Item 1A Risk Factors
Investing in our common stock involves a high degree of risk. Before you decide to invest in our common stock, you should consider carefully the risks described below, together with the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. We believe the risks described below are the risks that are material to us as of the date of this Annual Report on Form 10-K. If any of the following risks actually occur, our business, financial condition, results of operations, and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.
Summary of Risks
Some of the most significant risks we face are the following:
• we may experience cost overruns on our contracts, including before final receipt of a contract, which would require us to absorb the excess costs and potentially reduce our cash flow and profitability;
• concentration of our customers and backlog, in particular our largest customer, the SDA;
• we may fail to implement and maintain an effective system of internal control over financial reporting, and as a result may not be able to accurately determine or disclose our financial results;
• our operating results may fluctuate significantly;
• significant competition in the global space and satellite market;
• our failure to manage our growth effectively and our ability to achieve and maintain profitability;
• any failure of our spacecraft systems and related software to operate as intended, resulting in warranty claims for product failures, schedule delays or other problems with existing or new products;
• our revenue, results of operations and reputation may be negatively impacted if our products contain defects or fail to operate in the expected manner;
• our failure to establish and maintain important relationships with government agencies and prime contractors;
• our future revenue and operating results are dependent on our ability to generate a sustainable order rate for our products and services, and develop new technologies to meet the needs of our customers or potential new customers;
• our contracts with the U.S. government may be terminated by the U.S. government at any time;
• we are dependent on our current CEO and other members of management, as well as our highly trained employees;
• our dependence on contracts entered into in the ordinary course of business and our dependence on major customers and vendors;
• the scarcity or unavailability of critical components used to manufacture our products or used in our development programs;
• the market for spacecraft platforms and satellite software is still emerging and shifting, and the market may not achieve the growth potential we expect;
• uncertain global macro-economic and political conditions, including the implementation of tariffs;
• disruptions in U.S. government operations and funding and budgetary priorities of the U.S. government;
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• a failure of our information technology systems, physical or electronic security protections;
• adverse publicity stemming from any incident involving us, our competitors, or our customers;
• the failure to adequately protect our proprietary intellectual property rights;
• the inability to comply with any of our contracts or meet eligibility requirements to obtain certain government contracts;
• limitations on investor insight into portions of our business due to our classified contracts with the U.S. government;
• the potential inability to realize our backlog;
• our business is subject to a wide variety of extensive and evolving government laws and regulations and contracting in the defense industry is subject to significant regulation;
• we are subject to complex tax laws;
• we have substantial indebtedness, and we may not be able to generate sufficient cash to service all of such indebtedness;
• the market price of our common stock may be volatile or decline steeply or suddenly regardless of our operating performance and you may not be able to resell your shares at or above the price at which you purchased them;
• we incur increased costs and devote substantial management time as a result of operating as a public company;
• AE Industrial Partners controls us, and its interests may conflict with ours or yours in the future;
• provisions in our certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our common stock; and
• we are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.
These and other risks are more fully described below. If any of these risks actually occurs, our business, financial condition, results of operations, cash flows, and prospects could be materially and adversely affected. As a result, you could lose all or part of your investment in our common stock.
Risks Related to Our Business
If we experience cost overruns on our contracts, we would have to absorb the excess costs which could adversely affect our financial results.
During the year ended December 31, 2025, the majority of our net sales were from long-term firm-fixed-price (“FFP”) production contracts. Under FFP contracts, we agree to perform specified work for a fixed price and realize all of the profit or loss resulting from variations in the costs of performing the contract. As a result, all FFP contracts involve the inherent risk of unreimbursed cost overruns. We have in the past incurred, and expect in the future to incur unanticipated cost overruns on a FFP contract, harming our profitability. Future profitability is subject to risks including the ability of suppliers to deliver components of acceptable quality on schedule. Our FFP contracts include development work. This type of work is inherently more uncertain as to future events than non-development contracts, and, as a result, there is typically more variability in estimates of the costs to complete the development stage. While management uses its best judgment to estimate costs associated with FFP development, future events could result in adjustments to those estimates.
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We derive a substantial amount of our revenues and backlog from our largest customer, the Space Development Agency. A material adverse change in the SDA’s mandate could materially reduce our revenues and backlog.
As of and for the year ended December 31, 2025, the SDA accounted for substantially all of our revenue and backlog. A material change in the SDA’s mandate or spending could reduce future revenues we receive from the SDA, and could materially reduce our revenues and backlog. The SDA could change its ordering patterns or spending strategy, be delayed in the fulfillment of its contractual obligations to us, reduce or cease its use of our services, or become unable to pay for services it had contracted to buy, whether due to a downturn in appropriations, a government shutdown or various other causes, including the risk of changes to future government funding levels, which may be substantially curtailed or abandoned and result in contract cancellations, modifications, delays, or reduction in orders. In particular, the current U.S. presidential administration has indicated it is committed to decreasing federal spending and the size of the federal government. If the current administration were to take actions that impacted the amount the SDA is to spend on our services, it could materially impact our business, results of operations, and financial condition. In addition, under our contracts, the SDA generally has the right to , , or its contracts with us for convenience. Any decision by the SDA to , , or our contracts would affect our backlog revenues, revenue growth, and . If our backlog is reduced as a result of any of the foregoing factors or for other reasons, including for convenience, our revenues, operating margins, and cash flows would be further impacted.
Our quarterly operating results have fluctuated and may in the future fluctuate and be less than prior periods, our projections or the expectations of securities analysts or investors, which could materially adversely affect our stock price.
Our operating results have fluctuated from quarter to quarter at points in the past, and they may do so in the future. Therefore, results of any one fiscal quarter are not a reliable indication of results to be expected for any other fiscal quarter or for any year. If we fail to increase our results over prior periods, to achieve our projected results or to meet the expectations of securities analysts or investors, our stock price may decline, and the decrease in the stock price may be disproportionate to the shortfall in our financial performance. Results may be affected by various factors, including those described in these risk factors. We consider strategic acquisitions of businesses and other investments which may be costly, time consuming and challenging to consummate and/or integrate with our existing businesses, and may result in fluctuations in our operating results and financial position across periods that may be unrelated to our underlying performance. Any particular acquisition or other investment we make could prove less successful than anticipated and have a negative effect on our business.
Our limited operating history in an evolving industry makes it difficult to evaluate our business and future prospects and the risks and challenges we may encounter.
We have a limited operating history in a rapidly evolving industry that may not develop in a manner favorable to our business. While our business has grown, and much of that growth has occurred in recent periods, the markets for spacecraft and related software, components and services may not continue to develop in a manner that we expect or that otherwise would be favorable to our business. As a result of our limited operating history and ongoing changes in our new and evolving industry, including evolving demand for our products and services, our ability to forecast our future results of operations and plan for and model future growth is limited and subject to a number of uncertainties. We have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and uncertainties described herein. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors or cancellations of government programs, and our results of operations in future reporting periods may be below the expectations of investors or analysts. If we do not address these risks successfully, our results of operations could differ materially from our estimates and forecasts or the expectations of investors or analysts, causing our business to and our common stock price to .
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses or maintain effective internal controls, the accuracy and timeliness of our financial reporting may be materially adversely affected, which could cause the market price of our common stock to decline, lessen investor confidence and harm our business.
We have identified material weaknesses in our internal control over financial reporting relating to:
• identifying the correct measure of progress related to our over-time revenue recognition;
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• maintaining effective controls to sufficiently review the completeness and accuracy of the annual tax provision;
• classification of preferred units on the balance sheet and the related required recognition of dividends associated with the redeemable preferred units; and
• reclassification of direct and indirect costs associated with production from selling, general and administrative expenses to cost of goods sold.
The Public Company Accounting Oversight Board (United States) defines a material weakness as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.” The Company has performed additional accounting analysis and other procedures, including consulting with third-party subject matter experts, to ensure the proper accounting and financial disclosures for these items. The Company recently hired a Chief Accounting Officer and will continue to utilize third-party subject matter experts to enhance its internal controls processes. In connection with the filing of this Annual Report on Form 10-K, management concluded that the previously identified material weaknesses related to (i) maintaining effective controls to sufficiently review the completeness and accuracy of the annual tax provision; (ii) the classification of preferred units on the balance sheet and the related required recognition of dividends associated with the redeemable preferred units; and (iii) the reclassification of direct and indirect costs associated with production from selling, general and administrative to cost of goods sold, have been remediated. However, the remaining previously identified related to identifying the correct measure of related to our over-time revenue recognition has not yet been remediated.
Until our remediation plan with respect to the remaining material weakness is implemented, tested, and deemed effective, we cannot assure that our actions will adequately remediate the remaining material weakness or that additional material weaknesses in our internal controls will not be identified in the future. As a public company, the Company will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting in future annual reports on Form 10-K to be filed with the SEC beginning with the second annual report following our IPO. Failure to comply with the Sarbanes-Oxley Act could potentially subject us to sanctions or investigations by the SEC, or other regulatory authorities, which would require additional financial and management resources. If we are unable to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404, our independent registered public accounting firm would issue an opinion. However, for as long as the Company is an emerging growth company under the JOBS Act, its independent registered public accounting firm will not be required to attest to the effectiveness of its internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We could be an emerging growth company for up to five years from the last day of the fiscal year of our IPO. Our to conclude that we have internal control over financial reporting, could cause investors to confidence in our reported financial information, which could have a material effect on the trading price of our common stock. to remedy the remaining or any future material in our internal control over financial reporting, or to implement or maintain other control systems required of public companies, could also restrict our future access to the capital markets.
If we fail to implement and maintain an effective system of internal control over financial reporting, we may not be able to accurately determine or disclose our financial results. As a result, our stockholders could lose confidence in our financial results.
As a publicly traded company, we are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are required to file reports and other information with the SEC. As a publicly traded company, we are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file with, or submit to, the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. They include controls and procedures designed to ensure that information required to be disclosed in reports filed with, or submitted to, the SEC is accumulated and communicated to management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Effective disclosure controls and procedures are necessary for us to provide reliable reports, effectively prevent and detect fraud, and to operate successfully as a public company. Designing and implementing effective disclosure controls and procedures is a continuous effort that requires significant resources and devotion of time. In connection with the filing of this Annual Report on Form 10-K, we have an unremediated material , and previously had other material and may in the future discover in our disclosure controls and procedures that may be or time consuming to remediate in a timely manner. Our to maintain disclosure controls and procedures and internal control over financial reporting, or to timely effect the necessary thereto, could cause us to to meet our reporting obligations (which could affect the listing of
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our common stock on the NYSE). Additionally, our ineffective disclosure controls and procedures and internal control over financial reporting could also adversely affect our ability to prevent or detect fraud, harm our reputation and cause investors to lose confidence in our reports filed with, or submitted to, the SEC, which would likely have a negative effect on the market price of our common stock.
Failure to comply with the requirements of the National Industrial Security Program Operating Manual Rule could result in interruption, delay, or suspension of our ability to provide our products and services and could result in loss of current and future business with the U.S. government.
Certain contracts with the U.S. government require us to be issued facility security clearances under the National Industrial Security Program Operating Manual (NISPOM) Rule. The National Industrial Security Program requires that a corporation maintaining a facility security clearance be effectively insulated from foreign ownership, control, or influence (“FOCI”). Failure to maintain an agreement with the DoD regarding the appropriate FOCI mitigation arrangement could result in invalidation or termination of the facility security clearances, which in turn would mean that we would not be able to enter into future contracts with the U.S. government requiring facility security clearances, and which may result in the loss of our ability to complete existing contracts with the U.S. government.
If we fail to establish and maintain important relationships with government agencies and prime contractors, our ability to successfully maintain and develop new business could be materially adversely affected.
Our reputation and relationship with the U.S. government, and in particular with the agencies of the DoD and the U.S. intelligence community, are key factors in maintaining and developing new business opportunities. In addition, we often act as a subcontractor or in teaming arrangements in which we and other contractors bid together on particular contracts or programs for the U.S. government or government agencies. We expect to continue to depend on relationships with other prime contractors for a portion of our revenue for the foreseeable future. Negative press reports regarding conflicts of interest, poor contract performance, employee misconduct, information security breaches or other aspects of our business, regardless of accuracy, could harm our reputation. Additionally, as a subcontractor or team member, we often lack control over fulfillment of a contract, and poor performance on the contract could tarnish our reputation, even when we perform as required. As a result, we may be unable to maintain our relationships with government agencies or prime contractors, and any to do so could materially affect our ability to maintain our existing business and compete for new business.
We face significant competition in the global space and satellite market.
We operate in the highly competitive global space and satellite industry, which has been more competitive recently, given the increased focus of the U.S. presidential administration on human missions to space. Competitors range in size from divisions of large public corporations to small, privately held entities. We face intense competition in the global space and satellite market. Many of our current and potential competitors are larger and have substantially greater financial or other resources than we currently have or expect to have in the future, and thus may be better positioned to exploit the market need for spacecraft propulsion systems, satellite and launch services for payloads with targeted orbital delivery. Our ability to compete depends on high product performance, consistent high quality, short lead time and timely delivery, competitive pricing, superior customer service and support, and continued certification under customer quality requirements and assurance programs. Our competitors may also be able to devote greater resources to the development of their current and future technologies, which could overlap with our technologies, or the promotion and sale of their products and services. Our competitors could offer products and services at lower prices, which could our business strategy and potential competitive edge. Our current and potential competitors may also establish cooperative or strategic relationships amongst themselves or with third parties that may further their resources and offerings relative to ours, and may reduce the size of our addressable market. Further, it is possible that domestic or foreign companies or governments, some with experience in the aerospace industry or financial resources than we possess, will seek to provide products or services that compete directly or indirectly with ours in the future. Any such foreign competitor could from subsidies from, or other protective measures by, its home country. We believe our ability to compete as a provider of comprehensive space mission solutions does and will depend on number of factors, which may change in the future due to increased competition, including the price of our products and services, customer for the experiences we offer, and the frequency and availability of our products and services. If we encounter in scaling our production capabilities, if we to develop and commercialize our spacecraft systems, and related software, components and services, if we to develop such technologies before our competitors, or if such technologies to perform as expected, are to those of our competitors or are perceived as less safe than those of our competitors, our business, financial condition, and results of operations could be materially and impacted.
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If we are unable to manage the increasing technological complexity of our business, or achieve or manage our expected growth, our business could be adversely affected.
The technological complexity of our business has increased significantly over the last several years. This increased complexity and our expected growth has placed, and will continue to place, a strain on our management and our administrative, operational, and financial infrastructure. We anticipate that a further growth of headcount and facilities, domestically as well as internationally, will be required to address expansion in our product and service offerings and the geographic scope of our customer base. However, if we are unsuccessful in our efforts, our business could decline. Our success will depend in part upon the ability of our senior management to manage our increased complexity and expected growth effectively. To do so, we must continue to hire, train, manage, and integrate a significant number of qualified managers and engineers. If our new employees perform poorly, or if we are unsuccessful in hiring, training, managing, and integrating these new employees, or retaining these or our existing employees, then our business may experience declines. To support our expected growth, we must continue to improve our operational, financial, and management information systems. If we are to manage our growth while maintaining our quality of service, or if new systems that we implement to assist in managing our growth do not produce the expected benefits, then our business, financial condition, and results of operations could be materially affected.
If our spacecraft systems and related software and components fail to operate as intended, we may experience claims for product failures, schedule delays or other problems with existing or new products, which could have a material adverse effect on our business, financial condition, and results of operations.
Many of the spacecraft systems and related software and components we develop and manufacture are technologically advanced systems that must function under demanding operating conditions. The sophisticated and rigorous design, manufacturing, and testing processes and practices we employ do not entirely prevent the risk that we may not be able to successfully manufacture our products on schedule or that our products may not perform as intended, whether due to reasons attributable to us or third parties (such as technical limitations of customer payloads or our suppliers’ launch vehicles). When our products and services fail to perform adequately, some of our contracts require us to forfeit a portion of our expected profit, receive reduced payments, provide a replacement product or service, or reduce the price of subsequent sales to the same customer. Performance penalties may also be imposed when we fail to meet delivery schedules or other measures of contract performance. Our business partners may also cancel existing contracts, which could adversely affect our backlog, business, results of operations, and financial condition. We do not generally insure potential costs resulting from any required remedial actions or costs or of sales due to or of scheduled operations or product deliveries.
Our revenue, results of operations and reputation may be negatively impacted if our products contain defects or fail to operate in the expected manner.
We sell complex and technologically advanced products and services, including spacecraft solutions and services and related technology and components. Sophisticated software used in our products and services, including software developed by us, may contain defects that can unexpectedly interfere with the software’s intended operation. Defects may also occur in components and products that we manufacture or purchase from third parties. Most of the spacecraft and related software and components we have developed must function under demanding and unpredictable operating conditions and in harsh and potentially destructive environments. Our products and services may not be successfully implemented, pass required acceptance criteria, or operate or give the desired output, or we may not be able to detect and fix all defects in the spacecraft and related software and components and systems we sell and/or use. Failure to do so could result in backlog and revenue and to our reputation and may affect our ability to new contract awards.
Our future revenue and operating results are dependent on our ability to generate a sustainable order rate for our products and services and develop new technologies to meet the needs of our customers or potential new customers.
The ability to generate a sustainable order rate for our products and services can be challenging and may fluctuate on an annual basis as the number of contracts awarded varies. If we are unable to win new awards or execute existing contracts as expected, our business, financial condition and results of operations could be further adversely affected. Furthermore, if our customers experience delays or technical challenges with their products or services or exercise delay or termination rights under new or existing contracts, our ability to recognize the full potential value of such contracts could also adversely affect our business, financial condition and results of operations
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The cyclical nature of the satellite market could negatively impact our ability to accurately forecast customer demand. The markets that we serve may not grow in the future and we may not be able to maintain adequate gross margins or profits in these markets. Our growth is dependent on the growth in the sales of services provided by our customers, our customers’ ability to anticipate market trends, and our ability to anticipate changes in the businesses of our customers and to successfully identify and enter new markets. If we fail to anticipate such changes in demand, or such demand does not materialize to the extent we expected or at all, our business, financial condition and results of operations could be adversely affected.
