What changed in this filing

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Item 1A. Risk Factors

2025-08-11 compared with 2024-08-13 · 94 added, 81 removed, 329 unchanged (35% of the section changed)

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Sales of our products and services, primarily as a subcontractor or team member with defense prime contractors, and in some cases directly, to the U.S.

government and its agencies, as well as foreign governments and agencies, accounted for approximately 95%, 98% and 97% of our total net revenues in fiscal years 2024, 2023, and 2022, respectively.

government, as well as foreign governments, accounted for approximately 97%, 95% and 98% of our total net revenues in fiscal years 2025, 2024 and 2023, respectively.

Our products and services are incorporated into many different domestic and international defense programs.

Over the lifetime of a defense program, the award of many different individual contracts and subcontracts may impact our products’ requirements.

funding of U.S.

The funding of U.S.

government programs is subject to Congressional appropriations.

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Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations and prime contracts receive such funding.

The reduction or delay in funding or termination of a government program in which we are involved could result in a loss of or delay in receiving anticipated future revenues attributable to that program and contracts or orders received.

The reduction or delay in funding or termination of a program in which we are involved could result in a loss of or delay in receiving anticipated future revenues attributable to that program and contracts or orders received.

government could reduce or terminate a prime contract under which we are a subcontractor or team member irrespective of the quality of our products or services.

The termination of a program or the reduction in or failure to commit additional funds to a program in which we are involved could negatively impact our revenues and have a material adverse effect on our financial condition and results of operations.

defense budget frequently operates under a continuing budget resolution, which increases revenue uncertainty and volatility, and 2024 being a Presidential election year increases the likelihood of operating under a continuing budget resolution.

defense budget frequently operates under a continuing budget resolution, which increases revenue uncertainty and volatility.

For fiscal 2026 and beyond, the potential for gridlock in Congress, a continuing budget resolution, budget sequestration, a U.S.

government shutdown, or the crowding out of defense funding due to historically high budget deficits or changes in national spending priorities toward non-defense budget items could adversely impact our revenues and increase uncertainty in our business and financial planning.

Economic conditions could adversely affect our business, results of operations, and financial condition.

World economic conditions and financial markets have, at times, experienced turmoil which could have material adverse impacts on our financial condition or our ability to achieve targeted results of operations due to:

Further, the funding of the defense programs that incorporate our products and services is subject to the overall U.S.

government budget and appropriation decisions and processes, which are driven by numerous factors beyond our control, including geo-political, macroeconomic, public health and political conditions.

We are unable to predict the likely duration and severity of adverse economic conditions in the United States and other countries, but the longer the duration or the greater the

severity, the greater the risks we face in operating our business.

The near-term potential for recessionary economic conditions and possible stagflation (persistent high inflation and stagnant economic demand) presents increased risks to our business.

Economic, capital market and political conditions could adversely affect our business, results of operations, and financial condition.

Global economic conditions, financial markets and geopolitical events have, at times, experienced turmoil which could have material adverse impacts on our financial condition or our ability to achieve targeted results of operations due to:

• reduced and delayed demand for our products;

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• downward pressure on the prices of our products;

• supply chain challenges to source raw materials;

• greater difficulty in collecting accounts receivable;

• risks to our liquidity, including the possibility that we might not have access to our cash and short-term investments or to our line of credit when needed.

Further, the funding of the defense programs that incorporate our products and services is subject to the overall U.S.

government budget and appropriation decisions and processes, which are driven by numerous factors beyond our control, including geo-political, macroeconomic, public health and political conditions.

We are unable to predict the likely duration and severity of adverse economic conditions in the United States and other countries, but the longer the duration or the greater the severity, the greater the risks we face in operating our business.

The near-term potential for recessionary economic conditions and possible stagflation (persistent high inflation and stagnant economic demand) presents increased risks to our business.

Price inflation for labor and materials could adversely affect our business, results of operations and financial condition.

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We continue to work to mitigate such pressures on our business operations as they develop.

The loss of one or more of our largest customers, programs, or applications could adversely affect our results of operations.

