10-Q – 2026-05-28 – arxs-20260331.htm

carries inherent risks related to data privacy and cybersecurity, such as intended, unintended or inadvertent transmission of proprietary, sensitive or export-controlled information. Further, any output created by us using AI tools may not be subject to copyright protection, which may adversely affect our IP rights in, or ability to commercialize or use, any such content. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the AI tools used in our business, or if we experience cybersecurity incidents in connection with our use or any third party’s use of AI, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party IP, data privacy, cybersecurity, publicity, contractual or other rights. In addition, our competitors may be faster or more successful than we are in incorporating AI and other disruptive technology into their offerings, which could impair our ability to compete successfully.
We use, or may in the future use, third-party AI technologies, including third-party software and infrastructure, which may become integral to our operations. We cannot control the availability or pricing of such third-party AI technologies, especially in a highly competitive environment, and we may be unable to negotiate favorable economic terms with the applicable providers. If any such third-party AI technologies become incompatible with our products or services or unavailable for use, or if the providers of such models unfavorably change the terms on which their AI technologies are offered or terminate their relationship with us, our solutions may become less appealing to our customers and our business will be harmed. In addition, to the extent any third-party AI technologies are used as a hosted service, any disruption, outage or loss of information through such hosted services could disrupt our operations or solutions, damage our reputation, cause a loss of confidence in our solutions or result in legal claims or proceedings, for which we may be unable to recover damages from the affected provider.
Risks Related to Our Operations
Cost overruns could subject us to losses.
We must meet stringent customer specifications and requirements, which could result in us having to spend more to design or manufacture products than we expect. Because many of our contracts involve advanced designs and innovative technologies, we may experience unforeseen technological difficulties and cost overruns. These risks are heightened in a high inflationary environment. These risks are also heightened for new programs that often require ramp-up costs, such as non-recurring costs for tooling, first article testing, finalizing engineering specifications and hiring new employees, and often involve a greater volume of scrap, higher costs due to inefficiencies, delays in production and learning curves. If we are unable to control the costs we incur in performing under the contract, then our reputation and results of operations could be adversely affected.
Our business depends on the availability and pricing of certain components and raw materials from suppliers.
Our business is affected by the price and availability of the raw materials and component parts that we use to manufacture our products. Increases in the costs of raw materials or component parts, and reduced availability of such raw materials or component parts, could adversely affect our business, results of operations and financial condition. Supply sources could be interrupted from time to time, including by events such as the destruction of our suppliers’ facilities or their distribution infrastructure or a work stoppage or strike by our suppliers’ employees. If supply sources are interrupted, it is not certain that supplies could be resumed, whether in part or in whole, within a reasonable time frame and at an acceptable cost, or at all. Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive process to obtain requisite certifications could prevent efficient and timely replacement of a supplier, raw material or component part. Certain of our products depend on specialty materials and rare and precious metals, which may experience constraints in supply that postpone delivery or increase the costs of our products. Changes to tariff and import and export regulations in the U.S. and abroad may negatively impact the availability and pricing of raw materials and component parts. This risk is heightened by our use of sole source suppliers. We have experienced and expect to continue to experience supply shortages or increases in costs for raw materials and component parts. In addition, because we strive to limit the volume of raw materials and component parts on hand, we may be more susceptible to changes in the price and availability of raw materials and component parts. As a result, the cost to manufacture our products could be significantly greater than we expect, which could limit the demand for our products and, if we are unable to pass along such increased costs to our customers, reduce our gross margins. Additionally, counterfeit parts in our supply chain have been and continue to be a concern, since any counterfeit part can lower product quality, which may affect our reputation and the reliability of our products.
Inflation could adversely affect our results of operations.
Although historically our operations have not been materially affected by inflation and we have been successful in adjusting prices to our customers to reflect changes in our material and labor costs, the rate of current inflation and resulting pressures on our costs and pricing could adversely impact our business and financial results. Inflation adversely affects us by increasing our operating costs, including our materials, freight and labor costs, which are already under pressure due to supply chain constraints. Russia’s invasion of Ukraine, and prolonged conflict there, as well as the conflict in the Middle East and other geopolitical conflicts may result in increased

 
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inflation, escalating energy and commodity prices and increasing costs of materials. We may be unable to raise the sales prices of our products at or above the rate of inflation, particularly due to competitive conditions in the market for our products and services, which could reduce our profit margins and have a material adverse effect on our results of operations.
Tariffs and changes in trade policies could increase our cost of sales.
In 2025, the U.S. announced significant changes to its trade policies, including the imposition of significant tariffs on various products from other countries. Additional and different tariffs may be announced and implemented in the future by the U.S. and other countries. In particular, tariffs on steel and aluminum have increased our costs. While any steel and aluminum we use in our products is produced primarily in North America, the tariffs provide domestic steel and aluminum producers the flexibility to increase their prices, at least to a level where their products would still be priced below foreign competitors once the tariffs are taken into account. These tariffs could have an adverse impact on our results of operations, which include, but are not limited to, products we sell that include steel and aluminum, and if we are unable to pass such price increases through to our customers, it would likely increase our cost of sales and, as a result, decrease our gross margins. In response to U.S. tariffs, a number of other countries have threatened to and have imposed tariffs on U.S. imports, which could increase the price of our products in these countries and may result in our customers looking to alternative sources for our products. This could result in decreased sales, which could have a negative impact on our results of operations and financial condition.
Our operations and those of our suppliers and customers may be adversely affected by natural disasters, pandemics and other catastrophic events.
We, our suppliers and our customers are exposed to risks associated with natural disasters, fire, power shortages or other catastrophic events, which could damage or disrupt our operations and supply chain and those of our suppliers and customers. In the event of a natural disaster, we, our suppliers and our customers may be unable to continue our and their operations and may endure system interruptions, delays in fulfilling orders, breaches of data security and loss of critical data. In particular, some of our manufacturing facilities are located in earthquake-prone, flood-prone and wildfire-prone regions, which make them susceptible to such natural disasters. In addition, we, our suppliers and our customers are exposed to risks associated with public health crises, such as pandemics and epidemics, which could result in manufacturing and operational disruptions, reduced demand for our products and negative impacts on our industry and the markets we serve. Further, acts of terrorism, labor activism or unrest and other geopolitical unrest could cause disruptions in our operations and those of our suppliers and customers. We maintain business continuity insurance coverage at levels that we believe are appropriate for our business, but there can be no assurance that the amounts of insurance will be sufficient to satisfy any damages and losses associated with such events.
Our products may not operate as intended.
We design, manufacture, service and sell complex and sophisticated aerospace, medical technology and specialized industrial products. These products are manufactured according to detailed specifications and are subject to strict approval or certification requirements. Technical, mechanical and other failures have occurred in the past, and may occur in the future, whether as a result of manufacturing or design defects, operational processes or production issues. Our products could also fail as a result of cyber-attacks, such as those that seize control and result in misuse or unintended use of our products, or other intentional acts. As many of our products are mission-critical components, the failure of one of our products could lead to catastrophic consequences for the end products in which our products are component parts such as plane crashes. If our products do not operate as intended, we could be subject to product liability claims, product recalls, regulatory directives, warranty claims, service, repair and maintenance costs, damages and fines and other liabilities and our reputation could be adversely affected.
We may be unable to renew our leases.
We have made significant capital expenditures to ensure our leased facilities are suitable for our purposes as well as to meet requirements that we are subject to and obtain facility security clearances. However, at the end of the lease term and during any renewal period for a facility, we may be unable to renew the lease on commercially reasonable terms, or at all. If we are unable to renew our facility leases, we may close or relocate a facility, which could materially impact our ability to meet certain contractual schedule commitments or require us to incur significant costs to increase production at other facilities. In addition, relocating facilities could subject us to construction and other costs and risks, including significant capital expenditures, an inability to retain qualified personnel and a decrease in production and performance at the new facilities compared to the existing facilities. Additionally, we may have to seek qualification of any new facilities in order to meet customer or contractual requirements and to obtain facility security clearances for the new facility in order to continue to perform on classified contracts. Further, we may not be able to secure a replacement facility in a location that is as commercially viable as that of the lease we are unable to renew, due to contracts that may require us to have facilities in certain locations.

