Item 1A. Risk Factors
Our business, financial condition, results of operations and cash flows are subject to various risks which may cause actual performance to differ materially from historical or projected future performance, many of which are not exclusively within our control. The risks described below are the primary risks known to us which we believe could materially affect our business, financial condition, results of operations, or cashflows. However, these risks may not be the only risks that could impact us. Our business could also be affected by other factors which are not presently known to us, factors we currently consider to be immaterial to our operations, or factors that could emerge as new risks in the future.
Risks Relating to Our Company and Business
Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations .
Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences of such imposition, may have a material adverse impact on our business and results of operations and of our business partners and suppliers. In particular, the U.S. government has adopted a new approach to trade policy and in many cases is renegotiating, or potentially terminating, certain existing bilateral or multi-lateral trade agreements. It has also imposed or is considering the imposition of tariffs on certain foreign goods, including certain products imported into the United States from Mexico, Canada, China and numerous other jurisdictions. These measures have resulted in, and are likely to continue to result in, increased costs for goods imported into the United States, particularly if these measures are implemented in regions where we or our suppliers source components or raw materials. This in turn has required and may continue to require us to increase the prices we charge to our customers, which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold. Further, changes in U.S. trade policy have resulted in, and likely will continue to result in one or more of the United States’ trading partners adopting responsive trade policies making it more difficult or costly for us to export our products to those countries. Countries may also adopt other measures, such as controls on imports or exports of goods, technology or data, which could adversely impact our operations and supply chain. Any such volatility and disruptions may adversely affect our business or the third parties on whom we rely. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets.
There is substantial uncertainty about the duration of existing tariffs and whether additional tariffs may be imposed, modified or suspended. We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. The adoption and expansion of trade restrictions, reciprocal tariffs, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, costs, customers, suppliers, and the U.S. economy, which in turn could adversely impact our business, financial condition and results of operations.
In February 2026, the U.S. Supreme Court (the “Court") issued a ruling holding that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") are not legally authorized. The Court only ruled on IEEPA tariffs and did not invalidate any other tariffs. Although the ruling has been issued, its implications for trade policy and related administrative actions remain uncertain. A number of tariff-related matters continue to be challenged that could impact the continued utilization of certain tariffs and the manner in which tariff costs. Adverse rulings, or the replacement or implementation of new tariffs or trade restrictions, could adversely impact our business, financial condition and results of operations.
A disruption, termination or alteration of the supply of critical components from third-party suppliers could materially adversely affect the sales of our products.
Our sales and manufacturing processes depend on the supply of critical components such as vehicle chassis, engines, transmissions, wire harnesses, axles and hydraulic pumps from major vehicle manufacturers and other suppliers. If our suppliers experience production delays, if the quality or design of their products change, if they implement recalls or change or discontinue the specific type of products they manufacture, or terminate their relationships with us, we could incur significant costs or disruptions to our business, which could have a material adverse effect on our sales, financial condition, profitability and/or cash flows. At various times, we may carry increased inventory to protect against these concerns, which may negatively impact our results of operations.
The steel, stainless steel, aluminum and other raw materials and components for our U.S. business are predominantly manufactured in the U.S. and purchased from U.S. domestic suppliers. However, to the extent tariffs increase the price of imported products, others in the industry may choose to increase their orders from U.S. domestic suppliers, which could strain the capacity of our U.S. domestic suppliers, putting the normal, uninterrupted supply of components to us at risk. In addition, U.S. domestic suppliers that currently incorporate imported components in their products may be subject to the same issues, i.e., increased costs of those imported components and limited availability of U.S. domestic supplier sources. Our suppliers could also experience operational delays or disruptions, including as a result of reacting to the imposition of tariffs, the outbreak of epidemics or other public health crises, which could in turn affect our manufacturing processes and sales. Additionally, certain important components that we use in our vehicles, such as engines and transmissions, are produced by a limited number of qualified suppliers and for some components may be limited to a single source of supply, so any disruption in their supply to us of such components could have a negative impact on our business.
Volatility in the financial markets generally, and in the truck and automotive sectors in particular, could impact the financial viability of certain of our key third-party suppliers, or could cause them to exit certain business lines, or change the terms on which they are willing to provide products. During 2018 and 2019, many of our suppliers encountered production issues and delivery delays due to factors including a vendor factory fire, new plant location inefficiencies, unplanned work stoppages and indirect impacts from the implementation of tariffs. A recurrence of any of these events or another similar development could lead to difficulties in meeting our customers’ demands and reduce our overall sales volume. Further, any changes in quality or design, capacity limitations, shortages of raw materials or other problems could result in shortages or delays in the supply of vehicle chassis or components to us. Our business, operating results and financial condition could suffer if our suppliers reduce output or make changes to chassis models that are unpopular with customers or are incompatible with current product designs or production process.
In addition, a growth in popularity of EVs without a significant expansion in battery cell production capacity could result in shortages, which could result in increased materials costs and could adversely impact our projected manufacturing and delivery timelines.
Increases in the price of commodities would impact the cost or price of our products, which may impact our ability to sustain and grow earnings.
Our manufacturing processes consume significant amounts of raw materials, the costs of which are subject to worldwide supply and demand factors, as well as other factors beyond our control, including continuing inflation. Raw material price fluctuations may adversely affect our results. We purchase, directly and indirectly through component purchases, significant amounts of aluminum, stainless steel, nickel (in particular as part of stainless steel), plastics and other resins, wood, electronic components, cables, and fiberglass products as well as other commodity-sensitive raw materials annually. In particular, in past years, steel and aluminum prices have experienced volatility which has been unforeseen and unexpected. Further, tariffs enacted or proposed by the U.S. government, or retaliatory tariffs, could further increase the price of components imported from international suppliers, and lift prices of certain commodities generally, regardless of origin. For example, tariffs increasing the cost of wood imported from Canada would likely lead to commercial and price pressures from U.S. producers as the result of consumers moving purchases to U.S. producers. Although at times we purchase steel, aluminum and other raw materials in advance to provide certainty regarding portions of our pricing and supply, for the majority of our raw material purchases, we do not typically enter into any fixed-price contracts and may not be able to accurately anticipate future raw material prices for those inputs, including the impacts of inflation. Commodity pricing has fluctuated significantly over the past few years and may continue to do so in the future. In addition, the cost of land and sea transportation is impacted by fluctuations in the cost of crude oil and diesel.
Such fluctuations in commodity prices could have a material effect on our results of operations, balance sheets and cash flows and impact the comparability of our results between financial periods.
Any negative change in our relationship with major customers could have significant adverse effects on revenues and profits.
Our financial success is directly related to customers continuing to purchase our products. Failure to fill customers’ orders in a timely manner or on the terms and conditions of sale could harm our relationships with customers. The importance of maintaining excellent relationships with our major customers may also give those customers leverage in their negotiations with us, including pricing and other supply terms, as well as post-sale disputes. This leverage may lead to increased costs or reduced profitability for us. Furthermore, if any of our major customers experience a significant downturn in their business or fail to remain committed to their products or brands, these customers may reduce or discontinue purchases from us, which could have an adverse effect on our business, results of operations and financial condition.
The unavailability, reduction, elimination or adverse application of government funding could have an adverse effect on our business, prospects, financial condition and operating results.
The risk associated with government customers is linked to fluctuations in their tax revenues and budgets. While many of our products are often prioritized - being either safety-critical equipment for street maintenance (e.g., ice and snow removal) or mission-critical airport equipment - there remains a risk that budget constraints could lead to delays in funding allocations, impacting order timelines. Although government and municipal customers typically are required by law to maintain these operations, financial pressures may result in postponed or deferred purchases.
The agricultural sector faces a similar risk related to funding. Farmers typically rely on subsidies from public institutions, and spending in this sector is heavily dependent on the availability of those funds. Any reduction or delay in subsidies could directly impact purchasing decisions, posing a risk to demand for our products. For example, the U.S. federal government recently has frozen or otherwise refused to honor certain promised payments and subsidies to farmers and others, which poses such a risk.
Our U.S. airport customers operate under FAA regulations, so any failure of our equipment could have significant operational consequences. Funding for airport improvements comes from the FAA’s Airport Improvement Program (“AIP”), which requires compliance with the Buy American Act. A government shutdown or budget cuts would pose a direct risk, leading to delays in funding approvals and project execution. The Airport & Airway Trust Fund (“AATF”), a key funding source within the AIP, is government-funded and closely tied to federal budget decisions. Any reductions in government spending could negatively impact AATF allocations, directly affecting purchase decisions and potentially delaying orders.
We may not be able to remain competitive in the rapidly changing markets in which we compete.
We operate in a highly competitive environment in each of the markets we serve, and face competition in each of our product segments from numerous competitors. We compete principally on the basis of customer loyalty and repeat buyers, client-specific customization, product quality and reliability, breadth of product offering, manufacturing capability and flexibility, technical capability, product innovation, customer service, after-sales support, delivery times and price.
