanding options,
warrants, and rights

Number of securities
remaining available for
future issuances under
equity compensation
plans (excluding
securities reflected in column (a))Equity compensation plans approved by stockholders


1,681,314
(1)
$
10.69


3,563,235
(2)Total


1,681,314

$
10.69


3,563,235


---

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference from the discussion under the headings "Certain Transactions
and Business Relationships" and "Corporate Governance" in our 2010 Proxy Statement.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference from the discussion under the heading "Ratification of
Appointment of Independent Registered Public Accounting Firm" in our 2010 Proxy Statement.

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



The financial statements listed on the Index to Financial Statements (page 57) are filed as part of this Annual Report.



These schedules have been omitted because the required information is included in the consolidated financial statements or notes
thereto or because they are not applicable or not required.



The exhibits listed on the Index to Exhibits (pages 107 through 113) are filed as part of this Annual Report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 12th day of March, 2010.

BROADWIND ENERGY, INC.By:

/s/ J. CAMERON DRECOLL J. CAMERON DRECOLL Chief Executive Officer
(Principal Executive Officer)


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

SIGNATURE

TITLE

DATE/s/ J. CAMERON DRECOLL J. Cameron Drecoll

Chief Executive Officer and Director
(Principal Executive Officer)

March 12, 2010/s/ STEPHANIE K. KUSHNER Stephanie K. Kushner

Chief Financial Officer
(Principal Financial Officer)

March 12, 2010/s/ KEVIN E. JOHNSON Kevin E. Johnson

Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)

March 12, 2010/s/ JAMES M. LINDSTROM James M. Lindstrom

Director and Chairman of the Board

March 12, 2010/s/ DAVID P. REILAND David P. Reiland

Director

March 12, 2010/s/ TERENCE P. FOX Terence P. Fox

Director

March 12, 2010/s/ CHARLES H. BEYNON Charles H. Beynon

Director

March 12, 2010/s/ WILLIAM T. FEJES, JR. William T. Fejes, Jr.

Director

March 12, 2010


56

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Table of Contents

INDEX TO FINANCIAL STATEMENTS



PageReport of Independent Registered Public Accounting Firm

58Consolidated Balance Sheets as of December 31, 2009 and 2008

59Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008, and 2007

60Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2009,
2008, and 2007

61Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008, and
2007

62Notes to Consolidated Financial Statements

63


57

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Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and
Stockholders of Broadwind Energy, Inc.

We
have audited the accompanying consolidated balance sheets of Broadwind Energy, Inc. (a Delaware corporation) as of December 31, 2009 and 2008, and the related
consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2009. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Broadwind Energy, Inc. as
of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009 in conformity with
accounting principles generally accepted in the United States of America.

We
also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Broadwind Energy, Inc.'s internal control over financial
reporting as of December 31, 2009, based on criteria established inInternal ControlIntegrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 12, 2010 expressed an adverse opinion on the Company's internal control over financial reporting.

/s/
GRANT THORNTON LLP

Milwaukee,
Wisconsin
March 12, 2010

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

As of December 31,2009

2008ASSETSCURRENT ASSETS:Cash and cash equivalents

$
4,829

$
15,253Restricted cash


2,010


500Accounts receivable, net


21,920


36,709Inventories, net


9,039


41,895Prepaid expenses and other current assets


5,688


3,862Total current assets


43,486


98,219Property and equipment, net


136,249


144,707Goodwill


9,715


30,954Intangible assets, net


37,248


105,593Other assets


3,338


275TOTAL ASSETS

$
230,036

$
379,748LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES:Lines of credit and notes payable

$
10,717

$
3,340Current maturities of long-term debt


9,021


9,711Current portions of capital lease obligations


1,130


978Accounts payable


14,710


40,225Accrued liabilities


6,965


10,386Customer deposits


10,199


21,102Total current liabilities


52,742


85,742LONG-TERM LIABILITIES:Long-term debt, net of current maturities


15,778


25,792Long-term capital lease obligations, net of current portions


3,286


3,521Interest rate swap agreements


253


582Deferred income tax liabilities


403


1,497Other


1,979


458Total long-term liabilities


21,699


31,850COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' EQUITY:Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding





Common stock, $0.001 par value; 150,000,000 shares authorized; 96,701,127 and 96,470,415 shares issued and outstanding as of December 31, 2009 and 2008,
respectively


97


96Additional paid-in capital


300,779


297,222Accumulated deficit


(145,281
)

(35,162
)Total stockholders' equity


155,595


262,156TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
230,036

$
379,748


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

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

For the Years Ended December 31,2009

2008

2007Revenues

$
197,830

$
217,321

$
29,804Cost of sales


186,027


183,951


25,865Gross profit


11,803


33,370


3,939OPERATING EXPENSES:Selling, general and administrative


34,825


41,545


5,724Goodwill and intangible impairment


82,211


2,409


Intangible amortization


10,404


11,159


1,750Total operating expenses


127,440


55,113


7,474Operating loss


(115,637
)

(21,743
)

(3,535
)OTHER (EXPENSE) INCOME, net:Interest expense, net


(2,525
)

(2,276
)

(839
)Other, net


6,454


(204
)

(27
)Total other income (expense), net


3,929


(2,480
)

(866
)Net loss before (benefit) provision for income taxes


(111,708
)

(24,223
)

(4,401
)(BENEFIT) PROVISION FOR INCOME TAXES


(1,589
)

1,062


(1,039
)NET LOSS

$
(110,119
)
$
(25,285
)
$
(3,362
)NET LOSS PER COMMON SHAREBasic and diluted

$
(1.14
)
$
(0.28
)
$
(0.07
)WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBasic and diluted


96,574


89,899


51,535


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

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share data)

Common StockInterest in
Variable
Interest
EntityShares
Issued and
Outstanding

Issued
Amount

Additional
Paid-in
Capital

Accumulated
Deficit

TotalBALANCE, December31, 2006


35,235,500

$
35

$
1,261

$
(6,610
)
$


$
(5,314
)Stock issued for private placement to accredited investors, net of costs of $1,209


22,766,667


22


64,169








64,191Stock issued for satisfaction of third-party debt


1,500,000


2


2,248








2,250Stock issued for satisfaction of related-party debt


722,295


1


1,083








1,084Stock issued for acquisition of Brad Foote Gear Works, Inc


16,036,450


16


64,130








64,146Share-based compensation








142








142Capital contributions














1,399


1,399Net loss











(3,267
)

(95
)

(3,362
)BALANCE, December31, 2007


76,260,912


76


133,033


(9,877
)

1,304


124,536Stock issued for restricted stock


7,500














Stock issued for the acquisition of Energy Maintenance Service, LLC


1,629,834


2


13,819








13,821Stock issued for the acquisition of Badger Transport, Inc


581,959


1


5,999








6,000Stock issued for the conversion of related-party notes


3,333,332


3


24,997








25,000Stock issued in private equity placements, net of costs of $336


14,656,878


14


117,375








117,389Share-based compensation








1,999








1,999Reclassification of variable interest entity














(1,304
)

(1,304
)Net loss











(25,285
)




(25,285
)BALANCE, December31, 2008


96,470,415

$
96

$
297,222

$
(35,162
)
$


$
262,156Stock issued under stock option plans


91,940





675








675Stock issued for restricted stock


129,715


1











1Stock issued under defined contribution 401(k) retirement savings plan


9,057





76








76Share-based compensation








2,806








2,806Net loss











(110,119
)




(110,119
)BALANCE, December31, 2009


96,701,127

$
97

$
300,779

$
(145,281
)
$


$
155,595


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

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Years Ended December 31,2009

2008

2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(110,119
)
$
(25,285
)
$
(3,362
)Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization expense


25,725


21,866


3,523Goodwill and intangible impairment


82,211


2,409


Change in fair value of interest rate swap agreements


(330
)

194


153Deferred income taxes


(1,094
)

506


139Stock-based compensation


1,870


1,785


142Allowance for doubtful accounts


137


(1,703
)

175(Gain) loss on disposal of assets


162


113


2Changes in operating assets and liabilities:Accounts receivable


14,652


(16,355
)

(4,963
)Inventories


32,856


(28,419
)

715Prepaid expenses and other current assets


(508
)

(1,323
)

453Accounts payable


(25,014
)

21,586


2,266Accrued liabilities


(6,090
)

2,656


(259
)Customer deposits


(10,627
)

19,674


1,029Other non-current assets and liabilities


(1,844
)

(63
)

508Net cash provided by (used in) operating activities


1,987


(2,359
)

521CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for acquisitions, net of cash received





(23,016
)

(76,474
)Purchases of property and equipment


(11,836
)

(83,720
)

(5,854
)Proceeds from disposals of property and equipment


826


40


Increase in restricted cash


(1,510
)




(500
)Net cash used in investing activities


(12,520
)

(106,696
)

(82,828
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of stock


751


117,389


65,400Payments on lines of credit and notes payable


(13,324
)

(6,337
)

(6,292
)Payments on related party notes payable





(1,365
)

Proceeds from lines of credit and notes payable


8,480


9,315


29,042Proceeds from capital and sale-leaseback transactions


3,686





Proceeds from deposits on equipment


665





Principal payments on capital leases


(1,085
)

(690
)

(186
)Issuance of restricted stock grants


936


214


Net cash provided by financing activities


109


118,526


87,964NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(10,424
)

9,471


5,657CASH AND CASH EQUIVALENTS, beginning of the year


15,253


5,782


125CASH AND CASH EQUIVALENTS, end of the year

$
4,829

$
15,253

$
5,782Supplemental cash flow information:Interest paid, net of capitalized interest

$
2,200

$
2,969

$
783Income taxes paid

$
585

$
65

$
Non-cash investing and financing activities:Common stock issued for acquisitions

$


$
19,821

$
64,146Conversion of related party notes payable to equity

$


$
25,000

$
2,758Issuance of restricted stock grants

$
936

$
214

$



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

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BROADWIND ENERGY, INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        December 31, 2009, 2008, and 2007        (in
thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Broadwind Energy, Inc. (the "Company") is an independent, horizontally integrated supplier of customized products and services to the
U.S. wind industry. Our product and service portfolio provides our customers, including wind turbine manufacturers, wind farm developers and wind farm operators, with access to a broad array of wind
component and service offerings. The Company is also a manufacturer of gearing systems and wind towers for the wind industry. The Company also provides technical service and precision repair and
engineering and specialized logistics to the wind industry in the United States.

The
Company has a limited history of operations and has incurred operating losses since inception. The Company anticipates that current cash resources and cash to be generated from
operations in 2010 will be adequate to meet the Company's liquidity needs for at least the next twelve months. As discussed further in Note 10, "Debt and Credit Agreements" of these
consolidated financial statements, the Company repaid outstanding indebtedness in the amount of $16,076 and $3,066 to Bank of America and Investors Community Bank, respectively, in January 2010. The
repayment of the indebtedness due to Bank of America and Investors Community Bank released the Company from the related financial covenants and debt service requirements and improved the Company's
liquidity position. However, if sales and subsequent collections from several of the Company's large customers, as well as revenues generated from new customer orders, are not materially consistent
with management's plans, the Company may encounter cash flow and liquidity issues. Additional funding may not be available when needed or on terms acceptable to the Company. Furthermore, if the
Company is unable to obtain additional capital, the Company will likely be required to delay, reduce the scope of or eliminate our plans for expansion and growth, and this could affect our overall
operations. Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, will likely require financial covenants or other restrictions
on the Company.

As
of December 31, 2009, the Company had four subsidiaries which consisted of Brad Foote Gear Works, Inc. ("Brad Foote"), Tower Tech Systems Inc. ("Tower Tech"),
Energy Maintenance Service, LLC ("EMS") and Badger Transport, Inc. ("Badger"). In December 2009, the Company merged the operations of its R.B.A., Inc. ("RBA") subsidiary into
Tower Tech.

In
December 2009, the Company revised its reporting segment presentation into four reportable operating segments: Towers, Gearing, Technical and Engineering Services, and Logistics.
Accordingly, all current and prior period financial results have been revised to reflect these changes. See Note 19 "Segment Reporting" of these consolidated financial statements for further
discussion of our reportable segments.

Towers

The Company manufactures wind towers, specifically the large and heavier wind towers that are designed for 2 megawatt ("MW") and larger
wind turbines. Our production facilities are strategically located in close proximity to the primary U.S. wind resource regions, sited in Wisconsin and Texas, with a recently constructed third wind
tower manufacturing facility in Brandon, South Dakota, which will

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

become
operational as business warrants and pending the installation of certain additional equipment. The Company also manufactures other specialty weldments and structures for industrial customers.

Gearing

The Company manufactures precision gearing systems for the wind industry in North America and products for industrial markets including
mining and oilfield equipment, with plants in Illinois and Pennsylvania. The Company uses an integrated manufacturing process, which includes our machining process in Cicero, Illinois, our heat
treatment process in Neville Island, Pennsylvania and our finishing process in our Cicero factory.

Technical and Engineering Services

The Company is an independent service provider of construction support and operations and maintenance services to the wind industry.
Our specialty services include oil change-out, up-tower tooling for gearing systems, drive-train and blade repairs and component replacement. Our construction support
capabilities include assembly of towers, nacelles, blades and other components. The Company also provides customer support, preventive maintenance and wind technician training. Our technicians utilize
our regional service centers for storage and repair of parts as well as for training. Through our precision repair and engineering services, the Company repairs and refurbishes complex wind
components, including control systems, gearboxes and blades. The Company also conducts warranty inspections, commissions turbines and provides technical assistance. Additionally, the Company builds
replacement control panels for kilowatt ("kW") class wind turbines and repair both kW and MW blades. Our service locations are in Illinois, California, South Dakota, Texas and Colorado.

