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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

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

For the transition period from              to             .

COMMISSION FILE NUMBER 000-31687

Registrant’s telephone number, including area code: 508-357-2221

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:

     Yesx      Noo

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

     Yeso      Nox

     As of February 27, 2003, there were 11,410,826 shares of the registrant’s Common Stock, $.01 par value per share, outstanding. The aggregate market value of the registrant’s voting stock held by non-affiliates as of June 28, 2002 was approximately $15 million.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2002. Portions of such proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.

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PART I

ITEM 1. BUSINESS:

OVERVIEW

     We develop, manufacture and market solar power products that are capable of providing reliable and environmentally clean electric power throughout the world. Our solar power products are targeted at the global solar power market. We believe our proprietary and patented solar power technologies, including our String Ribbon^TM technology, will offer significant design, cost and manufacturing advantages over competing solar power technologies. We intend to become a leading producer of high-quality solar power products by expanding our manufacturing capacity, reducing our manufacturing costs, developing innovative solar power products, increasing our distribution capabilities and pursuing strategic relationships.

     Since our formation in 1994, we have conducted research and development of advanced process and product technologies and, between 1997 and June 2001, we used pilot manufacturing facilities to refine our solar power products and manufacturing processes. Also in 1997, we began shipping small quantities of commercial products. In 2001, we expanded our manufacturing capacity by relocating our operations to a 56,250 square foot facility in Marlboro, Massachusetts. We are continuing to refine, develop and commercialize a number of laboratory-demonstrated advancements in our solar power technologies, including advanced String Ribbon crystal growth, more efficient solar cells and improved solar panel designs. Through December 31, 2002, we shipped almost 30,000 solar panels for residential, commercial and industrial applications in the United States and internationally. As we continue to increase production volumes, we intend to actively expand existing and seek new distribution and marketing arrangements.

FINANCING TRANSACTION

     On March 21, 2003 we entered into the Stock and Warrant Purchase Agreement with Perseus 2000, L.L.C., Nth Power Technologies Fund II, LP, Nth Power Technologies Fund II-A, LP, RockPort Capital Partners, L.P., RP Co-Investment Fund, I, Micro-Generation Technology Fund, LLC, UVCC Fund II, UVCC II Parallel Fund, L.P., Caisse de dépôt et placement du Québec, CDP Capital – Technology Ventures U.S. Fund 2002 L.P., Beacon Power Corporation, Massachusetts Technology Park Corporation, Zero Stage Capital VII, L.P., Zero Stage Capital (Cayman) VII, L.P., Zero Stage Capital SBIC VII, L.P., IMPAX Environmental Markets plc, Merrill Lynch New Energy Technology Fund, MLIIF New Energy Fund, PNE Invest Limited, Odyssey Fund, SAM Private Equity Energy Fund LP, SAM Sustainability Private Equity LP and SAM Smart Energy pursuant to which we have agreed to issue, and the purchasers have agreed to purchase from us, $29,375,000 of Series A convertible preferred stock at a per share purchase price to be calculated as of the closing date. The per share purchase price to be paid for the shares of Series A convertible preferred stock will be 85% of the 60-day trading average closing price of our common stock for the period ending two trading days prior to the closing date of the private placement. However, in no event will the per share price exceed $1.12 (which is 85% of the 60-day trading average of the closing bid prices of our common stock for the period ending on March 17, 2003), or be less than $0.68. Additionally, we agreed to issue, and Beacon Power Corporation agreed to purchase for a purchase price of $100,000, a warrant to purchase 2,400,000 shares of common stock at an exercise price equal to the per share purchase price of the Series A convertible preferred stock paid by the purchasers, plus $2.25. The shares of Series A convertible preferred stock will be initially convertible into shares of common stock on a 1-to-1 basis (subject to adjustment to account for the payment of dividends, to take into account certain changes to our capital structure and to account for future dilutive issuances). Depending upon the final per share price paid by the purchasers for such shares, the Series A convertible preferred stock will, when issued, represent between 70% and 79% of the currently issued and outstanding shares of our capital stock. The closing of the transactions contemplated by the purchase agreement is subject to certain conditions, including, among other things, obtaining stockholder approval. If approved by stockholders, it is anticipated that the closing of the private placement would occur as soon as practicable thereafter.