The loss of one or more of our largest customers or programs could adversely affect our results of operations.

We are dependent on a small number of customers for a large portion of our revenues.

A significant decrease in the sales to or loss of any of our major customers would have a material adverse effect on our business and results of operations.

In fiscal 2025, RTX Corporation accounted for 13% of our total net revenues and both Lockheed Martin and U.

Navy accounted for 10% of our total net revenues.

In fiscal 2024, L3Harris accounted for 12% of our total net revenues, Lockheed Martin accounted for 11% of our total net revenues, and RTX Corporation accounted for 10% of our total net revenues.

In fiscal 2023, RTX Corporation accounted for 14% of our total net revenues, Lockheed Martin accounted for 13% of our total net revenues, and Northrop Grumman accounted for 11% of our total net revenues.

In fiscal 2022, RTX Corporation accounted for 14% of our total net revenues, the U.S.

Navy accounted for 14% of our total net revenues, and Lockheed Martin accounted for 10% of our total net revenues.

Customers in the defense market generally purchase our products in connection with government programs that have a limited duration, leading to fluctuating sales to any particular customer in this market from year to year.

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Additionally, on a limited number of programs the customer has co-manufacturing rights which could lead to a shift of production on such a program away from us which in turn could lead to lower revenues.

Going forward, we believe the F-35, Filthy Buzzard, F/A-18, LTAMDS, THAAD, AMCS and Aegis programs could be a large portion of our future revenues in the coming years, and the loss or cancellation of these programs could adversely affect our future results.

Going forward, we believe the F-35, F/A-18, KC-46, LTAMDS, SCAR, and THAAD programs could be a large portion of our future revenues in the coming years, and the loss or cancellation of these programs could adversely affect our future results.

Further, new programs may yield lower margins than legacy programs, which could result in an overall reduction in gross margins.

If we are unable to respond adequately to our competition or to changing technology, we may lose existing customers and fail to win future business opportunities.

The emergence of commodity-type products as acceptable substitutes for certain of our products may cause customers to delay purchases or seek alternative solutions.

The markets for our products are highly competitive and are characterized by rapidly changing technology, frequent product performance improvements, and evolving industry standards.

Competitors may be able to offer more attractive pricing, develop products with performance features that are superior to our products, or offer higher quality or superior on time delivery, resulting in reduced demand for our products.

Recently, our on-time delivery has suffered due in part to operational challenges.

We may be unable to keep pace with competitors’ marketing and the lack of visibility in the marketplace may negatively impact design wins, bookings, and revenues.

Customers may also decide to reduce costs and accept the least costly technically acceptable alternative to our products or services.

In addition, customers may decide to insource products that they have outsourced to us.

Due to the rapidly changing nature of technology, we may not become aware in advance of the emergence of new competitors into our markets.

The emergence of new competitors in our markets could result in the loss of existing customers or programs and may have a negative impact on our ability to win future business.

Perceptions of Mercury as a high-cost provider or for late deliveries could cause us to lose existing customers or programs or fail to win new business.

Further, our lack of strong engagements with important government-funded laboratories (e.g.

DARPA, MIT Lincoln Labs, MITRE) may inhibit our ability to become subsystem solution design partners with our defense prime customers.

Our products are often designed for operating under physical constraints such as limited space, weight, and electrical power.

Furthermore, these products are often designed to be “rugged,” that is, to withstand enhanced environmental stress such as extended temperature range, shock, vibration, and exposure to sand or salt spray.

Historically these requirements have often precluded the use of less expensive, readily available commodity-type systems typically found in more benign non-military settings.

With continued microprocessor evolution, low-end systems could become adequate to meet the requirements of an increased number of the lesser-demanding applications within our target markets.

Commercial server manufacturers and other low-end single-board computer, or new competitors, may attempt to penetrate the high-performance market for aerospace and defense electronics systems.

Factors that may increase the acceptability of commodity-type products in some aerospace and defense platforms include improvements in the physical properties and durability of such alternative products, combined with the relaxation of physical and ruggedness requirements by the military due to either a reevaluation of those requirements or the installation of products in a more highly environmentally isolated setting.