The satellite industry is characterized by development of technologies to meet changing customer demand for complex and reliable products and services. Our products and services embody complex technology and may not always be compatible with current and evolving technical standards and systems developed by others. Failure or delays to meet the requisite and evolving industry or user standards could have a material adverse effect on our business, financial condition and results of operations. Failure of suppliers to deliver against end customer requirements could lead to a material adverse effect on our financial results.
We have previously experienced, and may experience in the future, delays or other complications in the design, manufacture and commercialization of new satellites, satellite components and related services and technology. If we fail to develop and successfully commercialize new technologies, if we fail to develop such technologies before our competitors, or if such technologies fail to perform as expected, or are inferior to those of our competitors, our business, financial condition and results of operations could be materially and adversely impacted.
Our contracts with the U.S. government may be terminated by the U.S. government at any time, which could have a material adverse effect on us.
Government contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions. For example, the U.S. government may terminate any of our government contracts and subcontracts without cause. Upon the termination for convenience of a FFP contract, we expect to be entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract. However, U.S. government programs do not always have sufficient funds to cover termination settlements when the costs to terminate for convenience would exceed the amount of appropriated funds. Under such circumstances, the U.S. government could assert that it is not required to appropriate additional funding, which would negatively affect our expected profit and cash flows. Additionally, we typically contract with the U.S. government through Other Transaction Agreements (“OTAs”), which are not subject to certain provisions under the Federal Acquisition Regulation (“FAR”). The U.S. government has greater flexibility to terminate OTAs without cause, and to determine the amount payable to us in the event of a without cause, than under standard federal procurement contracts subject to the FAR. As a result, the U.S. government could its existing OTAs with us more than other contracts that are subject to the FAR, which could impact our business, prospects and results of operations.
In the event of a termination of a government contract for our default, the U.S. government could make claims to reduce the value of the relevant contract or recover its procurement costs and could assess other special penalties. In addition, a termination arising out of our default may expose us to liability and could have a material adverse effect on our ability to compete for future contracts and orders. In addition, the U.S. government could terminate a prime contract under which we are a subcontractor for any reason, including a default by the prime contractor, notwithstanding the fact that our performance and the quality of the products or services we delivered were consistent with our contractual obligations as a subcontractor. Further, some portion of our government contracts could operate for periods of time under Undefinitized Contract Actions (“UCAs”), under which we begin performing certain obligations before the parties agree to complete terms and specifications, and prior to the submission of a price proposal (but potentially after being required to submit a CROM). While operating under UCAs, the government may require us to submit a Ceiling Rough Order of Magnitude (“CROM”), which imposes a maximum adjustment to be made in the total agreement price or other terms, such as delivery schedule or time of performance. In light of the uncertainty around price and availability of component parts or other inputs, availability of labor and technical expertise, and timing of contract fulfillment, among other factors, we cannot guarantee that any CROM we submit would accurately capture all aspects of price or account for all potential in fulfilling a particular contract operating under UCA. As a result, this ceiling may cause our costs to exceed those included in the CROM under a particular contract or could result in our under a particular contract, each of which could impact our expected profit and cash flows and the price of our common stock.
Additionally, certain of our U.S. government contracts span one or more programs or efforts, including a base period, and may include multiple options. The U.S. government could decide not to exercise any of these options, which could
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result in a loss of expected sales or profits. In addition, the U.S. government may decide to exercise options for contracts under which it is expected that our costs may exceed the contract price or terms contained in the applicable CROM, which could result in unreimbursed costs and potential losses.
Our inability to hire or retain key personnel could have a material adverse effect on us.
Our success depends, in part, on our ability to retain and hire key personnel. We depend on our current CEO and other executive officers, senior management team, and highly trained employees, and any work stoppage, difficulty in hiring similar employees, or ineffective succession planning could materially adversely affect our business and could impair our relationships with U.S. government customers and disrupt the management of our business. Our operating performance is also dependent upon personnel who hold security clearances and receive substantial training to work on certain programs or tasks and can be difficult to replace on a timely basis if we experience unplanned attrition.
Because our products are highly engineered, we depend on an educated and trained workforce. There is substantial competition for skilled personnel in our industry, and we could be materially adversely affected by a shortage of skilled employees. We may not be able to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel. We may not be able to continue to hire, train, and retain qualified employees at current wage rates since we operate in a competitive labor market, and significant other pressures on wages, including inflation, currently exist. In addition, our success depends in part on our ability to attract and motivate senior management and highly skilled key employees, including engineering, manufacturing and quality assurance, design, finance, marketing, sales and support, and finance and accounting personnel. Achieving this objective may be difficult due to a variety of factors, including fluctuations in economic and industry conditions, competitors hiring practices, and the effectiveness of our compensation programs. Competition for qualified personnel can be strong. Our senior management team has extensive experience in the aerospace industry, and we believe that their depth of experience is instrumental to our continued . The of any one or more members of our senior management team, for any reason, including or retirement, could our ability to execute our business strategy, and if we are to effectively provide for the succession of key personnel, senior management, and our executive officers, our business, financial condition, and results of operations could be materially affected. We depend on our ability to recruit and retain employees who have advanced engineering and technical services skills and who work well with our customers. These employees are in demand and are likely to remain a limited resource in the foreseeable future. Often, significant amounts of time and resources are required to train technical, sales and other personnel. The current tight labor market has impacted our ability to recruit qualified personnel, including engineers. Increased restrictions on the import or retention of foreign labor may also increase demand for engineering personnel and impact our ability to hire and retain qualified personnel. Further, significant amounts of time and resources are required to train technical, sales, and other personnel, and we may new employees to our competitors or other companies before we realize the of our investment in recruiting and training them. If we are to recruit and retain a sufficient number of these employees, then our ability to maintain our competitiveness and grow our business could be affected. In addition, because of the highly technical nature of our products, the of any significant number of our existing engineering personnel could have a material effect on our business and operating results. Furthermore, the relationships and reputation that our CEO and other members of our senior management team have established and maintain with U.S. government agencies and personnel contribute to our ability to maintain customer relationships and to identify new business . The of any member of our senior management could our ability to identify and secure new contracts, to maintain customer relations, and to otherwise manage our business. Also, to the extent we hire personnel from competitors, we may be subject to that they have been solicited or proprietary or other confidential information. If we are to attract and retain the qualified personnel we need to , our business would .
We often rely on a single vendor or a limited number of vendors to provide certain key products or services and the inability of these key vendors to meet our needs could have a material adverse effect on our business.
Historically, we have contracted with a single vendor or a limited number of vendors to provide certain key products or services, such as solar array wings, inertial measurement units, primary structures, GPS receivers, star trackers, payload interface flight computers, radios, and propulsion. In addition, our manufacturing operations depend on specific technologies and companies for which there may be a limited number of vendors. If these vendors are unable to meet our needs because they fail to perform adequately, are unable to match new technological requirements or problems, or are unable to dedicate engineering and other resources necessary to provide the services contracted for, our business, financial condition, and results of operations may be adversely affected. While alternative sources for these products, services, and technologies may exist or develop in the future, and we have undertaken efforts to find or develop additional sources of these supplies, we may not be able to develop these alternative sources quickly and cost-effectively, which could materially
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impair our ability to operate our business. Furthermore, our current or future vendors may request changes in pricing, payment terms, or other contractual obligations, which could cause us to make substantial additional investments. Additionally, certain of our suppliers’ employees are represented by labor unions, and any labor union actions at our suppliers may also affect us. Work stoppages could delay the production and/or development of our products, which could strain relationships with customers and cause a loss of revenues which could adversely affect our operations.
If critical components used to manufacture our products or used in our development programs become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products and in completing our development programs, which could damage our business.
Our ability to meet customers’ demands depends, in part, on our ability to obtain timely and adequate delivery of quality materials, parts and components from our suppliers. We obtain certain of our hardware components, various subsystems and systems from a limited group of suppliers, some of which are sole source suppliers. Although we hold long-term contracts with certain key suppliers that establish pricing, minimize lead times and to some degree mitigate risk, we do not have long-term agreements with all suppliers that obligate them to continue to sell components, products required to build our systems or products to us. Our reliance on suppliers without long-term contracts involves significant risks and uncertainties, including whether our suppliers will provide an adequate supply of required components or products of sufficient quality, will increase prices for the components or products and will perform their obligations on a timely basis. In addition, certain components used in the manufacture of our products and in our development programs are periodically subject to supply shortages, and our business is subject to the risk of price increases and periodic delays in delivery. Particularly, the market for electronic components has been and currently still is experiencing increased demand and a global shortage of semiconductors, creating substantial uncertainty regarding our suppliers’ ongoing timely delivery of these components to us. Shortages in components for our products and in obtaining components for our products could cause customers to their contracts with us, orders from us or cause us to accepting orders, impact our ability to new programs and/or contracts, impact and our development programs, increase our costs and materially affect our business, results of operations, prospects and financial condition. Moreover, if any of our suppliers become capacity constrained, financially or otherwise or to provide us with components or other inputs, then we may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to redesign our products to accommodate components from different suppliers. Even if we identify alternate suppliers, we may experience significant in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish such alternative sources, be required to redesign our products and to complete additional quality control procedures. In addition, credit constraints of key suppliers could result in accelerated payment of accounts payable by us, impacting our cash flow. We have experienced increased costs for components, as well as increased shipping, warehousing and inventory costs. We cannot predict the extent to which these costs will continue and/or continue to increase or if we will be to obtain replacement components within the time frames that we require at an affordable cost, if at all. Additionally, of components may result in increased inventory of unfinished products and significant quantities of other unused components remaining in inventory, which could us to increased risks of and which may not be fully covered by insurance.
Our leases may be terminated or we may be unable to renew our leases on acceptable terms and if we wish to relocate, we may incur additional costs if we terminate a lease.
We have made significant capital expenditures to improve several of our leased facilities in order to make them suitable for our purposes as well as to meet requirements that we are subject to as a U.S. government contractor and obtain facility security clearances. However, at the end of the lease term and during any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all. If we are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, which in turn could have a material adverse effect on our business, results of operations, prospects and financial condition, including significant capital expenses that may materially impact our results of operations and ability to meet certain contractual schedule commitments. Additionally, we may have to seek qualification of any new facilities in order to meet customer or contractual requirements. We would also have to obtain facility security clearances for the new facility in order to continue to perform on classified contracts. Further, we may not be able to secure a replacement facility in a location that is as commercially viable as that of the lease we are unable to renew, due to contracts that may require us to have facilities in certain locations. Having to close a facility, even briefly to relocate, would reduce the sales that such facility would be to contribute to our revenues. Additionally, a relocated facility may generate less revenue and profit, if any, than the facility it was established to replace. Many of our facilities are located on leased premises subject to non-cancellable leases. Typically, our leases have initial terms ranging from five to 10 years, with options to renew for specified periods of time.
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We believe that our future leases will likely also be long-term and non-cancellable and have similar renewal options. If we close or stop fully utilizing a facility, we will most likely remain obligated to perform under the applicable lease, which would include, among other things, making the base rent payments, and paying insurance, taxes and other expenses on the leased property for the remainder of the lease term. Our inability to terminate a lease when we stop fully utilizing a facility could materially adversely impact our business, results of operations, prospects and financial condition.
The U.S. government’s budget deficit and the national debt, as well as any inability of the U.S. government to complete its budget process for any government fiscal year could have an adverse impact on our business, financial condition, and results of operations.
The U.S. government’s budget deficit and the national debt, as well as any inability of the U.S. government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year pursuant to a continuing resolution, could have an adverse impact on our business, financial condition, and results of operations. Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the defense spending priorities of the U.S. government, what challenges budget reductions will present for the defense industry and whether annual appropriations bills for all agencies will be enacted for U.S. government fiscal year 2026 and thereafter due to many factors, including but not limited to, changes in the political environment, and any resulting uncertainty or changes in policy or priorities and resultant funding. The U.S. government’s budget deficit and the national debt could have an adverse impact on our business, financial condition, and results of operations in a number of ways, including the following: The U.S. government could reduce or delay its spending on, reprioritize its spending away from, or to provide funding for the government programs in which we participate; U.S. government spending could be impacted by alternate arrangements to sequestration, which increases the uncertainty as to, and the in predicting, U.S. government spending priorities and levels; and we may experience in revenue, , and cash flows as a result of reduced or orders or payments or other factors caused by economic of our customers and prospective customers, including U.S. federal, state, and local governments. In particular, our future growth prospects would be impacted if the Golden Dome is not pursued on the timeline we expect, or if funding for the project is less than we anticipate or if the project is structured in ways that are to us. In particular, the SDA is our largest customer and if it is not centrally involved in the contracting process for Golden Dome projects, we will need to compete for contract awards from new customers, and we may not have the same degree of we historically have had with the SDA. In addition, if Golden Dome projects consist of a portion of cost plus contracts than we expect, our potential may be smaller than we expect. Furthermore, we believe continued budget pressures could have consequences for the security of the U.S., the defense industrial base and the customers, employees, suppliers, investors, and communities that rely on companies in the defense industrial base. Budget and program decisions made in this environment would have long-term implications for us and the entire defense industry.
Our business may be adversely affected by changes in budgetary priorities of the U.S. government.
Changes in federal government budgetary priorities could directly affect our financial performance and could have a material adverse effect on our business, results of operations, prospects, and financial condition. A significant decline in government expenditures, a shift of expenditures away from programs that support the industry in which we operate (including the Golden Dome project) or related industries or a change in federal government contracting policies could cause federal government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty or not to exercise options to renew contracts, any of which could result in decreased sales of our products, and could adversely impact the trading price of our common stock. In addition, if government budgets are not approved in a timely fashion, our U.S. government customers may not be able to start new programs and may not have adequate funding for existing programs, which could impact the progress in achieving certain milestones under our contracts and our business, results of operations, and financial condition.
Disruptions in U.S. government operations and funding could have a material adverse effect on our revenues, earnings, and cash flows, and otherwise adversely affect our financial condition.
Any disruptions in federal government operations could have a material adverse effect on our revenues, earnings, and cash flows. A prolonged failure to maintain significant U.S. government operations, particularly those pertaining to our business, could have a material adverse effect on our revenues, earnings, and cash flows. Continued uncertainty related to recent and future government shutdowns, the budget and/or the failure of the government to enact annual appropriations, such as long-term funding under a continuing resolution, could have a material adverse effect on our revenues, earnings, and cash flows. Additionally, disruptions in government operations may negatively impact regulatory approvals and guidance that are important to our operations. Our TAM assumes higher U.S. government spending in the future plus
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existing allocations, and therefore if the U.S. government spends less on the initiatives that we believe represent potential opportunities for our business, our TAM may be lower.
Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition.
Our results of operations and growth prospects are materially affected by economic and political conditions in the United States and internationally, including inflation, deflation, interest rates, recession or fears of recession, availability of capital, energy and commodity prices, the availability and cost of labor, tariffs, trade laws and trade wars, and the effects of governmental initiatives to manage economic conditions. In particular, the reciprocal tariffs announced by the U.S. government and countermeasures taken in response thereto have adversely impacted global economic and political conditions, and could disrupt the business of our customers and suppliers, and thereby harm our business. In certain prior periods, we have seen a broad-based weakening in the global macroeconomic environment which has impacted and could impact in the future certain of our markets. Additionally, instability in the global credit markets, the impact of uncertainty regarding global trade and central bank monetary policy, the instability in the geopolitical environment in many parts of the world (including as a result of the ongoing Russia and Ukraine war, in the Middle East, including with Iran, and China-Taiwan relations), the current economic in China, including global economic ramifications of Chinese economic , and other may continue to put pressure on global economic conditions. If global economic and market conditions, or economic conditions in key markets, remain uncertain or further, we may experience material impacts on our business, financial condition, and results of operations. For example, such conditions may cause current or potential customers to or decrease spending on our products and services or render our suppliers to meet our demand requirements, maintain the pricing of their products or continue operations, as their businesses and/or budgets are impacted by economic conditions. The of current and potential customers to pay us for our products and services, and the of our suppliers to provide us with products or services with the expected volumes or prices, may affect our earnings and cash flows. The current invasion of Ukraine by Russia has tensions among the United States, NATO, and Russia. Such invasion, ongoing military in the region, the with Iran, resulting sanctions, and by NATO states, the United States, and other countries, including countries in the Middle East, are to market , including significant in commodity prices, credit, and capital markets, as well as supply chain for equipment, which could have an impact on our operations and financial performance. in equity capital markets may affect the market price of our common stock, which may affect our ability to fund our business through the sale of equity securities and retain key employees through our equity compensation plans.
The market for spacecraft platforms and satellite software is still emerging, and shifting, and the market may not achieve the growth potential we expect.
The market for in-space infrastructure services, in particular, spacecraft and satellite software, has not been well established and is still emerging and shifting, with many players acting as customers, prime contractors, or acquirers, or targets of acquisitions. Our estimates for the total addressable global satellite market are based on a number of internal and third-party estimates, including our backlog, the number of potential customers who have expressed interest in our spacecraft services, assumed prices and production costs for our spacecraft services, our assumptions regarding our ability to leverage our current manufacturing and operational processes, and general market conditions. While we believe our assumptions and the data underlying our estimates are reasonable at this date and time, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates of the potential customers, total addressable market for our services, as well as the expected growth rate for the total addressable market for our services, may prove to be incorrect. Further, should any of our customers be acquired by one of our competitors, our future revenue and prospects may be impacted as those customers may decide not to continue to purchase our spacecraft and other services.
We may experience difficulties or disruptions in consummating future acquisitions and integrating the operations of acquired companies into our business, or entering into any partnerships or joint ventures, and in realizing the expected benefits of these transactions.