Interest of Certain Persons in the Matter to Be Acted Upon

     Micro-Generation Technology Fund, LLC, UVCC Fund II, and UVCC II Parallel Fund, L.P., each of which is an investment entity affiliated with Dr. Robert W. Shaw, Jr., the chairman of our board of directors, have agreed to invest $3.5 million in the aggregate in the private placement in return for shares of Series A convertible preferred stock on terms identical to those afforded to each other purchaser, except that Arete Corporation, as one of the five purchasers who signed the initial term sheet with respect to the private placement, will have the right to designate a member of our board of directors and will be eligible to receive a break-up fee under certain circumstances if the private placement does not close. Dr. Shaw is the President of Arete Corporation, which is the manager of Micro-Generation Technology Fund, LLC. Dr. Shaw is a general partner of Arete Venture Investors II, L.P., which is the general partner of UVCC Fund II. Dr. Shaw is also a general partner of Arete Ventures III, L.P., which is the general partner of UVCC II Parallel Fund, L.P. As of March 1, 2003, these entities and others affiliated with Dr. Shaw owned an aggregate of 840,453 shares of our common stock and Dr. Shaw, together with his wife, owned an aggregate of 112,699 additional shares of our common stock in their individual capacities. If the private placement is approved by our stockholders, and if the private placement is consummated, Arete Corporation intends to designate Dr. Shaw as its designee to our board of directors.

     Dr. Shaw is a limited partner of Nth Power Management II, L.P., the general partner of Nth Power Technologies Fund II, LP, and in such capacity provides advice as requested to this entity. Dr. Shaw does not serve on this entity’s investment committee nor does he have any decision making authority with respect thereto. Dr. Shaw has also agreed to become a member of, and perform comparable services for, Nth Power Management II-A, LLC, the general partner of Nth Power Technologies Fund II-A, L.P., and will have a similar advisory role with that entity. As of March 1, 2003, Nth Power Technologies Fund, I, L.P., an investment entity affiliated with Nth Power, LLC owned 1,016,914 shares of our common stock. Nth Power Technologies Fund II, LP and Nth Power Technologies Fund II-A, LP, each of which is an investment entity affiliated with Nth Power Management II, L.P. and Nth Power Management II-A, LLC, have agreed to invest $4 million in the aggregate in the private placement in return for shares of Series A convertible preferred stock on terms identical to those afforded to each other purchaser, except that Nth Power Technologies Fund II, LP, as one of the five purchasers who signed the initial term sheet with respect to the private placement, will have the right to designate a member of our board of directors and will be eligible to receive a break-up fee under certain circumstances if the private placement does not close. Dr. Shaw did not participate in the decision of either of the two Nth Power-related entities to invest in the private placement. Nth Power Technologies Fund II, LP intends to designate Timothy Woodward, a Managing Director of Nth Power, LLC, as its designee to our board of directors.

     Dr. Shaw serves as a member of the investment committee of SAM Private Equity Energy Fund L.P. and SAM Sustainability Private Equity Fund L.P. and he has a limited partnership interest in SAM Private Equity Energy Fund L.P. These entities and another affiliated entity, SAM Smart Energy, have agreed to invest $3.25 million in the aggregate in the private placement in return for shares of Series A convertible preferred stock on terms identical to those afforded to each other purchaser. Dr. Shaw recused himself and did not participate in the SAM investment committee decisions to invest in the private placement.

     Dr. Shaw has no voting power or dispositive power over any Evergreen shares held by the Nth Power investment entities or the SAM investment entities.

     Dr. Shaw, as a result of his relationships with investors in the private placement as described above, may have interests in the private placement that are different from those of other Evergreen stockholders. Dr. Shaw is not a member of, and did not participate in, any meetings of our financing committee that negotiated the private placement and did not participate in any discussions with the purchasers concerning the terms of the private placement.

     Mason Willrich, one of our directors, was previously affiliated with Nth Power, LLC. From 1996 through December 1999, Mr. Willrich served as a Principal of Nth Power, LLC, a managerial role that entails reviewing investment candidates and participating in day-to-day operations management, and from January 2000 through February 2002, he was a Special Limited Partner of Nth Power, LLC an advisory role that entailed reviewing investment candidates and providing insights into market trends and opportunities. As of March 1, 2003, Mr. Willrich, together with his wife and a trust entity of which he is the sole trustee, owned an aggregate of 19,503 shares of our common stock. If the private placement is approved by our stockholders, and if the private placement is consummated, Mr. Willrich intends to resign from our board.

