What changed in this filing

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Item 1A. Risk Factors

2023-03-28 compared with 2022-03-28 · 191 added, 185 removed, 779 unchanged (33% of the section changed)

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The risks described below are not the only ones facing us, and are not necessarily presented in the order of importance.

The list of summary risk factors below should be read in conjunction with the remainder of this “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks we face.The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition and results of operations.

The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition and results of operations.

In any such case, the trading price of our common stock could decline.

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defense spending for the vast majority of our revenues.

Disruptions or deteriorations in our relationships with the relevant agencies of the U.S.

Disruptions or deteriorations in our relationships with the relevant customer agencies of the U.S.

government could have a material adverse impact on our business, financial condition and results of operations.

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government priorities and spending levels more broadly may negatively impact our business and could have a material adverse impact on our business, financial condition and results of operations.

• The COVID-19 pandemic and related impacts have had and are likely to continue to have an adverse impact on our business, financial condition and results of operations.

• Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.

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government’s organizational conflict of interest rules could limit our ability to successfully compete for new contracts or may require us to exit or wind down certain existing contracts, any of which could adversely affect our business, financial condition, results of operations and prospects.

government has and may continue to implement initiatives focused on efficiencies, affordability and cost growth and other changes to its procurement practices.

government has and may continue to implement initiatives focused on efficiencies, affordability and cost growth as well as other changes to its procurement practices.

• We use estimates in pricing and accounting for many of our programs, and changes in our estimates could adversely impact our business, financial condition and results of operations.

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• We cannot predict future capital needs, the sufficiency of our current financing or our ability to obtain additional financing if we need it.

• We cannot predict the effect of global and regional economic downturns and rising interest rates on our business.

• As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company.

• As a public company we must maintain an effective system of internal control over financial reporting.

• The agreements governing our debt may contain various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests, and failure to comply with these covenants could have an adverse impact on our business, financial condition and results of operations.

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• We face intense competition and may suffer losses if we fail to compete efficiently.

• Preferences or set-asides for minority-owned, small and small disadvantaged businesses could impact our ability to be a prime contractor and limit our opportunity to work as a subcontractor on certain governmental procurements.

• We depend in part upon our relationships and alliances with industry participants in order to generate revenue, which involves risks and uncertainties.

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• Third parties have claimed in the past and may claim in the future that we are infringing directly or indirectly upon their intellectual property rights, and third parties may infringe upon our intellectual property rights.

• We remain subject to reputational and other risks as a result of the conviction of the chief executive officer of Leonardo S.p.A.

on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.

• We remain subject to reputational and other risks as a result of the conviction of the chief executive officer of Leonardo S.p.A., our ultimate majority stockholder, on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.

• Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate.

• We are subject to environmental laws and regulations, and our ongoing operations may expose us to environmental liabilities affecting our reputation, business, financial condition and results of operations.

• Our business, financial condition, and results of operations could be materially adversely affected by climate change regulations.

• The outcome of litigation, arbitration, investigations, claims, disputes, enforcement actions and other legal proceedings in which we are involved from time to time is unpredictable, and an adverse decision in any such matter could have a material adverse impact on our business, financial condition and results of operations.

• Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations.

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• A failure to attract and retain technical and other key personnel could reduce our revenues and our operational effectiveness.

• Our business could be harmed in the event of a prolonged work stoppage.

• Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks or our insurers may deny coverage of or be unable to pay for material losses we incur, which could adversely affect our business, financial condition and results of operations.

• We have unfunded obligations under our pension plans, and we use estimates in accounting for our pension plans and changes in our estimates could adversely affect our financial condition and results of operations.

• Changes to financial accounting standards may affect our results of operations and cause us to change our business practices.

• Changes in future business or other market conditions could cause business investments and/or recorded goodwill or other long-term assets to become impaired, resulting in substantial losses and write-downs that would adversely affect our business, financial condition and results of operations.

• Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

• We could be liable for certain tax liabilities, including tax liabilities of US Holding and its subsidiaries, under tax law and the tax allocation agreement.

• Acquisitions could result in operating difficulties, dilution and other harmful consequences.

• Failure to properly contain a global pandemic in a timely manner could materially affect how we and our business partners are operating.

• We have significant operations in locations that could be materially and adversely impacted in the event of a natural disaster or other significant disruption.

• Our leases may be terminated or we may be unable to renew our leases on acceptable terms and if we wish to relocate, we may incur additional costs if we terminate a lease.

• We cannot predict the consequences of future geopolitical events, but they may adversely affect the markets in which we operate, our ability to insure against risk, our operations or our results of operations.

• We operate under a proxy agreement with the DoD that regulates significant areas of our governance.

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We also have ongoing obligations in favor of Leonardo S.p.A.

• Our amended and restated certificate of incorporation provides that we waive any interest or expectancy in corporate opportunities presented to Leonardo S.p.A.

• We are legally bound to provide certain services to Leonardo S.p.A., which may divert human and financial resources from our business, and to rely on the provision of certain services from Leonardo S.p.A., which we may be unable to replicate should the need arise.

• Some of our contracts with the U.S.

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government priorities and spending levels have fluctuated and may continue to fluctuate over time.

We cannot predict the impact on existing, follow-on, replacement or future programs from potential changes in priorities whether due to changes in defense spending levels, the threat environment, procurement strategy, military strategy and planning and/or changes in social, economic or political priorities, including in response to the COVID-19 pandemic.

As the DoD budget represents the largest part of the federal discretionary budget, it is possible that the various COVID-19 relief legislative actions might exert downward pressure on defense spending, as well as other non-defense discretionary outlays.

As the DoD budget represents the largest part of the federal discretionary budget, it is possible that the various legislative actions might exert downward pressure on defense spending, as well as other non-defense discretionary outlays.

government may also delay, modify or cancel ongoing competitive bidding processes, procurements and programs, as well as change its acquisition strategy.

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government agencies due to changes in the definition of “inherently governmental” work, such as proposals to limit contractor access to sensitive or classified information and work assignments.

The COVID-19 pandemic and related impacts have had and are likely to continue to have an adverse impact on our business, financial condition and results of operations.

In March 2020, COVID-19 was recognized as a pandemic by the World Health Organization and declared a national emergency by the U.S.

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it is impacting our workforce, communities, suppliers, subcontractors and customers.

The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which has adversely affected, and is expected to continue to adversely affect, our business operations, and could materially and adversely affect our business, financial condition and results of operations.

In addition to volatility in the overall demand environment for our products, systems and services, we restricted the operations in our facilities, and we may again to restrict operations if we deem it necessary or if recommended or mandated by governmental authorities which would have a further adverse impact on us.

We also implemented enhanced health leave benefits and incurred other costs related to the COVID-19 pandemic.

We incurred $6 million and $12 million of expenditures for December 31, 2021 and December 31, 2020, respectively to ensure a safe work environment for our employees.

Although we offset a portion of the cash impacts from COVID-19 pursuant to Section 3610 of the Coronavirus Aid, Relief and Economic Securities Act (the “CARES Act”), allowing for a deferral of social security payroll tax payments and pension related contributions, we may not be able to fully offset COVID-19 related costs.

We are designated as an essential business in the primary jurisdictions in which we operate, but if we lose that designation we may be subject to additional restrictions on our operations.

We may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak.

These cost increases may not be fully recoverable or adequately covered by insurance.

“Management’s Discussion and Analysis of Financial Condition—Business Overview and Considerations—Impacts of COVID-19 On Our Business” in this Annual Report.

The COVID-19 pandemic has the potential to significantly impact our supply chains, including our access to vital products and services we source from suppliers and vendors.

Our supply chains could be impacted if the operations of our suppliers, logistics and other service providers are disrupted, temporarily closed or experience worker shortages.

In particular, we rely on smaller suppliers for some materials and underlying components needed for our products and these suppliers may be particularly vulnerable to

COVID-19 related disruptions.

To the extent that there is a slow-down in production from our suppliers, limiting our own production capacity, this could adversely affect our revenues and profit for a reporting period or beyond.

Further, the COVID-19 pandemic could cause delay, or limit the ability of the U.S.

government and other customers to perform, including in making timely payments to us.

Any effect on our suppliers, other service providers and customers could materially adversely impact our business, financial condition and results of operations.