These developments could negatively impact our revenues and have a material adverse effect on our business and operating results.

Failure to respond to competition or evolving technology could lead to customer loss and missed business opportunities.

The emergence of commodity-type substitutes may cause customers to delay purchases or seek alternatives.

Our markets are highly competitive, with frequent technological advances and evolving industry standards.

Competitors may offer lower pricing, superior products or better delivery, reducing demand for our offerings.

Operational challenges have impacted our on-time delivery, affecting visibility, design wins, bookings and revenue.

Customers may opt for lower-cost alternatives or insource previously outsourced products.

Rapid technological changes could lead to new competitors, resulting in lost customers and programs.

Negative perceptions regarding cost or delivery issues may further impact our ability to secure business.

Limited engagement with key government-funded laboratories (e.g., DARPA, MIT Lincoln Labs, and MITRE) may hinder our ability to become a design partner for defense prime contractors.

Our products are designed to operate under strict physical constraints and harsh conditions.

Historically, these requirements have limited the use of lower-cost commodity systems.

However, advancing technology and evolving military requirements may increase the acceptability of such alternatives.

The entry of commercial server manufacturers and new competitors into aerospace and defense electronics could reduce demand for our products, negatively impacting revenue and operating results.

Defense customers require frequent technological advancements for military superiority.

Historically, many design projects receive funding without actual deployment, and deployed systems favor subcontractors involved in the design phase.

To secure future business, we must consistently provide superior technology in a timely and cost-effective manner.

The design-in process is lengthy and costly, with no assurance that we will continue meeting customer specifications.

Failing to anticipate technological shifts, customer needs or demand fluctuations could negatively impact financial results, including inventory obsolescence.

Building inventory ahead of contractual commitments or purchasing end-of-life materials before confirmed customer demand increases this risk.

Product complexity occasionally leads to manufacturing delays.

For example, in fiscal year 2024, we halted production for months on multiple secure computing programs due to a root cause analysis, materially affecting financial results and customer confidence.

These challenges could recur in the future on other programs.

Competition from existing or new companies could cause us to experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and the loss of market share.

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If any of our sole-source suppliers limits or reduces the sale of these components, we may be unable to fulfill customer orders in a timely manner or at all.

These sole-source and other suppliers are each subject

to quality and performance issues, materials shortages, excess demand, reduction in capacity, and other factors that may disrupt the flow of goods to us or to our customers, which would adversely affect our business and customer relationships.

These sole-source and other suppliers are each subject to quality and performance issues, materials shortages, excess demand, reduction in capacity, and other factors that may disrupt the flow of goods to us or to our customers, which would adversely affect our business and customer relationships.

There can be no assurance that these suppliers will continue to meet our requirements.

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Carrying increased levels of inventory also increases our potential risk of future inventory obsolescence.

In addition, given the current political environment in the United States and Europe, the imposition of tariffs on the import of components from other countries, including China, could directly or, because of their effect on the prices of other components or suppliers themselves, indirectly raise the same risks described above.

Trade policies could increase the cost of our manufacturing operations, potentially reducing our gross margins and demand for our products.

Trade policies pose a risk to our manufacturing operations, potentially reducing our gross margins and impacting demand for our products.

There is uncertainty with respect to trade policies and treaties between the U.S.

and other countries.

has announced broad increases in tariffs on imported components, subject to limited exceptions.

trading partners have announced retaliatory tariffs in response and some have negotiated new trade agreements.

As a result, we are exposed to increased tariffs with respect to products and components that we import into the U.S.

Our gross margins could be reduced, potentially significantly, in the event we are unable to recover tariffs or duties from our customers.

Further, although we are required to pay tariffs upon importation of the components, we may not be able to recover these amounts from our customers

until sometime later, if at all, which could materially adversely impact our operating cash flow in a given period.

For example, tariff adjustments include a 10% baseline tariff on all imports to the U.S., with higher tariffs on specific goods from a range of countries.

