Item 1A. Risk Factors
RISK FACTORS
In addition to other information contained in this Annual Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business, because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those mentioned in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any of the following risks occur, our business, operating results, liquidity and financial condition, and the price of our common stock, could be materially adversely affected.
Risk Factor Summary
The products we sell are inherently risky and could give rise to product liability, product warranty claims, and other loss contingencies.
Our markets are highly competitive, and if we are unable to compete effectively, we will be adversely affected.
Technological advances, the introduction of new products, and new design and manufacturing techniques could adversely affect our operations unless we are able to adapt to the resulting change in conditions.
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We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock that would dilute your ownership.
We may be unsuccessful in our future acquisition endeavors, if any, which may have an adverse effect on our business; in addition, some of the businesses we acquire may incur significant losses from operations.
Our business and growth may suffer if we are unable to attract and retain key officers or employees, including our Chief Executive Officer, Warren B. Kanders, as well as any loss of officers or employees due to illness or other events outside of our control.
We are uncertain of our ability to manage our growth.
We have significant payment obligations under the terms of our long-term debt, $309.1 million of which was outstanding as of December 31, 2025.
The concentration of our capital stock ownership with insiders may limit your ability to influence corporate matters.
We may face difficulty in integrating the operations of the businesses we have acquired and may acquire in the future.
Cybersecurity incidents, IT outages, and evolving privacy and cybersecurity requirements could disrupt operations and expose us to liability and reputational harm.
Climate and ESG related stakeholder expectations and regulatory requirements are evolving and uncertain and may result in increased compliance costs, litigation, and reputational harm.
Changes in tariffs, tax laws, global trade policies and instability and volatility in global markets could adversely affect our business and results of operations.
If we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours, which could adversely affect our market share and results of operations.
Risks Related to Our Industry
The products we sell are inherently risky and could give rise to product liability, product warranty claims, and other loss contingencies.
The products that we manufacture are typically used in applications and situations that involve high levels of risk of personal injury. Failure to use our products for their intended purposes, failure to use or care for them properly, or their malfunction, or, in some limited circumstances, even correct use of our products, could result in serious bodily injury or death. Given this potential risk of injury, proper maintenance of our products is critical. Our products include, among others: body armor and plates designed to protect against ballistic and sharp instrument penetration; explosive ordnance disposal products; police duty gear; and crowd control products.
Claims have been made, and are pending against certain of our subsidiaries, involving permanent physical injury and death allegedly caused by our products or arising from the design, manufacture or sale of such goods. If these claims are decided against us and we are found to be liable, we may be required to pay substantial damages and our insurance costs may increase significantly as a result, which could have a material adverse effect on our business, financial condition and results of operations. Also, a significant or extended lawsuit, such as a class action, could divert significant amounts of management’s time and attention.
We cannot assure you that our insurance coverage would be sufficient to cover the payment of any potential claims. In addition, we cannot assure you that this or any other insurance coverage will continue to be available or, if available, that we will be able to obtain it at a reasonable cost. Any material uninsured loss could have a material adverse effect on our business, financial condition and results of operations. In addition, the inability to obtain product liability coverage would prohibit us from bidding for orders from certain governmental customers because, at present, many bids from governmental entities require such coverage, and any such inability would have a material adverse effect on our business, financial condition, results of operations and liquidity.
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Furthermore, while our products are rigorously tested for quality, our products nevertheless do, and may continue to, fail to meet customer expectations from time-to-time. Also, not all defects are immediately detectible. Failures could result from faulty design or problems in manufacturing. In either case, we could incur significant costs to repair and/or replace defective products under warranty. We have experienced such failures in the past, and remain exposed to such failures. In some cases, product redesigns and/or rework may be required to correct a defect, and such occurrences could adversely impact future business with affected customers. Our business, financial condition, results of operations and liquidity could be materially and adversely affected by any unexpected significant warranty costs.
We are subject to extensive government regulations, and our failure or inability to comply with these regulations could materially restrict our operations and subject us to substantial penalties.
We are subject to federal licensing requirements with respect to the export of some of our products. In addition, we are obligated to comply with a variety of federal, state and local regulations, both domestically and abroad, governing certain aspects of our sales, operations and workplace, including regulations promulgated by, among others, the U.S. Departments of Commerce, Defense, Justice, Treasury, State and Transportation, the Federal Aviation Administration, the U.S. Environmental Protection Agency, the ATF, the NRC, the DoE, and the Equal Employment Opportunity Commission. The ATF also regulates our manufacturing and distribution of certain destructive devices, firearms, and explosives. We also ship toxic, hazardous and radioactive materials, and in doing so, must comply with the regulations of the DoT for packaging and labeling. We are also required to comply with Controlled Goods Directorate Registration regime in Canada for explosive ordnance disposal products. Additionally, the failure to obtain applicable governmental approval and clearances could materially adversely affect our ability to continue to service the government contracts we maintain. Exports of some of our products to certain international destinations may require export authorization from U.S. export control authorities, including the U.S. Departments of Commerce and State, and authorizations may be conditioned on re-export restrictions. to receive these authorizations may materially affect our revenues and in turn our business, financial condition, results of operations and liquidity from international sales. Furthermore, we have material contracts with governmental entities and are subject to rules, regulations and approvals applicable to government contractors. We are also subject to routine audits to ensure our compliance with these requirements
While we continually work to enhance our international trade compliance programs, we cannot assure you that we are or will be in full compliance at all times with applicable laws and regulations governing the export and deemed export of defense articles, defense services, and dual-use products and services that are controlled by U.S. and/or foreign governments. In those instances where we have identified actual or potential non-compliance, we may incur remediation costs, reputational harm, and could be subject to enhanced oversight, penalties, suspension, or debarment, even where we take corrective actions. We also import significant volumes of foreign-made components and materials for use in our manufacturing processes, which may be subject to import duties and other regulations. Violations of international trade (export/ import) controls in the U.S. and elsewhere may result in severe criminal and/or civil penalties, which could have a material effect on our business, financial condition, results of operations and liquidity.
Like other companies operating internationally, we are subject to the Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption, anti-money laundering, and sanctions laws that prohibit improper payments and other misconduct by us, our employees, agents, distributors, and other third parties with whom we do business. We operate, and may seek to expand, in markets where corruption and bribery risks may be heightened, and we rely on third parties in certain jurisdictions. We have implemented policies, procedures, training, and internal controls designed to promote compliance, but we cannot assure you that our employees or third parties will comply, that our controls will be effective, or that we will not be subject to investigations, enforcement actions, or private litigation.
On February 10, 2025, Executive Order 14209 directed the U.S. Department of Justice (“DOJ”) to pause certain FCPA enforcement activity for a review period, and DOJ issued updated enforcement guidelines in June 2025 and resumed FCPA enforcement with a stated focus on matters implicating U.S. economic and national security interests. These developments, and any future shifts in enforcement priorities, do not eliminate our compliance obligations, and enforcement may increase or decrease over time. In addition, the SEC retains civil enforcement authority relating to, among other things, the FCPA’s accounting provisions (books and records and internal controls), and we could face significant penalties, compliance costs, business disruption, reputational harm, and loss of business if we, our employees, or third parties are alleged to have violated applicable laws.
