UNITED STATES SECURITIES AND
                               EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------
                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2003
                        Commission files number 000-31973

                            Beacon Power Corporation
             (Exact name of registrant as specified in its charter)


            Delaware                                   04-3372365
(State or other jurisdiction of                     (I.R.S.Employer
 incorporation or organization)                    Identification No.)

     234 Ballardvale Street
 Wilmington, Massachusetts                             01887-1032
(Address of principal executive offices)               (Zip code)

                              (978) 694-9121 Phone
                               (978) 694-9127 Fax
              (Registrant's telephone number, including area code)
                            ------------------------
        Securities registered pursuant to Section 12(b) of the Act: None

                    Securities registered pursuant to Section
                                12(g) of the Act:

                     Common Stock, par value $.01 per share
                            ------------------------

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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 __X___

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined by rule 12b-2 of the Act). ___ Yes _X_ No

     As of June 28, 2003 the market value of the voting stock of the  registrant
held by non-affiliates of the registrant was $7,450,147.

     The number of shares of the  Registrant's  common stock, par value $.01 per
share, outstanding as of March 23, 2004 was 43,005,526.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The Exhibit  Index  (Item No. 15)  located on pages 49 and 50  incorporates
several documents by reference as indicated therein.

<PAGE>
                                Table of Contents
                                                                          Page
PART I
     Item 1.    Business                                                     1
     Item 2.    Properties                                                   9
     Item 3.    Legal Proceedings                                            9
     Item 4.    Submission of Matters to a Vote of Security Holders          9
     Item 4A.   Executive Officers of the Company                            9

PART II
     Item 5.    Market for Registrant's Common Equity and Related
                  Stockholder Matters                                       11
     Item 6.    Selected Consolidated Financial Data                        12
     Item 7.    Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                       13
     Item 7A.   Quantitative and Qualitative Disclosure about Market Risk   27
     Item 8.    Financial Statements and Supplementary Data                 28
     Item 9.    Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure                       50
     Item 9A.   Controls and Procedures                                     50

PART III
     Item 10.   Directors and Executive Officers                            51
     Item 11.   Executive Compensation                                      55
     Item 12.   Security Ownership of Certain Beneficial Owners
                  And Management                                            58
     Item 13.   Certain Relationships and Related Transactions              60
     Item 14.   Principal Accounting Fees and Services                      61

PART IV
     Item 15.   Exhibits, Financial Statement Schedules, and
                  Reports on Form 8-K                                       62

     Signatures                                                             65

<PAGE>
Note Regarding Forward Looking Statements:

This Annual Report on Form 10-K may include  statements  that are not historical
facts and are considered  "forward-looking" statements within the meaning of the
Private  Securities  Litigation  Reform  Act of  1995.  These  "forward-looking"
statements  reflect  Beacon Power  Corporation's  view about  future  events and
financial  performance,  including  among  other  things,  its  expected  future
revenues,  costs  of  operations  and  capital  expenditures,  estimates  of the
potential markets for its products,  the rate of growth in those markets and the
competitive  advantage  that the  Company's  products  has that  will  result in
gaining  market  share.  Such  statements  made by the  Company  fall within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended. All such forward-looking
statements  are  necessarily  only  estimates  of future  results and the actual
results  achieved by the Company may differ  materially from these estimates due
to  a  number  of  factors  as  discussed  in  the  section  entitled  "Item  7.
Management's  Discussion and Analysis of Financial  Conditions"  and "Results of
Operations - Risk Factors " of this Form 10-K.

                                     PART I

Item 1.  Business

Overview

     Beacon  Power   Corporation  is  a  development   stage  company  that  was
incorporated on May 8, 1997. The  Corporation  and its subsidiary  (collectively
"Beacon" or "the Company") design, develop,  configure and offer for sale, power
conversion   and  energy   storage   systems  that  provide   highly   reliable,
high-quality, environmentally friendly, uninterruptible electric power employing
both  proprietary  and  third-party  technology  and  components for a number of
applications and potential applications. The Company has the following products,
which are in varying stages of development:

o    A  high-power,  flywheel-based  system,  that  continuously  regulates  the
     frequency of electricity on the power grid,  which the Company refers to as
     its Smart  Energy(TM)  Matrix,  that  could be used by  independent  system
     operators and regional transmission operators to regulate electrical power;

o    The Smart Energy Matrix could also  continuously  regulate the frequency of
     electricity  produced by a distributed  generation  facility and compensate
     for temporary differences between the demand for electricity and the amount
     being produced by that facility;

o    A high-power,  flywheel-based system that could provide electricity until a
     longer-term backup power source comes on-line,  which the Company refers to
     as its Smart Power(TM) 250;

o    An electronic system that converts direct current  electricity  produced by
     photovoltaic  panels into alternating  current  electricity for residential
     and  commercial  use,  which the  Company  refers to as its Smart  Power M5
     inverter system; and

o    A   high-energy   flywheel-based   system  that  stores   electricity   for
     telecommunications,  cable systems, computer networks, and Internet markets
     applications,  the  Company  refers to this  product  as its  Smart  Energy
     system.

     From the  Company's  inception  through  December  31, 2003 it has incurred
losses of  approximately  $123.5 million.  The Company does not expect to become
profitable  or obtain  positive  cash flow before  2006.  The Company must raise
additional  equity to execute its business plan.  Based on the Company's rate of
expenditure of cash and the additional  expenditures  expected in support of its
business  plan,  the Company will need to obtain an equity  investment  by early
2005 to fund:

o        continuing as a going concern;
o        ongoing research and development of inverter products;
o        manufacturing operations;
o        working capital requirements; and
o        new business development,

     In the event that the Company elects to begin full scale development of its
Smart Energy  Matrix or Smart Power 250 flywheel  systems,  the amount of equity
required would increase substantially.

     The  Company's  losses and uses of cash may  fluctuate  significantly  from
quarter to  quarter as sales (if any),  costs of  development,  inventories  and
receivables  fluctuate.  These  fluctuations  in  cash  requirements  could  put
additional  pressure on the Company's cash  position.  There can be no assurance
that the Company will be able to raise the required  capital or that  sufficient
funds will be  available  to it on terms that it deems  acceptable,  if they are
available at all.

     The Company  continues to be accounted for as a  development  stage company
under  Statement  of  Financial  Accounting  Standards  No.  7  "Accounting  and
Reporting by Development Stage Enterprises." Even though the Company had shipped
31 of its Smart Power M5 inverter  systems by December 31, 2003,  its operations
have  not yet  reached  a  level  that  would  qualify  it to  emerge  from  the
development  stage. The Company is selling its Smart Power M5 inverter system to
distributors  who in turn  sell  them to  installers  who  then  make  sales  to
residential homeowners or commercial customers.


Products and Markets

Smart Energy Matrix

     The Company has identified an application  for its Smart Energy Matrix in a
well-established market with attractive pricing characteristics.  This market is
frequency  regulation  for the  power  grid.  In order to  maintain  a  constant
frequency alternating current, the power grid must constantly balance the supply
of power  generated  with the varying  demand for it. This balance is maintained
today by constant,  small  adjustments  in the output of some of the  generators
operating on the grid.  Not all  generators  can be  successfully  operated with
constantly  varying output, but all generators that are able to operate this way
incur higher  operating costs due to increased fuel consumption and maintenance.
Using the Company's Smart Energy Matrix, frequency regulation can, for the first
time, be provided  separately with higher performance and lower operating costs.
The Smart Energy  Matrix is the first  product that would  specifically  address
this application.

     The requirements of the frequency  regulation  application  match perfectly
with the  characteristics of the Smart Energy Matrix,  which draws excess energy
when generated  power exceeds demand and delivers it when demand exceeds supply.
Unlike  generator-based  frequency  regulation,  no  fuel  is  consumed,  and no
emissions  are  generated.  The Smart  Energy  Matrix's  characteristics  should
simplify and  accelerate  the process for  establishing  new sites and obtaining
required  permits.  The Smart Energy Matrix can also be located nearly  anywhere
advantageous to the power grid, even within distribution systems.

     From an environmental  perspective,  the Company's Smart Energy Matrix will
reduce fuel  consumption  of generators  because they will be able to operate at
optimum efficiency instead of operating at less than optimum efficiency in order
to provide regulation. In addition, during peak output requirements,  widespread
use of the Company's Smart Energy Matrix to provide  frequency  regulation would
avoid the need to utilize the most inefficient generators. Both of these changes
in the way generators are used would reduce carbon dioxide and other emissions.

     Separate from the frequency  regulation of the power grid market identified
above, the Company has identified an additional application for its Smart Energy
Matrix. That application is providing a high-power,  flywheel-based  system that
continuously  regulates the frequency of  electricity  produced by a distributed
generation facility and compensates for temporary differences between the demand
for electricity and the amount being produced. A distributed generation facility
is any  electrical  power source other than the power grid,  including  advanced
generators such as fuel cells, natural gas engines, wind turbines,  photovoltaic
arrays and microturbines  which usually supply local power to facilities such as
hospitals or manufacturing plants. The Company's Smart Energy Matrix can be used
to regulate the frequency of the distributed  generation facility's power in the
same way it regulates  the frequency of the power grid as described  above.  The
Smart Energy Matrix,  because of its fast response time, can also compensate for
the generators slow response  characteristics  and therefore supply stability to
these micro-grid facilities. In distributed generation,  demand fluctuations are
a much higher percentage of power production than experienced in the power grid,
which affects the distributed generator's ability to match supply and demand.

     The Smart Energy  Matrix will be designed to store enough energy to deliver
one  megawatt  for 15 minutes and can be ganged to deliver ten or more  megawatt
systems.  Each Smart  Energy  Matrix  will  consist of a  container  housing ten
flywheels and the necessary electronics to connect to the grid. The Smart Energy
Matrix because of its container design will be able to be deployed in a few days
and it can be easily relocated.

     Although  the Company has finished  the  preliminary  designs for the Smart
Energy Matrix,  it will not begin  significant  design or development  until the
market has  expressed a more  tangible  interest in this product and the Company
has sufficient funds to complete development.  Once begun, the development cycle
for completion of this product is expected to be 18 to 24 months,  and achieving
significant  volume  production  capability  will take an  additional  six to 12
months.  Therefore,  the Company cannot  receive  revenues from this product for
approximately two to three years after development has commenced.

Smart Power 250

     For uninterrupted  power supply applications the Company has available it's
Smart  Power 250 for  short  (10 to 60  seconds)  duration.  When grid  power is
interrupted, the Company's Smart Power 250 provides power for a short time while
a diesel  generator can be activated.  This  application  would typically be for
commercial  and  industrial  facilities.  The Company does not produce the short
duration Smart Power 250, but has domestic distribution  agreements in place for
the flywheel and the required electronics with their manufacturers.  The Company
does not believe  that the market for this product is  significant.  The Company
does not have any short  duration Smart Power 250 units in inventory and has not
placed any purchase orders for any of the product's components.  The Company has
designs based on its  technology  that could create a long duration  Smart Power
250 that  would  have  output  power of up to  500kW or  durations  of ten to 15
minutes.  The ability to provide run times of ten to 15 minutes  would allow the
use of alternate  long-term  power sources such as gas turbines,  fuel cells and
natural gas generators which require the longer ride through  capabilities.  The
Company  believes  that as these  alternative  long-term  power  sources  become
commercialized,  its  product's  long  duration  capabilities  make it an  ideal
component of these power sources.

Smart Power M5

     The Smart  Power M5  inverter  system for the  photovoltaic  energy  market
converts  the  direct  current  generated  by solar  cells  from  sunlight  into
alternating  current  required by residential and commercial users for operating
electrical  devices  and  reducing  the  amount of  purchased  power  when it is
connected to a power grid.  Solar cells  contain  semi-conducting  material that
converts sunlight into direct current  electricity.  Photovoltaic modular panels
typically  contain  approximately  40 solar cells. The Company's Smart Energy M5
inverter system has the capacity to convert direct current  electricity  into up
to 5,000 watts of alternating current.

     The Company began  delivering its  Underwriters  Laboratory  approved Smart
Power M5 inverter systems in December 2003. The Smart Power M5 has been designed
for use in North American  grid-connected solar power applications.  The Company
intends to develop on and off grid inverters for use  throughout the world.  The
Company  also  plans to  develop  inverters  for use in low power  wind  turbine
applications.

Smart Energy

     The Company has available for sale its Smart Energy products, which deliver
a low level of power for a long  period of time  (typically  measured in hours).
These  products  include  the 2kWh and 6kWh  Smart  Energy  systems,  which have
demonstrated  quality  performance and reliability at numerous sites.  The Smart
Energy products are tailored to the telecommunications,  cable systems, computer
networks,  and  Internet  markets.  The Company  believes  that its Smart Energy
products  offer  life  cycle  cost   advantages  and   significant   performance
improvements over  conventional,  battery-based  back-up power sources.  At this
time,  does not have orders for its Smart  Energy  products or any  inventory of
finished  products and does not have  purchase  orders in place with vendors for
components.  In the event that the Company receives  significant customer orders
for these products, it will need to place orders for components with vendors and
hire and train  manufacturing  personnel to assemble,  inspect and assist in the
installation of deliverable units.

     The  Company's  Smart Energy  systems have  approximately  350,000 hours of
operation in customer sites without failure of their  mechanical  system,  which
the Company believes verifies the reliability of their technologies. The Company
has successfully  maintained power with no degradation of service in planned and
unplanned losses of utility power at several telecom and cable sites.  Also, the
Company's systems can be adapted to deliver the amount of power and back-up time
required to meet specific  needs of customers by integrating  multiple  flywheel
systems in parallel. This has been successfully demonstrated at several sites.

     The Company believes that its Smart Energy  technology is an excellent base
to begin  development  of a higher  energy 25kWh  flywheel  system for renewable
applications when the Company  determines that the market interest is sufficient
to justify that product's development.

Approvals and Certifications

     The Company has  obtained  Underwriters  Laboratory  approval for its Smart
Power M5 inverter system. The California Energy Commission and New York's Public
Service Commission for on-grid applications have also approved this product.

     The Company has obtained Underwriters  Laboratory approval for its existing
2kWh and 6kWh Smart Energy products. The Company has also designed and certified
its Smart Energy systems in accordance with Telcordia  standards,  which are the
baseline   for   performance   and   safety   standards   established   by   the
telecommunications  industry.  The Company's  Smart Energy products are the only
flywheel  products  that have passed a Zone 4 earthquake  test while  operating,
making them suitable for use anywhere in the United States.  The Company's Smart
Energy flywheel systems have also been successfully  tested for concurrence with
the Institute of Electrical and Electronics Engineers (IEEE) 587 standard, which
is the required standard for all Uninterruptible Power Supply systems.

The Company's Technology

Flywheel-based products

     Since the  Company's  formation,  it has been  developing  flywheel  energy
storage  products to offer superior  reliability  and performance at competitive
costs. The Company's composite flywheel is a rotating wheel on hybrid,  magnetic
bearings that operates in a near-frictionless  vacuum environment.  When the rim
spins, it stores kinetic  energy.  The flywheel is powered up to its operational
speed,  like a motor,  using  electricity  from an external  power  source.  The
flywheel is able to spin for  extended  periods with great  efficiency,  because
friction and drag are virtually  eliminated by employing magnetic bearings and a
vacuum in the  container.  Because  it has very low  friction,  little  power is
required to maintain the flywheel's  operating  speed.  When electrical power is
needed, the spinning flywheel drives a generator and its bi-directional inverter
converts the kinetic energy into electrical energy.

     Steel  flywheels  have  been  used  since  the  industrial   revolution  in
applications  such as piston engines to store energy during the power stroke for
release during the compression  stroke.  These  applications  are limited by the
revolutions  per minute at which steel  flywheels are able to operate and by the
limited  density  of  storage  of energy by volume of steel.  The  products  the
Company offers employ new enabling  materials and products such as high-strength
fiber, efficient electric drives, and low-loss, long-life bearings to create new
generations  of  flywheel  products.   The  Company's  composite  flywheels  are
fabricated from  high-strength,  lightweight fiber composites,  such as graphite
and fiberglass combined with resins,  which allow the flywheel to rotate at high
speeds and store large  amounts of energy  relative  to similar  size and weight
flywheels made from metals.  For example,  a 600-pound steel flywheel running at
8,000  revolutions per minute will store  approximately 900 watt-hours of energy
and can deliver  only 850  watt-hours  of energy.  In  contrast,  the  Company's
500-pound 6kWh composite  flywheel running at 22,500 RPM stores 7,200 watt-hours
of energy and delivers 6,000  watt-hours of energy.  On a per-pound  basis,  the
Company's  composite  flywheel  technology is significantly  more efficient than
steel flywheels.

     The Company's proprietary technology enables the design of maintenance-free
flywheel products,  in that its products employ an internal rather than external
vacuum  system and its bearing  systems have been designed and developed to have
no scheduled  replacement or maintenance.  Competing  flywheel  products rely on
bearings and external  vacuum  systems that  require  periodic  maintenance  and
replacement.  The  Company's  Smart Energy  flywheel  systems have  dramatically
longer  discharge times than any other flywheel  energy storage system;  this is
possible because the Company's  technologies  result in higher amounts of stored
energy and minimal energy losses during those products' operation.

Inverter Products

     The  Company  began  developing  its Smart  Power M5  inverter  system  for
photovoltaic  applications  during  2003.  This  product  and  additional  solar
products being developed are based on intellectual property the Company acquired
and  has   significantly   enhanced  in  the  areas  of  performance,   ease  of
installation, software integration, and reliability.


     The  Company's  Smart  Power M5  inverter  system  is  designed  for use in
grid-connected solar applications. When AC power is interrupted, the Smart Power
M5 inverter system immediately  converts to an independent battery back-up mode,
continuing to provide  electricity to critical  loads.  This product is the most
compact,  easy-to-install  and  efficient  product  available  for solar on-grid
applications.  The Company plans to expand its product family to include systems
for use in solar  off-grid  applications  as well as high  voltage  on-grid  and
off-grid  domestic  applications.  The  Company  plans to develop  international
configurations  for those  applications it believes it can successfully  market.
The  Company  also  plans  to  introduce  its  technologies  into  wind  turbine
applications in the future.


Research and Development

     The  Company  believes  that  its  research  and  development  efforts  are
essential to its ability to successfully design and deliver products to targeted
customers, as well as to modify and improve its existing products to reflect the
evolution of markets and  customer  needs.  The Company has worked  closely with
potential  customers to define product features and performance  requirements to
address  specific needs for both flywheel based  solutions and renewable  energy
applications. Research and development expenses, including engineering expenses,
were  approximately  $3,550,000 in 2003,  $7,130,000 in 2002, and $17,628,000 in
2001.  The  Company  expects  research  and  development  expenses in 2004 to be
somewhat higher than those in 2003 due primarily to the costs of development for
several  new  inverter  products.  If the  Company  is able to  validate  market
opportunities for its flywheel based products, it may choose to make significant
levels  of  research  and  development  expenditures  in order to  pursue  those
markets. At December 31, 2003, the Company employed 18 engineers and technicians
who were engaged in research and development.  At December 31, 2002, the Company
had 23 engineers and technicians.

Manufacturing

     The Company  assembles  and tests Smart Power M5 inverters at its facility.
The Company has design drawings and process specifications to ensure the quality
of components manufactured by its suppliers.  The Smart Power M5 inverter system
is  a  combination  of  off-the-shelf  components  and  components  produced  to
specifications  developed by the Company.  The Company  believes it has adequate
vendor sources for all the components for the Smart Power M5 inverter systems to
meet customer demand.

     The  Company's  facility  continues  to be  underutilized  as a  result  of
reductions in  development  work and a lack of customer  orders for its flywheel
systems.  The Company maintains a limited  manufacturing staff, many of whom are
skilled in Six-Sigma cost and quality control techniques.  If customers begin to
order  flywheel  systems,  the Company  expects to  establish  assembly and test
capabilities  using  outside  suppliers  to provide  components  to meet product
demand.  The  suppliers  of the  Company's  mechanical  flywheel and the control
electronics for short duration  Uninterruptible  Power Supply  applications  are
both single-source suppliers, and the loss or interruption of supply from either
of these suppliers would  adversely  affect the Company's  ability to market and
deliver these products.

Sales and Marketing

     The Company's sales and marketing  efforts for its  flywheel-based  product
have been  focused  on  regional  transmission  operators,  in  particular,  PJM
Interconnect  system,  which is the nation's first federally  regulated regional
transmission  operator.  PJM has worked closely with the Company to evaluate the
performance characteristics of its product. PJM has informed the Company that it
believes the  Company's  Smart Energy Matrix  flywheel  system could be added to
PJM's power grid, and bid into the frequency  regulation  market. The Company is
presenting  its Smart  Energy  Matrix  product  to other  regional  transmission
operators  as well  as  power  utilities  in an  effort  to  establish  tangible
interest.

     The Company's sales and marketing  efforts in renewable  energy are focused
on the sale of its Smart Power M5  inverter  systems  for North  American  solar
power applications. For the renewable energy market the Company is marketing its
Smart  Power M5 inverter  system to  distributors  in North  America who provide
products to residential and commercial installers.  The Company is attempting to
build market interest through advertising,  trade press articles,  participating
in industry conferences,  technical presentations to installers, trade shows and
homeowner shows.

     Marketing  efforts  for the  Company's  Smart  Energy  and Smart  Power 250
products have been limited to providing  support for its field trial systems and
identifying  key prospects and working with those  companies to demonstrate  the
Company's product advantages,  which include,  life cycle cost benefits and high
reliability.  The Company has installed on-site,  working demonstration units of
both its Smart Energy  products at various  major  telecommunications  and cable
companies. While sales efforts for these products have been limited, the Company
plans to continue to perform  market  analysis  to  identify  opportunities  for
installations  that require the unique  characteristics of these products and to
emphasize their value  proposition  and greater  technical  benefits.  Potential
customers for its Smart Power 250 product  include  businesses  with  heightened
needs for 100% reliability,  such as hospitals,  data centers,  call centers and
other critical-use facilities.  The Company believes that its products will also
be attractive to customers with power sources that are very expensive to replace
or maintain due to their  location or other  factors,  or power sources  located
where  there are high or low  prevailing  temperatures  or  dramatic  changes in
temperature.  And from an  environmental  perspective,  the Company believes its
flywheel products,  which contain no hazardous chemicals, are more attractive to
customers when compared to lead-acid batteries.

Backlog

     At December  31,  2003,  the Company had shipped 31 Smart Power M5 inverter
systems to its distributors but did not recognize  revenue.  The Company did not
have any  unfilled  orders at  year-end.  Revenue  will be  recognized  on these
products as they are sold by the distributors.

Customer Service

     The Company intends to provide  maintenance and support for its products by
utilizing its own customer  service  personnel as well as support as needed from
its engineering  organization.  In the future, the Company may elect to contract
all or part of the customer service activities to outside sources as it deems it
effective from both a customer  satisfaction and Company cost  perspective.  The
Company's Smart Power M5 inverter system is sold with a five-year warranty.

Competition

     The  Company   believes  its  Smart  Energy  Matrix  will  offer   superior
performance and cost benefits over  generators,  which now perform the task that
will be performed by the Smart Energy Matrix.  The Company  believes that, given
the demands of the frequency  regulation market,  batteries,  metal flywheel and
other alternative energy technologies,  such as fuel cells and ultra capacitors,
will not compete with the Smart Energy Matrix.

     There are several  products  that  compete with the Smart Power M5 inverter
system sold by companies with greater  experience in the solar power  conversion
market.  This market is  intensely  competitive,  with the  principal  bases for
competition being system reliability, quality, brand recognition, and price. The
Company  believes  that  it has a  competitive  advantage  due to its  product's
reliability,  ability to continue to provide power when the grid fails, improved
design and  efficiency  benefits  compared  to other  systems  providing  energy
storage.