The COVID-19 pandemic has had, and may continue to have, a significant impact on the availability of electric and electronic components, including micro-electronics.

The world-wide impact of the pandemic, including the lack of forecasting accuracy by the world’s largest microelectronics manufacturers has caused shortages for automotive manufacturers to defense contractors.

While the capacity and forecasting accuracy is expected to improve over time, the demand for microelectronics may continue at a pace that exceeds those corrections.

We have been able to forecast and reserve components with long enough notice to minimize impacts to revenue, but this could change due to dynamic market conditions.

These effects could materially adversely impact our business, financial conditions and results of operations.

On September 9, 2021, President Biden released an executive order that requires all employees of federal contractors to be vaccinated.

In light of certain court orders, the office of management and Budget has stated that the U.S Government will not take action to enforce the requirements of the executive order at this time.

If ultimately uph eld, there is a risk that some of our employees will not comply and have to be replaced.

Our employees are highly skilled, have critical knowledge, and in some cases have security clearances to be able to work on highly sensitive programs.

These employees will not be easy to replace, if required by the regulations implementing this executive order.

The extent to which the COVID-19 pandemic, or any mutation of this virus or a new virus that necessitates a similar national response, will impact us in the future will depend on numerous evolving factors and developments that we are unable to predict, including:

the severity and transmission rate of the virus(es);

the duration of the outbreak, including the risk of a resurgence of the virus in areas in which it appears to have been contained;

the extent and effectiveness of containment actions;

governmental, business and other actions (which could include limitations on our operations or mandates to provide products, systems or services);

the continued success of measures taken by governmental authorities worldwide to stabilize the markets and support economic growth, which is unknown and may not be sufficient to address future market dislocations or avert severe and prolonged reductions in economic activity;

the impacts on our supply chain;

the impact of the pandemic on economic activity;

the effects of additional business or facility closures or other changes to our operations;

the health of and the effect on our workforce and our ability to meet staffing needs in our businesses and facilities, particularly if members of our workforce are quarantined as a result of exposure;

any impairment in value of our tangible or intangible assets which could be recorded as a result of a weaker economic conditions;

and the potential effects on our internal controls, including those over financial reporting, as a result of remote working environments and other conditions such as shelter-in-place and similar orders that apply to our employees and business partners, among others.

In addition, disruptions in the credit or financial markets or impacts on our credit ratings from the pandemic could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.

This situation continues to evolve, sometimes rapidly, and additional impacts may arise that we are not aware of currently.

The impacts of the COVID-19 pandemic may exacerbate other risks described in this section, any of which could have a material adverse impact on our business, financial condition and results of operations.

Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.

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If we were to violate the terms and requirements of the NISPOM or such industrial security regulations (which apply to us under the terms of classified contracts), or if one or more of our facility or personnel security clearances is invalidated or terminated, we may not be able to continue to perform our existing classified contracts and may not be able to enter into new classified contracts, which could adversely affect our revenues.

forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S.

Failure to comply with the NISPOM or other security requirements may result in loss of access to classified information and subject us to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S.

government, which could have a material adverse impact on our business, financial condition and results of operations.

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security or export controls.

Leonardo S.p.A., an Italian company listed on the Milan Stock Exchange, owns the entire share capital of US Holding which, in turn, owns 100% of the voting power of our outstanding common stock .

Leonardo S.p.A., an Italian company listed on the Milan Stock Exchange, owns the entire share capital of US Holding which, in turn, owns approximately 81% of the voting power of our outstanding common stock.

As a result, we are deemed to be under FOCI.

Furthermore, the Italian state beneficially owns approximately 30.2% of Leonardo S.p.A.’s voting power (through its ownership of approximately 30.2% of the outstanding ordinary shares of Leonardo S.p.A.).

In order to be permitted to maintain our security clearances and our access to classified data and to perform or bid on classified programs, we are required to mitigate FOCI through a proxy agreement, which we have done by entering into a proxy agreement, dated as of October 26, 2017, with the DoD.

We are currently operating under an interim proxy agreement while we seek to enter into a new proxy agreement with the DoD.

The terms of any new proxy agreement or other mitigation agreements could impose heightened or new restrictions, which could further impact our business operations.

Proxy agreements, including ours, typically have limited duration and need to be renewed on a regular basis.

For additional information on the terms and requirements of the proxy agreement, see “— We operate under a proxy agreement with the DoD that regulates significant areas of our governance.

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government contracts could be terminated, which could have a material adverse impact on our business, financial condition and results of operations .”

While we currently mitigate FOCI under the proxy agreement, the DoD reserves the right to impose such additional security safeguards as it believes necessary in order to prevent unauthorized access to classified and controlled unclassified information and any U.S.

government agency may deny or revoke our access to classified and controlled unclassified information under its jurisdiction if it considers it necessary to protect national security.

While we currently mitigate FOCI under the interim proxy agreement, the DoD reserves the right to impose such additional security safeguards as it believes necessary in order to prevent unauthorized access to classified and controlled unclassified information and any U.S.

government agency may deny or revoke our access to classified and controlled unclassified information under its jurisdiction if it considers

it necessary to protect national security.

Failure to maintain an agreement with the DoD regarding the appropriate FOCI mitigation arrangement could result in invalidation or termination of our facility security clearances, which in turn would mean that we would not be able to perform under current or enter into future contracts with the U.S.

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Procurement funds are typically made available for obligation over the course of one to three years.

Consequently, programs

often initially receive only partial funding, and additional funds are obligated only as Congress makes further appropriations.

Consequently, programs often initially receive only partial funding, and additional funds are obligated only as Congress makes further appropriations.

We cannot predict the extent to which total funding and/or funding for individual programs will be included, increased or reduced as part of the annual appropriations process ultimately approved by Congress and the President or in separate supplemental appropriations or continuing resolutions, as applicable.

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government contracts may generally be terminated, in whole or in part, without prior notice at the U.S.

government’s convenience upon payment only for work done and commitments made at the time of termination.

government’s convenience upon payment only for work performed and commitments made at the time of termination.

For some contracts, we are a subcontractor and not the prime contractor, and in those arrangements, the U.S.

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Termination by the U.S.

government, or one of its prime contractors, of a contract due to default could in addition to the loss of future revenue obligate us to pay for re-procurement costs in excess of the original contract price, net of the value of work accepted from the original contract, as well as other damages.

government, or one of its prime contractors, of a

contract due to default could in addition to the loss of future revenue obligate us to pay for re-procurement costs in excess of the original contract price, net of the value of work accepted from the original contract, as well as other damages.

Termination of a contract due to our default could also impair our reputation and our ability to compete for other contracts which could have a material adverse impact on our business, financial condition and results of operations.

Additionally, our U.S.

government contracts are heavily regulated and subject to audit and negative audit findings could result in the termination of these or other contracts or the failure to receive future awards, see “— We operate in a highly regulated environment and are routinely audited and reviewed by the U.S.

government contracts are heavily regulated and subject to audit and negative audit findings which could result in the termination of these or other contracts or the failure to receive future awards, see “— We operate in a highly regulated environment and are routinely audited and reviewed by the U.S.

government and its agencies .”

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These agencies review performance on government contracts, direct and indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards.

They also review compliance with government standards for our business systems and the adequacy of our internal control

systems and policies.

They also review compliance with government standards for our business systems and the adequacy of our internal control systems and policies.

Negative findings related to our business and accounting systems and financial controls and capability could result in our ineligibility for future cost-plus contracts.

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government, any of which could have a material adverse effect on our business, financial condition and results of operations.

We (again, including our subcontractors and others with whom we do business) are also subject to, and expected to perform in compliance with, a vast array of federal laws, regulations and requirements related to our industry, our products and the businesses we operate.

the Foreign Investment Risk Review Modernization Act, the International Emergency Economic Powers Act, the Trading with the Enemy Act, and Executive Orders and regulations, administered by the U.S.

We (again, including our subcontractors and others with whom we do business) are also subject to, and expected to perform in compliance with, a vast array of federal, state, local and international laws, regulations and requirements related to our industry, our products and the businesses we operate.