We may from time to time enter into transactions to acquire other businesses which are complementary to or expand our existing offerings, as we did when we acquired ATLAS Space Operations and Orbion Space Technology, Inc. We are currently evaluating acquisition opportunities, and although we are not party to any definitive agreements at this time and no acquisition is probable as of the date hereof, we are actively considering opportunities and may enter into a definitive agreement with respect thereto after the filing of this Annual Report on Form 10-K, and the transactions contemplated by
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such agreements could be material to our business. Acquisitions involve numerous risks, any of which could harm our business and negatively affect our financial condition and results of operations. As a public company, we will be subject to the reporting requirements of the Exchange Act and certain acquisitions, including acquisition opportunities we are currently considering, may be significant under Regulation S-X, requiring us to compile and file additional historical and/or pro forma financial information in connection with such acquisitions. In addition, the rules of the NYSE will limit our ability to issue equity securities as consideration in acquisition transactions without seeking shareholder approval. Any of these requirements could impair or delay our ability to negotiate, sign, and execute potentially desirable transactions and any disputes or litigation which may result from such transactions could be costly and time consuming. In addition, the Orbion Acquisition was, and other acquisitions we make, may be dilutive to our existing stockholders for a variety of reasons, including because we used equity for all or a portion of the consideration in connection with such acquisitions. The of our acquisitions, once consummated, will depend in part on our ability to realize the anticipated business from combining their and our operations in an and manner. These integration processes could take longer than anticipated and could result in the of key employees, the of each company’s ongoing businesses, tax costs or , write-offs or , or in standards, controls, information technology systems, procedures, and policies, as well as with respect to remediating or assuming liabilities for events occurring prior to the acquisition, such as cybersecurity , any of which could affect our ability to maintain relationships with customers, employees or other third parties, or our ability to the anticipated benefits of the acquisitions, and could our financial performance. We may also evaluate potential partnerships or joint ventures with third parties. We may not be in identifying partnership and joint venture candidates, and any partnerships or joint ventures may not be , may reduce our cash reserves, may affect our earnings and financial performance and, to the extent financed with the proceeds of debt, may increase our indebtedness. Pursuing acquisitions, partnerships and joint ventures may management’s time and resources from our core business and our operations or may result in with our business. We cannot ensure that any acquisition, partnership, or joint venture we make or enter into will not have a material effect on our business, financial condition, and results of operations.
We may not be successful in developing new technology, and the technology we are successful in developing may not meet the needs of our customers or potential new customers.
The markets in which we operate are characterized by changing technology and evolving industry standards, and we may not be successful in identifying, developing, and marketing products and services that respond to rapid technological change, evolving technical standards and systems developed by others. Our competitors may develop technology that better meets the needs of our customers. Such development is also expensive. If we do not continue to develop, manufacture, and market innovative technologies or applications that meet customers’ requirements, or if we are unsuccessful in the development, manufacture or sale of any new technology or application we attempt to develop or are able to develop, sales may suffer, and our business may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business, or fund other liquidity needs, and our business prospects, financial condition, and results of operations could be materially and affected.
We are subject to certain unique business risks as a result of supplying services to the U.S. government.
Companies engaged in supplying defense-related services to U.S. government agencies, whether through direct contracts with the U.S. government or as a subcontractor to customers contracting with the U.S. government, are subject to business risks specific to the defense industry. These risks include the ability of the U.S. government to unilaterally: (i) suspend us from receiving new contracts based on alleged violations of procurement laws or regulations; (ii) terminate existing contracts; (iii) revoke required security clearances; and (iv) reduce the value of existing contracts. U.S. government contracts can be terminated by the U.S. government at its convenience without notice. In addition, work we currently perform could be in-sourced by the federal government and, as a result, our revenues could be reduced. Moreover, our employees could also be hired by the government. This loss of our employees would necessitate the need to retain and train new employees. Moreover, U.S. government purchasing regulations contain a number of operational requirements that apply to entities engaged in government contracting. Failure to comply with such government contracting requirements could result in civil and that could have a material effect on our business, financial condition, and results of operations. If a government or or activities, we could be subject to civil or or administrative sanctions, including contract , , of fees, of payment, civil Act (which can include civil and up to treble ) and or from doing business with U.S. government agencies, any of which could materially affect our reputation, business, financial condition, and results of operations.
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Many of our contracts are government contracts or issued under government contracts. The inability to comply with any of our contracts or meet eligibility requirements may result in financial liabilities, failure to receive security clearance certifications, and loss of current and future business.
A number of our contracts are with a government customer, or are subcontracts entered into in connection with a prime contract with a government customer. U.S. government contracts generally are subject to the FAR, agency-specific regulations that supplement FAR, such as the DoD’s Federal Acquisition Regulation Supplement, and other applicable laws, security requirements, and regulations. We typically contract with the U.S. government through OTAs, which are not subject to certain provisions under the FAR. The U.S. government has greater flexibility to terminate OTAs without cause, and to determine the amount payable to us in the event of a termination without cause, than under standard federal procurement contracts subject to the FAR. As a result, the U.S. government could terminate its existing OTAs with us more easily than other contracts that are subject to the FAR, which could negatively impact our business, prospects and results of operations.
These regulations impose a broad range of requirements and terms, many of which are unique to U.S. government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustments, mandatory disclosure, and audit requirements. For example, we are at times required to obtain approval to export, re-export or transfer (in-country) our products from U.S. government agencies and similar agencies elsewhere in the world. Failure to obtain approval to export, or a determination by the U.S. government or similar agencies elsewhere in the world from which we failed to receive required approvals or licenses, could eliminate or restrict our ability to sell our products outside the United States, and the penalties that could be imposed by the U.S. government or other applicable government for failure to comply with these laws could be significant.
Our customers are often required to flow down government contract terms to us, and we have no ability to negotiate or object to such terms. These requirements and terms that may increase our costs of doing business and reduce our profits under these contracts. Our failure to comply with any of the terms of our contracts could result in delays in the performance of our services, an inability to acquire government or commercial contracts, reductions of the value of contracts, contract modifications or termination, inability to bill and collect receivables from customers, contractual damages, the requirement to reperform work, the assessment of penalties and fines that could lead to suspension or debarment from U.S. government contracting or subcontracting, and potential civil and criminal liability. Government contracts are also generally subject to greater by the government, which conducts reviews, audits, and regarding our compliance with government contract requirements. Government contracts may be subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts. In particular, “whistleblower” provisions under federal law also allow private individuals, including present and former employees, to on behalf of the U.S. government. Any , , , , or could affect our ability to operate our business and our financial results.
Some of our contracts with the U.S. government allow it to use technical data developed under the contracts and to disclose technical data to third parties, which could harm our ability to compete.
Some of our contracts allow the U.S. government to use, royalty-free, or have others use, technical data developed under those contracts on behalf of the government. Some of the contracts allow the federal government to disclose technical data or computer software developed in the performance of the agreement or delivered to the government during the performance of the agreement without constraining the recipient on how that technical data or computer software is used. The ability of third parties to use technical data or computer software (for any purposes) and patents for government purposes creates the possibility that the government could attempt to establish alternative suppliers or to negotiate with us to reduce our prices. The potential that the government may release some of the technical data or computer software without constraint creates the possibility that third parties may be able to use this technical data or computer software to compete with us, which could have a material adverse effect on our business, financial condition, and results of operations.
Due to the competitive process to obtain contracts and the likelihood of bid protests, we may be unable to achieve or sustain revenue growth and profitability.
We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process. The U.S. government has increasingly relied on contracts that are subject to a continuing competitive bidding process, including multiple-award contracts, which has resulted in greater competition and increased pricing pressure. The competitive bidding process involves substantial costs, including labor cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, may be split among competitors, or that may be awarded but for which we do not receive meaningful task orders, and several risks, including the risk of inaccurately
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estimating the resources and costs that will be required to fulfill any contract we win. Following contract award, we may encounter significant expense, delay, contract modifications, or even cancellation of the contract award as a result of our competitors protesting the award of contracts to us. Any resulting loss or delay of start-up and funding of work under protested contract awards may adversely affect our revenues and profitability. In addition, multiple-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. As a result, we may not be able to obtain these task orders or recognize revenues under these multiple-award contracts. Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability.
We may use artificial intelligence in our business or systems, and challenges with properly managing its use could result in competitive and reputational harm and negatively impact the operations and profitability of our business.
We may incorporate artificial intelligence, generative artificial intelligence, machine learning and similar tools and technologies (collectively, “AI”) solutions into our core offerings, and these applications may become important in our business and operations over time, exposing us to additional risks, such as damage to our reputation, competitive position and business, legal and regulatory risks and additional costs. Our competitors or other third parties may incorporate AI into their products or services more quickly or more successfully than we may, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, generative AI has been known to produce false or “hallucinatory” inferences or output, and certain generative AI uses machine learning and predictive analytics, which can create deficient, inaccurate or misleading output, unintended biases and other discriminatory or unexpected results, or , any of which may not be detectable. Accordingly, if the content, analyses, or recommendations that AI applications assist in producing are or are to be , , or , biased, or otherwise , our business, financial condition, and results of operations may be affected.
Additionally, if any of our employees, contractors, consultants, vendors or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure or incorporation of our confidential information into publicly available training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our competitive position and business. Any output created by us using AI tools may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content. In the United States, a number of civil lawsuits have been initiated related to the foregoing and other concerns, any one of which may, among other things, require us to limit the ways in which our AI systems are trained and may affect our ability to develop our AI-powered products and solutions. Additionally, the use of AI applications has resulted in, and may in the future result in, cybersecurity incidents. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the AI tools used in our business, or if we experience cybersecurity related to our use or any third-party service provider’s use of AI applications, it could affect our reputation and results of operations and us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, data security, cybersecurity, publicity, contractual or other rights.
It is possible that new laws and regulations will be adopted in the United States and in non-U.S. jurisdictions, or that existing laws and regulations may be interpreted in new ways, that would affect our use and provision of AI-powered solutions in our business and operations. We may not be able to adequately anticipate or respond to these evolving laws and regulations, and we may need to expend additional resources to adjust our offerings in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations. The rapid evolution of AI, including government regulation of AI, will require significant resources to develop, test and maintain our platform, offerings, services, and features to help us implement AI ethically in order to minimize unintended, harmful impact.
Certain future operational facilities may require significant expenditures in capital improvements and operating expenses to develop and foster basic levels of service needed for our operations, and the ongoing need to maintain existing operational facilities requires us to expend capital.
As part of our growth strategy, we may need to acquire, build, or utilize additional facilities. Construction of incremental factories or other facilities in which we conduct our operations may require significant capital expenditures to develop, and in the future, we may be required to make similar expenditures to expand, improve or construct adequate facilities for our operations. If we cannot access the capital we need, we may not be able to execute on our growth strategy, take advantage of future opportunities or respond to competitive pressures.
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We are routinely subject to audit by our customers on government contracts and the results of those audits could have an adverse effect on our business, reputation and results of operations.
U.S. government agencies, including, but not limited to, the Defense Contract Audit Agency, Defense Counterintelligence and Security Agency, the Defense Contract Management Agency and Offices of Inspectors General, routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, its cost structure, its business systems and its compliance with applicable laws, regulations and standards. The U.S. government can decrease or withhold certain payments when it deems systems subject to its review to be inadequate. Any unaudited or unsettled claims could limit our ability to issue final billings on contracts for which authorized and appropriated funds may be expiring or can result in delays in final billings and our ability to close out a contract. If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or , of profits, of payments, of facility clearance, or , , or prohibition from doing business with the U.S. government. In addition, we could reputational if of were made us. Similar government oversight and risks to our business and reputation exist in most other countries where we conduct business.
We may be unable to obtain or maintain required authorization or contractual arrangements.
Various types of U.S. domestic and international authorizations and contractual arrangements are required in connection with the products and services that we provide. Compliance with certain laws, regulations, conditions and other requirements, including the payment of fees, may be required to maintain the rights provided by such authorizations. Failure to comply with such requirements, or comply in a timely manner, could lead to the loss of such authorizations and could have a material adverse impact on our business, financial condition and results of operations. Such authorizations are conditioned upon meeting certain requirements, which if not met or extended could result in loss of the authorization. While we anticipate that these authorizations will be extended or renewed in the ordinary course such that they otherwise would expire, or replaced by authorizations covering more advanced facilities, we can provide no assurance that this will be the case. Our inability to timely obtain or maintain such authorizations could delay or preclude our operation of such technology or our provision of products and services that rely upon such technology. Further, changes to the laws and regulations under which we operate could affect our ability to obtain or maintain authorizations. Any of these circumstances could have a material impact on our business, financial condition and results of operations. The use of spacecraft and other technologies in our business is subject to various conditions imposed by domestic and foreign governments and multinational regulatory entities contained in the authorizations held by us and third parties, as well as the requirements of the laws and regulations of those jurisdictions. Any to meet these types of requirements in a timely manner, maintain our contractual arrangements, obtain or maintain our authorizations, or manage potential , could lead to us our rights to operate or may otherwise require us to modify or limit our operations from these locations, which could materially affect our ability to operate, and could have a material impact on our business, financial condition and results of operations.
We may need to invest in new information technology systems and infrastructure to scale our operations and meet compliance requirements.
The markets in which we operate are characterized by changing technology and evolving industry standards, and accordingly we may need to adopt new information technology systems and infrastructure to scale our business and obtain the synergies from prior and future acquisitions. Our information technology and business systems and infrastructure could create product development or production work stoppages, unnecessarily increase our inventory, negatively impact product delivery times and quality, and increase our compliance costs. Failure to invest in newer information technology and business systems and infrastructure (including when certain software applications become obsolete or are no longer used in our business) may lead to operational inefficiencies and increased compliance costs and risks. In addition, an inability to maximize the utility and benefit of our current information technology and business tools could impact our ability to meet cost reduction and planned efficiency and operational improvement goals. Furthermore, operational may occur and our business may be impacted if certain of our software applications are no longer usable, including due to the foreign acquisition of such applications. As we implement new systems or integrate existing systems, they may not perform as expected. We also cannot guarantee that our efforts to maintain and upgrade our information technology systems and infrastructure will be sufficient to prevent , cybersecurity or other system or . An to maximize the utility and of our current information technology and business tools could impact our ability to meet cost reduction and planned and operational goals. Moreover, our competitors may develop technology systems and infrastructure that meets the needs of our customers. If we do not continue to develop, manufacture, and market technologies or infrastructure that meet customers’ requirements or
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expectations, sales may suffer, and our business may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business, or fund other liquidity needs, and our business prospects, financial condition, and results of operations could be materially and adversely affected.
U.S. government contracts are generally not fully funded at inception, contain certain provisions that may be unfavorable to us and may be undefinitized at the time of the start of performance, which could prevent us from realizing our contract backlog and materially harm our business, financial condition and results of operations.
U.S. government contracts typically involve long lead times for design and development and are subject to significant changes in contract scheduling. Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The termination or reduction of funding for a government program would result in a loss of anticipated future revenue attributable to that program. The actual receipt of revenue on awards included in backlog may never occur or may change because a program schedule could change or the program could be canceled, or a contract could be reduced, modified or terminated early. In addition, U.S. government contracts generally contain provisions permitting termination, in whole or in part, at the government’s convenience or for contractor default. Since a substantial majority of our revenue is dependent on the procurement, performance and payment under our U.S. government contracts, the termination of one or more critical government contracts could have a material effect on our business, financial condition and results of operations. arising out of our could result in to our reputation, us to liability and have a material effect on our ability to re-compete for future contracts and orders. Moreover, several of our contracts with the U.S. government do not contain a of liability provision, creating a risk of responsibility for indirect, incidental and consequential . These provisions could cause substantial liability for us, especially given the use to which our products may be put.
Our customers’ inability to obtain financing for their purchases from us and/or their inability to obtain financing to maintain their business could have a material adverse effect on our business.
Our customers’ inability to obtain financing for their purchases from us and/or their inability to obtain financing to maintain their business could have a material adverse effect on our business. Some of our customers may require substantial financing in order to fund their operations and make purchases from us. The inability of these customers to obtain sufficient credit to finance purchases of our products, or otherwise meet their payment obligations to us could adversely impact our financial condition and results of operations. In addition, if a market downturn results in insolvencies for our customers, it could materially adversely impact our business, results of operations, prospects and financial condition.
Interruption or failure of our infrastructure, including our information technology and communications systems, could hurt our ability to effectively perform our daily operations and provide and produce our products and services, which could damage our reputation and harm our operating results.
We are vulnerable to natural disasters and significant disruptions including tsunamis, hurricanes, floods, earthquakes, fires, water shortages, other extreme weather conditions, epidemics or pandemics, acts of terrorism, actual or threatened acts of war, espionage, power shortages or losses and blackouts, aging infrastructures, cyberattacks, computer viruses, computer denial of service attacks or other attempts to harm our systems, telecommunications failures, disruptive political events, service outages and defective software or hardware updates and other disruptions. In the event of such natural disaster or other , we could experience to our operations or the operations of suppliers, subcontractors, distributors or customers, including of facilities and/or of life. In certain cases, some may not excuse us from performing our obligations pursuant to agreements with third parties and therefore may us to liability. The availability of many of our products and services depends on the continuing operation of our information technology and communications systems. For more information on risks related to the operation of our information technology and communications systems, please refer to “—A of our information technology systems, physical or electronic security protections, or an in their operation due to internal or external factors including or insider , could have a material effect on our business, financial condition, or results of operations.” Any , to, or of our systems could result in in our operations and services, which could reduce our revenue and profits. Our manufacturing facilities are also subject to risks associated with an aging infrastructure. An infrastructure could result in the of newly developed technologies, satellites, and satellite components being manufactured or in inventory, manufacturing , or additional costs. We do not maintain back-up manufacturing facilities or operations. The occurrence of any of the foregoing could result in lengthy
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interruptions in our operations and services and/or damage our reputation, which could have a material adverse effect on our business, financial condition and results of operations.
Our products have a finite useful life.
Our ability to earn revenue is dependent on technologies and equipment that have a limited useful life. While our products are designed for a certain design life, there can be no assurance as to the actual operational life of our products and equipment and such useful life may prove to be shorter than such product’s and equipment’s design life. A number of factors impact the useful lives of our products and equipment, including, among other things, technological advancement leading to obsolescence or damage due to impact from meteors or space junk. In the event that equipment reaches the end of its useful life earlier than anticipated, replacement or repair may be necessary, which may affect costs and reduce profits. In addition, since we have not yet developed a cost-effective method of repurposing parts and materials once they have been deployed into space, we are not able to recoup any of the value from these parts and materials in the resale market.
Tariffs on certain imports to the United States and other potential changes to U.S. tariff and import/export regulations could have a material adverse effect on global economic conditions and our business, financial condition, and results of operations.