     Mr. Willrich, as a result of his relationship with an investor in the private placement as described above, may have interests in the private placement that are different from those of other Evergreen stockholders. Mr. Willrich was not a member of, and did not participate in, any meetings of our financing committee that negotiated the terms of the private placement and did not participate in any discussions with the purchasers concerning the terms of the private placement.

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HISTORICAL MILESTONES

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

INDUSTRY BACKGROUND

     The electric power industry is one of the world’s largest industries. Furthermore, electricity accounts for a growing share of overall energy use. We believe that deregulation and technological innovations are creating significant opportunities for new entrants and technologies within the electric power industry, just as these changes have created similar opportunities in other regulated industries such as telecommunications, banking and transportation.

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

     We further believe that environmentally benign, locally sourced power generation will become increasingly more important for economic development, environmental policy, and national security. Increasing attention to global warming, global energy policy, and regional stability and development will support the deployment of distributed generation, particularly renewable energy.

SOLAR POWER APPLICATIONS AND BENEFITS

     Unlike many other distributed generation technologies that have been under development but not in widespread commercial use, solar power technology has had a growing worldwide market for over 25 years in the following applications:

	-		On-grid. On-grid applications provide supplemental electricity to customers that are served by an electric utility grid but choose to generate a portion of their electricity needs on-site. On-grid applications have been the fastest growing part of the solar power market, largely driven by the worldwide trend toward deregulation and privatization of the electric power industry as well as by government initiatives, including incentive programs to subsidize and promote solar power systems in several countries including Japan, Germany and the United States. On-grid applications include residential and commercial rooftops and building facades and are available for both new construction and existing structures.
	-		Off-grid. Off-grid applications serve markets where access to conventional electric power is not economical or physically feasible. Solar power products can provide a cost-competitive, reliable alternative for powering highway call boxes, microwave stations, portable highway road signs, remote street or billboard lights, vacation homes, rural homes in developed and developing countries, water pumps and battery chargers for recreational vehicles and other consumer applications.

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

	-		Modular and scaleable. From tiny solar cells powering a hand-held calculator to an array of roof panels powering an entire home to acres of panels on a commercial building roof or field, solar power products can be deployed in many sizes and configurations and can be installed almost anywhere in the world. Solar is among the best technologies for power generation in urban areas, environmentally sensitive areas, and geographically remote areas in both developing and developed countries.
	-		Reliable. With no moving parts and no fuel supply required, solar power systems reliably power some of the world’s most sensitive applications, from space satellites to microwave stations in the mountains and other remote, harsh environments. Solar panels typically carry warranties as long as 25 years.
	-		Dual use. Solar panels are expected to increasingly serve as both a power generator and the skin of the building. Like architectural glass, solar panels can be installed on the roofs or facades of residential and commercial buildings.
	-		Environmentally cleaner. Solar power systems consume no fuel and produce no air or water emissions.

THE SOLAR POWER CHALLENGE

     Although solar power has been technically proven for over 25 years and is widely cost-effective for off-grid applications, we believe the principal challenge to widespread adoption of solar power is reducing manufacturing costs without impairing product performance or reliability. We believe the following advancements in solar power technology are necessary to meet this challenge:

	-		Efficient material use. Reduce raw materials waste, particularly the waste associated with slicing silicon blocks by conventional crystalline silicon technology.
	-		Simplified and continuous processing. Reduce reliance on expensive, multi-step manufacturing processes.
	-		Improved product design and performance. Increase product conversion efficiency, longevity and ease of use. Conversion efficiency refers to the fraction of the sun’s energy converted to electricity.

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

     Crystalline Silicon. Crystalline silicon technology was the earliest practiced solar power technology and remains the foundation for most solar power applications. Conventional crystalline silicon technology involves slicing thin wafers from solid crystalline silicon blocks. Crystalline silicon products are known for their reliability, performance and longevity; however, factors such as high materials waste from slicing, and multi-step processing procedures have limited the ability of conventional crystalline silicon manufacturers to reduce manufacturing costs.