In addition, we are subject to governmental laws, regulations and other legal obligations related to privacy, data protection, cybersecurity, and the collection, use, storage, sharing and transfer of personal data and other regulated or sensitive information. The legal and regulatory landscape in this area is rapidly evolving and increasingly complex, including an expanding patchwork of U.S.
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state privacy and cybersecurity laws, evolving global requirements (including in the European Union and other jurisdictions where we do business), and enhanced disclosure expectations for public companies regarding cybersecurity risk management, strategy and governance. These obligations may require us to implement and maintain additional administrative, technical and physical safeguards; conduct assessments and audits; provide expanded notices and consumer rights mechanisms; implement vendor and supply-chain controls; and devote significant management time and resources.
Any actual or alleged non-compliance, or any cybersecurity incident or other compromise of our systems or those of our vendors, could result in investigations, enforcement actions, fines, penalties, contractual liability, remediation costs, litigation (including class actions), and reputational harm. In addition, certain incidents may trigger public disclosure or notification obligations, and public reporting could increase our legal exposure and the cost and complexity of responding to such incidents.
A reduction in U.S. federal government funding or a shift in spending priorities could have a significant impact on our business, financial condition, results of operations, cash flows, and equity.
Changes in federal spending often have a cascading effect, influencing not only federally funded programs but also state and local government budgets that rely on federal support.
Our U.S. federal government programs must compete not only with other government contractors but also with broader policy initiatives for limited resources within the budget and appropriations process. Decisions on federal budget allocations are beyond our control and may have long-term consequences for our business.
Furthermore, reductions in federal funding or shifts in spending priorities could place financial strain on state and local governments, which often rely on federal grants, matching funds, and other support to sustain their own programs. A decrease in federal allocations to states and municipalities could result in reduced spending at those levels, potentially leading to delays or cutbacks in projects and initiatives that impact our operations.
We have significant international operations and assets and, therefore, are subject to additional financial and regulatory risks.
We sell our products in foreign countries and seek to increase our level of international business activity. Our overseas operations are subject to various risks, including: U.S.-imposed embargoes and/or sanctions of sales to specific countries (which could prohibit sales of our products there); foreign import controls (which may be arbitrarily imposed and enforced and which could interrupt our supplies or prohibit customers from purchasing our products); exchange rate fluctuations; dividend remittance restrictions; expropriation of assets; war, civil uprisings and riots; government instability; the necessity of obtaining government approvals for both new and continuing operations; and legal systems of decrees, laws, taxes, regulations, interpretations and court decisions that are not always fully developed and that may be retroactively or arbitrarily applied.
One component of our strategy is to expand our operations into selected international markets. Military procurement, for example, has traditionally had a large international base. We actively market our products in Europe, North and South America, the Middle East, Africa, and Asia. However, we may be unable to execute our business model in these markets or new markets. Further, foreign providers of competing products and services may have a substantial advantage over us in attracting customers and businesses in their countries due to earlier established businesses in those countries, greater knowledge with respect to the cultural differences of customers and businesses located in those countries and/or their focus on a single market. In pursuing our international expansion strategy, we face several additional risks, including:
foreign laws and regulations, which may vary by country, that may impact how we conduct our business;
uncertain costs of doing business in foreign countries, including different employment laws;
potential adverse tax consequences if taxing authorities in different jurisdictions worldwide disagree with our interpretation of various tax laws or our determinations as to the income and expenses attributable to specific jurisdictions, which could result in our paying additional taxes, interest and penalties;
technological differences that vary by marketplace, which we may not be able to support;
longer payment cycles and foreign currency fluctuations;
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economic downturns; and
uncertainty of sustained revenue growth outside of the United States.
We may also be subject to unanticipated income taxes, excise duties, import taxes, export taxes or other governmental assessments. In addition, a percentage of the payments to us in our international markets are often in local currencies. Although most of these currencies are presently convertible into U.S. dollars, we cannot be sure that convertibility will continue. Even if currencies are convertible, the rate at which they convert is subject to substantial fluctuation. Our ability to transfer currencies into or out of local currencies may be restricted or limited. Any of these events could result in a loss of business or other unexpected costs, which could reduce revenue or profits and have a material adverse effect on our business, financial condition, results of operations and liquidity.
We routinely operate in areas where local government policies regarding foreign entities and the local tax and legal regimes are often uncertain, poorly administered and in a state of flux. We cannot, therefore, be certain that we are in compliance with, or will be protected by, all relevant local laws and taxes at any given point in time. A subsequent determination that we failed to comply with relevant local laws and taxes could have a material adverse effect on our business, financial condition, results of operations and liquidity. One or more of these factors could adversely affect our future international operations and, consequently, could have a material adverse effect on our business, financial condition, results of operation and liquidity.
Changes in global cultural, political, and financial market conditions, including but not limited to tariffs, tax laws and global trade policies, could impair our international operations and financial performance.
We are subject to risks generally associated with doing business internationally. Some of our operations are conducted or products are sold in countries where economic growth has slowed, or where economies have suffered economic, social and/or political instability or hyperinflation. A particularly significant risk is the ongoing and potential future impact of tariffs and trade restrictions. These measures, whether imposed by the U.S. or foreign governments, can disrupt our ability to source materials, manufacture products, or deliver goods across borders in a cost-effective manner. Increased tariffs on imports and exports may substantially raise our operating costs, making it more difficult to maintain competitive pricing, and potentially leading to lost market share. Furthermore, we may face retaliatory tariffs from other countries, which could disrupt existing relationships with suppliers or customers. Additionally, global economic uncertainty relating to the effects of fiscal and political crises and political and economic , current or future ‘trade wars,’ changes in consumer spending, foreign currency exchange rate fluctuations, political , wars, terrorist acts, and/or military operations, could have a material effect on our financial condition, results of operations and cash flows.
The conflict between Russia and Ukraine and the conflicts in the Middle East, and the potential for these and other geopolitical conflicts to expand or intensify, including through the emergence of additional conflicts or heightened tensions in other regions, could have a material adverse effect on our operations, results of operations, financial condition, liquidity and business outlook.
There is continued, sustained military conflict between Russia and Ukraine as well as in the Middle East, and continued disruption in these regions and the broader global economic environment is likely. The uncertain consequences and duration of these conflicts, and the risk that they may expand in scope, escalate, or result in broader regional or global instability, including through the emergence of additional conflicts or heightened tensions in other regions, including the potential effects of any sanctions and countersanctions against officials, individuals and industries relating to these regions, including Russia, and the potential response to any such sanctions, as well as prolonged unrest and/or intensified military activities impacting these regions could have a material adverse effect on our operations, results of operations, financial condition, liquidity and business outlook.
