32878--8/28/2008--ENERGY_CONVERSION_DEVICES

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We have a history of losses and our future profitability is uncertain; the failure to maintain sustainable profitability could have a material adverse effect on our business, results of operations, financial condition and cash flows. We expect that we will need to make significant capital expenditures to increase our production capacity, and financing may be unavailable or available only on disadvantageous terms. Our expansion plans require significant engineering efforts, timely delivery of manufacturing equipment and dedicated management attention. We rapidly are expanding our manufacturing capacity for solar energy products in order to meet expected demand, and our revenue and profits will depend upon our ability to successfully complete this expansion and then to sell our solar energy products at higher volumes to match our expanded capacity. We have international operations, which we are expanding, that are vulnerable to risks associated with doing business in foreign countries. Certain equipment purchases are denominated in foreign currency. We face intense competition from other companies producing solar energy and other renewable energy products. Demand for our products may be adversely affected by the current economic and credit environment. Demand for our products is affected by existing regulations concerning the electrical utility industry; changes to such regulations may present technical, regulatory and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products. We receive a significant portion of our revenues from a small number of customers. The reduction or elimination of government incentives related to solar power could cause our revenues to decline. We must continue to develop and market new and innovative products and there can be no assurance that such efforts will be successful. The expansion of our business into new markets, such as residential, may increase our exposure to certain risks, including class action claims. We have focused our business strategy on, and invested significant financial resources in, the BIPV segment of the PV market and there is no guarantee that the demand for BIPV systems will develop as we anticipate. We may be unable to obtain key raw materials that meet our quality, quantity and cost requirements. Significant warranty and product liability claims could adversely affect our business and results of operations. The conversion rate of our outstanding convertible debt is dependent upon the trading price of our common stock and thus the dilutive impact of the future converted shares cannot be predicted. If we lose key personnel or are unable to attract and retain qualified personnel to maintain and expand our business, our business, financial condition, results of operations and prospects could be adversely affected. We may become subject to legal or regulatory proceedings which may reach unfavorable resolutions. We are subject to a variety of federal, state and local laws, rules and regulations related to the discharge or disposal of toxic, volatile or other hazardous chemicals. Our success depends in part upon our ability to protect our intellectual property and our proprietary technology including our trade secrets and other confidential information. We may be involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming. Third parties may own or control patents or patent applications that are infringed by our products or technologies. Compliance with environmental regulations can be expensive, and noncompliance with these regulations may require us to pay substantial fines, suspend production or cease operations. Our Cobasys affiliate faces uncertain prospects and is the subject of a pending arbitration the outcome of which is uncertain but may expose us to material liability if not settled or resolved favorably. We have entered into joint ventures and licensing agreements to develop and commercialize products based on our technologies and we must manage such joint ventures and licensing agreements successfully. Our government product development and research contracts may be terminated by unilateral government action, or we may be unsuccessful in obtaining new government contracts to replace those that have been terminated or completed. The credit facility entered into by our subsidiaries, United Solar Ovonic Corporation and United Solar Ovonic LLC, contains covenant restrictions that may limit our ability to operate our business. We have a significant amount of debt outstanding. Our indebtedness, along with our other contractual commitments, could adversely affect our business, financial condition and results of operations, as well as our ability to meet any of our payment obligations.

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32878--8/28/2008--ENERGY_CONVERSION_DEVICES_INC