895665--3/8/2006--SUPERCONDUCTOR_TECHNOLOGIES

related topics

{product, market, service}

{stock, price, share}

{customer, product, revenue}

{property, intellectual, protect}

{acquisition, growth, future}

{stock, price, operating}

{regulation, government, change}

{control, financial, internal}

{provision, law, control}

{personnel, key, retain}

{cost, regulation, environmental}

{interest, director, officer}

Risks Related to Our Business We have a history of losses and may never become profitable. We may need to raise additional capital, and if we are unable to raise capital our ability to implement our current business plan and ultimately our viability as a company could be adversely affected. We rely on a small number of customers for the majority of our commercial revenues and the loss of any one of these customers, or a significant loss, reduction or rescheduling of orders from any of these customers, could have a material adverse effect on our business, results of operations and financial condition. The wireless communication industry is highly concentrated, which limits the number of potential customers, and further industry consolidation could result in the loss of key customers. We experience significant fluctuations in sales and operating results from quarter to quarter. Our sales cycles are unpredictable, making future performance uncertain. We depend on the capital spending patterns of wireless network operators, and if capital spending is decreased or delayed, our business may be harmed. Our reliance on a limited number of suppliers and the long lead time of components for our products could impair our ability to manufacture and deliver our systems on a timely basis. Our reliance on a limited number of suppliers exposes us to quality control issues. We expect decreases in average selling prices, requiring us to reduce product costs in order to achieve and maintain profitability. Changes in the mix of our sales channels could cause fluctuations in our gross profit and future operating results. Our ability to protect our patents and other proprietary rights is uncertain, exposing us to possible losses of competitive advantage. We depend on specific patents and licenses to technologies, and we will likely need additional technologies in the future that we may not be able to utilize. Intellectual property infringement claims against us could materially harm results of operations. We currently rely on specific technologies and may not successfully adjust to the rapidly changing wireless telecommunications equipment market. Other parties may have the right to utilize technology important to our business. Our failure to anticipate and respond to developments in the wireless telecommunications market could substantially harm our business We may not be able to compete effectively against alternative technologies. We depend upon government contracts for a substantial portion of revenue, and our business may suffer if significant contracts are terminated or adversely modified or we are unable to win new contracts. Because competition for target employees is intense, we may be subject to claims of unfair hiring practices, trade secrets misappropriation or other related claims. If we are unable to forecast our inventory needs accurately, we may be unable to obtain efficient manufacturing capacity or may incur unnecessary costs and produce excess inventory. Our success depends on the attraction and retention of senior management and technical personnel with relevant expertise. Regulatory changes negatively affecting wireless communications companies could substantially harm our business. We may acquire or make investments in companies or technologies that could cause loss of value to stockholders and disruption of business. If we are unable to implement appropriate controls and procedures to manage our expected growth, we may not be able to successfully offer our products and implement our business plan. Compliance with environmental regulations could be especially costly due to the hazardous materials used in the manufacturing process. The reliability of market data included in our public filings is uncertain. Risks Related to Our Common Stock Our stock price is volatile. We may not be able to maintain our NASDAQ stock listing, and the loss of our listing would have a material adverse affect on the liquidity and price of our stock. We have decided to implement a reverse stock split, and the reverse stock split could reduce our total market capitalization. We have a significant number of outstanding warrants and options, and future sales of these shares could adversely affect the market price of our common stock. Our corporate governance structure may prevent our acquisition by another company at a premium over the public trading price of STI shares. We do not anticipate declaring any cash dividends on our common stock.

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895665--3/8/2006--SUPERCONDUCTOR_TECHNOLOGIES_INC