     Substantially all of the high-energy and uninterrupted power supply markets
that the Company's Smart Energy and Smart Power flywheel  systems compete in are
dominated by  battery-based  products,  rather than  battery-free  technologies.
These  markets  are  intensely   competitive,   with  the  principal  bases  for
competition   being  system  first  cost,  brand   recognition,   quality,   and
reliability.

     Additional  alternative  energy products that are  potentially  competitive
include ultra  capacitors,  fuel cells with integrated  hydrogen  generation and
storage, and super-conducting  magnetic energy storage products. There are other
companies  selling diesel  generators and micro turbines that are competitors in
the  broadest  sense,  although  the Company  believes  that in most cases,  its
flywheel systems will be complementary to that equipment.

     The  Company's  Smart  Energy  Matrix  system  provides  back-up  power and
competes on the basis of life-cycle cost and value to the customer. Although the
Company's product offers attractive performance to cost benefit when viewed on a
life-cycle cost basis,  customers are more focused on first cost, which makes it
very  difficult  for the Company to  effectively  compete.  The Company plans to
continue to emphasize  the value  proposition  of its products such as increased
dependability, environmental benefits, and their long maintenance-free life.

     The  Company  believes  that  its  high-energy   flywheel  systems  provide
significant  advantages  to potential  customers  due to the  numerous  problems
associated with lead-acid batteries, including:

o    Reliability.  Batteries are not only prone to multiple  problems leading to
     battery  failure,  but  when  they  are  repeatedly  used at close to their
     maximum  energy  capacity;  their  output  capacity  can rapidly  decrease,
     reducing the batteries' effectiveness over time. Also, the amount of energy
     available in battery  systems may not readily be monitored and,  therefore,
     the amount of remaining energy cannot be assured.

o    Life-Cycle  Cost. The use of batteries has both direct and indirect  costs.
     In addition to bearing the initial purchase costs of the batteries,  a user
     must allocate  significant  space to large battery arrays (space that could
     otherwise be allocated to revenue-generating  equipment),  must inspect and
     test them on site every few months (as their  power  output  degrades  over
     time),  must cool them with costly air  conditioning (if the user wishes to
     avoid the rapid  degradation  in  performance  and life that  results  with
     temperature  variations),  and must  replace  them  every  two to six years
     (depending on type of use, environment and other factors).

o    Life. In applications where discharges consume all or most of the battery's
     available  reserve,  or where the batteries are used in facilities that are
     not air-conditioned, the life of batteries is significantly reduced.

o    Environmental.  Batteries contain toxic materials such as lead and sulfuric
     acid.  They are  considered  hazardous  waste  and their  disposal  entails
     rigorous  environmental  regulations.  Facilities with spent batteries must
     make  arrangements  with hazardous  waste  handlers for disposal.  Both the
     costs  associated with disposal and the complexity of compliance for proper
     handling,  permitting and regulatory  requirements continue to increase and
     may accelerate sharply as pressure increases to curb such hazardous wastes.

     In addition to the Company's products, there are other companies working to
offer lead free chemical batteries such as nickel metal hydride and lithium ion,
as  well  as  alternative  technologies  such  as  super  capacitors  and  super
conductive magnetic energy storage.


Intellectual Property

     The Company's  success depends upon its ability to develop and maintain the
proprietary aspects of its technologies and to operate without infringing on the
proprietary rights of others. To some extent, the Company's success also depends
upon the same abilities on the part of its suppliers.

     The intellectual property rights of the Company's  flywheel-based  products
are  based  upon a  combination  of  SatCon  Technology  Corporation's  flywheel
technologies and patents that the Company is licensed to use, in perpetuity, and
patents that the Company  holds or which are pending.  The Company was issued by
SatCon a perpetual, exclusive, royalty-free,  worldwide right and license to use
its  flywheel  technologies  and patents  for  stationary  terrestrial  flywheel
applications.  Those rights include  eleven issued U.S.  patents and eleven U.S.
and foreign  patent  applications  that expire on various dates between 2012 and
2021. This license covers SatCon's technologies and patents and all improvements
made by SatCon through  November 16, 2000,  the date of Beacon's  initial public
offering.  The  Company is not  entitled  to any  improvements  to the  flywheel
technology that SatCon develops  subsequent to that date. The Company expects to
develop  additional  intellectual  properties  and trade secrets as it continues
developing additional Smart Energy and Smart Power flywheel systems. The Company
owns  all  technology  improvements  it has  developed  that  are  based  on the
technology  licensed from SatCon. The Company also holds patents on its flywheel
vacuum system, heat pipe cooling system and output paralleling algorithm and has
25 pending  U.S. and foreign  patent  applications,  and two other  applications
being prepared for filing.

     The Company relies on a combination of patent, trademark,  trade secret and
copyright law and contract  restrictions to protect the  proprietary  aspects of
its  technology.  The  Company  seeks to limit  disclosure  of its  intellectual
property by requiring employees,  consultants, and any third parties with access
to its  proprietary  information  to execute  confidentiality  agreements and by
restricting  access to that  information.  The Company's patent and trade secret
rights are of  material  importance  to its current  and future  prospects.  The
Company is actively pursuing both national and foreign patent protection.

     The short duration Smart Power 250 is based on intellectual  property owned
or controlled by the manufacturers of the two main elements of that product.

     The intellectual  property rights for the Company's Smart Power M5 inverter
systems  are  based on the  intellectual  property  assets  of  Advanced  Energy
Systems,  Inc.,  that the  Company  purchased  in March 2003.  These  assets are
wholly-owned by the Company and include anti-islanding  software,  which ensures
safe grid utility interconnection and reliable transition to stand-by power when
the grid fails, as well as drawings,  source code, production know-how,  and all
associated documentation. The Company has made substantial improvements to these
assets.

Government Regulation

     The Company  does not believe  that it will be subject to existing  federal
and  state  regulatory   commissions  governing  electric  utilities  and  other
regulated   entities.   The  Company   believes  that  its  products  and  their
installation  will be subject to oversight and  regulation at the local level in
accordance with state and local ordinances  relating to building codes,  safety,
pipeline  connections and related matters.  The Company intends to encourage the
standardization  of  industry  codes to avoid  having to comply  with  differing
regulations on a state-by-state or  locality-by-locality  basis. The Company has
obtained  FCC approval of its Smart  Energy 250  flywheel  systems.  The Company
plans to pursue the appropriate approvals for all emerging products.

Employees

     At December 31, 2003,  the Company's  headcount was 24 full-time  employees
and five independent  contractors,  of which approximately 18 were engineers and
technicians  involved  in  research  and  development  and five  were in  sales,
marketing  and  customer  service.  The  remaining  six people were  involved in
administrative tasks. None of the Company's employees are represented by a union
and the Company considers its relations with employees to be satisfactory.

Item 2.  Properties

     The Company's  principal  executive  offices,  laboratory and manufacturing
facilities are located at a single location in Wilmington,  Massachusetts.  This
51,650 square foot facility operates under a lease that expires on September 30,
2007.

Item 3.  Legal Proceedings

     The Company is not involved in any legal proceedings;  however, it may from
time to time be  involved in legal  proceedings  in the  ordinary  course of its
business.

Item 4.  Submission of Matters to a Vote of Security Holders

     There were no matters that were  submitted  to a vote of security  holders,
through the  solicitation of proxies or otherwise,  during the fourth quarter of
the year covered by this report.

Item 4A.  Executive Officers of the Company

     The Company's executive officers,  positions and their ages as of March 23,
2004, are as follows:

Name                     Age           Position

F. William Capp           55           President and Chief Executive Officer,
                                       Director

Matthew L. Lazarewicz     53           Vice President and Chief Technical
                                       Officer

James M. Spiezio          56           Vice President of Finance, Chief
                                       Financial Officer, Treasurer and
                                       Secretary


F. William Capp

     Mr. Capp has served as the Company's  President and Chief Executive Officer
since  December 1, 2001 when he joined  Beacon  Power.  Prior to joining  Beacon
Power, Mr. Capp was the President of the  Telecommunications  group of Bracknell
Corporation,  a company that provided  infrastructure for the telecommunications
industry with annual sales of $350 million and 30 regional offices in the US and
Canada.  From 1997-2000,  Mr. Capp served as the President of a division of York
International  where he  increased  aftermarket  sales by over 50% from  1997 to
1999, which were the two most profitable years in that division's history.  From
1978-1997,  Mr. Capp held numerous  positions at Ingersoll Rand. From 1992-1997,
he served as Vice President and General Manager of the Compressor Division where
he was  responsible  for an  operation  with over 700  employees.  He  managed a
complex supply chain  including over $100 million in purchases from a variety of
companies. From 1989-1992, Mr. Capp was the Vice President of Technology for the
Torrington  Company,  which  is a $900  million  manufacturer  of  bearings  and
precision components to the automotive and other industries worldwide.  Mr. Capp
assisted in the development of new products, new manufacturing  technologies and
project  management.  He also held numerous other  engineering  positions within
Ingersoll  Rand.  Prior to joining  Ingersoll Rand in 1978, he worked for Ford's
Truck Division in such positions as project engineering, supervisor, and product
planning. Mr. Capp received his Bachelor of Science in Aeronautical  Engineering
from Purdue University,  a Master of Business Administration and a Master Degree
in Mechanical Engineering from the University of Michigan. He also has his Black
Belt Training Program from the American Society for Quality.


Matthew L. Lazarewicz

     Mr.  Lazarewicz  has served as the Company's  Vice President of Engineering
since February 1999, and was named Chief Technical Officer in September of 2001.
Prior to joining the Company, Mr. Lazarewicz worked for General Electric Company
in various  capacities.  He started his 25-year career with the General Electric
Company in the gas turbine division as a design engineer. After a transfer to GE
Aircraft  Engines,  he  progressed  through a variety  of  positions  in design,
manufacturing,  quality,  marketing,  and product  support in both  military and
commercial  applications.  Most  recently  he  served as a  manager  of  program
independent analysis from 1996 to 1999, and he was the mechanical design manager
for the F414 engine used in the Navy front line F/A18 fighter from 1991 to 1996.
This included the development  through  production  phases. He was recognized as
the GE Aircraft  Engines  "Engineer of the Year" and received the  Department of
Defense  "Excellence in  Acquisition"  Award for his leadership of this project.
Mr.  Lazarewicz is a Registered  Professional  Engineer in the  Commonwealth  of
Massachusetts  and received both  Bachelor's and Master's  Degrees in Mechanical
Engineering from the Massachusetts Institute of Technology.  Mr. Lazarewicz also
completed his Master's  Degree in Management at the  Massachusetts  Institute of
Technology Sloan School of Management.


James M. Spiezio

     Mr. Spiezio joined the Company in May 2000. He has served as Vice President
of Finance,  Chief Financial  Officer and Treasurer  since July 2000,  Secretary
since March 2001, and the company's  Corporate  Controller from May 2000 to July
2000. He worked as a financial consultant from November 1999 to May 2000. He has
over twenty-five  years of diversified  manufacturing  and financial  management
experience.  Prior to acting as an independent financial consultant, Mr. Spiezio
was  the  Chief  Financial  Officer  at  Starmet   Corporation,   a  diversified
metallurgical   manufacturing   company  engaged  in  both  the  commercial  and
government sectors, from January 1993 to November 1999. While at Starmet he also
served as President of a wholly owned  chemical and  manufacturing  facility for
five  years  and  held  additional   financial  management  positions  including
Corporate  Controller  and  Manager  Planning  and  Analysis.  Prior to  joining
Starmet,   Mr.   Spiezio  held  financial   management   positions  with  United
Technologies  Corporation,  Pratt & Whitney  Aircraft Group in accounting,  cost
control  and  business  analysis.  Prior to Pratt & Whitney,  Mr.  Spiezio  held
financial  management  positions with General Electric Company in both the Power
Systems and Apparatus Services business groups. Mr. Spiezio is a graduate of the
Indiana University School of Business.

<PAGE>
                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     The Company's  Common Stock is quoted on the NASDAQ  SmallCap  Market under
the symbol "BCON".  The following  table sets forth the high and low sales price
of the common stock for the period indicated.

                             High        Low

Twelve months ended December 31, 2003
Fourth quarter               $1.54       $0.70
Third quarter                $1.34       $0.24
Second quarter               $0.48       $0.16
First quarter                $0.30       $0.16

Twelve months ended December 31, 2002
Fourth quarter               $0.44       $0.14
Third quarter                $0.31       $0.15
Second quarter               $0.58       $0.21
First quarter                $1.50       $0.50

     On March 23, 2004,  the last reported  sale price of the  Company's  common
stock on the NASDAQ  SmallCap  Market  was $1.01 per  share,  and there were 303
holders of record of common stock. The number of record holders does not include
shares held in "street name" through brokers.

     The Company  has never  declared  or paid cash  dividends  on shares of its
common stock.  The Company  expects to retain any future earnings to finance the
expansion of its business,  and therefore  does not expect to pay cash dividends
in the foreseeable future. Payment of future cash dividends,  if any, will be at
the  discretion  of the Company's  board of directors  after taking into account
various factors, including the Company's financial condition, operating results,
current and anticipated cash needs and plans for expansion.

Recent Sales of Unregistered Securities

During 2003, the Company issued no unregistered securities.

<PAGE>

Item 6.  Selected Consolidated Financial Data

     The  following  selected  financial  data  should  be  read  together  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and the financial  statements,  including the related notes,  found
elsewhere in this Form 10-K.

     The following  tables present  selected  historical  financial data for the
years ended December 31, 2003,  2002,  2001, 2000, 1999, and for the period from
May 8, 1997, the date of the Company's inception, through December 31, 2003.
<TABLE>
<CAPTION>
                                                                                                     Period from
                                                                                                        Date
                                                                                                    of Inception
                                                                                                    (May 8, 1997)
                                                                                                         to
                                                              Year ended December 31,
                                                                                                    December 31,
                                                    2003     2002      2001      2000      1999         2003
                                                 ------------------------------------------------------------------
                                                               (in thousands, except per share data)

Consolidated Statements of Operations Data:
<S>                                                   <C>      <C>       <C>       <C>       <C>         <C>
Revenues                                              $   -    $   -     $   -     $  50     $  269      $     551

                                                 ------------------------------------------------------------------
Operating expenses:
   Selling, general and administrative                4,936    5,637     8,940     4,631      1,559         28,059
   Research and development                           3,550    7,130    17,628    12,715      3,506         50,344
   Loss on sales commitments                              -        -         -        51        325            376
   Depreciation and amortization                        285    1,644     1,324       401        219          3,951
   Restructuring charges                                  -    2,159         -         -          -          2,159
   Loss on impairment of assets                         367    4,297         -         -          -          4,664
                                                 ------------------------------------------------------------------
Total operating expenses                              9,138   20,867    27,892    17,798      5,609         89,553
                                                 ------------------------------------------------------------------
Loss from operations                                (9,138) (20,867)  (27,892)  (17,748)    (5,340)       (89,002)
Interest and other income (expense), net                520       28     1,746       330      (331)          2,405
                                                 ------------------------------------------------------------------
Net loss                                            (8,618) (20,839)  (26,146)  (17,418)    (5,671)       (86,597)
Preferred stock dividends                                 -        -         -  (35,797)      (917)       (36,826)
Accretion of redeemable convertible preferred
stock                                                     -        -         -      (64)       (42)          (113)
                                                 ------------------------------------------------------------------
Loss to common shareholders                         (8,618) (20,839)  (26,146)  (53,279)    (6,630)      (123,536)
                                                 ==================================================================
Net loss per share, basic and diluted               ($0.20)  ($0.49)   ($0.61)  ($10.77)  ($393.52)
                                                 ===================================================
Shares used in computing net loss per share,         42,886   42,797    42,551     4,946         17
basic and diluted
                                                 ===================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                  As of December 31,
                                                 2003         2002        2001       2000        1999
                                             -------------------------------------------------------------
                                                                    (in thousands)
Balance Sheet Data:
<S>                                                 <C>        <C>         <C>        <C>            <C>
Cash and cash equivalents                           $9,314     $18,222     $34,602    $62,497        $234
Working capital                                      9,048      17,220      32,788     59,224       (878)
Total assets                                        12,599      20,906      42,131     67,738         974
Redeemable convertible preferred stock                   -           -           -          -       4,535
Total stockholders' equity (deficiency)             $9,497     $18,075     $38,981    $63,308    ($8,591)
</TABLE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

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

Overview

     When the Company  recognized  that its Smart Energy products as alternative
backup  solutions  to the  telecommunications  industry  were  not on a path  to
produce  meaningful  revenues,  the Company  initiated a series of cost  cutting
measures throughout 2002 and 2003. The focus of these efforts was to reduce cash
usage while preserving the Company's intellectual properties and maintaining the
integrity of its public  company  requirements  while  evaluating  all potential
product markets for the Company's  technologies and considering  acquisitions or
mergers  that  could  lead  to  increased   shareholder  value.  Based  on  this
evaluation,  which is ongoing,  the Company (i) believes that it has  identified
two  promising  applications  for its Smart Energy  Matrix  product and (ii) has
introduced its Smart Power M5 inverter  system into the renewable  energy market
and delivered 31 units in 2003.

     The Company  must raise  additional  equity to execute its  business  plan.
Based  on  the  Company's  rate  of  expenditure  of  cash  and  the  additional
expenditures  expected in support of its business plan, the Company will need to
obtain an equity investment by early 2005 to fund:

o        continuing as a going concern;
o        ongoing research and development of inverter products;
o        manufacturing operations;
o        working capital requirements; and
o        new business development,

     In the event that the Company elects to begin full scale development of its
Smart Energy  Matrix or Smart Power 250 flywheel  systems,  the amount of equity
required would increase substantially.

     The Company will not undertake this development or make investments without
expressions  of tangible  interest from the  marketplace  and having  identified
sufficient funding to ensure that it could complete development of this product.

     From inception  through  December 31, 2003, the Company has incurred losses
of approximately $123.5 million. The Company expects to continue to incur losses
as it expands its product development,  commercialization program, and expansion
of its manufacturing capabilities.

     The Company recognized an asset impairment charge in 2003 and restructuring
and asset impairment  charges in 2002. The Company,  as required by Statement of
Financial  Accounting  Standards  No. 144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived Assets,"  periodically  evaluates all of its property and
equipment  in light of facts and  circumstances  and the outlook for future cash
flows.  As a result  of its  ongoing  evaluations,  in 2003 the  Company  took a
non-cash charge of  approximately  $0.4 million  representing  the impairment of
capitalized  costs  of  internally  developed  intellectual  property  including
various  patents  and  patents  pending  relating  to  the  Company's   flywheel
technology.  In 2002 the Company took a non-cash charge of $6.5 million of which
$4.3 million represented impaired capital equipment and leasehold  improvements,
$1.9 million  related to a reserve  against  future  lease  payments and related
facility  costs and $0.3 million  relating to  severance  costs.  These  charges
related to a substantial  portion of the Company's long-term assets being idled,
including  machinery and equipment,  tooling,  office furniture and fixtures and
leasehold improvements.  The portion of the reserve that relates to future lease
payments is classified  as  "Restructuring  reserve" in the current  liabilities
section of the balance sheet.


     Revenues.  Although the Company has begun shipment of commercial  products,
its operations have not yet reached a level that would qualify it to emerge from
the  development  stage.  Therefore  it  continues  to  be  accounted  for  as a
development stage company under Statement of Financial  Accounting Standards No.
7 "Accounting and Reporting by Development  Stage  Enterprises." The Company has
begun shipping its Smart Power M5 inverter system in the solar renewable  energy
market through domestic  distributors who in turn sell the Company's products to
installers  who  then  make  sales  to  residential   homeowners  or  commercial
customers.  The Company has  established  that it will  recognize  revenues,  in
accordance with accounting principles generally accepted in the United States of
America, based on the sales by its distributors to their customers.  The Company
has determined  that this treatment will ensure that the  recognition of revenue
cannot be impacted by any disputes  between the Company and its  distributors on
product or possible  issues  resulting from  technology risk as new products are
commercialized that may have enhanced functionality to product already delivered
to distributors.  The Company is continuing to evaluate markets for its flywheel
systems  but has not  recognized  revenues in 2003,  2002 or 2001.  Prior to the
fourth quarter of 2000, the Company recorded revenues as a result of development
contracts  with   government   entities   focused  on  the  design  of  flywheel
technologies.  The  Company has placed  development  prototypes  with  potential
customers  and shipped  pre-production  units.  These  products were provided to
potential  customers  without  charge or on a  demonstration  basis to allow the
Company access to field test  information  and to demonstrate the application of
the technologies.

     Selling,  General and  Administrative  Expenses.  The  Company's  sales and
marketing  expenses consist primarily of compensation and benefits for sales and
marketing personnel and related business development expenses.  During 2003, the
Company  increased  its sales  and  marketing  efforts  for its  flywheel  based
products,  to introduce its concepts for frequency  regulation  and Smart Energy
Matrix  applications.  The Company also continued to market the Smart Power 250.
The Company  expanded its sales and marketing  effort into the renewable  energy
market for its Smart Power M5 inverter product. The Company continues to rely on
engineering personnel to provide technical  specifications and product overviews
to its potential customer base. The Company expects sales and marketing expenses
to  continue  to  increase  as it expands  efforts to define new markets for its
products.  General and administrative expenses consist primarily of compensation
and  benefits  related to the  Company's  corporate  staff,  professional  fees,
insurance  and  travel.  The  Company  expects  that its  selling,  general  and
administrative  expenses  will  increase  during  2004 as  compared to 2003 as a
result of expanded sales and marketing expenses.

     Research and  Development.  The Company's cost of research and  development
consists  primarily  of the cost of  compensation  and benefits for research and
development,  and support  staff,  as well as materials and supplies used in the
engineering design and development process. These costs are expected to increase
in 2004 as  compared  to  2003.  While  the  Company  does not  expect  to incur
significant  additional costs for its existing  flywheel  products,  the Company
does expect to incur costs for the design and development of additional products
for renewable  energy  applications.  The costs of  development  of its flywheel
systems will be significant if the Company determines there is sufficient market
validation  to  initiate  development  of these  products  and it has funding to
complete this work.

     Loss  on  Sales  Commitments.  The  Company  will  establish  reserves  for
anticipated  losses on sales commitments when its cost estimates indicate a loss
will be incurred. The Company did not accrue such losses during 2003 or 2002. In
the second half of 2001 the Company reversed  projected losses  contemplated and
recognized  during 2000 and early 2001.  The Company is most likely to recognize
probable losses on sales commitments early in a product's  introduction prior to
being able to realize  expected  decreases in cost per unit through  engineering
design changes, operating efficiencies, and volume purchasing discounts.

     Restructuring  and  asset  impairment   charges.   The  Company  recognized
restructuring  and asset impairment  charges during 2003 and 2002. The Company's
initial  products  were  focused  on the  telecom  industry.  As a result of the
overall economic  downturn and in particular the significant  decline in capital
and  maintenance  spending  in  telecom  as well as the low  price of  lead-acid
batteries,  the Company has not been  successful  in selling  products into this
market and therefore has taken non-cash asset impairment charges of $0.4 million
in 2003 and aggregating $4.3 million in 2002,  pursuant to Financial  Accounting
Standard  No. 144,  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets."

     Depreciation and Amortization.  The Company's depreciation and amortization
is  primarily   related  to  depreciation  on  capital   expenditures   and  the
amortization of lease and leasehold costs related to its facilities. The Company
has intellectual  property in the form of patents on its flywheel vacuum system,
its heat pipe cooling systems, DC output paralleling,  anti-islanding  software,
drawings,  source code, and  production  know-how on its Smart Power M5 inverter
system, and expects to obtain other patents during 2004 and beyond.