 
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We could continue to incur significant costs under our leases if we close or scale down facilities.
Many of our facilities are located on leased premises subject to non-cancellable leases. Typically, our leases have initial terms ranging from five to ten years, with options to renew for specified periods of time. If we close or stop fully utilizing a facility, we will most likely remain obligated to perform under the applicable lease, which would include, among other things, making the base rent payments, and paying insurance, taxes and other expenses on the leased property for the remainder of the lease term, even though we do not derive any revenue from such leased property.
We have a decentralized organizational structure, under which our business units operate with significant autonomy.
We operate through a decentralized organizational structure in which our business units have significant operational and managerial autonomy. This structure is intended to enhance agility, accountability and customer focus across our diverse portfolio of products and businesses. However, the autonomy of our business units also presents risks associated with inconsistent execution of enterprise policies and controls. Because our business units are responsible for their own operational performance, compliance and risk management, variations in management practices or local decision-making could result in inconsistent application of our corporate standards and procedures. This may affect areas such as contract compliance, ethics and business conduct, intellectual property policies and procedures, cybersecurity and data privacy, export and import controls, anti-corruption, environmental, health and safety and product quality. As we operate in highly regulated industries and act as a U.S. government contractor or subcontractor, a failure by any business unit to comply with applicable laws, regulations or contract requirements could subject us to administrative, civil or criminal proceedings, monetary penalties, loss of contract awards, suspension or debarment and reputational harm. Our decentralized model also increases the complexity of implementing company-wide initiatives, integrating acquisitions and maintaining consistent oversight across multiple operating environments. Communication gaps or delays in escalation between business unit leadership and corporate management could impair our ability to identify and respond promptly to emerging risks or operational issues. Our decentralized organizational structure may result in compliance challenges and may heighten many of the risk factors described in this “Risk Factors” section, including those related to cybersecurity and data protection, supply chain management, product quality and safety, internal controls over financial reporting and the retention and development of key personnel. In addition, our operations may be disrupted and we may be subject to additional risks as a result of any effort we undertake to align policies and procedures across our business units. Any such issues could adversely affect our business, financial condition, results of operations and reputation.
Disruptions to the various information technology systems upon which our operations and our products and services rely could harm our business, reduce our revenue, increase our expenses, damage our reputation and adversely impact our performance.
We rely on software, hardware, communication networks, cloud services and other information technology systems, including those of third parties, to process, transmit, store and protect electronic information. A significant portion of the communications between our personnel, customers, suppliers and vendors depends on such information technology systems, and we heavily rely on access to such information technology systems for our operations. Additionally, we rely on third-party service providers to execute certain business processes and maintain certain information technology systems and infrastructure. Any of these information technology systems may contain defects or errors when implemented or when new functionality is released, as we may modify, enhance, upgrade and implement new systems, procedures and controls to reflect changes in our business, technological advancements and changing industry trends. Additionally, such upgrades or replacements may not improve our productivity to the levels anticipated and may subject us to inherent costs and risks associated with implementing, replacing and updating these systems, including potential disruption of our internal control structure, substantial capital expenditures, demands on management time and other risks of delays or difficulties in transitioning to new systems or of integrating new systems into other existing systems.
Any disruption to these information technology systems, whether as the result of computer or telecommunications issues (including operational failures, server malfunctions, software bugs, errors or defects, or software or hardware failures), natural disasters, severe weather, power outages, telecommunication failures, personnel misconduct or error, localized conditions or events, or circumstances of broader geographic impact, could materially adversely affect our business by disrupting normal operations. This could impede our sales, disrupt or prevent manufacturing or other critical functions, result in loss or corruption of critical data or harm our customers, and the financial costs we could incur to respond to these disruptions could be significant and may be difficult to anticipate or measure. Moreover, such a disruption could cause reputational and financial harm or cause our customers to seek to terminate their contracts, delay or withhold payment or make claims against us. If any disruption to any information technology system on which we rely occurs, regardless of whether the disruption originates from our systems or those of our partners or suppliers, the market perception of the effectiveness of our products or services could be harmed. Any of the foregoing could subject us to liability to our customers, suppliers, business partners or any affected individual, lost business, increased insurance costs, difficulty in collecting accounts receivable, costly litigation or adverse publicity, which could materially and adversely affect our business, financial condition and results of operations.

 
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Cyberattacks, security incidents or other unauthorized access to our or our service providers’ information technology systems or sensitive or proprietary information, or any perceived compromise thereof, could have an adverse effect on our business and operations.
We have in the past been, and may in the future be, impacted by security incidents, including attacks from bad actors intended to circumvent our security capabilities. We are susceptible to compromises of our information technology systems and data, including those arising from process, coding or human errors. Cyberattacks, data breaches, data losses and other security incidents can result from, among other things, inadequate personnel, inadequate or failed internal control processes and systems or external events or actors that interrupt normal business operations and may include disruptions, failures, service outages, unauthorized access or misuse, software bugs, server malfunctions, software and hardware failure, defective software or hardware updates, malware and ransomware, social engineering and phishing attacks, theft of IP, trade secrets or other corporate assets, denial-of-service attacks, hacking by common hackers, criminal groups, nation-state organizations or social activist organizations, misconduct, fraud, error and other events that could have a serious impact on us. These risks may be further increased as a portion of our employees work from home. We may not have the resources or technical sophistication to anticipate, prevent or detect rapidly evolving types of cyberattacks and other security risks. Attacks may be targeted at us, our customers, suppliers, vendors or other service providers or others who have entrusted us with information, and such parties have faced and may continue to face cyberattacks, compromises or other security incidents from a variety of sources. A successful attack or other incident that results in an interruption of service or that compromises our or our service providers’ information technology systems or data could have a significant negative effect on our operations, reputation, financial resources and the value of our IP. We cannot assure you that any of our efforts to manage this risk will be effective in protecting us from such attacks.
Because of the frequently changing attack techniques, along with increased volume, persistence and sophistication, we may be adversely impacted by such attacks or other security incidents. Because such techniques change frequently, including through enhancements by the use of AI, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement sufficient control measures to defend against these techniques. It is virtually impossible for us to entirely eliminate the risk of such attacks, compromises, interruptions in service or other security incidents affecting our information technology systems or data, or those of our service providers.
Once a cyberattack or security incident is identified, we may be unable to remediate or otherwise respond to such an incident in a timely manner. While we have policies and procedures in place, including system monitoring and data back-up processes to prevent or mitigate the effects of these potential incidents, such incidents and other disruptions to information technology systems could interfere with our operations. Any failure to maintain, or disruption to, our information technology systems, whether as a result of cyberattacks or otherwise, could damage our reputation, subject us to legal claims and proceedings or remedial actions, create risks of violations of data privacy and cybersecurity laws, rules and regulations and cause us to incur substantial additional costs. Existing or emerging threats may have an adverse impact on our information technology systems and, further, technological enhancements to prevent business interruptions could require increased spending. Furthermore, cyberattacks and security incidents pose a risk to confidential data and IP, which could result in damage to our competitiveness and reputation. The costs, potential monetary damages and operational consequences of responding to cyberattacks and security incidents and implementing remediation measures may not be covered by any insurance that we may carry from time to time. We cannot predict the degree of any impact that increased monitoring, assessing or reporting of cybersecurity matters would have on operations, financial conditions and results.
We are subject to complex and evolving laws, regulations, and industry requirements related to data privacy, data protection, information security and cybersecurity across different markets where we conduct our business.
We are required to comply with stringent, complex and evolving laws, rules, regulations and standards in many jurisdictions, as well as contractual obligations, relating to data privacy and cybersecurity. Ensuring compliance with such requirements may increase operating costs, impact our data processing practices and policies and the development of new products or services, and reduce operational efficiency, any of which could adversely affect our business and operations.
In the U.S., there are numerous federal, state and local data privacy and cybersecurity laws, rules, and regulations governing the collection, sharing, use, retention, disclosure, security, transfer, storage and other processing of personal information, including federal and state data privacy and cybersecurity laws, data breach notification laws and data disposal laws. These include the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act, and similar state privacy laws. At the international level, we are subject to the General Data Protection Regulation (the “GDPR”) and its equivalent in the United Kingdom (the “U.K. GDPR”). Implementing mechanisms to endeavor to ensure compliance with the GDPR and the U.K. GDPR may be onerous and expose businesses to divergent parallel regimes that may be subject to potentially different interpretations and enforcement actions for certain violations and related uncertainty.