These laws and regulations include, but are not limited to, the Anti-Kickback Act, the Arms Export Control Act, including the ITAR, the Communications Act, the Defense Federal Acquisition Regulations, the EAR (which includes anti-boycott provisions), the False Claims Act, the Federal Acquisition Regulation, the FCPA, the Lobbying Disclosure Act, the Procurement Integrity Act, the Truthful Cost or Pricing Data Act, the Foreign Trade Regulations, the Foreign Investment Risk Review Modernization Act, the International Emergency Economic Powers Act, the Trading with the Enemy Act, and Executive Orders and regulations, administered by the U.S.

Department of the Treasury, Office of Foreign Assets Control, as well as rules and regulations administered by the U.S.

Customs and Border Protection and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

While we have implemented compliance programs that are intended to avoid violations of these federal laws, regulations and requirements, given the nature of our operations and the constant evolution of applicable laws, regulations and requirements, we may not be able to prevent future violations.

While we have implemented compliance programs that are intended to avoid violations of these laws, regulations and requirements, given the nature of our operations and the constant evolution of applicable laws, regulations and requirements, we may not be able to prevent future violations.

If we are found to have violated such laws, regulations or requirements, we may be subject to reductions of the value of contracts;

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Past efforts by the U.S.

government to reform its procurement practices have focused, among other areas, on the separation of certain types of work to facilitate objectivity and avoid or mitigate organizational conflicts of interest, and the strengthening of regulations governing organizational conflicts of interest.

government to reform its procurement practices have focused, among other areas, on the separation of certain types of work to facilitate objectivity and avoid or mitigate

organizational conflicts of interest, and the strengthening of regulations governing organizational conflicts of interest.

Organizational conflicts of interest may arise from circumstances in which a contractor has:

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and its subsidiaries (including US Holding), or with which we otherwise conduct business create organizational conflicts of interest issues for us, our business, financial condition, results of operations and prospects could be materially and adversely affected.

government has and may continue to implement initiatives focused on efficiencies, affordability and cost growth and other changes to its procurement practices.

Our industry has experienced, and we expect will continue to experience, significant changes to business practices globally as a result of an increased focus on affordability, efficiencies, business systems, recovery of costs and a reprioritization of available defense funds to key areas for future

defense spending.

government has and may continue to implement initiatives focused on efficiencies, affordability and cost growth as well as other changes to its procurement practices.

These initiatives and changes to procurement practices may change the way U.S.

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Additionally, accounting for our contracts requires judgment relative to assessing costs, including costs associated with customer-directed delays and reductions in scheduled deliveries, unfavorable resolutions of claims and contractual matters, judgments associated with estimating contract revenue and costs and assumptions for schedule and technical issues.

Due to the size, nature and performance period of many of our contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables.

Due to the size, nature and performance period

of many of our contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables.

For example, we must make assumptions regarding:

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We historically have not realized all of the revenue included in our total contract value or bookings, and we may not realize all of the revenue included in our total contract value or bookings in the future.

There is a higher degree of risk in this regard

with respect to unfunded backlog.

There is a higher degree of risk in this regard with respect to unfunded backlog.

In addition, there can be no assurance that our total bookings will result in actual revenue in any particular period.

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Our failure to replace canceled or reduced bookings could have a material adverse impact on our business, financial condition and results of operations.

See “— We have unfunded obligations under our pension plans, and we use estimates in accounting for our pension plans and changes in our estimates could adversely affect our financial condition and results of operations .”

Our business may be harmed if we are unable to appropriately manage our inventory.

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We may also enter into other types of financings in the future, including bank and bond financing.

Although we believe that our available cash resources,

together with our retained earnings, are sufficient to meet our presently anticipated liquidity needs and capital expenditure requirements, we might in the future need to raise additional funds to, among other things:

Although we believe that our available cash resources, together with our retained earnings, are sufficient to meet our presently anticipated liquidity needs and capital expenditure requirements, we might in the future need to raise additional funds to, among other things:

• fund our operations;

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We cannot guarantee that we will continue to be able to extend existing working capital financing on commercially reasonable terms or at all and we might be unable to obtain additional financing, if needed, on terms acceptable to us, if at all.

In the past we have been reliant on our parent company for financing.

If sufficient funds are not available or are not available on terms acceptable to us, our ability to fund our current operations, fund expansion, take advantage of acquisition opportunities, develop or enhance services or products, or otherwise respond to competitive pressures would be significantly limited.

We may be required to obtain the consent of US Holding in order to obtain financing and there is no guarantee that their consent will be granted.

See “— Risks Relating to Our Status under the Proxy Agreement — Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their significant ownership in us may discourage change of control transactions .” The existing debt obligations of Leonardo S.p.A., which contain restrictions applicable to subsidiaries of Leonardo S.p.A., including us, may also negatively impact our ability to obtain additional financing on terms acceptable to us, if at all.

In addition, any decline in the ratings of our corporate credit or any indications from the rating agencies that their ratings on our corporate credit are under surveillance or review with possible negative implications could adversely impact our ability to access capital.

See “— Risks Relating to Our Status under the Proxy Agreement — Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their majority ownership in us may discourage change of control transactions .” The existing debt obligations of Leonardo S.p.A., which contain restrictions applicable to subsidiaries of Leonardo S.p.A., including us, may also negatively impact our ability to obtain additional financing on terms acceptable to us, if at all.

addition, any decline in the ratings of our corporate credit or any indications from the rating agencies that their ratings on our corporate credit are under surveillance or review with possible negative implications could adversely impact our ability to access capital.

These limitations could have a material adverse impact on our business, financial condition and results of operations.

We are subject to global and regional economic downturns, rising interest rates and related risks.

Our business is affected by global and regional demographic and macroeconomic conditions.

A significant downturn in global economic growth, or recessionary conditions in major geographic regions for prolonged periods, may lead to a variety of adverse consequences for our business including reduced demand for our technologies, increases in our operating costs and rising interest rates.

Similarly, any disruption in access to bank deposits or lending commitments due to bank failure may adversely affect our business, financial condition and results of operations.

These and other adverse macroeconomic consequences could result in our inability to operate profitably and reduce our earnings.

The requirements of being a public company may strain our resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than we anticipate.

In 2022, we became a public company, and as such, have incurred, and will continue to incur, significant legal, accounting and other expenses that we did not incur as a private company.

We are subject to the reporting requirements of the Exchange Act and are required to comply with the applicable requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of the Nasdaq Stock Exchange (the “Nasdaq”), including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.

Compliance with these rules and regulations can be burdensome.

Our management and other personnel need to devote a substantial amount of time to these compliance initiatives.

Moreover, these rules and regulations will increase our historical legal and financial compliance costs and will make some activities more time-consuming and costly.

We may need to hire additional accounting and financial staff, and engage outside consultants, all with appropriate public company experience and technical accounting knowledge and maintain an internal audit function, which will increase our operating expenses.

We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Failure to maintain an effective system of internal control over financial reporting or to remediate weaknesses could materially harm our revenues, erode stockholder confidence in our ability to pursue business and report our financial results/condition, and negatively affect the trading price of our common stock.

As a public reporting company, we are required to establish and maintain effective internal control over financial reporting.

Failure to establish such internal control, or any failure of such internal control once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations.

Any failure of our internal control over financial reporting could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require annual assessment of our internal control over financial reporting.

The standards that must be met for management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards.

Any assessment by management that there are weaknesses in our internal control over financial reporting may raise concerns for investors.

Any actual or perceived weaknesses and conditions that need to be addressed in the internal controls over financial reporting (including those weaknesses identified in

periodic reports), or disclosure of management’s assessment of the internal controls over financial reporting may have an adverse impact on the price of our common stock.

The agreements governing our debt contain various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests, and failure to comply with these covenants could have an adverse impact on our business, financial condition and results of operations.

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• negotiations with our lenders to restructure the applicable debt.

Some of our variable-rate indebtedness uses LIBOR as a benchmark for establishing the rate.

LIBOR is expected to be discontinued after 2021 and will be replaced with an alternative reference rate.

The consequence of this development cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness.

Some of our variable-rate indebtedness uses the Secured Overnight Financing Rate, (“SOFR”) as a benchmark for establishing the rate.

Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us in an amount sufficient, to enable us to pay our anticipated indebtedness or to fund our other liquidity needs.