The markets we serve are undergoing rapid transformation, particularly with respect to EVs and autonomous vehicles. Our current and potential competitors include companies that have significantly greater financial, technical, manufacturing, marketing and other resources than we do, including OEMs and certain of their customers who are highly motivated by market opportunities to deploy those resources to the design, development, manufacturing, distribution, promotion, sale and support of their products, including their EVs and autonomous vehicles. As a result of these market opportunities, OEMs and other companies have taken actions to reduce costs, including through in-sourcing, supply base consolidation and vertical integration. We expect these trends to continue and even accelerate. We expect competition for EVs and autonomous vehicles to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide vehicle industry. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results, and prospects. Our business will be adversely affected if we are unable to adequately respond to these pressures or otherwise continue to compete in these markets.
Amounts included in order backlog may not result in actual revenue and are an uncertain indicator of our future revenue.
Backlog is generally comprised of agreements and purchase orders from customers that are subject to modification, cancellation, or rescheduling. We report these orders in our backlog at aggregate selling prices, net of discounts or allowances, and for certain products we recognize revenues based upon percentage completion. While realization of revenue related to order backlog has not been a major issue in the past, we cannot assure that we will recognize revenue with respect to each order included in order backlog. Should a cancellation occur, our order backlog and anticipated revenue would be reduced unless we are able to replace the cancelled order. As a result, the order backlog is not entirely within our control, and may not be indicative of future sales and can vary significantly from period to period. Reductions in our order backlog could negatively impact our future results of operations.
We evaluate our order backlog at least quarterly to determine if the orders continue to meet our criteria for inclusion in order backlog and to verify percentage of completion. We may adjust our reported order backlog to account for any changes, including those arising from continued customer intent and ability to fulfill order, supply base capacity, and changes in our ability, or the methodology used, to determine whether an order is likely to be completed. We cannot assure that our order backlog will result in revenue on a timely basis or at all, or that any cancelled contracts will be replaced. As a result, the order backlog may not be indicative of future sales and can vary significantly from period to period. In addition, it is possible that the methodology for determining the order backlog may not be comparable to methods used by other companies.
In addition, as a result of firm purchase orders from our customers, we may enter into agreements to produce and sell vehicles at a specified price with certain adjustments for changes and options based upon our estimation of the cost to produce and the timing of delivery. Due to the nature of these product cost estimates and the fluctuations in input costs and availability, we may underestimate the costs of production and therefore overestimate the profitability in the backlog. As a
result, the actual profitability of those sales in the future may differ materially from the initial estimates when we recorded the firm purchase orders in backlog.
Our ability to meet customer delivery schedules is dependent on a number of factors including, but not limited to, access to components and raw materials, an adequate and capable workforce, assembling/engineering expertise for certain projects and sufficient manufacturing capacity. The availability of these factors may in some cases be subject to conditions outside of our control. A failure by us to deliver in accordance with our performance obligations may result in financial penalties under certain of our contracts and damage to existing customer relationships, damage to our reputation and loss of future bidding opportunities, which could cause the loss of future business and could negatively impact our financial performance.
The integration of businesses or assets we have acquired or may acquire in the future involves challenges that could disrupt our business and harm our financial condition.
As part of our growth strategy, we have pursued and expect to continue to selectively pursue acquisitions of businesses or assets to diversify, expand our capabilities, enter new markets, or increase our market share. Integrating any newly acquired business or assets can be expensive and can require a great deal of management time and other resources. We cannot guarantee that we will be able to identify attractive acquisition targets or assets. If we are unable to successfully integrate newly acquired businesses (including Shyft) with our existing business, we will not realize the synergies we expect from the acquisition and our business and results of operations would be adversely impacted.
Reconfiguration or relocation of our production operations could negatively impact our earnings.
We may, from time to time, reconfigure our production lines or relocate production of products between buildings or locations or to new locations to maximize the efficient utilization of our existing production capacity or take advantage of opportunities to increase manufacturing efficiencies. Costs incurred to affect these reconfigurations or relocations may exceed our estimates, and the efficiencies gained may be less than anticipated, each of which may have a negative impact on our results of operations and financial position.
Unforeseen or recurring operational problems at any of our facilities, or a catastrophic loss of one of our key manufacturing facilities, may cause significant lost production and adversely affect our results of operations.
Our manufacturing process could be affected by operational problems that could impair our production capability. Many of our manufacturing facilities contain sophisticated machines that are used in our manufacturing process. Disruptions or shutdowns at any of our facilities could be caused by:
• maintenance outages to conduct maintenance activities that cannot be performed safely during operations;
• prolonged power failures or reductions;
• breakdown, failure or substandard performance of any of our machines or other equipment;
• noncompliance with, and liabilities related to, environmental requirements or permits;
• disruptions in the transportation infrastructure, including railroad tracks, bridges, tunnels or roads;
• fires, floods, earthquakes, tornadoes, hurricanes, microbursts or other catastrophic disasters, national emergencies, pandemics, political unrest, war or terrorist activities; or
• other operational problems.
If some of our facilities are shut down, they may experience prolonged startup periods, regardless of the reason for the shutdown. Those startup periods could range from several days to several weeks or longer, depending on the reason for the shutdown and other factors. Any prolonged disruption in operations at any of our facilities could cause a significant loss of production and adversely affect our results of operations and negatively impact our customers and dealers. Further, a catastrophic event could result in the loss of the use of all or a portion of one of our manufacturing facilities. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. Any of these events individually or in the aggregate could have a material adverse effect on our business, financial condition and operating results.
Disruptions within our dealer network could adversely affect our business.
We rely, for certain of our products, on a network of independent dealers to market, stock, deliver, provide training for, and service our products to and for customers. Our business is influenced by our ability to initiate and manage new and existing relationships with dealers.
From time to time, we or an individual dealer may choose to terminate the relationship, or the dealership could face financial difficulty leading to bankruptcy or other failure, or difficulty in transitioning to new ownership, in each case leading to a temporary loss of distribution channels. In addition, our competitors could engage in a strategy to attempt to acquire or convert our dealers to carry their products. We do not believe our business is dependent on any single dealer, the loss of which would have a sustained material adverse effect on our business.
However, the disruption of dealer coverage within a specific local market could have an adverse impact on our business within the affected market. The loss or termination of a significant number of dealers could cause difficulties in marketing and distributing our products and have an adverse effect on our business, operating results or financial condition. If a dealer in a strategic market experiences financial difficulty, we may choose to provide financial support such as extending credit to a dealership, reducing the risk of disruption, but increasing our financial exposure.
Additionally, there is a competitive risk related to the distribution chain, as dealers operate independently and set their own pricing and conditions in the market. While we may seek to mitigate that risk through direct sales, we have no control over dealer pricing strategies. This risk could impact the competitiveness of our products in specific dealer markets.
We may be unsuccessful in implementing our growth strategy.
Our growth strategy includes expanding existing market share through product innovation, continued expansion into industrial and global markets and merger or acquisition related activities. We believe that our future success depends in part on our research and development and engineering efforts, our ability to manufacture or source the products and customer acceptance of our products. As it relates to new markets, our success also depends on our ability to create and implement local supply chain, sales, distribution and services strategies to reach these markets.
The potential inability to successfully implement and manage our growth strategy could adversely affect our business and our results of operations. The successful implementation of our growth strategy will depend, in part, on our ability to integrate operations with acquired companies.
We also make investments in new business development initiatives which could have a relatively high failure rate. We limit our investments in these initiatives and establish governance procedures to contain the associated risks, but losses could result and may be material. Our growth strategy also may involve acquisitions, joint venture alliances and additional arrangements of distribution. We may not be able to enter into acquisitions or joint venture arrangements on acceptable terms, and we may not successfully integrate these activities into our operations. We also may not be successful in implementing new distribution channels, and changes could create discord in our existing channels of distribution.
When we introduce new products, we may incur expenses that we did not anticipate, such as recall expenses, resulting in reduced earnings.
The introduction of new products is critical to our future success. We will have additional costs when we introduce new products, such as initial labor or purchasing inefficiencies and costs to identify and comply with product regulations applicable to the new products. But we may also incur unexpected expenses. For example, we may experience unexpected engineering or design issues that will force a recall of a new product, increase our warranty costs for the new product, or increase production costs of the product above levels needed to ensure profitability. In addition, we may make business decisions that include offering incentives to stimulate the sales of products not adequately accepted by the market, or to stimulate sales of older or less marketable products. The costs resulting from these types of problems could be substantial and have a significant adverse effect on our earnings.
We may discover defects in our vehicles, potentially resulting in delaying new model launches, recall campaigns, increased warranty costs, liability or other costs.
Meeting or exceeding many government-mandated safety standards is costly and often technologically challenging. Government safety standards require manufacturers to remedy defects related to motor vehicle safety through safety recall campaigns, and a manufacturer is obligated to recall vehicles if we determine that they do not comply with relevant safety standards. Should we or government safety regulators determine that a safety or other defect or noncompliance exists with respect to certain of our vehicles, there could be a delay in the launch of a new model, recalls of existing models or a significant increase in warranty claims, the costs of which could be substantial. Any actual or perceived defect or other
quality issue in our products could be costly to address and could also lead to potential liability or reputational damage. Additionally, the vehicles we manufacture for sale are subject to strict contractually established specifications using complex manufacturing processes. If we fail to meet the contractual requirements for a vehicle or a part, we could be subject to warranty costs to repair or replace the part itself and additional costs related to the investigation and inspection of non-complying parts. These potential warranty and repair and replacement costs are generally not covered by our insurance. We establish warranty reserves that represent our estimate of expected costs for fulfilling our warranty obligations. We base our estimate for warranty reserves on our historical experience and other related assumptions. If actual results materially differ from these estimates, our results of operations could be materially affected.