Logistics

The Company offers specialized transportation, permitting and logistics management to the wind industry for oversize and overweight
machinery and equipment. The Company delivers complete turbines to the installation site, including blades, nacelles and tower sections for final erection. The Company focuses on the project
management of the delivery of complete wind turbine farms.

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

These consolidated financial statements include the accounts of Broadwind and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation. The results of operations of all acquired businesses have been consolidated for all periods subsequent to the date of
acquisition.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications

Where appropriate, certain reclassifications have been made to prior years' financial statements to conform to the current year
presentation.

Management's Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements
and reported amounts of revenues and expenses during the reported period. Significant estimates, among others, include revenue recognition, future tax rates, inventory reserves, warranty reserves,
stock option fair value, allowance for doubtful accounts, and allocation of purchase price to the fair value of net assets and liabilities acquired in connection with business combinations. Although
these estimates are based upon management's best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of cash balances and money market funds. Cash and cash equivalents were $4,829 and $15,253
as of December 31, 2009 and 2008, respectively. The Company's policy is to invest excess cash in money market account funds, which are generally of a short-term duration based upon
operating requirements. Income earned on these investments is recorded to interest income in our consolidated statements of operations. For the years ended December 31, 2009, 2008 and 2007,
interest income was $123, $584 and $400, respectively. Additionally, the Company is currently evaluating its risk management policies in terms of the potential impact of any significant credit risk
associated with cash deposits at various financial institutions which are in excess of federally insured amounts.

Restricted Cash

Restricted cash consists of cash down payments pertaining to certain contracts under which the use of such cash is restricted as per
the terms of the agreement. As of December 31, 2009 and 2008, the Company had restricted cash in the amounts of $2,010 and $500, respectively.

Revenue Recognition

The Company recognizes revenue when the earnings process is complete and when persuasive evidence of an arrangement exists, transfer of
title has occurred or services have been rendered, the selling price is fixed or determinable, collectability is reasonably assured, and delivery has occurred per the terms of the contract. Customer
deposits, deferred revenue, and other receipts are deferred and recognized when the revenue is realized and earned.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In
some instances, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition. Assuming the required revenue
recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.

Cost of Sales

Cost of sales represents all direct and indirect costs associated with the production of products for sale to customers. These costs
include operation, repair and maintenance of our equipment, direct and indirect labor and benefit costs, insurance, equipment rentals, freight in, and depreciation. Freight out to customers is
classified as a selling expense and is excluded from cost of sales. For the years ended December 31, 2009, 2008 and 2007, freight out was $11, $235 and $65, respectively.

Accounts Receivable

The Company generally grants uncollateralized credit to customers on an individual basis based upon the customer's financial condition
and credit history. Credit is typically on net 30-day terms and customer deposits are frequently required at various stages of the production process to minimize credit risk.

Historically,
our corresponding accounts receivable are highly concentrated with a select number of customers. During the years ended December 31, 2009, 2008 and 2007, sales to
three or fewer customers accounted for approximately 50%, 72% and 70%, respectively, of consolidated revenues. In addition, as of December 31, 2009 and 2008, three or fewer customers comprised
approximately 21% and 61%, respectively, of our total outstanding accounts receivable balances.

Allowance for Doubtful Accounts

Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to accounts
receivable. Our standard allowance estimation methodology considers a number of factors that, based on our collections experience, the Company believes will have an impact on our credit risk and the
realizability of our accounts receivable. These factors include individual customer circumstances, history with the Company, and other relevant criteria.

The
Company monitors our collections and write-off experience to assess whether or not adjustments to our allowance percentage estimates are necessary. Changes in trends in
any of the factors that the Company believes may impact the realizability of our accounts receivable, as noted above, or modifications to our credit standards, collection practices and other related
policies may impact our allowance for doubtful accounts and our financial results. Bad debt expense for the years ended December 31, 2009, 2008 and 2007 was $1,544, $1,196 and $2,983,
respectively.

Inventories

Inventories are stated at the lower of cost or market. Any excess of cost over market value is included in the Company's inventory
allowance. Market value of inventory, and management's

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

judgment
of the need for reserves, encompasses consideration of other business factors including physical condition, inventory holding period, contract terms and usefulness. Inventories are valued
based on an average cost method that approximates the first-in, first-out (FIFO) basis.

Inventories
consist of raw materials, work-in-process and finished goods. Raw materials consist of components and parts for general production use.
Work-in-process consists of labor and overhead, processing costs, purchased subcomponents and materials purchased for specific customer orders. Finished goods consist of
components purchased from third parties as well as components manufactured by the Company that will be used to produce final customer products.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is recognized using the straight-line
method over the estimated useful lives of the related assets for financial reporting purposes and an accelerated method for income tax reporting purposes. Expenditures for additions and improvements
are capitalized, while replacements, maintenance and repairs that do not improve or extend the useful lives of the respective assets are expensed as incurred. The Company capitalizes interest costs
incurred on indebtedness used to construct property, plant and equipment. Capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful
life. Interest cost capitalized was $465, $230 and $18 for the years ended December 31, 2009, 2008 and 2007, respectively. Property or equipment sold or disposed of is removed from the
respective property accounts, with any corresponding gains and losses recorded to other income or expense in our consolidated statement of operations.

Goodwill and Intangible Assets

Goodwill and intangible assets are reviewed for impairment on at least an annual basis by applying a fair value based test. In
evaluating the recoverability of the carrying value of goodwill and other intangible assets, the Company must make assumptions regarding the fair values of our reporting units. Our estimate of the
fair value of each of our reporting units is based primarily on projected future operating results and cash flows and other assumptions. The failure of a reporting unit to achieve projected future
operating results and cash flows, or adjustments to other valuation assumptions, could change our estimate of reporting unit fair value, in which case the Company may be required to record an
impairment charge related to goodwill and other intangible assets.

Warranty Liability

The Company provides warranty terms that range from two to seven years for various products relating to workmanship and materials
supplied by the Company. From time to
time, customers may submit warranty claims against the Company. In certain contracts, the Company has recourse provisions for items that would enable recovery from third parties for amounts paid to
customers under warranty provisions. As of December 31, 2009 and 2008, our estimated product warranty liability was $918 and $890, respectively, and is recorded within accrued liabilities in
our consolidated balance sheets.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
changes in the carrying amount of the Company's total product warranty liability for the years ended December 31, 2009 and 2008 were as follows:

As of December 31,2009

2008Balance, beginning of year

$
890

$
242Warranty expense


591


648Warranty claims


(563
)

Balance, end of year

$
918

$
890


Income Taxes

The Company accounts for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the
future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax
assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax
rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.

In
connection with the preparation of our consolidated financial statements, the Company is required to estimate our income tax liability for each of the tax jurisdictions in which the
Company operates. This process involves estimating our actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for
income tax reporting and financial reporting purposes. The Company also recognizes as deferred income tax assets the expected future income tax benefits of net operating loss carryforwards. In
evaluating the realizability of deferred income tax assets associated with net operating loss carryforwards, the Company considers, among other things, expected future taxable income, the expected
timing of the
reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Changes
in, among other things, income tax legislation, statutory income tax rates, or future taxable income levels could materially impact our valuation of income tax assets and liabilities and could cause
our income tax provision to vary significantly among financial reporting periods.

The
Company also accounts for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. The
Company follows the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition related to the uncertainty in
these income tax positions.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest Rate Swap Agreements

The Company periodically uses derivative financial instruments in the form of interest rate swaps to minimize the effect of interest
rate fluctuations on certain of our outstanding debt agreements. Our derivative financial instruments are recognized on our consolidated balance sheet at fair value. These derivatives do not qualify
for hedge accounting treatment and, accordingly, all gains or losses on the change in the fair value of these derivative financial instruments are reported in our consolidated statements of
operations.

Share-Based Compensation

The Company grants incentive stock options and restricted stock units to certain officers, directors, employees and consultants. The
Company accounts for share-based compensation related to these awards based on the estimated fair value of the equity award and recognize expense ratably over the vesting term of the award. See
Note 18 "Share-Based Compensation" of these consolidated financial statements for further discussion of our share-based compensation plans, the nature of share-based awards issued and our
accounting for share-based compensation.

Net Income (Loss) Per Share

The Company presents both basic and diluted net income (loss) per share. Basic net income (loss) per share is based solely upon the
weighted average number of common shares outstanding and excludes any dilutive effects of options, warrants and convertible securities. Diluted net income (loss) per share is based upon the weighted
average number of common shares and common-share equivalents outstanding during the year excluding those common-share equivalents where the impact to basic net income (loss) per share would be
anti-dilutive.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

2. EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings per share for the years ended December 31, 2009, 2008 and 2007 as follows:

For the Years Ended December 31,2009

2008

2007Basic earnings per share calculation:Net loss to common stockholders

$
(110,119
)
$
(25,285
)
$
(3,362
)Weighted average of common shares outstanding


96,574


89,899


51,535Basic net loss per share

$
(1.14
)
$
(0.28
)
$
(0.07
)Diluted earnings per share calculation:Net loss to common stockholders

$
(110,119
)
$
(25,285
)
$
(3,362
)Weighted average of common shares outstanding


96,574


89,899


51,535Common stock equivalents:Stock options and non-vested stock awards(1)








Convertible promissory note(2)








Weighted average of common shares outstanding


96,574


89,899


51,535Diluted net loss per share

$
(1.14
)
$
(0.28
)
$
(0.07
)


(1)Stock
options and restricted stock units granted and outstanding of 1,681,314; 2,157,500; and 965,000 as of December 31, 2009, 2008 and 2007,
respectively, are excluded from the computation of diluted earnings due to the anti-dilutive effect as a result of the Company's net loss for these respective years.(2)Common
stock equivalents of 685,000 with respect to the conversion feature of the senior subordinated convertible promissory notes outstanding as of
December 31, 2007 were excluded from the computation of diluted earnings due to the anti-dilutive effect as a result of the Company's net loss for the year ended December 31,
2007. The convertible promissory notes were converted into shares of the Company's common stock on April 4, 2008. See Note 16 "Stockholders' Equity" of these consolidated financial
statements for further discussion regarding this and other equity related transactions.


3. BUSINESS ACQUISITIONS

2008 Acquisitions

Energy Maintenance Service, LLC

On January 16, 2008, the Company acquired all of the outstanding membership interests in EMS, a South Dakota based company
engaged in construction support, engineering and maintenance services for the wind energy industry. The aggregate purchase price was $32,250, excluding $536 of transaction related costs. The purchase
price consisted of $18,429 of cash and 1,629,834 unregistered shares of the Company's common stock at a price per share of $8.48. The Company entered into a registration rights agreement with the
former owners of EMS which provides the former owners with demand and piggyback registration rights. The cash portion of the purchase price was financed by a private placement of the Company's common
stock. See Note 16 "Stockholders' Equity" of these consolidated financial statements for further discussion.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

3. BUSINESS ACQUISITIONS (Continued)

The
following table summarizes the estimated fair values of the EMS assets acquired and liabilities assumed on the date of the acquisition:

Current assets

$
4,712Property and equipment


1,549Intangibletrade name


1,790Intangiblecustomer relationships


24,700Goodwill


4,561Total assets acquired


37,312Current liabilities


(3,545
)Long term liabilities


(981
)Total purchase consideration

$
32,786


Goodwill of $4,561 and other intangibles of $26,490 are expected to be deductible for income tax purposes over 15 years. The Company does not have any contingent payments or commitments in
relation to the acquisition of EMS, with the exception of certain stock options that were awarded as a result of the acquisition.

Badger Transport, Inc.

On June 4, 2008, the Company acquired all of the outstanding shares of Badger, a Wisconsin based provider of transportation
services for oversized/overweight equipment and machinery, primarily to the wind industry, for an aggregate purchase price of $11,811, excluding $184 of transaction related acquisition costs. The
purchase price consisted of $5,811 of cash and 581,959 unregistered shares of Broadwind common stock at a price per share of $10.31. The Company entered into a registration rights agreement with the
former owner of Badger that provides the former owner with limited piggyback registration rights. The Company financed the cash portion of the acquisition with cash on hand.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

3. BUSINESS ACQUISITIONS (Continued)

The
following table summarizes the estimated fair values of the Badger assets acquired and liabilities assumed on the date of the acquisition:

Current assets

$
1,496Property and equipment


5,232Intangibletrade name


370Intangiblecustomer relationships


4,380Intangiblenon-compete agreement


1,490Goodwill


5,154Total assets acquired


18,122Current liabilities


(2,178
)Capital lease obligations


(1,052
)Long term debt


(2,544
)Deferred tax liability


(353
)Total purchase consideration

$
11,995


Goodwill
and intangible assets associated with the purchase of Badger are not expected to be deductible for income tax purposes. In connection with the Badger acquisition, the Company
was required to and completed funding of approximately $4,400 of equipment purchases that Badger had on order for expansion. The Company has funded $4,384 of this commitment which is complete.

Pro Forma Financial Information

The following table represents the consolidated financial information for the Company on a pro forma basis, assuming that the
acquisitions of Brad Foote, EMS and Badger had occurred as of January 1, 2007. The Company is excluding the pro forma results of the RBA acquisition because the impact of this acquisition is
not material to our consolidated results of operations for the year ended December 31, 2007. The historical financial information has been adjusted to give effect to pro forma items that are
directly attributable to the acquisition and expected to have a continuing impact on the consolidated results. These items include, among others, adjustments to increase depreciation related to the
stepped-up basis in machinery and equipment, adjust inventory to fair market value, record amortization of intangible assets, increase interest expense for certain long-term
notes payable, and reclassify certain items to conform to the Company's financial reporting presentation. Additionally, the following table sets forth unaudited financial information and has been
compiled from historical financial statements and other information, but is not necessarily indicative of the results that actually

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

3. BUSINESS ACQUISITIONS (Continued)

would
have been achieved had the transactions occurred on the dates indicated or that may be achieved in the future.