     Interest and Other Income/Expense,  net. The Company's non-operating income
and expenses are primarily  attributable  to interest income relating to cash on
hand from its  private  financings  and initial  public  offering  and  interest
expense associated with its capital.


Results of operations:

Comparison of Year ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                        Year ended December 31,
                                                 2003      2002    $ Change   % Change
                                               ------------------------------------------
                                                            (in thousands)
<S>                                                <C>       <C>        <C>      <C>
Revenues                                           $   -     $   -      $   -        N/A
Selling, general and administrative                4,937     5,637      (700)       -12%
Research and development                           3,550     7,130    (3,580)       -50%
Depreciation and amortization                        285     1,644    (1,359)       -83%
Restructuring and impairment of assets               367     6,456    (6,089)       -94%
Interest and other income (expense), net             520        28        492      1757%
</TABLE>

     Revenue.  Proceeds from the sale of demonstration and test of 2kWh and 6kWh
Smart Energy flywheel units as well as engineering  services performed for other
companies  has been  applied as a reduction  against  research  and  development
expense and has not been recorded as revenue.  These amounts were  approximately
$130,000  and  $79,000 for 2003 and 2002,  respectively.  The Company did record
deferred  revenue  for the first  time  during  the  fourth  quarter of 2003 for
shipments to distributors of its Smart Power M5 inverter systems.

     Selling,  General and  Administrative  Expenses.  The decrease from 2002 to
2003 of  approximately  $700,000 was  primarily  the result of lower  consulting
expenditures  in 2003 than the prior  year.  The Company  expects  its  selling,
general and administrative  expenses to increase in 2004 over 2003 due primarily
to  marketing  and sales  expenses  associated  with both  flywheel and inverter
products.

     Research  and  Development  Expenses.  The  decrease  from  2002 to 2003 of
approximately  $3,580,000 is primarily due to decreased compensation and benefit
costs  related to  reductions  in the number of  engineering  and  manufacturing
personnel as well as lower  expenditures on development  materials.  The Company
expects cost of research and development in 2004 to be somewhat higher than 2003
as it expands development of its product line for renewable energy products. The
business plan does not include  significant  development of the Company's  Smart
Energy Matrix product.

     Depreciation  and   Amortization.   The  decrease  from  2002  to  2003  of
approximately  $1,359,000  is  primarily  attributable  to the  reduction in the
depreciable  base of the Company's  assets that resulted from the  restructuring
and asset  impairment  charges  recorded in 2002.  Depreciation  in 2004 will be
lower than 2003 due to existing  assets  becoming fully  depreciated and minimal
additions to property and equipment in 2004.

     Restructuring and asset impairment charges. The Company recognized an asset
impairment  charge  for its  flywheel  patents  and  patents  pending in 2003 of
approximately  $367,000.  In 2002 the Company  recognized both restructuring and
asset   impairment   charges  of   approximately   $2,200,000  and   $4,300,000,
respectively.  The Company does not expect to  recognize  any  restructuring  or
asset impairment charges in 2004.

     Interest and Other Income/  (Expense),  net. The increase from 2002 to 2003
of approximately $492,000 is primarily attributable to the reversal of a reserve
for loans to  officers  taken in the prior year as a result of payments on those
loans being received, accrued dividends on the Company's investment in Evergreen
Solar  Preferred  Stock,  and lower  interest  expense  associated  with smaller
capital leases, which expired during the second half of 2003.


Comparison of Year ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                        Year ended December 31,
                                                 2002      2001    $ Change   % Change
                                               ------------------------------------------
                                                            (in thousands)
<S>                                                <C>       <C>        <C>        <C>
Revenues                                           $   -     $   -      $   -        N/A
Selling, general and administrative                5,637     8,940    (3,303)       -37%
Research and development                           7,130    17,628   (10,498)       -60%
Depreciation and amortization                      1,644     1,324        320        24%
Restructuring and impairment of assets             6,456         -      6,456        N/A
Interest and other income (expense), net              28     1,746    (1,718)       -98%
</TABLE>

     Revenue.  Proceeds from the sale of demonstration and test of 2kWh and 6kWh
Smart Energy flywheel units as well as engineering  services performed for other
companies  has been  applied as a reduction  against  research  and  development
expense and has not been recorded as revenue.  These amounts were  approximately
$79,000 and $69,000 for 2002 and 2001, respectively.

     Selling,  General and  Administrative  Expenses.  The decrease from 2001 to
2002 of approximately $3,303,000 was primarily due to the decreased compensation
and benefit  costs that resulted  from a reduction in staffing.  During  October
2001, March 2002 and again in July 2002, the Company reduced its headcount by 8,
11 and 7 respectively.

     Research  and  Development  Expenses.  The  decrease  from  2001 to 2002 of
approximately  $10,498,000 was primarily due to decreased  development  material
expenditures  and  compensation and benefit costs that resulted from a reduction
in staffing. During October 2001, March 2002 and again in July 2002, the Company
reduced its headcount by 29, 24 and 18 respectively.

     Depreciation  and   Amortization.   The  increase  from  2001  to  2002  of
approximately   $320,000  was   attributable   to   amortization   of  leasehold
improvements at the Company's  facility in Wilmington  Massachusetts  as well as
amortization  on additional  machinery  and  equipment and other capital  assets
acquired in 2001.

     Restructuring  and  asset  impairment   charges.   The  Company  recognized
restructuring  and asset  impairment  charges  in 2002.  The  Company's  initial
products  were  focused  on the  telecom  industry.  As a result of the  overall
economic  downturn  and in  particular  the  significant  decline in capital and
maintenance spending in telecom as well as the low price of lead-acid batteries,
the  Company  has not been  successful  in selling  products  into this  market.
Therefore,  in July 2002, in an effort to reduce its monthly cash spending rate,
the  Company  implemented  a number  of  cost-cutting  measures  to  ensure  the
availability  of  resources  necessary  to pursue its  business  strategy  for a
reasonable  period but at a significantly  lower cash  expenditure rate and on a
less ambitious  timetable.  As a result, a substantial  portion of the Company's
long-term assets were idled, including machinery and equipment,  tooling, office
furniture and fixtures and leasehold improvements. The Company has evaluated all
of its property and  equipment as required by Statement of Financial  Accounting
Standards  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets".  The Company took  restructuring and impairment charges of $6.5 million
of which $4.3  million  represents  impaired  capital  equipment  and  leasehold
improvements,  $1.9 million  related to a reserve  against future lease payments
and facility costs and $.3 million related to severance  costs.  The assets held
for sale have been grouped  together and classified as "Assets held for sale" in
the current assets section of the balance sheet.  Assets held for sale have been
written  down to their fair value based on quotes from  vendors and other market
factors.   The  reserve   against   future  lease   payments  is  classified  as
"Restructuring reserve" in the current liabilities section of the balance sheet.

     Interest and Other Income/  (Expense),  net. The decrease from 2001 to 2002
of  approximately  $1,718,000 was primarily the result of lower interest  income
associated  with  the  lower  cash  balances,  lower  interest  rate  yields  on
investments and a reserve of  approximately  $426,000 for the loan to the former
CEO.


Liquidity and Capital Resources

<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                            ----------------------------------------------
                                                                 2003           2002           2001
                                                            ----------------------------------------------
                                                                           (in thousands)
<S>                                                              <C>             <C>            <C>
Cash and cash equivalents                                        $   9,314       $  18,222      $  34,602
Working capital                                                      9,048          17,220         32,788
Cash provided by (used in)
   Operating activities                                            (7,651)        (15,587)       (24,220)
   Investing activities                                            (1,291)           (466)        (3,655)
   Financing activities                                                 35           (327)           (21)
                                                            ----------------------------------------------
Net decrease in cash and cash equivalents                       $  (8,907)      $ (16,380)     $ (27,896)
                                                            ==============================================
Current ratio                                                          3.9             7.1           12.1
                                                            ==============================================
</TABLE>

     The Company's cash requirements  depend on many factors,  including but not
limited  to,  research  and  development   activities,   continued   efforts  to
commercialize   its   products,   facilities   costs  as  well  as  general  and
administrative expenses. The Company expects to make significant expenditures to
fund its operations,  develop technologies and explore opportunities to find and
develop  additional  markets  to  sell  its  products.  The  Company  has  taken
significant  actions to reduce its cash  expenditures  for product  development,
infrastructure  and production  readiness by significantly  reducing  headcount,
development  spending  and  capital  expenditures  over the last two years.  The
Company has focused its activity on market analysis in terms of size of markets,
competitive aspects and advantages that its products could provide.  The Company
has continued to do preliminary  design of potential  products for markets under
consideration for its flywheel systems and has purchased intellectual properties
and incurred  development  costs for its newest product in the renewable  energy
market.

     The Company  must raise  additional  equity to execute its  business  plan.
Based  on  the  Company's  rate  of  expenditure  of  cash  and  the  additional
expenditures  expected in support of its business plan, the Company will need to
obtain an equity investment by early 2005 to fund:

o        continuing as a going concern;
o        ongoing research and development of inverter products;
o        manufacturing operations;
o        working capital requirements; and
o        new business development,

     In the event that the Company elects to begin full scale development of its
Smart Energy  Matrix or Smart Power 250 flywheel  systems,  the amount of equity
required would increase substantially.

     In as much as the Company is not  expecting  to become  profitable  or cash
flow  positive  until at least 2006,  its ability to continue as a going concern
will depend on being able to raise  additional  capital.  The Company may not be
able to raise this capital at all, or if it is able to do so, it may be on terms
that are adverse to  shareholders.  The Company believes that it cannot use debt
financing to meet its cash requirements.

     The Company's significant long-term contractual  obligations as of December
31, 2003 are as follows:

<TABLE>
<CAPTION>
                                          Cash Payments Due During the Year Ended December 31,
                                   ----------------------------------------------------------------------------------
Description of Commitment             2004        2005        2006        2007     2008   Thereafter       Total
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>         <C>         <C>         <C>        <C>       <C>     <C>
Operating Leases                       490,675     500,359     529,413     397,059      -            -     1,917,506
</TABLE>

     The  amounts  listed  for  operating  leases  represent  payments  for  the
occupancy  of  the  Company's  principal   executive  offices,   laboratory  and
manufacturing  facilities  located in Wilmington,  Massachusetts.  The Company's
commitment  on this lease is secured by an  irrevocable  letter of credit in the
amount of $355,232. A cash deposit secures this letter of credit.

     The  Company may make  investments  in  companies  for  strategic  business
reasons.  Because the Company's  primary  motivation in making these investments
may not be to realize a profit on the  investment  itself,  but rather to expand
its business  prospects,  these investments may lack any financial return to the
Company, may result in a loss of principal and may lack liquidity.

     On March 24, 2003 the Company purchased,  for approximately  $146,000,  the
inverter electronics  technologies of Advanced Energy Systems, Inc to strengthen
its entry into the renewable energy market.

     On May 15, 2003 the Company invested $1,000,000 in Series A Preferred Stock
of Evergreen Solar,  Inc., a public company that specializes in renewable energy
sources,  in order to develop a strategic  relationship  with that company.  The
Company believes that this investment may provide significant  financial returns
on investment.  The Company's investment was part of a larger financing provided
by several  investors.  The Company made its investment on the same terms as the
other  investors  in this  financing,  except that the Company was  permitted to
purchase a three-year  warrant for $100,000  that is  exercisable  for 2,400,000
shares  of  Evergreen's  common  stock.  Evergreen's  financing  was  a  private
placement  of  $29,475,000  of Series A Preferred  Stock and the above  warrant.
Perseus 2000, L.L.C., an affiliate of one of the Company's stockholders, Perseus
Capital,  L.L.C., invested $3 million in Evergreen's Series A Preferred Stock in
this  financing.  Mr. Philip J. Deutch and Mr. Kenneth M. Socha,  members of the
Board of  Directors of the Company,  are Managing  Director and Senior  Managing
Director,  respectively,  of Perseus,  L.L.C.,  and Mr. Deutch led the Evergreen
Solar  Series A  Preferred  financing  and is one of four  individuals  from the
Evergreen  investor  group to be added to the Board of Directors  of  Evergreen.
Messrs.  Deutch and Socha  disclosed  their possible  conflict  relating to this
transaction,  and abstained from voting on the matter.  In addition,  Mr. Deutch
has not taken  part in any  discussions  concerning  this  investment.  Beacon's
participation in the transaction was evaluated,  debated and approved by all the
disinterested  directors of the Company, after full disclosure of relevant facts
and circumstances.

     The Company believes that the Evergreen investment will provide the Company
additional  access  to the  renewable  energy  market,  which  it  believes  has
significant  potential  for its Smart  Power M5 inverter  system and  additional
products it plans to develop.  While the Company believes that its investment in
Evergreen represents a possible gain upon liquidation, there can be no assurance
that it will and  there can be no  assurance  that the  Company  will be able to
liquidate its position in the event that it requires cash on a short term basis.

     Investments  such as those made in Evergreen  Solar and the  acquisition of
the  intellectual  properties  of Advanced  Energy  Systems may  accelerate  the
Company's  need to raise  capital.  The  Company  may not be able to raise  this
capital at all, or if it is able to do so, it may be on terms that are extremely
dilutive to shareholders.

Inflation

     The Company's operations have not been materially affected by inflation.

                                  Risk Factors

The Company May Not Be Able to Continue as a Going Concern, as its Cash Balances
Are Sufficient to Fund Operations Only Through Approximately April 2005.

     As shown in the  consolidated  financial  statements,  the Company incurred
     significant losses from continuing  operations of $8,618,000,  $20,839,000,
     and  $26,146,000   and  cash  decreases  of  $8,907,000,   $16,379,000  and
     $27,896,000,  during the years  ended  December  31,  2003,  2002 and 2001,
     respectively.  The Company has  $9,314,000 of cash and cash  equivalents on
     hand at December  31,  2003.  The Company has not recorded any revenue from
     sales of its  products.  These  factors,  among  others,  indicate that the
     Company may be unable to continue as a going concern.

     Deloitte & Touche LLP, the Company's independent auditors, have included an
     explanatory paragraph related to a going concern uncertainty in their audit
     report on the Company's  consolidated  financial  statements for the fiscal
     year ended December 31, 2003,  which states that "the  Company's  recurring
     losses from  operations  and negative  cash flows raise  substantial  doubt
     about its ability to continue as a going concern."

     The  Company's  financial  statements  have been prepared on the basis of a
     going  concern,  which  contemplates  the  realization  of  assets  and the
     satisfaction  of liabilities in the normal course of business.  The Company
     has not made any adjustments to its financial statements as a result of the
     going  concern  uncertainty.  If the  Company  cannot  continue  as a going
     concern, it may have to liquidate its assets and may receive  significantly
     less than the values at which they are carried on its financial statements.
     Any shortfall in the proceeds from the liquidation of the Company's  assets
     would  directly  reduce the amounts  that holders of its common stock could
     receive in liquidation.

     The Company  expects its cash  position  to fund  operations  approximately
     through April 2005 according to its business plan. The Company is exploring
     opportunities  to  raise  additional   capital  through  equity  offerings,
     strategic alliances and other financing vehicles,  but it does not make any
     assurances that  sufficient  funds will be available to it on terms that it
     deems acceptable, if they are available at all.

The Company Needs Additional Financing.

     The Company will need  additional  financing to execute its business  plan.
     The  Company  cannot be  certain  that it will be able to raise  additional
     funds on terms  acceptable to the Company or at all. If future financing is
     not available or is not available on  acceptable  terms,  the Company would
     not be able to  continue  as a going  concern..  See  "Selected  Historical
     Financial  Data" and  "Management's  Discussion  and  Analysis of Financial
     Condition and Results of Operations."

The  Company's  Stockholders  may be  Adversely  Affected if the Company  Issues
Additional Equity to Obtain Financing.

     If the  Company  raises  additional  funds  by  issuing  additional  equity
     securities,  existing  stockholders  may be adversely  affected because new
     investors may have superior  rights than current  shareholders  and current
     shareholders may be diluted.

The Company May Not Be Able to Reduce Its Product Cost Enough to Make The
Company's Prices Competitive.

     There can be no assurance  that the Company will be  successful in lowering
     production  costs through  product designs or volume  discounts,  which may
     prevent market acceptance of its products due to its pricing for products.

The Company Has No Experience  Manufacturing Inverter Systems or Flywheel Energy
Storage Systems on a Commercial  Basis. In the Event of Significant  Sales,  the
Company Will Need to Develop or Obtain Manufacturing Capacity for Its Products.

     Should the Company experience  significant customer demand for its inverter
     or  flywheel  products,  it will need to  develop  or obtain  manufacturing
     capacity to meet quality, profitability and delivery schedules. The Company
     may need to  establish  additional  manufacturing  facilities,  expand  its
     current facilities or expand third-party manufacturing.  The Company has no
     experience in the volume  manufacture  of inverter or flywheel  systems and
     there can be no assurance  that it will be able to accomplish  these tasks,
     if  necessary,  on a timely  basis to meet  customer  demand or at all. The
     Company  has  taken   actions  to  conserve  cash   including   idling  its
     manufacturing  capabilities  through  headcount  reduction,   delaying  the
     development  of its  manufacturing  process  documentation  and the capital
     build-out.  The Company will not achieve profitability if it cannot develop
     or obtain  efficient,  low-cost  manufacturing  capability,  processes  and
     suppliers  that  will  enable  the  Company  to meet  the  quality,  price,
     engineering, design and production standards or production volumes required
     to meet its product  commercialization  schedule, if any, or to satisfy the
     requirements of its customers or the market generally.

It Is Difficult  to Evaluate  the Company and to Predict Its Future  Performance
Because of Its Short  Operating  History  and the Fact that It is a  Development
Stage Company.

     The Company has a limited  operating  history  and is a  development  stage
     company.  Unless the Company can achieve  significant  market acceptance of
     its current or future products at volumes and with margins that allow it to
     cover its costs of  operations,  the Company may never  advance  beyond the
     start-up phase.

     See "Business," "Selected Financial Data" and "Management's  Discussion and
     Analysis of Financial Condition and Results of Operations."

The Company Has Incurred  Losses Since Its Inception and  Anticipates  Continued
Losses Through at Least 2006.

     The  Company  has  incurred  net losses and  negative  cash flows since its
     inception  in May  1997.  The  Company  had  net  losses  of  approximately
     ($8,618,000)  in  2003,  ($20,839,000)  in  2002,  ($26,146,000)  in  2001,
     ($53,279,000) in 2000 and  ($6,630,000) in 1999.  Since its inception,  the
     Company has had net losses totaling ($123,536,000).  The Company expects to
     continue to incur net losses through at least 2006. Although the Company is
     looking for additional ways to economize and reduce costs,  its efforts may
     prove even more expensive than anticipated. The Company's revenue must grow
     substantially to offset these higher expenses and become  profitable.  Even
     if the Company does achieve  profitability,  it may be unable to sustain or
     increase its profitability in the future.

     See "Selected Financial Data" and "Management's  Discussion and Analysis of
     Financial Condition and Results of Operations."

Because the Company  Depends on Third-Party  Suppliers for the  Development  and
Supply of Key Components for Its Products,  It Could  Experience  Disruptions in
Supply that Could Delay or Decrease Its Revenues.

     The Company's  business,  prospects,  results of  operations,  or financial
     condition  could  be  harmed  if  it is  unable  to  maintain  satisfactory
     relationships  with suppliers.  To accelerate  development  time and reduce
     capital investment, the Company relies on third-party suppliers for several
     key components of its systems. The Company does not have contracts with all
     of these  suppliers.  If these  suppliers  should  fail to  timely  deliver
     components that meet the Company's  quality,  quantity,  or cost standards,
     then the Company  could  experience  production  delays or cost  increases.
     Because  certain  key  components  that  are  complex,   and  difficult  to
     manufacture  and require long lead times,  the Company may have  difficulty
     finding  alternative  suppliers on a timely or cost effective  basis.  As a
     result, the Company could experience shortages in supply or be unable to be
     cost competitive in the markets it is pursuing.

The Company's  Financial  Performance Could Be Adversely Affected by its Need to
Hire and Retain Key Executive Officers and Skilled Technical Personnel.

     Because  the  Company's  future  success  depends to a large  degree on the
     success  of its  technology,  the  Company's  competitiveness  will  depend
     significantly  on  whether it can  attract  and  retain  skilled  technical
     personnel,  especially  engineers,  and can retain members of its executive
     team.  The Company has  employment  agreements  with Messrs.  Capp, CEO and
     President;  Spiezio,  Vice President of Finance,  Chief Financial  Officer,
     Treasurer and Secretary; and Lazarewicz, Vice President and Chief Technical
     Officer.

     In the fourth quarter of 2001,  the first and second  quarters of 2002, the
     Company  substantially  reduced  its  workforce.  Competition  for  skilled
     personnel is intense and, if the Company seeks to increase the size for its
     workforce,  it may  not be  successful  in  attracting  and  retaining  the
     personnel or  executive  talent  necessary to develop  products and operate
     profitably.

The Company's Financial Performance Could be Adversely Affected by Needs to Hire
and Retain Key Sales Personnel.

     Because  the  Company's  future  success  depends to a large  degree on the
     success  of its  sales  organization,  the  Company's  ability  to meet its
     business  plan will  depend  significantly  on whether it can  attract  and
     retain sales personnel. The current sales organization has been impacted by
     both health  issues and a  resignation.  Competition  for skilled  sales is
     intense it may not be successful in attracting  and retaining the personnel
     or executive talent necessary to develop products and operate profitably.

There  May Be Only a Modest  Number of  Potential  Customers  for the  Company's
Products.

     There may only be a limited number of potential customers for the Company's
     products,  in which case the  Company  will be subject to the risk that the
     loss of or reduced  purchases by any single customer could adversely affect
     its business.

If the  Company is Unable to  Successfully  Market,  Distribute  and Service Its
Products  Internationally it May Experience a Shortfall in Expected Revenues and
Profitability.

     In addition to the risks the Company faces when operating  within the U.S.,
     additional  risks are present if the Company  operates  internationally.  A
     part of the Company's business strategy is to ultimately market, distribute
     and service products internationally through distributors.  The Company has
     limited experience developing and manufacturing products to comply with the
     commercial and legal requirements of international  markets.  The Company's
     ability to properly  service its  products  internationally  will depend on
     third-party  distributors  to  install  and  provide  service.  There is no
     assurance  that the Company  will be able to locate  service  providers  in
     every region or that these providers will effectively service its products.
     Also, the Company's  success in those markets will depend,  in part, on its
     ability to secure foreign customers and its ability to manufacture products
     that meet foreign regulatory and commercial requirements.  In addition, the
     Company's  planned  international  operations are subject to other inherent
     risks,  including  potential  difficulties  in  establishing   satisfactory
     distributor   relationships  and  enforcing  contractual   obligations  and
     intellectual  property  rights in foreign  countries,  and  fluctuations in
     currency exchange rates.

Any Failure to Protect  the  Company's  Intellectual  Property  Could  Seriously
Impair Its Competitive Position.

     The  Company  cannot  provide  assurance  that  it has or  will  be able to
     maintain a significant  proprietary position on the basic technologies used
     in its inverter  and flywheel  systems.  The  Company's  ability to compete
     effectively  against  alternative  technologies  will  be  affected  by its
     ability  to   protect   proprietary   technology,   systems   designs   and
     manufacturing  processes.  The  Company  does not know  whether  any of its
     pending or future patent  applications under which it has rights will issue
     or, in the case of patents issued or to be issued,  that the claims allowed
     are or will be  sufficiently  broad to protect the Company's  technology or
     processes,  or will protect it from competitors.  Even if all the Company's
     patent  applications  are issued and are  sufficiently  broad,  they may be
     challenged or  invalidated.  The Company could incur  substantial  costs in
     prosecuting or defending  patent  infringement  suits, and such suits would
     divert funds and resources  that could be used in the  Company's  business.
     The  Company  does  not  know  whether  it has  been or will be  completely
     successful in safeguarding and maintaining its proprietary rights.