Any significant increase in the price of our products due to increased costs may result in a reduction in demand from our customers at such higher prices.

The impact of any tariff increases will depend on various factors, including if such increases are ultimately implemented, the timing of implementation, contractual terms and the amount, scope and nature of the tariffs.

Tariffs and other restrictive trade measures may require us to take various actions, including changing suppliers and altering business relationships.

Changing our operations in accordance with new or evolving trade restrictions can be expensive, time-consuming, disruptive to our operations and distracting to management.

Tariffs and trade restrictions can be announced with little or no advanced notice, and we may not be able to effectively mitigate all adverse impacts from such measures.

We may not be able to effectively manage our relationships with contract manufacturers.

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Contract manufacturers also build products for other companies, and they may not have sufficient quantities of inventory available or sufficient internal resources to fill our orders on a timely basis or at all.

These risks may be enhanced for our International operations as we outsourced our former Swiss manufacturing operations to Cicor Group during fiscal 2025.

We are exposed to risks associated with international operations and markets.

We market and sell products in international markets and have sales offices and manufacturing and/or engineering facilities and subsidiaries in Switzerland, Spain, the United Kingdom and Canada.

Revenues from international operations accounted for 5%, 5%, and 4%, of our total net revenues in fiscal 2024, 2023, and 2022, respectively.

We market and sell products in international markets and have sales offices and manufacturing and/or engineering facilities and subsidiaries in Switzerland, Spain and the United Kingdom.

Revenues from international operations accounted for 5% of our total net revenues in each fiscal 2025, 2024, and 2023.

We also ship directly from our U.S.

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GAAP requires an employer to recognize the funded status of the defined benefit plan on the balance sheet, which we have presented in other long-term liabilities on our Consolidated Balance Sheets at June 27, 2025.

The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions in the Plan and we may have to record an increased liability as a result of fluctuations in the value of the Plan’s assets.

fluctuations in the value of the Plan’s assets.

As of June 27, 2025, we had a liability of $5.3 million in Other non-current liabilities representing the net under-funded status of the Plan.

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If we or our intermediaries fail to comply with the requirements of international applicable anti-corruption laws, governmental authorities in the United States or the countries in which we operate could seek to impose civil and criminal penalties, or restrict or limit our ability to do business, which could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

If we are unable to respond to technological developments and changing customer needs on a timely and cost-effective basis, our results of operations may be adversely affected.

Defense customers demand frequent technological improvements as a means of gaining military advantage.

Military planners have historically funded significantly more design projects than actual deployments of new equipment, and those systems that are deployed tend to contain the components of the subcontractors selected to participate in the design process.

To participate in the design of new defense electronics systems, we must demonstrate the ability to deliver superior technological performance on a timely and cost-effective basis.

There can be no assurance that we will secure an adequate number of design wins in the future, that the equipment in which our products are intended to function will eventually be deployed in the field, or that our products will be included in such equipment if it eventually is deployed.

The design-in process is typically lengthy and expensive, and there can be no assurance that we will be able to continue to meet the product specifications of customers in a timely and adequate manner.

In addition, any failure to anticipate or respond adequately to changes in technology, customer preferences and future order demands, or any significant delay in product developments, product introductions, or order volume, could negatively impact our financial condition and results of operations, including the risk of inventory obsolescence.

If we build inventory ahead of the associated customer contractual demand, we may face write downs of such inventory.

This risk is further enhanced if we purchase end of life material to support a product line or program prior to receiving a customer commitment to pay for such material.

Because of the complexity of our products, including the complexity of the related manufacturing processes, we have experienced delays from time to time in completing products on a timely basis.

For example, during our fiscal year ended June 28, 2024, we stopped production for several months on multiple programs utilizing a common processing architecture in our secure computing product line while we conducted a root cause corrective analysis on the product design and manufacturing process.

This delay and the associated costs had a material impact on our financial condition and results of operations for the fiscal year and negatively impacted our reputation with the customers for such products.

Our need for continued or increased investment in R&D may increase expenses and reduce our profitability.

