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Item 1A. Risk Factors

2026-02-23 compared with 2025-02-20 · 121 added, 64 removed, 365 unchanged (34% of the section changed)

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In addition, new risks may emerge at any time and we cannot predict those risks or estimate the extent to which they may affect us.

You should carefully consider these factors, as well as the other information contained in this Annual Report on Form 10-K, when evaluating an investment in our securities.

Risks Relating to Economic Conditions

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As a result, it is difficult to estimate the level of growth or contraction for the economy as a whole.

It is even more difficult to estimate growth or contraction in various parts, sectors and regions of the economy, including the materials processing, medical procedures and advanced applications in which we participate.

Because all components of our budgeting and forecasting are dependent upon estimates of growth or contraction in the markets and applications we serve and demand for our products, the prevailing economic uncertainties render estimates of future income and expenditures very difficult to make.

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Slowing economic growth or recession, tariff-trade wars or other adverse economic developments or uncertainty in any of our key markets, including in China, may result in a decrease in our sales.

In addition, the new presidential administration has articulated that it may impose substantial new or increased tariffs on foreign imports into the U.S.

In addition, the U.S.

presidential administration has implemented new tariff policies that substantially increased tariffs on foreign imports into the U.S.

Other countries have responded with increased tariffs on U.S.

Additional tariffs will be considered and may be adopted by the U.S.

government from time to time.

New tariffs may have the effect of increasing our costs, reducing our sales, as well as slowing general economic activity.

Adverse changes have occurred and may occur in the future as a result of declining or flat global or regional economic conditions, fluctuations in currency and commodity prices, wavering confidence, capital expenditure reductions, unemployment, declines in stock markets, contraction of credit availability, declines in real estate values, or other factors affecting economic conditions generally.

These changes may negatively affect the sales of our products, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, increase the risk of loss on investments, or increase costs associated with manufacturing and distributing products.

These changes may negatively affect the sales of our products, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, increase the risk of loss on

investments, or increase costs associated with manufacturing and distributing products.

An economic downturn could have a material adverse effect on our business, financial condition and results of operations.

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We compete with makers of fiber lasers, solid-state lasers, direct diode lasers, high power CO 2, YAG and disc lasers.

These include public and private companies such as Coherent, Inc., Laserline GmbH, Lumentum Holdings Inc., Maxphotonics Co., Ltd., MKS Instruments, Inc., nLight, Inc., Trumpf GmbH + Co.

These include public and private companies such as Coherent, Inc., JPT Opto-Electronics Co.

Ltd., Laserline GmbH, Lumentum Holdings Inc., Maxphotonics Co., Ltd., MKS Instruments, Inc., nLight, Inc., Trumpf GmbH + Co.

KG, and Wuhan Raycus Fiber Laser Technologies Co.

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Several of these are larger and have substantially greater financial, managerial and technical resources, more extensive distribution and service networks, greater sales and marketing capacity, and larger installed customer bases than we do.

Many of our fiber laser competitors are increasing the output powers, improving the quality of their fiber lasers and decreasing prices to compete with our products.

Many of our fiber laser competitors are increasing the output powers, improving the quality of their fiber lasers and decreasing prices.

Certain of our major global competitors are expanding their manufacturing, research and development, and sales capabilities in China, which may increase competitive pricing pressure, accelerate product innovation cycles, and strengthen their local customer relationships in that market.

Many of our competitors in Asia are beginning to export their fiber lasers and fiber laser-based systems to non-Asia markets, which may impact our pricing and sales in such markets.

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Market participants, particularly in China, have reduced and may continue to reduce, prices of competing products to gain market share.

If the ASPs of our products decline further and we are unable to increase our unit volumes, introduce new or enhanced products with higher margins or reduce manufacturing costs to offset anticipated decreases in the prices of our existing products, our operating results may be adversely affected.

in the prices of our existing products, our operating results may be adversely affected.

In addition, because of our significant fixed costs, we are limited in our ability to reduce total costs quickly in response to any revenue shortfalls.