We are subject to tariffs on certain imports into the United States. As the implementation of tariffs is uncertain, more tariffs may be added in the future and countermeasures may be adopted by other countries. In addition, any additional tariffs imposed by the U.S. presidential administration or retaliatory tariffs announced by other countries could result in a trade war, lead to market disruptions, including significant volatility in commodity prices, credit, and capital markets, as well as supply chain interruptions for equipment. These tariffs could adversely impact our business, financial condition, and results of operations, and if we are unable to pass such price increases through to our customers, it would likely increase our cost of sales and, as a result, decrease our gross margins, operating income, and net income.
If we are unable to adapt to and satisfy customer demands with respect to our product and service offerings in a timely and cost-effective manner, or if we are unable to manufacture our spacecraft platforms at a quantity and quality that our customers demand, our ability to grow our business may suffer.
The success of our business depends in part on effectively managing and maintaining our spacecraft, manufacturing a sufficient volume of components, subsystems, spacecraft platforms and software-enabled services, and providing customers with a high-quality experience that meets or exceeds their expectations. Even if we succeed in developing components, subsystems, spacecraft platforms and software-enabled services or producing these and other products consistent with our targeted timelines and customers’ expectations, we could thereafter fail to develop the ability to produce these products or provide the corresponding cislunar services at a sufficient volume with a quality management system that ensures each unit performs as required. Any delay in our ability to produce such components, subsystems, spacecraft platforms and software-enabled services at the rate our customers require and with a reliable quality management system could have a material adverse effect on our business. If our current or future products and services do not meet expected performance or quality standards, including with respect to customer safety and satisfaction, we could experience operational . Any operational or manufacturing or other changes to our ability to manufacture our products could have a material effect on our business, financial condition, and results of operations.
Space is a harsh and unpredictable environment where our products and service offerings are exposed to a wide and unique range of environmental risks, including, among others, coronal mass ejections, solar flares, and other extreme space weather events and potential collision with space debris or another spacecraft, which could adversely affect our spacecraft performance.
Space weather, including coronal mass ejections and solar flares have the potential to impact the performance and controllability of spacecraft on orbit, including completely disabling our spacecraft on orbit. Although we have some ability to actively maneuver our spacecraft to avoid potential collisions with space debris or other spacecraft, this ability is limited by, among other factors, uncertainties, and inaccuracies in the projected orbit location of and predicted conjunctions with debris objects tracked and cataloged by the U.S. government. Additionally, some space debris is too small to be tracked and therefore its orbital location is completely unknown; nevertheless, this debris is still large enough to potentially cause severe damage or a failure of our spacecraft or satellite services should a collision occur. Any such damage to our spacecraft could impact the success of our customers’ missions, our reputation, the reusability of certain of our products
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and have other negative effects that we do not currently anticipate, any of which could adversely impact our business, results of operation and financial condition.
We have classified contracts with the U.S. government, which may limit investor insight into portions of our business.
We derive a portion of our revenues from programs with the U.S. government and its agencies that are subject to security restrictions (e.g., contracts involving classified information and classified programs), which preclude the dissemination of information and technology that is classified for national security purposes under applicable law and regulation. In general, access to classified information, technology, facilities, or programs requires appropriate personnel security clearances, is subject to additional contract oversight and potential liability, and also requires appropriate facility security clearances and other specialized infrastructure. In the event of a security incident involving classified information, technology, facilities, programs, or personnel holding clearances, we may be subject to legal, financial, operational, and reputational harm. We are limited in our ability to provide information about these classified programs, their risks or any disputes or claims relating to such programs. As a result, investors have less insight into our classified business or our business overall. However, historically the business risks associated with our work on classified programs have not differed materially from those of our other government contracts.
Failure to maintain a level of corporate social responsibility could damage our reputation and could materially adversely affect our business, financial condition, and results of operations.
In light of evolving expectations around corporate social responsibility, our reputation could be materially adversely impacted by a failure (or perceived failure) to maintain a level of corporate social responsibility. In today’s environment, an allegation or perception regarding quality, safety, or corporate social responsibility can negatively impact our reputation. This may include, without limitation: failure to maintain certain ethical, social and environmental practices for our operations and activities, or failure to require our suppliers or other third parties to do so; our environmental impact, including our impact on greenhouse gas emissions and climate-related risks, renewable energy, water stewardship and waste management; responsible sourcing in our supply chain; the practices of our employees, agents, customers, suppliers, or other third parties (including others in our industry) with respect to any of the foregoing, actual or perceived; the failure to be perceived as appropriately addressing matters of corporate social responsibility; customer perception of statements made by us, our employees and executives, agents, customers, suppliers, or other third parties (including others in our industry); or our responses to any of the foregoing. A number of our customers have adopted, or may adopt, procurement policies that include social and environmental responsibility provisions or requirements that their suppliers should comply with, or they may seek to include such provisions or requirements in their procurement terms and conditions. Stakeholders also may have very different views on corporate social responsibility, including differing or views of regulators in various jurisdictions in which we operate. Various regulatory authorities have imposed, and may continue to impose, mandatory substantive or disclosure requirements with respect to corporate social responsibility matters. These requirements may not always be uniform across jurisdictions and may with legal requirements, particularly in certain U.S. states that seek to or consideration of corporate social responsibility factors in business operations, which may result in increased complexity, and cost for compliance, as well as could lead to increased risks related to disclosures made pursuant to these regulations and legal requirements, any of which could affect our financial performance. Certain investors are also requiring companies to corporate, social and environmental policies, practices, and metrics. If we are to comply with, or are to cause our suppliers to comply with such policies, or meet the requirements of our customers and investors, a customer may stop purchasing products from us or an investor may sell their shares, and may take legal action us, which could materially affect our reputation, business, financial condition, and results of operations. As a result, we may become subject to new or more regulations, legislation or other governmental requirements, customer or other stakeholder requirements or industry standards and/or an increased demand to meet voluntary criteria related to such matters. Increased regulations, customer requirements or industry standards, including around climate change , could subject us to additional costs and restrictions and require us to make certain changes to our manufacturing practices and/or product designs, which could materially affect our business, financial condition, and results of operations.
We are subject to many hazards and operational risks that can disrupt our business, including interruptions or disruptions in service at our headquarters in Colorado, which could have a material adverse effect on our business, financial condition, and results of operations.
Our operations are subject to many hazards and operational risks inherent to our business, including general business risks, product liability and damage to third parties, our infrastructure or properties that may be caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, human errors, epidemics and
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pandemics, and other similar health crises and similar events. Additionally, our manufacturing operations are hazardous at times and may expose us to safety risks, including health and safety hazards to our employees or third parties. At our facilities, particularly our headquarters in Colorado where the majority of our manufacturing and other operations are concentrated, any significant interruption due to any of the above hazards and operational to the manufacturing or operation of our spacecraft systems including from weather conditions, growth constraints, performance by third-party providers (such as electric, utility, or telecommunications providers), failure to properly handle and use hazardous materials, failure of computer systems, power supplies, fuel supplies, infrastructure damage, disagreements with the owners of the land on which our facilities are located, could result in manufacturing delays or the or of our spacecraft and, as a result, could have a material effect on our business, financial condition, and results of operations. Moreover, our insurance coverage may be to cover our liabilities related to such or operational risks. In addition, we may not be to maintain adequate insurance in the future at rates we consider reasonable and commercially , and insurance may not continue to be available on terms as as our current arrangements. The occurrence of a significant claim, or a claim in excess of the insurance coverage limits maintained by us, could our business, financial condition, and results of operations.
Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production.
Our operations and those of our customers and suppliers have been and may again be subject to natural disasters, climate change-related events, pandemics, or other business disruptions, which could seriously harm our results of operations and increase our costs and expenses. Our manufacturing facilities are located in regions that may be impacted by severe weather events, such as increased storm frequency or severity and fires in hotter and drier climates. These could result in potential damage to our physical assets as well as disruptions in manufacturing activities. Some of our manufacturing facilities are located in areas that could experience decreased access to water due to climate issues. We are also vulnerable to damage from other types of disasters, including power loss, fire, explosions, floods, communications failures, terrorist attacks, and similar events. could also occur due to health-related outbreaks and , , computer or equipment ( or ), operator , or process . Should insurance or other risk transfer mechanisms, such as our existing recovery and business continuity plans, be to recover all costs, we could experience a material effect on our business, results of operations, prospects, and financial condition.
Adverse publicity stemming from any incident involving us, our competitors, or our customers could have a material adverse effect on our business, financial condition, and results of operations.
To continue to be successful, we must continue to preserve, grow, and capitalize on the value of our brand in the marketplace. If our spacecraft systems, those of one of our competitors, or of our customers were to be involved in a public incident, accident, or catastrophe, this could create an adverse public perception of launch or manufacturing activities and result in decreased customer demand for launch and space products, which could cause a material adverse effect on our business, financial condition, and results of operations. Even an isolated incident or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if such incident or incidents result in adverse publicity, governmental investigations, or litigation. Further, if our spacecraft platforms and related services, software and technologies were to be involved in a public , , or , we could be to significant reputational or potential legal liability. Any reputational to our business or industry could tarnish our brand or cause customers with existing contracts with us to their contracts, and lead to a material effect on our business, and financial condition and results of operations. The insurance we carry may be inapplicable or to cover any such , , or . In the event that our insurance is inapplicable or not adequate, we may be to bear substantial from such , media, or .
A preference for small, small disadvantaged, service-disabled veteran-owned, woman-owned businesses or other preferred socioeconomic designations could impact our ability to be a prime contractor and limit our opportunity to work as a subcontractor on certain governmental procurements.
As a result of the Small Business Administration (“SBA”) set-aside program, the federal government may decide to restrict certain procurements only to bidders that qualify as small, small disadvantaged, service-disabled veteran-owned, woman-owned businesses or meeting some other socioeconomic designation. We do not qualify as a small, small disadvantaged, service-disabled veteran-owned, woman-owned business or having any other preferred socioeconomic designation. As a result, we would not be eligible to perform as a prime contractor on those programs and in general would be restricted as a subcontractor on those programs to receiving no more than 50% of the amount paid by the U.S.
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government to qualifying prime contractor. An increase in the amount of procurements under the SBA set-aside program, or other similar governmental programs, may impact our ability to bid on new procurements as a prime contractor, limit our opportunity to work as a subcontractor or restrict our ability to compete on incumbent work that is placed in the set-aside program.
Labor-related matters, including labor disputes, may adversely affect our operations.
None of our employees are currently represented by a union. If our employees decide to form or affiliate with a union, we cannot predict the effects such future organizational activities will have on our business and operations. If we were to become subject to work stoppages, we could experience disruption in our operations, including delays in manufacturing and operations, and increases in our labor costs, which could harm our business, results of operations, and financial condition. In addition, we have in the past and could face in the future a variety of employee claims against us, including but not limited to general discrimination, privacy, wage and hour, labor and employment, Employee Retirement Income Security Act, and disability claims. Any claims could also result in litigation or regulatory proceedings being brought against us by various government agencies that regulate our business, including the U.S. Equal Employment Opportunity Commission. Often these cases raise complex factual and legal issues and create risks and uncertainties. If we were to become subject to such labor , it could have a effect on our business, financial condition and results of operations.
Our cash flow and profitability could be reduced if expenditures are incurred prior to the final receipt of a contract.
From time to time, in order to ensure that we satisfy our customers’ delivery requirements and schedules, we have in the past and may in the future elect to initiate procurement and production in advance of receiving a contract award, or final authorization from the government customer or a prime contractor. In addition, from time to time, we have in the past and may in the future build production units in advance of receiving an anticipated contract award. These actions that we take to procure materials and/or commence production in advance of receiving a contract award require use of our working capital resources which impact our near-term operating cash flows. If we do not receive final authorization for a contract, or if contract requirements change, we may be unable to efficiently repurpose or resell some or all of the materials procured or items produced in anticipation of such contract. These actions have in the past and could in the future also reduce anticipated earnings or result in a loss, which could materially adversely affect our business, financial condition, and results of operations.
We are highly dependent on the services of Dirk Wallinger, our President, Chief Executive Officer and Founder, and if we are unable to retain Mr. Wallinger, our ability to compete could be harmed.
We are highly dependent on the services of Dirk Wallinger, our President, CEO, and Founder. Mr. Wallinger is the source of many of the ideas and execution driving our company and he plays a major role in assessing what potential new business contracts are a good fit for the Company. Mr. Wallinger also is heavily involved in the Company’s outreach efforts with the U.S. government customer base. If Mr. Wallinger were to discontinue his service to us due to death, disability or for any other reason, it could have a material adverse impact on our business, financial condition, and results of operations, and the market prices for our securities could significantly decline. We do not maintain, and we do not expect to maintain in the future, a key person life insurance policy with respect to Mr. Wallinger.
We may need to raise additional capital, and we cannot be sure that additional financing will be available.
To satisfy existing obligations and support the development of our business, we depend on our ability to generate cash flow from operations and to borrow funds. We may require additional financing for liquidity, capital requirements or growth initiatives. We may not be able to obtain financing on terms and at interest rates that are favorable to us or at all. Any inability by us to obtain financing in the future could have a material adverse effect on our business, financial position, results of operations and cash flows. In addition, if we were to undertake a substantial acquisition for cash, the acquisition would likely need to be financed in part through additional financing from banks, through offerings of debt or equity securities or through other arrangements. We cannot assure you that the necessary acquisition financing would be available to us on acceptable terms if and when required.
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We have a history of losses, we anticipate increasing operating expenses and capital expenditures in the future and we may not be able to achieve and, if ever achieved, maintain profitability.
We experienced net losses of $84.5 million and $98.9 million for the years ended December 31, 2025 and December 31, 2024, respectively. We expect to continue to incur net losses for the next several years and we may not achieve or maintain profitability in the future. Because the markets for spacecraft and related software, components and services are evolving, it is difficult for us to predict our future results of operations or the limits of our market opportunity. In addition, our customers for whom we provide these products and services may experience delays or technical challenges with their products and services that limit or delay our expected revenue and future growth opportunities from those customers. We expect our operating expenses and capital expenditures to significantly increase as we make significant investments, expand our operations and infrastructure, develop and introduce new technologies, and hire additional personnel. These efforts may be more costly than we expect and may not result in revenue growth or increased . In addition, as we grow as a public company, we will continue to incur additional significant administrative expenses that we did not incur as a private company. If our revenue does not increase to offset these expected increases in our operating expenses, we will not be in future periods. Our ability to is dependent on our ability to generate cash flows from operations, identify and obtain additional sources of funding and pursue expense reduction , but we may be to implement these strategies. Any to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from or maintaining or cash flow on a consistent basis. If we are to address these risks and as we encounter them, our business, financial condition, and results of operations could be affected. We cannot you that we will ever or sustain and may continue to incur significant going forward. Any by us to or sustain on a consistent basis could cause the value of our common stock to .
If we fail to manage our growth effectively, we may be unable to execute our business plan and our business, financial condition, and results of operations could be harmed.
We have experienced, and may continue to experience, rapid growth, which has placed, and may continue to place, significant demands on our management, sales and marketing, administrative, financial, R&D, and other resources. Additionally, our organizational structure is becoming more complex as we scale our operational, financial and management controls, as well as our reporting systems and procedures. If we fail to manage our anticipated growth, such failure could negatively affect our reputation and harm our ability to attract new customers and to grow our business. In order to achieve the future revenue growth we have projected, we must develop and market new products and services. We intend to expand our operations significantly. To properly manage our growth, we will need to hire and retain additional personnel, upgrade our existing operational management and financial and reporting systems, and improve our business processes and controls. Our future expansion will include: scaling our revenue and achieving the operating efficiencies necessary to achieve and maintain ; anticipating and responding to changing customer preferences; anticipating and responding to macroeconomic changes generally, including changes in the markets for spacecraft, software, components and services; and expanding our operations and information systems; competing established companies and new market entrants; managing and our business processes in response to changing business needs; effectively scaling our operations while maintaining high customer ; integrating any future acquisitions, including personnel, systems, and business processes; avoiding or managing in our business from information technology , cybersecurity and other factors affecting our physical and digital infrastructure; adapting to changing conditions in our industry; complying with regulations applicable to our business; hiring and training talented employees at all levels of our business; developing new technologies; controlling expenses and investments in anticipation of expanded operations; upgrading the existing operational management and financial reporting systems and team to comply with requirements as a public company; and implementing and administrative infrastructure, systems, and processes. If our operations continue to grow as planned, of which there can be no assurance, we will need to expand our sales and marketing, R&D, customer and commercial strategy, products and services, supply, and manufacturing functions. These efforts will require us to invest significant financial and other resources, including in industries and sales channels in which we have limited experience to date. We will also need to continue to leverage our manufacturing and operational systems and processes, and there is no guarantee that we will be to scale the business as currently planned or within the planned timeframe. The continued expansion of our business may also require additional manufacturing and operational facilities, as well as space for administrative support, and there is no guarantee that we will be to find suitable locations for the manufacture of our space vehicles and related equipment. Our continued growth could increase the on our resources, and we could experience operating , including in hiring and training employees, finding manufacturing capacity to produce our space vehicles and related equipment, and in production. These may the attention of management and key employees and impact financial and operational results. If we are to drive commensurate growth, these costs,
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which include lease commitments, headcount, and capital assets, could result in decreased margins, which could have a material adverse effect on our business, financial condition, and results of operations.
Changes in our accounting estimates and assumptions could negatively affect our financial position and results of operations.
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements. We are also required to make certain judgments that affect the reported amounts of revenues and expenses during each reporting period. We periodically evaluate our estimates and assumptions including, but not limited to, those relating to revenue recognition, recoverability of assets, valuation of derivatives and nonredeemable non-controlling interests, contingencies, stock-based compensation and income taxes. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. In particular, estimating our contract revenues requires judgments relative to assessing risks, including risks associated with estimating contract transaction prices and costs, assumptions for schedule and technical issues, customer-directed delays and reductions in scheduled deliveries, and unfavorable resolutions of claims and contractual matters. Due to the size and nature of many of our contracts, the estimation of total costs at completion is complicated and subject to many variables. For example, we must make assumptions regarding the length of time to complete the contract because costs include expected increases in wages and prices for materials; we also consider incentives or related to performance on contracts and include them in the variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the related uncertainty is resolved. These assumptions and estimates involve the exercise of judgment and discretion, which may evolve over time in light of operational experience, regulatory direction, developments in accounting principles and other factors. Actual results could differ from these estimates as a result of changes in circumstances, assumptions, policies or developments in the business, which could materially affect our consolidated financial statements.
