Beacon Power Corporation (Beacon Power) has reported revenues of $68,131 for the year-end 2008, compared with the revenues of $1.4 million in the previous year-end. It has also reported loss to common shareholders of $23.5 million, or $0.26 loss per share, for the year-end 2008, compared with the loss to common shareholders of $12.9 million, or $0.18 loss per share, in the previous year-end.

In 2008, the company has completed development of its Smart Energy Matrix energy storage system and began limited production of commercial units and its first frequency regulation installations. On November 18, 2008, Beacon began to provide one megawatt (MW) of frequency regulation service and earn limited amounts of commercial revenue through an ISO New England pilot program.

Net cash used in operating activities increased from $11.3 million in 2007 to $13.9 million in 2008, mainly because of a higher net loss and changes in operating assets and liabilities. Net cash used in investing activities increased from $6.9 million in 2007 to $17.1 million in 2008. This was mainly because of the purchase and construction of property and equipment related to the company’s megawatt-level frequency regulation installations in Massachusetts and New York. These increases in spending were partially funded by cash provided by financing activities of $14.9 million, mainly from the sale of stock and warrants. As of December 31, 2008, the company had cash and cash equivalents of $14.4 million, as compared to $30.4 million at the end of 2007, and working capital of $6.5 million.

Research and development expenses were around 84% higher in 2008 as compared to 2007. This increase was mainly because of legal and other costs associated with the Arete litigation and subsequent settlement; increased supplier development costs; higher material, consulting, and contractor expenses associated with the non-movable components of the frequency regulation installation under construction outside the company’s Tyngsboro, Massachusetts, facility; and increases in staffing to support engineering development and manufacturing. In 2008, selling, general and administrative expenses increased by around 20% over the same period in 2007, mainly because of increases in various costs associated with regulatory activity and continued work on the DOE loan guarantee application process, partially offset by a reduction in stock compensation expense.

For the fourth quarter of 2008, the company reported a net loss of $7.2 million, or ($0.08) per share, compared to a net loss of $3.9 million, or ($0.05) per share for the fourth quarter of 2007. The higher net loss during the fourth quarter of 2008 was because of increased research and development spending, increased depreciation and amortization expense, as well as increases in general and administrative spending.

During the fourth quarter of 2008, Beacon Power incurred costs of $965,000 in selling, general and administrative expense, compared to $1,524,000 in the fourth quarter of 2007. Research and development expense was $5,828,000 during the fourth quarter of 2008, compared to $2,925,000 in the fourth quarter of 2007. Total operating expenses for the three months ended December 31, 2008, were $7,160,000, compared to $4,351,000 for the same period in 2007, which is a net increase of $2,809,000.

By the end of 2009, Beacon Power expects to have deployed a minimum of 7 MW of frequency regulation capacity among three locations: Stephentown, New York, Groveport, Ohio, and Tyngsboro, Massachusetts. Additionally, the company is presently identifying and developing sites in other target markets.

The company’s key achievements during 2008 included the following:

Began to generate commercial revenue from a one-megawatt Smart Energy Matrix operating under the ISO New England Alternative Technologies Pilot Program. Beacon’s system has been performing with more than 90% average availability since January 1, 2009.

Moved into the next stage of the application process for a loan guarantee under a U.S. Department of Energy (DOE) Loan Guarantee Program. The DOE is presently completing its due diligence for this loan application.

Reached an agreement with National Grid to assess the potential operational value of the flywheel energy storage technology to National Grid’s electricity transmission networks in both the UUS and UK, for frequency regulation and wind-related ramp mitigation.

Received environmental and other permits required for its planned 20 MW frequency regulation installation in Stephentown, New York.

Made progress in promoting regulatory reforms that will allow the company to access its target markets.

Raised $12.4 million in corporate equity and put in place a $5-million debt facility with the Massachusetts Development Finance Agency.

Awarded a contract for a wind-related research and development project co-funded by the California Energy Commission. Project partners include Southern California Edison and the California ISO. The objective of the project is to utilize the company’s flywheel technology to find better ways to coordinate and maximize energy production and delivery from wind generation resources.

Completed R&D work under Phase I of a planned multi-phase project with the Pacific Northwest National Laboratory, Bonneville Power Administration, the California ISO and the California Energy Commission. Goals of the project include learning how to use fast-response energy storage to help cope with wind generation intermittency.