     Thin Films. While most major solar power manufacturers currently rely on crystalline silicon technology for the majority of their solar cell production, many are also developing alternative thin film technologies to achieve lower manufacturing costs. Thin film technology involves depositing several thin layers of silicon or more complex materials on a substrate to make a solar cell. Although thin film techniques may be able to use material more efficiently than conventional crystalline silicon, we believe the commercial acceptance of thin film technology is limited due to higher capital costs, lower manufacturing yields, lower conversion efficiency, reduced product performance and reliability, and, in some cases, concerns with toxic materials. Recent curtailments of R&D programs as well as plant closures by some industry participants, most notably BP Solar in 2002, highlight the commercial challenges that thin films have faced.

OUR TECHNOLOGY SOLUTION

     We believe our technologies and processes are unique among our competitors. Both our technologies and processes have been designed to reduce manufacturing costs while improving product design. We are developing technology at the wafer, cell and panel stages of manufacturing, and we hold patents and other intellectual property in all three areas. Our String Ribbon wafer manufacturing technology is our core technology and we believe it offers a substantial opportunity to reduce cost and otherwise advance our business through reduced materials cost, simpler processing and lower required economies of scale.

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

	-		Efficient materials use. Unlike conventional bulk crystalline silicon wafer technology, in which solid blocks of silicon are sliced into thin wafers at significant expense and silicon waste, our technology grows a continuous, flat ribbon to the desired thickness. Since our technology does not involve slicing solid blocks, we can use approximately half as much silicon as conventional crystalline silicon techniques and we believe we can reduce this amount to about one-fifth in the future through production of thinner wafers.
	-		Continuous processing. Our technology permits the continuous growth of crystalline silicon ribbon, which can lead to high automation, efficient equipment use and improved productivity.
	-		Modularity. String Ribbon furnaces individually have a capacity of approximately 0.5 megawatts per year, whereas conventional bulk technology typically has an individual machine capability of 3 megawatts per year, and the trend has been to increase minimum unit size in recent years. We expect that this modularity may enable us to achieve economies of scale at a smaller scale than conventional technologies, which could enable us to manufacture internationally in more numerous, smaller factories to better serve global markets.

     In addition to String Ribbon, we are developing and have patented advanced approaches in cell and panel fabrication, including a technique to produce “wrap-around” or back-contact solar cells, monolithic integration and polymer-framed modules. While these technologies are not yet in commercial production, they present an opportunity to further reduce cost and improve products by simplifying processes and reducing materials use.

OUR PRODUCTS

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

	-		Wafers. A crystalline silicon wafer is a flat piece of crystalline silicon that can be processed into a solar cell. Our rectangular wafers currently measure 81 millimeters by 150 millimeters and are approximately as thick as a business card.
	-		Cells. A solar cell is a device made from a wafer that converts sunlight into electricity by means of a process known as the photovoltaic effect. Our solar cells produce approximately 1.5 watts of power each.
	-		Panels. A solar panel is an assembly of solar cells that have been electrically interconnected and laminated in a physically durable and weather-tight package. A typical solar panel can produce from 20 to 150 watts of power and range in size from two to 15 square feet. A 100-watt solar panel can power a standard 100-watt light bulb, or approximately 3% of the power requirements of a typical home in the United States. Our current solar panels range from 47 to 110 watts in power.
	-		Systems. A solar system is an assembly of one or more solar panels that have been physically mounted and electrically interconnected, often with batteries and/or power electronics, to produce electricity. Typical residential on-grid systems contain between 10-40 panels and produce 1-4 kW.

     We sell primarily solar panels, although we may in the future also sell wafers, cells, or systems. We believe our panels are competitive with other products in the marketplace, and some customers have commented that our panels have benefits regarding appearance, electrical design capability, and ease of use.

     Our solar panels are certified to international standards for safety and quality. If our development programs are successful, we expect to continue to increase the conversion efficiency and power of our solar panels as we expand our manufacturing capacity.