In addition, we may not be able to enforce warranties and extended warranties received or purchased from our suppliers if they refuse to honor such warranties or go out of business. Also, a customer may choose to pursue remedies directly under our contract with us over enforcing such supplier warranties. In such a case, we may not be able to recover our losses from the supplier.
Increases in the cost of labor, deterioration in employee relations, union organizing activity and work stoppages at our facilities could have a negative effect on our business.
While we believe our employee relations are generally positive, we cannot assure that our relations with our workforce will remain positive. A deterioration in these relations could have an adverse effect on our business. In addition, we conduct a large portion of our business in highly competitive labor markets. If we are unable to recruit and retain a sufficient workforce, or if the costs of doing so increase, our business could be materially adversely affected.
Union organizers may work to organize employees at some of our facilities. If union representation is implemented at such sites and we are unable to agree with the union on reasonable employment terms, including wages, benefits, and work rules, we could experience a significant disruption of our operations and incur higher ongoing labor costs. Further, if a location does experience organizing activity, our management and other personnel need to divert attention from operational and other business matters to devote substantial time to address such activity.
Our ability to execute our strategy is dependent upon our ability to attract, retain, and develop qualified personnel, including our ability to execute proper succession plans for senior management and key employees.
Our continued success depends, in part, on our ability to identify, attract, motivate, train and retain qualified personnel in key functions and geographic areas, including the members of our senior management team. In particular, we are dependent on our ability to identify, attract, motivate, train and retain qualified engineers and skilled labor with the requisite education, background and industry experience to assist in the development, enhancement, introduction and manufacture of our products and technology solutions.
Failure to attract, train and retain qualified personnel, whether as a result of an insufficient number of qualified local residents or the allocation of inadequate resources to train, integrate and retain, could impair our ability to execute our business strategy and could have an adverse effect on our business prospects. Our success also depends to a large extent upon our ability to attract and retain key executives and other key employees, as well as the existence of a succession plan for these employees. These employees have extensive experience in our markets and are familiar with our business, systems and processes. The loss of the services of one or more of these key employees could have an adverse effect, at least in the short to medium term, on significant aspects of our business, including the ability to manage our business effectively and the successful execution of our strategies, if transitions according to our succession plans are not successful. If certain of these employees decide to leave, we could incur disruptions to the completion of certain initiatives and could incur significant costs in hiring, training, developing and retaining their replacements if our succession plans are not adequate.
Risks associated with international sales and contracts could have a negative effect on our business.
We face numerous risks associated with conducting international operations, any of which could negatively affect our financial performance, including changes in foreign country regulatory requirements, the strength of the U.S. dollar and the Euro compared to other currencies, import/export restrictions, the imposition of tariffs and other trade barriers, disruptions in the shipping of exported products and other logistical challenges. In addition, when we introduce an existing product into a new market, we generally will incur additional costs to adapt that product to local markets, and to identify and comply with product regulations applicable to products in that jurisdiction.
Our EVs rely on software and hardware that is highly technical, and if these systems contain errors, bugs, vulnerabilities, or design defects, or if we are unsuccessful in addressing or mitigating technical limitations in our systems, our EV business could be adversely affected.
Our EVs rely on software and hardware that is highly technical and complex and will require modification and updates over the life of our vehicles. Our software and hardware may contain errors, bugs, vulnerabilities or design defects, and our systems are subject to certain technical limitations that may compromise our ability to meet our objectives. Some errors, bugs, vulnerabilities, or design defects inherently may be difficult to detect and may only be discovered after the product has been released. Although we will attempt to remedy any issues we observe in our vehicles effectively and rapidly, such efforts may not be timely, may hamper production or may not be to the satisfaction of our customers.
If we are unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in our software and hardware, or fail to deploy updates to our software properly, we would suffer damage to our reputation, loss of customers, loss of revenue or liability for damages, any of which could adversely affect our business, prospects, financial condition, results of operations, and cash flows.
There are complex software and technology systems that we must develop in coordination with vendors and suppliers to reach mass production for our EVs, and there can be no assurance that we will successfully develop or integrate them.
Our EVs and EV operations use a substantial amount of complex third-party and in-house software and hardware. The development and integration of such advanced technologies are inherently complex, and we will need to coordinate with our vendors and suppliers to reach mass production for our EVs. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. As a result, our potential inability to develop and integrate the necessary software and technology systems may adversely affect our EV business.
We rely on third-party suppliers to develop a number of emerging technologies for use in our EVs, including battery technology and the use of different battery cell chemistries. Certain of these technologies and chemistries are not currently commercially viable, and they may never be commercially viable. There can be no assurances that our suppliers will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. Competitors and their suppliers may develop cheaper or more efficient battery technology. Furthermore, if we experience delays from our third-party suppliers (including due to their financial viability or technology), we could experience delays in delivering on our timelines. In addition, the technology may not comply with the cost, performance useful life, and warranty characteristics we anticipate in our business plan. As a result, our business plan could be significantly impacted and we may incur significant liabilities under warranty claims which could materially and adversely affect our business, prospects, financial condition, results of operations, and cash flows.
General economic, market, and/or political conditions, whether on a global, national, or more regional scale, could have a negative effect on our business.
Wars, acts of terrorism, armed conflicts, natural disasters (including those caused by climate change), budget shortfalls, cybersecurity incidents, civil unrest, governmental actions, and epidemics have in the past and could in the future create significant uncertainties that may have material and adverse effects on consumer demand, shipping and transportation, the availability of manufacturing components, commodity prices and our ability to engage in overseas markets as tariffs are implemented. An economic recession, whether resulting from one of these events or others, would have a material adverse impact on our financial condition and results of operations.
If there is a rise in the frequency and size of product liability, warranty and other claims against us, including wrongful death claims, our business, results of operations and financial condition may be harmed.
We are frequently subject, in the ordinary course of business, to litigation involving product liability and other claims, including wrongful death claims, related to personal injury and warranties. We insure our product liability claims in the commercial insurance market. We cannot be certain that our insurance coverage will be sufficient to cover all future claims against us. Any increase in the frequency and size of these claims, as compared to our experience in prior years, may cause our insurance premiums to rise significantly. It may also increase the amount we pay in punitive damages, which our insurance may not cover. In addition, a major product recall or increased levels of warranty claims could have a material adverse effect on our results of operations.
Changes to laws and regulations governing our business could have a material impact on our operations.
Our manufactured products and the industries in which we operate are subject to extensive federal, state and local regulations in multiple jurisdictions. Changes to any of these regulations or the implementation of new regulations could significantly increase the costs of manufacturing, purchasing, operating or selling our products, managing our data and systems, and could have a material adverse effect on our results of operations. Our failure to comply with present or future regulations could result in fines, potential civil and criminal liability, suspension of sales or production, or cessation of operations.
Failure to comply with, and liabilities arising under, environmental and motor vehicle laws and regulations could have a material impact on our operations.
Our operations are subject to a variety of federal, state, local and international environmental regulations in the jurisdictions in which we operate relating to, among other matters, noise pollution and the use, generation, storage, treatment, emission and disposal of hazardous materials and wastes, some of which impose joint and several liability, regardless of fault. Our failure to comply with present or future regulations could result in fines, potential civil and criminal liability, suspension of production or operations, alterations to the manufacturing process, costly cleanup or capital expenditures. Climate change regulations at the federal, state or local level in the jurisdictions in which we operate could require us to change our manufacturing processes or product portfolio or undertake other activities that may require us to incur additional expenses, which may be material.
Our vehicles are subject to motor vehicle safety standards, and the failure to satisfy such mandated safety standards could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
All vehicles sold must comply with applicable international, federal, state and local motor vehicle safety standards. In the United States, vehicles that meet or exceed all federally mandated safety standards are self-certified by the manufacturer under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Jurisdictions outside the United States require us to meet “Type Approval” requirements by proving to regulators that our vehicles meet those relevant safety standards in effect in those countries. Our failure to maintain compliance of our current vehicles or obtain certification of compliance for any future vehicle, including future EV models, with motor vehicle safety standards in the United States, Europe, Canada or other jurisdictions could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
Our operating results may fluctuate significantly on a quarter-to-quarter basis.
Our quarterly operating results depend on a variety of factors including the timing and volume of orders, the completion of product inspections and acceptance by our customers, and various restructuring initiatives that may be undertaken from time to time. Accordingly, our financial results may be subject to significant and/or unanticipated quarter-to-quarter fluctuations.
Our businesses are cyclical, and this can lead to fluctuations in our operating results.