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• demonstrate the effectiveness of fiber lasers in new applications for materials processing, medical and advanced applications;

• successfully develop new product lines, such as the handheld welder, UV, visible and ultrafast fiber lasers with competitive features that extend our product line;

• successfully develop new product lines with competitive features;

• increase our direct and indirect sales efforts;

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Furthermore, if our OEM customers or third-party system integrators experience financial or other difficulties that adversely affect their operations, our financial condition or results of operations may also be adversely affected.

We may not successfully commercialize our CROSSBOW™ counter‑UAS laser systems.

We recently introduced integrated high‑energy laser systems designed to counter small unmanned aerial systems (UAS) under our CROSSBOW™ product line.

These offerings differ from our historical participation in directed‑energy programs as a

component supplier, as they are complete operational systems and represent a new area of potential growth for us.

The commercial viability of this product line is uncertain, and it may not develop as we anticipate.

Adoption of counter‑UAS laser systems is still emerging.

Defense and security procurement cycles can be long, unpredictable, and dependent on successful demonstrations, evaluations, and integration with existing architectures.

Positive testing or customer interest may not lead to production contracts or sustained demand, and competing technologies from established defense contractors or alternative counter‑UAS providers could limit market opportunities.

If any of these risks materialize, our strategy to develop and commercialize the CROSSBOW product line may not be successful or generate the growth opportunities we anticipate.

Risks Relating to Our Operations

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We may not adjust these fixed costs quickly enough or sufficiently to adapt to rapidly changing market conditions.

Our gross profit, in absolute dollars and as

a percentage of net sales, is impacted by our sales volume, the corresponding absorption of fixed manufacturing overhead expenses and manufacturing yields.

Our gross profit, in absolute dollars and as a percentage of net sales, is impacted by our sales volume, the corresponding absorption of fixed manufacturing overhead expenses and manufacturing yields.

In addition, because we are a vertically integrated manufacturer and design and manufacture our key specialty components, insufficient demand for our products may subject us to the risks of high inventory carrying costs and increased inventory obsolescence.

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Our manufacturing capacity and operations may not be appropriate for future levels of demand and may adversely affect our gross margins.

We have added and are continuing to add substantial manufacturing capacity at our facilities in the United States, Germany, Italy and Poland.

A significant portion of our manufacturing facilities and production equipment, such as our semiconductor production and processing equipment, diode packaging equipment and diode burn-in stations, are special-purpose in nature and cannot be adapted easily to make other products.

If the demand for fiber lasers or amplifiers does not increase or if our revenue decreases from current levels, we may have significant excess manufacturing capacity and under-absorption of our fixed costs, which could in turn adversely affect our gross margins and profitability.

To maintain our competitive position and to meet anticipated demand for our products, we invest significantly in the expansion of our manufacturing and operations throughout the world and may do so in the future.

Recent expansions of capacity were required to offset the loss of capacity at our factories in Russia and Belarus due to sanctions.

In connection with these projects, we may incur cost overruns, construction delays, project cancellations, labor difficulties or regulatory issues which could cause our capital expenditures to be higher than what we currently anticipate, possibly by a material amount, which would in turn adversely impact our operating results.

Moreover, we may experience higher costs due to yield loss, production inefficiencies, equipment problems and lower margins until any operational issues associated with the opening of new manufacturing facilities are resolved.

We have added manufacturing capacity at our facilities in the United States, Germany, Italy and Poland.

Expansion of capacity was required to offset the loss of capacity at the factories we operated in Russia and Belarus due to sanctions.

In connection with expansion projects, we may incur cost overruns, construction delays, project cancellations or regulatory issues which could cause our capital expenditures to be higher than what we currently anticipate, possibly by a material amount, which would in turn adversely impact our operating results.

If our sales do not increase or if our revenue decreases from current levels, we may have significant excess manufacturing capacity and under-absorption of our fixed costs, which has adversely impacted and could adversely affect our gross margins and profitability.

We may experience higher costs due to yield loss, production inefficiencies, equipment problems and lower margins until any operational issues associated with the opening of new manufacturing facilities are resolved.

Because we lack long-term purchase commitments from our customers, our sales can be difficult to predict, which could lead to excess or obsolete inventory and adversely affect our operating results.

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This could lead to increased inventory levels and increased carrying costs and risk of excess or obsolete inventory due to unanticipated reductions in purchases by our customers.