 
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We are also subject to the DoW Cybersecurity Maturity Model Certification (“CMMC”) program, which mandates assessments, including in certain cases by third parties, for companies working with the DoW in order to verify such companies’ adherence to specific cybersecurity standards. Such compliance program is currently being phased in and expected to be completed by November 2028. To the extent we are unable to achieve certification in advance of contract awards, or we fail to achieve or maintain certification at the level required for a particular contract award, we will be unable to bid on such contract awards or follow-on awards for existing work with the DoW, which could materially adversely impact our revenue, profitability and cash flows. Additionally, our subcontractors, and certain of our vendors, may also need to comply with CMMC requirements. We may be negatively impacted if our subcontractors or vendors are not compliant with CMMC requirements. The obligations imposed on us under the CMMC may be different from, or in addition to those otherwise required by the data privacy and cybersecurity laws, rules and regulations to which we are subject. The costs to obtain and maintain CMMC certification are significant and may increase, which could materially adversely affect our business, results of operations, prospects and financial condition. Failure to maintain required certification may also result in bid protest challenges, and inaccurate representations regarding compliance could expose us to liability, under applicable laws, including the False Claims Act.
We have implemented internal controls and procedures designed to be compliant with the data privacy and cybersecurity laws, rules and regulations to which we are subject, the CMMC and other applicable standards, as well as contractual obligations related to data protection. However, such controls and procedures may not enable us to be fully compliant with such laws, rules and regulations. Moreover, data privacy and cybersecurity laws, regulations, standards and obligations are uncertain and evolving and may be modified, replaced, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations. We cannot yet determine the impact that such modifications or interpretations may have on our business. As such, we cannot assure ongoing compliance with all such laws or regulations and other legal obligations, and our efforts to do so may cause us to incur significant costs or require changes to our business practices, which could materially adversely affect our business, results of operations, prospects and financial condition. The rapid evolution and increased adoption of AI technologies may intensify these risks. Any failure or perceived failure by us to comply with applicable laws or regulations, or other contractual or legal obligations, or to adequately address privacy and security concerns, even if unfounded, may result in governmental enforcement actions, private litigation (including class actions), fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have a material adverse effect on our reputation, inhibit sales and materially adversely affect our business, results of operations, prospects and financial condition.
Our business is subject to economic, political, regulatory and other risks associated with international operations.
Our operations outside of the U.S. are subject to risks beyond those otherwise applicable to our domestic operations. Our net sales to foreign customers represented approximately 33.9% of our revenue for the year ended December 31, 2025. In addition, a number of our suppliers are located in foreign jurisdictions. A number of risks inherent in international operations could have a material adverse effect on our results of operations, including inflationary pressures, economic weakness or political instability in particular non-U.S. economies and markets; the risk of government-financed competition; difficulties in compliance with non-U.S. laws and regulations; changes in non-U.S. regulations and customs, tariffs and trade barriers; changes in non-U.S. currency exchange rates and currency controls; changes in a specific country’s or region’s political or economic environment; trade protection measures, economic sanctions and embargoes, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments; negative consequences from changes in tax laws, including with respect to the repatriation of funds; difficulties associated with staffing and managing international operations; business interruptions resulting from geopolitical actions and conflict, war and terrorism, including hostilities in Iran and related conflicts, the conflict between Russia and Ukraine and resulting sanctions, retaliatory measures, changes in the availability and price of various materials and effects on global financial markets; business interruptions resulting from natural disasters; and the impact of public health epidemics on employees and the global economy. Any of these factors could reduce the demand for our products, reduce our margins and create supply chain issues, such as those relating to the availability and price of raw materials and component parts, merchandise quality, shipping and transport availability, cost and security.
Failure to comply with applicable economic and trade sanctions could materially adversely affect our reputation and results of operations.
Our business must be conducted in compliance with applicable economic and trade sanctions and export control laws and regulations, such as those administered and enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control ("OFAC"), the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council, the Directorate of Defense Trade Controls and other relevant authorities. Such laws and regulations prohibit or restrict certain operations, investment decisions and sales activities, including dealings with certain countries or territories and with certain governments and designated persons. Such laws and regulations change over time and could be affected by political factors and the then-current political environment. Any violation or alleged violation by us, our employees, contractors or agents or others acting on our behalf or associated with us could expose us to reputational harm as well as significant penalties, including criminal fines, imprisonment, civil fines, disgorgement of profits, injunctions and debarment from government contracts, as well as other remedial measures.

 
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Risks Related to Our Financial Condition and Accounting Matters
We may require additional capital to support our growth.
We have funded our operations primarily through revenue generated by our products and services. We intend to continue to make investments in our business to respond to business opportunities, including developing new products and services, enhancing our operating infrastructure, expanding our operations and acquiring complementary businesses and products, all of which may require us to secure additional funds. Additional funds may not be available when we need them or on terms that are acceptable to us. Our ability to raise additional funds will depend on financial, economic and market conditions and other factors, over which we may have no or limited control. We may seek additional capital through a variety of means, including through public and private equity offerings and debt financings, credit and loan facilities and collaborations. If we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted and the terms of such equity or convertible debt securities may include liquidation or other preferences that are senior to or otherwise adversely affect your rights as a shareholder. If we raise additional capital through the sale of debt securities or through credit or loan facilities, we may be restricted in our ability to take certain actions, such as incurring additional debt, making capital expenditures, declaring dividends or encumbering our assets to secure future indebtedness, which restrictions could adversely impact our ability to conduct our operations and execute our business plan. If we raise additional capital through collaborations with third parties, we may be required to relinquish valuable rights to our IP and products, or we may be required to grant licenses to our IP and products on unfavorable terms.
Our quarterly operating results may vary widely.
Our quarterly revenue, cash flow and operating results have and may continue to fluctuate significantly in the future due to a number of factors, including the following: fluctuations in revenue derived from customer contracts; contract mix; the size and timing of orders; the mix of products and services that we sell in the period; fluctuations in customer demand for some of our products or services; unanticipated costs incurred in the introduction of new products and services; fluctuations in the adoption of our products and services in new markets; our ability to win additional contracts from existing customers or other contracts from new customers; cancellations, delays or contract amendments by our customers; changes in policy or budgetary measures that adversely affect our U.S. government customers and customers serving the U.S. and foreign governments; the cost of complying with various regulatory requirements applicable to our business and the potential penalties or sanctions that could be imposed for non-compliance; and our ability to obtain the necessary export licenses for sales of our products and services to international customers.
Changes in the volume of products and services provided under existing contracts and the number of contracts commenced, completed or terminated during any quarter may cause significant variations in our cash flow from operations because a relatively large amount of our expenses are fixed. We incur significant operating expenses during the start-up and early stages of large contracts and typically do not receive corresponding payments in that same quarter. We may also incur significant or unanticipated expenses when contracts expire or are terminated or are not renewed.
We face downward pricing pressure.
There is substantial and continuing pressure from our customers to reduce the prices they pay to suppliers such as us. We attempt to manage such downward pricing pressure, while trying to preserve our business relationships with our customers, by seeking to reduce our production and procurement costs through various measures, including implementing cost-effective process improvements and partnering with our own suppliers to reduce our cost of raw materials and component parts. Our suppliers have periodically resisted, and in the future may resist, pressure to lower their prices. We may be unable to fully offset price reductions from our customers by reducing our costs.
Our indebtedness and the restrictive covenants under the agreements governing our indebtedness could adversely affect our financial condition.
We have a significant amount of indebtedness. As of March 31, 2026, we had $2,679.7 million outstanding principal amount of indebtedness. Such indebtedness could have important consequences, including making it more difficult for us to satisfy our obligations with respect to our indebtedness; limiting our ability to obtain additional financing to fund working capital, capital expenditures, acquisitions and other general corporate requirements; increasing our borrowing costs; increasing our vulnerability to general economic downturns and adverse competitive and industry conditions; requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate requirements; limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; placing us at a competitive disadvantage compared to competitors that have less debt; and impacting investors’ perception of us.