The industries in which we operate are highly cyclical and there can be substantial fluctuations in our manufacturing, shipments and operating results, and the results for any prior period may not be indicative of results for any future period. Companies within these industries are subject to volatility in operating results due to external factors such as economic, demographic and political changes. Factors affecting the manufacture of chassis, specialty vehicles and other products include but are not limited to:
• Commodity prices;
• Fuel availability and prices;
• Unemployment trends;
• International tensions and hostilities;
• General economic conditions;
• Various tax incentives;
• Strength of the U.S. dollar and Euro compared to other currencies;
• Overall consumer confidence and the level of discretionary consumer spending;
• Dealers’ and manufacturers’ inventory levels; and
• Interest rates and the availability of financing.
Economic, legal and other factors could impact our customers’ ability to pay accounts receivable balances due from them.
In the ordinary course of business, customers are granted terms related to the sale of goods and services delivered to them. These terms typically include a period between when the goods and services are tendered for delivery to the customer and when the customer must pay for these goods and services. The amounts due under these payment terms are listed as accounts receivable on our balance sheet. Prior to our collecting these accounts receivable, our customers could encounter drops in sales, unexpected increases in expenses, or other factors which could impact their ability to continue as a going concern, and which could affect the collectability of these amounts. Writing off uncollectible accounts receivable could have a material adverse effect on our earnings and cash flow as we have major customers with material accounts receivable balances at any given time.
Our business operations could be disrupted if our information technology systems fail to perform adequately or experience a cybersecurity incident.
We rely on our information technology systems and those of third-party business partners to effectively manage our business data, communications, supply chain, product engineering, manufacturing, accounting and other business processes. Increased cybersecurity threats, computer crime and cyberterrorism pose a risk to the security of our systems and networks, and those of our third-party business partners, and the confidentiality, availability and integrity of our data. Cybersecurity incidents and similar attacks vary in their form and can include the deployment of harmful malware or ransomware, denial-of-services attacks, employee or personnel failures, fraud, phishing or other social engineering attempts or other methods to cause confidential information, payments, account access or access credentials, or other data to be transmitted to an unintended recipient. Cybersecurity threat actors also may attempt to exploit vulnerabilities through software including that is software commonly used by companies in cloud-based services and bundled software. Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information, including but not limited to confidential information relating to customer or employee data, improper use of our systems and networks, manipulation and destruction of data, and operational disruptions. A cybersecurity incident or failure or disruption relating to our information or systems, or that of our third-party business partners, or any failure by us or our third-party business partners to effectively address, enforce and maintain our information technology infrastructure and cybersecurity measures may result in substantial harm to our business strategy, results of operations and financial condition, including major disruptions to business operations, loss of intellectual property, release of confidential information, alteration or corruption of data or systems, costs related to remediation or the payment of ransom, and litigation, civil or criminal investigations or actions, regulatory intervention and sanctions or fines, investigation and remediation costs and possible prolonged negative publicity.
In addition, third-party providers of data hosting or cloud services, as well as our suppliers, may experience cybersecurity incidents that may involve data we share with them. There can be no assurance that cybersecurity incidents, whether with respect to us or such third-party providers, will not have a material adverse effect on us in the future. In order to mitigate risks to our information systems, we continue to make investments in personnel, technologies and training of personnel. Although we maintain a cyber insurance policy, there is no guarantee that such coverage will be sufficient to address costs, liabilities and damages we may incur in connection with a cybersecurity incident or that such coverage will continue to be available on commercially reasonable terms or at all.
Fuel shortages, or higher prices for fuel, could have a negative effect on sales.
Gasoline or diesel fuel is required for the operation of most of the specialty vehicles we manufacture. There can be no assurance that the supply of these petroleum products will continue uninterrupted, that rationing will not be imposed or that the price of, or tax on, these petroleum products will not significantly increase in the future. Increases in gasoline and diesel prices and speculation about potential fuel shortages may have had an unfavorable effect on consumer demand for certain we products. This, in turn, may have a material adverse effect on our sales volume. Increases in the price of oil also can result in significant increases in the price of many of the components in our products, which may have an adverse impact on margins or sales volumes.
We could incur asset impairment charges for goodwill, intangible assets or other long-lived assets.
We have a significant amount of goodwill, intangible assets and other long-lived assets. At least annually, we review goodwill and non-amortizing intangible assets for impairment. We will also review for impairment identifiable intangible
assets, goodwill and other long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable from future cash flows. If the operating performance at one or more of our reporting units fails to meet future forecasts, or if future cash flow estimates decline, we could be required, under current U.S. accounting rules, to record impairment charges for our goodwill, intangible assets or other long-lived assets. Any write-off of a material portion of such assets could negatively affect our results of operations or financial position.
We may be unable to adequately protect our intellectual property.
While we believe that our patents, trademarks, know-how and other intellectual property have significant value, it is uncertain that this intellectual property or any intellectual property acquired or developed by us in the future will provide a meaningful competitive advantage. Our patents or pending patent applications may be challenged, invalidated or circumvented by competitors or rights granted thereunder may not provide meaningful proprietary protection. Moreover, competitors may infringe on our patents or successfully avoid them through design innovation. Policing unauthorized use of our intellectual property is difficult and expensive, and we may not be able to, or have the resources to, prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the U.S. The cost of protecting our intellectual property may be significant and have a material adverse effect on our financial condition and future results of operations. In addition, because we operate in many countries throughout the world, our intellectual property may be subject to additional risks of infringement, sometimes in jurisdictions with weaker protections of intellectual property rights, and we must take steps to protect our intellectual property rights under the laws of multiple jurisdictions. This risk increases when the intellectual property rights relate to new technologies.
The unavailability, reduction, elimination or adverse application of government incentives could have an adverse effect on our business, prospects, financial condition and operating results.
The growth of our EV business depends in part on the availability and amounts of government incentives. Any reduction, elimination or discriminatory application of government incentives because of budgetary challenges, policy changes, the reduced need for such incentives due to the perceived success of EVs or other reasons may result in the diminished price competitiveness of the alternative fuel vehicle industry, which could have an adverse effect on our business, prospects, financial condition and operating results.
Emerging issues related to the development and use of artificial intelligence (“AI”) could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business.
Our development and use of AI technology in our products and operations remains in the early phases. While we aim to develop and use AI responsibly and attempt to mitigate ethical and legal issues presented by our use, we may ultimately be unsuccessful in identifying or resolving issues before they arise. AI technologies are complex and rapidly evolving and the technologies that we develop or use may ultimately be flawed. Moreover, AI technology is subject to rapidly evolving domestic and international laws and regulations, which could impose significant costs and obligations on the company. For example, the European Union’s Artificial Intelligence Act, which establishes broad obligations for the development and use of AI-based technologies made available in the European Union based on their potential risks and level of impact, came into force on August 1, 2024. Emerging regulations may pertain to data privacy, data protection, and the ethical use of AI, as well as clarifying intellectual property considerations. Our use of AI could give rise to legal or regulatory action, increased scrutiny or liability, damage our reputation or otherwise materially harm our business.
Our competitors or other third parties may incorporate AI into their products more quickly or more successfully than we do, which could impair our ability to compete effectively and could adversely affect our results of operations. In addition, there are significant risks in using AI, and there can be no assurance that the use of AI will enhance our business or be beneficial to our business operations, including our efficiency or our profitability.
We are subject to litigation in the ordinary course of business, and uninsured judgments, settlements or other costs, or a rise in insurance premiums may adversely impact our results of operations.
In the ordinary course of business, we are subject to various claims and litigation. Any such claims, whether with or without merit, could be time-consuming and expensive to defend, could divert management’s attention and resources, could result in reputational damage to us, could result in significant damages or other costs, and could otherwise have a material adverse effect on our business, financial condition and results of operations.
Some of our businesses have in the past and may in the future face claims and litigation regarding accidents involving their products, including accidents involving injuries and deaths, and the increasing amount of our vehicles on the road
may increase our exposure to such matters. In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. The levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. Further, we may not be able to maintain insurance at commercially acceptable premium levels or at all.
If any significant accident, judgment, claim or other event is not fully insured or indemnified against, then in either case that could have a material adverse impact on our business, financial condition and results of operations. We cannot assure that the outcome of all current or future litigation will not have a material adverse impact on our business or results of operations.
Fluctuations in foreign currency exchange rates have adversely affected and could continue to adversely affect our operating results.
Because the functional currency of most of our foreign operations is the applicable local currency, but our financial reporting currency is the U.S. dollar, we are required to translate the assets, liabilities, expenses, and revenues of our non-U.S. operations into U.S. dollars at the applicable exchange rate in preparing our financial statements. Accordingly, we face foreign currency exchange rate risk arising from transactions in the normal course of business, such as sales and loans to wholly owned subsidiaries, sales to third-party customers, purchases from suppliers, and bank lines of credit with creditors denominated in foreign currencies.
Foreign currency exchange rates have affected our sales, net earnings, and operating results in the past and could affect them in the future, in some cases materially. Currency exchange rate fluctuations may also affect the comparative prices between products we sell and products our non-U.S. competitors sell in the same market, which may decrease demand for our products. Substantial exchange rate fluctuations caused by the strengthening of the U.S. dollar or otherwise, may have an adverse effect on our operating results, financial condition, and cash flows, as well as the comparability of our financial statements between reporting periods. While we actively manage our foreign currency market risk in the normal course of business by entering into various derivative instruments to hedge against such risk, these derivative instruments involve risks and may not effectively limit our underlying exposure to foreign currency exchange rate fluctuations or minimize our net earnings and cash volatility associated with foreign currency exchange rate changes. Further, the failure of one or more counterparties to our foreign currency exchange rate contracts to fulfill their obligations to us could adversely affect our operating results.