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Our results of operations are subject to fluctuation from period to period and may not be an accurate indication of future performance.

While our revenues are generated through the sale of products and services across more than 300 programs with no single program contributing more than 10% of our annual revenues, we have experienced fluctuations in operating results due to shifts in timing or quantities across certain of our larger programs.

While our revenues are generated through the sale of products and services across hundreds of programs with no single program contributing more than 10% of our annual revenues, we have experienced fluctuations in operating results due to shifts in timing or quantities across certain of our larger programs.

Customers specify delivery date requirements that coincide with their need for our products and services on the programs in which we participate.

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Results of operations in any period should not be considered indicative of the results to be expected for any future period.

High quarterly book-ship ratios pressure our inventory and cash flow management, necessitating increased inventory balances to ensure quarterly revenue attainment.

High quarterly book-ship ratios have pressured our inventory and cash flow management at various times, necessitating increased inventory balances to ensure quarterly revenue attainment.

Increased inventory balances tie up additional capital, limiting our operational flexibility.

Some of our customers may have become conditioned to wait until the end of a quarter to place orders in the

expectation of receiving a discount.

Some of our customers may have become conditioned to wait until the end of a quarter to place orders in the expectation of receiving a discount.

Customers conditioned to seek quarter-end discounts increase risk and uncertainty in our financial forecasting and decrease our margins and profitability.

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• shortages and increased costs of components;

• excess and obsolescence of inventory;

• delays due to the implementation of new tariffs or other trade barriers;

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• declines in quarterly revenues from previous generations of products following announcement of replacement products containing more advanced technology;

• changes in estimates of completion (EAC) on fixed price engagements, which represent a substantial and increasing percentage of our business.

• changes in estimates of completion (EAC) on fixed price engagements, which represent a substantial percentage of our business.

In addition, from time to time, we have entered into contracts, referred to as development contracts, to engineer a specific solution based on modifications to standard products.

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There can be no assurance that we will receive any customer waivers if a required certification is lost or delayed.

Another factor contributing to fluctuations in our quarterly results is the fixed nature of expenditures on personnel, facilities, information technology and marketing programs.

Another factor contributing to fluctuations in our quarterly results is the fixed nature of expenditures on personnel, facilities, and information technology.

Expense levels for these programs are based, in significant part, on expectations of future revenues.

If actual quarterly revenues are below management’s expectations, our results of operations could be adversely affected.

Further, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

The percentage of our total revenue using over time revenue accounting has increased in recent years due to M&A transactions and the movement in our business toward subsystem development.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Over time revenue recognition is more reliant on estimates than the accounting for our component sales.

Changes in estimates of completion ("EACs") on fixed price engagements, which represent a substantial percentage of our business, also requires judgement, including in assessing risks, estimating contract revenue and costs, and predicting future performance.

Actual results could differ from those estimates, and changes in estimates in subsequent periods could cause our results of operations to fluctuate.

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As we grow our operations, the potential for natural or man-made disasters, political, economic, or infrastructure instabilities, or other country- or region-specific business continuity risks increases.

Our insurance coverage, customer indemnifications or other liability protections may be inadequate to cover our significant business risks, which could have a material adverse effect on our financial position.

We may be subject, in the ordinary course of business, to losses resulting from product liability, cyber-attacks, accidents, natural disasters, and other claims against us, for which we may have no insurance coverage.

The policies limits and terms of coverage may include significant deductibles or self-insured retentions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us.

A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results.

Risks Related to M&A and Acquisition Integration

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• environmental liabilities at current or previous sites of the acquired business;

• poor compliance programs pre-acquisition at acquired companies, which may lead to liabilities for violations, or impact the business acquired when placed under our compliance programs;

• poor compliance and document retention and retrieval programs pre-acquisition at acquired companies, which may lead to liabilities for violations, or impact the business acquired when placed under our compliance programs;

• unanticipated changes in applicable laws or regulations;

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We may incur substantial indebtedness.

On February 28, 2022, we amended our existing revolving credit facility (“the Revolver”) to increase and extend the borrowing capacity to a $1.1 billion, 5-year revolving credit line, with the maturity extended to February 28, 2027.