 
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All of our indebtedness bears variable rates, thereby making us more vulnerable to rising interest rates. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same. We hedge a portion of our variable rate indebtedness; however, there can be no assurance that we will be able to continue to do so on commercially reasonable terms, or at all.
The agreements that govern our indebtedness impose significant operating and financial restrictions on us. Negative covenants limit us from, among other things, incurring indebtedness, creating liens on our properties, entering into merger or consolidation transactions, selling assets, disposing of all or substantially all of our assets, paying dividends and distributions and making other restricted payments. As a result of these restrictions, we are limited as to how we conduct our business and may be unable to compete effectively or take advantage of new business opportunities. Our failure to comply with the restrictive covenants as well as other terms of our indebtedness could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date and result in the lenders thereunder to terminate their commitments.
Our ability to maintain compliance with the covenants imposed by our indebtedness and to repay the principal of, pay interest on and refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors, many of which are beyond our control. If we are unable to comply with the covenants imposed by our indebtedness or to generate sufficient cash flow to service or repay our indebtedness, we may be in default and be required to adopt one or more alternatives, such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital that can be highly dilutive. These remedies may not be available to us on commercially reasonable terms, or at all.
Additional tax liabilities and changes in tax laws could adversely impact our results of operations and financial condition.
We are subject to income taxes in the U.S. and subject to tax laws in various foreign jurisdictions. The laws and regulations in these jurisdictions are inherently complex, and we are obliged to make judgments and interpretations about the application of these laws and regulations. Such judgments and interpretations may be incorrect and be subject to challenge by tax authorities. If tax audits result in assessments different from amounts reserved, our income statement could include unfavorable adjustments to our tax liabilities. In addition, we could be adversely affected by changes to tax laws and regulations in the jurisdictions in which we operate.
We may incur expenditures prior to the final receipt of a contract.
We provide various specialized products, services and sometimes procure equipment and materials on behalf of our customers under various contractual arrangements. From time to time, in order to ensure that we satisfy our customers’ delivery requirements and schedules, we may elect to initiate procurement and production in advance of receiving a contract award or final authorization from the government or a prime contractor. These actions that we may take to procure materials and/or commence production in advance of a contract award or final authorization require use of our working capital resources which impact our near-term operating cash flows. If our government or prime contractor customers’ requirements should change or if the government or the prime contractor should direct the anticipated procurement to another contractor, or if the anticipated contract award or final authorization does not materialize, or if the equipment or materials become obsolete or require modification before we are under contract for the procurement, our investment in the equipment or materials might be at risk if we cannot efficiently resell them. This could reduce anticipated earnings or result in a loss, materially adversely affecting our business, results of operations, prospects and financial condition.
Changes in our accounting estimates could materially adversely affect our financial results.
Contract accounting requires judgments relative to assessing risks, including risks associated with estimating contract transaction prices and costs, assumptions for schedule and technical issues, customer-directed delays and reductions in scheduled deliveries and unfavorable resolutions of claims and contractual matters. Due to the size and nature of many of our contracts, the estimation of total costs at completion is complicated and subject to many variables. For example, we must make assumptions regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials; and consider incentives or penalties related to performance on contracts and include them in the variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the related uncertainty is resolved. Because of the significance of the judgments and estimation processes described above, it is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates could materially adversely affect our results of operations and financial condition.

 
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Our financial results of operations could be adversely affected by impairment of our goodwill or other intangible assets.
Goodwill and other intangible assets that have indefinite useful lives must be evaluated at least annually for impairment. The specific guidance for testing goodwill and other non-amortized intangible assets for impairment requires management to make certain estimates and assumptions. Changes in our estimates and assumptions, including as a result of factors beyond our control, could adversely impact the fair value of reporting units and result in impairments of goodwill and other intangible assets. If at any time we determine an impairment has occurred, we are required to reflect the reduction in value as an expense within operating income, resulting in a reduction of earnings and a corresponding reduction in our net asset value in the period such impairment is identified. Such a non-cash charge could have a material adverse effect on our results of operations.
We could be required to make future contributions to our defined benefit pension and post-retirement benefit plans and our costs may substantially increase in connection with such plans as a result of adverse changes in interest rates and the capital markets, changes in actuarial assumptions and legislative or other regulatory actions.
Our estimates of liabilities and expenses for pensions and other post-retirement benefits incorporate significant assumptions including the rate used to discount the future estimated liability, the long-term rate of return on plan assets and several assumptions relating to the employee workforce (salary increases, medical costs, retirement age and mortality). A dramatic decrease in the fair value of our plan assets resulting from movements in the financial markets or a decrease in discount rates may cause the status of our plans to go from an over-funded status to an under-funded status and result in cash funding requirements to meet any minimum required funding levels. Our results of operations, liquidity or shareholders’ equity in a particular period could be affected by a decline in the rate of return on plan assets, the rate used to discount the future estimated liability or changes in employee workforce assumptions.
We previously identified a material weakness in our internal control over financial reporting. If we experience additional material weaknesses in the future or otherwise fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements may be adversely affected.
We have been a private company since our inception and, as such, we have not been required to meet the internal control over financial reporting requirements that are applicable to a public company. As a result of becoming a public company, we will be required to comply with such requirements and to furnish a report by management on the effectiveness of internal control over financial reporting.
We previously identified a material weakness in our internal control over financial reporting related to the design and operating effectiveness of our internal controls over the accounting for certain complex transactions which could impact our ability to accurately account for and report certain transactions. The Public Company Accounting Oversight Board (“PCAOB”) defines a material weakness as a “deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.” Following the identification of the material weakness, we implemented a series of remediation measures designed to address the identified material weakness. These measures included the following:
• expanding our resources and personnel with the appropriate level of expertise within our technical accounting functions, including the hiring of an experienced Chief Accounting Officer with significant experience in complex transactions and public company reporting;

• implementing standardized controls for the identification of complex transactions;

• engaging external advisors with expertise and experience in the review of complex transactions and who are specialists in technical accounting matters, who advised management on accounting and reporting for transactions impacting the year ended December 31, 2025; and

• redesigning existing controls and implementing new controls to standardize accounting and reporting processes, including enhanced documentation and management review and approval requirements that clarify judgment criteria and accounting relevant to complex transaction.

Based on these remediation measures, we have concluded that the identified material weakness has been remediated as of December 31, 2025. However, we cannot assure you that the measures we have implemented will be sufficient to avoid future material weaknesses.
Pursuant to Section 404 of the Sarbanes-Oxley Act, management is not required to perform an assessment of, and our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting

 
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until our second Annual Report on Form 10-K to be filed with the SEC. When our independent registered public accounting firm formally attests to the effectiveness of our internal control over financial reporting, it may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent and detect error and/or fraud in a timely manner. Our ability to maintain effective disclosure controls and internal control over financial reporting may be further impacted by our decentralized model. If we are unable to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404, our independent registered public accounting firm may not issue an unqualified opinion, we may be unable to produce timely and accurate financial statements, investors could lose confidence in our reported financial and other information and we may be subject to sanctions or investigations by the SEC or other regulatory authorities, any of which could have a material adverse effect on the trading price and liquidity of our Class A common stock.
Risks Related to Government Regulation and Legal Matters
We are subject to extensive governmental regulation.
We are subject to numerous state, federal and international laws and directives and regulations in the U.S. and abroad that involve matters central to our business, including data privacy and security, employment and labor relations, immigration, taxation, import-export controls, trade restrictions, internal and disclosure control obligations, securities regulation and anti-competition. Compliance with legal requirements is costly, time-consuming and requires significant resources. Violations of one or more of these legal requirements in the conduct of our business could result in significant fines and other damages, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations or contractual obligations related to regulatory compliance in connection with the performance of customer contracts could also result in liability for significant monetary damages, fines and criminal prosecution, unfavorable publicity and other reputational damage, restrictions on our ability to compete for certain work and allegations by our customers that we have not performed our contractual obligations.
We are also subject to certain domestic and international anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”), other domestic U.S. bribery laws, the UK Bribery Act and similar laws and regulations in other jurisdictions. These laws and regulations generally prohibit the company and its employees and intermediaries from directly or indirectly authorizing, promising, offering or providing payments or benefits to government officials and other recipients in order to obtain or retain business improperly or secure an improper business advantage. We contract with governments and government agencies, and our business in various countries may involve interactions with government officials responsible for enforcing regulations or the authorization of permits, licenses or other approvals necessary for our business activities. We also may engage third parties or participate in joint ventures that can expose us to liability for the illegal activities of our partners or agents, even if we do not explicitly authorize such activities. Violations of applicable anti-corruption laws could subject us to significant civil or criminal penalties, including fines, disgorgement of profits, injunctions and debarment from government contracts, adverse media coverage and investigations, any of which could have a material adverse effect on our reputation, business and results of operations. Our exposure for violating these laws will increase as our international presence expands and as we increase sales and operations in foreign jurisdictions.
Also, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC promulgated disclosure requirements regarding the use of certain minerals (tantalum, tin, gold and tungsten), known as conflict minerals, which are mined from the Democratic Republic of the Congo or another covered country under such act. There are costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes or sources of supply as a consequence of such verification activities. Given the complexity of our supply chain, we may not be able to ascertain the origin of these minerals used in our products in a timely manner, which could cause some of our customers to disqualify us as a supplier to the extent we are unable to certify our products are conflict mineral free. Additionally, the rule could affect sourcing at competitive prices and availability in sufficient quantities of such minerals used in our manufacturing processes for certain products.