     Further, the Company's  competitors or others may independently  develop or
     patent  technologies  or processes  that are  substantially  equivalent  or
     superior to those of the Company.  If the Company is found to be infringing
     on third-party  patents,  the Company does not know whether it will be able
     to obtain  licenses to use such  patents on  acceptable  terms,  if at all.
     Failure to obtain needed  licenses could delay or prevent the  development,
     manufacture or sale of the Company's systems.

     The Company  relies,  in part, on  contractual  provisions to protect trade
     secrets and proprietary  knowledge.  These agreements may be breached,  and
     the Company may not have  adequate  remedies for any breach.  The Company's
     trade secrets may also be known without breach of such agreements or may be
     independently  developed by competitors or others. The Company's  inability
     to maintain the  proprietary  nature of its technology and processes  could
     allow   competitors  or  others  to  limit  or  eliminate  any  competitive
     advantages the Company may have, thereby harming its business prospects.

The Share Prices of Companies in the Company's  Sector have been Highly Volatile
and the Company's Share Price Could Be Subject to Extreme Price Fluctuations.

     The markets for equity securities of high technology  companies,  including
     companies in the power  reliability  and power quality  markets,  have been
     highly volatile recently and the market price of the Company's common stock
     has been and may continue to be subject to significant  fluctuations.  This
     could be in response to operating  results,  announcements of technological
     innovations or new products by the Company,  or its competitors,  patent or
     proprietary rights developments, energy blackouts and market conditions for
     high  technology  stocks in general.  In addition,  stock markets in recent
     years have  experienced  extreme price and volume  fluctuations  that often
     have been  unrelated or  disproportionate  to the operating  performance of
     individual  companies.  These  market  fluctuations,  as  well  as  general
     economic conditions, may adversely affect the market price of the Company's
     common stock,  which could affect its ability to attract additional capital
     to fund operations.

There may be Other Technologies Under Development That Could Prevent the Company
from  Achieving or Sustaining Its Ability to Sell Products or to Do So at Prices
that will Yield Profits.

     There are number of technology  companies in various stages of development.
     The Company  cannot give  assurance  that some or all of its target markets
     and pricing plans could not be displaced by emerging technologies.

The  Company  Has an  Investment  in Other  Companies  in Its Sector to Increase
Shareholder  Value Through  Strategic  Alliance or Return on Investment Which do
Not Create Gains and therefore Reduce Shareholder Value.

     Given the Company's financial position,  its ability to make investments in
     other companies is very limited at this time.  However,  in the future, the
     Company  may make  investments  in other  companies  in its  sector to gain
     strategic  alliances,  channels to market or  appreciation  in stock value.
     These investments may not increase  shareholder value. Given the volatility
     of share prices for companies in this sector,  general economic  conditions
     and market fluctuations in general, the market price of the investments may
     decrease and reduce shareholder value.

Provisions of Delaware Law and of the Company's  Charter and By-laws May Inhibit
a Takeover that Stockholders Consider Favorable.

     Provisions in the Company's certificate of incorporation and by-laws and in
     the  Delaware  corporate  law, and the  shareholder  rights plan adopted in
     September  2002,  may make it difficult  and expensive for a third party to
     pursue a tender  offer,  change in  control  or  takeover  attempt  that is
     opposed  by  the  Company's  management  and  board  of  directors.  Public
     stockholders  who might desire to participate in such a transaction may not
     have  an  opportunity  to  do  so.  Beginning  with  the  Company's  annual
     stockholder  meeting in 2001, it implemented a staggered board of directors
     that will make it difficult for  stockholders  to change the composition of
     the board of directors in any one-year.  Pursuant to a  shareholder  rights
     plan adopted in September  2002, the Company issued rights as a dividend on
     common  stock on  October  7, 2002  each of which  entitles  the  holder to
     purchase  1/100th of a share of newly issued  preferred stock for $22.50 in
     the event that any person not approved by the board of  directors  acquires
     more than 15% (30% in the case of one large  shareholder that already owned
     more than 15%) of the Company's  outstanding  common stock, or in the event
     of an acquisition by another  company,  $22.50 worth of the common stock of
     the other company at half its market value (in each case the rights held by
     the acquiring  person are not exercisable and become void). The shareholder
     rights  plan was  modified by rights plan  Amendment 1 dated  December  27,
     2002.  The amendment  increased the  beneficial  ownership  approved by the
     board of directors from 30% to 35% for one large shareholder. Additionally,
     the Company's  board of directors may authorize  issuances of "blank check"
     preferred  stock that could be used to increase  the number of  outstanding
     shares and discourage a takeover attempt.  These  anti-takeover  provisions
     could  substantially  impede the ability of public  stockholders to benefit
     from a change in control or change in the Company's management and board of
     directors.


Terrorist Attacks have Contributed to Economic Instability in the United States;
Continued  Terrorist  Attacks,  War or Other  Civil  Disturbances  Could Lead to
Further Economic Instability and Depress the Company's Stock Price.


     On  September  11,  2001,  the United  States  was the target of  terrorist
     attacks of unprecedented  scope.  These attacks have caused  instability in
     the global  financial  markets,  and have  contributed to volatility in the
     stock prices of United States  publicly  traded  companies,  such as Beacon
     Power.  These attacks may lead to armed  hostilities  or to further acts of
     terrorism and civil  disturbances in the United States or elsewhere,  which
     may further  contribute  to economic  instability  in the United States and
     could have a material adverse effect on the Company's  business,  financial
     condition and operating results.


Government Regulation May Impair the Company's Ability to Market Products.

     Government  regulation of the Company's  products,  whether at the federal,
     state or local  level,  including  any change in  regulations,  on tariffs,
     product buy downs or tax rebates  relating to purchase and  installation of
     its products,  may increase the cost and price of its systems, and may have
     a negative impact on the Company's revenue and  profitability.  The Company
     cannot provide  assurance that its products will not be subject to existing
     or future  federal and state  regulations  governing  traditional  electric
     utilities  and other  regulated  entities.  The  Company  expects  that its
     products and their installation will be subject to oversight and regulation
     at the local level in accordance with state and local  ordinances  relating
     to building codes,  safety,  pipeline  connections and related matters. The
     Company does not know the extent to which any  existing or new  regulations
     may impact its ability to  distribute,  install  and service its  products.
     Once the Company's  products  reach the  commercialization  stage  federal,
     state or local government entities may seek to impose regulations.

Product  Liability  Claims  Against  the  Company  Could  Result in  Substantial
Expenses  and Negative  Publicity  Which Could  Impair  Successful  Marketing of
Products.

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

Safety  Failures by the  Company's  Flywheel  Products or Those of The Company's
Competitors Could Reduce Market Demand or Acceptance for Flywheels in General.

     A serious  accident  involving  either  flywheels or  competitors'  similar
     products  could be a  significant  deterrent  to  customer  acceptance  and
     adversely  affect  the  Company's  financial  performance.   There  is  the
     possibility of accident with any form of energy storage. In particular,  if
     a metal  flywheel  fails and the stored  energy is  released,  the flywheel
     could  break apart into  fragments  that could be ejected at a high rate of
     speed.  However, the Company's flywheels are based on a composite design so
     that in the event of a  failure,  the  Company's  flywheel  would shut down
     rather than  disintegrate.  To date, the Company's  testing  validates this
     design conclusion. Also, the Company believes that one of the advantages of
     composite flywheels over metal flywheels is that in the event of a flywheel
     failure,  the flywheel tends to delaminate and shut down rather than (as in
     the case of metal) to break  into a number of large  fragments  that have a
     greater possibility of bursting a containment vessel and causing injury. At
     this early stage of  commercialization,  there are differing  approaches to
     containment safety with disagreement in the community on the most effective
     means.

The Market for Using the  Company's  Smart  Energy  Matrix to Provide  Frequency
Regulation has not been Established.

     The  Company  believes  that the use of its  Smart  Energy  Matrix  will be
     successful  in the frequency  regulation  market.  However,  this market is
     currently being served by using  generators and, while the Company believes
     its product  offers  greater  efficiencies  than  generators,  and produces
     positive  investment returns for the independent  service providers,  there
     can be no assurance  that the Company will be able to establish its product
     in that market.

The  Value  Proposition  of the  Company's  Smart  Energy  Products  May  Not Be
Recognized.

     There  can be no  assurance  that  the  Company  will be  able  to  compete
     successfully  against batteries.  To compete  successfully the Company must
     establish  the  value   proposition   of  its  products  based  upon  their
     dependability,  environmental benefits, and long maintenance-free life. The
     performance  of batteries has improved  while battery  prices have declined
     due to  lower  demand  from  the  communications  markets  and  others  and
     increased  competition  resulting from an increase in the number of battery
     manufacturers.  These changes in battery  pricing and  performance  make it
     even more  difficult for the Company to establish the value  proposition of
     its Smart Energy products.

The Company Might Fail to Develop Successful Flywheel Products.

     The successful  development  of the Company's  flywheel  products  involves
     significant  technological and cost challenges and will require  additional
     financing to complete. Major risks include:

     o    maintaining the development schedule and achieve technical success, as
          such development could take substantially  longer than anticipated;

     o    the cost of developing  key  components of the Company's  systems that
          have  significant  technical  risk and which  may not be  economically
          feasible for a competitive product;

     o    ensuring long-life and maintenance free performance through design and
          quality  control;

     o    ensuring  quality and cost control from  suppliers;  and

     o    raising the necessary financing.

The Company's  Sales Efforts may be Adversely  Affected by the Reputation of the
Bankrupt Company from which The Company Acquired the Intellectual Properties for
the Smart Power M5 Inverter System.

     The Company  purchased  the  intellectual  property that its Smart Power M5
     inverter system are based on from Advanced Energy Systems,  Inc., a company
     in  bankruptcy,  which had sold units that are not supported by warranties.
     And in some cases these units are not functioning as expected. Although the
     Company  will  provided  warranties  for  its  products  and  it  has  made
     engineering  changes  to  provide  reliable  performance,  there  can be no
     assurance that the Company's  sales efforts will not be adversely  affected
     by the performance of the unwarranted products in the field.

The Value Proposition of the Company's Inverter Systems May Not Be Recognized.

     There  can be no  assurance  that  the  Company  will be  able  to  compete
     successfully  and gain market  share in the  renewable  energy  market.  To
     compete  successfully  the Company must establish its value  proposition as
     cost effective for end users based upon its product's price, dependability,
     operational benefits, and long life.

The Company May Not be Able to  Establish  a  Distribution  Channels to Sell Its
Inverter Systems.

     The Company expects to market its Smart Power M5 inverter system as well as
     future inverter products through distributor channels. The Company does not
     have  experience  in these  distribution  channels  or in the  photovoltaic
     markets,  and may not be successful in establishing  adequate market volume
     through  this  distribution  strategy.  Even if the  Company  were  able to
     establish  sufficient  sales volumes,  there can be no assurance that these
     channels  will  continue  to provide  adequate  volumes  for the  Company's
     products in the future.

The Channels to Market For Photovoltaic Products are Not Stable and have Changed
Substantially in the Last Year.

     The photovoltaic market is growing rapidly,  but the sales and distribution
     channels  are not  stable..  In the last year,  the cross  section of these
     distributors has changed as some  photovoltaic  module  manufacturers  have
     left the market for  "balance of systems"  products  such as the  Company's
     Smart Power M5 inverter system, and other distributors have been merged. In
     particular,  several of the large volume  distributors  have reduced  their
     product  offerings  to only solar  panels.  When these types of change take
     place,  it often  results  in a period  of  uncertainty  in the  sales  and
     distribution  channels,  leading to fewer and smaller  orders being placed.
     The Company is using a strategy of selling through full-service,  wholesale
     distributors  and there can be no  assurance  that  this  strategy  will be
     successful in the channel structure that continues to be restructured.

Inverter Sales may Not be Achieved.

     If the value  proposition  that the  Company  offers  to the  market is not
     accepted,  or if the  market  does not  continue  to grow,  or if the sales
     channels to market  continue  to be in a state of change,  then the Company
     may not achieve sales of inverters. If sales are not achieved, then profits
     will not be realized,  resulting in further  need for  additional  investor
     funding which may not be available on acceptable terms, or at all.

The Company Faces Intense Competition in the Inverter Markets.

     There are a number of companies located in the United States,  Canada,  and
     abroad that are offering electronic  inverters into the photovoltaic market
     and the  number of  products  being  offered is  increasing.  Many of these
     companies  have  more  substantial  manufacturing,   marketing,  and  sales
     capabilities as well as brand recognition and established market positions.
     They may also have  greater  research,  development  and  commercialization
     capabilities.  There can be no  assurance  that the Company will be able to
     compete or be able to adapt as quickly to changing customer needs.

The Company Might Fail to Develop Successful Additional Inverter Products.

     The  successful   development  of  additional  inverter  products  involves
     technological and cost challenges and will require additional  financing to
     complete. Major risks include:

     o    maintaining  the  development  schedule  for these  products,  as such
          development could take substantially longer than anticipated;

     o    the cost of developing  key  components of the Company's  systems that
          have technical risk and which may not be  economically  feasible for a
          competitive product in the renewable energy market;

     o    reducing  manufacturing  and assembly  costs to increase the Company's
          chances of achieving profitability;

     o    ensuring minimal warranty expenses through design and quality control;

     o    ensuring quality and cost control from suppliers;

     o    raising the necessary financing; and

     o    extending each product design into as many applications and markets as
          possible.

The Photovoltaic Energy Market may not Maintain the Market Growth Upon Which the
Company's Business Plan is Based.

     Although  photovoltaic  installations  have  continued  to  grow  at  solid
     compound annual growth rates of greater than 20%, there can be no assurance
     that these rates of growth will continue.

The Company's High-Energy Flywheels Face Intensified  Competition from Batteries
Due to Batteries' Declining Prices and Improved Life. As a Consequence Customers
are Less Likely to Accept the Value  Proposition  of the  Company's  High-Energy
Flywheel Products.

     The  performance  of  batteries  has  improved  while  battery  prices have
     declined due to lower demand from the communications markets and others and
     increased  competition  resulting from an increase in the number of battery
     manufacturers.  These changes in battery pricing and performance  have made
     it very difficult for the Company to establish the value proposition of its
     high-energy flywheel products.

The Telecommunications Industry Continues to Experience lower rates of Build-Out
and Maintenance Spending.

     The Company initially targeted the  communications  markets for the sale of
     its  high-energy  products.  However,  this industry,  which had previously
     sustained high rates of infrastructure  build-out,  has experienced a sharp
     decline in build-out as well as  maintenance  spending  which began in 2000
     and has  continued  and there can be no certainty of when or if this market
     will  recover.  Significant  reductions  in both  maintenance  budgets  and
     capital  build-out  budgets at  telecommunications  companies  caused these
     potential  customers  to be  more  conservative  with  their  spending  and
     expenditure analysis and less willing to try new technology solutions, such
     as the Company's flywheel systems.

The Company Might Fail to Develop  Successful  Additional  High-Energy  Flywheel
Products.

     The successful  development  of additional  high-energy  flywheel  products
     involves  significant  technological  and cost  challenges and will require
     additional financing to complete. Major risks include:

     o    maintaining  the  development  schedule  for these  products,  as such
          development could take substantially longer than anticipated;

     o    the cost of developing  key  components of the Company's  systems that
          have  significant  technical  risk and which  may not be  economically
          feasible for a competitive product in the high-energy market;

     o    reducing  manufacturing  costs for the flywheel's  shaft, hub and rim,
          bearings and related  electronics to increase the Company's chances of
          achieving profitability;

     o    ensuring minimal warranty expenses through design and quality control;

     o    ensuring quality and cost control from suppliers;

     o    raising the necessary financing; and

     o    extending the product to new applications.

The Company Faces Intense Competition and May Be Unable to Compete  Successfully
in the High-Energy Flywheel Markets.

     The markets for uninterruptible  electric power are intensely  competitive.
     There are a number of companies located in the United States,  Canada,  and
     abroad that are offering battery based energy storage options.  The Company
     also competes with companies that are developing  applications  using other
     types of alternative  energy storage.  In addition,  if large,  established
     companies  decide  to  focus  on the  development  of  competing  or  other
     alternative energy products for sale to the Company's potential  customers,
     they may have the  manufacturing,  marketing,  and  sales  capabilities  to
     complete research, development and commercialization of commercially viable
     alternative  energy storage systems that could be more competitive than the
     Company's  systems  and could be brought  to market  more  quickly.  To the
     extent they already have name recognition, their products may enjoy greater
     initial market acceptance among potential customers.  These competitors may
     also be  better  able  than the  Company  to adapt  quickly  to  customers'
     changing demands and to changes in technology.



Item 7A.  Quantitative and Qualitative Disclosure about Market Risk

The Company cash equivalents and investments, all of which have maturities of
less than one year, may expose the Company to interest rate risk. At December
31, 2003, the Company had approximately $60,000 of cash equivalents that were
held in a non-interest bearing checking account. Also at December 31, 2003, the
Company had approximately $9,254,000 invested in interest-bearing money market
accounts. The fair value of these investments approximates their cost. A 10%
change in interest rates would change the investment income realized on an
annual basis by approximately $9,000 which the Company does not feel is
material.

<PAGE>
Item 8.  Financial Statements and Supplementary Data

                            BEACON POWER CORPORATION
                          (A Development Stage Company)
                   Index to Consolidated Financial Statements

                                                                           Page


Independent Auditors' Report                                                29

Consolidated Balance Sheets at December 31, 2003 and 2002                   30

Consolidated Statements of Operations for the years ended December 31,
  2003, 2002 and 2001 and for the period May 8, 1997 (date of
  inception) to December 31, 2003.                                          31

Consolidated Statements of Stockholders' Equity (Deficiency) for the years
  ended December 31, 2003, 2002 and 2001 and for the period
  May 8, 1997 (date of inception) to December 31, 2003.                     32

Consolidated Statements of Cash Flows for the years ended December 31,
  2003, 2002 and 2001 and for the period May 8, 1997 (date of
  inception) to December 31, 2003.                                          36

Notes to Consolidated Financial Statements                                  38


<PAGE>

                          INDEPENDENT AUDITORS' REPORT

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

We have audited the  accompanying  consolidated  balance  sheets of Beacon Power
Corporation and subsidiary  (the "Company") (a development  stage company) as of
December  31,  2003  and  2002,  and  the  related  consolidated  statements  of
operations,  stockholders'  equity  (deficiency)  and cash flows for each of the
three years in the period ended December 31, 2003 and for the period from May 8,
1997 (date of inception) through December 31, 2003. These consolidated financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  consolidated  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  financial  position  of Beacon  Power
Corporation  and  subsidiary as of December 31, 2003 and 2002 and the results of
their  operations and their cash flows for each of the three years in the period
ended  December  31,  2003 and the period  from May 8, 1997 (date of  inception)
through  December 31, 2003 in conformity  with accounting  principles  generally
accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the  Company's  recurring  losses  from  operations  and
negative cash flows raise  substantial  doubt about its ability to continue as a
going concern. Management's plans concerning these matters are also described in
Note 2. The  financial  statements  do not  include any  adjustments  that might
result from the outcome of this uncertainty.


/s/ Deloitte & Touche LLP

Boston, Massachusetts
March 25, 2004


<PAGE>


<TABLE>
<CAPTION>

                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                           Consolidated Balance Sheets

                                                                        December 31,       December 31,
                                                                            2003               2002
                                                                      -----------------  ------------------
Assets
Current assets:
<S>                                                                       <C>                 <C>
    Cash and cash equivalents                                             $  9,314,493        $ 18,221,766
    Accounts receivable, trade                                                 128,133                   -
    Inventory                                                                  238,684                   -
    Prepaid expenses and other current assets                                  773,226           1,775,455
    Investments                                                              1,695,638                   -
    Assets held for sale                                                             -              53,715
                                                                      -----------------  ------------------
       Total current assets                                                 12,150,174          20,050,936

Property and equipment, net (Note 3)                                           357,180             562,929
Other assets                                                                    91,325             291,901
                                                                      -----------------  ------------------

Total assets                                                              $ 12,598,679        $ 20,905,766
                                                                      =================  ==================

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                       $   148,075         $    77,326
    Accrued compensation and benefits                                          883,195             226,623
    Other accrued expenses                                                     664,527             576,881
    Restructuring reserve                                                    1,406,191           1,749,738
    Current portion of capital lease obligations                                     -             200,041
                                                                      -----------------  ------------------
       Total current liabilities                                             3,101,988           2,830,609

Commitments (Note 4)

Stockholders' equity:
    Preferred Stock, $.01 par value; 10,000,000 shares authorized
    no shares issued or outstanding                                                  -                   -
    Common stock, $.01 par value; 110,000,000 shares authorized;
    43,107,526 and 42,961,062 shares issued and outstanding at
    December 31, 2003 and 2002, respectively                                   431,075             428,129
    Deferred stock compensation                                              (832,639)            (18,413)
    Additional paid-in-capital                                             133,069,472         132,750,525
    Other comprehensive income                                                 531,880                   -
    Deficit accumulated during the development stage                     (123,603,437)       (114,985,424)
    Treasury stock, at cost                                                   (99,660)            (99,660)
                                                                      -----------------  ------------------
       Total stockholders' equity                                            9,496,691          18,075,157

Total liabilities and stockholders' equity                                $ 12,598,679        $ 20,905,766
                                                                      =================  ==================

                                      See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                      Consolidated Statements of Operations
                                                                                                           Cumulative from
                                                                                                             May 8, 1997
                                                     Year ended        Year ended         Year ended     (date of inception)
                                                      December          December           December        Through December
                                                        2003              2002               2001              31, 2003
                                                  ----------------- -----------------  ----------------- ---------------------

<S>                                                       <C>               <C>                <C>               <C>
Revenue                                                   $      -          $      -           $      -          $    551,184

Operating expenses:
   Selling, general and administration                   4,936,575         5,636,903          8,939,589            28,059,603
   Research and development                              3,549,592         7,129,880         17,627,714            50,343,486
   Loss on sales commitments                                     -                 -                  -               375,974
   Depreciation and amortization                           284,733         1,644,230          1,323,958             3,950,736
   Restructuring charges                                         -         2,159,280                  -             2,159,280
   Loss on impairment of assets                            366,788         4,297,128                  -             4,663,916
                                                  ----------------- -----------------  ----------------- ---------------------
         Total operating expenses                        9,137,688        20,867,421         27,891,261            89,552,995
                                                  ----------------- -----------------  ----------------- ---------------------

Loss from operations                                   (9,137,688)      (20,867,421)       (27,891,261)          (89,001,811)

Interest income                                            217,964           504,034          2,157,724             3,779,967
Interest expense                                           (6,713)          (41,932)          (303,160)           (1,093,703)
Other income (loss)                                        308,424         (433,933)          (108,971)             (281,696)
                                                  ----------------- -----------------  ----------------- ---------------------
   Total other income, net                                 519,675            28,169          1,745,593             2,404,568
                                                  ----------------- -----------------  ----------------- ---------------------
Net loss                                               (8,618,013)      (20,839,252)       (26,145,668)          (86,597,243)

Preferred stock dividends                                        -                 -                  -          (36,825,680)
Accretion of convertible preferred stock                         -                 -                  -             (113,014)
                                                  ----------------- -----------------  ----------------- ---------------------
Loss to common shareholders                          $ (8,618,013)     $(20,839,252)      $(26,145,668)      $  (123,535,937)
                                                  ================= =================  ================= =====================