For the Year Ended December 31,2008

2007As
reported

Pro-forma
adjustments
(Unaudited)

Pro-forma
(Unaudited)

As
reported

Pro-forma
adjustments
(Unaudited)

Pro-forma
(Unaudited)Revenues

$
217,321

$
5,710

$
223,031

$
29,804

$
95,565

$
125,369Net loss


(25,285
)

(1,826
)

(27,111
)

(3,362
)

(6,501
)

(9,863
)Loss per shareBasic and diluted

($
0.28
)
($
0.02
)
($
0.30
)
($
0.07
)
($
0.12
)
($
0.19
)


4. RECENT ACCOUNTING PRONOUNCEMENTS

Fair Value Measurements

In January 2009, the Company adopted the guidance related to fair value measurements pertaining to non-financial assets and
liabilities on a prospective basis. This guidance establishes the authoritative definition of fair value sets out a framework for measuring fair value and expands the required disclosures about fair
value measurements.

The
majority of the Company's non-financial assets, which include goodwill, intangible assets and property and equipment, are not required to be carried at fair value on a
recurring basis. However, if certain triggering events occur (or at least annually for goodwill) such that a non-financial asset is required to be evaluated for impairment, a resulting
asset impairment would require that the non-financial asset be recorded at the lower of historical cost or fair value. The adoption of this standard did not have a material impact on our
financial position, results of operations, or cash flows.

Business Combinations

In January 2009, the Company adopted the guidance related to the accounting for business combinations and applying such provisions
prospectively to business combinations that will have an acquisition date on or after January 1, 2009. This guidance establishes principles and requirements for how an acquirer in a business
combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree,
(ii) recognizes and measures goodwill acquired in a business combination or a gain from a bargain purchase and (iii) determines what information to disclose to enable users of financial
statements to evaluate the nature and financial effects of the business combination. In addition, changes in accounting for deferred tax asset valuation allowances and acquired income tax
uncertainties after purchase accounting is completed will be recognized in earnings rather than as an adjustment to the cost of an acquisition. This accounting treatment for deferred tax asset
valuation allowances and acquired income tax uncertainties is applicable to acquisitions that occurred both prior and subsequent to the adoption of this guidance. The adoption of this standard did not
have any impact on our financial position, results of operations, or cash flows.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

4. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Derivative Instruments and Hedging Activities

In January 2009, the Company adopted the guidance related to disclosure about derivative instruments and hedging activities. This
guidance is intended to enhance required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments;
(b) derivative instruments and related hedged items; and (c) derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows.
The adoption of this standard did not have a material impact on our financial position, results of operations, or cash flows.

Subsequent Events

In June 2009, the Company adopted the guidance related to the accounting for subsequent events. This guidance establishes the
accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are issued. This guidance requires that subsequent events be evaluated through the date that the financial statements are
issued. The adoption of this standard did not have a material impact on our financial position, results of operations, or cash flows.

Accounting Standards Codification

The Financial Accounting Standards Board (the "FASB") implemented the FASB Accounting Standards Codification (the "Codification")
effective July 1, 2009. The Codification became the source of authoritative GAAP recognized by FASB to be applied to nongovernmental entities. Rules and interpretive releases of the Securities
and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of the Codification, the Codification
superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the
Codification became non-authoritative. Following the effective date of the Codification, FASB will not release new standards in the form of Statements, FASB Staff Positions or Emerging
Issues Task Force abstracts, but instead will issue Accounting Standards Updates ("ASU's"). ASU's are not considered authoritative in their own right, but serve only to update the Codification,
provide background information about the guidance and provide the basis for conclusions on the changes in the Codification. The ASU's issued by FASB that are applicable to the Company are as follows:

In
October 2009, FASB issued ASU 2009-13Revenue Recognition (Topic 605). ASU 2009-05 provides accounting and
financial reporting disclosure amendments for multiple-deliverable revenue arrangements. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010. The adoption of this ASU is not anticipated to have a material impact on the Company's financial position or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

5. ALLOWANCE FOR DOUBTFUL ACCOUNTS

The activity in the accounts receivable allowance for the years ended December 31, 2009 and 2008 consists of the following:

For the Years Ended December 31,2009

2008Balance at beginning of year

$
1,504

$
2,983Bad debt expense


1,544


1,196Write-offs


(613
)

(2,899
)Other(1)


(794
)

224Balance at end of year

$
1,641

$
1,504


(1)"Other"
for the year ended December 31, 2008 represents opening balance sheet allowances for doubtful accounts as part of the acquisitions of EMS and
Badger in January 2008 and June 2008, respectively.


6. INVENTORIES

Inventories are stated at the lower of cost or market value and primarily consist of raw material, work-in-process, and finished goods.
Work-in-process consists of labor and overhead, processing costs, purchased subcomponents and materials purchased for specific customer orders. Finished goods consist of
components purchased from third parties as well as components manufactured by the Company that will be used to produce final customer products.

The
components of inventories as of December 31, 2009 and 2008 are summarized as follows:

As of December 31,2009

2008Raw materials

$
4,957

$
16,429Restricted raw material(1)





9,936Work-in-process


2,921


16,226Finished goods


3,338


40111,216


42,992Less: Reserve for excess and obsolete inventory


(2,177
)

(1,097
)Net inventories

$
9,039

$
41,895


(1)In
December, 2008, Tower Tech entered into an agreement pursuant to which it agreed to convey to a customer ownership of certain raw materials (the
"Bailment Materials") that Tower Tech had acquired for use in constructing wind turbine towers for such customer, in exchange for the release of a down payment of $9,936 paid by the customer pursuant
to the terms of a purchase order. In connection with the transaction, the customer caused the release/cancellation of a letter of credit securing the down-payment (the "L/C") in


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

6. INVENTORIES (Continued)

order
for the cash being held by the L/C issuer as security for the L/C to be released to Tower Tech. The customer also granted Tower Tech a security interest in a portion of the Bailment Materials in
the event the purchase order is not fully performed by the customer for any reason other than the breach or default of Tower Tech. Tower Tech issued a new performance letter of credit in the amount of
$500 as a guarantee of complete performance by Tower Tech of its obligations under the purchase order. The Bailment Materials were held by Tower Tech as a bailment for the sole and exclusive benefit
and use of the customer, and were intended to be used by Tower Tech for construction of the wind turbine towers for such customer under the purchase order. As a result of this transaction, $9,436 was
released from restricted cash and made available for other purposes. In December 2009, Tower Tech completed construction of the final wind turbine tower as part of the bailment agreement and was
subsequently released from the performance letter of credit in the amount of $500.


7. PROPERTY AND EQUIPMENT

The cost basis and estimated lives of property and equipment as of December 31, 2009 and 2008 are as follows:

As of December 31,2009

2008

LifeLand

$
4,018

$
2,556Buildings


23,501


6,456

39 yearsMachinery and equipment


105,070


94,019

5-10 yearsOffice furniture and equipment


2,518


1,641

3-20 yearsLeasehold improvements


2,613


2,052

Asset life or life of leaseConstruction in progress


26,510


51,004164,230


157,728Less-accumulated depreciation


(27,981
)

(13,021
)$
136,249

$
144,707


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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

8. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying value of goodwill during the years ended December 31, 2009 and 2008 are as follows:

Towers

Gearing

Technical and
Engineering
Services

Logistics

TotalGoodwill balance as of December 31, 2007

$
2,409

$
25,202

$


$


$
27,611Purchase accounting adjustments





(3,963
)







(3,963
)Goodwill related to acquisitions








4,561


5,154


9,715Impairment charge


(2,409
)










(2,409
)Goodwill balance as of December 31, 2008





21,239


4,561


5,154


30,954Purchase accounting adjustments





3,030








3,030Impairment charge





(24,269
)







(24,269
)Goodwill balance as of December 31, 2009

$


$


$
4,561

$
5,154

$
9,715


The
increase in goodwill during 2008 in our Technical and Engineering Services and Logistics segments is related to the acquisition of EMS in January 2008 and Badger in June 2008.
Purchase accounting adjustments of $3,963 were recorded in our Gearing segment during 2008 which related to adjustments to the fair value of certain machinery and equipment, recording additional
acquisition related costs and purchase price adjustments incurred as a result of our acquisition of Brad Foote in October 2007. Additionally, the Company recorded an impairment charge of $2,409 in our
Towers segment as a result of the annual impairment performed in October 2008. The impairment test indicated that the goodwill attributable to one of the operating business units within the Towers
segment was impaired as a result of a projected decline in the discounted cash flows associated with this operating business.

The
increase in goodwill in 2009 in the Gearing segment relates to purchase accounting adjustments of $3,030 recorded in connection with an escrow settlement agreement with the former
owners of Brad Foote in May 2009.

The
Company reviews goodwill balances for impairment on at least an annual basis through the application of a fair-value-based test. The Company reviews goodwill based on the
carrying value of these assets as of October 31of each year and the estimate of fair-value for each of our operating segments is based primarily on projected future results, cash
flows and other assumptions. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, the Company
determines the fair value of our reporting units using a combination of an income approach by preparing a discounted cash flow analysis and a market-based approach based on our market capitalization.
If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the
carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares
the implied fair value of the reporting unit's goodwill with its carrying amount to measure the amount of impairment loss, if any. The implied fair value of goodwill

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

8. GOODWILL AND INTANGIBLE ASSETS (Continued)

is
determined in the same manner as the amount of goodwill recognized in a business combination. As a result, the estimated fair value of the reporting unit is allocated to all of the assets and
liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase
price paid. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The
Company did not identify a triggering event during 2009 which would indicate an early assessment of goodwill impairment, however, upon the completion of our impairment analysis in
March 2010, the Company determined that the goodwill balance attributable to our Gearing segment was impaired due to a deterioration in financial performance during 2009 and as a result of the
subsequent revision in our projection of future operating results and cash flows in light of the effect of the continued economic downturn on the wind gearing industry. Accordingly, our analysis
indicated that projected fair value of the Gearing segment assets did not exceed the carrying value of these net assets. Our method in determining the fair value was based upon our estimate of the
projected future discounted cash flows of our reporting units. As a result, the Company recorded a goodwill impairment charge of $24,269 during the fourth quarter and the impairment charge was
recorded to operating expenses in our consolidated statement of operations for the year ended December 31, 2009.

As
of December 31, 2009 and 2008, the cost basis, accumulated amortization and net book value of intangible assets were as follows:

December 31, 2009

December 31, 2008Cost

Accumulated Amortization

Impairment Charge

Net Book Value

Weighted Average Amortization Period

Cost

Accumulated Amortization

Net Book Value

Weighted Average Amortization PeriodIntangible assets:Customer relationships

$
106,638

$
(21,332
)
$
(57,835
)
$
27,471


10.4

$
106,638

$
(11,939
)
$
94,699


10.2Trade names


10,279


(1,099
)

(107
)

9,073


20.0


10,279


(585
)

9,694


20.0Noncompete agreements


1,490


(786
)




704


3.0


1,490


(290
)

1,200


3.0Intangible assets

$
118,407

$
(23,217
)
$
(57,942
)
$
37,248


12.3

$
118,407

$
(12,814
)
$
105,593


11.0


The increase in intangible assets in 2008 is related to the acquisitions of Badger and EMS. See Note 3 "Business Acquisitions" of these
consolidated financial statements for further discussion of these respective acquisitions.

The
Company reviews intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not
be recoverable. Due to the revision in our projections of operating results and cash flows within our Gearing segment during the fourth quarter, the Company deemed this a triggering event, and
subsequently tested our intangible assets for impairment. The completion of our impairment analysis in March 2010 indicated that the customer relationship intangibles associated with our Gearing
segment were impaired during the fourth quarter as a result of a decline in projected future operating results. The decline in our estimates of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

8. GOODWILL AND INTANGIBLE ASSETS (Continued)

future
operating results and corresponding discounted cash flows indicated that the fair value of these customer relationships were less than the carrying value of these assets. Additionally, the
Company determined that the carrying value of our RBA trade name was impaired as a result of the merger of RBA's operations into our Towers segment in December 2009 and that RBA's customer
relationship intangible was impaired due to a revision in projected revenues and cash flows associated with this customer relationship. Accordingly, the Company recorded an intangible impairment
charge of $57,942 to properly reflect the carrying value of these assets. In the future, if our projected discounted cash flows associated with our operating segments do not exceed the carrying value
of their net assets, the
Company may be required to record additional write downs of the carrying value of our intangible assets.

Intangible
assets are amortized on a straight-line basis over their estimated useful lives, which range from 3 to 20 years. Amortization expense was $10,404, $11,159
and $1,750 for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009, estimated future amortization expense is as follows:

2010

$
4,2952011


4,0052012


3,7982013


3,7982014


3,7982015 and thereafter


17,554Total

$
37,248


9. ACCRUED LIABILITIES

Accrued liabilities as of December 31, 2009 and 2008 consisted of the following:

December 31,2009

2008Accrued operating expenditures

$
954

$
1,110Accrued payroll and benefits


2,295


3,631Accrued capital expenditures





2,204Accrued professional fees


1,067


514Accrued warranty liability


918


890Accrued other


1,731


2,037Total accrued liabilities

$
6,965

$
10,386


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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

10. DEBT AND CREDIT AGREEMENTS

The Company's outstanding debt balances as of December 31, 2009 and 2008 consisted of the following:

December 31,2009

2008Lines of credit

$
10,601

$
10,831Term loans and notes payable


22,595


28,012Related party note


2,320


35,516


38,843LessCurrent portion


(19,738
)

(13,051
)Long-term debt, net of current maturities

$
15,778

$
25,792


As
of December 31, 2009, future annual principal payments of our outstanding debt obligations were as follows:

2010(1)

$
28,3372011


1,5842012


4,1242013


1,2972014


174Total

$
35,516


(1)In
January 2010, the Company repaid all outstanding indebtedness to Bank of America, which included approximately $8,600 that was classified as
long-term debt, net of current maturities on our consolidated balance sheets as of December 31, 2009.