 
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Our business may be adversely affected if we were to lose our government or industry approvals, if more stringent government regulations were enacted or if industry oversight were to increase.
The aerospace industry is highly regulated in the U.S. and in other countries. In order to sell our products, we and the products we manufacture must be certified by the FAA, the DoW and similar agencies in foreign countries and by individual manufacturers. If any existing material authorizations or approvals were revoked or suspended, our business and reputation would be adversely affected. In addition, if new and more stringent government regulations are adopted or if industry oversight increases, we might incur significant expenses to comply with any new regulations or heightened industry oversight.
We are at times required to obtain approval to export our products from U.S. government agencies and similar agencies elsewhere in the world. U.S. laws and regulations applicable to us include the Arms Export Control Act, the ITAR, the Export Administration Regulations (“EAR”) and the sanctions administered by the OFAC. EAR restricts the export of commercial and dual-use products and technical data to certain countries, while ITAR restricts the export of defense products, technical data and defense services. Approval and license requirements change over time and could be affected by political factors and the then-current political environment. Failure to obtain required approval or licenses to export, or a determination by the U.S. government or similar agencies that we failed to receive required approvals or licenses to export, our products would eliminate or restrict our ability to sell our products and result in significant penalties, damages and fines and exclusion from future government contracts.
Contracting in the defense industry is subject to significant regulation.
Like all government contractors, including when we serve as a subcontractor to customers contracting with the U.S. government, we are subject to risks associated with this contracting. These risks include the potential for substantial civil and criminal fines and penalties. These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks or filing false claims. We have been, and expect to continue to be, subjected to audits and investigations by government agencies. The failure to comply with the terms of our and our customers’ government contracts could harm our reputation and result in our suspension or debarment from future contracts.
Product liability lawsuits and product recalls could cause us to incur substantial liabilities and to limit the commercial potential of our products.
We face an inherent risk of product liability and product recalls. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit or cease sales of our affected products. Even a successful defense would require significant financial and management resources. In addition, any product liability claims, regardless of outcome or basis, could damage our reputation for quality products, adversely affecting our ability to retain and attract customers. We currently carry product liability insurance in an amount that we believe is appropriate for our business. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We also may not be able to maintain insurance coverage in the future at an acceptable cost, or at all. Any liability not covered by insurance or for which third-party indemnification is not available could result in significant liability to us.
To the extent that a product fails to conform to its specifications or comply with the applicable laws or regulations, we may voluntarily or be required to conduct a product recall. Recalls are costly and take time and effort to administer and damage our reputation. Moreover, if any of our customers recall a product due to an issue with a product or component that we supplied, they may claim that we are responsible for such issue and may seek to recover the costs related to such recall or be entitled to certain contractual remedies from us. Recalls may further result in decreased demand for our or our customers’ products, could cause our customers to return products to us for which we may be required to provide refunds or replacement products or could result in product shortages. Recalls may also require regulatory reporting and result in findings of noncompliance and regulatory enforcement actions.
Litigation and other proceedings may adversely affect our business.
From time to time, we are and may become involved in legal and regulatory proceedings relating to contract claims, product liability claims, occupational health and safety matters, employee compensation and other employment-related matters and other proceedings. Such claims may be in the form of individual or class actions and may be brought by affected persons or governmental authorities. Legal and regulatory proceedings are inherently unpredictable. The outcome of such proceedings, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify and can result in excessive or unanticipated verdicts and/or injunctive relief that affect how we operate our business. We could incur judgments or enter into settlements of claims for monetary damages or for

 
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agreements to change the way we operate our business, or both. There may be an increase in the scope of these matters or there may be additional lawsuits, claims, proceedings or investigations in the future. Regardless of merit or outcome, these proceedings could result in substantial cost, require us to devote substantial resources to defend ourselves, create adverse publicity and damage our reputation, undermine our customers’ confidence and reduce the demand for our products and services.
Our employees or others acting on our behalf may engage in misconduct or other improper activities, which could cause us to lose contracts or cause us to incur costs.
We are exposed to the risk that employee fraud or other misconduct from our employees or others acting on our behalf could occur. Misconduct could include fraud or other improper activities such as falsifying time or other records, and violations of laws and the failure to comply with our policies and procedures or with federal, state or local government procurement regulations, regulations regarding the use and safeguarding of classified or other protected information, legislation regarding the pricing of labor and other costs in government contracts, laws and regulations relating to environmental, health or safety matters, bribery of foreign government officials, import-export control, lobbying or similar activities and any other applicable laws or regulations. Any data loss or information security lapses resulting in the compromise of personal information or the improper use or disclosure of sensitive or classified information could result in claims, remediation costs, regulatory investigations or sanctions against us, corruption or disruption of our systems or those of our customers, impairment of our ability to provide services to our customers, loss of current and future contracts, indemnity obligations, serious harm to our reputation and other potential liabilities. Although we have implemented policies, procedures, training and other compliance controls to prevent and detect these activities, these precautions may not prevent all misconduct, and as a result, we could face unknown risks or losses. This risk of improper conduct may increase as we continue to expand and do business with new partners. Misconduct or other improper activities by our employees or others could damage our reputation and subject us to administrative, civil or criminal investigations and enforcement actions, fines and penalties, restitution or other damages including civil False Claims Act allegations (which can include civil penalties and treble damages), loss of security clearance, loss of current and future customer contracts, loss of privileges and other sanctions, including suspension or debarment from contracting with federal, state or local government agencies, any of which would materially adversely affect our reputation, business, results of operations, prospects and financial condition.
We could incur substantial costs as a result of violations of or liabilities under environmental laws and regulations.
Our operations and facilities are subject to a number of federal, state, local and foreign environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water, the generation, handling, storage and disposal of hazardous materials and wastes, the remediation of contamination and the health and safety of our employees. Environmental laws and regulations may require that we investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, and compliance with these existing and evolving environmental laws and regulations requires and is expected to continue to require significant operating and capital costs. We may be subject to substantial administrative, civil or criminal fines, penalties or other sanctions (including suspension and debarment) for violations. In addition, as we enter into strategic acquisitions and investments, we may be subject to additional environmental risk, obligations and liabilities which may or may not be known to us at the time of such strategic acquisitions or investments. For example, we assumed certain liabilities related to environmental investigations and potential obligations to perform remediations. We have accrued amounts on our balance sheet related to these environmental investigations and remediations as described in further detail in “Note 12. Commitments and Contingencies” to the unaudited Arxis Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q. However, there can be no assurances that these accruals will be sufficient or that these matters will not have an adverse effect on our reputation, business, results of operations, prospects and financial condition.
Governmental authorities in the U.S. and abroad are increasingly focused on potential contamination resulting from the use of certain chemicals, most notably per- and polyfluoroalkyl substances (“PFAS”). As is common in our industry, certain of our products use PFAS. As a result, we may incur costs related to materials management and historic usage and disposal of PFAS-containing materials, transitioning away from the usage of PFAS- containing products, reporting the historical usage of PFAS and remediating any environmental impacts.
Estimates of our environmental liabilities are subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, including changes in law and regulation, imprecise engineering evaluations and cost estimates, the extent of corrective actions that may be required and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation. Accordingly, as any investigations and remediations proceed, it is likely that adjustments in our accruals will be necessary to reflect new information. The amounts of any such adjustments could have a material adverse effect on our results of operations or cash flows in a given period.
We may also become a party to legal proceedings and disputes involving government and private parties (including individual and class actions) relating to alleged impacts from pollutants released into the environment, including bodily injury and property damage.