Weather conditions, including conditions exacerbated by global climate change, present chronic and acute physical risks, have previously impacted, and may continue to impact, demand for some of our products and/or cause disruptions in our operations.
Weather conditions in particular geographic regions have adversely affected, and in the future will likely adversely affect the sales, demand, and field inventory levels and seasonality trends of some of our products. Weather conditions also have disrupted our own manufacturing and distribution facilities and our supply chain, which has impacted our ability to manufacture products to fulfill customer demand, and such disruptions may occur in the future. For example, drought or unusually wet conditions have had, and may continue to have, an adverse effect on sales of certain mowing equipment products. Lower snowfall accumulations in key markets have had, and may continue to have, an adverse effect on sales of our snow and ice removal business. Similarly, adverse weather conditions in one season may negatively impact customer purchasing patterns and sales for some of our products in another season. For example, lower snowfall accumulations may result in lower winter season revenues for landscape contractor professionals, causing such customers to forego or postpone spring purchases of our mowing equipment products.
Our business is subject to risks arising from our indebtedness, contingent obligations, liquidity and financial position.
Our business has meaningful working capital requirements and a decline in operating results or access to financing may have an adverse impact on our liquidity position. Our $600.0 million credit facilities agreement entered into on March 10, 2025 (the "New Credit Facilities Agreement"), which we have used or will use to finance existing interest-bearing financial indebtedness, to pay costs and expenses incurred in connection with the Merger, and for general corporate and working capital purposes, went into effect on July 1, 2025. Our ability to make required payments of principal and interest on our debt will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, political and other factors, some of which are beyond our control. Accordingly, conditions could arise that could limit our ability to generate sufficient cash flows or to access borrowings to enable us to fund our liquidity needs, which could further limit our financial flexibility or impair our ability to obtain alternative financing sufficient to repay our debt at maturity.
We believe that our cash on hand, together with funds generated by our operations and borrowings under the New Credit Facilities Agreement, will provide us with sufficient liquidity and capital resources to meet our working capital, capital expenditures and other operating needs for the foreseeable future. This belief is based on significant assumptions including, among other things, assumptions relating to future sales volumes, the successful implementation of our business strategies, the continuing availability of trade credit from certain key suppliers and that there will be no material adverse developments in our competitive market position, business, liquidity or capital requirements. Any failure to achieve earnings expectations may have an adverse impact on our available liquidity. As a result, we cannot provide assurance that we will continue to have sufficient liquidity to meet our operating needs. In the event that we do not have sufficient liquidity, we may be required to seek additional capital, reduce or cut back our operating activities, capital expenditures or otherwise alter our business strategy. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional debt, the agreements governing that debt may contain significant financial and other covenants that may materially restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all.
The New Credit Facilities Agreement contains, and agreements governing future indebtedness may contain, restrictive covenants that may impair our ability to access sufficient capital and operate our business.
The New Credit Facilities Agreement contains various provisions that limit our ability (subject to a number of exceptions) to, among other things:
• incur additional indebtedness;
• incur certain liens;
• consolidate or merge with other parties;
• alter the business conducted by us and our subsidiaries taken as a whole;
• make investments, loans, advances, guarantees and acquisitions;
• sell, lease or transfer assets, including capital stock of our subsidiaries;
• enter into certain sale and leaseback transactions;
• repay any subordinated indebtedness we may issue in the future;
• amend the terms of certain unsecured or subordinated debt;
• engage in transactions with affiliates; and
• enter into agreements restricting our subsidiaries’ ability to pay dividends.
In addition, the restrictive covenants in the New Credit Facilities Agreement require us to maintain specified financial ratios and other business or financial conditions. Our ability to comply with these financial ratios or other covenants may be affected by events beyond our control, and our failure to comply with these ratios or other covenants could result in an event of default. These covenants may affect our ability to operate and finance our business as we deem appropriate. Our inability to meet obligations as they become due or to comply with various financial covenants contained in the instruments governing our current or future indebtedness could constitute an event of default under the instruments governing our indebtedness. If there were an event of default under the New Credit Facilities Agreement, or any future instruments governing our indebtedness, the holders of the affected indebtedness could declare all of the affected indebtedness immediately due and payable, which, in turn, could cause the acceleration of the maturity of all of our other indebtedness. We may not have sufficient funds available, or we may not have access to sufficient capital from other sources, to repay any accelerated debt. Even if we could obtain additional financing, the terms of the financing may not be favorable to us. In addition, we have pledged the equity securities of certain of our material subsidiaries as security for our obligations under the New Credit Facilities Agreement. If amounts outstanding under our Credit Facilities Agreement were accelerated, our lenders could foreclose on those pledges, and we could lose a substantial part of our assets. Any event of default under the instruments governing our indebtedness could have a material adverse effect on our business, financial condition and results of operations.
We have meaningful contingent obligations, which could negatively impact our results of operations.
We have meaningful contingent liabilities with respect to certain items that, if realized, could have a material adverse effect on our business, financial condition and operating results. In particular, we obtain certain vehicle chassis from automobile manufacturers under converter pool agreements. Chassis typically are converted and delivered to customers within 90 to 120 days of receipt. If the chassis are not converted within this timeframe of delivery, in certain cases we are obliged to purchase the chassis and record it as inventory or is obligated to begin paying an interest charge on this inventory until purchased. We also obtain vehicle chassis directly from our customers in connection with specific vehicle
orders. These vehicle chassis are stored at our various production facilities until the related value-added work is completed and the finished unit is shipped back to the customer. The customer does not transfer the vehicle chassis certificate of origin to us. If damage or theft were to occur to these chassis, we would be responsible for related costs incurred to repair or replace the customer-provided chassis. Further, in connection with dealers’ wholesale floor-plan vehicle financing programs, we enter into repurchase agreements with certain lending institutions, customary in the industries in which we operate, which may require us to repurchase previously sold vehicles. Although our exposure under these agreements is limited by the expected resale value of the inventory we may repurchase, we may receive less than anticipated on such resales and could collect payment on such resales later than originally expected. Additionally, we are party to multiple agreements whereby we guarantee indebtedness of others, including losses under pool agreements. Also, we are contingently liable under bid, performance and specialty bonds issued by our surety companies and has open standby letters of credit issued by our banks in favor of third parties. While we do not expect to experience material losses under these agreements, we cannot provide any assurance that these contingent liabilities will not be realized.
We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain an effective system of internal control over financial reporting. If our remediation of the material weaknesses is not effective, or we fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired, which could harm our business and negatively impact the value of our Common Stock.
In connection with the preparation of our consolidated financial statements as of December 31, 2025, 2024 and 2023 and for the years then ended, we identified material weaknesses in our internal control over financial reporting. A material weakness is 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 our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
We are developing a plan to remediate the material weaknesses identified and have initiated certain remediation procedures. While we are working to remediate the identified material weaknesses as timely and efficiently as possible, at this time we cannot provide an estimate of the time we will take to complete this remediation plan. We cannot assure you that these remediation measures will significantly improve or remediate the material weaknesses above. As of the date of this Annual Report, the material weaknesses have not been remediated.
During the fiscal year ended December 31, 2025, we have not incurred material costs as part of our remediation efforts; however, we cannot provide an estimate of costs expected to be incurred in connection with the implementation of this remediation plan. We expect the remediation to be time-consuming and place significant demands on our financial and operational resources. The implementation of our remediation measures will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period.
We cannot assure that we will be successful in remediating the material weaknesses identified above. The failure to correct the material weaknesses or the failure to discover and address any other material weaknesses or deficiencies could result in inaccuracies in the financial statements and impair the ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis.
For more information on these matters, please refer to Part II, Item 9A of this Annual Report.
Expectations relating to environmental, social and governance (“ESG”) considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business.
Various regulatory authorities have imposed, and may continue to impose, mandatory substantive or disclosure requirements with respect to ESG and sustainability matters. These requirements are not uniform across jurisdictions and may conflict with legal requirements, particularly in certain U.S. states that seek to discourage or penalize consideration of ESG factors in business operations, which may result in increased complexity, and cost for compliance, as well as could lead to increased litigation risks related to disclosures made pursuant to these regulations and legal requirements, any of which could adversely affect our financial performance. Additionally, we make statements about our ESG goals and initiatives through information provided on our website, press statements and other communications, and in the future expect to report on ESG matters in line with mandatorily applicable reporting rules under Swiss law. Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could
result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.
Risks Relating to Tax Matters
The U.S. Internal Revenue Service may assert that Aebi Schmidt is a “domestic corporation” or a “surrogate foreign corporation” for U.S. federal income tax purposes as a result of the Transactions.