A significant portion of our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could harm our business, financial condition and results of operations.
Risks Related to Litigation and Regulation
Our business is subject to various regulatory risks that could adversely affect our operations.
The environment in which we operate is highly regulated due to the sensitive nature of our complex and technologically advanced systems, including spacecraft platforms and related components, and the fact that we contract with national security and defense customers, in addition to those regulations broadly applicable to publicly traded corporations. There are numerous regulatory risks that could adversely affect operations, including but not limited to:
Changes in laws and regulations. It is possible that the laws and regulations governing our business and operations will change in the future. While our current revenue is generated primarily within the U.S., we are committed to expanding into the global market and enhancing our growth potential. There may be a material adverse effect on our financial condition and results of operations if we are required to alter our business to comply with changes in both domestic and foreign regulations, tariffs, or taxes and other trade barriers that reduce or restrict our ability to sell our products and services on a global basis, or by political and economic instability in the countries in which we conduct business. Any failure to comply with such regulatory requirements could also subject us to various penalties or sanctions.
Import and Export Restrictions. Our business is subject to stringent U.S. import and export control laws and regulations as well as economic sanctions laws and regulations. We are required to import and export our products, software, technology, and services, as well as run our operations in the United States, in full compliance with such laws and regulations, which include the EAR, the ITAR, and economic sanctions administered by the Treasury Department’s Office of Foreign Assets Control (“OFAC”). Although our operations and customers are primarily based in the U.S.,
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certain of our spacecraft systems and related components, services and technologies we have developed have required, and may in the future require, the implementation or acquisition of products or technologies from third parties and affiliates, including those in other jurisdictions. In addition, certain of our spacecraft systems and related components, services and technologies may be required to be forwarded, imported, or exported to other jurisdictions. In certain cases, if the use of such technologies can be viewed by the jurisdiction in which that supplier, subcontractor or affiliate resides as being subject to import or export constraints or restrictions relating to national security, we may not be able to obtain the technologies and products that we require from subcontractors and suppliers who would otherwise be our preferred choice or may not be able to obtain the export permits necessary to transfer or export our technology. The inability to obtain or maintain export approvals and export restrictions or changes during contract execution or non-compliance by our suppliers, subcontractors, and customers, could have an adverse effect on our revenues and margins. Further, we may have had, and may in the future have, inadvertent disclosures of certain of our products or components that are subject to the requirements of U.S. import and export control laws and may be found to be in of these laws and regulations, which could have a material effect our business, financial condition, and results of operations.
U.S. Government Approval Requirements. For certain aspects of our business operations, we are required to obtain U.S. government licenses and approvals and to enter into agreements with various government bodies to export spacecraft and related software, components and services, to disclose technical data, or provide defense services to foreign persons. The delayed receipt of or the failure to obtain the necessary U.S. government licenses, approvals, and agreements may prohibit entry into or interrupt the completion of contracts which could lead to a customer’s termination of a contract for default or monetary penalties, which could materially adversely affect our financial condition and results of operations. Given the great discretion the government has in issuing or denying such authorizations to advance U.S. national security and foreign policy interests, there can be no assurance we will be successful in our future efforts to secure and maintain necessary licenses, registrations, or other U.S. government regulatory approvals. Under the “Exon-Florio Amendment” to the U.S. Defense Production Act of 1950, as amended (the “DPA”), the U.S. President has the power to or block certain foreign investments in U.S. businesses if he or she determines that such a transaction U.S. national security. CFIUS has been delegated the authority to conduct national security reviews of certain foreign investments. CFIUS may impose mitigation conditions to grant clearance of a transaction. The FIRRMA, enacted in 2018, amended the DPA to, among other things, expand CFIUS’s jurisdiction beyond acquisitions of control of U.S. businesses. Under FIRRMA, CFIUS also has jurisdiction over certain foreign non-controlling investments in U.S. businesses that have involvement with “ technology” or “ infrastructure,” or that collect and maintain “sensitive personal data” of U.S. citizens (“TID U.S. Businesses”), if the foreign investor receives specified triggering rights in connection with its investment. We are a TID U.S. Business because we develop and design technologies that would be considered technologies. Certain foreign investments in TID U.S. Businesses are subject to mandatory filing with CFIUS. These restrictions on the ability of foreign persons to invest in us has in the past, and could in the future, limit our ability to engage in strategic transactions that could our stockholders, including a change of control, and could also affect the price that an investor may be willing to pay for our common stock.
Other Government Regulations. Our ability to pursue our business activities is regulated by various agencies and departments of the U.S. government and the governments of other countries. Commercial space launch activities require licenses from the Department of Transportation. Radio communications for satellites, launch activities and spacecraft operations require licenses from the Federal Communications Commission (the “FCC”) and frequency coordination with the International Telecommunication Union. The operation of private remote sensing space systems requires a license from the Department of Commerce. Any failure to comply with these and other regulatory requirements could subject us to various penalties or sanctions and could have a significant adverse effect on our reputation, financial condition, and results of operations.
Competitive Impact of U.S. Regulations. Export and import control, economic sanction, and trade embargo laws and regulations, including those administered by the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S. State Department’s Directorate of Defense Trade Controls and the U.S. Treasury Department’s Office of Foreign Assets Control, including, but not limited to, the ITAR and EAR, may limit certain business opportunities or delay or restrict our ability to contract with potential foreign customers or suppliers. To the extent that our non-U.S. competitors are not currently or in the future subject to similar export and import controls, economic sanctions, and trade embargo laws and regulations, they may enjoy a competitive advantage with foreign customers, and it could become increasingly difficult for us to recapture this lost market share.
Anti-Corruption Laws. As part of the regulatory and legal environments in which we operate, we are subject to domestic and international anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (the “FCPA”) that prohibit improper payments directly or indirectly to government officials, authorities or persons defined in those anti-
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corruption laws in order to obtain or retain business or other improper advantages in the conduct of business. Our policies mandate compliance with anti-corruption laws. Failure by our employees, agents, subcontractors, suppliers and/or existing or future partners to comply with anti-corruption laws and our policies could impact us in various ways that include, but are not limited to, criminal, civil and administrative fines and/or legal sanctions and the inability to bid for or enter into contracts with certain entities, all of which could have a significant adverse effect on our reputation, operations, and financial results. Our exposure for violating these laws will increase as our international presence expands and as we increase sales and operations in foreign jurisdictions.
We may become involved in litigation that may materially adversely affect us.
From time to time, we have been and will continue to be involved in various legal proceedings relating to matters incidental to our business, supplier, customer, or other third-party relationships, including intellectual property, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources from the operation of our business, and cause us to incur significant expenses or liability or require us to change our business practices. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material effect on our business. The outcome of , particularly class action lawsuits and regulatory actions, is to assess or quantify, as may seek recovery of very large or indeterminate amounts in these types of lawsuits, and the magnitude of the potential may remain unknown for substantial periods of time. We can provide no assurance that or will not arise in the future. We may also choose to settle such actions if we believe that doing so is in the interests of the Company, and the amount of such settlement could also have a material effect on our business, financial condition, and results of operations.
Our business is subject to a wide variety of extensive and evolving government laws and regulations. Failure to comply with such laws and regulations could have a material adverse effect on our business.
We are subject to a wide variety of laws and regulations relating to various aspects of our business, including with respect to employment and labor, health care, tax, privacy and data security, health and safety, and environmental issues. Laws and regulations at the foreign, federal, state, and local levels frequently change, especially in relation to new and emerging industries, and we cannot always reasonably predict the impact from, or the ultimate cost of compliance with, current or future regulatory or administrative changes. While we monitor these developments and devote a significant amount of management’s time and external resources towards compliance with these laws and regulations, we cannot guarantee that these measures will be satisfactory to regulators or other third parties, such as our customers. Moreover, changes in law, the imposition of new or additional regulations or the enactment of any new or more stringent legislation that impacts our business could require us to change the way we operate and could have a material adverse effect on our sales, profitability, cash flows and financial condition. Failure to comply with these laws, such as with respect to obtaining and maintaining licenses, certificates, authorizations and permits critical for the operation of our business, may result in civil or private lawsuits, or the or of licenses, certificates, authorizations or permits, which would prevent us from operating our business. Regulation of our industry is still evolving, and new or different laws or regulations could affect our operations, increase direct compliance costs for us or cause any third-party suppliers or contractors to raise the prices they charge us because of increased compliance costs. Moreover, changes in law, the imposition of new or additional regulations or the enactment of any new or more legislation that impacts our business could require us to change the way we operate and could have a material effect on our sales, , cash flows and financial condition. The regulatory approaches of different jurisdictions may be multi-layered and may be in with one another, and our compliance could require alteration of our manufacturing processes or operational parameters which may impact our business. We may not be in complete compliance with all such requirements at all times and, even when we believe we are in complete compliance, a regulatory agency may determine that we are not. In addition, the actions of third parties may cause us to to comply with certain requirements.
Our business and operations could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy, and impact our stock price.
Our share price has fluctuated and may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities litigation, including class action litigation. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the stock price of
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our common stock or other reasons may cause us to become the target of securities litigation or stockholder activism. Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our Board’s attention and resources from our business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks, and uncertainties of any securities litigation and stockholder activism.
Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business.
Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our proprietary software from operating properly. For example, errors or other design defects within the software we offer or on which we rely may result in failure to comply with applicable laws and regulations, a negative experience for customers, delayed introductions of new features or enhancements or failure to protect data or our intellectual property. If our proprietary software does not function reliably or fail to achieve customer expectations in terms of performance, we may lose or to grow in customer usage and customers could assert liability us. This could our reputation and our ability to attract or maintain relationships with our customers and third parties.
If we fail to adequately protect our proprietary intellectual property rights, including our unpatented proprietary intellectual property, our competitive position could be impaired and we may lose valuable assets, generate reduced revenue, and incur costly litigation to protect our rights. We have granted licenses in our intellectual property to certain customers, which creates an additional risk of unauthorized use or disclosure of our intellectual property.
The success of business depends, in part, on our ability to protect our proprietary intellectual property rights. To date, we have relied primarily on a combination of trade secrets, patents, data rights assertions, trademarks, copyrights, confidentiality procedures, contractual commitments, non-disclosure or confidentiality agreements with our employees and consultants, and other legal rights to establish and protect our intellectual property (including our intellectual property that may not be patentable or subject to copyright, trademark, trade dress or service mark protection), and intend to continue to rely on these and other means. We also rely on trade secrets, designs, know-how, and other confidential information to protect our intellectual property that may not be patentable or subject to copyright, trademark, trade dress, or service mark protection, or that we believe is best protected by means that do not require public disclosure. However, the steps we take to protect our intellectual property may be inadequate, and we may choose not to pursue or maintain certain types of intellectual property protection or registration for our intellectual property in the United States or foreign jurisdictions. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect use of our intellectual property. To the extent we expand our international activities, our exposure to copying and use of our technologies and proprietary information may increase. our precautions, our proprietary rights in the United States or abroad may not be adequate, and it may be possible for third parties to copy, reverse engineer or our technology or intellectual property rights and use information that we regard as proprietary to create technology that competes with ours. In addition, although we seek to enter into non-disclosure and assignment agreements with our employees and enter into non-disclosure agreements with our customers, consultants and other parties with whom we have strategic relationships and business , no assurance can be given that these agreements will be in controlling access to and distribution of our technology and proprietary information. Such employees and third parties may make ownership to our current and future intellectual property, and, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, may arise as to the rights in related or resulting intellectual property. While we seek to enter into such agreements, we may to enter into such agreements with all relevant entities, such agreements may be or may not be self-executing, and we may be subject to that employees relevant rights from their previous employers. Accordingly, we cannot guarantee that the steps we have taken to protect our intellectual property will be adequate to prevent of our rights or of our technology, trade secrets or know-how, or that we have secured, or will be to secure, appropriate permissions or protections for all of the intellectual property rights we use or claim rights to. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or to our products. In certain instances, we have granted customers licenses to our intellectual property, and we have the necessary intellectual property, including our trade secrets, proprietary know-how and other confidential information, to these customers. Additionally, certain of our customer agreements contain provisions permitting the customer to become a party
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to, or beneficiary of, an escrow agreement under which we place certain intellectual property in escrow with a third party. Under these escrow agreements, such intellectual property may be released to the customer for certain purposes, including to manufacture (or coordinate the manufacture of) certain of our products upon the occurrence of specified events, such as our filing for bankruptcy or ceasing our business operations generally. Although our license grants contain certain restrictions and protections for our intellectual property, we cannot control the actions by third parties, their affiliates and manufacturing partners, and their respective employees. If we fail to protect our intellectual property rights adequately, we may lose an important advantage in the markets in which we compete. Our efforts to protect these rights may be insufficient or ineffective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Any use or disclosure of our intellectual property, including by our current or future manufacturing partners and suppliers, would cause us material in a manner that monetary alone could not , and this use or disclosure could have a material effect on our business and operations. Other parties may also independently develop technologies, products, and services that are substantially similar or to ours. We also may be to bring third parties, or that they may bring us, to determine the ownership of what we regard as our intellectual property. and time-consuming could be necessary to enforce and determine the scope of our proprietary rights, and to obtain or maintain protection for our proprietary information could affect our competitive business position. Further, adequate remedies may not be available in the event of an use or disclosure of our trade secrets and manufacturing expertise. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired, the product is generally open to competition. Products under patent protection usually generate significantly higher revenues than those not protected by patents. If we to enforce our intellectual property rights, our competitive position could , which could our business, financial condition, results of operations, and cash flows. We also rely on physical and electronic security measures to protect our proprietary information, but we cannot provide assurance that these security measures will not be or will provide adequate protection for our property. There is a risk that third parties may obtain and utilize our proprietary information to our competitive . We may not be to detect or prevent the use of such information or take appropriate and timely steps to enforce our intellectual property rights.
Our business is substantially dependent on contracts entered into with customers in the ordinary course of business. As such, we are subject to counterparty risk. If a counterparty to one of our contracts were to default or otherwise fail to perform or be delayed in its performance on any of its contractual obligations to us, such default, failure to perform or delay could have a material adverse effect on our business, financial condition, and results of operations.
Our business is substantially dependent on contracts entered into with customers in the ordinary course of business. Our budgeted capital expenditures for our backlog, forecasted growth, and strategic plan are based on revenues expected to be generated pursuant to existing contracts. If a customer were to default or otherwise fail to perform or be delayed in the fulfillment of its contractual obligations to us, we would be required to adjust our budget, forecasts, and strategic plans, which may negatively affect our business, financial condition, cash flows, and/or liquidity. Additionally, if the scope of anticipated work related to any customer contract were to change due to unforeseen circumstances or evolving requirements of one or more of our counterparties, we may be unable to generate revenue on our anticipated timeline or may be required to incur increased costs from those originally estimated for a project, which could cause our budgets, forecasts, and plans to be inaccurate. It is not possible to predict with accuracy the impact of any default, failure to perform or , which results in our to completely mitigate such risks. As such, the counterparty , to perform or in performance may have a material impact on our business, financial condition, and results of operations.
A failure of our information technology systems, physical or electronic security protections, or an interruption in their operation due to internal or external factors including cyberattacks or insider threats, could have a material adverse effect on our business, financial condition, or results of operations.
Our business and operations are dependent on our ability to protect our employees, business systems, manufacturing capabilities, information systems, computer equipment and information databases from system failures or malicious acts. We rely on both internal information technology systems, physical controls and policies, and certain external services and service providers to manage the day-to-day operation of our business, operate elements of our manufacturing facilities, manage relationships with our employees, customers, and suppliers, fulfill customer orders and maintain our financial and accounting records. In addition, many of our systems are required to comply with higher standards applicable to systems that hold controlled technology or data. If our main data center were to fail, or if we were to suffer an interruption or degradation of services at our main data center, we could lose important manufacturing and technical data, which could harm our business. Similarly, we rely on third-party providers and in the event that any third-party provider’s systems or service abilities fail or are , our ability to operate may be . Some of these third-party providers may
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store or have access to our data and may not have effective controls, processes, or practices to protect our information from attack, damage, or unauthorized access. Any of these risks may be augmented if our or any third-party provider’s business continuity and disaster recovery plans prove to be inadequate. While we generally perform cybersecurity due diligence on our key third-party service providers, because we do not control our third-party service providers and our ability to monitor their cybersecurity is limited, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them. Due to applicable laws and regulations or contractual obligations, we may be held responsible for such cyberattacks and other incidents or disruptions attributed to our third-party service providers as they relate to the information we share with them.
We and our third-party service providers are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, terrorist attacks, actual or threatened acts of war, power losses, telecommunications failures, personnel misconduct, human error, and similar events. We and our third-party service providers are also vulnerable to cyberattacks or cybersecurity incidents, such as software bugs, computer viruses, worms, malware and ransomware, and other malicious and destructive code, social engineering and phishing attacks, denial of service attacks or other attempts to harm our systems, misconduct, and or of service attacks, and have been, and may continue to be, the target of attempted . Because of the nature of our business and that of our third-party service providers, and our support of the U.S. government, we (and our customers and our third-party service providers) may be targeted for such attacks by foreign governments. Further, the techniques used to obtain access to, or to , systems or networks, are constantly evolving and generally are not recognized until launched a target. and other security have increased in frequency, and sophistication in recent years and are conducted by organized groups and individuals with a wide range of motives and expertise, including organized groups, “hacktivists,” terrorists, nation states, nation-state supported actors and others. Consequently, we may be to anticipate these techniques, react in a timely manner, or implement preventive measures, which could result in in our detection or remediation of, or other responses to, , security and other security-related . The wide availability of open source software used in our solutions could also us and our third-party service providers to security . The of our information technology systems, or those of our third-party service providers, to perform as anticipated for any reason or any significant of security could our business and result in numerous consequences, including reduced effectiveness and of operations, increased costs, or of important information or capabilities, any of which could have a material effect on our business, financial condition, or results of operations.