On August 13, 2024, we amended our Revolver, permanently decreased borrowing capacity to $900.0 million, with a temporary reduction in credit availability to $750.0 million until we meet a minimum consolidated EBITDA level of $75.0 million excluding (a) adjustments for cost savings, operating expense reductions and synergies, (b) estimate at completion (“EAC”) charges and other non-cash expenses, charges, and losses addbacks and (c) deducts to reverse EAC charges previously added back, in each case for a last twelve-month period.

The temporary reduction in credit availability was removed as of the filing of our Q2 compliance certificate, and capacity returned to $900.0 million.

As of June 27, 2025, we had $591.5 million of outstanding borrowings on the Revolver.

On August 13, 2024, we further amended our Revolver, permanently decreased borrowing capacity to $900 million, with a temporary reduction in credit availability to $750.0 million until we meet a minimum consolidated EBITDA level of $75.0 million excluding (a) adjustments for cost savings, operating expense reductions and synergies, (b) estimate at completion (“EAC”) charges and other non-cash expenses, charges, and losses addbacks and (c) deducts to reverse EAC charges previously added back, in each case for a last twelve-month period.

The Revolver accrues interest, at our option, at floating rates tied to Secured Overnight Financing Rate ("SOFR") or the prime rate plus an applicable percentage.

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The movement of interest rates would affect the value of such swap agreement.

Limited or negative free cash flow as we have recently experienced, if not improved, could eventually lead to a challenge in servicing our debt.

Limited or negative free cash flow as we experienced during certain prior periods could eventually lead to a challenge in servicing our debt.

We are subject to refinancing risk as we expect to need to refinance our debt prior to the expiration of the Revolver.

We have a significant amount of goodwill and intangible assets on our consolidated financial statements that are subject to impairment based upon future adverse changes in our business or prospects.

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We evaluate indefinite lived intangible assets and goodwill for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

During the quarter ended March 29, 2024, we assessed potential triggering events for goodwill impairment and concluded that there was a triggering event for the Mission Systems reporting unit.

Based on the quantitative evaluation during the quarter ended March 29, 2024 we determined that the Mission Systems reporting unit had an estimated fair value in excess of carrying value.

During the quarter ended March 29, 2024, we assessed potential triggering events for goodwill impairment and concluded that there was a triggering event for the Mission Systems reporting unit.

Based on the quantitative evaluation during the quarter ended March 29, 2024 we determined that the Mission Systems reporting unit had an estimated fair value in excess of carrying value.

Indefinite lived intangible assets are impaired and goodwill impairment is indicated when their book value exceeds fair value.

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In the event we are awarded a contract, we are subject to protests by losing bidders of contract awards that can result in the reopening of the bidding process and changes in governmental policies or regulations and other political factors.

subject to multiple rebid requirements over the life of a defense program to continue to participate in such program, which can result in the loss of the program or significantly reduce our revenue or margin.

We may be subject to multiple rebid requirements over the life of a defense program to continue to participate in such program, which can result in the loss of the program or significantly reduce our revenue or margin.

Requirements for more frequent technology refreshes on defense programs may lead to increased costs and lower long-term revenues.

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For example, there have been legislative proposals to narrow the definition of a “commercial item” (as defined in the FAR) or to require cost and pricing data on commercial items that could limit or adversely impact our ability to contract under commercial item terms.

Changes could be accelerated due to changes in our mix of business, in federal regulations, or in the interpretation of federal regulations, which may subject us to increased oversight by the Defense Contract Audit Agency (“DCAA”) for certain of our products or services.

Agency (“DCAA”) for certain of our products or services.

Such changes could also trigger contract coverage for a larger percentage of our contracts under the Cost Accounting Standards (“CAS”), requiring compliance with a defined set of business systems criteria.

Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts.

Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts and subject us to 5% billing withholding on open cost type contracts.

We may also need to implement or enhance our processes and information systems to support certified cost and pricing and earned value management systems.