Under current U.S. federal income tax law, a corporation is generally considered for U.S. federal income tax purposes to be a tax resident in the jurisdiction of our organization or incorporation. Accordingly, under generally applicable U.S. federal income tax rules, Aebi Schmidt, which is incorporated under the laws of Switzerland and is a Swiss tax resident, would be classified as a non-U.S. corporation (and, therefore, not a U.S. tax resident) for U.S. federal income tax purposes. Section 7874 of the Internal Revenue Code of 1986, as amended, (the “Code”), however, contains rules that may cause a non-U.S. corporation to, in certain circumstances, be treated as a domestic corporation for U.S. federal income tax purposes. If we were treated as a domestic corporation for U.S. federal income tax purposes, we could be subject to substantial U.S. tax liability, in addition to tax liability in our country of residence, and the gross amount of any dividend payments to our non-U.S. holders could be subject to U.S. withholding tax. In addition, even if a non-U.S. corporation is not treated as a domestic corporation for U.S. federal income tax purposes, the non-U.S. corporation may be treated as a “surrogate foreign corporation” under Section 7874 of the Code, in which case the non-U.S. corporation would be subject to certain adverse U.S. federal income tax rules, including the ineligibility of dividends paid by the non-U.S. corporation for the reduced rates of tax that apply to qualified dividends.
We believe that we are not a “surrogate foreign corporation” within the meaning of Section 7874(a)(2)(B) of the Code or a “domestic corporation” pursuant to Section 7874(b) of the Code. However, the application of the rules under Section 7874 of the Code is complex and subject to uncertainty, and there is limited guidance regarding their application. Moreover, the application of Section 7874 of the Code to the facts and circumstances of the Transactions is uncertain.
If Aebi Schmidt is a passive foreign investment company, U.S. holders of shares of our Common Stock could be subject to adverse U.S. federal income tax consequences.
Aebi Schmidt, as a non-U.S. corporation, will be classified as a passive foreign investment company (“PFIC”) for any taxable year if either (1) at least 75% of our gross income for such year consists of certain types of “passive” income, or (2) at least 50% of the value of our assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passive income. Under certain “look-through” rules, a non-U.S. corporation is treated for purposes of determining whether it is a PFIC as owning a proportionate share of the assets, and receiving a proportionate share of the gross income, of subsidiaries in which it directly or indirectly owns a 25% or greater interest. Based on the current composition of our income, assets and operations, we believe that Aebi Schmidt was not a PFIC for the 2025 taxable year. Because determining PFIC status is a fact-intensive exercise made on an annual basis and depends on the composition of a non-U.S. corporation’s assets and income during each year, no assurance can be given that we are not, and we will not be, classified as a PFIC. If we were a PFIC for any taxable year, or portion thereof, that is included in the holding period of a U.S. holder of our Common Stock, such U.S. holder could be subject to certain adverse U.S. federal income tax consequences and could be subject to additional reporting requirements. There can be no assurance that we will not be a PFIC for U.S. federal income tax purposes for this or any future taxable year.
If a U.S. investor is treated for U.S. federal income tax purposes as owning directly or indirectly at least 10% of our Common Stock, such U.S. investor may be subject to adverse U.S. federal income tax consequences.
For U.S. federal income tax purposes, if a U.S. investor is treated for U.S. federal income tax purposes as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our Common Stock, such U.S. investor may be treated as a “United States shareholder” with respect to Aebi Schmidt, or any of our non-U.S. subsidiaries, which could result in adverse U.S. federal income tax consequences to such U.S. investor if Aebi Schmidt or such subsidiary is a “controlled foreign corporation.” A non-U.S. corporation is considered a controlled foreign corporation if more than 50% of (1) the total combined voting power of all classes of stock of such corporation entitled to vote, or (2) the total value of the stock of such corporation is owned or is considered as owned by applying certain constructive ownership rules, by U.S. shareholders on any day during the taxable year of such non-U.S. corporation.
Under these rules, certain U.S. shareholders (that directly or indirectly own at least 10% of the value or voting power of our Common Stock) may be required to report annually and include in their U.S. federal taxable income their pro rata
share of our non-U.S. subsidiaries’ “Subpart F income” and, in computing their “global intangible low-taxed income,” “tested income” and a pro rata share of the amount of certain U.S. property held by the subsidiaries regardless of whether such subsidiaries make any distributions. Failure to comply with these reporting obligations (or related tax payment obligations) may subject such U.S. shareholder to significant monetary penalties and may extend the statute of limitations with respect to such U.S. shareholder’s U.S. federal income tax return for the year for which reporting (or payment of tax) was due. We do not intend to assist U.S. investors in determining whether we or any of our non-U.S. subsidiaries are treated as a controlled foreign corporation for U.S. federal income tax purposes or whether any U.S. investor is treated as a U.S. shareholder with respect to any of such controlled foreign corporations or furnish to any investor information that may be necessary to comply with reporting and tax paying obligations if we, or any of our non-U.S. subsidiaries, is treated as a controlled foreign corporation for U.S. federal income tax purposes. U.S. investors who directly or indirectly own 10% or more of the combined voting power or value of our Common Stock are strongly encouraged to consult their own tax advisors regarding the U.S. tax consequences of owning or disposing of our Common Stock.
Future changes to tax laws could adversely affect our effective tax rate, potential tax liability, operations or financial performance.
Any change in tax law, interpretation or practice, or in the terms of tax treaties, in a jurisdiction where we are subject to tax could increase the amount of tax payable by us. These changes could negatively affect our operations or financial performance.
We have operations in various countries that have differing tax laws and are subject to audit by domestic and foreign authorities. Our effective tax rate may change from year to year based on changes in the mix of activities and income earned among the different jurisdictions in which we operate; changes in tax laws in these jurisdictions; changes in the tax treaties between various countries in which they will operate; changes in eligibility for benefits under those tax treaties; and changes in the estimated values of deferred tax assets and liabilities. Tax laws, regulations and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political and other conditions, and significant judgment is required in evaluating and estimating the provision and accruals for these taxes. Such changes could result in a substantial increase in the effective tax rate on all or a portion of our income.
Tax authorities may disagree with certain positions we have taken and assess additional taxes, along with interest and penalties. We regularly assess the likely outcomes of these audits and assessments in order to assess the appropriateness of our tax assets and liabilities. However, the calculation of such liabilities involves significant judgment in the interpretation of complex and developing tax regulations in many jurisdictions. Therefore, any dispute with a taxing authority may result in a payment or outcome that is significantly different from current estimates. There can be no assurance that we will accurately predict the outcomes of these audits and the actual outcomes of these audits could have a material impact on our consolidated earnings and financial condition in the periods in which they are recognized.
Repurchases of shares of our capital stock could be subject to Swiss tax, and it may not be possible to manage such share repurchases efficiently at a sufficiently large scale.
The repurchase of shares of our capital stock for cancellation is treated as a partial liquidation, and the proceeds from any repurchase of shares of our capital stock are generally subject to Swiss withholding tax at a rate of 35% on any amount that cannot be allocated to share capital (as reported on the our annual standalone financial statements prepared pursuant to Swiss law) or capital contribution reserves (as reported on our annual standalone financial statements prepared pursuant to Swiss law and recognized as such by the Swiss Federal Tax Administration). Through the Merger, we created additional capital contribution reserves in the amount of the fair market value of Shyft. While the repurchase of shares of our capital stock for purposes other than for cancellation (such as to retain the repurchased shares of our capital stock as treasury shares for use in connection with acquisitions, equity incentive plans, convertible debt or other instruments) would generally not be subject to Swiss withholding tax, the repurchase of shares of our capital stock for purposes other than cancellation would also be treated as a partial liquidation if we repurchase shares of our capital stock in excess of certain thresholds or if it fails to sell or reissue such shares of our capital stock within the applicable time period after the repurchase.
In most instances, Swiss companies with shares listed on a Swiss trading venue will repurchase shares for cancellation through a second trading line on such Swiss trading venue. On the second trading line, the Swiss withholding tax of 35% is deducted from the portion of the purchase price that is subject to Swiss withholding tax as required by Swiss tax laws, and certain shareholders may subsequently apply for a full or partial refund of this Swiss withholding tax. Should we not deduct the Swiss withholding tax upon repurchase (for example, in the case of a repurchase on an ordinary trading line), we would have to pay the grossed-up Swiss withholding tax (53.8%) upon cancellation of the repurchased shares of our capital
stock, in case of the repurchase of the shares of our capital stock in excess of certain thresholds or failure to sell or reissue such shares of our capital stock within the applicable time period after the repurchase.
We do not expect to be able to use the customary second trading line process available on Swiss trading venues to repurchase shares of our capital stock because we do not expect to list the shares of our capital stock on any Swiss trading venues.
Risks Relating to the recent acquisition of Shyft
Our future results may be adversely impacted if we do not effectively manage our expanded operations.
As a result of the Merger, the size of our business is significantly larger than the size of either Shyft’s or our businesses immediately prior to the Merger. Our ability to successfully manage this expanded business will depend, in part, upon management’s ability to implement an effective integration of the two companies and our ability to manage the increased costs and complexities associated with a combined business that is significantly larger in size and scope. There can be no assurances that our management will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger.
We incurred substantial expenses related to the completion of the Merger, and we expect to incur substantial expenses related to the integration of the Shyft into our businesses.