Any security breach, including personal data breaches, or incident, including cybersecurity incidents, that we or our third-party service providers experience could result in unauthorized access to, misuse of or unauthorized acquisition of our or our customers’ data, the loss, corruption, or alteration of this data, interruptions in our operations or damage to our computer hardware or systems or those of our customers. Moreover, negative publicity arising from these types of disruptions could damage our reputation. Such incidents and disruptions may require us to notify affected individuals and other third parties and incur additional remediation or mitigation costs or have other legal and regulatory consequences to us and our business, particularly if we or our third-party service providers are to anticipate such acts or implement adequate preventative measures. For more information on our legal and regulatory obligations with respect to privacy and data security, see Risk Factors—Risks Related to and Regulation—Our business is subject to federal, state, and international laws regarding data protection, privacy, and data security, as well as confidentiality obligations under various agreements, and our actual or perceived to comply with such obligations could our reputation, us to risk and materially affect our business and operating results.
In addition, our remediation efforts may not be successful, and we may not have adequate insurance to cover these losses. While we maintain insurance policies that may cover certain liabilities in connection with a cyberattack or other incidents, we cannot be certain that our insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
The U.S. government’s determination to award a future contract or contract option may be challenged by an interested party, and, if that challenge is successful, that future contract or option may be terminated.
The laws and regulations governing procurements by the U.S. government provide procedures by which other bidders and interested parties may challenge the award of a government contract at the U.S. Government Accountability Office (“GAO”) or in federal court. If we are awarded a government contract, such challenges or protests could be filed even if there are not any valid legal grounds on which to base the challenge or protest. If any such challenges or protests are filed, the government agency may decide to suspend our performance under the contract while such challenges or protests
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are being considered by the GAO or the applicable federal court, thus potentially delaying delivery of payment. In addition, we could be forced to expend significant funds to defend any potential award. If a challenge or protest is successful, the government agency may be ordered to terminate any one or more of our contracts and reselect bids. The government agencies with which we have contracts could even be directed to award a potential contract to one of the other bidders. Finally, the government agency, in its discretion, may elect to take corrective action to resolve a pending bid protest which could result in the government agency reevaluating bidders, or asking bidders to re-compete for the contract, and the selection of a new bidder.
Our business involves significant risks and uncertainties that may not be covered by insurance. Also, due to the inherent risks associated with commercial spaceflight, there is the possibility that any accident or catastrophe could lead to the loss of human life or a medical emergency.
Although there have been and will continue to be technological advances in spaceflight, it is still an inherently dangerous activity. Explosions and other accidents on launch or during the flight have occurred and will likely occur in the future. If such incident should occur, we will likely experience a total loss of our systems, products, technologies and services and our payloads and payloads of our customers. The total or partial loss of one or more of our products or payloads could have a material adverse effect on our business, financial condition and results of operations. For some missions, we can elect to buy launch insurance, which can reduce our monetary losses from the launch failure, but even in this case we will have losses associated with our inability to test our technology in space and delays with further technology development. Further, commercial spaceflight is an inherently activity that can lead to or impacting human life. It is to completely eliminate the potential for human , and there is a possibility that other may occur in the future as a result of human or for a variety of other reasons, some of which may be out of our control. Any such could result in substantial to us, including reputational and legal liability, and, as a result, could have a material effect on our business, financial condition and results of operations.
Our insurance, customer indemnifications or other liability protections may be insufficient to protect us from product and other liability claims or losses.
We maintain insurance coverage with third-party insurers as part of our overall risk management strategy and because some of our contracts require us to accept risk of loss during various issuing phases. Not every risk or liability is or can be protected by insurance, and for those risks we insure, the limits of coverage that is reasonably obtainable may not be sufficient to cover all actual losses or liabilities incurred. We are limited in the amount of insurance we can obtain to cover certain risks, such as cybersecurity risks and natural hazards, including earthquakes, fires, and extreme weather conditions, some of which can be worsened by climate change and pandemics. If any of our third-party insurers fail, become insolvent, cancel our coverage or otherwise are unable to provide us with adequate insurance coverage or renew our insurance coverage on favorable terms, then our overall risk exposure and our operational expenses would increase, and the management of our business operations would be disrupted. Our insurance may be to protect us from significant product and other liability or . Moreover, there is a risk that commercially available liability insurance will not continue to be available to us at a reasonable cost, if at all. In some circumstances, we are entitled to certain legal protections or indemnifications from our customers through contractual provisions, laws, regulations, or otherwise. However, these protections are not always available, can be to obtain, are typically subject to certain terms or , including the availability of funds, and may not be sufficient to cover all or liabilities incurred. For example, although the U.S. government may pay for third-party to the extent they exceed our insurance coverage, this depends on a government appropriation and is subject to a statutory limit. In addition, this insurance will not protect us our own , including to our satellites. If liability or exceed our current or available insurance coverage, customer indemnifications, or other legal protections, our business, results of operations, prospects and financial condition could have a material effect on us. Any significant claim may have a material effect on our industry and market reputation, to a substantial decrease in demand for our products and services and reduced revenues, making it more for us to compete effectively, and could affect the cost and availability of insurance coverage at adequate levels in the future.
Contracting in the defense industry is subject to significant regulation, including rules related to bidding, billing, and accounting kickbacks and false claims, and any non-compliance could subject us to fines and penalties or possible debarment.
Like all government contractors, we are subject to risks associated with this contracting. These risks include the potential for substantial civil and criminal fines and penalties. These fines and penalties could be imposed for failing to
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follow procurement integrity and bidding rules, employing improper billing practices, or otherwise failing to follow cost accounting standards, receiving, or paying kickbacks or filing false claims. We may be subject to audits and investigations by government agencies. The failure to comply with the terms of our government contracts could harm our business reputation, which could significantly reduce our sales and earnings. It could also result in our suspension or debarment from future government contracts, which could materially adversely affect our business, financial condition, and results of operations. In addition, we could be subject to criminal or civil penalties or administrative sanctions, including contract termination, of contract actions including related , , of fees, of payment, and civil Act (which can include civil and up to treble ), any of which could materially affect our reputation, business, financial condition, and results of operations.
We are subject to procurement rules and regulations, which increase our performance and compliance costs under our U.S. government contracts. Our failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts, civil False Claims Act allegations, and suspension or debarment from U.S. government contracting.
We must comply with laws and regulations relating to the formation, administration, and performance of U.S. government contracts, which affect how we do business with our customers. Such laws and regulations may impose added costs on our business and our failure to comply with them, or the failure of our agents’ to comply with them, may lead to civil or criminal penalties, termination of our U.S. government contracts, civil False Claims Act allegations (which can include civil penalties and up to treble damages), suspension or debarment from contracting with federal agencies and could have a material adverse effect on our reputation and ability to receive other U.S. government contract awards in the future. Government contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions. One of the significant differences is that the U.S. government may any of our government contracts, not only for based on our performance but also at its convenience. Generally, prime contractors have a similar right under subcontracts related to government contracts. If a contract is for convenience, we would expect to be entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract. If a contract is for , the U.S. government could make to reduce the contract value or recover its procurement costs and could assess other special , us to liability and materially affecting our ability to compete for future contracts and orders. In addition, the U.S. government could a prime contract under which we are a subcontractor, notwithstanding the fact that our performance and the quality of the products or services we delivered were consistent with our contractual obligations as a subcontractor. Similarly, the U.S. government could indirectly a program or contract by not funding it. The decision to programs or contracts for convenience or could materially affect our business, financial condition, and results of operations.
Our failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts, civil False Claims Act allegations and suspension or debarment from U.S. government contracting.
We must comply with laws and regulations relating to the formation, administration and performance of U.S. government contracts, which affect how we do business with our customers. Such laws and regulations may impose added costs on our business and our failure to comply with them may lead to civil or criminal penalties, termination of our U.S. government contracts, civil False Claims Act allegations (which can include civil penalties and up to treble damages) or suspension or debarment from contracting with federal agencies. Government contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions. One of the significant differences is that the U.S. government may terminate any of our government contracts, not only for default based on our performance but also at its convenience. Generally, prime contractors have a similar right under subcontracts related to government contracts. If a contract is for convenience, we would expect to be entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract. If a contract is for , the U.S. government could make to reduce the contract value or recover its procurement costs and could assess other special , us to liability and materially affecting our ability to compete for future contracts and orders. In addition, the U.S. government could a prime contract under which we are a subcontractor, notwithstanding the fact that our performance and the quality of the products or services we delivered were consistent with our contractual obligations as a subcontractor. Similarly, the U.S. government could indirectly a program or contract by not funding it. The decision to programs or
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contracts for convenience or default could materially adversely affect our business, results of operations, prospects and financial condition, and our future financial performance.
Failure to comply with anti-corruption laws, including the FCPA and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.
We operate a global business and may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act and possibly other anti-bribery and anti-corruption laws in countries in which we conduct activities. These laws that prohibit companies and their employees and third-party intermediaries from corruptly promising, authorizing, offering, or providing, directly or indirectly, improper payments or anything of value to foreign government officials, political parties, and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person, or securing any advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. In many foreign countries, including countries in which we may conduct business, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable laws and regulations. We face significant risks if we or any of our directors, officers, employees, agents or other partners or representatives to comply with these laws and governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or and which could have a material effect on us. Any of the FCPA or other applicable anti- laws could result in whistleblower , media coverage, , of export privileges, or civil sanctions and, in the case of the FCPA, or from U.S. government contracts, any of which could have a materially effect on our reputation, business, operating results and prospects. In addition, responding to any enforcement action may result in a significant of management’s attention and resources and significant defense costs and other professional fees.
We routinely conduct hazardous operations in the manufacturing and testing of our spacecraft and related components and technology, which could result in damage to property or persons. The release, unplanned ignition, explosion, or improper handling of dangerous materials used in our business could disrupt our operations and adversely affect our financial results.
We manufacture, test, and operate highly sophisticated spacecraft and related components and technology. Our business operations involve the purchase and management of potentially explosive and ignitable energetic materials, and other dangerous chemicals, including materials used in rocket propulsion. The handling, production, transport, and disposition of hazardous materials could result in incidents that temporarily shut down or otherwise disrupt our operations and could cause production delays. A release of these chemicals or an unplanned ignition or explosion could result in death or significant injuries to employees and others. Material property damage to us and third parties could also occur. Extensive regulations apply to the handling of explosive and energetic materials, including but not limited to regulations governing hazardous substances and hazardous waste. The failure to properly store and ultimately of such materials could create significant liability and/or result in regulatory sanctions. While we have built operational processes designed to ensure that the design, manufacture, performance, and servicing of our spacecraft meet rigorous quality standards, there can be no assurance that we will not experience operational or process issues that could result in potential safety risks. Any actual or perceived safety or reliability issues may result in significant reputational to our businesses, in addition to tort liability, maintenance, increased safety infrastructure, and other costs that may arise. Such issues could result in contracts, increased regulation, or other systemic consequences. Our to meet our safety standards or publicity affecting our reputation as a result of , mechanical , to customer property, or other could have a material effect on our business, financial condition, and results of operations.
We use third-party licensed software and services in or with our solutions, and the inability to maintain these licenses and services arrangements, or issues with the software we license or services we leverage, could result in increased costs or reduced service levels, which would adversely affect our business.
Our solutions include software or other intellectual property licensed from certain third parties, and we otherwise use certain software and other intellectual property licensed from third parties in our business and operations. We anticipate that we will continue to rely on such third-party software and intellectual property in the future, and from time to time, we may be required to renegotiate our current third-party licenses or services arrangements or license additional intellectual property or technology or procure additional services from third parties to develop new solutions or enhancements thereto or to facilitate new business models. This exposes us to risks over which we may have little or no control. For example, the third-party licenses and services on which we currently rely may not always be available, or may not be available on
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commercially reasonable terms, and we may not have access to alternative third-party software in the event of any issues with such software. In addition, the agreements under which we license intellectual property from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property, or increase what we believe to be our financial or other obligations under the relevant agreement. A third party may assert that we or our customers are in breach of the terms of applicable licenses or services arrangements, which could, among other things, force us to cease use of such software and give such third party the right to terminate the applicable license or services arrangement or seek damages from us, or both. Additionally, third parties from whom we currently license intellectual property rights and technology could refuse to renew our agreements upon their expiration or could impose additional terms and fees that we otherwise would not deem acceptable requiring us to obtain the intellectual property from another third party, if any is available, or to pay increased licensing fees or be subject to additional restrictions on our use of such third party intellectual property. Additionally, we may not have the right to control the maintenance, , preparation, filing, enforcement, and defense of, or relating to, the intellectual property that we license from third parties and are reliant on our licensors to do so. We also cannot be certain that activities such as intellectual property protection, maintenance, , and enforcement by our licensors have been or will be conducted consistent with our interests or in compliance with applicable laws and regulations or will result in valid and enforceable intellectual property rights. It is possible that our licensors conduct proceedings or defense activities less vigorously than we would conduct them ourselves or such proceedings or activities may not be conducted in accordance with our interests. Furthermore, we cannot be certain that our licensors are not , , or otherwise the intellectual property rights of third parties or that our licensors have sufficient rights to the intellectual property we license in all jurisdictions in which we may offer our solutions. Our to obtain or maintain certain licenses, services arrangements or other rights or to obtain or maintain such licenses, services arrangements or rights on terms, or the need to engage in or any other proceedings regarding these matters, could result in in releases of new solutions and could otherwise our business, until equivalent technology can be identified, licensed, or developed, if at all. In addition, our rights to certain technologies are licensed to us on a non- basis. The owners of these non- licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be to those offered to us, which could place us at a competitive . Also, to the extent that our solutions depend upon the operation of third-party software in conjunction with our software, any , , compromises, or in such third-party software could prevent the deployment or the functionality of our solutions, new feature introductions, result in a of our platform, and our reputation. Any of the foregoing could materially affect our business, financial condition, and results of operations.
Protecting and defending against intellectual property claims may have a material adverse effect on our business.
Our success depends in part upon successful prosecution, maintenance, enforcement, and protection of our owned and licensed intellectual property. To protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Such litigation could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology, as well as any costly litigation or of our management’s attention and resources, could our business, as well as have a material effect on our financial condition and results of operations. The results of intellectual property are to predict and may result in significant awards or settlement costs. We may also be required to undertake workarounds or substantial reengineering of our products or services, stop using certain technologies, stop offering certain services or enter into royalty or licensing agreements, which may include terms that are not commercially acceptable to us. There is no guarantee that any action to , maintain or enforce our owned or licensed intellectual property rights will be , and an result in any such proceeding could have a material impact on our business, financial condition, and results of operations. In addition, we may from time-to-time face that we are , , or otherwise the intellectual property rights of third parties, including the intellectual property rights of our competitors. We may be of the intellectual property rights that others may claim cover some or all of our technology or services. Irrespective of the validity of any such , we could incur significant costs and of resources in them, and there is no guarantee any such defense would be , which could have a material effect on our business, financial condition, and results of operations. Even if these matters do not result in or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to or them, could the time and resources of our management team and our business, financial condition, our results of operations, and our reputation.
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Environmental matters, including costs associated with compliance and remediation efforts and government and third-party claims, could have a material adverse effect on our reputation and our business, financial condition, and results of operations.
Our operations are subject to and affected by various federal, state, local, and foreign environmental laws, and regulations, which can frequently be expanded, changed, or enforced differently over time. Compliance with these existing and evolving environmental laws and regulations requires and is expected to continue to require significant operating and capital costs. We may be subject to substantial administrative, civil, or criminal fines, penalties, or other sanctions (including suspension and debarment from our government contracts) for violations. For instance, if we are found to be in violation of the Federal Clean Air Act or the Clean Water Act, the facility or facilities involved in the violation could be placed by the Environmental Protection Agency on a list of facilities that generally cannot be used in performing on U.S. government contracts until the violation is corrected. Stricter or different remediation standards or enforcement of existing laws and regulations; new requirements, including regulation of new substances; discovery of previously unknown contamination or new contaminants; imposition of , , or (including natural resource ); a determination that certain remediation or other costs are unallowable; rulings on allocation or insurance coverage; and/or the , or of other parties to pay their share, could require us to incur material additional costs in excess of those anticipated. We may become a party to legal proceedings and involving government and private parties (including individual and class actions) relating to impacts from pollutants released into the environment, including bodily and property . These matters could result in material compensatory or other , remediation costs, , non-monetary relief, and allowability or insurance coverage determinations. The impact of these factors is to predict, but one or more of them could our reputation and business and have a material effect on our results of operations, prospects, and financial condition.
Our business is subject to federal, state, and international laws regarding data protection, privacy, and data security, as well as confidentiality obligations under various agreements, and our actual or perceived failure to comply with such obligations could damage our reputation, expose us to litigation risk and materially adversely affect our business and operating results.
In connection with our business, we receive, collect, process, and retain certain personal information about our customers, vendors, and employees. As a result, we are subject to the evolving and increasingly complex data protection laws and regulatory frameworks of the jurisdictions in which we operate or conduct our business, including to state comprehensive privacy laws, such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act, the European Union General Data Protection Regulation (“EU GDPR”), and the U.K. General Data Protection Regulation (“U.K. GDPR”) (collectively, “Data Protection Laws”). These laws impose obligations in relation to the collection, use, and disclosure of personal information, including providing customers with certain rights to access, correct, delete, and restrict the processing of their personal information. Failure to comply with applicable laws may result in regulatory scrutiny, enforcement actions, fines, litigation, or other liabilities or costs, and the evolving complexity of the privacy landscape could impact our ability to collect, use or disclose personal information, decrease demand for our products, require us to restrict our business operations, increase our costs, and impair our ability to maintain and grow our customer base and increase our revenue. We are also subject to the DoD Cybersecurity Maturity Model Certification (“CMMC”) requirements, which requires companies that do business with the DoD to, depending on the level of security required, meet, or exceed certain specified cybersecurity standards to be eligible for new contract awards. To the extent we are to or maintain certification at the level required for a particular contract award, we will be to bid on such contract awards or follow-on awards for existing work with the DoD, which could materially impact our revenue, , and cash flows.