Credit Facilities

Brad Foote

In connection with our acquisition of Brad Foote in October 2007, the Company assumed outstanding debt and available lines of credit
totaling approximately $25,500 under various secured debt facilities (the "BOA Debt Facilities") with Bank of America. The BOA Debt Facilities were governed by a Loan and Security Agreement dated as
of January 17, 1997 (as amended and/or restated, the "Loan Agreement"). On August 7, 2009, Brad Foote and Bank of America entered into the Third Omnibus Amendment of the Loan Agreement.
Pursuant to this amendment, Bank of America waived Brad Foote's violation of the financial covenants for the second quarter of 2009 and reset the covenants for the remainder of 2009 and 2010. Bank of
America also waived certain administrative breaches related to record keeping, timely delivery of financial information and other matters. The interest rate was increased to the London Interbank
Offered Rate ("LIBOR") plus 5%, with a 7% floor. On December 22, 2009, Brad Foote and Bank of America further amended the Loan Agreement so that the quarterly debt to EBITDA ratio for the
quarter ended December 31, 2009, the cumulative revenue

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

10. DEBT AND CREDIT AGREEMENTS (Continued)

threshold
for December 2009 and the cumulative EBITDA thresholds for January and February 2010 would no longer apply. As of December 31, 2009, the total principal amount outstanding under the
BOA Debt Facilities was approximately $15,964 and the effective interest was 7%.

On
January 22, 2010, (i) Brad Foote repaid all of the outstanding principal and interest under the BOA Debt Facilities in the aggregate amount of approximately $16,076 from
proceeds of our recently completed public offering of common stock; and (ii) the BOA Debt Facilities were terminated.

Tower Tech

ICB Line and ICB Notes

In October 2007, Tower Tech obtained a secured line of credit (the "ICB Line") from Investors Community Bank in the amount of $2,500,
which was increased to $5,500 on March 21, 2008. The ICB Line is secured by substantially all of the assets of Tower Tech. Draws on the
ICB Line bear interest at a variable rate equal to the greater of (A) 6.0% or (B) 0.50% above prime. Pursuant to a Commercial Debt Modification Agreement dated as of October 22,
2008, Tower Tech and Investors Community Bank extended the maturity date of the ICB Line to April 22, 2009. In connection with the extension, the Company provided re-executed
guaranties to Investors Community Bank for all debt owed by each of Tower Tech and RBA to Investors Community Bank. In addition, Tower Tech re-executed its guaranty for debts owed to
Investors Community Bank by RBA, and RBA re-executed its guaranty for debts owed to Investors Community Bank by Tower Tech. The Company anticipated that each of Tower Tech and RBA would be
in violation of certain financial covenants relating to net worth and debt to net worth ratio as of December 31, 2008. Tower Tech and RBA each received waivers on December 29, 2008 from
Investors Community Bank for the anticipated violations. On March 13, 2009, Investors Community Bank agreed to extend the maturity date of the ICB Line to March 13, 2010 (the "ICB Line
Extension Agreement"). Pursuant to the ICB Line Extension Agreement, Tower Tech agreed to establish new financial covenants with respect to minimum debt service coverage ratio and minimum tangible net
worth. Tower Tech also agreed to maintain its primary deposit accounts with Investors Community Bank and that no additional loans or leases would be entered into by Tower Tech without the prior
approval of Investors Community Bank.

On
April 7, 2008, RBA executed four (4) promissory notes in favor of Investors Community Bank (the "ICB Notes"), in the aggregate principal amount of approximately $3,781,
as follows: (i) a term note in the maximum principal amount of approximately $421, bearing interest at a per annum rate of 6.85%, with a maturity date of October 5, 2012; (ii) a
term note in the maximum principal amount of $700, bearing interest at a per annum rate of 5.65%, with a maturity date of April 25, 2013; (iii) a term note in the maximum principal
amount of $928, bearing interest at a per annum rate of 5.65%, with a maturity date of April 25, 2013; and (iv) a line of credit note in the maximum principal amount of $1,732, bearing
interest at a per annum rate of 4.48% until May 1, 2008 and thereafter at LIBOR plus 1.75%, with a maturity date of April 5, 2009 (the "Line of Credit Note"). The Line of Credit Note was
subsequently modified on March 13, 2009 to extend the maturity date to March 13, 2010 and to change the interest rate to the greater of (A) 5% or (B) prime. The ICB Notes provide for
multiple advances, and were secured by substantially all of the assets of RBA.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

10. DEBT AND CREDIT AGREEMENTS (Continued)

Pursuant
to the merger of RBA into Tower Tech on December 31, 2009, Tower Tech became the successor by merger to RBA's interest in the loans from Investors Community Bank to RBA
evidenced by the ICB Notes (other than the Line of Credit Note, which was repaid in full). In addition, pursuant to a Master Amendment dated as of December 30, 2009 (the "ICB Master Amendment")
among Investors Community Bank, Tower Tech and Broadwind (as guarantor), the amount of the ICB Line was increased to $6,500, subject to borrowing base availability. After giving effect to the merger
of RBA into Tower Tech and the increase in the amount of the ICB Line, as of December 31, 2009: (i) Tower Tech had $1,402 available for additional borrowing under the ICB Line;
(ii) the total amount of outstanding indebtedness under the ICB Line was $5,098 and the effective interest rate thereunder was 6%; and (iii) the total amount of outstanding indebtedness
under the ICB Notes was $1,625.

Pursuant
to the Master Amendment, among other provisions:



net
profit before taxes+depreciation and amortization+interest+impairment of goodwill

principal
payments and interest payments+capital lease obligations



December 31, 2009

$5.5 millionJanuary 31, 2010

$5 millionFebruary 28, 2010

$5 million




On
January 26, 2010, Tower Tech repaid all of the outstanding indebtedness under the ICB Line in the amount of $3,066. The ICB Line is scheduled to expire on March 13,
2010, and Tower Tech does not intend to request an extension of the ICB Line prior to its expiration.

Great Western Construction Loan

On April 28, 2009 (the "Construction Loan Closing Date"), Tower Tech entered into a Construction Loan Agreement with Great
Western Bank ("Great Western"), pursuant to which Great Western agreed to provide up to $10,000 in financing (the "Construction Loan") to fund construction of Tower Tech's wind tower manufacturing
facility in Brandon, South Dakota (the "Facility"). On the Construction Loan Closing Date, Great Western agreed to advance $3,703 under the Construction Loan, representing amounts previously paid by
Tower Tech relating to construction of the Facility.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

10. DEBT AND CREDIT AGREEMENTS (Continued)

Subsequently,
Tower Tech made additional draws under the Construction Loan relating to construction of the Facility. As of December 31, 2009, Tower Tech had received proceeds of approximately
$5,503 under the Construction Loan and had the availability to borrow an additional $4,497.

On
December 22, 2009, Tower Tech and Great Western agreed to extend the maturity date of the Construction Loan to March 5, 2010, and on February 16, 2010, Tower Tech
and Great Western agreed
to further extend the maturity date of the Construction Loan to April 5, 2010. Tower Tech intends to convert the Construction Loan to a term loan on or before that date, pursuant to the
conversion right described below.

The
Construction Loan bears interest at a rate of 7.5% per annum on all advances. Tower Tech is required to make monthly payments of accrued and unpaid interest beginning June 5,
2009 and on the fifth day of each month thereafter, and must pay the outstanding principal and all accrued and unpaid interest on the maturity date, unless the Construction Loan is converted to a term
loan as described below. Tower Tech was also required to pay a $100 origination fee on the Construction Loan Closing Date.

The
Construction Loan is secured by a first mortgage on the Facility and all fixtures, accounts and proceeds relating thereto, pursuant to a Mortgage and a Commercial Security Agreement,
each between Tower Tech and Great Western and entered into on the Construction Loan Closing Date. In addition, pursuant to an Assignment of Deposit Account entered into on the Construction Loan
Closing Date, Tower Tech granted Great Western a security interest in a $2,000 deposit account. The Company also executed a Commercial Guaranty and entered into a Subordination Agreement in connection
with the Construction Loan, under which it has agreed to guarantee Tower Tech's performance and to subordinate all intercompany debt with Tower Tech to the Construction Loan.

The
Construction Loan may be accelerated under certain events of default (subject to applicable notice and cure provisions), including but not limited to: (i) failure to make any
payment on the Construction Loan when due; (ii) failure to comply with or perform any covenants or conditions under the Construction Loan; (iii) failure to construct the Facility in
accordance with the plans and specifications approved by Great Western or in accordance with the construction contracts relating to the Facility; and (iv) cessation of construction of the
Facility. The Construction Loan contains representations, warranties and covenants that are customary to a construction financing arrangement and contains no financial covenants.

Pursuant
to a Letter Agreement dated as of the Construction Loan Closing Date among Great Western, Tower Tech and the Company (as amended, the "Letter Agreement"), Tower Tech may, any
time prior to April 5, 2010, convert the Construction Loan into a term loan for up to $6,500, with an interest rate not to exceed 8.5% per annum (the "Great Western Term Loan"). Tower Tech
would be required to pay a 1.0% origination fee upon the conversion, and would be required to make monthly payments of principal and accrued interest over the life of the Great Western Term Loan,
which would be not less than seventy-eight months. Following the conversion to the Great Western Term Loan, Great Western would retain its security position in the collateral given as security for the
Construction Loan, except for the deposit account assigned pursuant to the Assignment of Deposit Account, which

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

10. DEBT AND CREDIT AGREEMENTS (Continued)

would
be released upon conversion. All other customary terms and conditions would be mutually agreed upon by Great Western and Tower Tech at the time of conversion.

Badger

On March 13, 2009, Badger obtained a term loan (the "FNB Term Loan") from First National Bank ("FNB") in the principal amount of
approximately $1,538. A portion of the proceeds from the FNB Term Loan was used to pay off Badger's existing term loan and revolving line of credit with FNB, with the remainder available for working
capital. The FNB Term Loan is secured by the inventory, accounts receivable and certain equipment of Badger, and is guaranteed by the Company. The FNB Term Loan bears interest at a rate of 6.75% per
annum, matures on March 13, 2013, and requires monthly payments of principal and interest. The FNB Term Loan contains no financial covenants. As of December 31, 2009, the total amount of
outstanding indebtedness under the FNB Term Loan was $1,280.

On
September 30, 2009, Badger obtained a term loan (the "GE Capital Term Loan") from General Electric Capital Corporation in the principal amount of approximately $1,000. The GE
Capital Term Loan is secured by certain equipment of Badger, and is guaranteed by the Company. The GE Capital Term Loan bears interest at a rate of 7.76% per annum, matures on September 30,
2014, and requires monthly payments of principal and interest. The GE Capital Term Loan contains no financial covenants. As of December 31, 2009, the total amount of outstanding indebtedness
under the GE Capital Term Loan was $949.

Covenant Compliance

For each of the credit facilities described above, the Company was in compliance with all financial and other applicable loan covenants
as of December 31, 2009.

Selling Shareholder Notes

On May 26, 2009, the Company entered into a settlement agreement (the "Settlement Agreement") with the former owners of Brad
Foote (the "Selling Shareholders"), including J. Cameron Drecoll, our Chief Executive Officer and a member of our Board of Directors, related to the post-closing escrow
established in connection with our acquisition of Brad Foote. Under the terms of the Settlement Agreement, among other terms, the Company issued three promissory notes to the Selling Shareholders in
the aggregate principal amount of $3,000 (the "Selling Shareholder Notes"). The Selling Shareholder Notes mature on May 28, 2012 and bear interest at a rate of 7% per
annum, with interest payments due quarterly. The Selling Shareholder Note issued to Mr. Drecoll in the principal amount of $2,320 and pursuant to the terms of the Settlement Agreement is deemed
by us to be a related party transaction. As of December 31, 2009, principal of $3,000 and accrued interest of $53 were outstanding under the Selling Shareholder Notes. The Company has accounted
for the Selling Shareholder Notes as long-term debt in our consolidated balance sheets as of December 31, 2009.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

11. LEASES

The Company leases various property and equipment under operating lease arrangements. Lease terms generally range from 2 to 15 years with renewal options for extended terms. The
Company is required to make additional payments under certain property leases for taxes, insurance and other operating expenses incurred during the operating lease period. Rental expense for the years
ended December 31, 2009, 2008 and 2007 was $5,283, $3,090 and $611, respectively.

In
addition, the Company has entered into capital lease arrangements to finance property and equipment and assumed capital lease obligations in connection with certain acquisitions. The
cost basis and accumulated depreciation of assets recorded under capital leases, which are included in property and equipment, are as follows as of December 31, 2009 and 2008:

December 31,2009

2008Cost

$
7,014

$
6,592Accumulated depreciation


(1,117
)

(507
)Net book value

$
5,897

$
6,085


Depreciation
expense recorded in connection with assets recorded under capital leases was $946, $482 and $25 for the years ended December 31, 2009, 2008 and 2007, respectively.

As
of December 31, 2009, future minimum lease payments under capital leases and operating leases are as follows:

Capital
Leases

Operating
Leases

Total2010

$
1,482

$
5,161

$
6,6432011


1,385


4,982


6,3672012


1,349


4,358


5,7072013


983


2,615


3,5982014





2,060


2,0602015 and thereafter





5,159


5,159Total


5,199

$
24,335

$
29,534Lessportion representing interest at a weighted average annual rate of 8.9%


(783
)Principal


4,416Lesscurrent portion


(1,130
)Capital lease obligations, noncurrent portion

$
3,286


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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

12. COMMITMENTS AND CONTINGENCIES

Customer Disputes

During the third quarter of 2009, the Company was involved in a contract dispute with a customer. The Company and the customer are
negotiating a resolution on this matter. Based on the discussions that occurred, the Company has reserved $1,500, of which $1,200 relates to a settlement of this contract dispute and $300 is for a
warranty reserve associated with this matter.