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We expect that a majority of the business that we seek will be awarded through competitive bidding.

government has increasingly relied on certain types of contracts that are

subject to multiple competitive bidding processes, including multi-vendor Indefinite Delivery Indefinite Quantity (“IDIQ”), Government wide Acquisition Contracts, General Services Administration Schedule and other multi-award contracts, which has resulted in greater competition and increased pricing pressure.

government has increasingly relied on certain types of contracts that are subject to multiple competitive bidding processes, including multi-vendor Indefinite Delivery Indefinite Quantity (“IDIQ”), Government wide Acquisition Contracts, General Services Administration Schedule and other multi-award contracts, which has resulted in greater competition and increased pricing pressure.

Many of our larger competitors have significantly greater financial resources than we do and have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas, including as a result of substantial industry consolidation, which increased the market share of certain of our competitors and enabled them to take advantage of economies of scale and develop new technologies.

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Further, the competitive bidding process involves significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split with competitors, as well as the risk that we may fail to accurately estimate the resources and costs required to fulfill any contract awarded to us.

The current competitive environment has resulted in an increase of bid protests from unsuccessful bidders, which typically extends the time until work on a contract can begin.

Any increase in bid protests from unsuccessful bidders typically extends the time until work on a contract can begin.

Following any contract award, we may experience significant expense or delay, contract modification or contract rescission as a result of our competitors protesting or challenging contracts awarded to us in competitive bidding.

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In addition, particularly where we act as a subcontractor and form teaming arrangements in which we and other contractors bid on particular contracts or programs, we often lack control over fulfillment of a contract and poor performance on the contract could impact our customer relationship, even when we perform as required.

If partners in teaming arrangements suffer financial difficulties, face compliance or other reputational issues or fail to comply with the law, we may be

adversely affected to the extent we are relying on such partners.

If partners in teaming arrangements suffer financial difficulties, face compliance or other reputational issues or fail to comply with the law, we may be adversely affected to the extent we are relying on such partners.

Additionally, the U.S.

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We may have disputes with our contractual counterparts, including regarding the quality and timeliness of work performed by a subcontractor, customer concerns about a subcontract or subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, our hiring of personnel of a subcontractor or as a subcontractor or our counterpart’s failure to comply with applicable law.

In addition, there are certain parts, components and services for many of our products, systems and services that we source from other manufacturers or vendors.

In addition, there are certain parts, components and services for many of our products,

systems and services that we source from other manufacturers or vendors.

Some of our suppliers, from time to time, experience financial and operational difficulties, which may impair their ability to supply the materials, components, subsystems and services that we require.

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Impacts from the COVID-19 pandemic have created or exacerbated existing materials shortages, resulted in supplier business closures and disrupted our supply chain.

Future impacts from the pandemic remain highly uncertain as the situation continues to evolve, sometimes rapidly.

In addition, our supply chain may be disrupted by trade conflicts and tariffs imposed on products, as well as other external events, including natural disasters, extreme weather conditions, future medical epidemics or pandemics, acts of terrorism, cyber-attacks and labor disputes, governmental actions and legislative or regulatory changes, such as product certification or stewardship requirements, sourcing restrictions, product authenticity and climate change or greenhouse gas emission standards.

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In addition, in connection with our government contracts, we are required to procure certain materials, components and parts from supply sources approved by the U.S.

government and we rely on our subcontractors and suppliers to comply with applicable laws, regulations and other requirements

regarding procurement of counterfeit, unauthorized or otherwise non-compliant parts or materials, including parts or materials they supply to us, and in some circumstances, we rely on their certifications as to their compliance.

government and we rely on our subcontractors and suppliers to comply with applicable laws, regulations and other requirements regarding procurement of counterfeit, unauthorized or otherwise non-compliant parts or materials, including parts or materials they supply to us, and in some circumstances, we rely on their certifications as to their compliance.

From time to time, we use components for which there is only one supplier, and that supplier may be unable to meet our needs.

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governments and agencies concerning safeguarding and maintaining information confidentiality including extensive and evolving cyber requirements of the DoD.

We face the risk of a security breach with respect to that data, whether through cyber attack, cyber intrusion or insider threat via the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or with access to systems inside our organization, threats to the physical security of our facilities and employees or other significant disruption of our IT networks and related systems or those of our suppliers or subcontractors.

The risk of security breaches may be higher during times of a natural disaster or pandemic (including COVID-19) due to remote working arrangements.

As an advanced technology-based solutions provider, and particularly as a government contractor with access to national security and other sensitive government information, we face a heightened risk of a security breach or disruption from threats to gain unauthorized access to our and our customers’ proprietary or classified information on our IT networks and related systems and to the IT networks and related systems that we operate and maintain for certain of our customers.

We face the risk of a security breach with respect to that data, whether through cyber-attack, cyber-intrusion or insider threat via the Internet, malware, e-mail attachments, persons inside our organization or with access to systems inside our organization, threats to the physical security of our facilities and employees or other significant disruption of our IT networks and related systems or those of our suppliers or subcontractors.

and related systems and to the IT networks and related systems that we operate and maintain for certain of our customers.

These types of information and IT networks and related systems are critical to the operation of our business and essential to our ability to perform day-to-day operations, and, in some cases, are critical to the operations of certain of our customers.

We make significant efforts to maintain the security and integrity of these types of information and IT networks and related systems and have implemented various measures to manage the risk of a security breach or disruption.

As is the case with many other companies, we have experienced cyber security incidents in the past, including DoS attacks, ransomware, and attacks from suspected nation state actors.

As is the case with many other companies, we have experienced cyber-security incidents in the past, including denial of service attacks, ransomware, and attacks from suspected nation state actors.

Our efforts and measures have not been effective in the case of every incident, but no incident has had a material negative impact on us to date.

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• disrupt the proper functioning of these networks and systems and, therefore, our operations and/or those of certain of our customers;

employees, including trade secrets, which could be used to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;

• result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours, our customers or our employees, including trade secrets, which could be used to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;

• result in litigation and governmental investigation and proceedings associated with cybersecurity incidents;

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government) and the general public.

Additionally, a failure to comply with the National Institute of Standards and Technology Special Publication 800-171 or the DoD’s cybersecurity requirements, including the Cyber Security Material Model Certificate (“CMMC”) which will require all contractors to receive specific third-party certifications relating to specified cybersecurity standards in order to be eligible for contract awards, whether or not resulting in a security breach or disruption, could restrict our ability to bid for, be awarded and perform on DoD contracts.

The DoD expects that all new contracts will be required to comply with the CMMC by 2026, and initial requests for information and for proposal have already begun.

We are in the process of evaluating our readiness and preparing for the CMMC, but to the extent we, or our subcontractors or other third parties on whom we rely, are unable to achieve certification in advance of contract awards that specify the requirement, we will be unable to bid on such contract awards or on follow-on awards for existing work with the DoD, depending on the level of standard as required for each solicitation, which could adversely impact our revenue, business, results of operations and financial condition.

We will also be required to go through a recertification process every two years in order to maintain our certification.

In addition, any obligations that may be imposed on us under the CMMC may be different from or in addition to those otherwise required by applicable laws and regulations, which may cause additional expense for compliance.

Additionally, a failure to comply with the National Institute of Standards and Technology Special Publication 800-171 or other DoD cybersecurity requirements including the Cyber Security Material Model Certificate (“CMMC”), whether or not resulting in a security breach or disruption, could restrict our ability to bid for, be awarded and perform on DoD contracts.

DoD requirements to comply with the CMMC now and in the future, and any obligations that may be imposed on us under the CMMC that may be different from or in addition to those otherwise required by applicable laws and regulations, may cause additional expense for compliance.

We must also rely on the safeguards put in place by customers, suppliers, vendors, subcontractors, partners in teaming arrangements or other third parties to minimize the impact of cyber threats, other security threats or business disruptions.

These third parties may have varying levels of cybersecurity expertise and safeguards, and their relationships with government contractors, such as our company, may increase the likelihood that they are targeted by the same cyber threats, including from foreign governments, we face.

These third parties may have varying levels of cybersecurity expertise and safeguards, and their relationships with government contractors, such as our company,

may increase the likelihood that they are targeted by the same cyber threats, including from foreign governments.