In addition, provisions have been recorded as a result of changes in market prices of certain components, the value of those inventories that was realizable through finished product sales due to declines in certain end market demand and uncertainties related to the recoverability of the value of inventories due to technological and product changes, and excess quantities.

In addition, provisions have been recorded as a result of changes in

market prices of certain components, the value of those inventories that was realizable through finished product sales due to declines in certain end market demand and uncertainties related to the recoverability of the value of inventories due to technological and product changes, and excess quantities.

If our OEM customers, end users or distributors fail to accurately forecast the demand for our products, fail to accurately forecast the timing of such demand, or are unable to consistently negotiate acceptable purchase order terms with customers, our results of operations may be adversely affected.

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Many of the tools and equipment we use are custom-designed, and it could take a significant period of time to repair or replace them.

Our primary manufacturing facilities are

located in the United States and Germany, and we have added production in Italy and Poland.

Our primary manufacturing facilities are located in the United States and Germany, and we have added production in Italy and Poland.

Despite our efforts to mitigate the impact of any flood, fire, natural disaster, political unrest, act of terrorism, war, trade sanctions, outbreak of disease or other similar event, our business could be adversely affected to the extent that we do not have redundant production capabilities if any of our major manufacturing facilities or equipment should become inoperable, inaccessible, damaged or destroyed.

Also, we purchase certain raw materials used to manufacture our products and other components, such as semiconductor wafer substrates, diode packages, modulators, micro-optics, bulk optics and high power beam delivery products, from single or limited-source suppliers.

We purchase certain raw materials used to manufacture our products and other components, such as semiconductor wafer substrates, diode packages, modulators, micro-optics, bulk optics and high power beam delivery products, from single or limited-source suppliers.

We typically purchase our components and materials through purchase orders or agreed-upon terms and conditions and we do not have guaranteed supply arrangements with many of these suppliers.

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Some of our suppliers are also our competitors.

Some of our suppliers may not be able to meet demand from our because of global demand for their components.

As a result, we experienced and may in the future experience longer lead times or delays in fulfillment of our orders.

Some of our suppliers may not be able to meet our requirements due to global demand for their components.

As a result, we have experienced and may in the future experience longer lead times or delays in fulfillment of our orders.

Furthermore, other than our current suppliers, there are a limited number of entities from whom we could obtain these supplies.

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Any of these circumstances could adversely affect our operations and, as a result, our financial results could suffer.

Although we have implemented compliance measures designed to prevent transactions prohibited by current or future Trade Controls, we have previously identified, and may continue to identify, instances in which we exported products without obtaining the required export authorizations and/or submitting the required requests.

we exported products without obtaining the required export authorizations and/or submitting the required requests.

As a result, we have submitted a limited number of voluntary self-disclosures regarding compliance with export control laws and regulations with the U.S.

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In December 2024, affiliates of Trumpf SE & Co.

KG filed two different patent lawsuits in two different Unified Patent Courts located in Germany against IPG Laser GmbH & Co.

KG filed two different patent lawsuits in two different Unified Patent Courts ("UPC") located in Germany against IPG Laser GmbH & Co.

KG, our German subsidiary, alleging infringement of two patents granted by the European Patent Office by our adjustable mode beam lasers.

There can be no assurance that we will be able to dispose of any claims or other allegations made or asserted against us without them having a material impact on our results of operations.

These lasers are used in certain welding and

cutting applications.

The patents asserted cover Germany, where we manufacture lasers, and other large countries in Europe.

Hearings were held in January 2026 and we await the decisions of the two UPC panels on February 24 and March 16, 2026.

There can be no assurance that the outcome of either case will be favorable to the Company, and an adverse finding that the Company infringed one or more of the patents‑in‑suit could have a material adverse effect on the Company and its business.

The patents also have counterparts in the U.S., China and elsewhere, and there can be no assurance that Trumpf will not assert such patents in other jurisdictions.

There can be no assurance that we will be able to resolve any claims or other allegations made or asserted against us without them having a material impact on our results of operations.

Even if we ultimately are successful on the merits of any such litigation or re-examination, legal and administrative proceedings related to intellectual property are typically expensive and time-consuming, generate negative publicity and divert financial and managerial resources.