Purchase Commitments

The Company has issued building purchase commitments associated with the construction of a new wind tower manufacturing facility
located in Brandon, South Dakota totaling approximately $1,100 as of December 31, 2009.

During
2009, the Company entered in a purchase agreement for equipment totaling $995. Under the terms of the purchase agreement, the Company was required to make a deposit of $249 in
December 2009 and is required to make two additional payments in January and February of 2010. As of December 31, 2009, the deposit balance was $746 and is included in other assets in our
consolidated balance sheets as of December 31, 2009.

During
2008, the Company entered into two purchase agreements for equipment totaling $4,888. Under the terms of the purchase agreements, the Company was required to make a $1,324 deposit
and must purchase the stated equipment in the purchase agreement or equipment of equal or lesser value. If the equipment is not purchased prior to the expiration of the purchase agreement on
December 31, 2010, the Company would be required to surrender its deposit for the equipment to the vendor. As of December 31, 2009, the deposit balance was $1,324 and is included in
other assets in our consolidated balance sheets as of December 31, 2009.

During
2007, the Company entered into a purchase contract for equipment with a foreign vendor, which was subsequently modified on December 31, 2008. Under the terms of this
amended purchase agreement, the Company agreed to equipment purchases totaling $3,674, of which $978 was paid as a down payment and the remaining $2,784 in principal plus accrued interest at 6% per
annum would be paid in twelve equal monthly installments. The Company has accounted for this purchase agreement as a promissory note and the outstanding balances of $116 and $2,784 are included in
lines of credit and notes payable in the current liabilities section of the Company's consolidated balance sheets as of December 31, 2009 and December 31, 2008, respectively.

Legal Proceedings

The Company is subject to legal proceedings in the normal course of business. The Company periodically evaluates the need to record
liabilities in connection with loss contingencies, including, but not limited to, settlement of legal proceedings and regulatory compliance matters. The Company accrues for costs related to loss
contingencies when such costs are probable and reasonably estimable.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

12. COMMITMENTS AND CONTINGENCIES (Continued)

Environmental Compliance and Remediation Liabilities

Our operations and products are subject to a variety of environmental laws and regulations in the jurisdictions in which the Company
operates and sell products governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous materials, soil and groundwater contamination, employee
health and safety, and product content, performance and packaging. Also, certain environmental laws can impose the entire cost or a portion of the cost of investigating and cleaning up a contaminated
site, regardless of fault, upon any one or
more of a number of parties, including the current or previous owner or operator of the site. These environmental laws also impose liability on any person who arranges for the disposal or
treatment of hazardous substances at a contaminated site. Third parties may also make claims against owners or operators of sites and users of disposal sites for personal injuries and property damage
associated with releases of hazardous substances from those sites.

Warranty Liability

The Company provides warranty terms that range from two to seven years for various products relating to workmanship and materials
supplied by the Company. From time to time, customers may submit warranty claims against the Company. In certain contracts, the Company has recourse provisions for items that would enable recovery
from third parties for amounts paid to customers under warranty provisions. As of December 31, 2009 and 2008, our estimated product warranty liability was $918 and $890, respectively, and is
recorded within accrued liabilities in our consolidated balance sheets.

Sale-Leaseback Transactions

The Company has entered into sale-leaseback agreements whereby certain owned equipment is sold to a third party financing
company in exchange for cash and the subsidiary then leases back the equipment from the purchaser. The primary purpose of these arrangements is to provide additional liquidity to meet working capital
requirements. Depending on the terms of the lease agreement, the lease may be classified as an operating or capital lease. In addition, the sale of the assets may result in a gain or loss, which must
be amortized to other income or loss in our statement of operations over the life of the operating lease. As of December 31, 2009, the minimum monthly payments due under these lease agreements
totaled $98.

Other

As of December 31, 2009, approximately 21% of our employees were covered by two collective bargaining agreements with local
unions in Cicero, Illinois and Neville Island, Pennsylvania. Collective bargaining agreements with our Cicero and Neville Island unions were ratified by local unions in the fourth quarter of 2009 and
the first quarter of 2010, respectively, and are scheduled to remain in effect through October 2012 and February 2014, respectively.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

13. INTEREST RATE SWAP AGREEMENTS

As part of our acquisition of Brad Foote in October 2007, the Company assumed two interest rate swap agreements. These swap agreements are intended to minimize the impact of interest
rate fluctuations on certain debt instruments. Interest rate swap agreements involve exchanges of fixed or floating rate interest payments periodically over the life of the agreement without the
exchange of the underlying principal amounts. Derivatives are measured at fair value and recognized as either assets or liabilities on the Company's balance sheet. The accounting for changes in the
fair value of a derivative is dependent upon the use of the derivative and its resulting designation. Unless specific hedge accounting criteria are met, changes in the fair value of the derivative
must be recognized currently in earnings. The Company's interest rate swaps do not qualify for hedge accounting, and therefore, the Company is required to recognize the swap agreements at their fair
market value and record the fluctuations in the fair value of the swap agreements in current earnings. During the year ended December 31, 2009, the Company reported a gain related to the change
in the fair value of these instruments of $330 compared to a loss of $194 and $153 for the years ended December 31, 2008 and 2007, respectively. The fair market value of the interest rate swaps
of $253 and $582 is recorded as a long-term liability in our consolidated balance sheets as of December 31, 2009 and December 31, 2008, respectively.

In
February 2010, the Company settled both interest rate swap agreements for $270 in connection with the repayment of all outstanding indebtedness to Bank of America in January 2010.

The
following table presents the fair values of derivative instruments included on our consolidated balance sheets as of December 31, 2009:

Liability DerivativesDerivatives Not Designated as Hedging Instruments

Balance Sheet Location

Fair ValueInterest rate contracts

Long-term liabilities(1)

$
253Total derivatives not designated as hedging instruments



$
253


(1)The
Company's interest rate contracts are classified on a separate line item titled "Interest rate swap agreements" in the long-term liabilities
section on our consolidated balance sheets.


The
following table presents the pretax amounts of interest rate contracts affecting our consolidated statements of operations for the years ended December 31, 2009, 2008 and
2007:

Derivatives Not Designated as Hedging Instruments

Location of Gain or (Loss)
Recognized in Income on
Derivative

Amount of Gain or (Loss)
Recognized in Income on
DerivativeTwelve Months Ended December 31,2009

2008

2007Interest rate contracts

Other income (expense)

$
330

$
(194
)
$
(153
)Total



$
330

$
(194
)
$
(153
)


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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

14. FAIR VALUE MEASUREMENTS

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
(i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, the Company is required to provide disclosure and categorize assets and
liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of
fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to
the fair value measurement. The fair value hierarchy is defined as follows:

Level 1Valuations
are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2Valuations
are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which
significant inputs are observable, either directly or indirectly.

Level 3Valuations
are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
Inputs reflect management's best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The
following table represents the fair values of the Company's financial liabilities as of December 31, 2009 and 2008:

2009Level 1

Level 2

Level 3

TotalLiabilities:Interest rate swaps

$


$
253

$


$
253Total liabilities at fair value

$


$
253

$


$
253




2008Level 1

Level 2

Level 3

TotalLiabilities:Interest rate swaps

$


$
582

$


$
582Total liabilities at fair value

$


$
582

$


$
582


See
Note 13 "Interest Rate Swap Agreements" of these consolidated financial statements for a discussion of the Level 2 interest rate swap agreements.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

14. FAIR VALUE MEASUREMENTS (Continued)

Fair value of financial instruments

The carrying amounts of the Company's financial instruments, which include cash and cash equivalents, accounts receivable, prepaid
expenses and other current assets, accounts payable, accrued liabilities and customer deposits approximate their respective fair values due to the relatively short-term nature of these
instruments. Based upon interest rates currently available to the Company for debt with similar terms, the carrying value of the Company's long-term debt is approximately equal to its fair
value.

Assets measured at fair value on a nonrecurring basis

The Company reviews its goodwill balances for impairment on at least an annual basis based on the carrying value of these assets as of
October 31 and tests its intangible and long-lived assets whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Due to the continuing
effects of the economic downturn on the wind energy industry, the Company tested goodwill and intangible assets for impairment using a fair value measurement approach. The fair value measurement
approach utilizes a number of significant unobservable inputs or Level 3 assumptions. These assumptions include, among others, projections of our future operating results, the implied fair
value of these assets using an income approach by preparing a discounted cash flow analysis and a market based approach based on our market capitalization, and other subjective assumptions. The
valuation techniques used in 2009 to measure fair value were similar to the techniques used in our analysis in 2008. Upon completion of our impairment analysis in March 2010, the Company determined
that the carrying value of its goodwill and intangible assets exceeded the fair value of these assets. Accordingly, the Company recorded goodwill and intangible impairment charges of $24,269 and
$57,942, respectively, to properly reflect the carrying value of these assets.

The
following table presents the fair value measurements of our nonrecurring assets as of December 31, 2009:

Fair Value Measurements UsingDescription

Year Ended
12/31/09

Prices in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs (Level 2)

Significant
Unobservable
Inputs (Level 3)

Total Gains
(Losses)Goodwill

$
9,715

$


$


$
9,715

$
(24,269
)Intangible assets


37,248








37,248


(57,942
)$
(82,211
)


15. INCOME TAXES

The Company accounts for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the future tax consequences of the differences between the
financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary
differences, and operating loss

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

15. INCOME TAXES (Continued)

and
tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that
the change is enacted.

The
provision for income taxes for the years ended December 31, 2009, 2008 and 2007 consists of the following:

For the Years Ended December 31,2009

2008

2007Current provisionFederal

$
(675
)
$


$
State


180


554


Total current provision


(495
)

554


Deferred creditFederal


(38,199
)

(7,666
)

(1,541
)State


(5,804
)

(444
)

(229
)Total deferred credit


(44,003
)

(8,110
)

(1,770
)Increase in deferred tax valuation allowance


42,909


8,618


731Total (benefit) provision for income taxes

$
(1,589
)
$
1,062

$
(1,039
)


The
increase in the deferred tax valuation allowance was $42,909, $8,618, and $731 for the years ended December 31, 2009, 2008 and 2007, respectively. The change in the deferred
tax valuation allowance in 2009 was the result of a significant increase to deferred tax assets in connection with the impairment of goodwill and intangible assets, which created additional federal
and state net operating losses. The deferred tax benefit of $1,039 for the year ended December 31, 2007 was related to the change in valuation allowance due to changed expectations about the
realization of deferred tax assets as a result of the acquisition of RBA.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

15. INCOME TAXES (Continued)

The
tax effects of the temporary differences and net operating losses that give rise to significant portions of deferred tax assets and liabilities are as follows:

As of December 31,2009

2008Current deferred income tax assets:Accrual and reserves

$
2,573

$
2,216Total current deferred tax assets


2,573


2,216Valuation allowance


(2,573
)

(2,216
)Current deferred tax assets, net of valuation allowance





Noncurrent deferred income tax assets:Net operating loss carryforwards

$
30,900

$
15,225Intangible assets


29,296


Other


735


410Total noncurrent deferred tax assets


60,931


15,635Valuation allowance


(47,704
)

(5,152
)Noncurrent deferred tax assets, net of valuation allowance


13,227


10,483Noncurrent deferred income tax liabilities:Fixed assets

$
(13,630
)
$
(9,624
)Intangible assets





(2,356
)Total noncurrent deferred tax liabilities


(13,630
)

(11,980
)Net deferred income tax liability

$
(403
)
$
(1,497
)


The
Company has indefinite long-lived intangible assets consisting of goodwill, which are not amortized for financial reporting purposes. However, the expense related to the
amortization of these assets is tax deductible, and therefore the assets are amortized for income tax purposes. As a result, deferred income tax expense and deferred income tax liabilities arise as a
result of the tax-deductibility of these indefinite long-lived intangible assets. The resulting deferred tax liability, which is anticipated to continue to increase over time,
has an indefinite life, resulting in what is referred to as a "naked tax credit." This deferred tax liability could remain on our consolidated balance sheets indefinitely unless there is an impairment
of the related assets for financial reporting purposes, or the businesses to which the assets relate are to be disposed of.

Valuation
allowances of $50,277 and $7,368 have been provided for deferred income tax assets for which realization is uncertain as of December 31, 2009 and 2008, respectively. A
reconciliation of the beginning and ending amounts of the valuation was as follows:

Valuation allowance as of December 31, 2008

$
(7,368
)Gross increase for current year activity


(42,909
)Valuation allowance as of December 31, 2009

$
(50,277
)


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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

15. INCOME TAXES (Continued)

As
of December 31, 2009, the Company had federal net operating loss carryforwards of approximately $80,082 expiring in various years through 2029. The majority of the net
operating loss carry forwards will expire in 2028 and 2029.

As
of December 31, 2009, the Company had un-apportioned state net operating losses in the aggregate of approximately $80,082 expiring in various years from 2021
through 2029 based upon various net operating loss periods as designated by the different taxing jurisdictions.