 
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These matters could result in material compensatory or other damages, remediation costs, penalties, non-monetary relief and adverse allowability or insurance coverage determinations. The impact of these factors is difficult to predict, but one or more of them could harm our reputation and business and have a material adverse effect on our results of operations, prospects and financial condition.
Regulations designed to address climate change may result in additional compliance costs.
Our operations and products and those of our customers are currently subject to rules limiting emissions and to other climate-related regulations in certain jurisdictions where we operate. The increased prevalence of global climate change concerns may result in new regulations that may negatively impact us, our suppliers and customers. 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. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us, our suppliers and our customers, resulting in increases in the costs of raw materials and component parts and reduced demand for our products and services.
Risks Related to Intellectual Property
We may be unable to adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights on which our business depends.
Our business depends in part on our ability to seek, obtain, maintain, protect and enforce our IP and other proprietary rights, including with respect to our proprietary design, manufacturing processes, databases, confidential information and know-how. We rely on, and expect to continue to rely on, a combination of trademark, trade dress, domain name, copyright, patent, trade secret and unfair competition laws in the U.S. and similar laws in other countries, as well as confidentiality and license agreements with our employees, contractors, consultants and third parties with whom we have relationships to establish, maintain and protect our IP rights. We may, over time, strategically increase our IP investment through additional trademark, patent and other IP filings, which could be expensive and time-consuming and are not guaranteed to result in the issuance of registrations. In addition to registering material and eligible IP, we rely to a degree on contractual restrictions to prevent others from exploiting our IP rights. IP laws vary by jurisdiction and we may be unable to maintain, protect or enforce our proprietary rights adequately in all cases, or do so without undue cost.
Our efforts to establish, maintain, protect and enforce our IP rights may not be sufficient or effective. Our IP rights, including rights in our proprietary design and manufacturing processes and trade secrets, could be lost through misappropriation or breach of our confidentiality and license agreements. Moreover, any of our IP rights may be circumvented, infringed, diluted, disclosed, misappropriated, challenged or otherwise violated, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that our IP rights will be sufficient to protect against others offering products or technologies that are substantially similar to ours and that compete with our business.
Further, IP protection may not be available to us in every country in which our products are available, and the laws of certain countries do not protect proprietary rights to the same degree as the laws of the U.S. Therefore, in certain jurisdictions, we may be unable to protect our IP adequately against unauthorized third-party copying, infringement or use, which could adversely affect our competitive position.
Our reliance on proprietary information, such as trade secrets, know-how and confidential information, depends in part on agreements we have in place with employees, independent contractors and other third parties that allocate ownership of IP and place restrictions on the use and disclosure of this IP and confidential information, such as confidentiality and invention assignment agreements. We require third parties who may have access to our proprietary information, such as trade secrets, know-how and confidential information, to enter into non-disclosure agreements or to be bound by professional, fiduciary or other contractual obligations requiring the applicable third party to protect our trade secrets, know-how and confidential information. These agreements may be insufficient or may be breached, especially after our employees or third parties end their employment or engagement with us, in either case potentially resulting in the unauthorized use or disclosure of our proprietary information, such as trade secrets, know-how and confidential information, including to our competitors, which could cause us to lose any competitive advantage resulting from this IP, and we cannot be certain that we will have adequate remedies for any breach. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret or know-how is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, trade secrets and know-how can be difficult to protect and some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets and know-how. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our proprietary information, such as trade secrets, know-how and confidential information, or otherwise developed IP for us. Individuals and entities not subject to invention assignment agreements may make adverse ownership claims to our current and future IP, and, to the extent that our employees, independent contractors or other third parties with whom we do business use IP owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Failure to obtain, maintain or protect proprietary information, such as trade secrets, know-how and other confidential information, could

 
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adversely impact our business. Additionally, employees, independent contractors and other third parties may make adverse ownership claims to our current and future IP, and, to the extent that our employees, independent contractors or other third parties with whom we do business use IP owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Furthermore, competitors or other third parties may independently discover our trade secrets, copy or reverse engineer our products or portions thereof or develop similar technology.
We may be subject to claims for alleged infringement, misappropriation or other violation of others’ intellectual property and proprietary rights, and we may incur significant costs in our efforts to successfully avoid, manage, defend and litigate intellectual property matters.
We also may be subject to claims of infringement, misappropriation or other violation of IP and proprietary rights from third parties. IP litigation and disputes are often complex and uncertain. This risk has been amplified by the increase in “non-practicing entities” or patent holding companies that seek to monetize patents they have purchased or otherwise obtained and whose sole or primary business is to assert such claims. Our IP portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement, misappropriation or other violation. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us, payment of damages, including treble damages if we were found to be willfully infringing on ongoing royalty payments and significant settlement payments, including to satisfy indemnification obligations. Such claims may require us to temporarily or permanently cease engaging in certain activities or offering certain products or services in some or all jurisdictions, develop or substitute non-infringing technologies, redesign affected products, which may not be commercially feasible and may require us to incur substantial cost, or enter into costly settlement, royalty or licensing agreements, which may not be available on commercially reasonable or favorable terms, or at all.
We may engage in legal action to enforce, defend or protect our IP rights. Our efforts to enforce our IP rights in this manner may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our IP rights. Generally, IP litigation is expensive, time-consuming and unpredictable. Our involvement in IP litigation could divert the attention of our management and technical personnel, expose us to significant liability and have a material, adverse effect on our business.
Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business.
Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our proprietary software from operating properly. For example, errors or other design defects within the software on which we rely may result in failure to comply with applicable laws and regulations, a negative experience for customers, delayed introductions of new features or enhancements or failure to protect data or our IP. If our proprietary applications do not function reliably or fail to achieve customer expectations in terms of performance, we may lose or fail to grow in customer usage and customers could assert liability claims against us. This could damage our reputation and impair our ability to attract or maintain relationships with our customers and third parties.
Our proprietary software contains, or may in the future contain, open source software, which may pose particular risks to our proprietary software and services in a manner that could have a material and adverse effect on our business, financial condition and results of operations.
We use open source software in connection with our proprietary software and anticipate using open source software in the future. The terms of certain open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our platform. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, any open source software or derivative works that we have developed using such software, which could include proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering our products or services unless and until we can re-engineer such source code in a manner that avoids infringement. This re-engineering process could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protection regarding infringement claims or the quality of the code. There is little legal precedent in this area and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could