Some litigants may have greater financial resources than we have and may be able to sustain the costs of complex intellectual property litigation more easily than we can.

The UPC, in which we currently have two pending litigations, is a relatively new patent court in Europe, and its procedures, jurisprudence and available remedies continue to evolve, creating additional uncertainty regarding patent interpretation, the application of prior European patent precedents, and the timing, scope, and outcome of proceedings.

If we do not prevail in any intellectual property litigation brought against us, it could affect our ability to sell our products and materially harm our business, financial condition and results of operations.

These developments could adversely affect our ability to compete for customers and increase our revenues.

These developments could adversely affect our ability to compete for customers and increase our revenues, or could decrease our revenues or profits or increase our costs.

Plaintiffs in intellectual property cases often seek, and sometimes obtain, injunctive relief.

Intellectual property litigation commenced against us could force us to take actions that could be harmful to our business, including the following:

Intellectual property litigation commenced against us, including the Trumpf litigation, could force us to take actions that could be harmful to our business, including the following:

• stop selling our products or using the technology that contains the allegedly infringing intellectual property;

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• attempt to license the relevant intellectual property which may not be available on reasonable terms.

Further, we could incur increased engineering, qualification, logistics and customer transition costs in connection with patent litigation outcomes or risk mitigation.

Even if sales are not enjoined by a court, customer uncertainty could delay orders, pressure pricing, or affect design‑wins, and mitigation measures may be costly, time‑consuming and not fully effective.

In addition, intellectual property lawsuits can be brought by third parties against OEMs and end users that incorporate our products into their systems or processes.

In some cases, we indemnify OEMs against third-party infringement claims relating to

our products and we often make representations affirming, among other things, that our products do not infringe the intellectual property rights of others.

In some cases, we indemnify OEMs against third-party infringement claims relating to our products and we often make representations affirming, among other things, that our products do not infringe the intellectual property rights of others.

As a result, we may incur liabilities in connection with lawsuits against our customers.

Any such lawsuits, whether or not they have merit, could be time-consuming to defend, damage our reputation or result in substantial and unanticipated costs.

Adverse judgments and court remedies in the Trumpf litigation or similar proceedings could also increase indemnification claims from OEM customers or prompt follow‑on assertions by other patent holders.

Our inability to protect our intellectual property and proprietary technologies could result in the unauthorized use of our technologies by third parties, hurt our competitive position and adversely affect our operating results.

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Given our reliance on trade secret laws, others may independently develop similar or alternative technologies or duplicate our technologies and commercialize discoveries that we have made.

Therefore, our intellectual property efforts may be insufficient to maintain our competitive advantage or to stop other parties from commercializing similar products or technologies.

Therefore, our intellectual property efforts may be

insufficient to maintain our competitive advantage or to stop other parties from commercializing similar products or technologies.

Many countries outside of the United States afford little or no protection to trade secrets and other intellectual property rights.

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Any unauthorized access could negatively impact our customers' products, result in a loss of confidence by our customers, damage our reputation, disrupt our business, result in a misappropriation of our assets (including cash), lead to legal liability and negatively impact our future sales.

Additionally, such actions could result in significant costs associated with loss of our intellectual property, impairment of our ability to conduct our

operations, rebuilding our network and systems, prosecuting and defending litigation, responding to regulatory inquiries or actions, paying damages or taking other remedial steps.

Additionally, such actions could result in significant costs associated with loss of our intellectual property, impairment of our ability to conduct our operations, rebuilding our network and systems, prosecuting and defending litigation, responding to regulatory inquiries or actions, paying damages or taking other remedial steps.

In addition, we may incur significant costs designed to prevent or mitigate the damage related to cybersecurity incidents.

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For instance, in 2020, California enacted the California Consumer Privacy Act (“CCPA”), giving consumers many of the same rights as those available under GDPR.

Several laws similar to the CCPA have been approved in the United States at the state level and more are being proposed at the federal and state levels.

Several laws similar to the CCPA have been approved in the United States at

the state level and more are being proposed at the federal and state levels.

GDPR and other similar laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business.

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Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different than the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our operating results and financial condition.