Loss per share, basic and diluted                      $    (0.20)       $    (0.49)        $    (0.61)
                                                  ================= =================  =================
Average shares outstanding, basic                       42,885,675        42,797,072         42,550,502
                                                  ================= =================  =================

                                       See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
          Consolidated Statements of Stockholders' Equity (Deficiency)

                                                Class A            Class C                                Deferred        Deferred
                                             Preferred Stock     Preferred Stock      Common Stock       Consulting        Stock
                                          Shares       Amount   Shares     Amount   Shares    Amount      Expense      Compensation
                                     -----------------------------------------------------------------------------------------------

<S>                                      <C>       <C>          <C>     <C>       <C>          <C>       <C>            <C>
BALANCE AT MAY 8, 1997 (DATE OF INCEPTION)      -   $        -     -   $      -            -  $       -  $        -  $            -

Issuance of Founder's Shares                    -            -      -         -    6,750,000     67,500           -               -
Issuance of Class A preferred stock     1,390,000    5,662,500      -         -            -          -   (275,000)               -
Recapitalization                        3,373,313       67,466      -         -  (6,746,626)    (67,466)          -               -
Rounding for fractional shares                  -            -      -         -          (2)          -           -               -
Issuance of Class C preferred and
  common stock                                  -            -      6    29,866       13,476        134           -               -
Proceeds from stock offering, net
  of related expenses                           -            -      -         -    9,200,000     92,000           -               -
Conversion of Series A preferred
  stock                               (4,767,907)  (5,741,451)      -         -    9,535,814     95,358           -               -
Conversion of Series C preferred stock          -            -    (6)  (29,866)           12          -           -               -
Conversion of convertible preferred stock       -            -      -         -   19,823,704    198,237           -               -
Deferred Consulting                             -            -      -         -            -          -     773,284               -
Series A Issuance for Consulting                -            -      -         -      134,464      1,345   (498,284)               -
Repayment of subscription receivable            -            -      -         -            -          -           -               -
Issuance of Series A preferred stock for
  services and interest on loans            4,594       11,485      -         -            -          -           -               -
Dividend on Class D preferred stock             -            -      -         -            -          -           -               -
Dividends on redeemable convertible
  preferred stock                               -            -      -         -            -          -           -               -
Payment of accrued dividend                     -            -      -         -      859,330      8,593           -               -
Repayment of subscription receivable            -            -      -         -            -          -           -               -
Accretion of redeemable preferred stock
  to redemption value                           -            -      -         -            -          -           -               -
Deferred Stock Compensation                     -            -      -         -            -          -           -     (3,009,967)
Amortization of Deferred Stock Compensation     -            -      -         -            -          -           -         939,308
Issuance of warrants                            -            -      -         -            -          -           -               -
Cashless Warrant exercise                       -            -      -         -    1,982,876     19,829           -               -
Exercise of Stock Options                       -            -      -         -      480,266      4,803           -               -
Net loss                                        -            -      -         -            -          -           -               -
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2000                      -      $     -      -  $      -   42,033,314    420,333    $      -  $  (2,070,659)

Deferred Stock Compensation revaluation         -            -      -         -            -          -           -       1,566,906
Issuance of stock options for
  consulting services                           -            -      -         -            -          -           -        (47,892)
Amortization of Deferred Stock Compensation     -            -      -         -            -          -           -         340,081
Issuance of Stock Options to settle lawsuit     -            -      -         -            -          -           -               -
Shares issued through ESPP                      -            -      -         -       54,956        550           -               -
Option extension for CEO                        -            -      -         -            -          -           -               -
Option extension for severed employees          -            -      -         -            -          -           -               -
Exercise of Stock Options                       -            -      -         -      682,586      6,826           -               -
Net loss                                        -            -      -         -            -          -           -               -
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2001                      -     $      -      -  $      -   42,770,856  $ 427,709    $      -   $   (211,564)

Deferred Stock Compensation revaluation         -            -      -         -            -          -           -         173,616
Amortization of Deferred Stock Compensation     -            -      -         -            -          -           -          19,535
Shares issued through ESPP                      -            -      -         -       42,041        420           -               -
Purchase of Treasury Stock                      -            -      -         -            -          -           -               -
Net loss                                        -            -      -         -            -          -           -               -
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2002                      -     $      -      -  $      -   42,812,897  $ 428,129    $      -   $    (18,413)

Deferred Stock Compensation revaluation         -            -      -         -            -          -           -        (87,031)
Issuance of restricted stock units for bonus    -            -      -         -            -          -           -       (727,195)
Shares issued through ESPP                      -            -      -         -        5,494         54           -               -
Unrealized gains on available-for-sale
  securities                                    -            -      -         -            -          -           -               -
Exercise of Stock Options                       -            -      -         -      289,135      2,892           -               -
Net loss                                        -            -      -         -            -          -           -               -
                                     -----------------------------------------------------------------------------------------------
Other comprhensive loss                         -            -      -         -            -          -           -               -
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2003                      -    $       -      -  $      -   43,107,526  $ 431,075    $      -    $  (832,639)
                                     ===============================================================================================
</TABLE>
                 See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                                                                     Accumulated                          Total
                                         Additional      Stock                          Other                         Stockholders'
                                          Paid-in    Subscription    Retained       Comprehensive    Treasury Stock    (Deficiency)
                                          Capital      Receivable     Deficit        Income (Loss)  Shares     Amount     Equity
                                     -----------------------------------------------------------------------------------------------

<S>                                       <C>          <C>            <C>           <C>         <C>         <C>         <C>
BALANCE AT MAY 8, 1997 (DATE OF INCEPTION)$       -    $       -      $      -      $       -           -  $       -   $           -

Issuance of Founder's Shares                      -            -      (67,500)               -          -           -              -
Issuance of Class A preferred stock               -  (5,000,000)             -               -          -           -        387,500
Recapitalization                                  -            -             -               -          -           -              -
Rounding for fractional shares                    -            -             -               -          -           -              -
Issuance of Class C preferred and  common stock   -            -             -               -          -           -         30,000
Proceeds from stock offering, net
  of related expenses                    49,249,537            -             -               -          -           -     49,341,537
Conversion of Series A preferred stock    5,646,093            -             -               -          -           -              -
Conversion of Series C preferred stock       29,866            -             -               -          -           -              -
Conversion of convertible preferred
  stock                                  36,496,431            -             -               -          -           -     36,694,668
Deferred Consulting                               -            -             -               -          -           -        773,284
Series A Issuance for Consulting            496,939            -             -               -          -           -              -
Repayment of subscription receivable              -    2,992,492             -               -          -           -      2,992,492
Issuance of Series A preferred stock for
  services and interest on loans                  -            -             -               -          -           -         11,485
Dividend on Class D preferred stock               -            -     (749,005)               -          -           -      (749,005)
Dividends on redeemable convertible
  preferred stock                                 -            -   (1,496,675)               -          -           -    (1,496,675)
Payment of accrued dividend               1,077,714            -             -               -          -           -      1,086,307
Repayment of subscription receivable              -    2,007,508             -               -          -           -      2,007,508
Accretion of redeemable preferred stock
  to redemption value                             -            -     (113,014)               -          -           -      (113,014)
Deferred Stock Compensation               3,009,967            -             -               -          -           -              -
Amortization of Deferred Stock Compensation       -            -             -               -          -           -        939,308
Issuance of warrants                     36,520,366            -  (34,580,000)               -          -           -      1,940,366
Cashless Warrant exercise                  (19,829)            -             -               -          -           -              -
Exercise of Stock Options                   451,674            -             -               -          -           -        456,477
Net loss                                          -            -  (30,994,310)               -          -           -   (30,994,310)
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2000              132,958,758   $        -  (68,000,504)               -          -           -  $  63,307,928

Deferred Stock Compensation
  revaluation                           (1,566,906)            -             -               -          -           -              -
Issuance of stock options for
  consulting services                        47,892            -             -               -          -           -              -
Amortization of Deferred Stock Compensation       -            -             -               -          -           -        340,081
Issuance of Stock Options to
  settle lawsuit                            303,160            -             -               -          -           -        303,160
Shares issued through ESPP                  109,394            -             -               -          -           -        109,944
Option extension for CEO                    315,394            -             -               -          -           -        315,394
Option extension for severed employees       31,197            -             -               -          -           -         31,197
Exercise of Stock Options                   712,367            -             -               -          -           -        719,193
Net loss                                          -            -  (26,145,668)               -          -           -   (26,145,668)
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2001            $ 132,911,256   $        - $(94,146,172)       $       -          -  $        -  $  38,981,229

Deferred Stock Compensation revaluation   (173,616)            -             -               -          -           -              -
Amortization of Deferred Stock Compensation       -            -             -               -          -           -         19,535
Shares issued through ESPP                   12,885            -             -               -          -           -         13,305
Purchase of Treasury Stock                        -            -             -               -    132,000    (99,660)       (99,660)
Net loss                                          -            -  (20,839,252)               -          -           -   (20,839,252)
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2002            $ 132,750,525    $       - $(114,985,424)      $       -    132,000  $ (99,660)  $  18,075,157

Deferred Stock Compensation revaluation      87,031            -             -               -          -           -              -
Issuance of restricted stock units for bonus      -            -             -               -          -           -      (727,195)
Shares issued through ESPP                      911            -             -               -          -           -            965
Exercise of Stock Options                   231,005            -             -               -          -           -        233,897
Unrealized gains on available-for-sale
  securities                                      -            -             -         531,880          -           -        531,880
Net loss                                          -            -   (8,618,013)               -          -           -    (8,618,013)
                                     -----------------------------------------------------------------------------------------------
Comprehensive loss                                -            -   (8,618,013)         531,880          -           -    (8,086,133)
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2003            $ 133,069,472    $       - $(123,603,437)   $    531,880    132,000  $ (99,660)  $  $9,496,691
                                     ===============================================================================================
</TABLE>

<TABLE>
<CAPTION>

                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                      Consolidated Statement of Cash Flows
                                                                                                                 Cumulative from
                                                                                                                   May 8, 1997
                                                                                                               (date of inception)
                                                                         Year ended December 31,                through December
                                                                  2003             2002            2001             31, 2003
                                                            ------------------------------------------------------------------------
Cash flows from operating activities:
<S>                                                             <C>             <C>              <C>               <C>
    Net loss                                                    $ (8,618,013)   $(20,839,252)    $(26,145,668)     $   (86,597,243)
    Adjustments to reconcile net loss to net cash used in
    operating activities:
         Depreciation and amortization                                284,734       1,644,230        1,323,958            3,950,737
         Loss on sale of fixed assets                                       -          14,481          108,971              170,868
         Impairment of assets                                         366,788       4,297,128                -            4,663,916
         Restructuring charge net of expenses paid                  (343,547)       1,749,738                -            1,406,191
         Reserve (reversal) for officers note                       (308,423)         428,398                -              119,975
         Interest expense relating to issuance of warrants                  -               -                -              371,000
         Non-cash charge for change in option terms                         -               -          346,591              346,591
         Non-cash charge for settlement of lawsuit                          -               -          303,160              303,160
         Amortization of deferred consulting expense, net                   -               -                -            1,160,784
         Amortization of deferred stock compensation                        -          19,534          340,081            1,290,253
         Warrants issued for consulting services                            -               -                -            1,569,366
         Services and interest expense paid in preferred stock              -               -                -               11,485
    Changes in operating assets and liabilities:
         Accounts receivable                                        (128,133)               -                -            (128,133)
         Inventory                                                  (238,684)               -          207,613            (238,684)
         Prepaid expenses and other current assets                  1,310,652     (1,172,448)        (273,928)            (992,861)
         Accounts payable                                              70,749       (834,139)        (816,866)              148,075
         Accrued compensation and benefits                           (70,623)       (494,507)          444,044              156,000
         Accrued interest                                                   -               -                -              275,560
         Dividend receivable                                         (63,758)               -                -             (63,758)
         Due to related party                                               -        (35,532)         (17,193)                    -
         Other accrued expenses and current liabilities                87,646       (364,219)         (40,570)              673,197
                                                            ------------------------------------------------------------------------
         Net cash used in operating activities                    (7,650,612)    (15,586,588)     (24,219,807)         (71,403,521)

Cash flows from investing activities:
    Purchase of investments                                       (1,100,000)               -                -          (1,100,000)
    Increase in other assets                                        (236,854)               -          664,986            (412,072)
    Purchases of property and equipment                               (7,993)       (466,081)      (4,320,064)          (8,421,708)
    Sale of property and equipment                                     53,365               -                -               53,365
                                                            ------------------------------------------------------------------------
         Net cash used in investing activities                    (1,291,482)       (466,081)      (3,655,078)          (9,880,415)

Cash flows from financing activities:
    Initial public stock offering, net of expenses                          -               -                -           49,341,537
    Payment of dividends                                                    -               -      (1,159,373)          (1,159,373)
    Shares issued under employee stock purchase plan                      965          13,305          109,944              124,214
    Exercise of employee stock options                                233,897               -          719,193            1,409,567
    Issuance of preferred stock                                             -               -                -           32,868,028
    Repayment of subscription receivable                                    -               -                -            5,000,000
    Proceeds from capital leases                                            -               -          495,851              495,851
    Repayment of capital leases                                     (200,041)       (340,455)        (186,247)          (1,031,395)
    Proceeds from notes payable issued to investors                         -               -                -            3,550,000
                                                            ------------------------------------------------------------------------
         Net cash provided by (used in) financing activities           34,821       (327,150)         (20,632)           90,598,429

(Decrease)increase in cash and cash equivalents                   (8,907,273)    (16,379,819)     (27,895,517)            9,314,493

Cash and cash equivalents, beginning of period                     18,221,766      34,601,585       62,497,102                    -
                                                            ------------------------------------------------------------------------

Cash and cash equivalents, end of period                         $  9,314,493    $ 18,221,766     $ 34,601,585       $    9,314,493
                                                            ========================================================================

Supplemental disclosure of non--cash transactions:
    Cash paid for interest                                         $    6,700     $    48,926      $    34,000        $     488,126
                                                            ========================================================================
    Cash paid for taxes                                            $    4,700     $    17,000       $    1,600        $      30,500
                                                            ========================================================================
    Assets acquired through capital lease                           $       -       $       -        $       -        $     535,445
                                                            ========================================================================
                 See notes to consolidated financial statements.
</TABLE>

<PAGE>

                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements

1.  Nature of Business and Operations

     Nature of Business. Beacon Power Corporation (the "Company" or "Beacon") (a
development  stage  company) was  incorporated  on May 8, 1997 as a wholly owned
subsidiary of SatCon  Technology  Corporation  ("SatCon").  Since its inception,
Beacon has been engaged in the  development of flywheel  devices for storing and
transmitting  kinetic energy.  As discussed in Note 6, during the fourth quarter
of 2000, the Company  completed an initial  public  offering of its common stock
and raised  approximately  $49.3 million net of offering  expenses.  In 2003 the
Company  began  development  and  manufacturing  activities in the area of power
conversion systems for the renewable energy market.  Because the Company has not
yet generated a significant amount of revenue from its principal operations,  it
is accounted  for as a development  stage  company under  Statement of Financial
Accounting  Standards  No.  7.  The  Company  has a  single  operating  segment,
manufacturing  alternative power sources. The Company's organizational structure
has no  divisions  or  subsidiaries  dictated  by product  lines,  geography  or
customer type.

     Operations. The Company has experienced net losses since its inception and,
as of December 31, 2003,  had an  accumulated  deficit of  approximately  $123.6
million. The Company is currently facing the challenge of identifying  potential
applications,  and the ongoing  development  and  refinement,  of its commercial
products.   This  ongoing  research  and  development  is  expected  to  require
significant  additional  outlays of capital.  The Company has taken  significant
actions  over the last two years to reduce  its cash  expenditures  for  product
development,  infrastructure and production  readiness.  Headcount,  development
spending and capital  expenditures  have also been  significantly  reduced.  The
Company has focused its activity on market analysis in terms of size of markets,
competitive  aspects and advantages  that the Company's  products could provide.
Preliminary  design of potential  products for markets for its flywheel products
under consideration has continued.  No expenditures for prototype development or
production  capabilities  will be made until the  specific  markets to be served
have been defined.  The Company has begun  production of an inverter product for
solar energy  applications.  The Company must raise additional equity to execute
its  business  plan and  continue  as a going  concern.  Based on the  Company's
current cash usage rates and additional  expenditures expected in support of its
business plan the Company will need to obtain an equity investment by early 2005
to cover expenses relating to continuing operations, working capital, completing
additional inverter products'  prototype  development and production of emerging
inverter  products.  In the event  that the  Company  elects to begin full scale
development of its Smart Energy Matrix  systems,  the amount of equity  required
would increase substantially.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

     Going concern. The accompanying consolidated financial statements have been
prepared on a going concern basis,  which contemplates the realization of assets
and the  satisfaction of liabilities in the normal course of business.  As shown
in the  consolidated  financial  statements,  the Company  incurred  significant
losses from continuing  operations of $8,618,000,  $20,839,000,  and $26,146,000
and cash decreases of $8,907,000,  $16,379,000 and $27,896,000, during the years
ended December 31, 2003, 2002 and 2000, respectively. The Company has $9,314,000
of cash and cash  equivalents  on hand at December 31, 2003. The Company has not
recorded any revenue from sales of its products.  These  factors,  among others,
indicate  that the Company may be unable to  continue  as a going  concern.  The
consolidated financial statements do not include any adjustments relating to the
recoverability  and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.

     Management recognizes that the Company's continuation as a going concern is
dependent upon its ability to generate sufficient cash flow to allow the Company
to satisfy its obligations on a timely basis.  The generation of sufficient cash
flow is dependent,  not only on the successful  expansion of the Company's share
of the market for its current product and the  establishment  of new markets for
products under development,  but also on its ability to obtain additional equity
investments.  Management  believes  that  the  successful  achievement  of these
initiatives   combined  with  the  generation  of  additional  cash  via  equity
offerings, should provide the Company with sufficient resources to meet its near
term cash requirements. In addition, the Company is also considering a number of
other strategic financing  alternatives,  however, no assurance can be made with
respect to the long-term viability of the Company.

     Accounting Principles.  The accompanying  consolidated financial statements
have been prepared using accounting  principles generally accepted in the United
States of America.

     Consolidation.  The accompanying  consolidated financial statements include
the  accounts  of  the  Company  and  its  subsidiary  Beacon  Power  Securities
Corporation.  All significant  inter-company accounts and transactions have been
eliminated in consolidation.

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

Summary of Significant Accounting Policies

     Use of Estimates.  The preparation of consolidated  financial statements in
accordance with accounting principles generally accepted in the United States of
America,  requires  management to make estimates and assumptions that affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and  liabilities at the date of the  consolidated  financial  statements and the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.

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

     Inventories.  Inventories  are  stated  at the  lower  of  cost  (first-in,
first-out  method) or market and consist of raw  materials,  work in process and
finished  goods  held  for  resale.  Inventory  balances  are  comprised  of the
following amounts as of December 31, 2003:

Raw materials                      $    104,362
Work in progress                         26,001
Finished goods                          108,321
                          ----------------------
Total inventories                  $    238,684

     Investments.  The Company's  investment in Evergreen Solar (see Note 13) is
classified as  available-for-sale  and is recorded on the  consolidated  balance
sheet at fair value.  Unrealized gains or losses on this investment are included
as a separate component of accumulated other comprehensive income (loss), net of
any tax effect.

     Employee Advances. During 2001, the Company advanced approximately $785,000
to three  officers of the  Company.  These  advances  are  interest  bearing and
secured by the officers'  holdings of Beacon Power Corporation  common stock and
were provided to the officers to allow them to exercise stock options and in one
case,  to pay the related  taxes.  Through  December 31,  2003,  the Company had
collected  approximately  $667,000 in principal  payments on these advances.  In
June 2002,  due to the current  market value of the pledged  securities  and the
uncertainty  of  collection  of the  advance,  the Company  took a charge in the
amount of  $426,000  to reserve  the  remaining  balance  of the  advance to Mr.
William  Stanton,  its former CEO and president.  During 2003, a portion of this
reserve was reversed due to a partial  payment of $323,000  from the proceeds of
the sale of the Beacon common stock that secured the loan.  This balance of this
loan of $118,000 is still  reserved,  however,  it has not been  cancelled.  Mr.
Stanton  continues to be a director of the  Company.  This charge is included in
other expenses in the  accompanying  consolidated  statement of operations.  All
other officers have paid their  respective  loan balances in full as of December
31, 2003.

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

     Other Assets. Other assets consist of intellectual property relating to the
Company's Smart Power M5 inverter system purchased from Advanced Energy Systems,
Inc. and deposits securing  performance on the Company's  operating lease of its
facility.

     Loss on Sales  Commitments.  At December  31, 2003 the Company had no sales
commitments and therefore no analysis of loss on sales commitments was required.
When the Company has sales commitments that are firm, have fixed-prices, and the
direct  costs to  manufacture  products  covered  by the  Company's  firm  sales
commitments  are in excess  of the fixed  selling  prices,  revenue  and cost of
revenue on such sales  commitments  are recorded as deliveries are made.  Direct
costs consist of materials and direct labor costs.  These excess costs have been
estimated and accrued as losses on sales  commitments in the period in which the
sales  commitment  is  made.  Estimates  of costs to  manufacture  products  are
reviewed  and revised  periodically  and changes in  estimated  losses from such
revisions are recorded in the accounting period in which the revisions are made.

     Long-Lived  Assets.  In accordance  with Statement of Financial  Accounting
Standards  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets",  long-lived  assets to be held and used by the Company are  reviewed to
determine  whether  any  events or changes in  circumstances  indicate  that the
carrying value of the asset may not be  recoverable.  The conditions  considered
include whether or not the asset is in service, has become obsolete,  or whether
external  market  circumstances  indicate  that the  carrying  amount may not be
recoverable.  The  Company  recognizes  a loss for the  difference  between  the
estimated fair value of the asset and the carrying amount. The fair value of the
asset is measured using either available  market prices or estimated  discounted
cash flows. The Company's analyses indicate that there has been an impairment of
long-lived  assets  and  recognized  an  asset  impairment  charge  in 2003  and
restructuring and asset impairment charges in 2002.

     Restructuring and asset impairment charges.  The Company's initial products
were  focused  on the  telecom  industry.  As a result of the  overall  economic
downturn and in particular the  significant  decline in capital and  maintenance
spending in telecom as well as the low price of lead-acid batteries, the Company
has not been  successful  in selling  products into this market.  Therefore,  in
December of 2003,  the Company  recorded a non-cash asset  impairment  charge of
$0.4  million in order to reduce the  carrying  amount of its  flywheel  related
patents and patents pending as the estimated future cash flows  anticipated from
these assets is  substantially  in doubt.  Also,  in July 2002,  in an effort to
reduce its  monthly  cash-spending  rate,  the Company  implemented  a number of
cost-cutting  measures to ensure the  availability  of  resources  necessary  to
pursue its  business  strategy for a  reasonable  period but at a  significantly
lower cash expenditure rate. As a result, a substantial portion of its long-term
assets have been idled,  including  machinery  and  equipment,  tooling,  office
furniture and fixtures,  and equipment and leasehold  improvements.  The Company
has  evaluated  all of its  property  and  equipment as required by Statement of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets" and, as a result,  has taken a restructuring and
impairment  charge of $6.5  million of which $4.3  million  represents  impaired
capital equipment and leasehold  improvements,  $.3 million relates to severance
costs and $1.9 million  relates to a reserve  against  future lease payments and
related  facility costs. The assets held for sale have been grouped together and
classified  as  "Assets  held for sale" in the  current  assets  section  of the
balance  sheet.  Assets held for sale have been written down to their fair value
based on quotes  from  vendors and other  market  factors.  The reserve  against
future lease  payments is classified as  "Restructuring  reserve" in the current
liabilities section of the balance sheet.