Additionally, our subcontractors, and certain of our vendors, may also need to comply with CMMC requirements. We may be negatively impacted if our subcontractors or vendors are not compliant with CMMC requirements. The obligations imposed on us under the CMMC may be different from, or in addition to those, otherwise required by the Data Protection Laws to which we are subject. The costs to comply with the new CMMC requirements are significant and may increase, which could materially adversely affect our business, financial condition, or results of operations. Failure to comply with CMMC requirements may also make us subject to bid protest challenges or False Claims Act allegations claiming damages to the government based on such non-compliance. We have implemented internal controls and procedures designed to comply with the Data Protection Laws to which we are subject, the CMMC and other applicable standards, as well as contractual obligations related to data protection.
Data protection laws, regulations, standards, and obligations are evolving and may be modified, replaced, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements, or legal obligations. For example, the application of the EU GDPR alongside the U.K. GDPR exposes us to
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two parallel regimes that may be subject to potentially different interpretations, each of which potentially authorizes similar fines and other potentially divergent enforcement actions for certain violations. While the EU GDPR and the U.K. GDPR remain substantially similar for the time being, the government of the U.K. has adopted reforms to its privacy and data security legal framework in its Data Use and Access Act 2025, which became law on June 19, 2025 (phasing in between June 2025 and June 2026) and will introduce significant changes from the EU GDPR. This may lead to additional compliance costs and could increase overall risk exposure as businesses may no longer be able to take a unified approach across the European Economic Area and the U.K., and such businesses may need to amend their processes and procedures to align with the new framework. We cannot yet determine the impact that such modifications may have on our business. As such, our practices may not have complied with, and we cannot assure ongoing compliance with, all such laws or regulations and other legal obligations. Further, we expect that new industry standards, laws, and regulations will continue to be proposed regarding privacy and data security in many jurisdictions. We cannot yet determine the impact that such future laws, regulations, and standards may have on our business. Our efforts to comply with these evolving obligations may cause us to incur significant costs or require changes to our business practices, which could materially affect our business, financial condition, and results of operations. Any or perceived by us to comply with applicable laws or regulations, or other contractual or legal obligations, or to address privacy and data security , even if , may result in governmental enforcement actions, private (including class actions), and or publicity and could cause our customers to trust in us, which could have a material effect on our reputation, inhibit sales, and materially affect our business, financial condition, and results of operations.
Our systems utilize third-party open-source software, and any failure to comply with the terms of one or more of these open-source software licenses could adversely affect our business, subject us to litigation, or create potential liability.
Our systems include software licensed from third parties under any one or more open-source licenses, and we expect to continue to incorporate open-source software in our systems and technology in the future. Moreover, we cannot ensure that we have effectively monitored our use of open-source software, or validated the quality or source of such software, or that we are always in compliance with the terms of the applicable open-source licenses or our current policies and procedures. From time to time, there have been claims against companies that use open-source software in their products and services asserting that the use of such open-source software infringes the claimants’ intellectual property rights. As a result, we could be subject to suits by third parties claiming that what we believe to be licensed open-source software infringes such third parties’ intellectual property rights. Additionally, if an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such and could be subject to significant and required to comply with conditions or restrictions on these solutions, which could the distribution and sale of these solutions. could be for us to , have a effect on our business, financial condition, and results of operations, or require us to devote additional R&D resources to change our solutions. We may continue to experience such in the future. Use of open-source software may entail risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or other contractual protections regarding or the quality of the code, including with respect to security where open-source software may be more . In addition, certain open-source licenses require that source code for software programs that incorporate, use, or combine with such open-source software be made available to the public at no cost and that any modifications or derivative works to such open-source software continue to be licensed under the same terms as the open-source software license. The terms of various open-source licenses to which we are subject are ambiguous and have not or may not have been interpreted by courts in the relevant jurisdictions, and there is a risk that such licenses could be construed in a manner that imposes conditions or restrictions on our ability to market or provide our software and data. By the terms of certain open-source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open-source licenses, if we combine our proprietary software with open-source software in a certain manner. In the event that portions of our proprietary software are determined to be subject to an open-source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our solutions, seek licenses from third parties on terms that are not commercially feasible or otherwise be limited in the provision of our products and services, each of which could reduce or eliminate the value of our solutions. our proprietary source code could allow our competitors to create similar products with lower development effort and time and ultimately could result in a of sales. Furthermore, any such re-engineering or other remedial efforts could require significant additional R&D resources, and we may not be to complete any such re-engineering or other remedial efforts. Any of these events could create liability for us and our reputation, which could have a material effect on our business, financial condition, and results of operations.
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Laws and regulations designed to address climate change may result in additional compliance costs.
Our operations and the products we sell are currently subject to rules limiting emissions and to other climate-related regulations in certain jurisdictions where we operate. The increased prevalence of global climate change concerns may result in new regulations that may negatively impact us, our suppliers, and customers. We are continuing to evaluate short-, medium- and long-term risks related to climate change. We cannot predict what climate-related legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers, in which case, the costs of component parts could increase.
Misconduct of employees, subcontractors, agents, suppliers, business partners, or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and customers and could have a material adverse impact on our reputation, business, financial condition, and results of operations.
Our employees, subcontractors, agents, suppliers, business partners, joint ventures or others working on our behalf may engage in misconduct that could adversely impact our business including by committing fraud or engaging in other improper activities such as falsifying time or other records, and violating laws and failing to comply with our policies and procedures or with federal, state, or local government procurement regulations, regulations regarding the use and safeguarding of classified or other protected information, legislation regarding the pricing of labor and other costs in government contracts, laws, and regulations relating to environmental, health or safety matters, bribery of foreign government officials, import-export control, lobbying or similar activities, and any other applicable laws or regulations. Any data loss or information security lapses resulting in the compromise of personal information or the improper use or disclosure of sensitive or classified information could result in , remediation costs, regulatory or sanctions us, or of our systems or those of our customers, of our ability to provide services to our customers, of current and future contracts, indemnity obligations, to our reputation and other potential liabilities. Although we have implemented policies, procedures, training, and other compliance controls to prevent and detect these activities, these precautions may not prevent all , and as a result, we could face unknown risks or . This risk of conduct may increase as we continue to expand and do business with new partners. In the ordinary course of our business, we form and are members of joint ventures (meaning joint efforts or business arrangements of any type). Our to comply with applicable laws or regulations could our reputation and subject us to administrative, civil, or and enforcement actions, , and , restitution or other including civil Act (which can include civil and up to treble ), of security clearance, of current and future customer contracts, of privileges and other sanctions, including or from contracting with federal, state, or local government agencies, any of which would materially affect our reputation, business, financial condition, and results of operations.
Efforts by the U.S. government to revise its organizational conflict of interest rules could limit our ability to successfully compete for new contracts or task orders, which would materially adversely affect our business, financial condition, and results of operations.
Efforts by the U.S. government to reform its procurement practices have focused on, among other areas, the separation of certain types of work to facilitate objectivity and avoid or mitigate organizational conflicts of interest and the strengthening of regulations governing organizational conflicts of interest. Organizational conflicts of interest may arise from circumstances in which a contractor has impaired objectivity during performance; unfair access to non-public information; or the ability to set the “ground rules” for another procurement for which the contractor competes. A focus on organizational conflicts of interest issues has resulted in legislation and a proposed regulation aimed at increasing organizational conflicts of interest requirements, including, among other things, separating sellers of products and providers of advisory services in major defense acquisition programs. The passage of a new federal law in December 2022 requires the FAR council to provide and update definitions of each of the above types of conflicts of interest and provide illustrative examples of various relationships that contractors could have that would give rise to potential of interest. The passage of this legislation comes as this topic continues to garner increased of such among federal contractors. The resulting rule-making process, as well as continuing reform initiatives in procurement practices, may, however, result in future amendments to the FAR, increasing the restrictions in current organizational of interest regulations and rules. Similarly, organizational of interest remain an active area of bid , increasing the likelihood that competitors may leverage such in an attempt to agency award decisions. To the extent that proposed and future organizational of interest laws, regulations, and rules or interpretations thereof limit our ability to compete for new contracts or task orders with the U.S. government,
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either because of organizational conflicts of interest issues arising from our business, or because companies with which we are affiliated, or with which we otherwise conduct business, create organizational conflicts of interest issues for us, our business, financial condition, and results of operations could be materially adversely affected.
We may experience claims for product failures, schedule delays or other problems with existing or new products.
Many of the products we develop and manufacture are technologically advanced systems that must function under demanding operating conditions. The sophisticated and rigorous design, manufacturing and testing processes and practices we employ do not entirely prevent the risk that we may not be able to successfully launch or manufacture our products on schedule or that our products may not perform as intended. When our products fail to perform adequately, some of our contracts require us to forfeit a portion of our expected profit, receive reduced payments, provide a replacement product or service or reduce the price of subsequent sales to the same customer. Performance penalties may also be imposed when we fail to meet delivery schedules or other measures of contract performance. We do not generally insure against potential costs resulting from any required remedial actions or costs or loss of sales due to postponement or cancellation of scheduled operations or product deliveries.
New sustainability and climate-related disclosure obligations could result in unforeseen costs associated with compliance, government and third-party claims, operations, and increased reputational and litigation risk.
New sustainability and climate-related disclosure obligations could result in unforeseen costs associated with compliance, government and third-party claims, operations, and increased reputational and litigation risk. We may be subject to rulemaking regarding corporate social responsibility and/or disclosure, as public awareness and focus on social and environmental issues has led to legislative and regulatory efforts to impose or increase regulations and require further disclosure. We operate in various jurisdictions in the U.S. that have adopted or proposed federal and state laws related to sustainability and climate change reporting. Any adopted or proposed laws could impose significant new burdens on the Company and our suppliers, with significant potential costs and operational impacts, and restrict access to capital if our disclosures are not perceived as meeting applicable third-party verification standards. Our failure to adequately comply with such disclosure obligations could jeopardize our competitive position and ability to win business, as well as adversely affect our results of operations and financial condition. Separately, sustainability and climate-related disclosure requirements could lead to reputational or other to our relationships with customers, regulators, investors, or other stakeholders. We may also face increased risks arising from sustainability and climate-related disclosure requirements relating to resulting from our reported or projected GHG emissions or statements made by us or others in our industry regarding environmental and climate change risks.
We are subject to complex tax laws, and changes in tax laws or in positions by the relevant tax authorities regarding the application, administration or interpretation of tax laws or regulations, particularly if applied retrospectively, or challenges to our tax position could adversely affect our financial condition and results of operations.
Tax laws are complex and subject to subjective evaluations and interpretative decisions, and we may be subject in the future to tax audits aimed at addressing our compliance with direct and indirect taxes. Changes in tax laws could adversely affect our tax position, including our effective tax rate or tax payments. We often rely on generally available interpretations of applicable tax laws and regulations. We cannot be certain that the relevant tax authorities agree with our interpretation of these laws, or with the positions we have taken or intend to take, on tax laws applicable to our ordinary activity and extraordinary transactions. If our tax positions are challenged by relevant tax authorities, we could face long tax proceedings and the imposition of additional taxes or the denial of tax benefits could require us to pay taxes that we currently do not collect or pay or increase the cost of our services to track and collect such taxes. We cannot, therefore, rule out that claims by the tax authorities may give rise to burdensome and long tax litigation and to the payment of significant amounts for taxes, penalties and interest for payment. Any of these risks could increase our cost of operations or our tax rate and have a effect on our business, financial condition, operating results and cash flows.
Our ability to use our net operating loss carryforwards may be limited.
As of December 31, 2025, we had $291.1 million of U.S. federal and $366.4 million of U.S. state net operating loss (“NOLs”) carryforwards available to reduce future taxable income. While the federal NOL carryforwards can be carried forward indefinitely, state NOLs begin to expire in the year ending December 31, 2046. It is possible that we will not generate taxable income in time to use these NOL carryforwards before their expiration or at all. Under legislative changes made in December 2017, U.S. federal NOLs incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such NOLs is limited. In addition, the federal and state NOL carryforwards and certain tax credits may
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be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended (the “Code”), respectively, and similar provisions of state law. Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and to offset its post-change income or tax may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Future issuances or sales of our common stock, including certain transactions involving our common stock that are outside of its control, could result in future “ownership changes.” “Ownership changes” that have occurred in the past or that may occur in the future could result in the imposition of an annual limit on the amount of pre-ownership change NOLs and other tax attributes we can use to reduce our taxable income, potentially increasing and accelerating our liability for income taxes, and also potentially causing those tax attributes to expire unused. States may impose other limitations on the use of our NOLs. Any limitation on using NOLs could, depending on the extent of such limitation and the NOLs previously used, result in us retaining less cash after payment of U.S. federal and state income taxes during any year in which we have taxable income, rather than , than we would otherwise retain if such NOLs were available as an offset such income for U.S. federal and state income tax reporting purposes. As a result, such on our NOL could impact our operating results.
We entered into a Tax Receivable Agreement that requires us to make payments in relation to certain tax attributes of York Space Systems and its subsidiaries to our pre-IPO owner (or certain transferees or successors), and such payments may be substantial.
We entered into a tax receivable agreement (“TRA” or “Tax Receivable Agreement”) with equity holders of Holdings and holders of Class P Units (such shareholders and any transferee or successor being a “TRA Holder”) that will require us to make payments to TRA Holders in an amount equal to 85% of certain tax savings (or expected tax savings) in respect of certain tax attributes of York Space Systems. The TRA contemplates payments in respect of the Covered Tax Assets (as defined below) described in “Certain Relationships and Related Transactions, and Director Independence—Tax Receivable Agreement” in Item 13 of Part III of this Annual Report on Form 10-K, including net operating losses, the carryforward of any unused research and development tax credits and interest disallowed pursuant to Section 163(j) of the Code, the amortization of research and experimental expenditures pursuant to Section 174 of the Code, and other tax attributes of York Space Systems accrued on or prior to the date of the Tax Receivable Agreement (including, without limitation, refunds and amortization and depreciation of other assets of York Space Systems) and any deductions or other tax attributes that may arise in connection with our IPO. The timing of payments under any Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character and timing of our and our subsidiaries’ taxable income in the future. These payments may be substantial and will be made only to TRA Holders, rather than to all of our shareholders. These payments could have a material effect on our business, financial condition and results of operations. To the extent that we are to make payments under any Tax Receivable Agreement as a result of the terms of our debt agreements, such payments may be deferred and will accrue interest until paid.
The Tax Receivable Agreement requires us to make cash payments to TRA Holders in respect of certain tax benefits to which we may become entitled, and we expect that the payments we will be required to make will be substantial.
On January 28, 2026, we entered into the Tax Receivable Agreement with TRA Holders. Pursuant to the Tax Receivable Agreement, we will be required to make cash payments to TRA Holders, collectively, equal to 85% of the tax benefits, if any, that we actually realize, or, in some circumstances, are deemed to realize, as a result of the usage of the Covered Tax Assets. We estimate that such payments may be substantial. Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, which tax reporting positions will be based on the advice of our tax advisors. Any payments made by us to TRA Holders under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us. To the extent that we are unable to make payments under the Tax Receivable Agreement, such payments generally will be deferred and will accrue interest until paid. Nonpayment for a specified period, however, may constitute a breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement. Furthermore, although we will retain 15% of the amount of such tax benefits, the Tax Receivable Agreement may adversely impact the price of our common stock and our future obligation to make payments under the Tax Receivable Agreement could make us a less target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized in connection with the acquisition under the Tax Receivable Agreement. The payments under the Tax Receivable Agreement are also not conditioned upon TRA Holders maintaining a continued ownership interest in York Space Systems. See “Certain Relationships and Related Transactions, and Director Independence—Tax Receivable Agreement” in Item 13 of Part III of this Annual Report on Form 10-K for more information.
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The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount and timing of the taxable income we generate in the future and the federal tax rates then applicable.
The amounts that we may be required to pay to TRA Holders under the Tax Receivable Agreement may be accelerated in certain circumstances and may also significantly exceed the actual tax benefits that we ultimately realize.
The Tax Receivable Agreement provides that if (i) certain mergers, asset sales, other forms of business combination or other changes of control were to occur, (ii) we breach any of our material obligations under the Tax Receivable Agreement or (iii) at any time, we elect an early termination of the Tax Receivable Agreement, then the Tax Receivable Agreement will terminate and our obligations, or our successor’s obligations, to make payments under the Tax Receivable Agreement would accelerate and become immediately due and payable. The amount due and payable in that circumstance is based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement. See “Certain Relationships and Related Transactions, and Director Independence—Tax Receivable Agreement” in Item 13 of Part III of this Annual Report on Form 10-K. We may need to incur debt to finance payments under the Tax Receivable Agreement to the extent our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise.
As a result of a change in control, material breach or our election to terminate the Tax Receivable Agreement early, (i) we could be required to make cash payments to TRA Holders that are greater than 85% of the actual benefits we ultimately realize in respect of the Covered Tax Assets and (ii) we would be required to make an immediate cash payment equal to the anticipated future tax benefits that are the subject of the Tax Receivable Agreement discounted in accordance with the Tax Receivable Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combination, or other changes of control. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement. If we were to elect to terminate the Tax Receivable Agreement on February 28, 2026, we estimate that we would be required to pay under the Tax Receivable Agreement an amount equal to the present value of the gross amount of approximately $262.0 million.
In addition, payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, consistent with the terms of the Tax Receivable Agreement. No TRA Holder will be required under any circumstances to make a payment or return a payment to us in respect of any portion of any payment previously made to such TRA Holder under the TRA if a tax reporting position relating to a TRA tax attribute is challenged. If it is determined that excess payments have been made under the Tax Receivable Agreement, certain future payments, if any, otherwise to be made will be reduced. As a result, in certain circumstances, including, for example, if a previously claimed deduction is subsequently disallowed, payments could be made under the Tax Receivable Agreement in amounts that exceed 85% of the actual tax savings we realize in respect of the TRA tax attribute.
We may not be able to realize all or a portion of the tax benefits that are currently expected to result from the tax attributes covered by the Tax Receivable Agreement and from payments made under the Tax Receivable Agreement.