If we or our third-party vendors fail to comply with FDA regulations or similar legal requirements in foreign jurisdictions relating to the manufacturing, labeling or marketing of our products or any component part, we may be subject to fines, injunctions and penalties, and our ability to commercially distribute and sell our products may be negatively impacted.

We now make fiber laser systems and accessories targeted at specific medical applications.

In addition, we sell our commercial fiber and diode laser modules, subassemblies and systems to OEMs that incorporate them into their medical products.

With respect to such products, some of our manufacturing facilities, and the manufacturing facilities of any of our third-party component manufacturers or critical suppliers, are required to comply with the FDA’s Quality System Regulation and those of other countries (“QSR”), which sets forth minimum standards for the procedures, execution and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, and shipping of the

products we sell in the medical industry, and related regulations, including Medical Device Reporting (“MDR”) regulations regarding reporting of certain malfunctions and adverse events potentially associated with our products.

If we or our third-party vendors fail to comply with FDA regulations or similar legal requirements in foreign jurisdictions relating to the design, manufacture, labeling, marketing, distribution or post-market surveillance of our products or any component part, we may be subject to fines, injunctions, product recalls, penalties or other enforcement actions, and our ability to commercially distribute and sell our products may be negatively impacted.

We design, manufacture and commercialize fiber laser systems and related accessories for specific medical applications.

Through IPG Medical Corporation, we are the legal manufacturer of certain of these products and hold FDA clearances for their marketing and sale in the United States.

As the legal manufacturer, we are responsible for regulatory obligations across the product lifecycle, including establishment registration and device listing, compliance with applicable pre- and post-market requirements, submission of medical device reports for certain malfunctions and adverse events, and initiating corrections or recalls where necessary.

We have distribution partners that market and distribute certain of these products on our behalf.

We also continue to sell our commercial fiber and diode laser modules, subassemblies and systems to OEMs that incorporate them into their medical products.

As a medical device manufacturer, we and certain of our facilities, as well as critical suppliers, are required to comply with the FDA’s Quality System Regulation and those of other countries (“QSR”), which sets forth minimum standards for the procedures, execution and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, and shipping of the products we sell in the medical industry, and related regulations, including Medical Device Reporting (“MDR”) requirements regarding the reporting of certain malfunctions and adverse events potentially associated with our products.

The FDA and other regulatory agencies may evaluate our compliance with the QSR, MDR and other regulations, among other ways, through periodic announced or unannounced inspections which could disrupt our operations and interrupt our manufacturing and sales.

If in conducting an inspection of our manufacturing facilities, or the manufacturing facilities of any of our third-party component manufacturers or critical suppliers, an investigator from the FDA or another regulatory agency observes conditions or practices believed to violate the QSR, the investigator may document their observations on a Form FDA 483 that is issued at the conclusion of the inspection.

A manufacturer that receives an FDA 483 may respond in writing and explain any corrective actions taken in response to the inspectional observations.

The FDA will typically review the facility’s written response and may re-inspect to determine the facility’s compliance with the QSR and other applicable regulatory requirements.

If in conducting an inspection of our manufacturing facilities, or the manufacturing facilities of any of our third-party component manufacturers or critical suppliers, an investigator from the FDA or another regulatory agency observes conditions or practices believed to violate the QSR, MDR or other applicable regulatory requirements, the investigator may document their observations on a Form FDA 483 which may be issued at the conclusion of the inspection.

A manufacturer that receives an FDA 483 may respond in writing and explain or describe any corrective actions taken or planned to address the inspectional observations.

The FDA will typically review the facility’s written response and may re-inspect or otherwise follow-up to determine the facility’s compliance with the QSR, MDR and other applicable regulatory requirements.

Failure to take adequate and timely corrective actions to remedy objectionable conditions listed on an FDA 483 could result in the FDA taking administrative or enforcement actions.

Among these may be the FDA’s issuance of a Warning Letter to a manufacturer, which informs it that the FDA considers the observed violations to be of “regulatory significance” that, if not corrected, could result in further enforcement action.