In the event of a breach affecting these third parties, our business and financial results could suffer materially.

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The impact of these various factors is difficult to predict, but any of them could result in the loss of information or capabilities, harm to individuals or property, damage to our reputation, loss of business, contractual or regulatory actions and potential liabilities, any one of which could have a material adverse impact on our business, financial condition and results of operations.

Significant capital investments and other expenditures could be required to remedy cybersecurity problems and prevent future breaches, including costs associated with additional security technologies, personnel and experts.

These costs, which could be material, could adversely impact our results of

operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems.

Significant capital investments and other expenditures could be required to remedy cybersecurity challenges and prevent future breaches, including costs associated with additional security technologies, personnel and experts.

These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems.

We may be at greater risk from terrorism and other threats to our physical security and personnel, than other companies.

As a defense contractor, we may be more likely than other companies to be a direct target of, or an indirect casualty of, physical attacks including by active shooters, terrorists or terrorist organizations.

As a defense contractor, we may be more likely than other companies to be a direct target of, or indirectly damaged by, physical attacks including by active shooters, terrorists or terrorist organizations.

It is impossible to predict accurately the likelihood or impact of any attack on our industry generally or on our business.

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Our ability to develop new products and technologies that anticipate changing customer requirements, reduce costs and otherwise retain or enhance our competitive position in existing and new markets will be an important factor in our future results from operations.

We will continue to make substantial capital expenditures and incur significant research and development costs aimed at improving our manufacturing capability, reducing costs, and developing and introducing new products and enhancements.

We will continue to make substantial capital expenditures and incur significant R&D costs aimed at improving our manufacturing capability, reducing costs, and developing and introducing new products and enhancements.

If we fail to develop and introduce new products and technologies in a timely manner it could have a material adverse effect on our business, financial condition and results of operations.

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Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control.

Failure to meet our contractual obligations could adversely affect our business, financial condition, results of operations, reputation and future prospects.

Failure to meet our contractual obligations could

adversely affect our business, financial condition, results of operations, reputation and future prospects.

We design, develop and manufacture technologically advanced and innovative products and services, which are applied by our customers in a variety of environments, including some under highly demanding operating conditions, to accomplish challenging missions.

Problems and delays in development or delivery, or system failures, as a result of issues with respect to design, technology, intellectual property rights, labor, inability to achieve learning curve assumptions, inability to manage effectively a broad array of programs, manufacturing materials or components, or subcontractor performance could prevent us from meeting requirements and create significant risk and liabilities.

In addition, any obsolescence of components used in our products may require us to redesign our products, in whole or in part, which could cause increased costs.

Problems and delays in development or delivery, or system failures, as a result of issues with respect to design, technology, intellectual property rights, labor, inability to achieve learning curve assumptions, inability to effectively manage a broad array of programs, manufacturing materials or components, or subcontractor performance could prevent us from meeting requirements and create significant risk and liabilities.

In addition, any obsolescence of components used in our products may require us to redesign our products, in whole or in part, which could result in increased costs.

Similarly, failures to perform on schedule or otherwise to fulfill our contractual obligations could negatively affect our reputation and ability to win future business which could have a material adverse impact on our business, financial condition and results of operations.

In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen problems.

Examples of unforeseen problems that could negatively affect revenue, schedule

and results of operations include premature failure of products that cannot be accessed for repair or replacement, failure to perform in anticipated or unanticipated battlefield conditions, unintended explosions or similar events, problems with design, quality and workmanship, inadequate delivery of subcontractor components or services and degradation of product performance.

Examples of unforeseen problems that could negatively affect revenue, schedule and results of operations include premature failure of products that cannot be accessed for repair or replacement, failure to perform in anticipated or unanticipated battlefield conditions, unintended explosions or similar events, problems with design, quality and workmanship, inadequate delivery of subcontractor components or services and degradation of product performance.

These failures could result, either directly or indirectly, in loss of life or property.

Among the factors that may affect revenue and results of operations could be inaccurate cost estimates, design issues, human factors, unforeseen costs and expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseen problems, loss of follow-on work, and, in the case of certain contracts, repayment to the government customer of contract cost and fee payments we previously received, or replacement obligations.

See also “ Part I.

Risk Factors — Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.

In particular, fixed-price contracts subject us to the risk of loss in the event of cost overruns or higher than anticipated inflation .” and “ Part I.

Risk Factors — We use estimates in pricing and accounting for many of our programs, and changes in our estimates could adversely impact our business, financial condition and results of operations .”

See also Part I, Item 1A, “Risk Factors — Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.

In particular, fixed-price contracts subject us to the risk of loss in the event of cost overruns or higher than anticipated inflation .” and Part I, Item 1A, “Risk Factors — We use estimates in pricing and accounting for many of our programs, and changes in our estimates could adversely impact our business, financial condition and results of operations .”

If we are unable to meet our obligations, including due to issues regarding the design, development or manufacture of our products or services, it could have a material adverse impact on our reputation, our ability to compete for other contracts and our business, financial condition and results of operations.

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• contractual provisions may not be enforceable in certain jurisdictions.

Also, despite the steps taken by us to protect our proprietary rights, it may be possible for unauthorized third parties to copy or reverse-engineer aspects of our products, develop similar technology independently or otherwise obtain and use information from our supply chain that we regard as

proprietary and we may be unable to successfully identify or prosecute unauthorized uses of our technology.

Third parties have claimed in the past and may claim in the future that we are infringing directly or indirectly upon their intellectual property rights, and third parties may infringe upon our intellectual property rights.

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We may be required to spend significant resources to monitor and enforce our intellectual property rights.

Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be costly and could divert management’s attention away from other aspects of our business.

We remain subject to reputational and other risks as a result of the conviction of the chief executive officer of Leonardo S.p.A.

on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.

In October 2020, an Italian court convicted Alessandro Profumo, the chief executive officer of our ultimate parent company, Leonardo S.p.A., on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.

Litigation to determine the scope of intellectual

property rights, even if ultimately successful, could be costly and could divert management’s attention away from other aspects of our business.

We remain subject to reputational and other risks as a result of the conviction of the chief executive officer of Leonardo S.p.A., our ultimate majority stockholder, on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.

In October 2020, an Italian court convicted Alessandro Profumo, the chief executive officer of our ultimate majority stockholder, Leonardo S.p.A., on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.

The conviction, if ultimately upheld by the Italian Supreme Court, would prevent Mr.

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Profumo, we remain subject to reputational risk as a result of this ongoing proceeding.

Additionally, the loss of continuity of leadership at our parent company, if the conviction is ultimately upheld, could disrupt our business in the short term.

Any such disruption or reputational harm related to the proceeding could affect our ability to win new customer contracts and

harm our existing relationships with customers, employees, suppliers, subcontractors and others with whom we do business, which could have an adverse impact on our business, financial condition and results of operations.

For further discussion of risks relating to misconduct of our employees, business partners and other associated persons, including proceedings against the former chief executive officer of Leonardo S.p.A.

and another Leonardo S.p.A.

executive, see “— Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate .”

Additionally, the loss of continuity of leadership at our majority stockholder, if the conviction is ultimately upheld, or when Profumo’s term has ended, our business could be disrupted in the short term.

Any such disruption or reputational harm related to the proceeding could affect our ability to win new customer contracts and harm our existing relationships with customers, employees, suppliers, subcontractors and others with whom we do business, which could have an adverse impact on our business, financial condition and results of operations.

For further discussion of risks relating to misconduct of our employees, business partners and other associated persons, see “— Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate .”

Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate.

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Additionally, we may have limited ability to control the conduct of our affiliates and we have been, and may in the future be, adversely impacted by misconduct of our affiliates.

For example, in May 2019 the Italian Supreme Court overturned the 2014 convictions of the former chief executive officer of our ultimate parent, Leonardo S.p.A., and another Leonardo S.p.A.

executive, of international bribery.

While the convictions in Italy were overturned in a final non-appealable proceeding, the case continues to be the subject of a corruption trial in India.

Therefore, we remain subject to reputational risk as a result of this ongoing action and future restrictions on our ability to sell to the Indian government.

This risk of improper conduct may increase as we continue to grow and expand our operations.

