1103345--3/30/2007--BEACON_POWER

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{stock, price, share}

{cost, regulation, environmental}

{control, financial, internal}

{product, market, service}

{financial, litigation, operation}

{property, intellectual, protect}

{customer, product, revenue}

{personnel, key, retain}

{provision, law, control}

{gas, price, oil}

{product, liability, claim}

We face significant technical challenges in completing the development of the Smart Energy Matrix . We may fail to develop our 25kWh generation flywheel system, which is a critical requirement for the development of the Smart Energy Matrix and, even if we are able to develop the 25kWh system, we may fail to develop the Smart Energy Matrix . Our stock may be removed from The Nasdaq Capital Market System. Our ability to complete development of our Smart Energy Matrix will require substantial funds. Our stockholders may be adversely affected if we issue debt securities or additional equity securities to obtain financing. We intend to bring our frequency regulation services to market through participation in the energy auction markets, where on a national basis the amount of frequency regulation required is typically one percent of all power produced. If changes in this percentage occur due to regulatory modifications and are not offset by a proportionate increase in pricing for frequency regulation, our business plan could be adversely affected. Our revenue and sales depend upon the achievement of the product development and commercialization milestones set forth in our contracts with third parties. Our future revenues will result from similar milestones related to government contracts and from our commercial applications. These revenues will depend on our ability to deliver flywheel systems with certain performance and dependability attributes. Our business plan includes the design, development, construction, financing and operation of several frequency regulation power facilities that incorporate our Smart Energy Matrix technology in order to provide frequency regulation services. We have no prior experience doing this. Should we fail in any material aspect of these tasks, it is unlikely that we will recognize significant revenue under our current business model. We have a history of losses and anticipate future losses and we will have limited revenues in the near term. Unless we raise additional capital to operate our business, we may not be able to continue as a going concern. Even with the cash raised in February 2007, our cash balances are sufficient to fund operations only into approximately the fourth quarter of 2007. Although the market for frequency regulation services is large and growing, we have not demonstrated an ability to sell into that market. Increases or decreases in purchase prices or availability of carbon fiber or other materials and commodities may affect our ability to achieve profitability. Fluctuations in energy prices may have a material impact on the pricing of frequency regulation services and therefore the profitability of our flywheel systems. New sources of energy including the commissioning of nuclear power plants and other technologies could adversely affect the demand for frequency regulation services. Failure to protect our intellectual property could impair our competitive position. Government regulation may impair our ability to market our products. The exercise of options and warrants and other issuances of shares will likely have a dilutive effect on our stock price. Our financial performance could be adversely affected if we are unable to retain or attract key technical personnel. Competitors in the frequency regulation market include established utilities and independent service providers with far greater resources than we have. We have anti-takeover defenses that could delay or prevent an acquisition and changes in control that could adversely affect the price of our common stock.

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1103345--3/30/2007--BEACON_POWER_CORP