FDA enforcement actions, which include seizure, injunction, criminal prosecution, and civil penalties, could result in total or partial suspension of a facility’s production and/or distribution, product recalls, fines, suspension of the FDA’s review of product applications, and/or the FDA’s issuance of adverse publicity.

On November 4, 2025, the FDA issued an inspectional observation on Form FDA 483 at the conclusion of an on-site Electronic Product Radiation Control inspection at IPG Medical Corporation (“IPGM”).

IPGM submitted a written response to the FDA on November 14, 2025 addressing the inspectional observation.

A FDA Form 483 is not a final agency determination.

IPGM has received no further communication from the FDA regarding this matter, and there is no specific date or deadline by which the FDA is required to respond or make a determination.

We cannot predict the timing or outcome of the FDA’s review, and there can be no assurance that the matter

will be resolved without additional inquiry, corrective actions, or enforcement measures that could adversely affect our business.

FDA enforcement actions, which include the FDA's issuance of a Warning Letter, seizure, injunction, criminal prosecution, and civil penalties, could result in total or partial suspension of a facility’s production and/or distribution, product recalls, fines, suspension or delay of the FDA’s review of product applications, and/or the FDA’s issuance of adverse publicity.

Thus, an adverse inspection could force a shutdown of our manufacturing operations for products servicing the medical industry or a recall of such products.

Adverse inspections could also delay FDA approval of our products for the medical industry.

Enforcement actions could also delay FDA clearance or approval of our products for use in the medical industry.

Failure to maintain effective internal controls may cause a loss of investor confidence in the reliability of our financial statements or to cause us to delay filing our periodic reports with the SEC and adversely affect our stock price.

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In recent years, the U.S.

changes in trade policies that included the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the United States, including, in particular, on Russian and Chinese-made goods, economic sanctions on individuals, corporations or countries and other government regulations affecting trade between the United States and other countries where we conduct our business.

instituted changes in trade policies that included the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the United States, including, in particular, on Russian and Chinese-made goods, economic sanctions on individuals, corporations or countries and other government regulations affecting trade between the United States and other countries where we conduct our business.

On February 20, 2026, the U.S.

Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act.

This decision introduces uncertainty regarding potential refund processes and future trade policy actions.

Policy changes and proposals could require time-consuming and expensive alterations to our business operations and may result in greater restrictions and economic uncertainty and disincentives on international trade, which could negatively impact our competitiveness in jurisdictions around the world as well as lead to an increase in costs in our supply chain.

We are a multinational corporation, with manufacturing located both in the United States and internationally and with approximately 75% of our net sales arising from foreign customers.

We are a multinational corporation, with manufacturing located both in the United States and internationally and with approximately

74% of our net sales arising from foreign customers.

As such, we may be more susceptible to negative impacts from these tariffs or change in trade policies than other less internationally focused enterprises.

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and worldwide economic conditions, our industry and the global demand for our products, and as a result, could negatively affect our business, financial condition and results of operations.

Our CROSSBOW counter‑UAS activities are subject to complex, rapidly evolving, and stringent U.S.

regulatory, export control, aviation, and procurement requirements, and changes in these regimes or our failure to comply with them could adversely affect our ability to develop, test, demonstrate, sell, or deploy these systems.

In the United States, counter‑UAS systems operate within a highly regulated and rapidly evolving legal environment.

The federal statutory and regulatory framework governing the development, use, sale and operation of counter‑UAS technologies continues to develop at a significant pace and is subject to change.

We cannot predict the impact of future legal, regulatory, or policy changes by U.S.

governmental entities relating to counter‑UAS technologies.

New or amended laws, regulations, or policies could increase our compliance costs or restrict market opportunities for the testing, demonstration, sale, or use of counter‑UAS systems, including our CROSSBOW system.

Our activities relating to CROSSBOW are also subject to stringent export control and government procurement requirements, including ITAR, EAR, and other domestic and international restrictions governing the classification, transfer, sale, end‑use, and end‑users of defense‑related technologies.

Changes in these regulations, delays or difficulties in obtaining or maintaining required licenses or approvals, or adverse jurisdiction, classification, or end‑user determinations could restrict our ability to sell, deploy, or service CROSSBOW systems, particularly outside the United States.