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We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist.

Our products and services are also used in nuclear-related activities (including providing

components for nuclear-powered platforms and sensors used in nuclear applications) and used in support of nuclear-related operations of third parties.

Our products and services are also used in nuclear-related activities (including providing components for nuclear-powered platforms and sensors used in nuclear applications) and used in support of nuclear-related operations of third parties.

Our business also involves the handling, transportation, storage and disposal of potentially dangerous chemicals and unstable materials and is subject to hazards inherent in such activities including chemical spills, storage tank leaks, discharges or releases of toxic or hazardous substances or gases and other hazards incident to the handling, transportation, storage and disposal of dangerous chemicals.

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For example, a government site within a national park for which we may be deemed a potentially responsible party has been subject to a government investigation since July 2000.

The remediation of such contamination, or the enactment of more stringent laws or regulations or more strict interpretation of existing laws and regulations, may require us to make additional expenditures, and could decrease the amount of free cash flow available to us for other purposes, including capital expenditures, research and development and other investments and could have a material adverse impact on our business, financial condition and results of operations.

The remediation of such contamination, or the enactment of more stringent laws or regulations or more strict interpretation of existing laws and regulations, may require us to make additional expenditures, and could decrease the amount of free cash flow available to us for other purposes, including capital expenditures, R&D and other investments and could have a material adverse impact on our business, financial condition and results of operations.

Our business, financial condition, and results of operations could be materially adversely affected by climate change regulations.

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The size, nature and complexity of our business make us susceptible to investigations, claims, disputes, enforcement actions, litigation and other legal proceedings, particularly those involving governments.

From time to time, we are and may become subject to investigations, claims, disputes, enforcement actions and administrative, civil or criminal litigation, arbitration or other legal proceedings globally and across a broad array of matters, including, but not limited to, government contracts, commercial transactions, false claims, false statements, mischarging, contract performance, fraud, procurement integrity, products liability, warranty liability, the use of hazardous materials, personal injury claims, environmental matters, shareholder-derivative actions, prior acquisitions and divestitures, intellectual property, tax, employees, export/import, anti-corruption, labor, health and safety, accidents, employee benefits and plans, including plan administration, and improper payments, as well as matters relating to our acquisition of assets or companies and other matters.

From time to time, we are and may become subject to investigations, claims, disputes, enforcement actions and administrative, civil or criminal litigation, arbitration or other legal proceedings

globally and across a broad array of matters, including, but not limited to, government contracts, commercial transactions, false claims, false statements, mischarging, contract performance, fraud, procurement integrity, products liability, warranty liability, the use of hazardous materials, personal injury claims, environmental matters, shareholder-derivative actions, prior acquisitions and divestitures, intellectual property, tax, employees, export/import, anti-corruption, labor, health and safety, accidents, employee benefits and plans, including plan administration, and improper payments, as well as matters relating to our acquisition of assets or companies and other matters.

These actions may divert financial and management resources that would otherwise be used to benefit our operations.

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Desired levels of insurance may not be available in the future at economical prices or at all.

Although we believe that we have meritorious defenses to the claims made in the litigation matters in which we have been named a party and intend to contest each lawsuit vigorously, no

assurances can be given that the results of these matters will be favorable to us.

Although we believe that we have meritorious defenses to the claims made in the litigation matters in which we have been named a party and intend to contest each lawsuit vigorously, no assurances can be given that the results of these matters will be favorable to us.

An adverse resolution or outcome of any of these investigations, claims, disputes, enforcement actions, litigation and other legal proceedings could have an adverse impact on our business, financial condition and results of operations.

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Our international business is subject to both U.S.

and foreign laws and regulations, which may include, without limitation, laws and regulations relating to import-export controls, (such as the ITAR, EAR, and customs laws), tariffs, embargoes, technology transfer restrictions, government contracts and procurement, data privacy and protection, investment, exchange rates and controls, the FCPA and other anti-corruption laws, including the UK Bribery Act and the Canadian Corruption of Foreign Public Officials Act, the anti-boycott provisions under the EAR, U.S.

economic sanctions administered by the Office of Foreign Assets Control and other federal agencies, labor and employment, works councils and other labor groups, anti-human trafficking, taxes, environment, immunity, security restrictions and intellectual property.

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generally have the ability to terminate contracts for default based on performance.

Suspension or debarment, or termination of a contract due to default, in particular, could have a material adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash flows.

Suspension or debarment, or termination of a contract due to default, in particular, could have a material adverse effect on our reputation, our ability to compete for other contracts and our

financial position, results of operations and/or cash flows.

New regulations and requirements, or changes to existing ones in the various countries in which we operate can significantly increase our costs and risks of doing business internationally.

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These changes may affect export control laws as products or markets that were not previously subject to stringent controls may become subject to greater restrictions and oversight.

These changes may also

affect the defense spending priorities and procurement policies of foreign governments which may affect our international military sales.

These changes may also affect the defense spending priorities and procurement policies of foreign governments which may affect our international military sales.

Global economic conditions and fluctuations in foreign currency exchange rates could further impact our business.

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also depends on our ability to attract and retain sufficient qualified personnel with the skills and/or security clearances in the markets in which we do business.

The products and services we provide internationally, including those provided by subcontractors and joint ventures in which we have an interest, are sometimes in countries with unstable governments, economic or fiscal challenges, military or political conflicts and/or developing legal systems.

The products and services we provide internationally, including those provided by subsidiaries, subcontractors and joint ventures in which we have an interest, are sometimes in countries with unstable governments, economic or fiscal challenges, military or political conflicts and/or developing legal systems.

This may increase the risk to our employees, subcontractors or other third parties, and/or increase the risk of a wide range of liabilities, as well as loss of property or damage to our products.

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For example, the U.S.

Department of State must notify

Congress at least 15 to 30 days, depending on the size and location of the proposed sale, prior to authorizing certain sales of defense equipment and services to some foreign governments.

Department of State must notify Congress at least 15 to 30 days, depending on the size and location of the proposed sale, prior to authorizing certain sales of defense equipment and services to some foreign governments.

During that time, Congress may take action to block the proposed sale.

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Our success depends largely upon the continued services of our executive officers and other key employees.

We rely on our leadership team in the areas of research and development, operations, security, marketing, sales, customer experience, general and administrative functions, and on individual contributors in our research and development and operations.

We rely on our leadership team in the areas of R&D, operations, security, marketing, sales, customer experience, general and administrative functions, and on individual contributors in our R&D and operations.

In addition, the relationships and reputation that many members of our senior management team have established and maintain with U.S.

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We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time.

The loss of one or more of our executive officers, especially our chief executive officer, or key employees could impair our ability to identify and secure new contracts, disrupt customer relations, cause us to be in breach of contracts that require us to maintain key personnel or otherwise harm our business.

Changes in our executive management team may also cause disruptions in, and harm to, our business.

The loss of one or more of our executive officers, especially our chief executive officer, or key employees could impair our ability to identify and secure new contracts, disrupt customer relations, and cause us to be in breach of contracts that require us to maintain key personnel or otherwise harm our business.

Further, leadership changes have occurred and will continue to occur from time to time and we cannot predict whether significant resignations will occur or whether we will effectively manage leadership transitions.

The term of the chief executive officer of our ultimate majority stockholder, Leonardo S.p.A.

expires later this year.

We may face risks related to that change and other transitions in both our leadership team and that of Leonardo S.p.A.’s.

If we cannot effectively manage leadership transitions and management changes in the future, our reputation and future business prospects could be adversely affected.

There is a high demand for qualified technical and other key personnel, and we believe that our future growth and success will depend upon our ability to attract, train and retain such personnel.

Competition for personnel in the defense industry is intense, and there is a limited number of persons with knowledge of and experience in this industry.

Additionally, some of our businesses are located in regions where competition for personnel is particularly intense.

Additionally, some of our businesses are located in regions where

competition for personnel is particularly intense.

Although we currently experience manageable rates of turnover for our technical personnel, the rate of turnover may increase in the future.

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We generally have been able to renegotiate renewals to expiring agreements without significant disruption of operating activities.

If we experience difficulties with renewals and renegotiations of existing collective agreements

or if our employees pursue new collective representation, we could incur additional expenses and may be subject to work stoppages, slow-downs or other labor-related disruptions.