 
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help third parties, including our competitors, develop technology that is similar to or better than ours. Any of the foregoing could adversely affect our business, financial condition and results of operations.
We currently license and may in the future license third-party intellectual property.
We currently license and may in the future license certain IP rights from third parties. While we believe, based upon past experience and standard industry practice, that such licenses generally could be obtained and maintained on commercially reasonable terms, there can be no assurance that our existing or future third-party licenses will be available to us on commercially reasonable terms, if at all. Our ability to comply with such license terms may be affected by factors that we can only partially influence or control. If any of our third-party licensors are acquired by our competitors, the applicable licensed IP may no longer be available to us or available only on less favorable terms, which could adversely impact our business, results of operations and financial condition. Further, if we fail to comply with any of our obligations under such agreements, we may be required to pay damages, and the licensor may have the right to terminate the license. Termination by the licensor would cause us to lose valuable rights, and could prevent us from selling our products and services or inhibit our ability to commercialize future systems. Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed IP rights against infringing third parties, if the licensed IP rights are found to be infringing third-party rights, or if we are unable to enter into necessary licenses on acceptable terms. In addition, the agreements under which we license IP from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant IP, or increase what we believe to be our financial or other obligations under the relevant agreement. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing our products and services. Our inability to maintain or obtain any third-party license required to sell or develop our products and services, or the need to engage in litigation regarding our third-party licenses, could have a material adverse effect on our business, operating results and financial condition.
Risks Related to the Reorganization
We may not realize the anticipated benefits from the Reorganization.
The benefits that we expect to achieve as a result of the Reorganization will depend, in part, on our ability to realize anticipated cost savings and synergies. As a combined company, we believe that we will be able to, among other things, save on our costs as a result of greater purchasing power and economies of scale, streamline administrative and general corporate functions and implement and maintain a capital structure designed to meet our specific needs and industry dynamics. A variety of risks could cause us not to realize some or all of the expected benefits. These risks include the creation of a new organizational structure, changes in processes and information systems, dis-synergies from the Reorganization and changes to our operating model. Even if we are able to execute this transition successfully, this may not result in the full realization of the benefits that we currently expect, either within the expected time frame, or at all. In addition, the costs to achieve the anticipated benefits may be higher than we currently anticipate.
We have incurred, and expect to continue to incur, significant transaction costs in connection with the Reorganization.
In connection with the Reorganization, we have incurred and expect to continue to incur significant costs and expenses, including financial advisory, legal, accounting, consulting and other advisory fees and expenses, reorganization and restructuring costs and other related expenses. We are not able to quantify the exact amount of these expenses or the period in which they will be incurred. Some of the factors affecting the costs associated with the Reorganization include the timing of the completion of the Reorganization, the structure and execution of the Reorganization and the resources required to transition and integrate the Arxis Businesses into a single combined organization. There may also be additional unanticipated significant costs in connection with the Reorganization that we do not currently anticipate. These costs and expenses could reduce the benefits we expect to achieve from the Reorganization.
Risks Related to Our Class A Common Stock
We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.
As a public company, we will incur significant legal, accounting and other expenses that we do not incur as a private company. For example, we will be subject to the reporting requirements of the Exchange Act, and will have to comply with the applicable requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as SEC rules and regulations and stock exchange listing standards, including the establishment and maintenance of effective disclosure and financial controls, changes in corporate governance practices and required filing of annual, quarterly and current reports with respect to our business and results of operations. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, we expect that our management and

 
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other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. If we are unable to satisfy our obligations as a public company, our Class A common stock could be delisted and we could be subject to fines, sanctions, regulatory action and lawsuits.
We also expect that operating as a public company will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. This could also make it more difficult for us to attract and retain qualified people to serve on our board of directors, on our board committees or as executive officers.
Our Sponsor has substantial control over us and could limit your ability to influence the outcome of key transactions, including a change of control.
We have four authorized series of common stock: Class A common stock, which is entitled to one vote per share on all matters on which our stockholders generally are entitled to vote; Class B common stock, which is entitled to twenty votes per share on all matters on which our stockholders generally are entitled to vote; Class C common stock, which is not entitled to vote on any matter on which our stockholders generally are entitled to vote, in each case, except as otherwise provided in our Amended and Restated Certificate of Incorporation (our "Certificate of Incorporation") or as required by applicable law; and convertible common stock which will be entitled to vote on an as-converted basis in accordance with the terms set forth in our Certificate of Incorporation or as required by applicable law. Holders of our common stock vote together as a single class on all matters on which our stockholders generally are entitled to vote, except as otherwise provided in our Certificate of Incorporation or as required by applicable law. Following the completion of our IPO, our Sponsor beneficially owned common stock with 99.00% of the total voting power of our outstanding common stock. We have entered into a stockholders agreement with our Sponsor, pursuant to which our Sponsor will have certain director nomination rights, information rights and consent rights with respect to certain of our actions, including mergers and other extraordinary transactions, as long as our Sponsor and its permitted transferees beneficially own common stock representing at least 10% of the total voting power of our outstanding common stock. As a result, our Sponsor is able to control certain matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other extraordinary transactions. Our Sponsor may also have interests that differ from yours and may vote or exercise its rights under the stockholders agreement in a way with which you disagree and which may be adverse to your interests. The concentration of voting power and the rights granted under the stockholders agreement may have the effect of delaying, preventing or deterring a change of control of our Company, could deprive our stockholders of an opportunity to receive a premium for their Class A common stock as part of a sale of our Company and might ultimately affect the market price of our Class A common stock.
We will be required to pay Arcline Arxis Advisory I, L.P. and any other persons that become parties to the Convertible-Related Tax Receivable Agreement for certain tax benefits we may receive.
Arxis has entered into a Convertible-Related Tax Receivable Agreement with Arcline Arxis Advisory I, L.P. whereby we will pay to Arcline Arxis Advisory I, L.P. 85% of the cash tax savings we realize with respect to the compensation deduction resulting from the transfer of the convertible common stock in respect of the services to be provided under the amended and restated advisory and consulting services agreement. Actual tax benefits realized by Arxis may differ from tax benefits calculated under the Convertible-Related Tax Receivable Agreement as a result of the use of certain assumptions in the Convertible-Related Tax Receivable Agreement, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits. The compensation deduction is expected to be recognized in the year the convertible common stock is issued. Payment under the Convertible-Related Tax Receivable Agreement is due 125 days following the filing of our U.S. federal income tax return that reflects the applicable cash tax savings, subject to Arcline Arxis Advisory I, L.P.’s continued provision of services under the amended and restated advisory and consulting services agreement at the time of payment. We will have no further obligation to make payments in respect of tax benefits under the Convertible-Related Tax Receivable Agreement upon the earliest of (i) all payments required under the Convertible-Related Tax Receivable Agreement having been made, (ii) the election of an early termination by the independent members of our board and our making of the corresponding early termination payment and (iii) the termination of the amended and restated advisory and consulting services agreement.
The payments we will be required to make under the Convertible-Related Tax Receivable Agreement will principally depend on the value of convertible common stock and the prevailing federal tax rates applicable to us over the life of the Convertible-Related Tax Receivable Agreement (as well as the assumed combined state and local tax rate). Estimating the amount and timing of our realization of tax benefits subject to the Convertible-Related Tax Receivable Agreement is by its nature imprecise. For purposes of the Convertible-Related Tax Receivable Agreement, net cash savings in tax generally will be calculated by comparing our actual tax liability (determined by using the actual applicable U.S. federal income tax rate and certain simplifying assumptions with respect to state and local income taxes) to the amount we would have been required to pay had we not been able to utilize any of the deduction subject to the Convertible-Related Tax Receivable Agreement.

