1009759--6/12/2008--CAPSTONE_TURBINE

related topics

{product, market, service}

{customer, product, revenue}

{product, liability, claim}

{control, financial, internal}

{personnel, key, retain}

{operation, natural, condition}

{regulation, government, change}

{financial, litigation, operation}

{competitive, industry, competition}

{provision, law, control}

{tax, income, asset}

{property, intellectual, protect}

{stock, price, operating}

{system, service, information}

{cost, regulation, environmental}

{acquisition, growth, future}

Our operating history is characterized by net losses. We anticipate further losses and we may never become profitable. A sustainable market for microturbines may never develop or may take longer to develop than we anticipate which would adversely affect our revenue and profitability. We operate in a highly competitive market among competitors who have significantly greater resources than we have and we may not be able to compete effectively. If we do not effectively implement our sales, marketing and service plans, our sales will not grow and our profitability will suffer. We may be unable to fund our future operating requirements, which could force us to curtail our operations. We may not be able to effectively manage our growth, expand our production capabilities or improve our operational, financial and management information systems, which would impair our sales and profitability. Our suppliers may not supply us with a sufficient amount of components or components of adequate quality, and we may not be able to produce our product. Approval of the New York City Department of Buildings' Materials Equipment Acceptance ("MEA") application for listing our product on the MEA Index may not result in an increase in sales. Approval of Capstone-branded products for listing on the General Service Administration ("GSA") Schedule does not ensure that we will supply products to the federal government and may not result in an increase in sales. We may not be able to retain or develop OEMs, distributors in our targeted markets, in which case our sales would not increase as expected. A significant customer may not achieve its forecasted sales growth or we may fail to complete the development and commercialization of the C200, in which case the significant customer would receive a non-exclusive, perpetual, world-wide license to the C200 or we may incur additional expense related to service contracts we acquired from this customer, thereby affecting our revenue levels and cash flow. We may not be able to develop sufficiently trained applications engineering, installation and service support to serve our targeted markets. Changes in our product components may require us to replace parts held at distributors and ASCs. We operate in a highly regulated business environment, and changes in regulation could impose significant costs on us or make our products less economical, thereby affecting demand for our microturbines. Utility companies or governmental entities could place barriers to our entry into the marketplace, and we may not be able to effectively sell our products. Product quality expectations may not be met causing slower market acceptance or warranty cost exposure. We depend upon the development of new products and enhancements of existing products. Operational restructuring may result in asset impairment or other unanticipated charges. We may not achieve production cost reductions necessary to competitively price our product, which would impair our sales. Commodity market factors impact our costs and availability of materials. Our products involve a lengthy sales cycle and we may not anticipate sales levels appropriately, which could impair our potential profitability. Potential intellectual property, stockholder or other litigation may adversely impact our business. Our success depends in significant part upon the continuing service of management and key employees. We cannot be certain of the future effectiveness of our internal controls over financial reporting or the impact thereof on our operations or the market price of our common stock. Our operations are vulnerable to interruption by fire, earthquake and other events beyond our control. The market price of our common stock has been and may continue to be highly volatile and an investment in our securities could suffer a decline in value. Provisions in our certificate of incorporation, bylaws and our stockholder rights plan, as well as Delaware law, may discourage, delay or prevent a merger or acquisition at a premium price.

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1009759--6/12/2008--CAPSTONE_TURBINE_CORP