Our ability to realize the tax benefits that we currently expect to be available as a result of the Covered Tax Assets and the payments made pursuant to the Tax Receivable Agreement all depend on a number of assumptions, including that we earn sufficient taxable income each year during the period over which such deductions are available and that there are no adverse changes in applicable law or regulations. Additionally, if our actual taxable income were insufficient or there were additional adverse changes in applicable law or regulations, we may be unable to realize all or a portion of the expected tax benefits and our cash flows and shareholders’ equity could be negatively affected. See “Certain Relationships and Related Transactions, and Director Independence—Tax Receivable Agreement” in Item 13 of Part III of this Annual Report on Form 10-K.
The Tax Receivable Agreement will continue to be payable regardless of whether TRA Holders or its beneficial owners continue to own an interest in York Space Systems.
We will be obligated to make substantial payments under the Tax Receivable Agreement to TRA Holders for the realization or deemed realization of the benefit of the Covered Tax Assets, regardless of whether the TRA Holders continue to hold interests in York Space Systems following our IPO. For example, in connection with a change of control, and
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certain other transactions, the TRA Holders will be entitled to receive the full value of the amounts payable under the Tax Receivable Agreement with respect to the Covered Tax Assets regardless of whether the tax benefit of the Covered Tax Assets has been realized or will be realized in the future and without regard to any impairment of the future tax benefit of the Covered Tax Assets such as under Section 382 of the Code. The payment obligations in these scenarios will effectively be treated as debt of York Space Systems and the value of payments may be material and will reduce the amount of cash paid to equity holders in connection with a change of control. Accordingly, you should be aware that these ongoing obligations under the Tax Receivable Agreement may adversely affect the value of your investment in York Space Systems.
Risks Related to Our Indebtedness
Our substantial indebtedness could materially adversely affect our financial condition.
We have a significant amount of indebtedness. As of December 31, 2025, we had $150.0 million of term loans outstanding under the Term Loan Facility (as defined herein) and $150.0 million available for borrowing under the Revolving Facility (as defined herein) (after giving effect to outstanding letters of credit). All obligations under the Term Loan Facility and the Revolving Facility are guaranteed by certain of our subsidiaries and are secured by substantially all of our assets.
Our substantial indebtedness under the Credit Agreement (as defined herein), and any future indebtedness we may incur could have important consequences to the holders of our common stock, including the following:
• making it more difficult for us to satisfy our obligations with respect to our and our subsidiaries’ other debt;
• limiting our and our subsidiaries’ ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements;
• requiring us to dedicate a substantial portion of our cash flows to debt service payments and to use proceeds from various transactions to prepay debt, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions, and other general corporate purposes;
• increasing our vulnerability to general adverse economic and industry conditions;
• exposing us to the risk of increased interest rates, to the extent any of our borrowings are at variable rates of interest;
• limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
• placing us at a disadvantage compared to other, less leveraged competitors; and
• increasing our cost of borrowing.
In addition, the Credit Agreement contains, and agreements governing our future borrowings may contain, financial covenants that require us to maintain certain liquidity and cash flow metrics, as well as restrictive covenants that limit our and certain of our subsidiaries’ ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all our debt.
We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the Credit Agreement contains, and agreements governing our future borrowings may contain, restrictions on the incurrence of additional indebtedness, these restrictions are, or may in the future be, subject to a number of qualifications and exceptions, and the amount of additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute “indebtedness” under the Credit Agreement.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled principal and interest payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory, and other factors, some of which are beyond our control. We cannot be sure that our business will generate sufficient cash flows from operating activities, or that future borrowings will be available, to permit us to pay the principal and interest on our indebtedness.
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If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Credit Agreement restricts, and any agreement governing any debt we incur in the future may restrict, our ability to dispose of assets and use the proceeds from those dispositions and also limits our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
Additionally, if we cannot make scheduled payments on our debt, we will be in default, and the outstanding principal amount of indebtedness thereunder may be accelerated, commitments to loan money may be terminated and/or assets securing such borrowings may be foreclosed against, as applicable in the relevant debt instrument, and we could be forced into bankruptcy or liquidation. Any of these events could result in you losing all or a portion of your investment in the common stock.
Agreements governing our current and future indebtedness will contain covenants that restrict our current and future operations, including our ability to respond to changes or to take certain actions.
The Credit Agreement contains, and any future indebtedness agreements we enter into will likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries and may limit our and our subsidiaries’ abilities to engage in acts that may be in our long-term best interest. These covenants may include restrictions on our and our subsidiaries abilities to:
• incur additional indebtedness and guarantee indebtedness;
• pay dividends or make other distributions or repurchase or redeem our capital stock;
• prepay, redeem, or repurchase junior debt;
• issue certain preferred stock or similar equity securities;
• make loans and investments;
• sell assets or property, except in certain circumstances;
• sell or license intellectual property, except in certain circumstances;
• incur liens;
• dispose of our assets;
• enter into transactions with affiliates;
• modify or waive certain material agreements in a manner that is adverse in any material respect to the lenders;
• enter into agreements restricting our subsidiaries’ ability to pay dividends; and
• make fundamental changes in our business, corporate structure, or capital structure, including, among other things, entering into mergers, acquisitions, consolidations, and other business combinations or selling all or substantially all of our assets.
As a result of these restrictions, we may be:
• limited in how we conduct our business;
• unable to raise additional debt or equity financing to operate during general economic or business downturns; or
• unable to compete effectively or to take advantage of new business opportunities.
These restrictions may affect our ability to grow in accordance with our strategy. If we incur indebtedness provided or guaranteed by the U.S. government, we may be subject to additional restrictions on our operations, including limitations on employee headcount and compensation reductions and other cost reduction activities.
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Risks Related to Ownership of Our Common Stock
The market price of our common stock may be volatile or may decline steeply or suddenly regardless of our operating performance. You may not be able to resell your shares at or above the price at which you purchased such shares and may lose all or part of your investment.
There has been no prior public market for our common stock prior to our IPO. Purchasers of our common stock may not be able to resell those shares at or above their purchase price. The market price of our common stock fluctuates and may decline significantly in response to numerous factors, many of which are beyond our control, including:
• actual or anticipated fluctuations in our revenues or other operating results;
• variations between our actual operating results and the expectations of securities analysts, investors, and the financial community;
• any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information;
• actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors;
• additional shares of common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if existing stockholders sell shares into the market when the applicable “lock-up” periods end;
• announcements by us or our competitors of significant products or features, innovations, acquisitions, strategic partnerships, joint ventures, capital commitments, divestitures, or other dispositions;
• loss of relationships with significant suppliers or other customers;
• changes in operating performance and stock market valuations of companies in our industry, including our competitors;
• difficulties in integrating any new acquisitions we may make;
• loss of services from members of management or employees or difficulty in recruiting additional employees;
• deterioration of economic conditions in the United States and reduction in demand for our products;
• price and volume fluctuations in the overall stock market, including as a result of general economic trends;
• lawsuits threatened or filed against us, or events that negatively impact our reputation; and
• developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies.
In addition, extreme price and volume fluctuations in the stock markets have affected and continue to affect the stock prices of many companies. Often, their stock prices have fluctuated in ways unrelated or disproportionate to their operating performance. In the past, stockholders have filed securities class action litigation against companies following periods of market volatility. Such securities litigation, if instituted against us, could subject us to substantial costs, divert resources and the attention of management from our business and seriously harm our business.
An active trading market for our common stock may never develop or be sustained.
Our IPO occurred in January 2026. Therefore, there has been a public market for our common stock for a short period of time. However, we cannot be certain that an active trading market for our common stock will be sustained. Furthermore, we cannot be certain that we will continue to satisfy the continued listing standards of the NYSE. If we fail to satisfy the continued listing standards, we could be de-listed, which would have a material adverse effect on the liquidity and price of our common stock. Accordingly, we cannot assure you of the liquidity of any trading market, your ability to sell your shares of our common stock when desired or the prices that you may obtain for your shares of our common stock.
Future sales of our common stock and other actions by existing stockholders could cause our stock price to decline.
If our existing stockholders, including employees, who have or obtain equity, sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and legal restrictions on resale related to our IPO lapse, the trading price of our common stock could decline. Currently, only the shares of common stock sold in the
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our IPO are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held by persons who are not our “affiliates” as defined in Rule 144 under the Securities Act and who have complied with the holding period requirements of Rule 144 under the Securities Act.
In connection with the IPO, we and our officers, directors, and holders of substantially all of our common stock and securities convertible into or exercisable for our common stock, including AE Industrial Partners, have agreed, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from January 30, 2026 continuing through July 29, 2026, except with the prior written consent of at least two of the representatives (which must include Goldman Sachs & Co. LLC) of the underwriters our IPO. In connection with the acquisition of Orbion, the sellers who received shares of our common stock as consideration for our purchase, agreed to similar restrictions with the same timeline.
When the lock-up period in these agreements expires, we, our officers and directors, AE Industrial Partners, and such other stockholders will be able to sell shares in the public market. In addition, at least two of the representatives (which must include Goldman Sachs & Co. LLC) on behalf of the underwriters may, in their sole discretion, release all or some portion of the shares subject to the lock-up agreements prior to the expiration of the lock-up period. Sales of a substantial number of such shares, or the perception that such sales may occur, upon the expiration or early release of the securities subject to the lock-up agreements could cause the price of our common stock to decline or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.
In addition, certain of our stockholders have demand and “piggy-back” registration rights with respect to our common stock.
Your ability to achieve a return on your investment will depend on appreciation in the price of our common stock because we currently do not intend to pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.
We currently do not anticipate paying any cash dividends for the foreseeable future. In addition, the terms of our indebtedness limit our ability to pay dividends or make other distributions on, or to repurchase or redeem, shares of our capital stock. Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our common stock appreciates and you sell your shares at a profit. There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price that you pay. We cannot be sure that we will pay dividends in the future or continue to pay dividends if we do commence paying dividends.
If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us, our business, or our market, if they adversely change their recommendations regarding our common stock, or if our operating results do not meet their expectations or any financial guidance we may provide, the trading price or trading volume of our common stock could decline.
The trading market for our common stock will be influenced in part by the research and reports that securities or industry analysts may publish about us, our business, our market, or our competitors. If one or more of the analysts initiate research with an unfavorable rating or downgrade our common stock, provide a more favorable recommendation regarding our competitors, or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more analysts who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price or trading volume of our common stock to decline.
In addition, if we do not meet any financial guidance that we may provide to the public or if we do not meet expectations of securities analysts or investors, the trading price of our common stock could decline significantly. Our operating results may fluctuate significantly from period to period as a result of changes in a variety of factors affecting us or our industry, many of which are difficult to predict. As a result, we may experience challenges in forecasting our operating results for future periods.
Future issuances of our common stock could result in significant dilution to our stockholders, dilute the voting power of our common stock and depress the market price of our common stock.
Future issuances of our common stock, such as the recent issuance in connection with the acquisition of Orbion, could result in dilution to existing holders of our common stock. Such issuances, or the perception that such issuances may
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occur, could depress the market price of our common stock. We may issue additional equity securities from time to time, including equity securities that could have rights senior to those of our common stock. As a result, purchasers of shares of common stock bear the risk that future issuances of equity securities may reduce the value of their shares and dilute their ownership interests. Also, to the extent outstanding stock-based awards are issued or become vested, there will be further dilution to the holders of our common stock.
We will incur increased costs and devote substantial management time as a result of operating as a public company.
As a public company, we incur significant legal, accounting, investor relations, and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and the NYSE, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. The requirements of operating as a public company have increased our legal and financial compliance and investor relations costs and made some activities more time consuming and costly. In addition, our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an emerging growth company, as defined by the JOBS Act. We were also required to establish an investor relations function. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of those costs.
Public company reporting and disclosure obligations and a broader stockholder base as a result of our status as a public company may expose us to a greater risk of claims by stockholders, and we may experience threatened or actual litigation from time to time. If claims asserted in such litigation are successful, our business and operating results could be adversely affected, and, even if claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them and the diversion of management resources, could adversely affect our business and operating results.
In addition, we expect that being a public company subject to these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
We are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, under the JOBS Act, emerging growth companies can delay the adoption of certain new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less as a result, there may be a less active trading market for our common stock and our stock price may be more .
We may take advantage of these reporting exemptions until we are no longer an emerging growth company or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following
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the fifth anniversary of the date of the completion of our IPO; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Risks Related to Our Organizational Structure
AE Industrial Partners has significant influence over us, and its interests may conflict with ours or yours in the future.
AE Industrial Partners and its respective affiliates have the ability to exercise significant influence over us, which could delay or prevent a change of corporate control or result in the entrenchment of our management and/or our board of directors.
AE Industrial Partners beneficially owns, in the aggregate, approximately 23.8 % of our outstanding common stock. In addition, Voting Agreement Stockholders have entered into voting arrangements with the Company, pursuant to which the Voting Agreement Stockholders have granted AE Industrial Partners the right to direct the voting of the shares of common stock held by the Voting Agreement Stockholders with respect to the election of the Company’s directors and the Company will exercise its rights under the Voting Agreement for the benefit of AE Industrial Partners pursuant to the terms of the Director Nomination Agreement. As a result, AE Industrial Partners has significant influence over our management and affairs.
Our concentration of ownership may harm the market price of our common stock by, among other things:
• delaying, deferring or preventing a change of control, even at a per share price that is in excess of the then-current price of our common stock;
• impeding a merger, consolidation, takeover or other business combination involving us, even at a per share price that is in excess of the then-current price of our common stock; or
• discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, even at a per share price that is in excess of the then current price of our common stock.
Provisions in our certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our common stock.
Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that our stockholders may deem advantageous. In particular, our certificate of incorporation and bylaws:
• establish a classified board of directors so that not all members are elected at one time, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
• permit our board of directors to establish the number of directors and fill any vacancies (including vacancies resulting from an expansion in the size of our board of directors);
• establish limitations on the removal of directors, following a Trigger Date (as defined herein);
• authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
• provide that our board of directors is expressly authorized to make, alter, or repeal our bylaws without stockholder approval and that stockholders may adopt, amend, alter, or repeal our bylaws by the affirmative vote of a majority of the voting power of our outstanding common stock (other than certain specified bylaws which, following the Trigger Date, will require the affirmative vote of two-thirds of our outstanding common stock);
• restrict the forum for certain litigation against us to Delaware;
• provide that stockholders may not act by written consent following the Trigger Date, which would require stockholder action to be taken at an annual or special meeting of our stockholders;
• prohibit stockholders from calling special meetings following the Trigger Date, which would delay the ability of our stockholders to force consideration of a proposal or to take action, including with respect to the removal of directors; and
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• establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings, other than with respect to AE industrial Partners prior to the Trigger Date, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Section 203 of the Delaware General Corporation Law (the “DGCL”) prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person, individually or together with any other interested stockholder, who owns or within the last three years has owned 15% of our voting stock, unless the business combination is approved in a prescribed manner. We have elected to opt out of Section 203 of the DGCL. However, our certificate of incorporation contains a provision that is of similar effect, except that it will exempt from its scope AE Industrial Partners, any of its affiliates and certain of their respective direct or indirect transferees.
Any provision of our certificate of incorporation, our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of common stock and could also affect the price that some investors are willing to pay for our common stock.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders and the federal district courts of the United States as the exclusive forum for litigation arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents.
Pursuant to our certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any claims in state court for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees, or stockholders to us or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws, or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine; provided that for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action,” does not apply to suits to enforce a duty or liability created by Securities Act, the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.
Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our certificate of incorporation will also provide that, unless we consent in writing to the selection of an alternative forum and to the fullest extent permitted by law, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that our federal forum provision should be enforced in a particular case, application of our federal forum provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and our certificate of incorporation will provide that neither the exclusive forum provision nor our federal forum provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Our certificate of incorporation further provides that any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our certificate of incorporation described above. The forum selection provision in our certificate of incorporation may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. If the enforceability of our forum selection provisions were to be challenged, we may incur additional costs associated with resolving such challenge. While we currently have no basis to expect any such challenge would be successful, if a court were to find our forum selection provisions to be inapplicable or unenforceable with respect to one or more of these specified types of actions or proceedings, we may incur additional costs associated with having to litigate in other jurisdictions, which could have an effect on our business, financial
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condition, results of operations, cash flows, and prospects and result in a diversion of the time and resources of our employees, management, and board of directors.
Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities.
Under our certificate of incorporation, neither of AE Industrial Partners nor any of its respective portfolio companies, funds, or other affiliates, nor any of its officers, directors, employees, agents, stockholders, members, or partners have any duty to refrain from engaging, directly, or indirectly, in the same business activities, similar business activities, or lines of business in which we operate. In addition, our certificate of incorporation provides that, to the fullest extent permitted by law, no officer or director of ours who is also an officer, director, employee, agent, stockholder, member, partner, or affiliate of either of AE Industrial Partners will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to AE Industrial Partners, instead of to us, or does not communicate information regarding a corporate opportunity to us that the officer, director, employee, agent, stockholder, member, partner or affiliate has directed to AE Industrial Partners. For example, a director of our company who also serves as an officer, director, employee, agent, stockholder, member, partner, or affiliate of AE Industrial Partners, or any of their respective portfolio companies, funds, or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other may not be available to us. These potential of interest could have a material effect on our business, financial condition, results of operations, or prospects if corporate are allocated by AE Industrial Partners to itself or its respective portfolio companies, funds, or other affiliates instead of to us.
We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.
Following our IPO in late January 2026, AE Industrial Partners controls, through share ownership and contractual arrangements, a majority of the voting power of our outstanding voting stock with respect to the election of our directors, and as a result we are a controlled company within the meaning of NYSE corporate governance standards. Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that:
• a majority of the board of directors consist of independent directors;
• the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
• the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
We currently utilize these exemptions and intend to do so as long as we remain a controlled company. As a result, we may not have a majority of independent directors and our nominating and corporate governance committee and compensation committee do not consist entirely of independent directors. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
Pursuant to Rule 10C-1 under the Exchange Act, the NYSE has adopted amendments to its listing standards that require, among other things, that:
• compensation committees be composed of fully independent directors;
• compensation committees be explicitly charged with hiring and overseeing compensation consultants, legal counsel, and other committee advisors; and
• compensation committees be required to consider, when engaging compensation consultants, legal counsel, or other advisors, certain independence factors, including factors that examine the relationship between the consultant or advisor’s employer and us.
As a “controlled company,” we will not be subject to these compensation committee requirements.
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