The restructuring reserves are as follows:

Beginning balance at December 31, 2002                  $  1,749,738

Charges for the period                                             -
Payments                                                   (343,547)
                                                   ------------------
Ending balance at December 31, 2003                     $  1,406,191
                                                   ==================

     Revenue Recognition.  Revenue is recognized on transfer of title, typically
when  products  are shipped and all related  costs are  estimable.  For sales to
distributors,  the Company  makes an  adjustment to defer revenue until they are
subsequently sold by distributors.

     Stock-Based Compensation. In 2002 the Company implemented FASB Statement of
Financial Accounting Standards No. 148 ("SFAS 148"), "Accounting for Stock-Based
Compensation-Transition  and  Disclosure."  SFAS 148 amends  current  disclosure
requirements  and  requires  prominent  disclosures  on both  annual and interim
financial  statements  about the method of accounting for  stock-based  employee
compensation  and the  effect  of the  method  used on  reported  results.  This
statement is effective for financial reports containing financial statements for
interim  periods  beginning  after  December  15, 2002.  SFAS 148 also  provides
alternative  methods of transition  for a voluntary  change to fair-value  based
methods of  accounting,  which have not been adopted at this time.  Compensation
expense  associated  with  awards of stock or options to  employees  is measured
using the intrinsic-value  method. Deferred compensation expense associated with
awards to non-employees is measured using the fair-value method and is amortized
over  the  vesting  period  of  three  years  using  a  calculation  under  FASB
Interpretation  No.  28,  "Accounting  for Stock  Appreciation  Rights and Other
Variable Stock Option or Award Plans."

     No  stock-based  compensation  is  reflected  in net  earnings  for options
granted to employees as all options granted under the plan had an exercise price
equal to or greater than the market price of the underlying stock at the date of
the grant.  The  following  table  illustrates  the effect on net  earnings  and
earnings  per  share if the  Company  had  applied  the fair  value  recognition
provisions of FASB Statement No. 123 "Accounting  for Stock-Based  Compensation"
to stock-based employee compensation.

<TABLE>
<CAPTION>

                                                            Year Ended December 31,
                                               ---------------------------------------------------
                                                     2003             2002            2001
                                               ---------------------------------------------------

<S>                                               <C>              <C>              <C>
Net loss to common shareholders as reported       $ (8,618,013)    $(20,839,251)    $(26,145,668)

Pro forma compensation expense                          400,148        2,998,612        2,608,000
                                               ---------------------------------------------------
Net loss--pro forma                               $ (9,018,161)    $(23,837,863)    $(28,753,668)
                                               ===================================================
Loss per share--as reported                         $    (0.20)      $    (0.49)      $    (0.61)
Loss per share--pro forma                           $    (0.21)      $    (0.56)      $    (0.68)
</TABLE>


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

                                                       2003                2002                2001
                                               --------------------------------------------------------------

<S>                                               <C>                 <C>                  <C>
Risk-free interest rate                           1.22% - 3.56%       2.48% - 3.56%        3.0% - 6.25%
Expected life of option                             1-3 years           1-3 years            1-3 years
Expected dividend payment rate, as a
percentage of the stock price on the date of
grant                                                   0%                  0%                  0%
Assumed volatility                                 109% - 137%         130% - 137%          100% - 135%
</TABLE>

     The option-pricing  model used was designed to value readily tradable stock
options with  relatively  short lives.  However,  management  believes  that the
assumptions  used to value the options and the model  applied yield a reasonable
estimate of the fair value of the grants made under the circumstances  (see also
Note 8).

     Income Taxes.  Deferred  income tax assets and  liabilities  are determined
based on the differences between the financial reporting and tax bases of assets
and  liabilities  and tax loss and credit  carry  forwards  using the  currently
enacted  tax rates and laws.  A  valuation  allowance  is provided to the extent
realization of deferred tax assets is not  considered  more likely than not (see
Note 11).

     Research and  Development.  Research and development  costs are expensed as
incurred.

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

     Concentration  of  Credit  Risk.  Financial  instruments  that  potentially
subject  the  Company  to  significant  concentration  of  credit  risk  consist
primarily  of cash and cash  equivalents.  At December  31,  2003 and 2002,  the
Company  had cash  balances at a financial  institution  in excess of  federally
insured  limits.  However,  the Company  does not believe  that it is subject to
unusual  credit risk beyond the normal credit risk  associated  with  commercial
banking relationships.

     Comprehensive  Loss.  Comprehensive loss is the combination of reported net
loss and other  comprehensive  income,  which consists of the unrealized gain on
the Company's investment in Evergreen Solar.

     Loss Per Share - Basic and Diluted.  Basic loss per share has been computed
using the  weighted-average  number of shares of common stock outstanding during
each period. Diluted loss per share was computed in the same manner. Potentially
dilutive securities have been excluded from the computation,  as their effect is
antidilutive.

3.  Property and Equipment

Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>

                                                     Estimated
                                                       Useful         December 31,         December 31,
                                                       Lives              2003                 2002
                                                    -------------  -------------------- --------------------
<S>                                                   <C>                   <C>                  <C>
Machinery and equipment                               5 years               $2,111,972           $1,998,631
Service vehicles                                      5 years                   63,792               63,792
Furniture and fixtures                                7 years                  685,535              717,293
Office equipment                                      3 years                2,028,545            1,914,195
Leasehold improvements                               Lease term              2,072,577            2,072,577
Equipment under capital lease obligations            Lease term              1,008,985            1,081,726
                                                                   -------------------- --------------------
     Total                                                                  $7,971,406           $7,848,214
Less accumulated depreciation and amortization                             (3,453,209)          (2,996,079)
                                                                   -------------------- --------------------
     Property and equipment, before impairment                              $4,518,197           $4,852,135
                                                                   -------------------- --------------------
Less impairment reserve                                                    (4,161,017)          (4,289,206)
                                                                   -------------------- --------------------
     Property and equipment, net                                              $357,180             $562,929
                                                                   ==================== ====================
</TABLE>

4.  Commitments

     The Company leases office and light  manufacturing space under an operating
lease through September 30, 2007. At December 31, 2003, the Company has provided
the lessor with an irrevocable  letter of credit in the amount of $355,232.  The
Company  entered into a  manufacturing  agreement  with a vendor for an integral
component of the Company's M5 power conversion  system. The Company provided the
vendor  with an  irrevocable  letter  of credit in the  amount of  $50,000  that
expires  on  October 3,  2004.  Both  letters  of credit  are  secured by a cash
deposit.

     Future minimum annual lease payments under non-cancelable  operating leases
as of December 31, 2003 are as follows:

                                          2004                490,675
                                          2005                500,359
                                          2006                529,413
                                          2007               $397,059

     Total rent expense was $215,415, $436,083, and $567,239, during 2003, 2002,
and 2001, respectively.

     The Company has placed  purchase  orders with its  suppliers to fulfill its
Smart  Power  M5  production   requirements   for  2004.  These  orders  include
non-cancelable commitments of approximately $855,000.

5.  Preferred Stock

     As a result of the initial  public  offering of the Company's  common stock
and the  conversion  of all  outstanding  shares of all classes of the preferred
stock,  the  Company  amended  its  charter  and  cancelled  all its  classes of
preferred  stock. The Company then added a new class of preferred stock that can
be  issued  in the  future  by filing a  Certificate  of  Designations  with the
specific terms as set by its Board of Directors.  At December 31, 2003 and 2002,
there are 10 million shares of preferred stock authorized with none outstanding.

6.  Common Stock

     Initial  Public  Offering.  During the fourth  quarter of 2000, the Company
sold 9,200,000 shares of its common stock,  inclusive of the underwriters'  over
allotment,  at an initial public offering price of $6 per share. Net proceeds to
the  Company  as a result  of the stock  offering  totaled  approximately  $49.3
million   reflecting   gross  proceeds  of  $55.2  million  net  of  underwriter
commissions of approximately  $3.9 million and other estimated offering costs of
approximately $2.0 million.

     Shareholder  rights  plan.  In  September  2002,  the  Company's  Board  of
Directors  approved a Shareholder  Rights Plan.  Under the plan,  each holder of
common stock on October 7, 2002  automatically  received a  distribution  of one
Right for each share of common  stock held.  Each Right  entitles  the holder to
purchase  1/100th of a share of the Company's  newly issued  preferred stock for
$22.50 in the event  that any  person  not  approved  by the board of  directors
acquires  more than 15% (35% in the case of one large  shareholder  that already
owned more than 15%) of the  outstanding  common stock, or in the event that the
Company is acquired by another company,  $22.50 worth of the common stock of the
other  company  at half its market  value (in each case any  rights  held by the
acquiring person are not exercisable and become void).

     Reserved Shares.  At December 31, 2003,  11,755,157  shares of common stock
were reserved for issuance under the Company's stock option plan and outstanding
warrants.

7.  Redeemable Convertible Preferred Stock and Stock Warrants

     Class D Redeemable  Convertible Preferred Stock and Class D Stock Warrants.
Prior to its initial public offering,  the Company's capital structure  included
Class  D  redeemable   convertible   preferred  stock  ("Class  D  Stock").  All
outstanding  shares of the Class D Stock  plus  accrued  dividends  were  either
converted into shares of common stock during the initial public offering or were
paid in cash in February 2001.  After the initial public  offering,  the Company
amended its charter and cancelled all its Class D Stock.

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

     Additional  warrants were issued under the Class D Stock  agreement  during
April 2000 to three  investors  to purchase  712,500  shares of common  stock at
$1.67 per share,  712,500 shares of common stock at $2.25 per share, and 712,500
shares of common stock at $3.00 per share. Upon issuance of these warrants,  the
Company  recorded a dividend  of  approximately  $1,300,000  for the fair market
value of these warrants based on the Black-Scholes  option pricing model.  These
warrants expire December 31, 2004.

     In December  2000, an investor  exercised a portion of its  warrants,  in a
cashless  transaction,  to purchase 300,000 shares of the Company's common stock
at $1.67,  300,000  shares of the  Company's  common  stock at $2.25 and 300,000
shares of the  Company's  common  stock at $3.00 per share.  Net  shares  issued
totaled 608,843.

     Class E Redeemable  Convertible Preferred Stock and Class E Stock Warrants.
Prior to its initial public offering,  the Company's capital structure  included
Class  E  redeemable   convertible   preferred  stock  ("Class  E  Stock").  All
outstanding  shares of the Class E Stock  plus  accrued  dividends  were  either
converted into shares of common stock during the initial public offering or were
paid in cash in February 2001.  After the initial public  offering,  the Company
amended its charter and cancelled all its Class E Stock.

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

     In  conjunction  with the Class E Stock  conversion,  warrants  to purchase
315,000 shares,  issued in conjunction  with the issuance of the Senior Notes in
August 1999, were cancelled. In exchange, warrants to purchase 306,535 shares of
Class E Stock at $2.50 per share were  issued.  These  warrants  expire April 7,
2005.  The  estimated  fair market  value of these  warrants  was  approximately
$344,000.  Since these warrants replaced the August 2, 1999 warrants, the amount
allocated to the August 1999  warrants  have been  reallocated  to Class E Stock
Warrants and the remaining  $174,000 was charged to interest expense in the year
ended December 31, 2000. As a result of the initial public stock offering by the
Company  in the fourth  quarter of 2000,  the  holders of the  warrants  are now
entitled to purchase 613,070 shares of the Company's common stock instead of the
Class E Stock.

     In December 2000, an investor  exercised its 102,398 of its warrants,  in a
cashless transaction, to purchase 84,433 shares of the Company's common stock.

     Class F Redeemable  Convertible Preferred Stock and Class F Stock Warrants.
Prior to its initial public offering,  the Company's capital structure  included
Class  F  redeemable   convertible   preferred  stock  ("Class  F  Stock").  All
outstanding  shares of the Class F Stock  plus  accrued  dividends  were  either
converted into shares of common stock during the initial public offering or were
paid in cash in February 2001.  After the initial public  offering,  the Company
amended its charter and cancelled all its Class F Stock.

     In conjunction  with the issuance of the Class F Stock,  the Company issued
warrants to seven investors to purchase  6,333,333 shares of its common stock at
an exercise price of $2.25. The estimated fair value of the warrants at the date
of their issuance was $33,000,000. This amount was recorded as a dividend to the
holders of the Class F Stock and credited to additional  paid-in-capital  during
2000. These warrants expire on May 23, 2005. During December 2000, two investors
exercised 1,884,800 of their warrants,  in a cashless  transaction,  to purchase
1,289,600 shares of the Company's common stock.

     Consultant  Warrants.  The Company issued warrants to two consultants  that
are  exercisable  for an  aggregate  of 70,000  shares of its common stock at an
exercise  price of $6.00  per  share.  The  holder of one of these  warrants  to
purchase  50,000  shares of common  stock may  exercise  its warrant at any time
prior to January  31,  2002.  None of these  warrants  were  exercised  prior to
January 31, 2002 and the warrants have expired.  The holder of the other warrant
to purchase  20,000  shares of common stock may exercise its warrant at any time
prior to August 2, 2005.  These warrants were fully vested upon the issuance and
the Company recorded a charge to consulting expense of $213,861.

     On October 24, 2000, the Company issued 240,000  warrants to an investor at
an exercise  price of $2.10 per share in  conjunction  with an  agreement  by an
affiliate of that investor to provide the Company with technical expertise.  One
half of the warrants vest  immediately  and the  remainder  vest as services are
utilized.  During the fourth quarter of 2000,  the company  recorded a charge to
consulting  expense for  $1,355,505  to  recognize  the fair market value of the
vested  warrants.  The Company has  deferred  the  remaining  warrants  and will
revalue the amount and record additional expense as necessary in future quarters
as the remaining services are provided.  Deferred compensation relating to these
warrants was  approximately  $105,000 and $18,000 at December 31, 2003 and 2002.
The agreement  terminates and any unvested  options are forfeited on October 24,
2005.

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

<TABLE>
<CAPTION>
                                                        April                  August     October
                                                         2000        2000       1999        1999        1997
                                                       Warrants    Warrants   Warrants    Warrants    Warrants
                                                     ------------------------------------------------------------

<S>                                                     <C>          <C>        <C>        <C>         <C>
Risk-free interest rate                                 6.15%        6.5%       5.62%      5.86%       6.25%
Expected life of warrant                              12 months    Various    30 months  27 months   24 months
Expected dividend payment rate, as a percentage
of the stock price on the date of grant                   0%          0%         0%          0%          0%
Assumed volatility                                       73%         100%        60%        60%         48%
</TABLE>

<PAGE>

8.  Stock Options

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

Stock option activity since inception is as follows:

                                                 Weighted-  Weighted-
                                                  Average    Average
                                     Number of   Exercise      Fair
                                       Shares      Price      Value
                                    ------------------------------------

Outstanding at inception                       -
   Granted                             5,757,688    $  2.17        1.35
   Exercised                           (480,266)       0.89
   Canceled, forfeited or expired      (544,382)       1.99
                                    ------------------------------------

Outstanding, December 31, 2000         4,733,040       2.50
   Granted                             2,361,007       2.94        1.93
   Exercised                           (682,586)       1.05
   Canceled, forfeited or expired    (1,561,560)       4.07
                                    ------------------------------------

Outstanding, December 31, 2001         4,849,901       2.37
   Granted                             3,050,628       1.16        0.38
   Exercised                                   -          -
   Canceled, forfeited or expired    (2,513,186)       2.25
                                    ------------------------------------

Outstanding, December 31, 2002         5,387,343       1.78
   Granted                               367,099       1.26        0.07
   Exercised                           (289,135)       0.81
   Canceled, forfeited or expired    (2,649,378)       1.95
                                    ------------------------------------

Outstanding, December 31, 2003         2,815,929    $  1.59
                                    ========================


     The following table summarizes  information about stock options outstanding
at December 31, 2003:
<TABLE>
<CAPTION>

                             Weighted-                          Vested
                                                    --------------------------------
                              Average    Weighted-                    Weighted-
                   Number    Remaining    Average                      Average
                 of Options Contractual   Exercise      Number         Exercise
 Exercise Price Outstanding     Life       Price      of Options        Price

<C>                <C>               <C>       <C>        <C>                 <C>
$.255-$.89         2,022,228         7.9       $0.80      1,815,566           $0.81
$1.00 - $2.50        399,104        6.82       $2.20        399,104           $2.20
$3.00 - $4.10        190,000        6.57       $3.94        190,000           $3.94
$5.10 - $6.10        171,541        7.06       $5.64        163,203           $5.66
$6.90 - $7.22         21,389        8.16       $7.08         18,889           $7.09
$9.25 - $9.31         11,667        7.43       $9.30         11,667           $9.30
</TABLE>

     Included  in the above  schedules  are grants of 0,  45,000,  0 and 130,000
options  made  to  non-employee  consultants  in  2003,  2002,  2001  and  2000,
respectively.


9.  Employee Stock Purchase Plan

     On October 15, 2000 the Company  adopted an Employee  Stock  Purchase  Plan
(the "Plan") under which eligible  employees are able to purchase  shares of the
Company's  Common  Stock at 85% of the market  value at the date of the start of
each six month  option  period or the end of such  period,  whichever  is lower.
Under the provisions of the Plan up to 1,000,000  shares are authorized.  Shares
purchased  under  the Plan in 2003,  2002 and 2001  totaled  5,494,  42,041  and
54,956,  respectively  and the  weighted  average  grant  date fair value of the
shares  purchased was $0.18 in 2003,  $0.28 in 2002 and $2.00 in 2001. There are
897,509 shares available under the Plan at December 31, 2003.


10. Restricted Stock Units.

     During 2003 the Company  put into place a long-term  incentive  plan (LTIP)
for all executives and employees for 2003 and 2004.  Based on the Company's cash
requirements  and  the  need to  retain  its  professional  staff,  the  Company
determined  that it would be in the best  interest  of it and its  employees  to
implement a Deferred Compensation Plan

     The LTIP has  eliminated  the previous cash bonus  structure for successful
performance and replaced it with a program whereby the Company establishes goals
that are  strategically  aligned to the Company's  performance  and,  therefore,
shareholder  value. The LTIP agreement is intended to provide employees deferred
compensation in the form of restricted stock units (or "RSUs") at no cost to the
recipient,  that can be converted into shares of Company's  common stock through
establishing and evaluating quarterly,  or in some cases yearly, targets for the
employee and,  following each quarter,  determining the number of RSUs to accrue
and to be granted in four equal  installments  in the fiscal year  following the
fiscal year with respect to which employee accrued the RSUs.  Employees have the
right to convert their RSUs into shares at any time after such grant, subject to
a quarterly  vesting schedule.  The Company's  employees earned 667,151 RSUs for
the fiscal year ended  December 31, 2003,  which are not  available for exercise
until  satisfaction of the quarterly  vesting period during 2004. The grants are
recorded as deferred stock  compensation  until they are earned over the vesting
schedule,  at which time, the value of the RSUs will be recorded as compensation
expense in the Company's Income Statement.


11.  Income Taxes

     The components of the provision (benefit) for income taxes consisted of the
following:
<TABLE>
<CAPTION>

                                                                                 Cumulative
                                                                                from date of
                                                                                  inception
                                                                                   through
                                          Year ended December 31,               December 31,
                             --------------------------------------------------
Components of Provision            2003             2002            2001            2003
                             -------------------------------------------------------------------
<S>                                  <C>               <C>           <C>              <C>
State Current                        $   1,956         $     -       $  17,156        $  19,112
Federal Def                        (5,807,539)     (7,377,177)     (9,919,839)     (32,847,774)
State Def                          (1,169,696)       (824,557)     (1,679,472)      (5,483,483)
Increase in Valuation                6,977,235       8,201,734      11,599,311       38,331,257
                             -------------------------------------------------------------------
Provision/(Benefit)                  $   1,956         $     -       $  17,156        $  19,112
                             ===================================================================
</TABLE>


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

         Statutory federal rate benefit                            (34) %
         State, net of federal effect                               (6)
         Valuation allowance provided                                40
                                                                   -----
         Effective rate                                             --%


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

                                                  2003            2002
                                            ----------------------------------
Long term assets:
   Net operating loss carryforwards             $ 29,965,300     $ 26,081,296
   Research & development credits                  2,577,524        2,214,815
   Loss on sales commitments                               0                0
   Restructuring reserves                          2,373,598        2,415,578
   Other                                             135,966          642,333
                                            ----------------------------------
Net deferred tax assets before valuation          35,052,388       31,354,022
allowance
Less valuation allowance                        (35,052,388)     (31,354,022)
                                            ----------------------------------

Net deferred tax assets                             $      -         $      -
                                            ==================================

     The valuation  allowance  increased by $3,698,366 in 2003 and $8,201,734 in
2002,  primarily due to the  generation of net operating loss carry forwards and
credits for which realization is not reasonably assured.

     The Company has  available  for future  periods  net  operating  loss carry
forwards for federal and state tax  purposes of  approximately  $75,080,000  and
$73,746,000, respectively, as of December 31, 2003. In addition, the Company has
business credits of approximately  $1,734,000 and $843,203 for federal and state
purposes,  respectively  as of December 31, 2003.  The net operating  loss carry
forwards  begin to expire in 2012 for federal  and 2002 for state tax  purposes.
The  federal  research  and  development  credits  begin to expire in 2012.  The
Company did not pay any income taxes from inception to December 31, 2003.

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


12.  Benefit Plan

     In 1998, the Company  created a 401(k) Profit Sharing Plan (the "Plan") for
its full-time employees.  Each participant in the Plan may elect to contribute a
percentage of his or her annual  compensation  to the Plan on a pre-tax basis up
to the annual limit  established by the Internal  Revenue  Service.  The Company
matches  employee  contributions  at a rate  of 50%  up to the  first  6% of the
employee's  contributions.  The Company may also elect to make a  profit-sharing
contribution at the discretion of the Board of Directors. Employee contributions
are fully vested.  Company  matching and profit sharing  contributions  vest 20%
after two years of service  consisting of at least 1,000 hours per calendar year
and 20% annually thereafter.  Company  contributions were $63,671,  $113,257 and
$189,883 during 2003, 2002 and 2001 respectively.

13.  Related Party Transactions

     Strategic  Investment.  On May 15, 2003, the Company invested $1,000,000 in
the Series A Preferred Stock of Evergreen Solar,  Inc., a public company,  which
specializes  in  renewable  energy  sources,  in order to  develop  a  strategic
relationship  with that company.  This investment was part of a larger financing
provided by several investors. The Company made its investment on the same terms
as the other investors in this financing.  The Company  purchased 892,857 shares
of the Series A Preferred  Stock of Evergreen,  for $1.12 per share. In addition
the Company purchased a three-year  warrant  exercisable for 2,400,000 shares of
Evergreen's  common  stock.  The warrant has a purchase  price of $100,000 and a
cash  exercise  price of $3.37 per share.  Evergreen's  financing  was a private
placement  of  $29.475  million of its  Series A  Preferred  Stock and the above
warrant.   Perseus  2000,   L.L.C.,   an  affiliate  of  one  of  the  Company's
stockholders, Perseus Capital, L.L.C., invested $3 million in Evergreen's Series
A Preferred Stock,  and led the investor group in this financing.  Mr. Philip J.
Deutch  and Mr.  Kenneth M.  Socha,  members  of the Board of  Directors  of the
Company,  are Managing Director and Senior Managing Director,  respectively,  of
Perseus,  L.L.C.,  and Mr. Deutch is one of four  individuals from the Evergreen
investor  group that was added to the Board of Directors  of Evergreen  when the
investment closed.

