Karman Holdings (KRMN) risk factors, FY2024 10-K

Risks Related to Our Strategy

1. 01We rely heavily on certain customers and suppliers for a significant portion of our sales
2. 02A significant deferment of orders by customers could have a material adverse effect on our business, results of operations, prospects, and financial condition
3. 03Loss of our GSA contracts or GWACs could impair our ability to attract new business
4. 04If we are unable to manage the increasing technological complexity of our business, or achieve or manage our expected growth, our business could be adversely affected
5. 05We have in the past consummated acquisitions and intend to continue to pursue acquisitions as a part of our growth plan. Our business may be materially adversely affected if we cannot consummate acquisitions on satisfactory terms or if we cannot effectively integrate acquired operations
6. 06We depend on our executive officers, senior management team and highly trained employees, and any work stoppage, difficulty hiring similar employees, or ineffective succession planning could materially adversely affect our business
7. 07Our business may be adversely affected by changes in budgetary priorities of the U.S. government
8. 08Shortfalls in available external research and development funding could adversely affect us
9. 09We generally do not have guaranteed future sales of our products. Further, when we enter into fixed-price contracts with some of our customers, we take the risk of cost overruns

Risks Related to Our Operations

1. 10If critical components or raw materials used to manufacture our products or used in our development programs become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products and in completing our development programs, which could damage our business
2. 11Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production
3. 12Our leases may be terminated or we may be unable to renew our leases on acceptable terms and if we wish to relocate, we may incur additional costs if we terminate a lease
4. 13We may not realize the full amounts reflected in our backlog as revenues, which could materially adversely affect our expected future revenues and growth prospects
5. 14Our quarterly operating results may vary widely
6. 15our ability to obtain the necessary export licenses for sales of our products and services to international customers
7. 16Our business may be materially adversely affected if we were to lose our government or industry approvals, if more stringent government regulations were enacted or if industry oversight were to increase
8. 17Because our operations are conducted through our subsidiaries, we are dependent on the receipt of distributions and dividends or other payments from our subsidiaries for cash to fund our operations and expenses and future dividend payments, if any
9. 18Technology failures or cybersecurity breaches or other unauthorized access to or use of our information technology systems or sensitive or proprietary information could have a material adverse effect on the Company’s business and operations
10. 19We are subject to certain unique business risks as a result of supplying equipment to the U.S. government
11. 20audit our contract-related costs and fees, including allocated indirect costs
12. 21A preference for small, small disadvantaged, service-disabled veteran-owned, woman-owned businesses or other preferred socioeconomic designations could impact our ability to be a prime contractor and limit our opportunity to work as a subcontractor on certain governmental procurements
13. 22If we fail to establish and maintain important relationships with government agencies and prime contractors, our ability to successfully maintain and develop new business could be materially adversely affected
14. 23The loss of any member of our senior management could impair our relationships with U.S. government customers and disrupt the management of our business
15. 24Efforts by the U.S. government to revise its organizational conflict of interest rules could limit our ability to successfully compete for new contracts or task orders, which would materially adversely affect our business, results of operations, prospects and financial condition
16. 25Some of our contracts with the U.S. government allow it to use inventions developed under the contracts and to disclose technical data to third parties, which could harm our ability to compete
17. 26U.S. government contracts are subject to a competitive bidding process that can consume significant resources without generating any revenue
18. 27the need to estimate accurately the resources and cost structure that will be required to service any contract we are awarded; and
19. 28We have classified contracts with the U.S. government, which may limit investor insight into portions of our business
20. 29We face significant competition
21. 30If we are unable to adapt to technological change, demand for our products may be reduced
22. 31We may need to invest in new information technology systems and infrastructure to scale our operations
23. 32Our future operating results will be impacted by changes in global economic and political conditions
24. 33The volatility in equity capital markets that may continue to adversely affect the market price of our common shares, which may affect our ability to fund our business through the sale of equity securities and retain key employees through our equity compensation plans
25. 34Our customers’ inability to obtain financing for their purchases from us and/or their inability to obtain financing to maintain their business could have a material adverse effect on our business