The
reconciliation of the tax (benefit) provision computed at the statutory rate to the effective tax rate is as follows:

For the Year Ended December 31,2009

2008

2007Statutory U.S. federal income tax rate


35.0
%

35.0
%

35.0
%State and local income taxes, net of federal income tax benefit


3.4


(0.4
)

5.2Permanent differences


(0.3
)

(5.0
)

(0.4
)Change in valuation allowance


(36.8
)

(34.6
)

(16.6
)Uncertain tax positions


(0.1
)




Other


0.2


0.6


0.4Effective income tax rate


1.4
%

(4.4)
%

23.6
%


The
Company accounts for the uncertainty in income taxes by prescribing a minimum recognition threshold for a tax provision taken or expected to be taken in a tax return that is required
to be met

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

15. INCOME TAXES (Continued)

before
being recognized in the financial statements. The changes in the Company's uncertain income tax positions for the years ended December 31, 2009 and 2008 consisted of the following:

For the Year Ended December 31,2009

2008Beginning balance

$
193

$
Tax positions related to current year:Additions





31Reductions








31Tax positions related to prior years:Additions


196


32Reductions


(17
)

Settlements


(23
)

Lapses in statutes of limitations





Additions from current year acquisitions





130156


162Ending balance

$
349

$
193


It
is the Company's policy to include interest and penalties in tax expense. During the years ended December 31, 2009 and 2008, the Company recognized and accrued approximately
$10 and $53, respectively, of interest and penalties.

The
Company files income tax returns in the U.S. federal and state jurisdictions. As of December 31, 2009, open tax years in the federal and some state jurisdictions date back to
1996 due to the taxing authorities' ability to adjust operating loss carryforwards. No changes in settled tax years have occurred through December 31, 2009. The Company does not anticipate
there will be a material change in the total amount of unrecognized tax benefits within the next 12 months.

16. STOCKHOLDERS' EQUITY

On January 16, 2008, to finance the cash portion of the EMS acquisition, the Company sold an aggregate of 2,031,250 shares of unregistered common stock in a private placement to
Tontine Partners, L.P. ("TP") and Tontine 25 Overseas Master Fund, L.P. ("T25") at $8.48 per share for a total purchase price of $17,225, pursuant to a previously disclosed Amended and Restated
Securities Purchase Agreement with Tontine Capital Partners, L.P. ("TCP"), TP and T25.

In
connection with the acquisition of EMS, on January 16, 2008, the Company issued 1,629,834 shares of unregistered common stock to the members of EMS, calculated at $8.48 per
share, for total stock consideration of $13,821. The Company entered into a registration rights agreement with the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

16. STOCKHOLDERS' EQUITY (Continued)

former
owners of EMS which provides the former owners with demand and piggyback registration rights. Upon consummation of the Company's acquisition of EMS, 7,500 shares of restricted stock units
previously granted to certain Company executives vested; another 7,500 restricted shares vested as of January 16, 2009.

In
the second quarter of 2008, the Company completed transactions resulting in the sale of an aggregate of $100,500 of its unregistered common stock, as follows: (A) $500, or
62,814 shares, was purchased by a member of the Company's Board of Directors at a price of $7.96 per share, in connection with this transaction , the Company entered into a registration rights
agreement with the applicable director that provides the director with piggyback registration rights; and (B) an aggregate of $100,000 worth, or 12,562,814 shares, was purchased by TCP, TP,
Tontine Overseas Fund, Ltd. ("TOF"), and T25 at a price of $7.96 per share.

On
April 24, 2008, Tontine Capital Overseas Master Fund, L.P. ("TMF"), TP, and TOF each converted the full original principal amount of their respective 9.5% notes into shares of
Company common stock. Upon conversion, an aggregate of 3,333,332 shares of the Company's common stock were issued to TMF, TP and TOF.

On
June 4, 2008, the Company acquired all of the outstanding capital stock of Badger for total purchase price of $11,811, exclusive of transaction related acquisition costs. A
portion of the purchase price consisted of 581,959 unregistered shares of Broadwind's common stock at a price per share of $10.31. The Company entered into a registration rights agreement with a
former owner of Badger that provides the former owner with limited piggyback registration rights.

On
June 25, 2008, at the 2008 Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the Company's Articles of Incorporation, which increased the
authorized number of shares of common stock from 100,000,000 to 150,000,000.

Tontine Registration Rights Agreement

In March 2007, the Company entered into a Registration Rights Agreement (as amended, the "Tontine Registration Rights Agreement") with
TCP and TOF. The
Tontine Registration Rights Agreement was subsequently amended on October 19, 2007, July 18, 2008, September 12, 2008 and October 31, 2008. Pursuant to the Tontine
Registration Rights Agreement, the Company agreed to register the shares of TP, TOF, TCP, TMF, T25, and TCP Overseas Master Fund II, L.P. (collectively with their affiliates, "Tontine") for
resale and have provided Tontine with certain demand and piggyback registration rights.

Under
the terms of the Tontine Registration Rights Agreement, in certain circumstances, Tontine was entitled to deliver a demand notice to the Company, which then triggered the
obligation of the Company to file a registration statement with the SEC to register the shares held by Tontine as soon as reasonably practicable thereafter. Additionally, whenever the Company
proposed to register any of its securities under the Securities Act of 1933, as amended, with certain exceptions, the Company was obligated to give notice to Tontine and provide an opportunity for
piggyback registration of the shares held by Tontine.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

16. STOCKHOLDERS' EQUITY (Continued)

The
amendment to the Tontine Registration Rights Agreement dated October 31, 2008 extended the deadline for our obligation to file a registration statement to
December 31, 2008. On January 9, 2009, Tontine executed a Waiver (the "Waiver") relating to the Registration Rights Agreement. The Waiver waived the requirement that the Company
file a registration statement to register shares held by Tontine no later than December 31, 2008 and extended the deadline for our obligation to file the Selling Stockholder Registration
Statement to March 31, 2009. On April 15, 2009, Tontine provided written notice to us with a demand that the Company file the Selling Stockholder Registration Statement as soon as
possible and reserving all of Tontine's rights under the Tontine Registration Rights Agreement. Tontine's shares became registered for resale when the Company filed a registration statement on
Form S-1, which became effective on August 17, 2009.

See
Note 10 "Debt and Credit Agreements" and Note 17 "Related Party Transactions" of these consolidated financial statements for further discussion regarding transactions
between the Company and Tontine.

17. RELATED PARTY TRANSACTIONS

On May 26, 2009, the Company entered into the Settlement Agreement with the Selling Shareholders, including J. Cameron Drecoll, the Company's Chief Executive Officer and a member
of the Company's Board of Directors, related to the post-closing escrow established in connection with the Company's acquisition of Brad Foote. The post-closing escrow fund was
created to provide a source of funds for claims for indemnification made by the Company and certain other indemnified persons against the Selling Shareholders under the Stock Purchase Agreement
executed in connection with the Company's acquisition of Brad Foote. On October 19, 2007, the date the Company consummated its acquisition of Brad Foote, the Company deposited a portion of its
total purchase price for Brad Foote (in the amount of $5,000 in cash and 2,500,000 shares of its common stock) into the escrow fund. The consideration deposited into the escrow fund was to be held by
an escrow agent until five business days after the eighteen month anniversary of the Brad Foote acquisition. Under the terms of the Settlement Agreement, the Company received the entire cash escrow
balance of $5,000 plus accrued interest income of $82, which was recorded as other income. In exchange, the Company agreed to cause the release to the Selling Shareholders of 2,500,000 shares of the
Company's common stock held under the escrow agreement in proportion to their ownership interest in Brad Foote prior to its acquisition by the Company. In addition, the Company agreed to make a cash
payment of $30 to one Selling Shareholder and issued promissory notes to the three Selling Shareholders in the aggregate principal amount of $3,000 (each a "Selling Shareholder Note", and collectively
the "Selling Shareholder Notes"). The cash payment and promissory notes were recorded as an increase to the purchase price through goodwill as these amounts were calculated in accordance with the
purchase agreement. The Company also paid to Mr. Drecoll certain tax refunds in the aggregate amount of approximately $2,212 related to our acquisition of Brad Foote and tax payments in respect
of the period prior to the acquisition to which the Company believes the Selling Shareholders are entitled (or to which the Company is entitled on their behalf). The Selling Shareholder Notes mature
on May 28, 2012 and bear interest at a rate of 7% per annum, with interest payments due quarterly. The Selling Shareholder Note issued to Mr. Drecoll in the principal amount of $2,320
and pursuant to the terms of the Settlement Agreement is deemed by

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

17. RELATED PARTY TRANSACTIONS (Continued)

the
Company to be a related party transaction. As of December 31, 2009, principal of $3,000 and accrued interest of $53 was outstanding under the Selling Shareholder Notes. The Company has
accounted for the Selling Shareholder Notes as long-term debt in our consolidated balance sheets as of December 31, 2009.

During
the years ended December 31, 2009, 2008 and 2007, interest expense of $128, $1,226 and $547, respectively, was incurred on shareholder and related party notes.

In
April 2008, EMS purchased its Howard West facility from the former majority owner of EMS and its former president, and concurrently terminated its lease agreement, which required a
monthly payment of $5. EMS continues to lease its primary administrative offices, a machine shop, a residential property, and storage facilities from the former majority owner of EMS, and its former
president. The agreement provides for a lease term expiring on December 31, 2012 and requires a monthly payment of $3.

In
February 2008, Brad Foote completed the purchase of two real estate parcels located in Cicero, Illinois and Pittsburgh, Pennsylvania. Brad Foote previously leased these properties
pursuant to a lease agreements dated August 22, 2007. Brad Foote acquired the Cicero property from BFG Cicero LLC, an Illinois limited liability company ("BFG Cicero") and
acquired the Pittsburgh property from BFG Pittsburgh LLC, a Pennsylvania limited liability company ("BFG Pittsburgh") pursuant to two Real Property Purchase Agreements that were
executed on February 14, 2008 and effective February 11, 2008 (together, the "Purchase Agreements"). The sole member of each of BFG Cicero and BFG Pittsburgh is
BFG Acquisition LLC, an Illinois limited liability company whose sole member is the wife of the Company's Chief Executive Officer.

See
Note 16 "Stockholders' Equity" of these consolidated financial statements for further discussion regarding transactions between the Company and related parties.

18. SHARE-BASED COMPENSATION

Overview of Share-Based Compensation Plan

The Company grants incentive stock options and other equity awards pursuant to the Broadwind Energy, Inc. 2007 Equity Incentive
Plan (the "EIP"), which was approved by the Company's Board of Directors in October 2007 and by the Company's stockholders in June 2008. The EIP was subsequently amended in August 2008 by the
Company's Board of Directors to include certain non-material amendments to clarify the terms and conditions of restricted stock awards and to provide that the administrator of the EIP has
the authority to authorize future amendments to the EIP. The EIP was further amended by the Company's stockholders in June 2009 to increase the number of shares of common stock authorized for issuance
under the EIP. As amended, the EIP reserves 5,500,000 shares of our common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company
and its affiliates will depend to a large degree. As of December 31, 2009, the Company had reserved 1,402,163 shares for the exercise of stock options outstanding, 279,151 shares for restricted
stock unit awards outstanding and 3,563,235 additional shares for future stock

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

18. SHARE-BASED COMPENSATION (Continued)

awards
under the EIP. As of December 31, 2009, 255,451 shares of common stock reserved for stock options and restricted stock unit awards under the EIP have been issued in the form of common
stock.

Stock Options.The exercise price of stock options granted under the EIP is equal to the closing price of our common stock on the date
of grant.
Stock options generally become exercisable on the anniversary of the grant date, with vesting terms that may range from one to five years from the date of grant. Additionally, stock options expire ten
years after the date of grant. If a plan participant's employment is terminated during the vesting period, he or she forfeits the right to unvested stock option awards.

Restricted Stock.The granting of restricted stock units is provided for under the EIP. Restricted stock units generally vest on the
anniversary of
the grant date, with vesting terms that range from immediate vesting to five years from the date of grant. The fair value of each unit granted is equal to the closing price of our common stock on the
date of grant and is expensed ratably over the vesting term of the restricted stock award. If a plan participant's employment is terminated during the vesting period, he or she forfeits the right to
any unvested portion of the restricted stock units.

Stock
option activity during the years ended December 31, 2009 and 2008 under the EIP was as follows:

Options

Weighted Average
Exercise Price

Weighted Average
Remaining
Contractual Term

Aggregate Intrinsic
Value
(in thousands)Outstanding as of December 31, 2007


950,000

$
7.92Granted


1,165,000

$
14.59Exercised





Forfeited


(85,000
)
$
11.38Expired





Outstanding as of December 31, 2008


2,030,000

$
11.60Granted


209,193

$
7.66Exercised


(91,940
)
$
7.34Forfeited


(723,257
)
$
12.05Expired


(21,833
)
$
10.23Outstanding as of December 31, 2009


1,402,163

$
11.08

8.4 years

$
2,304Exercisable as of December 31, 2009


392,393

$
11.12

8.2 years

$
824


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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

18. SHARE-BASED COMPENSATION (Continued)

The
following table summarizes information with respect to all outstanding and exercisable stock options under the EIP as of December 31, 2009:

Options Outstanding

Options ExercisableExercise Price Ranges

Number of options
outstanding

Weighted Average
Exercise Price

Weighted Average
Remaining Contractual Term

Number
Exercisable

Weighted Average
Exercise Price$4.60 - $7.78


142,103

$
7.78

9.3 years




$
$8.00 - $12.85


965,060


9.22

8.2 years


313,393


8.83$17.21 - $18.20


270,000


18.06

8.5 years


58,000


18.06$25.20 - $26.30


25,000


26.08

8.4 years


21,000


26.251,402,163

$
11.08

8.4 years


392,393

$
11.12


The
following table summarizes information with respect to outstanding restricted stock units as of December 31, 2009 and 2008:

Number of Units

Weighted Average
Grant-Date Fair Value
Per UnitsOutstanding as of December 31, 2007


15,000

$
10.90Granted


120,000

$
10.70Vested


(7,500
)
$
10.90Forfeited





Outstanding as of December 31, 2008


127,500

$
10.71Granted


367,215

$
6.86Vested


(176,663
)
$
5.79Forfeited


(38,901
)
$
9.63Outstanding as of December 31, 2009


279,151

$
8.76


The
fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Our determination of the fair value of each stock option is
affected by our stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected
stock price volatility over the expected life of the awards and actual and projected stock option exercise behavior. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

18. SHARE-BASED COMPENSATION (Continued)

weighted
average fair value per share of stock option awards granted during the years ended December 31, 2009 and 2008, and assumptions used to value stock options, are as follows:

For the Years
Ended
December 31,2009

2008Dividend yield





Risk-free interest rate


2.6
%

3.1
%Weighted average volatility


85.0
%

65.5
%Expected life (in years)


6.5


6.5Weighted average grant date fair value per share of options granted

$
5.64

$
7.18


Dividend
yield is zero as the Company currently does not pay a dividend.