<PAGE>

14.   Quarterly Results (Unaudited)

     In  management's   opinion,   this  unaudited   information   includes  all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair presentation of the information for the quarters  presented.  The operating
results for any quarter are not necessarily indicative of results for any future
quarters.
<TABLE>
<CAPTION>
                                                                              2003
                                                      First          Second          Third          Fourth
                                                     Quarter         Quarter        Quarter         Quarter
                                                 ---------------------------------------------------------------

<S>                                                      <C>            <C>             <C>            <C>
Revenue                                                  $      -       $      -        $      -       $      -
Loss from operations                                $ (2,277,244)  $ (2,256,698)   $ (2,056,258)  $ (2,547,488)
Net loss                                            $ (2,229,375)  $ (2,218,750)   $ (1,708,861)  $ (2,461,027)
Loss per share - basic and diluted                    $    (0.05)    $    (0.05)     $    (0.04)    $    (0.06)
Weighted-average common shares outstanding             42,812,897     42,814,929      42,883,762     43,028,761


                                                                              2002
                                                      First          Second          Third          Fourth
                                                     Quarter         Quarter        Quarter         Quarter
                                                 ---------------------------------------------------------------

Revenue                                                  $      -       $      -        $      -       $      -
Loss from operations                                $ (5,681,606)  $ (3,746,500)   $ (9,258,822)  $ (2,180,493)
Net loss                                            $ (5,550,895)  $ (4,037,184)   $ (9,150,158)  $ (2,101,015)
Loss per share - basic and diluted                    $    (0.13)    $    (0.09)     $    (0.21)    $    (0.05)
Weighted-average common shares outstanding             42,770,856     42,795,821      42,809,361     42,811,667
</TABLE>

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

None.

Item 9A.  Controls and Procedures

     Mr. F. William Capp, the Company's Chief Executive  Officer,  and Mr. James
M.  Spiezio,   the  Company's  Chief  Financial  Officer,   have  evaluated  the
effectiveness of the Company's disclosure controls and procedures as of December
31, 2003. Based upon that  evaluation,  they have concluded that the Company had
in place on that date controls and other  procedures that are designed to ensure
that information  required to be disclosed by the Company in the reports that it
files  or  submits  under  the  Securities  Exchange  Act of 1934  is  recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's  rules and  forms.  Since the date of the  evaluation,  there have been no
significant  changes in the Company's internal controls or in other factors that
could significantly affect these controls.

<PAGE>

                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

     Information  concerning  executive officers of the Company that responds to
this Item is  incorporated by reference from Item 4A contained in Part 1 of this
Form 10-K.

Members of the current board of directors are as follows:

Name and Age                      Principal Occupation and Other Information
--------------------------  ----------------------------------------------------

William E. Stanton,  age 60  --  Mr.  Stanton has been a director of the Company
          since its formation in 1997. He served as the President and CEO of the
          Company from January 1998 through  December of 2001.  Prior to joining
          Beacon,  Mr.  Stanton was the Chief  Operating  Officer of SatCon from
          September  1995 to May  1997,  where  he  managed  operations  and the
          strategy  development to convert  SatCon from a contract  research and
          development  company  to  a  commercial  product  organization.   This
          strategy  included  the  formation of Beacon  Power.  Prior to joining
          SatCon,  Mr.  Stanton was one of two Vice  Presidents of Operations at
          the Charles Stark Draper  Laboratory  where he managed  $75,000,000 of
          contract  research and development  annually.  At Draper,  he had also
          served as the Vice  President of Corporate  Development,  where he led
          strategic  planning,   developed  and  managed  a  $25,000,000  annual
          corporate  research and  development  program,  and helped  create new
          business units that were generating  over  $30,000,000 in software and
          avionics products  annually.  Mr. Stanton received a Bachelor's Degree
          in Electrical  Engineering  from the  University of Maine,  a Master's
          Degree in Instrumentation and Control from the Massachusetts Institute
          of  Technology,  and a Master's  in Business  Administration  from the
          Harvard Business School. Mr. Stanton's term of office expires in 2006.


F.   William Capp,  age 55  --  Mr. Capp has served as the  Company's  President
          and Chief  Executive  Officer  since  December  1, 2001 when he joined
          Beacon  Power.  Prior  to  joining  Beacon  Power,  Mr.  Capp  was the
          President of the Telecommunications group of Bracknell Corporation,  a
          company  that  provided   infrastructure  for  the  telecommunications
          industry with annual sales of $350 million and 30 regional  offices in
          the US and Canada. From 1997-2000, Mr. Capp served as the President of
          a division of York International where he increased  aftermarket sales
          by over 50%  from  1997 to 1999,  which  were the two most  profitable
          years in that  division's  history.  From  1978-1997,  Mr.  Capp  held
          numerous  positions at Ingersoll Rand.  From  1992-1997,  he served as
          Vice President and General Manager of the Compressor  Division were he
          was responsible for an operation with over 700 employees. He managed a
          complex  supply chain  including over $100 million in purchases from a
          variety of companies.  From 1989-1992, Mr. Capp was the Vice President
          of  Technology  for the  Torrington  Company,  which is a $900 million
          manufacturer  of bearings and precision  components to the  automotive
          and other industries  worldwide.  Mr. Capp assisted in the development
          of  new  products,   new   manufacturing   technologies   and  project
          management.  He also held numerous other engineering  positions within
          Ingersoll Rand. Prior to joining Ingersoll Rand in 1978, he worked for
          Ford's  Truck  Division  in such  positions  as  project  engineering,
          supervisor,  and product  planning.  Mr. Capp received his Bachelor of
          Science in Aeronautical  Engineering from Purdue University,  a Master
          of  Business   Administration   and  a  Master  Degree  in  Mechanical
          Engineering  from the  University  of Michigan.  He also has his Black
          Belt Training Program from the American Society for Quality.  Mr. Capp
          has been a member of the board since December 2001. Mr. Capp's term of
          office expires in 2005.

Kenneth M. Socha,  age 57  --  Mr. Socha has served as Senior Managing  Director
          of Perseus  Capital since 1996.  From January 1, 1998 to June 30, 1991
          he was a partner  of Dewey  Ballantine  in New York  City.  In June of
          1991, he joined Rappahannock  Investment  Company,  the predecessor of
          Perseus Capital.  Mr. Socha is a director of four private companies in
          which Perseus has  investments.  He is a graduate of the University of
          Notre Dame and the Duke University School of Law. Mr. Socha has served
          as a  director  since  October  1998 and  serves  as  Chairman  of the
          Company's  compensation  committee  and  is  a  member  of  the  audit
          committee. Mr. Socha's term of office expires in 2004.

Philip J. Deutch,  age 39  --   Mr. Deutch has served as a Managing  Director of
          Perseus  since 1997.  In this  position,  Mr.  Deutch has led Perseus'
          investments in numerous energy technology companies. Mr. Deutch serves
          on the board of  directors of Metallic  Power,  Evergreen  Solar,  and
          International   Marketing  Concepts.   Assuming  the  closing  of  the
          committed financing of Evergreen Solar, Inc. Mr. Deutch will also join
          the board of directors of that company.  Prior to joining Perseus, Mr.
          Deutch was an attorney at Williams & Connolly  LLP.  and worked in the
          Mergers and  Acquisitions  Department  of Morgan  Stanley & Co. in New
          York City.  In this  position,  Mr.  Deutch was a member of  execution
          teams for  acquisitions,  divestitures,  and  leveraged  buyouts.  Mr.
          Deutch is a graduate, with distinction,  of Stanford Law School and of
          Amherst  College where he was elected a member of Phi Beta Kappa.  Mr.
          Deutch is a term member of the Council of Foreign Relations and serves
          on the  board  of  directors  of  the  City  Lights  School,  and  the
          International Center for Research on Women. Mr. Deutch has served as a
          director  of the  Company  since  October  1998 and is a member of the
          audit committee. Mr. Deutch's term of office expires in 2005.

Jack P. Smith, age 55  --  Mr. Smith is President of More Space Place,  Inc., a
          leading producer and retailer of furniture system solutions. Currently
          located mainly in Florida, the company has several retail locations in
          other  states as well.  Mr.  Smith is also a Partner  and  Director of
          SilverSmith  Inc.,  a firm  producing  and selling  gas well  metering
          systems. These systems employ radio telemetry,  satellite connectivity
          to the internet and data management by the company, allowing customers
          real time internet based access to remote gas well production and also
          enabling certain remote control features.  Prior to these ventures Mr.
          Smith served as President and Chief Executive Officer of Holland Neway
          International   in  Muskegon,   Michigan,   a  leading   designer  and
          manufacturer  of  suspension  systems  and  brake  actuators  for  the
          commercial  vehicle  market.  In 2000,  this  650-person  company  had
          worldwide  sales  of  $200  million.  During  his  tenure,  Smith  was
          responsible  for  growing  sales  of  Holland  Neway  (formerly  Neway
          Anchorlok International) from $70 million to the present level of $200
          million. He developed a comprehensive strategic vision for growth that
          has enabled the company to successfully grow despite stiff competition
          and  steadily   declining  market  prices  for  brake  and  suspension
          components.  In 1992,  Smith led the company's  divestiture  from Lear
          Siegler to American  Industrial  Partners (AIP), a financial buyer. In
          1995,  Smith led a  successful  management  buyout of the company with
          equity  partner  Kohlberg  Kravis  Roberts.  From 1992 to 1999,  these
          transactions  generated an equity return of over $110  million.  Smith
          also held the positions of V.P. of Engineering  and Quality  Assurance
          at Neway  Anchorlok  International  and directed the  engineering  and
          quality assurance  departments.  Earlier, he was Chief Engineer.  From
          1972 to 1982,  Smith was Design Group Leader at the Ford Motor Company
          - Heavy Truck  Division,  in  Dearborn,  Michigan,  where he also held
          positions as project  engineer,  and product planning  analyst.  Smith
          also serves on the board of directors of Bissell  Corporation in Grand
          Rapids,   Michigan,   SRAM   Corporation   in  Chicago,   and  Weasler
          Engineering,  Inc. in West Bend,  Wisconsin.  He is a Foundation Board
          member of Grand Valley State  University.  A resident of Grand Rapids,
          Michigan,  Smith  attended the  University of Michigan where he earned
          bachelor's   (1970)  and  master's   (1971)   degrees  in   mechanical
          engineering  and an MBA (1979.)  Mr.  Smith has served on the board of
          the  Company  since  August  2001,  is a  member  of the  compensation
          committee  and is the  acting  chairman  of the audit  committee.  Mr.
          Smith's      term      of      office       expires      in      2004.


Audit Committee.

     The current Audit Committee  members are Messrs.  Smith,  Socha and Deutch.
The members of the Audit  Committee will meet the  requirements  of the Nasdaq's
recently  adopted  listing  standards  when the same  become  applicable  to the
Company. Mr. Smith is the only current director that is "independent" as defined
in those new standards.  No member of the Audit  Committee is an Audit Committee
Financial  Expert.  The  Company  has been  unable to attract a person who would
qualify as such to sit on its Board of Directors.  The Board has  designated Mr.
Smith as the  financial  expert  within the meaning of SEC  regulations  and the
Nasdaq's  listing  standards.  The  Committee is appointed by and reports to the
Board of Directors.  Its  responsibilities  include, but are not limited to, the
appointment,  compensation and dismissal of the independent auditors,  review of
the scope and results of the independent auditors' audit activities,  evaluation
of the  independence  of the independent  auditors,  and review of the Company's
accounting controls and policies, financial reporting practices and the internal
audit control procedures and related reports of the Company.

Compensation Committee.

     The current Compensation Committee members are Messrs. Smith and Socha. The
Compensation  Committee  has the authority to set the  compensation  of Beacon's
Chief Executive Officer and all executive officers and has the responsibility to
review the design, administration and effectiveness of all programs and policies
concerning  executive   compensation  and  establishing  and  reviewing  general
policies  relating to  compensation  and benefits of  employees.  The  Committee
administers  Beacon's  Amended and Restated 1998 Stock Incentive Plan,  Employee
Stock Purchase Plan and its Restricted  Stock Unit Incentive Plan. The Committee
is composed of two non-employee directors who have no interlocking relationships
as defined by the Securities and Exchange Commission.

Code of Ethics.

     In 2001,  the Company  updated  its Code of Ethics for the Chief  Executive
Officer and Chief Financial Officer, its directors and employees (the "Code"). A
copy  of the  Code  may be  found  on the  Internet  at the  Company's  website,
www.beaconpower.com.  The  Company  intends  to  disclose  on  its  website  any
amendments to the Code or any waiver from a provision of the Code.


<PAGE>


Item 11.  Executive Compensation
<TABLE>
<CAPTION>
                                                    Annual Compensation                              Long Term Compensation
                                  --------------------------------------------------- ----------------------------------------------
                                                                                             Awards                     Payouts
                                                                                      ------------------------------- -------------
                                                                                                        Restricted      Securities
                                                                        All Other (2)      Stock        Underlying        LTIP
Name and Principal Position            Year      Salary      Bonus     Compensation        Awards         Options        Payouts
--------------------------------------------  ------------ ---------- --------------- ---------------- -------------- -------------
<S>                                    <C>      <C>         <C>         <C>              <C>             <C>               <C>
F. William Capp (3)                    2003     $220,000    $      -    $   71,335       $  225,217               -        $    -
President and Chief Executive          2002     $220,000    $      -    $  212,685       $        -               -        $    -
Officer                                2001     $ 12,692    $ 90,000    $    2,765       $        -         900,000        $    -

Matthew L. Lazarewicz (4)              2003     $157,500    $ 20,000    $    1,077       $  108,422               -        $    -
Vice  President and Chief Technical    2002     $157,500    $ 32,573    $    1,073       $        -          80,000        $    -
Officer                                2001     $150,000    $ 35,000    $    1,073       $        -               -        $    -

James M. Spiezio (5)                   2003     $168,000    $ 25,200    $    3,103       $  125,183               -        $    -
Vice President of Finance, Chief       2002     $168,000    $ 51,094    $    3,094       $        -          80,000        $    -
Financial Officer,
Treasurer and Secretary                2001     $160,000    $      -    $    3,094       $        -               -        $    -

William J. Driscoll (6)                2003     $ 87,404    $      -    $        -       $        -               -        $    -
Former Vice President of Engineering   2002     $145,769    $ 21,839    $        -       $        -         100,000        $    -
                                       2001     $ 37,500    $      -    $        -       $        -          50,000        $    -

Richard L. Hockney (7)                 2003     $114,400    $  2,500    $        -       $   27,706               -        $    -
Chief Engineer                         2002     $ 97,223    $      -    $        -       $        -          25,000        $    -
                                       2001     $ 70,548    $      -    $        -       $        -           3,000        $    -
----------------------
1)   Columns required by the rules and regulations of the Securities and
     Exchange Commission that contain no entries have been omitted.

2)   Amounts represent term life insurance premiums paid by the executive and
     reimbursed by Beacon plus an amount to reimburse the executive for taxes
     paid on the amount of the premium. Mr. Capp also received other
     compensation relating to realtor expenses and temporary living costs and
     the related taxes on these items.

3)   The Company hired Mr. Capp in December 2001.

4)   The Company hired Mr. Lazarewicz in February 1999.

5) The Company hired Mr. Spiezio in May 2000.

6) Mr. Driscoll resigned from the Company in May 2003.

7) Mr. Hockney has been with the Company from its inception.
</TABLE>

<PAGE>

Executive Employment Agreements.

     The Company has employment  agreements  with Messrs.  Capp,  Lazarewicz and
Spiezio. In addition to the benefits described below, each executive is entitled
to  receive  group  health  and  dental  benefits,  group  long and  short  term
disability  insurance coverage,  401(k) plan and stock plan participation,  paid
vacation and life insurance.

Mr. Capp

     The term of the  agreement  is from  December 1, 2003 to December 31, 2004.
During this  period,  Mr. Capp is entitled to salary of $240,000  and a bonus of
$240,000 if Mr. Capp  achieves  the  performance  goals set by the Board  (which
bonus may be more if the goals are exceeded or less if they are not reached). In
addition,  the Company will pay Mr. Capp a bonus of $45,000 related to 2002. Mr.
Capp shall move to Massachusetts  and will receive a bonus of $10,000 if he does
so by May 1, 2004.  The Company  will  reimburse  him for certain  out-of-pocket
expenses  incurred  in  connection  with  the  move.  Until  Mr.  Capp  moves to
Massachusetts  (but not after May 1, 2004),  the Company will  reimburse him for
the  reasonable  cost of an apartment  (not to exceed  $3500 per month).  If the
agreement is terminated by Mr. Capp without good reason (generally, a diminution
of his duties or title, a breach of this  agreement by the Company,  a change of
the Company's location,  a sale of the Company or his removal from the Board) or
by the Company for cause  (generally,  fraud or embezzlement,  failure to cure a
breach of this  agreement  within 30 days after notice,  a material  breach of a
material Company policy or willful  misconduct),  then Mr. Capp will be entitled
to his salary up to the date of  termination.  If the agreement is terminated by
the Company without cause or by Mr. Capp for good reason,  then Mr. Capp will be
entitled to the remainder of his salary for the term and the portion of $225,217
equal  to the  percentage  of the  term  that has  elapsed  (but  not to  exceed
$192,000).  In the event of Mr.  Capp's  death or  disability,  he or his estate
shall be entitled to three  months'  salary.  If the Company  fails to offer Mr.
Capp a new  employment  agreement  by the end of the  term,  or if he  continues
thereafter as an employee-at-will,  then he will be entitled to receive the same
amount in 2005 as he received in 2004.

Mr. Lazarewicz

     The term of the  agreement  is from  October  25,  2002 to April 25,  2004.
During this  period Mr.  Lazarewicz  is entitled to salary of $167,000  per year
and, at the discretion of the Board, a bonus.  If the agreement is terminated by
Mr.  Lazarewicz  without good reason  (generally,  a diminution of his duties or
title,  a breach of this  agreement  by the Company,  a change of the  Company's
location, a sale of the Company or his removal from the Board) or by the Company
for cause  (generally,  fraud or embezzlement,  failure to cure a breach of this
agreement  within 30 days after notice,  a material breach of a material Company
policy or willful  misconduct),  then Mr.  Lazarewicz  will be  entitled  to his
salary up to the date of  termination.  If the  agreement is  terminated  by the
Company without cause or by Mr. Lazarewicz for good reason,  then Mr. Lazarewicz
will be entitled to one years'  salary and the portion of $108,422  equal to the
percentage  of the term that has  elapsed  (but not to exceed  $78,750).  In the
event of Mr.  Lazarewicz  's  death or  disability,  he or his  estate  shall be
entitled to three months' salary. In addition,  in the event of Mr. Lazarewicz's
death or disability or the  termination  by the Company  without cause or by Mr.
Lazarewicz  for good  reason,  he is  entitled to  accelerated  vesting of stock
options. If the Company fails to offer Mr. Lazarewicz a new employment agreement
by the end of the term, or if he continues  thereafter  as an  employee-at-will,
then he will be  entitled  to receive  the same amount in 2005 as he received in
2004.

Mr. Spiezio

     The term of the agreement  began on October 25, 2002 and continues until it
is terminated.  During this period Mr. Spiezio is entitled to salary of $178,500
per year and, at the  discretion  of the Board,  a bonus.  If the  agreement  is
terminated by Mr. Spiezio without good reason (generally, the Company's material
breach of the agreement or a change of the Company's location) or by the Company
for cause (having the same meaning as in Mr. Capp's  agreement) then Mr. Spiezio
will be entitled to his salary up to the date of  termination.  If the agreement
is  terminated by the Company  without cause or by Mr.  Spiezio for good reason,
then Mr.  Spiezio  will be  entitled  to 48 weeks'  salary.  In the event of Mr.
Spiezio's  death or  disability,  he or his estate  shall be  entitled  to three
months' salary.

Option Grants in Last Fiscal Year.

     There were no options  granted to executive  officers of the Company during
the last fiscal year ending December 31, 2003.


Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

<TABLE>
<CAPTION>

                              Shares                    Number of Securities Underlying      Value of Unexercised in-the-money
                            Acquired on     Value       Unexercised Options at Year End             Options at Year End
                             Exercise      Realized     Exercisable       Unexercisable       Exercisable        Unexercisable
-------------------------- -------------- ------------ ---------------- ----------------- ---------------------- ---------------
<S>                             <C>            <C>             <C>               <C>              <C>                <C>
F. William Capp                        -       $   -           900,000                  -         $   180,000        $         -
Matthew L. Lazarewicz                  -       $   -           269,999             26,667         $    54,133        $    10,400
James M. Spiezio                       -       $   -           206,666             26,667         $    20,800        $    10,400
William J. Driscoll                    -       $   -                 -                  -         $         -        $         -
Richard L. Hockney                     -       $   -            18,667              9,333         $     6,500        $     3,250
</TABLE>


     Total value of exercisable  and  unexercisable  options is derived from the
difference  between the fair market value ($1.09 as of December 31, 2003) of the
Company's stock and the exercise price of the options at fiscal year-end.

Long-Term Incentive Plans -- Awards in Last Fiscal Year
<TABLE>
<CAPTION>

                                                Performance or                Estimated Future Payouts
                              Number             Period Until            Under Non-Stock Price Based Plans*
                                                                       ----------------------------------------
                             of Units               Payout               Threshold     Target      Maximum
                          --------------- ---------------------------  ----------------------------------------

<S>                              <C>                          <C>                <C>       <C>            <C>
F. William Capp                  206,621     Quarterly during 2004               100%      100%           100%
Matthew L. Lazarewicz             99,470     Quarterly during 2004               100%      100%           100%
James M. Spiezio                 114,847     Quarterly during 2004               100%      100%           100%
William J. Driscoll                    -              N/A                          0%        0%             0%
Richard L. Hockney                25,418     Quarterly during 2004               100%      100%           100%
</TABLE>

     See  note 16 to the  financial  statements  for a full  description  of the
Company's long-term incentive plan.

Director Compensation.

     The Company  has  adopted a  compensation  package  that  consists of stock
options and cash  designed to  compensate  board  members who are not  employees
("non-employee  directors").  All non-employee directors serving on the board of
directors  receive  options to purchase  10,000 shares of the  Company's  common
stock that vest  monthly over a 12-month  period and an exercise  price equal to
the  fair  market  value  of the  common  stock  on the  date of  grant.  On the
anniversary date of each particular  non-employee  director's appointment to the
Company's board, each non-employee  director will receive  additional options to
purchase  10,000 shares of the  Company's  common stock that vest monthly over a
12-month period and have an exercise price equal to the fair market value of the
common stock on the date of grant.

     Non-employee directors also receive an annual retainer of $10,000,  payable
quarterly,  plus $2,000 for each board of directors  meeting  attended in person
and $500 for each meeting attended by telephone. Audit committee members receive
an annual  retainer of $50,000 for 2003 and $30,000 for 2004  payable  quarterly
plus $500 per meeting.  The board of directors  will establish  audit  committee
retainers for years subsequent to 2004 during 2004. All other committee  members
receive $500 per meeting.  Directors are reimbursed for reasonable out-of-pocket
expenses incurred in the performance of their duties.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth, as of March 31, 2004,  certain  information
concerning  the  ownership of shares of Common Stock by (i) each person or group
that the Company  knows owns  beneficially  more than five percent of the issued
and  outstanding  shares of Common  Stock,  (ii) each  director  and nominee for
director,  (iii) each named  executive  officer  described in  "Compensation  of
Executive  Officers" below,  and (iv) all directors and executive  officers as a
group. Except as otherwise indicated,  each person named has sole investment and
voting power with respect to his or its shares of Common Stock shown.

