896778--3/15/2007--CONCEPTUS

related topics

{product, liability, claim}

{provision, law, control}

{product, candidate, development}

{property, intellectual, protect}

{debt, indebtedness, cash}

{product, market, service}

{customer, product, revenue}

{acquisition, growth, future}

{regulation, change, law}

{regulation, government, change}

{control, financial, internal}

{personnel, key, retain}

{stock, price, operating}

{tax, income, asset}

{capital, credit, financial}

We are presently a one product company and if our product fails to gain market acceptance, our business will suffer. We have a limited history of operation with the Essure system and since inception, have had a negative cash flow from operations and incurred operating losses. We expect to incur operating losses for the foreseeable future and we may never achieve or maintain profitability. If the effectiveness and safety of our product are not supported by long-term data, we may not achieve market acceptance and we could be subject to liability. Our advertising campaigns may not be successful. If we fail to manage any expansion or acquisition, our business could be impaired. We face intense competition, and if we are unable to compete effectively, demand for the Essure system may be reduced. We, our contract manufacturer and our subcontractors may not meet regulatory quality standards applicable to our manufacturing processes, which could have an adverse effect on our business. We may experience disruption in supply due to our dependence on our contract manufacturers to supply our commercial product requirements and our inability to obtain suppliers of certain components for our products. Our agreements and contracts entered into with partners and other third parties may not be successful. Government or third party reimbursement for the Essure procedure may not be available or may be inadequate, which would limit our future product revenues and delay or prevent our profitability. We may not maintain regulatory approvals for the Essure system, which would delay or prevent us from generating product revenues, and would harm our business and force us to curtail or cease operations. We have received FDA approval to market the Essure system in the United States. If we lose that approval or fail to comply with existing or future regulatory requirements, it would delay or prevent us from generating further product revenues. We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and, if we are unable to fully comply with such laws, could face substantial penalties. Our intellectual property rights may not provide meaningful commercial protection for our product, which could enable third parties to use our technology, or very similar technology, and could impair our ability to compete in the market. If we cannot operate our business without infringing third-party intellectual property rights, our prospects will suffer. We have been, and may be in the future, a party to patent litigation, which could be expensive and divert our management s attention. Our future liquidity and capital requirements are uncertain. The fluctuation of our quarterly results may adversely affect the trading price of our common stock. Health care reform may limit our return on our product. We may be exposed to product liability claims, and we have only limited insurance coverage. We may not be able to attract and retain additional key management, sales and marketing and technical personnel or we may lose existing key management, sales and marketing or technical personnel, which may delay our development and marketing efforts. We are required to recognize expense for stock- Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected revenue fluctuations and affect our reported results of operations. Our 2.25% convertible senior notes present certain liquidity and other risks. As adjusted to include the sale of the notes our total consolidated long-term debt as of December 31, 2006 would have been approximately $86.25 million. In addition, the indenture for the notes will not restrict our ability to incur additional indebtedness. Our level of indebtedness could have important consequences on our future operations, including: Provisions in our charter documents, Delaware law and the indenture for our 2.25% convertible senior notes due 2027 could discourage an acquisition of us by a third party, even if the acquisition would be favorable to you. Our charter and bylaws contain provisions relating to issuance of preferred stock, special meetings of stockholders and advance notification procedures for stockholder proposals that could have the effect of discouraging, delaying or preventing an unsolicited change in the control of our company. Our charter provides for our board of directors to be divided into three classes of directors, serving staggered three-year terms. The classified board provision could have the effect of discouraging a third party from making a tender offer or attempting to obtain control of us. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, unless certain conditions are met. Section 203 may discourage, delay or prevent an acquisition of our company even at a price our stockholders may find attractive. Delaware law, could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to our security holders.

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896778--3/15/2007--CONCEPTUS_INC