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Inability to meet the qualifications to the CMMC and any amendments may increase our costs or delay the award of contracts if we are unable to certify that we satisfy such cybersecurity requirements at our Company level and into our supply chain.

Further, our suppliers in general are not as prepared to comply with CMMC requirements today as we are, and thus we may have to change suppliers or delay production to the extent the application of such requirements materially effects our supply chain.

government or a defense prime contractor customer could require us to relinquish data rights to a product in connection with performing work on a defense contract, which could lead to a loss of valuable technology and intellectual property in order to participate in a government program.

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Undetected errors may adversely affect our product’s ease of use and may create customer satisfaction issues.

If we are unable to repair these problems in a timely manner, we may experience a loss of or delay in revenue and significant damage to our reputation and business prospects.

If we are unable to repair these problems in a timely manner, we may experience a loss

of or delay in revenue and significant damage to our reputation and business prospects.

Many of our customers rely upon our products for mission-critical applications.

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If we suffer ransomware breaches, data breaches, or phishing diversions involving the designs, schematics, or source code for our products or other sensitive information, our business and financial results could be adversely affected.

Our business is subject to heightened risks of cyber intrusion as nation-state hackers seek access to technology used in U.S.

Our business is subject to constant attempts at cyber intrusion as nation-state hackers seek access to technology used in U.S.

defense programs and criminal enterprise hackers, which may or may not be affiliated with foreign governments, use ransomware attacks to disable critical infrastructure and extort companies for ransom payments.

We are also targeted by spear phishing attacks in which an email directed at a specific individual or department is disguised to appear to be from a trusted source to obtain sensitive information.

We are also regularly targeted by spear phishing attacks in which an email directed at a specific individual or department is disguised to appear to be from a trusted source to obtain sensitive information.

Like all DoD contractors that process, store, or transmit controlled unclassified information, we must meet minimum security standards or risk losing our DoD contracts.

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Similarly, a breach that involves loss of customer-provided data could subject us to loss of a customer, loss of a program or contract, litigation costs and legal damages and reputational harm.

Like other defense contractors, from time to time we have

experienced the loss of proprietary data due to employees retaining proprietary information in violation of company policies and applicable regulations, resulting in investigation and remediation expenses as well as the other risks outlined above.

We have experienced cyber intrusions involving the loss of some proprietary data in the past which did not result in material effects on our business or operations, but we cannot assure you that any future cyber intrusion would not be material or that prior intrusions could have more material effects than initially determined.

Like other defense contractors, from time to time we have experienced the loss of proprietary data due to employees retaining proprietary information in violation of company policies and applicable regulations, resulting in investigation and remediation expenses as well as the other risks outlined above.

While we have deployed protective measures to counter these attacks, there is no assurance that these measures will detect all threats or prevent a cybersecurity attack because of the continuously evolving nature of such attacks.

We may be unsuccessful in protecting our intellectual property rights which could result in the loss of a competitive advantage.

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In addition, we may incur substantial costs in attempting to protect our proprietary rights.

We may become subject to claims that we infringe the intellectual property rights of others.

We have been subject to claims that we infringe the intellectual property rights of others and we may become subject to such claims in the future.

We cannot assure you that, if made, these claims will not be successful.

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The complaint alleged that our public disclosures in SEC filings and on earnings calls were false and/or misleading .

While the Court dismissed the case without prejudice on July 24, 2024, it permitted the plaintiffs 30 days to file an amended complaint.

We are currently defending that securities litigation.

We have never paid cash dividends on our common stock and we do not anticipate paying any dividends in the foreseeable future.

We have not declared or paid cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business and for future mergers and acquisitions.

As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

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The Massachusetts Business Corporation Act permits directors to look beyond the interests of shareholders and consider other constituencies in discharging their duties.

In determining what the director of a Massachusetts corporation reasonably believes to be in the best interests of the corporation, a director may consider the interests of the corporation's employees, suppliers, creditors, and customers, the economy of the state, the region, and the nation, community and societal considerations and the long-term and short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.

and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.

Shareholder activism could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation and impact our stock price.

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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