If we experience difficulties with renewals and renegotiations of existing collective agreements or if our employees pursue new collective representation, we could incur additional expenses and may be subject to work stoppages, slow-downs or other labor-related disruptions.

Any such expenses or delays could adversely affect our programs served by employees who are covered by such agreements or representation.

On September 9, 2021 President Biden released an executive order that requires all employees of federal contractors to be vaccinated.

Subsequently, a nationwide preliminary injunction was placed on the order and it is currently being appealed.

We continue to monitor the progress of the appeal as well as the Safer Federal Workforce Task Force website for updates to enforcement policy.

While we await the legal determination, we continue to encourage our employees to get the vaccination and the booster when eligible and continue to provide resources and support to help employees get vaccinated.

Following a final determination, there is a risk that some of our employees will not comply and may need to be replaced, if required by the regulations implementing this executive order.

On September 9, 2021, President Biden released an executive order (“EO”) that required all employees of federal contractors to be vaccinated.

As of August 2022, the three federal appellate courts that have reviewed the issue have found that the requirements outlined in the EO exceeded President Biden’s authority under the Federal Procurement Act.

On October 19, 2022, the Office of Management and Budget (“OMB”) and the Safer Federal Workforce Task Force issued new guidance regarding implementation of the EO, confirming that the U.S government will not take action to enforce the requirements of the EO.

In January 2023, the U.S.

government announced it intends to end the public health emergency (and national emergency) declarations in May 2023.

However, there can be no assurances that the federal government will not seek to enforce the requirements of this EO or subsequently issue a similar EO in response to COVID-19 or a future pandemic .

If the EO or a similar EO is ultimately enforced, there is a risk that some of our employees will not comply and will need to be dismissed.

Our employees are highly skilled, have critical knowledge, and in some cases have security clearances that allow them to work on highly sensitive programs.

These employees will not be easy to replace.

If we are unable to attract and retain a qualified workforce, we may be unable to maintain our competitive position and it could have a material adverse impact on our business, reputation, financial condition and results of operations.

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In general, under Section 382 of the U.S.

Internal Revenue Code of 1986, as amended (the “Tax Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize

its pre-change net operating losses (“NOLs”) to offset future taxable income.

Internal Revenue Code of 1986, as amended (the “Tax Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) to offset future taxable income.

Future changes in our stock ownership, some of which are beyond our control, could result in an ownership change under Section 382 of the Tax Code.

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In addition, to the extent US Holding fails to pay taxes imposed with respect to any consolidated, combined or unitary tax return of US Holding or any of its subsidiaries that includes us or any of our subsidiaries, the relevant taxing authority could seek to collect such taxes (including taxes for which US Holding or any of its subsidiaries is responsible under the tax allocation agreement) from us or our subsidiaries.

For a description of the tax allocation agreement, see Part III., Item 13.

“Certain Relationships and Related Transactions and Director Independence—Relationship with Leonardo S.p.A.—Tax Allocation Agreement” in this Annual Report.

Acquisitions could result in operating difficulties, dilution and other harmful consequences.

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In addition, the anticipated benefit of many of our acquisitions may not materialize.

Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which

could harm our financial condition and results of operations.

Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.

Finally, we may be required to obtain the consent of US Holding in order to pursue certain material transactions and there is no guarantee that their consent will be granted See “— Risks Relating to Our Status under the Proxy Agreement — Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their significant ownership in us may discourage change of control transactions .”

The COVID-19 pandemic, as well as other pandemics, health emergencies and related impacts, have had and are likely to continue to have an adverse impact on our business, financial condition and results of operations.

The COVID-19 pandemic continued to cause significant volatility, uncertainty and economic disruption in 2022.

The emergence of the Omicron variant in late 2021 and resulting increase in COVID-19 cases in early 2022 adversely affected, and may continue to adversely affect, our business operations, and could materially and adversely affect our business, financial condition and results of operations.

The Company faces risks related to health epidemics and other outbreaks of communicable disease which could significantly disrupt operations, and may materially and adversely affects its business, financial conditions and results of operations.

The extent to which a pandemic or epidemic, will impact us in the future will depend on numerous evolving factors and developments that we are unable to predict, including:

the severity and transmission rate of the virus(es);

the duration of the outbreak, including the risk of a resurgence of the virus in areas in which it appears to have been contained;

the extent and effectiveness of containment actions;

governmental, business and other actions (which could include limitations on our operations or mandates to provide products, systems or services);

the impacts on our supply chain;

the impact of the pandemic on economic activity;

the effects of additional business or facility closures or other changes to our operations;

any impairment in value of our

tangible or intangible assets which could be recorded as a result of a weaker economic conditions;

We have significant operations in locations that could be materially and adversely impacted in the event of a natural disaster or other significant disruption.

Our operations and the operations of our suppliers and customers could be subject to natural disasters or other significant disruptions, including hurricanes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, pandemics (including COVID-19), acts of terrorism, power shortages and blackouts, telecommunications failures and other natural and manmade disasters or disruptions.

Our operations and the operations of our suppliers and customers could be subject to natural disasters or other significant disruptions, including hurricanes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, pandemics, acts of terrorism, power shortages and blackouts, telecommunications failures and other natural and manmade disasters or disruptions.

We have significant business operations located in areas that are subject to these risks, for example our facilities in Florida and Texas.

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These matters also may cause our insurance coverages to increase in cost, or in some cases, to be unavailable altogether.

Risks Relating to Our Status under the Proxy Agreement

Risks Relating to Our Ownership and Status under the Proxy Agreement

We operate under a proxy agreement with the DoD that regulates significant areas of our governance.

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government contracts could be terminated, which could have a material adverse impact on our business, financial condition and results of operations.

Leonardo S.p.A., an Italian company listed on the Milan Stock Exchange, owns the entire share capital of our immediate parent US Holding which, in turn owns 100 % our outstanding common stock.As a result, we are deemed to be controlled by a foreign company and to be under FOCI, as defined in the NISPOM, which establishes procedures and requirements for government contractors, such as our company, with regard to classified information.

Leonardo S.p.A., an Italian company listed on the Milan Stock Exchange, ultimately owns the entire share capital of our immediate majority stockholder US Holding which, in turn owns approximately 81% our outstanding common stock.

As a result, we are deemed to be controlled by a foreign company and to be under FOCI, as defined in the NISPOM, which establishes procedures and requirements for government contractors, such as our company, with regard to classified information.

See “— Risks Relating to Our Business — We are subject to the U.S.

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We have therefore entered into a proxy agreement, dated as of October 26, 2017, with the DoD.

We have therefore entered into a proxy agreement with the DoD.

Among other things, the proxy agreement:

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and its subsidiaries (including US Holding and us) (subject to limited exceptions) and must maintain adequate security clearance;

• provides that the proxy holders are appointed by our immediate parent US Holding (in consultation with Leonardo S.p.A.)., but the appointment is subject to approval of the DCSA, an agency of the DoD, and that the proxy holders must be members of our board of directors;

• restricts our ability to share facilities and personnel with and receive certain services from any Leonardo S.p.A.

• provides that the proxy holders are appointed by our immediate majority stockholder US Holding (in consultation with Leonardo S.p.A.)., but the appointment is subject to approval of the DCSA, an agency of the DoD, and that the proxy holders must be members of our Board;

• restricts our ability to share facilities and personnel with and receive certain services from Leonardo S.p.A.

or its other subsidiaries;

• requires us to maintain a government security committee of our board of directors;

• requires us to maintain a government security committee of our Board;

• regulates meetings, visits and communications that are not deemed to be routine business visits between us and Leonardo S.p.A.

or its other subsidiaries (including US Holding).

Compliance with the proxy agreement requires a significant commitment of resources and management and board oversight, and the DoD may impose additional security safeguards that it believes necessary to adequately safeguard classified and controlled unclassified information, which could make it more difficult for us to comply with the proxy agreement.

We are currently operating under an interim proxy agreement while we seek to enter into a new proxy agreement with the DoD.

The terms of any new proxy agreement or other mitigation requirements could impose heightened or new restrictions which could further impact our business operations.

Proxy agreements, including ours, typically have limited duration and need to be renewed on a regular basis.