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SALES AND MARKETING

     Market Focus

     We intend to primarily target the on-grid markets and the off-grid rural electrification market, where we believe growth prospects are the largest and where we expect our solar power technology will provide us the greatest competitive advantage. These markets are characterized as follows:

	-		On-grid. The on-grid market is currently the fastest growing solar power market within which, we are focused primarily on U.S. and European markets.
	-		Off-grid rural electrification. Within the off-grid market, we believe that rural electrification has the largest potential but is the least penetrated market as evidenced by the two billion people in the world without conventional electricity. Marketing, financing, local infrastructure and support are projected to remain the principal challenges to greater expansion of this market. To date, we have primarily pursued sales in Central and South America and the Pacific Rim.

     Since inception, over 80% of our sales have been to on-grid market segments, and over 50% of our sales have been exported from the U.S. The majority of our export sales to date have been to Europe.

     Distribution, Marketing and Other Strategic Relationships

     We bring our solar power products to market using distributors, system integrators and other value-added resellers. Our resellers often add value through system design by incorporating our panels with batteries, associated electronics, structures and wiring systems. Most of our resellers have a geographic or applications focus. Our channel partners include companies that are exclusively solar distributors as well as others for whom solar power is an extension of their core business, such as, engineering design firms or other energy product marketers.

     We expect to collaborate closely with a relatively small number of resellers throughout the world. We currently have less than 50 distributors worldwide and are actively adding new accounts and channel partners. Our distribution partners include Kawasaki Heavy Industries, a Japanese engineering and construction company, Hutton Communications, a leading marketer and distributor of wireless telecommunications and power products in North America, and Krannich Solartechnik, a marketer and distributor of photovoltaic modules and systems in Germany.

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

     We currently work with a relatively small number of reseller partners who have particular expertise in a selected geographic or applications market segment. Sales to our ten largest resellers have accounted for approximately 90% of our total product revenues since inception. No single reseller has accounted for more than 45% of total revenues over that period. As we continue to expand manufacturing capacity and sales volumes, we anticipate developing relationships with additional resellers. During fiscal year 2002, approximately 32% of our product sales were made to resellers in the United States, and all of our research revenue was generated within the United States. During the same period, revenue from the National Institute of Industry Standards, the National Renewable Energy Laboratory, and Krannich Solartechnik accounted for 11%, 10% and 44% of total revenues, respectively.

     In addition, we market our products through trade shows, on-going customer communications, promotional material, our web site, direct mail and advertising. Our staff provides customer service and applications engineering support to our distribution partners while also gathering information on current product performance and future product requirements. Our internal sales force currently handles all solar power product sales. During 2002, we brought on board a North American Sales Manager based in Marlboro, Massachusetts, as well as a European Sales Manager based in Munich, Germany.

MANUFACTURING

     Our principal manufacturing objective is to provide for large-scale manufacturing of our solar power products at low costs that will enable us to penetrate price-sensitive solar power markets. In March 2000, we signed a lease agreement for a 56,250 square foot facility in Marlboro, Massachusetts, which includes approximately 35,000 square feet of manufacturing space.

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This facility includes a complete line of equipment to manufacture String Ribbon wafers, fabricate and test solar cells, and laminate and test panels The first of the facility’s two planned manufacturing lines entered service in 2001. During 2002, we initiated the design and construction of the second production line in our Marlboro facility. At the end of 2002, installation and construction of equipment for parts of the cell processing and module fabrication operations neared completion.

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

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

RESEARCH AND DEVELOPMENT

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

     We intend to continue our policy of selectively pursuing contract research, product development and market development programs funded by various agencies of the United States, state and international governments to complement and enhance our own resources. The percentage of our total revenues derived from government-related contracts was approximately 21% for the year ended December 31, 2002. We currently have two active research contracts with total estimated revenues of approximately $5.0 million, $2.75 million of which has been authorized by the sponsoring agencies and $2.1 million of which has been recorded as revenue as of December 31, 2002. We expect the remaining $2.9 million of revenue will be recognized over the remaining life of each of the contracts, which expire on October 31, 2003 and May 31, 2005.