Pandemics, epidemics or other disease outbreaks may negatively impact our business operations, financial condition, liquidity, and consolidated results of operations.
A widespread outbreak of disease can adversely affect the operation of our customers’ businesses, which could lead to a material decline in demand for our products and services and our customers’ ability to pay us for the products and services we have provided to them. A pandemic could also have material negative impact on the operation of our vendors’ and suppliers’ businesses and affect their ability to provide us the products and services we rely on to conduct our business and provide products and services to our customers. A widespread outbreak could potentially result in the infection of the Company's employees and diminish our ability to operate our business, service our customers or produce and sell our products. These potential negative impacts to our business could negatively
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impact our financial results and thereby reduce our operating results and borrowing capacity, which could limit our ability to operate our business. These situations can also lead to a general downturn in the equity markets which could negatively impact the value of the Company’s shares as well as increase the cost to the Company to raise equity capital. Any and all of the above situations could have a material adverse impact on our operations, results of operations, financial condition, liquidity and business outlook . We cannot predict whether future variants of COVID-19 or other pandemics might cause further slowdowns or cessation of business activities, nor can we predict the impact that pandemics akin to COVID-19 might have on our business and operating results in the future.
Risks Related to Our Business
Many of our customers have fluctuating budgets, which may cause substantial fluctuations in our results of operations.
Customers for our products include domestic and international first responders such as state and local law enforcement, fire and rescue, explosive ordnance disposal technicians, emergency medical technicians, fish and wildlife enforcement and departments of corrections, as well as federal agencies and numerous foreign government agencies. Government tax revenues and budgetary constraints, which fluctuate from time to time, can affect budgetary allocations for these customers. Many domestic and foreign government agencies have in the past experienced budget deficits that have led to decreased spending in defense, law enforcement and other military and security areas. In addition, first responder budgets have been the subject of increased discussion as a result of controversies relating to police reform. Our results of operations may be subject to substantial period-to-period fluctuations because of these and other factors affecting military, law enforcement and other governmental spending. A reduction of funding for state, local, municipal as well as federal and foreign governmental agencies could have a material adverse effect on sales of our products and our business, financial condition, results of operations and liquidity.
Because our markets are highly competitive, and our business depends significantly on winning contracts from government customers, if we are unable to compete effectively, we will be adversely affected.
The markets in which we operate are highly competitive, encompassing a broad range of competitors, from small businesses to multinational corporations. To remain competitive, we must continuously adapt to changing technologies, customer preferences, and industry trends. If we are unable to differentiate our services from those of our competitors, our revenues may decline. Additionally, many of our competitors have established relationships with each other or with third parties, enhancing their ability to address customer needs and creating the potential for new competitive alliances that may outperform us.
A significant portion of our revenue depends on securing contracts from government agencies at the national, state, and local levels. The procurement process for government contracts is highly competitive, with agencies often using competitive bidding processes that subject us to increased pricing pressure and heightened competition. Certain government contracts, particularly those issued by the U.S. federal government, require multiple competitive bidding rounds, further increasing the risk of losing business to competitors, some of whom have greater financial resources, specialized expertise, or more extensive operational capabilities.
Additionally, the competitive bidding process requires substantial investment of time and resources, with no guarantee of success. Even when we secure contracts, we may face challenges in accurately estimating the resources and costs required for execution. We may also choose not to participate in certain bidding opportunities, which could limit our revenue potential. Moreover, competitors frequently challenge awarded contracts through bid protests, potentially leading to delays, increased costs, modifications, or even contract rescission.
Any of these competitive pressures, whether in the broader market or within government procurement, could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
There are limited sources for some of our raw materials and components, which may significantly curtail our manufacturing operations.
The raw materials and components that we use to manufacture our products, include SpectraShield ® , a patented product of Honeywell, Inc.; Kevlar ® , a patented product of E.I. du Pont de Nemours Co., Inc.; Dyneema ® , a patented product of Koninklijke DSM N.V.; and Twaron ® , a patented product of Teijin Limited, amongst others, which we use in manufacturing ballistic resistant garments. We purchase the materials and components that we use in manufacturing ballistic resistant garments directly from these suppliers and also through five independent weaving companies. The supply of the materials and components that we use to
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manufacture our products may be constrained by a number of factors, including a supplier’s need to prioritize the manufacture of rated orders issued under the Defense Production Act of 1950 (the “DPA”). We cannot predict when the United States government will invoke the DPA, and in the past we have faced shortages from our sources of materials and components when the DPA has been invoked, including shortages in the raw materials and components that we use in manufacturing ballistic resistant garments.
Should these materials or components become unavailable for any reason, we would not necessarily be able to replace them with materials or components of like weight and strength, as our ballistic resistant garments must be manufactured to specific standards using specific materials and components that are not necessarily interchangeable based on metrics such as weight and strength. When we have faced shortages in the past, we have been able to ameliorate the issue by obtaining substitutable alternative materials and components from other commercially available sources. However, the use of alternative materials and components in our ballistic resistant garments requires research and development, recertification, as well as customer acceptance of the new products utilizing these alternative materials and components, and there is no guarantee that any such recertification or acceptance will be obtained by us. Thus, if our supply of any of these materials or components were materially reduced or cut off or if there was a material increase in the prices of these materials or components, our manufacturing operations could be adversely affected and our costs increased, and our business, financial condition, results of operations and liquidity could be materially affected.
Our resources may be insufficient to manage demand.
As we expand our operations, any growth may place significant demands on our management, administrative, operating and financial resources. The growth of our customer base, the types of services and products offered and the geographic markets we serve could place a significant strain on our resources. In addition, we cannot easily identify and hire personnel qualified both in the provision and marketing of our products and systems. Our future performance and profitability will depend in large part on our ability to attract and retain additional management and other key personnel; our ability to implement successful enhancements to our management, accounting and information technology systems; and our ability to adapt those systems, as necessary, to respond to any growth in our business.
We are dependent on industry relationships.
A number of our products are components in our customers’ final products. Accordingly, to gain market acceptance, we must demonstrate that our products will provide advantages to the manufacturers of final products, including increasing the safety of their products, providing such manufacturers with competitive advantages or assisting such manufacturers in complying with existing or new government regulations affecting their products. There can be no assurance that our products will be able to achieve any of these advantages for the products of our customers. Furthermore, even if we are able to demonstrate such advantages, there can be no assurance that such manufacturers will elect to incorporate our products into their final products, or if they do, that our products will be able to meet such customers’ manufacturing requirements. Additionally, there can be no assurance that our relationships with our manufacturer customers will ultimately lead to volume orders for our products. The failure of manufacturers to incorporate our products into their final products could have a material effect on our business, financial condition, results of operations and liquidity.
We may be unable to protect our proprietary technology.
