1081078--8/10/2010--API_Technologies

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{control, financial, internal}

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{personnel, key, retain}

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{condition, economic, financial}

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Additional Risk Factors to Consider: Risk Relating to Our Business Our business may be adversely affected by the global economic downturn and the continuing uncertainties in the financial markets We are highly reliant on defense spending Our operations are subject to numerous laws, regulations and restrictions, and failure to comply with these laws, regulations and restrictions could subject us to fines, penalties, suspension or debarment We have a history of net losses, and may not be profitable in the future We are reliant on certain security clearances for some of our business Some of our directors and officers may be subject to conflicts of interest We currently maintain a significant level of debt and our failure to service such indebtedness may adversely affect our financial and operating activities We may require additional financing which we may not be able to obtain; Dilution Net sales could decline significantly if we lose a major customer Control of us by our officers and directors could adversely affect the Company s stockholders because of their control of our affairs We are dependent on key personnel Our inability to retain employees with key technical or operational expertise may adversely affect our business The integration of acquisitions may be difficult and may not yield the expected results Failure to maintain adequate internal controls could adversely affect our business There are inherent limitations in all internal control systems over financial reporting, and misstatements due to error or fraud may occur and not be detected Since some of our directors and assets are located outside United States it may be more difficult to enforce certain judgments against us and our directors We may have difficulty attracting and holding outside board members and this may affect the quality of our management The possibility of goodwill impairments exist Downturns in the cyclical semiconductor, and/or electronic component industries would adversely affect our operating results and our value The defense, semiconductor and electronic components industries are highly competitive and increased competition could adversely affect our operating results We depend on limited suppliers for certain critical raw materials We may not be able to develop new products to satisfy changes in demand Cancellation or changes or delays in orders could materially reduce our net sales and operating results Our lengthy sales cycle may increase the likelihood that our quarterly net sales will fluctuate which may adversely affect the market price of our common stock We depend on military prime contractors for the sale of our products Our failure to comply with U.S. government laws, regulations and manufacturing facility certifications would reduce our ability to be awarded future military business We may lose our status as a disadvantaged business corporation Adverse resolution of litigation may harm our operating results or financial condition Our products may be found to be defective, product liability claims may be asserted against us and we may not have sufficient liability insurance Our inability to protect our intellectual property rights or our infringement of the intellectual property rights of others could adversely affect our business We must commit resources to product production prior to receipt of purchase commitments and could lose some or all of the associated investment Variability of our manufacturing yields may affect our gross margins Our inventories may become obsolete Interruptions, delays or cost increases affecting our materials, parts, equipment or subcontractors may impair our competitive position Environmental liabilities could adversely impact our financial position Fixed costs may reduce operating results if our sales fall below expectations Risks Relating to Our Stock Our stock market price and trading volume may be volatile We do not expect to pay dividends Listing our stock on markets other than the OTCBB could be costly for us Shareholders may experience dilution through options and warrants

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1081078--8/10/2010--API_Technologies_Corp.