     These and other research contracts we have obtained generally provide for development of advanced materials and methods for wafer, cell and panel manufacturing, product development and market development. In all cases to date, we retain all rights to any intellectual property and technological developments resulting from the government funding, with the exception of government “march-in” rights to practice the technology on its own behalf and certain rights universities retain for work they perform under subcontract to us. These contracts usually require the submission of technical progress reports, most of which may become publicly available. These contracts are generally cost-shared between the funding agency and us with our share of the total contract cost historically ranging from approximately 30% to 70%. The contracts normally expire between six months and three years from their initiation. We have recognized research revenues of $1.8 million in 2000, $932,000 in 2001, and $1.4 million in 2002 from several government-sponsored research contracts. We have recorded research and development expenditures, including the cost of research revenue, of $3.3 million in 2000, $2.9 million in 2001 and $3.6 million in 2002. The following table summarizes research revenues received from various government agencies as a percentage of total revenues:

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INTELLECTUAL PROPERTY RIGHTS

     Patents

     We believe that our commercial success will significantly depend on our ability to protect our intellectual property rights underlying our proprietary technologies. We seek United States and international patent protection for major components of our technology platform, including our crystalline silicon wafers, solar cells and solar panels. We own or have licensed 19 issued United States patents and 2 issued foreign patents in the solar power field, which expire beginning in 2003 and ending in 2019. In addition, we have 7 United States patent applications pending. We decide whether and in what foreign countries to file counterparts of our United States patent applications. We devote substantial resources to building a strong patent position, and we intend to continue to file additional United States and foreign patent applications to seek protection for technology we deem important to our commercial success.

     Crystalline Silicon Wafers. Dr. Emanuel Sachs, a tenured Professor of Mechanical Engineering at the Massachusetts Institute of Technology, developed our core String Ribbon technology. Dr. Sachs has been awarded three issued United States patents for the String Ribbon technology. An additional issued patent for a related technology, invented by two employees of the United States National Renewable Energy Laboratory, formerly the Solar Energy Research Institute, was assigned to Dr. Sachs in 1984.

     In September 1994, Dr. Sachs granted us an irrevocable, worldwide, royalty-bearing license to practice the String Ribbon technology and related patents under a license and consulting agreement. The patents underlying this agreement begin to expire in 2003. This agreement permits us to sublicense any of our license and other rights under the agreement. The license is exclusive worldwide, subject only to nonexclusive, nontransferable rights held by the United States Department of Energy to practice the String Ribbon technology on its own behalf. Dr. Sachs continues to actively consult with Evergreen Solar on new technological developments.

     We have been awarded 3 issued United States patents and have filed 5 patent applications on our own, internally-developed inventions related to String Ribbon and wafer fabrication, which are method inventions relating to automated, high-yield production techniques.

     Solar Cell Fabrication. We have been awarded 5 issued United States patents relating to our solar cell processing technology. The issued United States patents relate to the method for forming wrap-around contacts on solar cells and a method for processing solar cells.

     Solar Panels. We have been awarded 7 issued United States patents and have filed 2 additional United States patent applications relating to advanced solar panel designs. The 7 issued United States patents relate to solar cell modules with an improved backskin, solar cell modules with an interface mounting system, an encapsulant material for solar cell modules and a solar cell roof tile system. The pending patent applications relate to new materials for encasing the panel, which we believe will lower cost, extend panel life and enhance panel performance.

     The long-term status of patents in our industry, as well as others, are generally uncertain and involve complex legal and factual questions. Furthermore, even if patents are licensed or issued to us, others may design around the patented technologies. In addition, we could incur substantial costs in litigation if we are required to initiate patent litigation to enforce our patent rights, and the outcome of any patent litigation is uncertain. The following may impair our patent positions:

	-		our pending patent applications may not result in issued patents;
	-		the claims of patents which are issued may not provide meaningful protection;
	-		we may not develop additional proprietary technologies that are patentable;
	-		patents licensed or issued to us may not provide a basis for commercially viable products or may not provide us with competitive advantages and may be challenged by third parties; or
	-		patents of others may have an adverse effect on our ability to do business.

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

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     Trade Secrets and Other Rights

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

COMPETITION

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

     We believe the technologies used in our current solar power products have some similarities with those employed in our competitors’ products. However, because our solar power products are made from crystalline silicon, we believe they may be more reliable than those made from thin film technologies which often use materials, such as amorphous silicon, which we believe may be less stable.