Risks Related to Legal and Regulatory Matters

1. 35We could incur substantial costs as a result of violations of or liabilities under environmental laws and regulations
2. 36We may be subject to periodic litigation and regulatory proceedings, which may materially adversely affect our business, results of operations, prospects and financial condition
3. 37Our failure to comply with applicable economic and trade sanctions could materially adversely affect our reputation and results of operations
4. 38We are subject to the Foreign Corrupt Practices Act and other similar anti-corruption laws and regulations, which could expose us to liability and materially adversely impact our business
5. 39We could be the subject of future product liability suits or product recalls, which could harm our business
6. 40Our insurance, customer indemnifications or other liability protections may be insufficient to protect us from product and other liability claims or losses
7. 41Our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could materially adversely affect our business, results of operations, prospects and financial condition
8. 42Our inability to adequately enforce and protect our intellectual property or defend against assertions of infringement could prevent or restrict our ability to compete
9. 43In addition, there can be no assurances that others will not obtain knowledge of these trade secrets or know-how through independent development or other access by legal means
10. 44We may be harmed by intellectual property infringement claims
11. 45Contracting in the defense industry is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks and false claims, and any non-compliance could subject us to fines and penalties or possible debarment
12. 46Environmental matters, including unforeseen costs associated with compliance and remediation efforts and government and third-party claims, could have a material adverse effect on our reputation and our business, results of operations, prospects and financial condition
13. 47We are subject to procurement rules and regulations, which increase our performance and compliance costs under our U.S. government contracts
14. 48Regulations designed to address climate change may result in additional compliance costs
15. 49Failure to maintain a level of corporate social responsibility could damage our reputation and could materially adversely affect our business, results of operations, prospects and financial condition
16. 50Negative publicity could damage our brand reputation, particularly at the subsidiary level, and materially adversely affect our business, results of operations, prospects and financial condition

Risks Related to Financial Matters

1. 51Tariffs on certain imports to the United States, other potential changes to U.S. tariff and import/export regulations, and other changes to macroeconomic conditions could have a material adverse effect on global economic conditions and our business, results of operations, prospects and financial condition
2. 52We use estimates in accounting for many of our programs and changes in our estimates could materially adversely affect our future financial results
3. 53Our financial results of operations could be materially adversely affected by impairment of our goodwill or other intangible assets
4. 54Our cash flow and profitability could be reduced if expenditures are incurred prior to the final receipt of a contract
5. 55We may be subject to risks relating to changes in our tax rates or exposure to additional income tax liabilities
6. 56We may need to raise additional capital, and we cannot be sure that additional financing will be available
7. 57we did not design and maintain effective process-level controls for all significant business process cycles
8. 58and cause us to fail to meet our financial reporting obligations, or result in material misstatements in our consolidated financial statements, which could adversely affect our business and reduce the price of our common stock

Risks Related to Our Indebtedness

1. 59Our indebtedness, which is subject to variable interest rates, could adversely affect our financial health and could harm our ability to react to changes to our business
2. 60limit, along with the financial and other restrictive covenants contained in the documents governing our indebtedness, among other things, our ability to borrow additional funds, make investments and incur liens
3. 61Our ability to make payments on and to refinance our indebtedness and to fund our operations, will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control
4. 62The terms of the Citi Credit Agreement restrict our current and future operations, particularly our ability to respond to changes or to take certain actions
5. 63engage in certain business activities

Risks Related to Ownership of Our Common Stock

1. 64We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors
2. 65certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable with similarly situated public companies
3. 66We will incur significant increased costs and become subject to additional regulations and requirements as a result of becoming a public company, and our management will be required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult to run our business
4. 67Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your shares of common stock for a price greater than that which you paid for it
5. 68Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline
6. 69Upon the expiration of the lock-up agreements described above, all of such shares will be eligible for resale in a public market, subject, in the case of shares held by our affiliates, to volume, manner of sale and other limitations under Rule 144
7. 70Trive Capital controls us, and its interests may conflict with ours or other stockholders’ in the future
8. 71Anti-takeover provisions in our organizational documents, Stockholders Agreement and under Delaware law could delay or prevent a change of control
9. 72the required approval of at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, to adopt, amend, or repeal certain provisions of our certificate of incorporation
10. 73Our Board is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval
11. 74Trive Capital controls a majority of our voting power for the election of directors. As a result, we will be a “controlled company” within the meaning of the NYSE corporate governance standards
12. 75Our certificate of incorporation contains exclusive forum provisions for certain stockholder litigation matters, which limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, associates or stockholders