<TABLE>
<CAPTION>

                                                          Number of                    Percentage of
                                                            Shares                      Common Stock
                                                         Beneficially                   Beneficially
   Name and Address of Beneficial Owner (1)             Owned (2) (3)                  Owned (2) (3)
-----------------------------------------------  -----------------------------  -----------------------------
<S>                                                                   <C>                   <C>
F. William Capp                                                       900,000               2.0%
Matthew L. Lazarewicz (4)                                             410,813                *
James M. Spiezio                                                      233,333                *
Philip J. Deutch                                                       10,000                *
Jack P. Smith (5)                                                      27,333                *
Kenneth M. Socha                                                       10,000                *
William E. Stanton (6)                                                 11,000                *
Perseus Capital, L.L.C. (7)                                        12,014,944              25.2%
The Beacon Group Energy Investment Fund II,
L.P. (8)                                                            3,055,856               6.9%
All directors and executive officers as a
group (8 persons)                                                   1,601,479               3.6%
</TABLE>

--------------
*   Less than 1%.

(1)  The address for all  executive  officers and  directors is c/o Beacon Power
     Corporation,  234 Ballardvale Street,  Wilmington,  MA 01887. Messrs. Capp,
     Lazarewicz,  and Spiezio are executive  officers of Beacon.  Messrs.  Capp,
     Deutch, Smith, Socha and Stanton are directors of Beacon.

(2)  The number of shares  beneficially  owned by each stockholder is determined
     under rules issued by the Securities  and Exchange  Commission and includes
     voting or investment  power with respect to those  securities.  Under these
     rules,  beneficial ownership includes any shares as to which the individual
     or entity has sole or shared voting power or investment  power and includes
     any  shares as to which the  individual  or entity has the right to acquire
     beneficial  ownership  within 60 days  after  March 31,  2004  through  the
     exercise of any warrant, stock option or other right. The inclusion in this
     proxy statement of these shares,  however, does not constitute an admission
     that the named  stockholder  is a direct or  indirect  beneficial  owner of
     those  shares.  The number of shares of common  stock  outstanding  used in
     calculating  the percentage  for each listed person  includes the shares of
     common  stock  underlying  warrants or options held by that person that are
     exercisable or  convertible  within 60 days of March 31, 2004, but excludes
     shares of common  stock  underlying  warrants or options  held by any other
     person.

(3)  Includes the following  number of shares of common stock  issuable upon the
     exercise of stock options which may be exercised on or before May 30, 2004:
     Mr. Capp,  900,000;  Mr. Spiezio,  233,333;  Mr. Lazarewicz,  269,999;  Mr.
     Deutch,  10,000;  Mr. Smith,  25,833;  Mr. Socha,  10,000; and Mr. Stanton,
     10,000.

(4)  Includes  2,500  shares of common  stock held in trust for Mr.  Lazarewicz'
     wife and sister-in-law,  for which Mr. Lazarewicz acts as sole trustee. Mr.
     Lazarewicz disclaims beneficial ownership over these shares.

(5)  Includes  500 shares of common  stock held by Mr.  Smith's  son.  Mr. Smith
     disclaims beneficial ownership over these shares.

(6)  Includes  1,000  shares of common  stock held by Mr.  Stanton's  wife.  Mr.
     Stanton disclaims beneficial ownership over these shares.

(7)  Includes  shares of common  stock  issuable  upon  exercise  of warrants to
     purchase  4,512,593 shares of common stock.  Perseus  Capital's  address is
     2099 Pennsylvania Avenue, N.W., Suite 900, Washington, DC 20006. Mr. Philip
     J. Deutch and Mr.  Kenneth M. Socha,  members of the Board of  Directors of
     the  Company,  are also  Managing  Director and Senior  Managing  Director,
     respectively, of Perseus, L.L.C.,

(8)  Includes  shares of common  stock  issuable  upon  exercise  of warrants to
     purchase  1,018,000  shares of common stock.  Beacon Group's address is 399
     Park Avenue, New York, NY 10022.

Equity compensation plan information

     The  following  table  gives  information  about  equity  awards  under the
Company's stock option plan and employee stock purchase plan, as of December 31,
2003.
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
                                Number of securities to be Weighted average exercise
                                 issued upon exercise of     price of outstanding      Number of securities
                                  outstanding options,      options, warrants and     remaining available for
         Plan category             warrants and rights              rights                future issuance
----------------------------------------------------------------------------------------------------------------
                                           (a)                       (b)                        (c)
----------------------------------------------------------------------------------------------------------------
<S>                                             <C>               <C>                      <C>
Equity compensation plans                                -           $             -                          -
approved by security holders
----------------------------------------------------------------------------------------------------------------
Equity compensation plans not                    2,815,929           $          1.84                  5,681,891
approved by security holders
----------------------------------------------------------------------------------------------------------------
Total                                            2,815,929           $          1.84                  5,681,891
----------------------------------------------------------------------------------------------------------------
</TABLE>

     For additional  information  concerning the Company's  equity  compensation
plans,  see  discussion in footnotes 8, 9 and 10 to the  Company's  consolidated
financial statements, Stock Options, Employee Stock Purchase Plan and Restricted
Stock Units.

<PAGE>

Item 13.  Certain Relationships and Related Transactions

Strategic Investment

     On May 15,  2003,  the Company  invested  $1,000,000  in Series A Preferred
Stock of Evergreen  Solar,  Inc., a public company that specializes in renewable
energy sources, in order to develop a strategic  relationship with that company.
This investment was part of a larger  financing  provided by several  investors.
The Company made its investment on the same terms as the other investors in this
financing.  The Company  purchased 892,857 shares of Series A Preferred Stock of
Evergreen,  for $1.12 per share.  In  addition  the  Company  also  purchased  a
three-year warrant exercisable for 2,400,000 shares of Evergreen's common stock.
The warrant has a purchase  price of $100,000 and a cash exercise price of $3.37
per share  Evergreen's  financing was a private  placement of $29.475 million of
its Series A Preferred  Stock and the above warrant.  Perseus 2000,  L.L.C.,  an
affiliate  of  one of  the  Company's  stockholders,  Perseus  Capital,  L.L.C.,
invested  $3  million  in  Evergreen's  Series A  Preferred  Stock,  and led the
investor group in this financing. Mr. Philip J. Deutch and Mr. Kenneth M. Socha,
members of the Board of  Directors of the  Company,  are  Managing  Director and
Senior Managing Director,  respectively,  of Perseus,  L.L.C. Mr. Deutch led the
Evergreen Solar Series A Preferred financing and is one of four individuals from
the Evergreen investor group to be added to the Board of Directors of Evergreen.
.. Messrs.  Deutch and Socha disclosed their possible  conflict  relating to this
transaction,  and abstained from voting on the matter. Beacon's participation in
the  transaction  was evaluated,  debated and approved by all the  disinterested
directors  of  the  Company,   after  full  disclosure  of  relevant  facts  and
circumstances.  Mr. Deutch does not  participate in discussions  concerning this
strategic investment.

Advances to Certain Officers

     During 2001, the Company advanced  approximately $785,000 to three officers
of the Company. These advances are interest bearing and secured by the officers'
holdings of Beacon Power Corporation  common stock and options and were provided
to the officers to allow them to exercise  stock options and in one case, to pay
the related  taxes.  Through  December  31,  2003,  the  Company  had  collected
approximately  $667,000 in principal  payments on these advances.  In June 2002,
due to the current market value of the pledged securities and the uncertainty of
collection  of the advance,  the Company took a charge in the amount of $426,000
to reserve the  remaining  balance of the advance to Mr.  William  Stanton,  its
former CEO and  president.  During  2003, a portion of this reserve was reversed
due to a partial payment of $323,000 from the proceeds of the sale of the Beacon
stock that secured the loan.  This balance of this loan of  $118,000and is still
reserved,  however,  it has not been  cancelled.  Mr. Stanton  continues to be a
director  of the  Company.  This  charge is  included  in other  expenses in the
accompanying consolidated statement of operations.  All other officers have paid
their respective loan balances in full as of December 31, 2003.

Agreement with GE Corporation Research and Development

     As a result of the investment in Beacon by GE Capital  Equity  Investments,
Inc., the Company has entered into an agreement  with GE Corporate  Research and
Development  ("GE  CR&D"),  under which GE CR&D will  provide  the Company  with
technical  expertise  in  controls  and  materials.  Under  the  terms  of  that
agreement,  GE CR&D has agreed to make  available to Beacon up to  $2,000,000 of
its  services at cost and the Company has issued GE Equity a warrant to purchase
240,000 shares of its common stock at an exercise  price of $2.10 per share.  Of
these warrants,  120,000 vested immediately and 120,000 will vest ratably to the
extent to which Beacon uses GE CR&D's services.  This agreement terminates,  and
any unvested options are forfeited,  on October 24, 2005.  Beacon did not engage
GE CR&D for any services  during 2003; thus no other warrants were vested during
2003.


<PAGE>

Item 14. Principal Accounting Fees and Services

                         2003          2002
                     ------------- -------------

Audit Fees               $122,960      $123,920
Audit-Related Fees              -             -
Tax Fees                   78,480        41,760
All Other Fees                  -             -
                     ------------- -------------
Total Fees            $  185,940    $  167,680
                     ============= =============


     The Company has engaged Deloitte and Touche,  LLP as its principal auditors
since before its initial public offering in November 2000.

Audit Fees

     The aggregate audit fees billed by Deloitte and Touche for the fiscal years
ended December 31, 2003 and 2002 were $122,960 and $123,920, respectively. These
fees  include  amounts  for  the  audit  of the  Company's  consolidated  annual
financial  statements and the reviews of the consolidated  financial  statements
included in the Company's  Quarterly  Reports on Form 10-Q,  including  services
related thereto such as attest services and consents.

Audit-Related Fees

     There were no  audit-related  fees  billed  during the fiscal  years  ended
December 31, 2003 and December 31, 2002.

Tax Fees

     The aggregate fees billed by Deloitte and Touche for tax services  rendered
for the fiscal years 2003 and 2002 were $78,480 and $41,760, respectively. These
fees were for the preparation and filing of the 2001 and 2002 income tax return,
developing  estimated  payments for 2003 income taxes, and tax advice related to
the Company's restricted stock unit bonus program.

All Other Fees

     Other than the services  performed  above,  there were no other fees billed
for 2003 and 2002.

Audit Committee Pre-Approval Requirements

     The Audit  Committee's  charter  provides that it has the sole authority to
review in advance and grant any pre-approvals of (i) all auditing services to be
provided by the independent auditor,  (ii) all significant non-audit services to
be  provided by the  independent  auditors  as  permitted  by Section 10A of the
Securities  Exchange Act of 1934, and (iii) all fees and the terms of engagement
with respect to such  services.  All audit and non-audit  services  performed by
Deloitte  &  Touche  during  fiscal  2003  were  pre-approved  pursuant  to  the
procedures outlined above.

<PAGE>

                                     PART IV

Item 15.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         (a)      1.  Financial Statements

The financial statements are listed under Part II, Item 8 of this Report.

                  2.  Financial Statement Schedules

     Schedules for which provision is made in the applicable  regulations of the
Securities and Exchange  Commission have been omitted because the information is
disclosed in the Consolidated Financial Statements or because such schedules are
not required or not applicable.

                  3.  Exhibits

The exhibits are listed below under Part IV, Item 14(c) of this report.

         (b) Reports on Form 8-K




         (c )     Exhibits


  Exhibit
  Number                          Description of Document

3.1  Sixth Amended and Restated  Certificate of  Incorporation  (Incorporated by
     reference to Exhibit No. 3.1 to the  Registration  Statement on Form S-1 of
     Beacon Power Corporation No. 333-43386 filed on November 16, 2000).

3.2  Amended and Restated Bylaws  (Incorporated  by reference to Exhibit No. 3.2
     to the Registration  Statement on Form S-1 of Beacon Power  Corporation No.
     333-43386 filed on November 16, 2000).

4.1  Shareholder Rights Agreement dated as of September 25, 2002.  (Incorporated
     by  reference  to Exhibit  No.  99.1 to the  Current  Report on Form 8-K of
     Beacon Power Corporation filed on October 4, 2002).

4.2  Amendment to Shareholder  Rights  Agreement  dated as of December 27, 2002.
     (Incorporated  by reference  to Exhibit  12.2 to the Annual  Report on Form
     10-K of Beacon Power Corporation No. 333-43386 filed on March 31, 2003).

10.1.1 Securities Purchase Agreement by and among SatCon Technology Corporation,
     Duquesne  Enterprises  (n/k/a  DQE  Enterprises,  Inc.)  and  Beacon  Power
     Corporation  dated May 28, 1997  (Incorporated  by reference to Exhibit No.
     10.1.1  to  the  Registration   Statement  on  Form  S-1  of  Beacon  Power
     Corporation No. 333-43386 filed on November 16, 2000).

10.1.2 Securities  Purchase  Agreement  by and among  Beacon Power  Corporation,
     Perseus  Capital,  L.L.C.,  Duquesne  Enterprises  (n/k/a DQE  Enterprises,
     Inc.),  Micro-Generation  Technology  Fund,  L.L.C.  and SatCon  Technology
     Corporation  dated October 23, 1998  (Incorporated  by reference to Exhibit
     No.  10.1.2  to the  Registration  Statement  on Form S-1 of  Beacon  Power
     Corporation No. 333-43386 filed on November 16, 2000).

10.1.3 Securities  Purchase  Agreement  by and among  Beacon Power  Corporation,
     Perseus  Capital,  L.L.C.,  Duquesne  Enterprises  (n/k/a DQE  Enterprises,
     Inc.), Micro-Generation Technology Fund, L.L.C. and SatCon Technology dated
     April 7, 2000  (Incorporated  by  reference  to Exhibit  No.  10.1.3 to the
     Registration  Statement  on  Form  S-1  of  Beacon  Power  Corporation  No.
     333-43386 filed on November 16, 2000).

10.1.4 Securities  Purchase  Agreement  by and among  Beacon Power  Corporation,
     Perseus  Capital,   L.L.C.,   Micro-Generation   Technology  Fund,  L.L.C.,
     Mechanical Technology Incorporated, The Beacon Group Energy Investment Fund
     II, L.P.  and Penske  Corporation  dated April 21,  2000  (Incorporated  by
     reference to Exhibit No. 10.1.4 to the  Registration  Statement on Form S-1
     of Beacon Power Corporation No. 333-43386 filed on November 16, 2000).

10.1.5 Securities  Purchase  Agreement  by and among  Beacon Power  Corporation,
     Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro-Generation Technology
     Fund,  L.L.C.,  Mechanical  Technology  Incorporated,   GE  Capital  Equity
     Investments,  Inc.,  The Beacon Group Energy  Investment  Fund II, L.P. and
     Penske Corporation dated May 23, 2000 (Incorporated by reference to Exhibit
     No.  10.1.5  to the  Registration  Statement  on Form S-1 of  Beacon  Power
     Corporation No. 333-43386 filed on November 16, 2000).

10.1.6 Investor Rights Agreement by and among Beacon Power Corporation,  Perseus
     Capital, L.L.C., DQE Enterprises,  Inc.,  Micro-Generation Technology Fund,
     L.L.C., Mechanical Technology Incorporated,  GE Capital Equity Investments,
     Inc., The Beacon Group Energy Investment Fund II, L.P., Penske Corporation,
     SatCon Technology Corporation,  James S. Bezreh, Russel S. Jackson, Russell
     A. Kelley, Stephen J. O'Connor,  Jane E. O'Sullivan and Robert G. Wilkinson
     dated May 23, 2000  (Incorporated by reference to Exhibit No. 10.1.6 to the
     Registration  Statement  on  Form  S-1  of  Beacon  Power  Corporation  No.
     333-43386 filed on November 16, 2000).

10.1.7 Form of Warrant of Beacon Power  Corporation  issued  pursuant to class D
     financing and list of holders thereof (Incorporated by reference to Exhibit
     No.  10.1.7  to the  Registration  Statement  on Form S-1 of  Beacon  Power
     Corporation No. 333-43386 filed on November 16, 2000).

10.1.8 Form of Warrant of Beacon Power  Corporation  issued  pursuant to class E
     financing and list of holders thereof (Incorporated by reference to Exhibit
     No.  10.1.8  to the  Registration  Statement  on Form S-1 of  Beacon  Power
     Corporation No. 333-43386 filed on November 16, 2000).

10.1.9 Form of Warrant of Beacon Power  Corporation  issued  pursuant to class F
     bridge financing and list of holders thereof  (Incorporated by reference to
     Exhibit  No.  10.1.9 to the  Registration  Statement  on Form S-1 of Beacon
     Power Corporation No. 33-43386 filed on November 16, 2000).

10.1.10 Form of Warrant of Beacon Power  Corporation  issued pursuant to class F
     financing and list of holders thereof (Incorporated by reference to Exhibit
     No.  10.1.10  to the  Registration  Statement  on Form S-1 of Beacon  Power
     Corporation No. 333-43386 filed on November 16, 2000))

10.1.11 Warrant of Beacon Power Corporation issued to Cox  Communications,  Inc.
     dated August 2, 2000  (Incorporated  by reference to Exhibit No. 10.1.11 to
     the  Registration  Statement  on Form S-1 of Beacon Power  Corporation  No.
     333-43386 filed on November 16, 2000).

10.1.12 Warrant  of Beacon  Power  Corporation  issued to  Kaufman-Peters  dated
     August 2, 2000  (Incorporated  by reference  to Exhibit No.  10.1.12 to the
     Registration  Statement  on  Form  S-1  of  Beacon  Power  Corporation  No.
     333-43386 filed on November 16, 2000).

10.1.13  Warrant  of  Beacon  Power  Corporation  issued  to GE  Capital  Equity
     Investments,  Inc.  dated  October 24, 2000  (Incorporated  by reference to
     Exhibit No.  10.1.13 to the  Registration  Statement  on Form S-1 of Beacon
     Power Corporation No. 333-43386 filed on November 16, 2000).

10.1.14 Second  Amended and Restated 1998 Stock  Incentive  Plan of Beacon Power
     Corporation  (Incorporated  by  reference  to  Exhibit  No.  10.1.14 to the
     Registration  Statement  on  Form  S-1  of  Beacon  Power  Corporation  No.
     333-43386 filed on November 16, 2000).

10.1.15 Form of  Incentive  Stock Option  Agreement of Beacon Power  Corporation
     (Incorporated  by  reference  to Exhibit  No.  10.1.15 to the  Registration
     Statement on Form S-1 of Beacon Power  Corporation  No.  333-43386 filed on
     November 16, 2000).

10.1.16 Form of Non-Qualified Stock Option Agreement of Beacon Power Corporation
     (Incorporated  by  reference  to Exhibit  No.  10.1.16 to the  Registration
     Statement on Form S-1 of Beacon Power  Corporation  No.  333-43386 filed on
     November 16, 2000).

10.1.17 Form of Non-Qualified Stock Option Agreement of Beacon Power Corporation
     issued to certain  consultants on July 24, 2000 and list of holders thereof
     (Incorporated  by  reference  to Exhibit  No.  10.1.17 to the  Registration
     Statement on Form S-1 of Beacon Power  Corporation  No.  333-43386 filed on
     November 16, 2000).

10.1.18 Amended and  Restated  License  Agreement  by and between  Beacon  Power
     Corporation  and SatCon  Technology  Corporation  dated  October  23,  1998
     (Incorporated  by  reference  to Exhibit  No.  10.1.18 to the  Registration
     Statement on Form S-1 of Beacon Power  Corporation  No.  333-43386 filed on
     November 16, 2000).

10.1.19 Lease between Beacon Power Corporation and BCIA New England Holdings LLC
     dated July 14, 2000  (Incorporated  by reference to Exhibit No.  10.1.20 to
     the  Registration  Statement  on Form S-1 of Beacon Power  Corporation  No.
     333-43386 filed on November 16, 2000).

10.1.20 Letter  Agreement  among Beacon  Power  Corporation,  GE Capital  Equity
     Investments,  Inc. and GE Corporate  Research and Development dated October
     24,  2000  (Incorporated  by  reference  to  Exhibit  No.  10.1.24  to  the
     Registration  Statement  on  Form  S-1  of  Beacon  Power  Corporation  No.
     333-43386 filed on November 16, 2000).

10.1.21 Form of Director and Officer Indemnification  Agreement (Incorporated by
     reference to Exhibit No. 10.1.25 to the Registration  Statement on Form S-1
     of Beacon Power Corporation No. 333-43386 filed on November 16, 2000).

10.1.22 Employment  agreement dated December 1, 2001 between F. William Capp and
     Beacon Power Corporation. (Incorporated by reference to Exhibit No. 10.1.22
     to the Annual Report on Form 10-K of Beacon Power Corporation No. 333-43386
     filed on March 31, 2003).

10.1.23  Employment   agreement  dated  October  25,  2002  between  Matthew  L.
     Lazarewicz  and Beacon  Power  Corporation.  (Incorporated  by reference to
     Exhibit  No.  10.1.23  to the  Annual  Report on Form 10-K of Beacon  Power
     Corporation No. 333-43386 filed on March 31, 2003).

10.1.24 Employment  agreement dated October 25, 2002 between William J. Driscoll
     and Beacon  Power  Corporation.  (Incorporated  by reference to Exhibit No.
     10.1.24 to the Annual Report on Form 10-K of Beacon Power  Corporation  No.
     333-43386 filed on March 31, 2003).

10.1.25 Employment agreement dated October 25, 2002 between James M. Spiezio and
     Beacon Power Corporation. (Incorporated by reference to Exhibit No. 10.1.25
     to the Annual Report on Form 10-K of Beacon Power Corporation No. 333-43386
     filed on March 31, 2003).

10.1.26 Employment agreement amendment dated October 25, 2003 between Matthew L.
     Lazarewicz and Beacon Power Corporation.

10.1.27  Employment  agreement  dated March 11, 2004 between F. William Capp and
     Beacon Power Corporation.

10.1.28 Form of Restricted Stock Unit Agreement of Beacon Power Corporation.

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

23.1 Consent of Deloitte & Touche LLP

31.1 Certification of Principal Executive Officer pursuant to Section 302 of the
     Sarbanes-Oxley Act and Rules 13a-14 and 15d-14 of the Exchange Act

31.2 Certification  of Principal  Financial and Accounting  Officer  pursuant to
     Section 302 of the  Sarbanes-Oxley  Act and Rules  13a-14 and 15d-14 of the
     Exchange Act

32.1 Certification  of CEO pursuant to 18  U.S.C.ss.135  as adopted  pursuant to
     section 906 of the  Sarbanes-Oxley  Act of 2002 32.2  Certification  of CFO
     pursuant  to 18  U.S.C.ss.135  as adopted  pursuant  to section  906 of the
     Sarbanes-Oxley Act of 2002

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements  of Section 13 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.

                            BEACON POWER CORPORATION

                             By: /s/ F. William Capp
                                 F. William Capp
                                 President and Chief Executive Officer

                              Date: March 30, 2004

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/ F. William Capp       President and Chief Executive Officer,
                           and Director
F. William Capp            (Principal Executive Officer)      March 30, 2004

/s/ James M. Spiezio      Vice President of Finance, Chief Financial
                            Officer, Treasurer and Secretary
James M. Spiezio            (Principal Financial Officer)     March 30, 2004


/s/ Philip J. Deutch
Philip J. Deutch           Director                           March 30, 2004

/s/ Jack P. Smith
Jack P. Smith              Director                           March 30, 2004

/s/ Kenneth M. Socha
Kenneth M. Socha           Director                           March 30, 2004

/s/ William E. Stanton
William E. Stanton         Director                           March 30, 2004