We depend upon a variety of methods and techniques that we regard as proprietary trade secrets. We also depend upon a variety of trademarks, service marks and designs to promote brand name development and recognition. We rely on a combination of trade secret, copyright, patent, trademark, unfair competition and other intellectual property laws as well as contractual agreements to protect our rights to such intellectual property. Due to the difficulty of monitoring unauthorized use of and access to intellectual property, however, such measures may not provide adequate protection. It is possible that our competitors may access our intellectual property and proprietary information and use it to their advantage. In addition, there can be no assurance that courts will always uphold our intellectual property rights, or enforce the contractual arrangements that we have entered into to protect our proprietary technology. Any unenforceability or misappropriation of our intellectual property could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Furthermore, we cannot assure you that any pending patent application or trademark application made by us will result in an issued patent or registered trademark, or that, if a patent is issued, it will provide meaningful protection against competitors or competitor technologies. In addition, if we bring or become subject to litigation to defend against claimed infringement of our rights or
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of the rights of others or to determine the scope and validity of our intellectual property rights, such litigation could result in substantial costs and diversion of our resources, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Unfavorable results in such litigation could also result in the loss or compromise of our proprietary rights, subject us to significant liabilities, require us to seek licenses from third parties on unfavorable terms, or prevent us from manufacturing or selling our products, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Technological advances, the introduction of new products, and new design and manufacturing techniques could adversely affect our operations unless we are able to adapt to the resulting change in conditions.
Our future success and competitive position depend to a significant extent upon our proprietary technology. We must make significant investments to continue to develop and refine our technologies. We will be required to expend substantial funds for and commit significant resources to research and development activities, the engagement of additional engineering and other technical personnel, the purchase of advanced design, production and test equipment, and the enhancement of design and manufacturing processes and techniques. Our future operating results will depend to a significant extent on our ability to continue to provide design and manufacturing services for new products that compare favorably on the basis of time to introduction, cost and performance with the design and manufacturing capabilities. The success of new design and manufacturing services depends on various factors, including utilization of advances in technology, innovative development of new solutions for customer products, efficient and cost-effective services, timely completion and delivery of new product solutions and market acceptance of customers’ end products. Because of the complexity of our products, we may experience from time to time in completing the design and manufacture of new product solutions. In addition, there can be no assurance that any new product solutions will receive or maintain customer or market acceptance. If we are to design and manufacture solutions for new products of our customers on a timely and cost- basis, such could have a material effect on our business, financial condition, results of operations and liquidity.
We may be adversely affected by applicable environmental, health and safety laws and regulations.
We are subject to federal, state, local and foreign laws and regulations governing environment, health and safety (“EHS”) matters, including those regulating discharges to the air and water, the management of wastes, the control of noise and odors, and the maintenance of a safe and healthy operating environment for our employees. We cannot assure you that we are at all times in complete compliance with all such requirements. Like all companies in our industry, we are subject to potentially significant fines or penalties if we fail to comply with various EHS requirements. Such requirements are complex, change frequently, and could become more stringent in the future. Accordingly, we cannot assure you whether these requirements will change in a manner requiring material capital or operating expenditures or will otherwise have a material adverse effect on us in the future. In addition, we are also subject to environmental laws requiring the investigation and clean-up of environmental contamination. We may be subject to liability, including liability for clean-up costs, if contamination is discovered at one of our current or former facilities, in some circumstances even if such contamination was caused by a third party such as a prior owner. We also may be subject to liability if contamination is discovered at a landfill or other location where we have disposed of waste, notwithstanding that historic disposal practices may have been in accordance with all applicable requirements. We use Orthochlorabenzalmalononitrile and Chloroacetophenone chemical agents in connection with our production of our crowd control products, and these chemicals are and could cause environmental if not handled and disposed of properly. Moreover, private parties may bring us based on health impacts or property caused by our operations. The amount of liability for cleaning up contamination or private party could be material and have a material effect on our business, financial condition, results of operations and liquidity.
The effects of climate change, together with increased focus by governmental and non-governmental organizations, customers and investors on sustainability issues, including evolving climate and sustainability related disclosure expectations, may adversely affect our business and financial results and damage our reputation.
Climate change is occurring around the world and may impact our business in numerous ways. Such change could lead to, among other things, increased costs (including energy, raw materials and packaging), supply chain disruptions, damage to or interruption of operations at our facilities or those of suppliers due to extreme weather events, increased insurance costs or limited availability of coverage, changes in customer demand, and impacts on our employees and communities. In addition, we may incur increased costs to measure, monitor and manage climate-related risks and to satisfy actual or proposed legal requirements, contractual obligations and market expectations relating to climate and sustainability matters.
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Investor advocacy groups, institutional investors, lenders, customers and other stakeholders have increasingly focused on environmental, social and governance (“ESG”) practices and disclosure. We may face increased requests for ESG information, contractual requirements, and expectations regarding targets, policies or performance. We may also face reputational harm, litigation or regulatory scrutiny (including so-called “greenwashing” claims) if our disclosures, statements or actions are perceived as inaccurate, incomplete or misleading. The SEC adopted climate-related disclosure rules on March 6, 2024, but the rules have been stayed and remain subject to litigation and potential changes, including the SEC’s March 2025 vote to cease defending the rules in court. Even if the SEC rules are modified, rescinded or never become effective, climate and ESG related requirements and expectations in the United States and other jurisdictions may continue to evolve and could increase our compliance costs and legal exposure.
We may lose money or generate less than expected profits on our fixed-price contracts.
Our direct government contracts are primarily fixed-price for a specified term. Under these contracts, we agree to perform a specific scope of work or deliver a certain quantity of end items for a fixed price. Typically, we assume more risk with fixed-price contracts since we are subject to rising labor costs and commodity price risk. Fixed-price contracts require us to price our contracts by forecasting our expenditures. When making proposals for fixed-price contracts, we rely on our estimates of costs and timing for completing these projects. These estimates reflect management’s judgments regarding our capability to complete projects efficiently and timely. Our production costs may, however, exceed forecasts due to unanticipated delays or increased cost of materials, components, labor, capital equipment or other factors. Therefore, we may incur losses on fixed price contracts that we had expected to be profitable, or such contracts may be less profitable than expected, which could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Fixed-price contracts represented approximately 18% and 65% of 2025 Product and Distribution segment net sales, respectively.
Our business is subject to various laws and regulations favoring the U.S. government’s contractual position, and our failure to comply with such laws and regulations could harm our operating results and prospects.
Furthermore, as a direct and indirect contractor to the U.S. government, we must comply with laws and regulations relating to the formation, administration and performance of federal government contracts, which affect how we do business with our clients and may impose added costs on our business. These rules generally favor the U.S. government’s contractual position.
For example, these regulations and laws include provisions that subject contracts we have been awarded to:
protest or challenge by unsuccessful bidders; and
unilateral termination, reduction or modification by the government without penalty.
The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. government under both cost-plus and fixed-price contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the DoW. Responding to governmental audits, inquiries or investigations may involve significant expense and divert management’s attention. Our failure to comply with these or other laws and regulations could result in contract termination, suspension or debarment from contracting with the federal government, civil fines and damages and criminal prosecution and penalties, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Our Chief Executive Officer has divided responsibilities and is not required to devote any specified amount of time to our business.
