1111665--3/3/2009--TELECOMMUNICATION_SYSTEMS_INC

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{product, market, service}

{regulation, government, change}

{customer, product, revenue}

{system, service, information}

{property, intellectual, protect}

{condition, economic, financial}

{provision, law, control}

{stock, price, operating}

{operation, international, foreign}

{acquisition, growth, future}

{control, financial, internal}

{loss, insurance, financial}

{regulation, change, law}

{financial, litigation, operation}

{personnel, key, retain}

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{competitive, industry, competition}

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We are subject to procurement and other related laws and regulation which carry significant penalties for non-compliance. Current levels of market volatility are unprecedented and adverse capital and credit market conditions may negatively impact us. Changes in the U.S. and global market conditions that are beyond our control may have a material adverse effect on us. We could incur substantial costs from product liability claims relating to our software. Our operating results could be adversely affected by any interruption of our data delivery services, system failure or production interruptions. Because we rely on a few key customers, our revenue may decline if we fail to retain those customers. We derive a significant portion of our revenue from sales to various agencies of the U.S. Government which has special rights unlike other customers and exposes us to additional risks that could have a material adverse effect on us. Because we rely on key partners to expand our marketing and sales efforts, if we fail to maintain or expand our relationships with strategic partners and indirect distribution channels our license revenues could decline. Because our business may not generate sufficient cash to fund our operations, we may not be able to continue to grow our business if we are unable to obtain additional capital when needed. We are exposed to counterparty credit risk and there can be no assurances that we will manage or mitigate this risk effectively. Our short-term investments are subject to market fluctuations which may affect our liquidity. Our stock price, like that of many technology companies, has been and may continue to be volatile. Variations in quarterly operating results due to factors such as changes in demand for our products and changes in our mix of revenues and costs may cause our Class A common stock price to decline. Growing market acceptance of open source software could have a negative impact on us. Because our product offerings are sold internationally, we are subject to risks of conducting business in foreign countries. Because several of our competitors have significantly greater resources than we do, we could lose customers and market share. Because we are not a small business under government size standards, we could lose business to small-business set-aside competitors. While we characterize a significant portion of our revenue as being recurring there is no guarantee that we will actually achieve this revenue. We cannot guarantee that our estimated contract backlog will result in actual revenue. The loss of key personnel or any inability to attract and retain additional personnel could harm our business. If our subcontractors and vendors fail to perform their contractual obligations, our performance and reputation as a prime contractor and our ability to obtain future business could suffer. Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations, and they require management to make estimates, judgments and assumptions about matters that are inherently uncertain. Because the wireless data industry is a rapidly evolving market, our product and service offerings could become obsolete unless we respond effectively and on a timely basis to rapid technological changes. Concerns about personal privacy and commercial solicitation may limit the growth of mobile location services and reduce demand for our products and services. Because many providers are not in compliance with current regulatory mandates and because our industry is undergoing rapid technological and regulatory change, our future performance is uncertain. Our E9-1-1 business is dependent on state and local governments and the regulatory environment for Voice over Internet Protocol (VoIP) services is developing. Because the industries which we serve are currently in a cycle of consolidation, the number of customers may be reduced which could result in a loss of revenue for our business. Because our software may contain defects or errors, and our hardware products may incorporate defective components, our sales could decrease if these defects or errors adversely affect our reputation or delays shipments of our products. If we are unable to integrate our products with wireless service providers systems we may lose sales to competitors. Failure to meet our contractual obligations could adversely affect our profitability and future prospects. Because our systems may be vulnerable to systems failures and security risks, we may incur significant costs to protect against the threat of these problems. If mobile equipment manufacturers do not overcome capacity, technology and equipment limitations, we may not be able to sell our products and services. Because the market for most mobile content delivery and mobile location products is new, our future success is uncertain. If wireless handsets pose health and safety risks, we may be subject to new regulations and demand for our products and services may decrease. If we are unable to protect our intellectual property rights or are sued by third parties for infringing upon intellectual property rights, we may incur substantial costs. Pursuing infringers of our patents and other intellectual property rights can be costly. Third parties may claim we are infringing their intellectual property rights and we could be prevented from selling our products, or suffer significant litigation expense, even if these claims have no merit. The security measures we have implemented to secure information we collect and store may be breached, which could cause us to breach agreements with our partners and expose us to potential investigation and penalties by authorities and potential claims by persons whose information was disclosed. Our past and future acquisitions of companies or technologies could prove difficult to integrate, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our Class A common stock. Risks Related to Our Capital Structure and Common Stock A majority of our Class A common stock is beneficially owned by a small number of holders, and those holders could thereby transfer control of us to a third party without anyone else s approval or prevent a third party from acquiring us. Our governing corporate documents contain certain anti-takeover provisions that could prevent a change of control that may be favorable to shareholders. Because this report contains forward-looking statements, it may not prove to be accurate.

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