We incurred substantial expenses in connection with the Merger, and we expect to incur substantial expenses to integrate a large number of processes, policies, procedures, operations, technologies and systems of Shyft into our business. The substantial majority of these costs will be non-recurring expenses related to the Merger, ancillary agreements and the facilities and systems consolidation costs. We may incur additional costs or suffer loss of business under third-party contracts that are terminated, may suffer losses of, or decreases in orders by, customers, and may incur costs to retain certain key management personnel and employees. We also have incurred and will continue to incur transaction fees and costs related to formulating and executing the integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs and time delays. These incremental transaction-related costs may exceed the savings we expect to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event of any material unanticipated costs. Factors beyond the parties’ control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we will continue to incur significant legal, accounting, and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We expect that the we will need to hire and train additional accounting, finance, and other personnel in connection with our efforts to comply with the requirements of being a public company, and our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. Our management and other personnel have and will also need to continue to devote a substantial amount of time to compliance with the additional reporting requirements of the Exchange Act. These requirements have and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
We may fail to realize the anticipated benefits and cost savings of the Merger, which could adversely affect the value of our Common Stock.
The success of the Merger will depend, in part, on our ability to realize the anticipated benefits, including synergies, cost savings and operational efficiencies from combining the businesses of Shyft and Aebi Schmidt. Our ability to realize these anticipated benefits and cost savings is subject to certain risks, including:
• our ability to successfully integrate Shyft into our business in a manner that permits these cost saving to be realized without adversely affecting current revenues and future growth;
• whether we will perform as expected; and
• the assumption of known and unknown liabilities of Shyft.
In addition, the actual cost saving of the Merger could be less than anticipated, the costs associated with effecting the Merger may be more than anticipated, and integration may result in additional and unforeseen expenses. If we are not able to successfully integrate Shyft into our business within the anticipated time frame, or at all, or the costs of such combination exceed the current expectation, the anticipated cost savings and other benefits of the Merger may not be realized fully (or at all) or may take longer to realize than expected, we may not perform as expected and the value of the shares of our Common Stock may be adversely affected.
In order to realize the anticipated benefits of the Merger such that we may perform as expected, certain issues must be considered in the course of integrating Shyft into our operations, including, among other things:
• integrating separate operational, financial, reporting and corporate functions, including with respect to differing U.S. and non-U.S. domicile and applicable law considerations;
• integrating Shyft’s products and services into our business;
• identifying and eliminating redundant and underperforming operations and assets;
• harmonizing our operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes;
• addressing possible differences in business backgrounds, corporate cultures and management philosophies;
• consolidating corporate, administrative and information technology infrastructure;
• coordinating sales, distribution and marketing efforts;
• managing potential facility closures and the movement of certain businesses and positions to different locations;
• maintaining existing agreements with customers and suppliers and avoiding delays in entering into new agreements with prospective customers and suppliers;
• coordinating geographically dispersed organizations;
• consolidating offices that are currently in or near the same location;
• harmonizing and integrating supplier and logistic streams; and
• effecting potential actions that may be required in connection with obtaining regulatory approvals.
Some of these factors will be outside of our control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and other adverse impacts which could materially affect our financial position, results of operations and cash flows.
Risks Relating to our Common Stock
Our Common Stock has a limited a history of trading and the market price and trading volume of our Common Stock may be volatile.
Because we were a private company prior to the Merger, our Common Stock has a limited trading history, and the market price and trading volume of our Common Stock may be volatile.
Our limited operating history as a publicly-traded company, and our inexperience could materially and adversely affect us and our stockholders.
We became a publicly-traded company in July 2025. Our senior management team lacks significant experience in operating a public company. As a publicly-traded company, we are required to develop and implement substantial control systems, policies and procedures in order to satisfy our periodic SEC reporting and Nasdaq obligations. We cannot guarantee that management’s past experience will be sufficient to successfully develop and implement these systems, policies and procedures and to operate our company. Failure to do so could jeopardize our status as a public company, and the loss of such status may materially and adversely affect us and our stockholders.
We are parties to certain Relationship Agreements, which provide certain Stockholders with certain rights over company matters.
In connection with the Merger, we entered into certain Relationship Agreements (the “Relationship Agreements”) with Mr. Peter Spuhler and PCS Holding AG (“PCS” and, together with Mr. Peter Spuhler, the “PCS Parties”), Gebuka AG and Barend Fruithof (collectively, the “Specified Stockholders”). The Relationship Agreements establish certain rights, restrictions and obligations of the Specified Stockholders, and set forth other arrangements relating to Aebi Schmidt, including the right of to designate up to four individuals for nomination to the our Board, subject to the PCS Parties maintaining certain beneficial ownership of shares of our Common Stock. Pursuant to the Relationship Agreements, after the second anniversary of the closing of the Merger, the Specified Stockholders may increase their respective stakes in the Company, which would lead to more influence of the Specified Stockholders in our general meeting of shareholders. Also, the PCS Parties’ Relationship Agreement can be terminated by PCS after the fourth anniversary of the closing of the Merger, and if the PCS Parties’ Relationship Agreement were to be terminated, the PCS Parties could nominate more members to our Board than what is envisaged by their Relationship Agreement. The interests of the parties to the Relationship Agreements may differ from those of other holders of our Common Stock.
We are a Swiss corporation, and our shareholders may not have the same rights and protections generally afforded to shareholders of U.S. corporations.
Swiss law and our Amended Articles of Association ("Amended Articles") may not grant our shareholders certain of the rights and protections generally afforded to shareholders of U.S. corporations. In particular, Swiss corporate law limits the ability of a shareholder to challenge resolutions or actions of the board of directors in court. Under Swiss law, shareholders generally cannot bring a suit to reverse a decision by the board of directors, but may seek damages for breaches of duty by the board of directors. Furthermore, remedies against transactions involving conflicts of interest or other procedural flaws may be limited if a claimant cannot prove that the benefits inuring to us are manifestly disproportionate to the consideration rendered in return.
The PCS Parties control a significant number of shares of our Common Stock, providing them with substantial influence over our business.
The PCS Parties beneficially own approximately 35% of the issued and outstanding shares of our Common Stock and four directors nominated by the PCS Parties serve on our Board, pursuant to the PCS Relationship Agreement. As a result, the PCS Parties may have substantial influence over matters requiring approval by our shareholders, including the election and removal of directors, amendments to the Amended Articles, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. The PCS Parties may have interests that are different from those of other stockholders.
The PCS Parties’ ownership of the shares of our Common Stock may adversely affect the trading price for our Common Stock to the extent investors perceive disadvantages in owning shares of a company with a significant stockholder or if the PCS Parties take any action with our shares that could result in an adverse impact on the price of our Common Stock, including a sale of any portion of their shares of our Common Stock.
Our shares are not listed in Switzerland, our home jurisdiction. As a result, shareholders may not benefit from certain provisions of Swiss law that are designed to protect shareholders in a public takeover offer or a change-of-control transaction.
Because our shares are listed exclusively on Nasdaq and not in Switzerland, our shareholders will not benefit from the protection afforded by certain provisions of Swiss law that are designed to protect shareholders in the event of a public takeover offer or a change-of-control transaction. For example, the Swiss takeover regime imposes a duty on any person or group of persons who acquires more than one-third of a company’s voting rights to make a mandatory offer for all of the company’s outstanding listed equity securities. In addition, the Swiss takeover regime imposes certain restrictions and obligations on bidders in a voluntary public takeover offer that are designed to protect shareholders. However, these protections are applicable only to issuers that list their equity securities in Switzerland, and because our shares are listed exclusively on Nasdaq, such Swiss law protections are not applicable to us. While the Amended Articles provide for clauses aiming to provide similar takeover protections, there is no guarantee that such clauses will result in the same or similar level of protection of minority shareholders as would be the case if Swiss law would apply directly. Furthermore, since Swiss law will restrict our ability to implement rights plans or U.S.-style “poison pills,” our ability to resist an unsolicited takeover attempt or to protect minority shareholders in the event of a change-of-control transaction may be
limited. Therefore, our shareholders may not be protected to the same degree in a public takeover offer or a change-of-control transaction as are shareholders in a Swiss company listed in Switzerland.
The Amended Articles designate the courts at the location of our registered seat as the exclusive forum for certain types of actions and proceedings that may be initiated by the our shareholders.
The Amended Articles provide that (except with respect to any disputes arising under the Securities Act, the Exchange Act and any rules and regulations promulgated thereunder) the exclusive jurisdiction for any disputes arising from company matters (including but not limited to disputes between individual shareholders and the Company or our corporate bodies, as well as between us and our corporate bodies, or between the corporate bodies themselves) is at our registered seat in Frauenfeld, Switzerland. Any person or entity purchasing or otherwise acquiring our shares will be deemed to have notice of and consented to the provisions of the Amended Articles, including the exclusive forum provision. As a result, our shareholders may be required to bring certain legal actions or proceedings exclusively in Swiss courts, which may be less convenient and more costly than courts in other jurisdictions, including the United States. Furthermore, the jurisdiction clause in the Amended Articles may limit the ability of our shareholders to initiate legal proceedings against us or our directors, officers, or other representatives in jurisdictions of their choosing. It may also discourage lawsuits or derivative actions, even if such claims would otherwise be permissible under applicable laws. Moreover, Swiss courts may apply legal principles or procedural rules that differ from those in U.S. courts, potentially leading to outcomes less favorable to shareholders compared to an action or proceeding brought in a U.S. court.