Our Chief Executive Officer, Warren B. Kanders, is also the Executive Chairman of Clarus Corporation, which is in the business of designing, manufacturing, and marketing equipment for outdoor recreation activities. Our employment agreement with Mr. Kanders requires that he devote his time, attention, energy, knowledge, best professional efforts and skills to the duties assigned to him by us, but he is permitted to pursue other professional endeavors and investments that do not violate the terms of his employment agreement, including provisions relative to non-competition. Mr. Kanders’ employment agreement does not require him to devote any specific amount of time to the Company. Accordingly, it is possible that Mr. Kanders will fail to devote the necessary time to our Company which could have a material adverse effect on our business, financial condition, results of operations and liquidity.
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We may be subject to disruptions, failures or cyber-attacks in our information technology systems and network infrastructures that could disrupt our operations, damage our reputation and adversely affect our business, operations, and financial results.
We maintain and rely extensively on information technology systems and network infrastructures for the effective operation of our business, including manufacturing, order fulfillment, financial reporting, and communications with customers and suppliers. Techniques used to gain unauthorized access to networks, compromise systems, or obtain data are constantly evolving, and we may be unable to anticipate or prevent all incidents. We and our third-party vendors are vulnerable to computer viruses, malware, ransomware, phishing and other social engineering attacks, denial-of-service attacks, insider threats, and other malicious activities. Any such incident could lead to interruptions, delays, or shutdowns; loss, corruption, or access to data (including personally identifiable information); and increased costs and of management attention. For example, in July 2024 we experienced a cybersecurity involving access to certain systems that required containment and mitigation measures and resulted in temporary to certain operations, and in September 2024 we experienced a second that required containment actions.
In addition, public companies are subject to evolving cybersecurity disclosure and governance requirements, including SEC rules adopted in July 2023 that require disclosure of material cybersecurity incidents on Form 8-K and enhanced annual disclosures regarding cybersecurity risk management, strategy and governance. Compliance may require additional processes, controls, and resources, and may increase the risk of regulatory scrutiny, private litigation, and reputational harm. Moreover, disclosure of information about incidents or our cybersecurity controls could be costly, could expose us to additional risks (including by providing threat actors with information), and could adversely affect our relationships with customers, suppliers, and other stakeholders.
Our use of emerging technologies (including artificial intelligence) and reliance on third-party service providers could expose us to operational, regulatory, intellectual property, and reputational risks.
We may use, or our employees, suppliers and business partners may use, emerging technologies, including automated decision-making tools and artificial intelligence (“AI”) systems (including generative AI), in areas such as product development, customer service, procurement, security, and back-office functions. The use of such tools may introduce risks, including errors or hallucinated outputs, bias, cybersecurity vulnerabilities, unauthorized disclosure of confidential information or personal data, loss of intellectual property or trade secrets, infringement allegations, and failures to comply with evolving laws and regulations governing AI, privacy, consumer protection, and workplace practices. In addition, reliance on third-party AI providers and other vendors may increase concentration and resiliency risks, including outages, changes in terms of service, model behavior changes, or restrictions on use. Any of these risks could result in operational disruption, regulatory investigations, litigation, reputational , and increased costs.
Initiatives to upgrade our business processes and information technology systems to optimize our operational and financial performance involve many risks which could result in, among other things, business interruptions, higher costs and lost profits.
We regularly implement business process improvement and information technology initiatives intended to optimize our operational and financial performance. Transitioning to these new or upgraded processes and systems requires significant capital investments and personnel resources. Implementation is also highly dependent on the coordination of numerous employees, contractors and software and system providers. The interdependence of these processes and systems is a significant risk to the successful completion and continued refinement of these initiatives, and the failure of any aspect could have a material adverse effect on the functionality of our overall business. We may also experience difficulties in implementing or operating our new or upgraded business processes or information technology systems, including, but not limited to, ineffective or inefficient operations, significant system failures, system outages, delayed implementation and loss of system availability, which could lead to increased implementation and/or operational costs, or of data, shipments, excess inventory and of operations resulting in sales and/or profits.
We rely on information technology systems, including third-party cloud-based solutions, and any failure of these systems, including, without limitation, due to outages and/or cyberattacks, may result in disruptions or outages, loss of processing capabilities, and/or loss of data, any of which may have a material adverse effect on our business, operations, and financial results.
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Our reputation and ability to attract, retain and serve customers is dependent upon the reliable performance of our underlying technology infrastructure and external service providers, including third-party cloud-based solutions. These systems are vulnerable to damage or interruption and we have experienced interruptions in the past. We rely on cloud-based solutions furnished by third parties primarily to allocate resources, pay vendors, collect from customers, process transactions, develop demand and supply plans, manage product design, production, transportation, and distribution, forecast and report operating results, meet regulatory requirements and administer employee payroll and benefits, among other functions. We have also designed a significant portion of our software and computer systems to utilize data processing and storage capabilities from third-party cloud solution providers. Both our on-premises and cloud-based infrastructure may be susceptible to outages due to any number of reasons, including, human error, fire, floods, power loss, telecommunications failures, terrorist attacks and similar events. the implementation of security measures that we believe to be reasonable, both our on-premises and our cloud-based infrastructure may also be to hacking, computer viruses, the installation of malware and similar either by third-parties or employees, which may result in . We do not have redundancy for all of our systems and our recovery planning may not account for all eventualities. If we or our existing third-party cloud-based solution providers experience in service regularly or for a basis, or other similar issues, our business could be and, in some instances, our customers may not be to purchase our products, which could significantly and affect our sales. Additionally, our existing cloud-based solution providers have broad discretion to change and interpret their terms of service and other policies with respect to us, and they may take actions beyond our control that could our business. We also may not be to control the quality of the systems and services we receive from our third-party cloud-based solution providers. Any transition of the cloud-based solutions currently provided to different cloud providers would be to implement and may cause us to incur significant time and expense.
If we and/or our cloud-based solution providers are not successful in preventing or effectively responding to outages and cyberattacks, such as the cybersecurity incidents occurring in July and September 2024, our business, operations, and financial results could be materially and adversely affected.
Additionally, information technology systems require periodic modifications, upgrades, and replacement that subject us to costs and risks, including potential disruption to our internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel or outside firms to implement and operate existing or new systems, and other risks and costs of delays or difficulties in transitioning to new or modified systems or of integrating new or modified systems into our current systems. In addition, challenges implementing new or modified technology systems may cause disruptions in our business operations and, if not anticipated and appropriately mitigated, could have a material adverse effect on our business operations.
Misuse of our products may adversely affect the Company’s reputation.