The development, testing and use of certain counter‑UAS laser systems in the United States may fall under the regulatory oversight of the Federal Aviation Administration (“FAA”) or other government agencies, depending on factors such as the operating environment and the nature of the customer.

Although many of our potential U.S.

government and defense customers operate pursuant to military or other federal authorizations outside the FAA’s civil regulatory framework, certain testing or demonstration activities may still require coordination with, or authorization from, the FAA and other agencies.

Changes in applicable FAA or other governmental policies or requirements, or the inability to obtain or comply with any authorizations that may be required for particular testing or demonstration scenarios, or for the sale or deployment of CROSSBOW, could delay, limit, or prevent our ability to conduct such activities.

Any of the foregoing regulatory developments, enforcement actions, or compliance challenges could restrict our ability to advance the CROSSBOW product line and limit its potential future contribution to our business.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and may adversely affect our business, operating results and financial condition.

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IPFD and the trusts may vote their shares of our common stock in ways that other stockholders may consider would be adverse to the interests of the other stockholders.

These significant ownership interests could delay, prevent or cause a change in control of the Company and might affect the market price of our common stock.

These significant ownership

interests could delay, prevent or cause a change in control of the Company and might affect the market price of our common stock.

Future sales of our common stock by our existing shareholders could cause our stock price to decline.

Sales of a substantial number of shares of our common stock by our existing stockholders (including the trusts established by Dr.

Sales of a substantial number of shares of our common stock by our existing stockholders (including the trusts established by our late founder, Dr.

Gapontsev, and IPFD) in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities or other securities convertible into or exchangeable for equity securities, regardless of whether there is any relationship between such sales and the performance of our business.

Provisions in our charter documents and Delaware law, and our severance arrangements, could prevent or delay a change in control of our company, even if a change in control would be beneficial to our stockholders.

Provisions of our certificate of incorporation and by-laws, including certain provisions that will take effect when founder of the Company, the late Dr.

Gapontsev, together with his affiliates and associates, ceases to beneficially own an

aggregate of 25% or more of our outstanding voting securities, may discourage, delay or prevent a merger, acquisition or change of control, even if it would be beneficial to our stockholders.

Provisions of our certificate of incorporation and by-laws, including certain provisions that will take effect when the founder of the Company, the late Dr.

Gapontsev, together with his affiliates and associates, ceases to beneficially own an aggregate of 25% or more of our outstanding voting securities, may discourage, delay or prevent a merger, acquisition or change of control, even if it would be beneficial to our stockholders.

The existence of these provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

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• authorizing the issuance of "blank check" preferred stock;

• establishing a classified board and providing that directors thereon may only be removed for cause;

• establishing a classified board effective at the next annual meeting of stockholders after Dr.

Gapontsev, together with his affiliates and associates, ceases to beneficially own an aggregate of 25% or more of our outstanding voting securities, and providing that directors thereon may only be removed for cause;

• providing that directors fill board vacancies;

• prohibiting stockholder action by written consent;

• prohibiting stockholder action by written consent after Dr.

Gapontsev, together with his affiliates and associates, ceases to beneficially own an aggregate of 25% or more of our outstanding voting securities;

• limiting the ability of stockholders to call a special meeting of stockholders;

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• longer accounts receivable collection periods and less developed credit assessment and collection procedures;

• compliance with domestic and foreign laws and regulations, unexpected changes in those laws and regulatory requirements, including uncertainties regarding taxes, tariffs, quotas, export controls, export licenses, trade sanctions and other trade barriers, and any corresponding retaliatory actions by affected countries, including China and Russia;

• compliance with domestic and foreign laws and regulations, unexpected changes in those laws and regulatory requirements, including uncertainties regarding taxes including transfer pricing, tariffs, quotas, export controls, export licenses, trade sanctions and other trade barriers, and any corresponding retaliatory actions by affected countries, including China and Russia;

• certification requirements;

• less effective protection of intellectual property rights in some countries;

• potentially adverse tax consequences;

• potentially adverse tax and transfer pricing consequences;

• different capital expenditure and budget cycles for our customers, which affect the timing of their spending;

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Any interruption or delay in the supply of our required components, products, materials or services, or our inability to obtain these components, materials, products or services from alternate sources at acceptable prices and within a reasonable amount of time, could impair our ability to meet scheduled product deliveries to our customers and could cause customers to cancel orders.