We cannot guarantee the timing, amount or payment of dividends on shares of our capital stock.
While we expect to pay dividends, the timing, declaration, amount and payment of any future dividends on shares of our capital stock will fall within the discretion of our Board. There can be no assurance that we will pay or declare dividends in the future. Under Swiss law, we may only pay dividends if (i) we have sufficient net income from the immediately preceding fiscal year, (ii) we have brought forward net income from prior fiscal years or (iii) we have otherwise freely distributable reserves, each as evidenced by our audited annual standalone financial statements prepared pursuant to Swiss law, after allocations of net income to statutory retained earnings as required by Swiss law and by the Amended Articles. Additionally, any decision by our Board to recommend the payment of a dividend will depend on many factors, such as our financial condition, earnings, corporate strategy, credit rating, capital requirements, debt service obligations, debt covenants, industry practice, legal requirements, regulatory constraints and other factors that our Board deems relevant. Additionally, the declaration, timing and amount of any dividends to be paid by us will be subject to approval by our shareholders at the relevant general meeting of shareholders. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and access to the capital markets. Further, under Swiss law, although shareholders must approve dividend distributions in advance, the determination of the record and payment dates may be delegated to the company’s board of directors. We currently anticipates that our Board will adopt a practice of recommending an annual dividend paid in equal quarterly installments. If our Board were to do so, Shyft expects that the policy would be effected by seeking approval of our shareholders at the annual general meeting for an annual dividend distribution to be paid in four quarterly installments on dates determined by our Board. However, any specific decisions in the future regarding dividends and dividend policy will be determined from time to time by our Board with the approval of the shareholders.
Dividends on shares of our capital stock may subject U.S. shareholders to Swiss withholding tax.
Dividends paid on shares of our capital stock generally will be subject to Swiss withholding tax at a rate of 35% on any amount that cannot be allocated to share capital as reported on the annual standalone financial statements prepared pursuant to Swiss law (i.e., would constitute a reduction of share capital) or capital contribution reserves as reported on our annual standalone financial statements prepared pursuant to Swiss law and recognized as such by the Swiss Federal Tax Administration. Through the Merger we created additional capital contribution reserves in the amount of the fair market value of Shyft. There can be no assurance our shareholders will approve dividends out of capital contribution reserves. It is also possible that Swiss withholding tax rules will be changed in the future or that a change in Swiss law will adversely affect us or our shareholders, in particular as a result of distributions out of capital contribution reserves becoming subject to additional corporate law or other restrictions. If we are unable to allocate any portion of a dividend to share capital or capital contribution reserves, we will not be able to make distributions without subjecting our shareholders to Swiss withholding tax.
Swiss law imposes certain restrictions on our ability to repurchase our Common Stock.
Swiss law limits our ability to hold or repurchase our shares of capital stock. We and our subsidiaries may only repurchase shares of our capital stock to the extent that (i) we have freely distributable reserves in the amount of the purchase price (as reported on the annual standalone financial statements prepared pursuant to Swiss law) and (ii) the aggregate nominal amount (par value) of all shares of our capital stock held by us and our subsidiaries does not exceed 10% of our share capital (excluding any treasury shares dedicated for cancellation pursuant to a shareholder-ratified repurchase program) registered in the Commercial Register. As a result, should we choose to repurchase shares of our capital stock in the future, our shareholders would be required to periodically approve a reduction in the share capital through the cancellation of designated blocks of repurchased shares held in treasury and may from time to time, as necessary, in a separate vote, have to approve share repurchase programs. If our shareholders do not approve the cancellation of repurchased shares or, if necessary, approve a proposed share repurchase program, we may be unable to return capital to shareholders through share repurchases.
Certain provisions of the Amended Articles and Swiss law may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs.
The rights of our shareholders are governed by Swiss law and the Amended Articles. Swiss law requires approval by shareholders for certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example, Swiss law provides that the payment of dividends and other distributions and the cancellation of treasury shares must be approved by shareholders. Swiss law also requires that shareholders resolve to, or authorize the board of directors to, increase the share capital. While shareholders may authorize a board of directors to increase or reduce the company’s share capital by introducing a capital band into the company’s articles of association, Swiss law limits this capital band to between 50% and 150% of the issued share capital as recorded in the Commercial Register at the time of the introduction of the capital band. The capital band, furthermore, has a limited duration of up to five years unless renewed by shareholders (by holders of at least two-thirds of the votes represented at a general meeting of shareholders) from time to time. According to the Amended Articles, our Board will be authorized to increase our share capital to a maximum of $116,299,384 and/or reduce it to a minimum of $62,080,000 without a shareholder vote. However, this capital band authorization will expire on February 12, 2030, at which point a new capital band must be approved by shareholders before our Board may increase and/or reduce our share capital under a capital band.
Additionally, Swiss law grants preemptive rights to existing shareholders to subscribe for new issuances of shares and advance subscription rights for convertible bonds or similar instruments with conversion or option rights.
Swiss law also does not provide as much flexibility in the various terms that can attach to different classes of shares as the laws of some other jurisdictions. These Swiss law requirements relating to our capital management may limit our flexibility, and situations may arise where greater flexibility would provide substantial benefits to our shareholders.
Certain provisions in the Amended Articles may limit or preclude shareholders’ ability to exercise control over us.
The Amended Articles contain provisions that are intended to limit the ability of shareholders to exercise control over the Company. For example, the Amended Articles provide that no person may, directly or indirectly, formally, constructively or beneficially own or otherwise control voting rights with respect to 49% or more of our share capital (as registered in the Commercial Register).
Shareholders may not be able to exercise preemptive rights in future issuances of equity or other securities that are convertible into equity.
Under Swiss law, shareholders may receive certain preemptive rights to subscribe on a pro rata basis to issuances of equity or other securities that are convertible into equity. Due to laws and regulations in their respective jurisdictions, however, non-Swiss shareholders may not be able to exercise such rights unless we take action to register or otherwise qualify the rights offering under the laws of such shareholders’ jurisdiction. We cannot give any assurance that we will register or otherwise qualify the offering of subscription rights or shares under the law of any jurisdiction where the offering of such rights is restricted. If shareholders in such jurisdictions were unable to exercise their subscription rights, their ownership interest in us would be diluted.
Holders of shares of our capital stock may not be able to exercise certain shareholder rights if they are not registered as shareholders of record on our Share Register.
Our capital stock is issued as uncertificated securities, which are held either in the name of Cede & Co. through the Depository Trust Company, the U.S. central securities depositary (“DTC”), or directly registered on our share register (our “Share Register”). Given that shares of our capital stock will primarily be held through DTC, SIX SIS AG, the national
central securities depository of the Swiss financial market and an international central securities depository (“SIX SIS”), will not serve as the primary central securities depositary for shares of our capital stock, and any shares of our capital stock held through SIX SIS, including those received in the Merger, will be derivatives of shares held through DTC. Therefore, and contrary to common practice for other Swiss companies with shares listed on the SIX Swiss, holders of our shares will not be eligible for automated registration on our Share Register under the system of SIX SIS (AREG-Data).
In relation to us, only those shareholders directly registered in our Share Register will be recognized as shareholders. Voting rights may only be exercised by holders of shares of our capital stock registered with voting rights in our Share Register. While holders of shares who are not registered as shareholders of record on our Share Register will be able to receive dividends and in certain cases, if duly authorized by a proxy issued by the relevant holder of record and depending on their bank or broker, vote their shares at general meetings of shareholders, certain other shareholder rights (such as the right to request that a general meeting of shareholders be called, the right to put items on the agenda of a general meeting of shareholders, the right to sue our corporate bodies, or the right to inspect our books and records) will not be available to such holders of shares who are not registered as shareholders of record on our Share Register.
U.S. shareholders may not be able to obtain judgments or enforce civil liabilities against us or our executive officers or members of our Board.
We are organized under the laws of Switzerland, and our jurisdiction of incorporation is Switzerland. In addition, certain of our directors and officers reside outside the United States and certain of our assets and the assets of such persons are located in jurisdictions outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or upon such persons, obtain documents or other discovery in connection with any legal proceedings against such persons in the United States or enforce against them judgments obtained in U.S. courts.
Switzerland and the United States do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. The recognition and enforcement in Switzerland of a judgment of the courts of the United States are governed by the principles set forth in the Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerland only if:
• the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;
• the judgment of such non-Swiss court has become final and non-appealable;
• the judgment does not contravene Swiss public policy;
• the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and
• no proceeding involving the same position and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland, or was earlier adjudicated in a third state and this decision is recognizable in Switzerland.
In particular, there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent predicated upon the civil liability provisions of the federal and state securities laws of the United States. Some remedies available under the laws of U.S. jurisdictions, including some remedies available under the U.S. federal securities laws, may not be allowed in Swiss courts as contrary to public policy. Also, provisions of Swiss law may be applicable regardless of any other law that would otherwise apply.