Compliance with the proxy agreement requires a significant commitment of resources and management and Board oversight, and the DoD may impose additional security safeguards that it believes necessary to adequately safeguard classified and controlled unclassified information, which could make it more difficult for us to comply with the proxy agreement or adversely impact the manner in which we operate our business.

Under the proxy agreement we are required to prepare and submit an annual implementation and compliance report to the DCSA including detailed information with respect to the manner in which we comply with the proxy agreement including with respect to classified information, any acts of noncompliance and other matters specified by DCSA.

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or its other subsidiaries mean that we cannot benefit from the full range of synergies and cost savings typically enjoyed by a majority-owned subsidiary.

In the event of a material breach of the proxy agreement, the DoD may (i) novate our classified contracts to a company not under FOCI at our expense, (ii) terminate our classified contracts and deny us new classified contracts, (iii) revoke our facility security clearance and/or (iv) suspend or debar us from participation in all U.S.

In the event of a material breach of the proxy agreement or the failure of the DoD to renew a current proxy agreement upon its expiration, the DoD may (i) novate our classified contracts to a company not under FOCI at our expense, (ii) terminate our classified contracts and deny us new classified contracts, (iii) revoke our facility security clearance and/or (iv) suspend or debar us from participation in all U.S.

government contracts.

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defense spending for the vast majority of our revenues.

Disruptions or deteriorations in our relationships with the relevant agencies of the U.S.

Disruptions or deterioration in our relationships with the relevant agencies of the U.S.

government could have a material adverse impact on our business, financial condition and results of operations.

” Therefore, if we fail to comply with the terms of the proxy agreement and the DoD imposes any of the above remedies, this could have a material adverse impact on our business, financial condition and results of operations.

For further information about the proxy agreement, see

CFIUS may modify, delay or prevent our future acquisition or investment activities.

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If a particular proposed acquisition or investment in a U.S.

business falls within CFIUS’s jurisdiction, we may determine that we are required to make a mandatory filing or that we will submit a voluntary notice to CFIUS, or to proceed with the transaction without notifying CFIUS and risk CFIUS intervention, before or after closing the transaction.

business falls

within CFIUS’s jurisdiction, we may determine that we are required to make a mandatory filing or that we will submit a voluntary notice to CFIUS, or to proceed with the transaction without notifying CFIUS and risk CFIUS intervention, before or after closing the transaction.

CFIUS may decide to block or delay an acquisition or investment by us, impose conditions to mitigate national security concerns with respect to such acquisition or investment or order us to divest all or a portion of a U.S.

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We may therefore be adversely affected in terms of competing with other companies in our industry which do not have similar foreign ownership issues.

Furthermore, because the Italian state

beneficially owns approximately 30.2% of the voting power of the outstanding ordinary shares of, and exercises certain governance rights over, Leonardo S.p.A.

Furthermore, because the Italian state beneficially owns approximately 30.2% of the voting power of the outstanding ordinary shares of, and exercises certain governance rights over, Leonardo S.p.A.

(through its ownership of approximately 30.2% of Leonardo S.p.A.’s ordinary shares), which in turn has the ability to exercise control over us for purposes of CFIUS’s regulations, we are considered to be foreign government controlled under the regulations administered by CFIUS.

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The proxy holders have the right to vote US Holding’s shares of our common stock in the same manner and to the same extent as if they were the absolute owners of such shares in their own right.

In exercising their power as proxy holders, the proxy holders are directed to act to protect the legitimate economic interests of our shareholders and in a manner consistent with their fiduciary duties, but they are not generally required to follow instructions of Leonardo S.p.A., US Holding or us.

In exercising their power as proxy holders, the proxy holders are directed to act to protect the legitimate economic interests of our stockholders and in a manner consistent with their fiduciary duties, but they are not generally required to follow instructions of Leonardo S.p.A., US Holding or us.

The proxy agreement provides that the proxy holders may vote for or consent to in, their sole and absolute discretion, without consultation with US Holding or Leonardo S.p.A., the election of additional directors who are not proxy holders (and who are selected from candidates proposed by US Holding after reasonable consultation with our nominating and corporate governance committee, and subject to DCSA’s approval in certain circumstances), any changes or amendments to our certificate of incorporation or by‑laws, the sale or disposal of our property, assets or business, our incurrence of debt or any pledge, mortgage or encumbrance of any of our assets, or any other matter affecting us, other than as described below.

However, the proxy holders may only vote for or consent to the following matters with the express written approval of US Holding:

• other than in the ordinary course of business with vendors, customers and suppliers, the sale or disposition of any of our subsidiaries, property, assets or business or those of our subsidiaries or the purchase by us or our subsidiaries of any business, properties, assets or entities, other than in the ordinary course of business, in any individual transaction where our investment (based on our share of the enterprise value) exceeds two percent (2%) of our revenues for the immediately preceding year or where our investment, in the aggregate for all such sales or dispositions in a calendar year, exceeds an amount equal to five percent (5%) of our revenues for the immediately preceding year;

• other than in the ordinary course of business with vendors, customers and suppliers, the sale or disposition of any of our subsidiaries, property, assets or business or those of our subsidiaries or the purchase by us or our subsidiaries of any business, properties, assets or entities, other than in the ordinary course of business, in any individual transaction where our investment (based on our share of the enterprise value) exceeds two percent (2)% of our revenues for the immediately preceding year or where our investment, in the aggregate for all such sales or dispositions in a

calendar year, exceeds an amount equal to five percent (5)% of our revenues for the immediately preceding year;

• the incurrence of debt or pledge, mortgage, lease or other encumbrance of our assets of those of our subsidiaries in connection with the incurrence of debt if such incurrence would cause the aggregate outstanding principal amount of all debt of us and our subsidiaries to exceed a target leverage ratio set forth in our then-current operating plan, excluding current debt incurred for purposes of funding day-to-day working capital requirements in the ordinary course of business;

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In addition, the proxy holders may only vote to declare or suspend dividends after prior consultation with US Holding.

At all times subject to the proxy agreement, on November 28, 2022, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) as well as a cooperation agreement (the “Cooperation Agreement”) with Leonardo S.p.A and US Holding.

The Registration Rights Agreement, among other things, provides Leonardo S.p.A.

and its affiliates with customary demand, shelf and piggy-back registration rights to facilitate a public offering of our common stock held by US Holding.

The Cooperation Agreement, among other things, provides (a) Leonardo S.p.A.

with certain consent, access and cooperation rights, (b) US Holding with certain consent rights with respect to actions taken by the Company and its subsidiaries, including with respect to the creation or issuance of any new classes or series of stock (subject to customary exceptions), listing or delisting from any securities exchange, and making material changes to the Company’s accounting policies and changing the Company’s auditor, and (c) neither US Holding nor Leonardo S.p.A.

with the ability to transfer any Company voting securities for a period of six months following the merger with RADA, except in connection with a change in control of the Company or for transfers to affiliates.

Conflicts of interest may arise between our majority stockholder and us.

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nor US Holding have an obligation to offer us corporate opportunities.

As a result of these relationships the interests of our ultimate parent, Leonardo S.p.A., may not coincide with our interests or the interests of the other holders of our common stock.

As a result of these relationships the interests of our ultimate majority stockholder, Leonardo S.p.A., may not coincide with our interests or the interests of the other holders of our common stock.

So long as Leonardo S.p.A.

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This influence, including the requirement in our proxy agreement for approval by the proxy holders and our majority stockholder of mergers and consolidations, may also discourage change of control transactions.

The term of the Leonardo S.p.A.

Chief Executive Officer expires later this year.

Changes in the leadership at our ultimate majority stockholder could create uncertainty and potentially exacerbate these risks.

Our amended and restated certificate of incorporation provides that we waive any interest or expectancy in corporate opportunities presented to Leonardo S.p.A.

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and its affiliates with services in support of its U.S.

operations (aside from us), including services related to tax, financial and accounting support, legal support, trade compliance, marketing, communications, media and advertising, and security, on an arm’s-length basis.

operations (aside from us), including services related to tax, financial and accounting support, legal support, trade compliance, marketing and, communications on an arm’s-length basis.

Under the tax allocation agreement, we are responsible for administering certain U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors