1009759--6/15/2009--CAPSTONE_TURBINE

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{product, market, service}

{acquisition, growth, future}

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{personnel, key, retain}

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{cost, operation, labor}

{operation, natural, condition}

{regulation, government, change}

{product, liability, claim}

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Our operating history is characterized by net losses. We anticipate further losses and we may never become profitable. We may be unable to fund our future operating requirements, which could force us to curtail our operations. If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue as a going concern. A sustainable market for microturbines may never develop or may take longer to develop than we anticipate which would adversely affect our results of operations. Our operating results are dependent, in large part, upon the successful development and commercialization of our C200 product. Failure to produce this product as scheduled and budgeted would materially and adversely affect our business and financial condition. 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 results of operations. The current global financial crisis may have an impact on our business and financial condition, including some effects we may not be able to predict. Our suppliers may not supply us with a sufficient amount of components or components of adequate quality or they may provide components at significantly increased prices, and, therefore, we may not be able to produce our products. Product quality expectations may not be met causing slower market acceptance or warranty cost exposure. 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 results of operations will suffer. 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. We may not be able to retain or develop relationships with OEMs or 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. Also, we may incur expenses greater than we anticipate related to the sub-contactor service agreement we have with this customer, thereby adversely affecting our revenue levels and cash flow. Loss of a significant customer could have a material adverse effect on our results of operations. 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. 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 adversely affect 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 results of operations. 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. 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 you could lose all or part of your investment in our securities. 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--6/15/2009--CAPSTONE_TURBINE_CORP