Risk-free
rate is based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life of the award.

During
the year ended December 31, 2009, the Company utilized a standard volatility assumption of 85% for estimating the fair value of stock options awarded based on comparable
volatility averages for the energy related sector. During the year ended December 31, 2008, the Company utilized a range of expected volatility assumptions for such purposes, with such
volatility assumptions ranging from 60% to 70%.

The
expected life of each stock option award granted is derived using the "simplified method" for estimating the expected term of a "vanilla-option" in accordance with Staff Accounting
Bulletin ("SAB") No. 107, "Share-Based Payment," as amended by SAB No. 110, "Share-Based
Payment." The fair value of each unit of restricted stock is equal to the fair market value of our common stock as of the date of grant.

During
the years ended December 31, 2009 and 2008, the Company utilized a forfeiture rate of 10% for estimating the forfeitures of stock options granted.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

18. SHARE-BASED COMPENSATION (Continued)

The
following table summarizes share-based compensation expense included in our consolidated statements of operations for the years ended December 31, 2009, 2008 and 2007 as
follows:

For the Years Ended December 31,2009

2008

2007Share-based compensation expense:Selling, general and administrative

$
2,805

$
1,999

$
142Income tax benefit(1)








Net effect of share-based compensation expense on net loss

$
2,805

$
1,999

$
142Reduction in earnings per share:Basic and diluted earnings per share(2)

$
0.03

$
0.02

$
0.00


(1)Income
tax benefit is not illustrated because the Company is currently operating at a loss and an actual income tax benefit was not realized for the years
ended December 31, 2009, 2008 and 2007. The result of the loss situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the valuation allowance.(2)Diluted
earnings per share for the years ended December 31, 2009, 2008 and 2007 does not include common stock equivalents due to their
anti-dilutive nature as a result of the Company's net losses for these respective periods. Accordingly, basic earnings per share and diluted earnings per share are identical for all
periods presented.


As
of December 31, 2009, the Company estimates that pre-tax compensation expense for all unvested share-based awards, including both stock options and restricted stock
units, in the amount of approximately $7,649 will be recognized through the year 2014. The Company expects to satisfy the exercise of stock options and future distribution of shares of restricted
stock by issuing new shares of common stock.

19. SEGMENT REPORTING

In December 2009, the Company revised its reporting segments. The revised reporting structure includes four reportable segments: "Towers" (formerly "Products"), "Gearing" (formerly
"Products), "Technical and Engineering Services" (formerly "Services") and "Logistics"(formerly "Services"). Accordingly, all prior period segment information has been reclassified to properly reflect
our current reportable segments.

The
Company's segments and their product and service offerings are summarized below:

Towers

The Company manufactures wind towers, specifically the large and heavier wind towers that are designed for 2 megawatt ("MW") and larger
wind turbines. Our production facilities are strategically

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

19. SEGMENT REPORTING (Continued)

located
in close proximity to the primary U.S. wind resource regions, sited in Wisconsin and Texas, with a recently constructed third wind tower manufacturing facility in Brandon, South Dakota, which
will become operational as business warrants and pending the installation of certain additional equipment. The Company also manufactures other specialty weldments and structures for industrial
customers.

Gearing

The Company manufactures precision gearing systems for the wind industry in North America and products for industrial markets including
mining and oilfield equipment, with plants in Illinois and Pennsylvania. The Company uses an integrated manufacturing process, which includes our machining process in Cicero, Illinois, our heat
treatment process in Neville Island, Pennsylvania and our finishing process in our Cicero factory.

Technical and Engineering Services

The Company is an independent service provider of construction support and operations and maintenance services to the wind industry.
Our specialty services include oil change-out, up-tower tooling for gearing systems, drive-train and blade repairs and component replacement. Our construction support
capabilities include assembly of towers, nacelles, blades and other components. The Company also provides customer support, preventive maintenance and wind technician training. Our technicians utilize
our regional service centers for storage and repair of parts as well as our training offerings. Through our precision repair and engineering services, the Company repairs and refurbishes complex wind
components, including control systems, gearboxes and blades. The Company also conducts warranty inspections, commission turbines
and provides technical assistance. Additionally, the Company builds replacement control panels for kW class wind turbines and repairs both kW and MW blades. Our service locations are in Illinois,
California, South Dakota, Texas and Colorado.

Logistics

The Company offers specialized transportation, permitting and logistics management to the wind industry for oversize and overweight
machinery and equipment. The Company delivers complete turbines to the installation site, including blades, nacelles and tower sections for final erection. The Company focuses on the project
management of the delivery of complete wind turbine farms.

Corporate and Other

"Corporate and Other" is comprised of adjustments to reconcile segment results to consolidated results, which primarily includes
corporate administrative expenses and intercompany eliminations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

19. SEGMENT REPORTING (Continued)

Summary
financial information by reportable segment is as follows:

Revenues For the Years Ended

Operating (Loss) Profit
For the Years Ended2009

2008

2007

2009

2008

2007Segments:Towers

$
93,316

$
72,561

$
12,889

$
(500
)
$
5,813

$
1,030Gearing


64,518


104,553


16,975


(97,059
)

(6,614
)

(4,579
)Technical and engineering services


27,575


31,249





(610
)

(1,822
)

Logistics


13,258


10,253





(3,382
)

131


Corporate and Other(1)


(837
)

(1,295
)

(60
)

(14,086
)

(19,251
)

14$
197,830

$
217,321

$
29,804

$
(115,637
)
$
(21,743
)
$
(3,535
)




Depreciation and Amortization
For the Years Ended

Capital Expenditures
For the Years Ended2009

2008

2007

2009

2008

2007Segments:Towers

$
3,393

$
1,626

$
587

$
10,294

$
47,523

$
4,921Gearing


15,929


15,341


2,906


262


26,566


933Technical and engineering services


3,250


3,023





485


3,267


Logistics


3,029


1,774





566


4,628


Corporate and Other(1)


124


102


30


229


1,736


$
25,725

$
21,866

$
3,523

$
11,836

$
83,720

$
5,854




Total Assets as of December 31,2009

2008Segments:Towers

$
80,146

$
108,261Gearing


92,665


199,612Technical and engineering services


36,417


43,622Logistics


21,259


24,980Corporate and Other(2)


(451
)

3,273$
230,036

$
379,748


(1)"Corporate
and Other" includes corporate administrative expenses and intercompany eliminations. Corporate selling, general and administrative expenses
includes corporate salaries and benefits, share-based compensation, and professional fees.(2)"Corporate
and Other" includes assets of the corporate headquarters and intercompany eliminations.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

19. SEGMENT REPORTING (Continued)




The
Company generates revenues entirely from transactions completed in the United States and our long-lived assets are located in the United States. During 2009, four
customers each accounted for more than 10% of total net revenues. During the years ended December 31, 2009, 2008, and 2007, three or fewer customers accounted for 50%, 72% and 70%,
respectively, of total net revenues. In addition, as of December 31, 2009 and 2008, three or fewer customers comprised approximately 21% and 61%, respectively, of our total outstanding accounts
receivable balances.

20. EMPLOYEE BENEFIT PLANS

Retirement Savings and Profit Sharing Plans

In October 2007, the Company began sponsoring a defined contribution 401(k) retirement savings plan covering substantially all of its
corporate employees and employees at its Brad Foote and Tower Tech subsidiaries. Under the terms of the plan, an eligible employee may elect to contribute a portion of salary on a pre-tax
basis, subject to federal statutory limitations. The plan allowed for a discretionary match in an amount up to 50% of each participant's first 4% of compensation contributed.

As
part of the acquisitions of RBA in October 2007, EMS in January 2008, and Badger in June 2008, the Company adopted the defined contribution 401(k) retirement savings plan provisions
that were previously in effect at these respective companies. Under the RBA defined contribution 401(k) retirement savings plan, which covered substantially all of its employees, the plan allowed for
the Company to provide a discretionary match of 100% of the participants' contributions up to 4% of the participants' compensation. Under the EMS defined contribution 401(k) retirement savings plan,
which covered substantially all of its employees, the plan allowed for the Company to provide a discretionary match or profit sharing contribution each year. Under the Badger defined contribution
401(k) retirement savings plan, which covered substantially all of its employees, the plan required the Company to match 100% of the participants' contributions up to 3% of the participants'
compensation and an additional 50% up to 5% of the participants' compensation.

Effective
January 1, 2009, the Company replaced all of its defined contribution 401(k) retirement savings plans with one defined contribution 401(k) safe harbor plan covering
substantially all of the Company's non-union employees. Under the new plan, an eligible employee may elect to contribute a portion of salary on a pre-tax basis, subject to
federal statutory limitations. The plan requires the Company to make basic matching contributions equal to 100% of the
first 3% of the eligible participant's plan compensation contributed as elective deferral contributions and 50% of the next 2% of the eligible participant's plan compensation contributed as an
elective deferral contribution. Under the plan, elective deferrals and basic company matching will be 100% vested at all times. Effective for the fourth quarter of 2009 and for all subsequent Company
matching contributions, the Company will fund these contributions in shares of the Company's common stock in lieu of a cash contribution. For the Company's union employees, in 2009 the Company
continued its discretionary match in an amount up to 50% of each participant's first 4% of compensation contributed.

Effective
January 1, 2010, based on the collective bargaining agreement with the Brad Foote union employees in Pennsylvania, a discretionary match will be made in an amount equal
to 100% of the first 3% of the eligible participant's plan compensation contributed as elective deferral contributions and

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

20. EMPLOYEE BENEFIT PLANS (Continued)

50%
of the next 2% of the eligible participant's plan compensation contributed as an elective deferral contribution.

For
the years ended December 31, 2009, 2008 and 2007, the Company recorded expense under these plans of approximately $786, $368 and $74, respectively.

Deferred Compensation Plan

The Company maintains a deferred compensation plan for certain key employees and nonemployee directors, whereby certain wages earned,
compensation for services rendered, and discretionary company-matching contributions are deferred and deemed to be invested in the Company's common stock. Changes in the fair value of the plan
liability are recorded as charges or credits to compensation expense. Compensation expense recorded during the years ended December 31, 2009, 2008, and 2007, was $587, $170 and $0,
respectively. The fair value of the plan liability to the Company is included in accrued liabilities in our consolidated balance sheets. As of December 31, 2009 and 2008, the fair value of plan
liability to the Company was $215 and $80, respectively.

In
addition to the employee benefit plans described above, the Company participates in certain customary employee benefits plans, including those which provide health and life insurance
benefits to employees.

21. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)

The following table provides a summary of selected financial results of operations by quarter for the years ended December 31, 2009 and 2008 as follows:

2009

First

Second

Third

FourthRevenues

$
53,062

$
52,313

$
59,507

$
32,948Gross profit (loss)


4,685


3,151


6,582


(2,615
)Operating loss


(7,137
)

(10,280
)

(4,571
)

(93,649
)Net loss


(7,150
)

(5,426
)

(4,944
)

(92,599
)Net loss per share:Basic and Diluted

$
(0.09
)
$
(0.06
)
$
(0.05
)
$
(0.96
)




2008

First

Second

Third

FourthRevenues

$
35,164

$
40,830

$
63,688

$
77,639Gross profit


8,010


10,091


8,982


6,287Operating loss


(1,939
)

(1,642
)

(6,060
)

(12,102
)Net loss


(3,443
)

(1,973
)

(7,499
)

(12,370
)Net loss per share:Basic and Diluted

$
(0.04
)
$
(0.02
)
$
(0.08
)
$
(0.14
)


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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2009, 2008, and 2007

(in thousands, except share and per share data)

22. SUBSEQUENT EVENTS

On January 22, 2010, the Company announced the completion of its public offering of common stock, par value $0.001 per share, at an offering price of $5.75 per share. In the
offering, the Company sold 10,000,000 newly issued shares of its common stock for approximately $53,900 in proceeds net of underwriter commissions. As part of this offering, Tontine sold a combined
total of 6,125,000 shares of common stock and J. Cameron Drecoll, the Company's Chief Executive Officer, sold 1,125,000 shares of common stock. The sales by Tontine and J. Cameron Drecoll included all
shares subject to the over-allotment option by the Company's underwriters.

In
January 2010, the Company repaid all outstanding indebtedness due under the BOA Debt Facilities and all outstanding indebtedness due under the Investors Community Bank Line in the
amounts of $16,076 and $3,066, respectively. In February 2010, the Company settled two interest rate swap agreements for $270. The interest rate swap agreements related to the underlying notional
amounts of two term notes, which were included in the Bank of America Debt Facilities repayment in January 2010.

On
February 16, 2010, Tower Tech and Great Western entered into an agreement to extend the maturity date of the Construction Loan from March 5, 2010 to April 5,
2010.