The target end users of the products that we sell, which include firearms, ammunition and body armor, include licensed professionals such as state and local law enforcement, federal agencies, foreign police, military agencies as well as private security firms. However, if any misuse of our products were to occur, the Company’s reputation could be harmed. The occurrence of any misuse of our products could seriously damage our reputation and the image of our brands or cause our customers to consider alternatives to the Company’s products, which could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Adverse publicity about the Company and/or its brands, including without limitation, through social media or in connection with brand damaging events and/or public perception, could negatively impact our business.
Negative claims or publicity involving us, our board of directors, our brands, our products, services and experiences, consumer data, or any of our key employees, or suppliers could seriously damage our reputation and the image of our brands, regardless of whether such claims are accurate. Social media, which accelerates and potentially amplifies the scope of negative publicity, can increase the challenges of responding to negative claims. Negative attention or scrutiny on the various products sold by our brands can also possibly result in negative publicity. For example, heightened governmental scrutiny of the safety of crowd control products has resulted in requests by two subcommittees of the U.S. House Committee on Oversight and Reform for information from major U.S. manufacturers, including us, relating to the production, sale, safety, and regulation of crowd control products. Congressional and other similar inquiries by governmental bodies may our reputation and may also result in potential legislation designed to regulate the various products sold by our brands.
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Adverse publicity could also damage our reputation and the image of our brands, undermine consumer confidence in us and reduce long-term demand for our products, even if such adverse publicity is unfounded or not material to our operations. If the reputation, culture or image of any of our brands is tarnished or receives negative publicity, then our business, financial condition, results of operations and liquidity could be materially adversely affected.
The terms of our outstanding long-term debt and any requirements to incur further indebtedness or refinance our outstanding indebtedness in the future could have a material adverse effect on our business and results of operations.
Our significant payment obligations under the terms of our long-term debt, $309.1 million of which was outstanding as of December 31, 2025, together with any additional indebtedness we may incur in the future (including under the 2024 Credit Agreement (herein defined)), could adversely affect our business, financial condition, results of operations and prospects. For example, our indebtedness or any additional financing may:
make it more difficult for us to pay or refinance debts as they become due;
require us to use a larger portion of cash flow for debt service, reducing funds available for other purposes;
limit our ability to pursue business opportunities, such as potential acquisitions, and to react to changes in market or industry conditions;
reduce the funds available for other purposes, such as implementing our strategy, funding capital expenditures and making distributions to stockholders;
increase our vulnerability to adverse economic, industry or competitive developments;
affect our ability to obtain additional financing;
decrease our profitability or cash flow, or require us to dispose of significant assets in order to satisfy debts and other obligations if we are not able to satisfy these obligations using cash from operations or other sources; and
disadvantage us compared to competitors.
Any of the foregoing, alone or in combination, could have a material adverse effect on our business, financial condition, results of operations and prospects. A breach of, or the inability to comply with, the covenants in our term loan facility and revolving credit agreement could result in an event of default, in which case the lenders will have the right to declare all borrowings to be immediately due and payable, which would have a material adverse effect on our business, financial condition, results of operations and prospects and could lead to foreclosure on our assets.
In the future, we may need to refinance our indebtedness. However, additional financing may not be available on favorable commercial terms to us, or at all. If, at such time, market conditions are materially different or our credit profile has deteriorated, the cost of refinancing such debt may be significantly higher than our indebtedness existing at that time. Furthermore, we may not be able to procure refinancing at all. Any failure to meet any future debt service obligations through use of cash flow, refinancing or otherwise, could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our business is significantly dependent on our ability to meet our labor needs.
The success of our business depends significantly on our ability to hire and retain quality employees, which include but are not limited to managers and other personnel. Competition for non-entry-level personnel, particularly those with experience in our industry, is highly competitive. We may be unable to meet our labor needs and control our costs due to external factors such as the availability of a sufficient number of qualified persons in the workforce of the markets in which we operate, competition, unemployment levels, demand for certain labor expertise, prevailing wage rates, wage inflation, changing demographics, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and the impacts of man-made or natural disasters, such as tornadoes, hurricanes, and public health emergencies, such as the COVID-19 pandemic. We have experienced, and expect to continue to experience, a shortage of labor for certain functions, which has increased our labor costs and negatively impacted our profitability. The extent and duration of the effect of these labor market challenges are subject to numerous factors, including the availability of qualified persons in the markets where we and our vendors and customers operate and levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and
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labor laws and regulations (including increased minimum wage requirements) or government programs, safety levels of our operations, and our reputation within the labor market.
Recent or potential future legislative initiatives may seek to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states or markets. As federal or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly employees as well. Further, should we fail to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our customer service to suffer. Additionally, the U.S. Department of Labor has enacted rules that may have salary and wage impact for “exempt” employees, which could result in a substantial increase in store payroll expense. Any increase in the cost of our labor could have an adverse effect on our operating costs, financial condition and results of operations, which in turn can materially adversely affect our business.
Although none of our employees are currently covered under collective bargaining agreements, we cannot guarantee that employees will not elect to be represented by labor unions in the future. If some or our entire workforce were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements or work practice, it could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Reductions in the availability of energy supplies or an increase in energy costs may increase our operating costs.
Electricity and natural gas are used to operate equipment at our manufacturing facilities. Over the past several years, prices for electricity and natural gas have fluctuated significantly. An outbreak or escalation of hostilities between the United States and any foreign power, or between foreign powers, including conflicts or heightened tensions in regions that are significant producers, processors or transit routes for energy supplies, or a natural disaster, or the emergence of additional conflicts or heightened tensions in other regions, could result in a real or perceived shortage of petroleum and/or natural gas, which could result in an increase in the cost of electricity or energy generally as well as an increase in the cost of our raw materials, of which many are petroleum-based. In addition, increased energy costs negatively impact our freight costs due to higher fuel prices. Future limitations on the availability, transportation, distribution or consumption of petroleum products and/or an increase in energy costs, particularly electricity for plant operations, could have a material adverse effect upon our business, financial condition, results of operations and liquidity.
Our nuclear operations subject us to various environmental, regulatory, financial , and other risks.
Our nuclear operations involve the design and manufacture of nuclear material handling, transportation, and storage products, as well as radioactive material identification, protection, and alarm systems and services, including onsite support services, for commercial and governmental sectors. These operations subject us to various risks, including:
Potential liabilities relating to harmful effects on the environment and human health resulting from nuclear operations and the storage, handling, and disposal of radioactive materials.
Unplanned expenditures relating to maintenance, operation, security, defects, upgrades, and repairs required by the NRC and other government agencies.
Limitations on insurance coverage for the amounts and types of losses that might arise in connection with nuclear operations.
Potential liabilities arising from a nuclear, radiological, or criticality incident, whether or not it is within our control. Our nuclear operations are subject to various safety-related requirements imposed by the U.S. Government, including the DoE and NRC. In the event of non-compliance, these agencies might increase regulatory oversight, impose fines, or shut down our operations, depending upon the severity of the situation.
Our business also supplies equipment and services to operators of nuclear energy facilities, including facilities operated by the DoE.
