1262200--3/22/2010--DAYSTAR_TECHNOLOGIES

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In order to continue operations, we require immediate and substantial additional capital beyond our current cash on hand. Our independent auditor s report expresses doubt about our ability to continue as a going concern, which may make it more difficult and expensive for us to raise additional capital. We have incurred net losses since our inception and anticipate continued net losses as we execute our commercialization plan. Current and future litigation against us may be costly and time consuming to defend, and the outcome of current litigation could affect our ability to operate at our Newark, California location. The lease for our Santa Clara facility ends on March 31, 2010. If we are unable to extend that lease, we will have to relocate our research and development activities which could cause delays in our current product development plans. Our common stock may be delisted from the Nasdaq Capital Market. Reduced growth in or the reduction, elimination or expiration of government subsidies, economic incentives and other support for on-grid solar electricity applications could reduce demand for our solar modules, and adversely impact our operating results. Existing regulations and policies and changes to these regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar PV products, which may significantly reduce demand for our solar modules. An increase in interest rates or lending rates or tightening of the supply of capital in the global financial markets could make it difficult for end-users to finance the cost of a PV system and could reduce the demand for our solar modules and/or lead to a reduction in the average selling price for photovoltaic modules. We are a development company, have not generated any revenue from operations and currently have no commercial products. Our products have never been sold on a commercial basis, and we do not know whether they will be accepted by the market. We have no experience manufacturing CIGS solar PV products on a commercial scale. We may not reach profitability if PV technology is not suitable for widespread adoption or sufficient demand for solar PV modules does not develop or develops slower than we anticipate. We will rely on third-party suppliers for most of our manufacturing equipment. If our manufacturing equipment, some of which will be customized and sole sourced, fails or our equipment suppliers fail to perform under their contracts, we could experience production disruptions and be unable to satisfy our contractual requirements. The failure to achieve target yields, product qualities or target costs of our CIGS solar PV products could materially and adversely affect our business and financial condition. If we experience significant delays, cost overruns and technical difficulties in establishing commercial manufacturing capacity in California, our business and financial condition could be materially and adversely harmed. We depend on one customer, Blitzstrom GmbH, for a substantial percentage of our anticipated future revenue. We will need to expand our manufacturing capacity beyond our initial production line in order to achieve industry competitive targets and to achieve profitability. The failure to manage our anticipated growth effectively could materially and adversely affect our business and financial condition. Our management team has limited experience working together and its failure to work together effectively could materially and adversely affect our business and financial condition. If we lose key personnel, or are unable to attract and retain necessary talent, we may be unable to develop or commercialize our products under development. If we are unable to adequately protect our intellectual property, our competitors and other third parties could produce products based on our intellectual property, which would substantially impair our ability to compete. We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from selling our product offerings, require us to obtain licenses from third parties to develop non-infringing alternatives and subject us to substantial monetary damages and injunctive relief. The PV industry is highly competitive and subject to rapid technological change, and our success will depend on our ability to develop and market a lower cost, higher performance product. Our facilities in California are located near an earthquake fault, and an earthquake or other types of natural disasters or resource shortages could disrupt our operations and adversely affect results. Environmental obligations and liabilities could have a substantial negative impact on our financial condition, cash flows and profitability. We face risks associated with our anticipated international business. Anti-takeover defenses that we have in place could prevent or frustrate attempts by stockholders to change the direction or management of the company. Our common stock could be subject to extreme volatility. Our stockholders may be diluted, and the prices of our securities may decrease, by the exercise of outstanding stock options and warrants or by future issuances of securities.

Full 10-K form ▸

1262200--3/22/2010--DAYSTAR_TECHNOLOGIES_INC