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Table of Contents

INDEX TO EXHIBITS

Exhibit
Number

Description2.1

Share Exchange Agreement by and among Blackfoot Enterprises, Inc. and the shareholders of Tower Tech Systems Inc. and Tower Tech Systems Inc. dated as of November 7, 2005 (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K filed November 21, 2005)2.2

Stock Purchase Agreement dated September 13, 2007 among the Company, R.B.A. Inc. and the stockholders of R.B.A. Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K filed September 17, 2007)2.3

Stock Purchase Agreement dated August 22, 2007 among the Company, Brad Foote Gear Works, Inc. and the shareholders of Brad Foote Gear Works, Inc. (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed August 24, 2007)2.4

Stock Purchase Agreement dated April 24, 2008 among Broadwind Energy, Inc., Badger Transport, Inc. and the shareholders of Badger Transport, Inc. (incorporated by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K filed April 30, 2008)2.5

Membership Interest Purchase Agreement dated December 9, 2007 among the Company, Energy Maintenance Service, LLC, Joseph A. Kolbach and the members of Energy Maintenance Service, LLC (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed December 13, 2007)2.6

Amendment No. 1 to the Membership Interest Purchase Agreement dated December 9, 2007 among the Company, Energy Maintenance Service, LLC, Joseph A. Kolbach and the members of Energy
Maintenance Service, LLC (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed January 14, 2008)3.1

Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008)3.2

Bylaws, as amended and restated through June 20, 2008 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2008)10.1

Form of Irrevocable Proxy of each of Christopher Allie, Raymond L. Brickner, III, Terence P. Fox and Daniel P. Wergin, each dated March 1, 2007, pursuant to the Securities Purchase Agreement by and
among Tontine Capital Partners, L.P., Tontine Capital Overseas Master Fund, L.P. and Tower Tech Holdings Inc. dated March 1, 2007 (incorporated by reference to Exhibit 5 to Schedule 13D filed by Tontine Capital Partners,
 L.P., Tontine Capital Management, L.L.C., Tontine Capital Overseas Master Fund, L.P., Tontine Capital Overseas GP, L.L.C. and Jeffrey L. Gendell on March 5, 2007)10.2

Proxy Agreement between Tontine Capital Partners, L.P., Tontine Capital Overseas Master Fund, L.P., J. Cameron Drecoll, Patrick Rosmonowski, Dennis Palmer and Noel Davis dated August 22, 2007
(incorporated by reference to Exhibit 4 to Schedule 13D filed by J. Cameron Drecoll on October 26, 2007)10.3

Lease agreement dated January 1, 2005 between Tower Tech Systems Inc. and City Centre, LLC (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2005)


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Table of Contents

Exhibit
Number

Description10.4

Amendment, dated December 1, 2007, to Lease agreement dated January 1, 2005 between Tower Tech Systems Inc. and City Centre, LLC (incorporated by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2007)10.5

Lease Agreement dated December 26, 2007 between Tower Tech Systems Inc. and City Centre, LLC (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2007)10.6

Purchase Agreement Addendum effective February 11, 2008 between Brad Foote Gear Works, Inc. and BFG Cicero LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed February 21, 2008)10.7

Assignment and Assumption of Purchase Agreement effective February 11, 2008 between Brad Foote Gear Works, Inc. and 1309 South Cicero Avenue, LLC (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K filed February 21, 2008)10.8

Purchase Agreement effective February 11, 2008 between Brad Foote Gear Works, Inc. and BFG Pittsburgh LLC (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K
filed February 21, 2008)10.9

Assignment and Assumption of Purchase Agreement effective February 11, 2008 between Brad Foote Gear Works, Inc. and 5100 Neville Road, LLC (incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K filed February 21, 2008)10.10

Securities Purchase Agreement dated March 1, 2007 among the Company, Tontine Capital Partners, L.P. and Tontine Capital Overseas Master Fund, L.P. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K filed March 5, 2007)10.11

Securities Purchase Agreement dated August 22, 2007 among the Company, Tontine Capital Partners, L.P., Tontine Capital Overseas Master Fund, L.P., Tontine Partners, L.P., Tontine Overseas Fund,
 Ltd. and Tontine 25 Overseas Master Fund, L.P. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 24, 2007)10.12

Amended and Restated Securities Purchase Agreement dated January 3, 2008 by and among the Company, Tontine Capital Partners, L.P., Tontine Partners, L.P., and Tontine 25 Overseas Master Fund, L.P.
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed January 4, 2008)10.13

Securities Purchase Agreement dated April 22, 2008 between Broadwind Energy, Inc., Tontine Capital Partners, L.P., Tontine Partners, L.P., Tontine Overseas Fund, Ltd., and Tontine 25 Overseas
Master Fund, L.P. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 28, 2008)10.14

Securities Purchase Agreement dated April 22, 2008 between Broadwind Energy, Inc. and Charles H. Beynon (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed
April 28, 2008)10.15

Registration Rights Agreement dated March 1, 2007 among the Company, Tontine Capital Partners, L.P., and Tontine Capital Overseas Master Fund, L.P. (incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K filed March 5, 2007)


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Exhibit
Number

Description10.16

Amendment to Registration Rights Agreement dated October 19, 2007, among the Company, Tontine Capital Partners, L.P., Tontine Capital Overseas Master Fund, L.P., Tontine Partners, L.P., Tontine
Overseas Fund, Ltd. and Tontine 25 Overseas Master Fund, L.P. (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed October 24, 2007)10.17

Amendment No. 2 to Registration Rights Agreement among the Company, Tontine Capital Partners L.P., Tontine Partners, L.P., Tontine Capital Overseas Master Fund, L.P., Tontine 25 Overseas Master
Fund, L.P., and Tontine Overseas Fund, Ltd. dated July 18, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 23, 2008)10.18

Amendment No. 3 to Registration Rights Agreement among the Company, Tontine Capital Partners L.P., Tontine Partners, L.P., Tontine Capital Overseas Master Fund, L.P., Tontine 25 Overseas Master
Fund, L.P., and Tontine Overseas Fund, Ltd. dated September 12, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 12, 2008)10.19

Amendment No. 4, dated October 31, 2008, to Registration Rights Agreement dated March 1, 2007 and amended October 19, 2007, July 18, 2008 and September 12, 2008, among Broadwind Energy,
 Inc., Tontine Capital Partners, L.P., Tontine Capital Overseas Master Fund, L.P., Tontine Partners, L.P., Tontine Overseas Fund, Ltd. and Tontine 25 Overseas Master Fund, L.P. (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 4, 2008)10.20

Waiver relating to Registration Rights Agreement, dated January 9, 2009, by Tontine Capital Partners, L.P., Tontine Capital Overseas Master Fund, L.P., Tontine Partners, L.P., Tontine Overseas Fund,
 Ltd. and Tontine 25 Overseas Master Fund, L.P. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed January 15, 2009)10.21

Registration Rights Agreement dated October 19, 2007 among the Company, J. Cameron Drecoll, Pat Rosmonowski, Dennis Palmer and Noel Davis (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed October 24, 2007)10.22

Registration Rights Agreement dated January 16, 2008 among the Company, EMS, Inc., Fagen, Inc., Joseph A. Kolbach and Daniel A. Yarano (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed January 23, 2008)10.23

Registration Rights Agreement dated April 24, 2008 between Broadwind Energy, Inc. and Charles H. Beynon (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed
April 28, 2008)10.24

Registration Rights Agreement dated June 4, 2008 between Broadwind Energy, Inc. and the shareholders of Badger Transport, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed June 10, 2008)10.25

Employment Agreement dated October 19, 2007 between the Company and J. Cameron Drecoll (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed
October 24, 2007)10.26

Amended and Restated Employment Agreement dated November 12, 2008 between the Company and Lars Moller (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K/A filed
November 18, 2008)


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Exhibit
Number

Description10.27

Amended and Restated Employment Agreement dated November 12, 2008 between the Company and Matthew J. Gadow (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K/A filed
November 18, 2008)10.28

Employment Agreement dated as of June 30, 2008 between the Company and Robert A. Paxton (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed
March 16, 2009)(1)10.29

Employment Agreement dated as of August 1, 2008 between the Company and Jesse E. Collins, Jr. (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed
January 14, 2010)10.30

Employment Agreement dated as of June 30, 2008 between the Company and J.D. Rubin (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed March 16,
2009)10.31

Employment Agreement dated as of July 29, 2009 between the Company and Stephanie K. Kushner (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed
August 3, 2009)10.32

Separation Agreement and Release dated as of April 30, 2009, by and between Broadwind Energy, Inc. and Matthew Gadow (incorporated by reference to Exhibit 10.9 to the Company's Current Report on
Form 8-K filed May 1, 2009)10.33

Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed October 26, 2007)10.34

2007 Equity Incentive Plan, as amended through August 8, 2008 (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2008)10.35

Form of Executive Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed March 16, 2009)10.36

Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed March 16, 2009)10.37

Form of Nonqualified Option Agreement (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed March 16, 2009)10.38

Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed March 16, 2009)10.39

Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed March 16, 2009)10.40

Form of Performance Award Agreement (incorporated by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K filed March 16, 2009)10.41

Form of Stock Appreciation Rights Agreement (incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K filed March 16, 2009)10.42

Broadwind Energy, Inc. Executive Short-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 16, 2009)


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Exhibit
Number

Description10.43

Agreement Governing Extensions of Credit dated October 4, 2007 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.35 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007)10.44

Commercial Promissory Note dated October 4, 2007, from Tower Tech Systems Inc. to Investors Community Bank (incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2007)10.45

Commercial Loan Agreement dated October 4, 2007 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007)10.46

Commercial Security Agreement dated October 4, 2007 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007)10.47

Agreement Governing Extensions of Credit dated March 21, 2008 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.39 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007)10.48

Commercial Promissory Note dated March 21, 2008, from Tower Tech Systems Inc. to Investors Community Bank (incorporated by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2007)10.49

Commercial Loan Agreement dated March 21, 2008 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2007)10.50

Guaranty dated October 22, 2008, by the Company to Investors Community Bank for R.B.A. Inc. (incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2008)10.51

Guaranty dated October 22, 2008, by the Company to Investors Community Bank for Tower Tech Systems Inc. (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2008)10.52

Commercial Debt Modification Agreement dated as of October 22, 2008 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.58 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)10.53

Guaranty dated October 22, 2008, by R.B.A. Inc. to Investors Community Bank for Tower Tech Systems Inc. (incorporated by reference to Exhibit 10.59 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2008)10.54

Guaranty dated October 22, 2008, by Tower Tech Systems Inc. to Investors Community Bank for R.B.A. Inc. (incorporated by reference to Exhibit 10.60 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2008)10.55

Agreement Governing Extensions of Credit dated March 13, 2009 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.88 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2008)


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Exhibit
Number

Description10.56

Commercial Debt Modification Agreement dated March 13, 2009 between Tower Tech Systems Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.89 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2008)10.57

Agreement Governing Extensions of Credit dated March 13, 2009 between R.B.A. Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.90 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2008)10.58

Commercial Debt Modification Agreement dated March 13, 2009 between R.B.A. Inc. and Investors Community Bank (incorporated by reference to Exhibit 10.91 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2008)10.59

Agreement Governing Extensions of Credit dated April 22, 2009 between Investors Community Bank and R.B.A. Inc. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2009)10.60

Master Amendment dated as of December 30, 2009 among Investors Community Bank, Tower Tech Systems Inc., and Broadwind Energy, Inc. (incorporated by reference to Exhibit 10.63 to the Company's
Registration Statement on S-1 filed on January 5, 2010)10.61

Construction Loan Agreement, dated April 28, 2009, by and between Tower Tech Systems Inc. and Great Western Bank (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed May 1, 2009)10.62

Promissory Note, dated April 28, 2009, from Tower Tech Systems Inc. to Great Western Bank (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed May 1,
2009)10.63

Letter Agreement, dated April 28, 2009, by and among Broadwind Energy, Inc., Tower Tech Systems Inc. and Great Western Bank (incorporated by reference to Exhibit 10.96 to Amendment No. 1 to
the Company's Registration Statement on Form S-1)10.64

Commercial Security Agreement, dated April 28, 2009, by and between Tower Tech Systems Inc. and Great Western Bank (incorporated by reference to Exhibit 10.4 to the Company's Current Report on
Form 8-K filed May 1, 2009)10.65

Mortgage, dated April 28, 2009, from Tower Tech Systems Inc. to Great Western Bank (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed May 1,
2009)10.66

Assignment of Deposit Account, dated April 28, 2009, by and between Tower Tech Systems Inc. and Great Western Bank (incorporated by reference to Exhibit 10.6 to the Company's Current Report on
Form 8-K filed May 1, 2009)10.67

Subordination Agreement, dated April 27, 2009, by and between Broadwind Energy, Inc. and Great Western Bank (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K
filed May 1, 2009)10.68

Commercial Guaranty, dated April 27, 2009, from Broadwind Energy, Inc. to Great Western Bank (incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed May 1,
2009)10.69

Change in Terms Agreement, dated December 22, 2009, by and between Tower Tech Systems Inc. and Great Western Bank (filed herewith)


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Exhibit
Number

Description10.70

Letter Agreement, dated December 22, 2009, by and among Broadwind Energy, Inc., Tower Tech Systems Inc. and Great Western Bank (filed herewith)10.71

Change in Terms Agreement, dated February 16, 2010, by and between Tower Tech Systems Inc. and Great Western Bank (filed herewith)10.72

Letter Agreement, dated February 16, 2010, by and among Broadwind Energy, Inc., Tower Tech Systems Inc. and Great Western Bank (filed herewith)21.1

Subsidiaries of Broadwind Energy, Inc. (filed herewith)23.1

Consent of Grant Thornton LLP (filed herewith)31.1

Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)31.2

Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer (filed herewith)32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer (filed herewith)


Indicates
management contract or compensation plan or arrangement.


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