Pursuant to the Price-Anderson Act, the DoE has provided indemnification by incorporating its Nuclear Hazards Indemnity Agreement into contracts deemed to involve a risk of nuclear liability. This indemnity protects subcontractors in work that entails radiological risk.
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While the DoE has provided indemnification pursuant to the Price-Anderson Act, there could be delays in obtaining reimbursement for costs from the DoE, and the DoE may determine that some or all costs are not reimbursable under the indemnification. In addition, the Price-Anderson Act indemnification does not cover loss or damage to property located on a nuclear energy facility due to a nuclear incident. These claims could include allegations of damages that are not covered by the Price-Anderson Act. If the DoE were to determine that the Price-Anderson Act did not apply to any claims or allegations asserted against the Company, we would have to pay all or part of any damages awarded as a result of such claims, and the cost to us, including legal fees, could adversely affect our results of operations and financial condition.
The Price-Anderson Act’s indemnification provisions may not apply to all liabilities that we might incur while performing services as a contractor for the DoE and the nuclear power industry. If an incident or evacuation is not covered under the Price-Anderson Act’s indemnification provisions, we could be held liable for damages, regardless of fault, which could have an adverse effect on our financial condition and results of operations.
Our business seeks to protect itself from liability associated with accidents, but there can be no assurance that such contractual limitations on liability will be effective in all cases or that our Company or its customers’ insurance will cover all the liabilities it has assumed under those contracts. The costs of defending against a claim arising out of a nuclear incident or precautionary evacuation, and any damages awarded as a result of such a claim, could adversely affect our results of operations and financial condition.
We maintain insurance coverage as part of our overall risk management strategy and due to requirements, we also maintain specific coverage for some of our contracts. These policies do not protect against all liabilities associated with accidents or unrelated claims. In addition, comparable insurance may not continue to be available to us in the future at acceptable prices, or at all.
Our business may suffer if it or its employees are unable to obtain the security clearances or other qualifications needed to perform services for its customers.
Our Company derives a portion of its revenue from programs with the U.S. government and its agencies that provide access to classified information, technology, facilities, or programs. If our Company or its employees lose or are unable to obtain necessary security clearances, we may not be able to win new business, and existing government customers could terminate or decide not to renew their contracts with us. To the extent our Company cannot obtain or maintain the required clearances, our results of operations and financial condition could be materially and adversely affected.
Risks Related to our Acquisition Strategy
A number of other companies are seeking to make acquisitions in our industry, which may make our acquisition strategy more difficult or expensive to pursue.
We compete with many other companies, and certain of them have greater financial resources than we do for pursuing and consummating acquisitions and to further develop and integrate acquired businesses. Our strategy of growing through the acquisition of businesses and assets relies on our ability to consummate acquisitions to develop and offer new products that foster the growth of our core business, and to establish ourselves in other geographic regions and related businesses in which we do not currently operate. Increased competition for acquisition opportunities may impede our ability to acquire these companies because they choose another acquirer. It could also increase the price that we must pay for these companies. Either of these outcomes could reduce our growth, harm our business and adversely impact our ability to consummate acquisitions.
We may be unsuccessful in identifying suitable acquisition candidates, which may negatively impact our competitive position and our growth strategy.
In addition to organic growth, our future growth will be driven by our selective acquisition of additional businesses, our competitors and complementary businesses. Our growth through acquisitions, to date, has consisted of 17 acquisitions and two divestitures. We may be unable to identify other suitable targets for future acquisition or acquire businesses at favorable prices, which would negatively impact our growth strategy. We may not be able to execute our growth strategy through organic expansion, and if we are unable to identify and successfully acquire new businesses complementary to ours, we may not be able to offer new products in line with industry trends.
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The due diligence process that we undertake in connection with acquisitions may not reveal all facts that may be relevant in connection with an investment.
Before making acquisitions and other investments, we conduct due diligence of the target company that we deem reasonable and appropriate based on the facts and circumstances applicable to each acquisition. The objective of the due diligence process is to assess the investment opportunities based on the facts and circumstances surrounding an investment or acquisition. When conducting due diligence, we may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. The due diligence process may at times be subjective with respect to newly-organized companies for which only limited information is available. Accordingly, we cannot be certain that the due diligence investigation that we conduct with respect to any investment or acquisition opportunity will reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. For example, instances of fraud, accounting irregularities and other deceptive practices can be difficult to detect. Executive officers, directors and employees may be named as defendants in involving a company we are acquiring or have acquired. Even if we conduct extensive due diligence on a particular investment or acquisition, we may to all material issues relating to such investment, including regarding the controls and procedures of a particular target or the full scope of its contractual arrangements. We rely on our due diligence to identify potential liabilities in the businesses we acquire, including such things as potential or actual lawsuits, contractual obligations or liabilities imposed by government regulation. However, our due diligence process may not these liabilities, and where we identify a potential liability, we may believe that we can consummate the acquisition without ourselves to that liability. If our due diligence to identify issues specific to an investment or acquisition, we may obtain a lower return from that transaction than the investment would return or otherwise subject ourselves to liabilities.
We may face difficulty in integrating the operations of the businesses we have acquired and may acquire in the future.
Acquisitions have been and will continue to be an important component of our growth strategy; however, we will need to integrate these acquired businesses successfully in order for our growth strategy to succeed and for our Company to be profitable. We will implement, and the management teams of the acquired businesses will adopt, our policies, procedures and best practices. We may face difficulty with the integration of the businesses we acquire, such as coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. Furthermore, we may fail in implementing our policies and procedures, or the policies and procedures may not be effective or provide the results we anticipate for a particular business. Further, we will be relying on these policies and procedures in preparing our financial and other reports as a public company, so any failure of acquired businesses to properly adopt these policies and procedures could impair our public reporting. Management of the businesses we acquire may not have the operational or business expertise that we require to implement our policies, procedures and practices.
We typically retain the management of the businesses we acquire and rely on them to continue running their businesses, which leaves us vulnerable in the event they leave our Company.
We seek to acquire businesses that have strong management teams that will continue to run the business after the acquisition. We often rely on these individuals to conduct the day-to-day operations, and pursue the growth, of these acquired businesses. Although we typically seek to sign employment agreements with the managers of acquired businesses, it remains possible that these individuals will leave our organization. This would harm the prospects of the businesses they manage, potentially causing us to lose money on our investment and harming our growth and financial results.
We may be required to take write downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
In connection with our general growth strategy of acquiring businesses and assets, we may be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in us reporting losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our common stock.
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Risks Related to Ownership of Our Common Stock
Our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control all matters submitted to stockholders for approval.
As of the date hereof, our executive officers, directors and stockholders who own more than 5% of our outstanding common stock and their respective affiliates beneficially owned, in the aggregate, 59.5% of the Company, accounting for the shares of common stock and derivatives exercisable for shares of common stock within sixty days that they own. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:
delay, defer or prevent a change in control;
entrench our management and the board of directors; or
impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.