We are subject to risks of doing business in Belarus, which historically provided mechanical parts to our German subsidiary and former Russian subsidiary and which does not currently provide parts to our affiliates outside of Belarus.

We are subject to risks of doing business in Belarus, where our Belarusian subsidiary historically provided mechanical parts to our German subsidiary and former Russian subsidiary, but does not currently provide parts to our current subsidiaries outside of Belarus.

We are also subject to risks of doing business in China, as approximately 29% of our sales in 2025 were to Chinese customers.

The results of our operations, business prospects and facilities in China and Belarus are subject to the economic and political

environment there and global geopolitical conditions.

The results of our operations, business prospects and facilities in China and Belarus are subject to the economic and political environment there and global geopolitical conditions.

The future economic direction of these emerging market countries remains largely dependent upon the effectiveness of economic, financial and monetary measures undertaken by the government, together with tax, legal, regulatory and political developments.

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Further, given the volatility of exchange rates, we may not be able to effectively manage our currency risks, and any volatility in currency exchange rates may increase the price of our products in local currency to our foreign customers or increase the manufacturing cost of our products, which may have an adverse effect on our financial condition, cash flows and profitability.

We incurred a foreign exchange loss of $5.5 million in 2024 and a gain of $1.4 million in 2023.

We incurred a foreign exchange loss of $9.4 million in 2025 and a loss of $5.5 million in 2024.

We pursue acquisitions and investments in new businesses, products, patents or technologies.

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We may not be able to effectively integrate acquired businesses, business cultures, products, patents or technologies into our existing business and products, or retain key employees.

As a result of the rapid pace of technological change in our industry, we may misjudge the long-term potential of an acquired business, product, patent or technology, or the acquisition may not be complementary to our existing business.

As a result of the rapid pace of technological change in our industry, we may misjudge the long-term potential of an acquired business, product, patent or technology, or the

acquisition may not be complementary to our existing business.

Furthermore, potential acquisitions and investments, whether or not consummated, may divert our management's attention, require considerable cash outlays at the expense of our existing operations, incur unanticipated costs or liabilities, including the costs associated with improving the internal controls of the acquired company.

5 unchanged sentences

Also, the process of evaluating the potential impairment of long-lived assets is subjective.

We operate in a highly competitive environment and projections of future operating results and cash flows may vary significantly from actual

We operate in a highly competitive environment and projections of future operating results and cash flows may vary significantly from actual results.

Additionally, if our analysis indicates potential impairment to long-lived assets in one or more of our reporting units, we may be required to record additional charges to earnings in our financial statements, which could negatively affect our results of operations.

10 unchanged sentences

We occasionally borrow under our existing credit facilities to fund operations, including working capital investments.

Our major credit line in the United States expires in April 2025.

Our major credit line expires in 2030.

Uncertainty or disruptions in financial markets may negatively impact our ability to access additional financing or to refinance our existing credit facilities or existing debt arrangements on favorable terms or at all, which could negatively affect our ability to fund current and future expansion as well as future acquisitions and development.

3 unchanged sentences

Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business.

Our short-term investment portfolio and certain cash balances could experience a decline in market value or otherwise become illiquid, which could materially and adversely affect our financial results.

As of December 31, 2024, we had approximately $620 million of cash and cash equivalents and $310 million in short-term investments.

See Note 3, "Fair Value Measurements" in the Notes to Consolidated Financial Statements in Part IV, Annual Report for further information about our cash equivalents and short-term investments.

Our short-term and long-term investment portfolios and certain cash balances could experience a decline in market value or otherwise become illiquid, which could materially and adversely affect our financial results.

As of December 31, 2025, we had approximately $404 million of cash and cash equivalents, $436 million in short-term investments and $77 million in long-term investments.

See Note 3, "Fair Value Measurements" in the Notes to Consolidated

Financial Statements in Part IV, Annual Report for further information about our cash equivalents, short-term investments and long-term investments.

We currently do not use derivative financial instruments to adjust our investment portfolio risk or income profile.

6 unchanged sentences

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