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

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

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

ENVIRONMENTAL REGULATIONS

     We use, generate and discharge toxic, volatile or otherwise hazardous chemicals and wastes in our research and development and manufacturing activities. We are subject to a variety of federal, state and local governmental regulations

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related to the storage, use and disposal of hazardous materials. If we fail to comply with present or future environmental regulations, we could be subject to fines, suspension of production or a cessation of operations.

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

EMPLOYEES

     As of December 31, 2002, we had 132 full-time employees, including 16 engaged in research and development and 105 engaged in manufacturing. Nineteen of our employees have advanced degrees, including 4 with Ph.D.s. None of our employees are represented by any labor union nor are they organized under a collective bargaining agreement. We have never experienced a work stoppage and believe that our relations with our employees are good.

WEBSITE

     Our Internet address is www.evergreensolar.com.

ITEM 2. PROPERTIES:

     Our headquarters is currently located in a leased space in Marlboro, Massachusetts, where we currently occupy approximately 56,250 square feet of administrative, laboratory and manufacturing space. Our lease expires on June 30, 2010.

ITEM 3. LEGAL PROCEEDINGS:

     We are not a party to any material legal proceedings.

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

     No matters were submitted to a vote of security holders during the quarter ended December 31, 2002.

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PART II

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

Market for Our Common Stock

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

     On February 27, 2003 there were approximately 132 stockholders of record of our common stock. We have never declared or paid cash dividends. If the proposed financing is consummated, holders of shares of Series A convertible preferred stock will be entitled to a quarterly dividend at an annual rate of 10% payable in cash or, at our option, we may accrete the Series A convertible preferred stock 10% dividend to the conversion price and liquidation preference of the series A convertible preferred stock. Apart from the dividend on the Series A convertible preferred stock, we intend to retain any earnings for use in our business.

Use of Proceeds

On October 31, 2000, the Securities and Exchange Commission declared effective our registration statement on Form S-1 (file number 333-43140), relating to the initial public offering of 3,000,000 shares of our common stock, $.01 par value per share, at a price to the public of $14.00 per share. The offering commenced on November 2, 2000 and closed on November 7, 2000. The managing underwriters of the offering were Banc of America Securities LLC, CIBC World Markets and FAC/Equities. The aggregate offering price to the public of the initial public offering was $42.0 million. The proceeds to us, net of underwriting discounts and commissions of $2.9 million and offering expenses of $1.3 million, were approximately $37.7 million. Through December 31, 2002, approximately $29.2 million of the net offering proceeds was spent, of which $7.7 million was spent on capital equipment and the remainder on general operations. We have invested all of such proceeds in investment grade, interest-bearing securities. Other than for compensation and reimbursement of expenses incurred in the normal course of business, none of the net proceeds from the offering were used to pay, directly or indirectly, directors, officers, persons owning ten percent or more of our equity securities, or affiliates.

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ITEM 6. SELECTED FINANCIAL DATA:

     You should read the data set forth below in conjunction with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this filing. The statement of operations data presented below for the fiscal years ended December 31, 2000, 2001, and 2002 and the balance sheet data at December 31, 2001, and 2002 have been derived from our financial statements which have been audited by PricewaterhouseCoopers LLP, independent accountants, and which appear elsewhere in this filing. The statement of operations data presented below for the years ended December 31, 1998 and 1999, and the balance sheet data at December 31, 1998, 1999 and 2000 have been derived from our financial statements that have been audited by PricewaterhouseCoopers LLP and are not included in this filing.

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

     We caution readers that statements in this Annual Report on Form 10-K that are not strictly historical statements, including, but not limited to: statements reflecting our expectations regarding the timing, cost, and success of our manufacturing scale-up at our new facility in Marlboro, Massachusetts and future manufacturing expansion and production, as well as related financing requirements; future financial performance; our technology and product development, cost and performance; our current and future strategic relationships and future market opportunities; and our other business and technology strategies and objectives, constitute forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified with such words as “we expect”, “we believe”, “we anticipate” or similar indications of future expectations. These statements are neither promises nor guarantees and involve risks and uncertainties, which could cause our actual results to differ materially from such forward-looking statements. Such risks and uncertainties may include, among other things, those risks and uncertainties described in this Annual Report and in our other filings with the Securities and Exchange Commission, copies of which