Shares of our common stock have been, and may continue to be, thinly traded, which may contribute to volatility in our stock price and less liquidity for investors.
The trading volume of our common stock has varied, and at times may be characterized as thinly traded. As a result of this thin trading market or “float” for our common stock, our common stock has been, and may continue to be, less liquid than the common stock of companies with broader public ownership. If our common stock is thinly traded, the trading of a relatively small volume of our common stock may have a greater impact on the trading price of our common stock than would be the case if our float were larger. As a result, the trading prices of our common stock may be more volatile than the common stock of companies with broader public ownership, and an investor may be unable to liquidate an investment in our common stock at attractive prices.
We cannot predict the prices at which our common stock will trade in the future. Variations in financial results, announcements of material events, changes in our dividend policy, technological innovations or new products by us or our competitors, our quarterly operating results, changes in general conditions in the economy or government spending on law enforcement and military, other developments affecting us or our competitors or general price and volume fluctuations in the market are among the many factors that could cause the market price of our common stock to fluctuate substantially.
Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for investors.
The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
actual or anticipated fluctuations in our results of operations;
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments;
changes in operating performance and stock market valuations of other technology or retail companies generally, or those in our industry in particular;
price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
changes in our board of directors or management;
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sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;
lawsuits threatened or filed against us;
changes in laws or regulations applicable to our business;
the expiration of contractual lock-up agreements;
changes in our capital structure, such as future issuances of debt or equity securities;
short sales, hedging and other derivative transactions involving our capital stock;
general economic conditions in the United States and abroad;
other events or factors, including those resulting from war, pandemics, incidents of terrorism or responses to these events; and
the other factors described in the sections of the Annual Report on Form 10-K titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and have a materially adverse effect on our business, financial condition, results of operations and liquidity.
Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
We have outstanding an aggregate of 42,726,564 shares of our common stock as of March 6, 2026. This includes 11,447,685 shares of common stock that are owned by Mr. Kanders, our CEO and Chairman of the Board, and his affiliates, of which he has 3,750,000 shares pledged as security for loans from financial institutions and that may be sold by such financial institutions in the event of a foreclosure of these loans.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, including sales of the shares beneficially owned by Mr. Kanders, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including:
not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
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reduced disclosure obligations regarding executive compensation in our periodic reports and annual report on Form 10-K;
the ability to delay adoption of new or revised accounting standards; and
exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Our status as an emerging growth company will cease no later than December 31, 2026.
We cannot predict if investors will find our common stock less attractive if we choose to rely on any of the exemptions afforded emerging growth companies. If some investors find our common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.
Compliance with changing laws, regulations and standards of corporate governance and public disclosure may result in additional expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, new Securities and Exchange Commission regulations and NYSE rules, are creating uncertainty for companies such as ours. These new or changed laws, regulations, and standards are subject to varying interpretations, often due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations, and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock, which may also have the consequence of depressing the market price of our common stock.
Our status as a Delaware corporation and the anti-takeover provisions of Delaware law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following:
permitting the board of directors, and not stockholders, to establish the number of directors and fill any vacancies and newly created directorships;
authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
restricting the forum for certain litigation against us to Delaware;
establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings;
preventing stockholders from taking any action except at a formal meeting of stockholders;
requiring certain amendments to our amended and restated certificate of incorporation to be approved by the holders of at least 66 2/3% of our then-outstanding common stock; and/or
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requiring that any special meeting of our stockholders will only be able to be called by a majority of our board of directors, the chairperson of our board of directors, our Chief Executive Officer, or our President.
These provisions, alone or together, may (a) frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to select or replace members of our board of directors, which is responsible for appointing the members of our management; (b) discourage, delay, or prevent a transaction involving a change in control of our Company; and/or (c) discourage proxy contests, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the market price of our common stock.
Our second amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our second amended and restated bylaws provide that the Court of Chancery of the State of Delaware (or the federal district court for the State of Delaware if the Court of Chancery does not have jurisdiction) is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine or any action asserting an “internal corporate claim” as that term is defined in Section 115 of the Delaware General Corporation Law. Our second amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the federal district courts of the United States of America will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable. To the extent it is enforceable, however, the provision may have the effect of lawsuits our directors and officers, and our stockholders cannot waive our compliance with federal securities laws and the rules and regulations thereunder.
Our second amended and restated bylaws provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Our payment of future quarterly dividends on our common stock is subject to the discretion and approval of our board of directors.
On January 20, 2026, the Company announced that its board of directors approved the continuation of a quarterly cash dividend policy of $0.10 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.40 per share on an annualized basis, representing an increase of 2 cents over the previous annualized dividend of $0.38 per share. While we intend to pay regular Quarterly Cash Dividends for the foreseeable future, all subsequent dividends will be reviewed quarterly and declared at the discretion and approval of our board of directors and will depend upon, among other things, our results of operations, capital requirements, general business conditions, contractual restrictions under our 2024 Credit Agreement on the payment of dividends, legal and regulatory restrictions on the payment of dividends, and other factors our board of directors deems relevant. Therefore, you should not purchase our common stock if you need immediate or future income by way of dividends from your investment. In addition, upon an event of default under our 2024 Credit Agreement, we are prohibited from declaring or paying any dividends on our common stock or generally making other distributions to our stockholders.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
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Our amended and restated certificate of incorporation authorizes the issuance of shares of blank check preferred stock.
Our amended and restated certificate of incorporation provides that our board of directors will be authorized to issue from time to time, without further stockholder approval, up to 10,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of any series. Such shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights. We may issue additional preferred stock in ways which may delay, defer or prevent a change in control of us without further action by our stockholders. Such shares of preferred stock may be issued with voting rights that may adversely affect the voting power of the holders of our common stock by increasing the number of outstanding shares having voting rights, and by the creation of class or series voting rights.
We may issue a substantial amount of our common stock in connection with future acquisitions, and the sale of those shares could adversely affect our stock price.
As part of our acquisition strategy, we anticipate issuing additional shares of common stock as consideration for such acquisitions. To the extent that we are able to grow through acquisitions and issue shares of our common stock as consideration, the number of outstanding shares of common stock that will be eligible for sale in the future is likely to increase substantially. Persons receiving shares of our common stock in connection with these acquisitions may be more likely to sell large quantities of their common stock, which may influence the price of our common stock. In addition, the potential issuance of additional shares in connection with anticipated acquisitions could lessen demand for our common stock and result in a lower price than would otherwise be obtained.
Techniques employed by short sellers or other derivative traders may drive down the market price of our common stock and/or spur litigation or regulatory action.
Short selling is the practice of selling securities that a seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. Short sellers hope to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement securities, as short sellers expect to pay less in that purchase than they received in the sale. As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.
If we were to become the subject of unfavorable allegations contained in short reports, whether such allegations are proven to be true or untrue, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would prefer to strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could divert management’s attention from our day-to-day operations. Even if such allegations are ultimately proven to be groundless, allegations us could impact the market price of our common stock and our business operations.