 
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Payments under the Convertible-Related Tax Receivable Agreement may reduce cash that would otherwise be available for other uses and for the benefit of all stockholders, including for the payment of operating expenses, debt obligations, and taxes. However, because the payments under the Convertible-Related Tax Receivable Agreement are not expected to be substantial, we do not anticipate that such payments will materially affect our liquidity or our ability to meet these obligations.
Additionally, our obligations under the Convertible-Related Tax Receivable Agreement may create potential conflicts of interest between the interests of Arcline Arxis Advisory I, L.P. and those of our other shareholders. Such conflicts could arise in connection with decisions regarding tax planning, business investments, or the allocation of future cash flows, as Arcline Arxis Advisory I, L.P. may benefit from decisions that maximize the tax benefits subject to the Convertible-Related Tax Receivable Agreement, which could differ from decisions that maximize value for all stockholders.
Payments under the Convertible-Related Tax Receivable Agreement will be based on certain tax reporting positions regarding a compensation deduction in respect of the convertible common stock, and the Internal Revenue Service or another tax authority may challenge the positions upon which payment under the Convertible-Related Tax Receivable Agreement are based, as well as other related tax positions we take, and a court could sustain such challenge. Arcline Arxis Advisory I, L.P. will not reimburse us for any payments previously made if such positions are successfully challenged. As a result, in such circumstances, we could make payments to Arcline Arxis Advisory I, L.P. under the Convertible-Related Tax Receivable Agreement that are greater than our actual cash tax savings and we may not be able to recoup those payments, which could adversely affect our liquidity.
The Convertible-Related Tax Receivable Agreement will provide that (1) in the event that we breach any of our material obligations under the Convertible-Related Tax Receivable Agreement or (2) if, with the written approval of a majority of our independent directors, we elect an early termination of the Convertible-Related Tax Receivable Agreement, our obligations under the Convertible-Related Tax Receivable Agreement would accelerate and become payable in a lump sum amount equal to the present value of the anticipated future tax benefits calculated based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deduction subject to the Convertible-Related Tax Receivable Agreement. Because most of the deduction subject to the Convertible-Related Tax Receivable Agreement is expected to be utilized in the year of our IPO or the following year, we do not expect a breach or early termination election to meaningfully affect our obligations under the Convertible-Related Tax Receivable Agreement. However, it is possible that a payment under the Convertible-Related Tax Receivable Agreement in one of these situations could be made in advance of, and may be in excess of, the cash savings to which such a payment relates.
Our obligations under the Convertible-Related Tax Receivable Agreement will also apply with respect to any person that becomes a party to the Convertible-Related Tax Receivable Agreement in the future.
Finally, because we are a holding company with no operations of our own, our ability to make payments under the Convertible-Related Tax Receivable Agreement depends on the ability of our subsidiaries to make distributions to us. There can be no assurance that we will be able to meet our obligations under the Convertible-Related Tax Receivable Agreement. To the extent that we are unable to make payments under the Convertible-Related Tax Receivable Agreement for any reason, such payments will accrue interest until paid and nonpayment may constitute a breach of a material obligation under the Convertible-Related Tax Receivable Agreement and therefore accelerate payments due under the Convertible-Related Tax Receivable Agreement, thereby requiring us to make such payments earlier than anticipated.
Our convertible common stock is convertible into Class B common stock (or, if no shares of Class B common stock are outstanding at the time of such voluntary conversion, shares of Class A common stock), and prior to conversion participates on an as-converted basis, which will have the effect of diluting the economic and voting interests of holders of our Class A common stock and may adversely affect the market price of our Class A common stock.
Our convertible common stock will be convertible into a number of shares of our Class B common stock (or Class A common stock if no Class B common stock is outstanding at the time of such conversion) on the terms and conditions described in our Certificate of Incorporation. In addition, prior to satisfaction of the conditions to conversion of the convertible common stock, each holder of convertible common stock is entitled to vote, to consent, to receive dividends, if any, to receive notices as stockholders with respect to any meeting of stockholders and to exercise any rights whatsoever as our stockholders in an amount equal to the number of Class B shares that represent 1.25% of the Company’s fully diluted capital stock. After satisfaction of the Conversion Conditions, if ever, each holder of convertible common stock is entitled, on an as-converted basis, to vote, to consent, to receive dividends, if any, to receive notices as stockholders with respect to any meeting of stockholders and to exercise any rights whatsoever as our stockholders until they become holders of the shares of our common stock issued upon conversion of the convertible common stock.
The conversion of the share of convertible common stock into shares of Class B common stock (or, if no shares of Class B common stock are outstanding at the time of such voluntary conversion, shares of Class A common stock) would dilute the economic ownership interests of existing stockholders, including holders of our Class A common stock.

 
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Furthermore, because shares of Class B common stock will carry greater voting power than shares of our Class A common stock and shares of our convertible common stock are entitled to vote as described above, the voting power of the current holder of the share of convertible common stock, Arcline Arxis Advisory I, L.P., the Sponsor, will be disproportionately increased, further increasing the ability of the Sponsor to significantly influence or control the outcome of matters submitted to a vote of stockholders. This concentration of voting power could limit the ability of holders of Class A common stock to influence corporate matters and may have the effect of discouraging certain transactions, including changes of control, that holders of Class A common stock might otherwise view as beneficial. Furthermore, the existence of the share of convertible common stock, the issuance of shares of Class B common stock upon conversion, or the perception that such conversion may occur, could adversely affect the market price of our Class A common stock and increase volatility in the trading price of our securities.
In addition, as noted above, the share of convertible common stock may in the future be convertible into Class A common stock if no shares of Class B common stock are outstanding at the time of such voluntary conversion. Any sales in the public market of the Class A common stock issuable upon such conversion could adversely affect prevailing market prices of our Class A common stock. In addition, the anticipated conversion of the convertible common stock into shares of our Class A common stock could adversely affect the market price of our Class A common stock and increase volatility in the trading price of our securities.
We are a “controlled company” within the meaning of Nasdaq corporate governance standards and, as a result, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.
We are a “controlled company” under Nasdaq corporate governance standards. Under the Nasdaq corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements. We have availed ourselves of certain of these exemptions available to controlled companies, including (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that we have a compensation committee that is composed entirely of independent directors and (iii) the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors. Consequently, holders of our Class A common stock will not have the same protections afforded to stockholders of companies that are subject to all Nasdaq corporate governance requirements. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price.
Our Amended and Restated Certificate of Incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities.
Our Certificate of Incorporation provides for the allocation of certain corporate opportunities between us and our Sponsor and its affiliates. Under these provisions, our Sponsor and its affiliates will not have any duty to refrain from directly or indirectly engaging in the same or similar business activities or lines of business in which we or any of our affiliates engages or proposes to engage or otherwise competing with us or any of our affiliates. For instance, a non-employee director may pursue certain acquisition or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our financial performance, financial position and results of operations if attractive corporate opportunities are allocated by our Sponsor to itself or its affiliates or subsidiaries instead of to us.
The multi-series structure of our common stock may depress the trading price and liquidity of our Class A common stock.
The multi-series structure of our common stock may result in a lower or more volatile market price of our Class A common stock or other adverse consequences. For example, certain index providers restrict inclusion of companies with multi-series structures in certain of their indexes. In addition, certain proxy advisory firms oppose the use of multi-series structures. As a result, the multi-series structure of our common stock may prevent the inclusion of our Class A common stock in certain indices and may cause proxy advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, which could result in a less active trading market for our Class A common stock and adversely affect the value of our Class A common stock. In addition, the difference in the voting rights of the series of our common stock could harm the value of our Class A common stock to the extent that any investor or potential future purchaser of our Class A common stock ascribes value to the superior voting power of our Class B common stock.
The market price of our Class A common stock may fluctuate significantly.
The trading price of our Class A common stock may be volatile and subject to wide price fluctuations in response to various factors, including:

 
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o market conditions in the broader stock market in general, or in our industry in particular;

o actual or anticipated fluctuations in our quarterly financial and operating results;

o introduction of new products and services by us or our competitors;

o issuance of new or changed securities analysts’ reports or recommendations;

o sales of large blocks of our stock;

o additions or departures of key personnel;

o regulatory developments;

o litigation and governmental investigations;

o economic and political conditions or events; and

o the other factors described in this “Risk Factors” section.

These and other factors may cause the market price and demand for our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.
If securities or industry analysts do not publish research or reports about our business, or if they issue adverse or misleading opinions regarding our stock, our stock price and trading volume could decline.
The trading market for our Class A common stock may be influenced by the research and reports that industry or securities analysts publish about us or our business. If no or few securities or industry analysts commence coverage of us, the trading price for our Class A common stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.
If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our Class A common stock could decline.
Sales of a substantial number of shares of Class A common stock in the public market, or the perception in the market that the holders of a large number of shares of Class A common stock (or securities convertible into shares of Class A common stock) intend to sell shares, could reduce the market price of our Class A common stock. The holders of approximately 340,676,783 shares of Class A common stock (or securities convertible into such shares of Class A common stock) are entitled to registration rights with respect to their shares. Registration of these shares under the Securities Act would enable the holders to sell these shares without restriction under the Securities Act upon the effectiveness of the registration statement. We have also registered all shares of Class A common stock that we may issue under our equity compensation plans. These shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and lock-up agreements entered into in connection with our IPO which will expire on October 13, 2026. If a substantial number of shares become available for sale or are sold in a short period of time, the market price of our Class A common stock could decline.
Some provisions of Delaware law and our Amended and Restated Certificate of Incorporation and bylaws may deter third parties from acquiring us.
Our Certificate of Incorporation and Amended and Restated Bylaws (our "Bylaws") provides for, among other things:

 
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o four series of common stock with disparate voting power;

o after our Sponsor and its permitted transferees cease to beneficially own common stock representing a majority of the total voting power of our outstanding common stock, a staggered board;

o restrictions on the ability of our stockholders to fill a vacancy on the board of directors;

o the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

o after our Sponsor and its permitted transferees cease to beneficially own common stock representing a majority of the total voting power of our outstanding common stock, a prohibition on stockholder action by written consent, thereby requiring all actions to be taken at a duly called meeting of the stockholders;

o supermajority approval to amend our Bylaws and certain provisions of our Certificate of Incorporation; and

o advance notice requirements for stockholder proposals.

Moreover, because we are incorporated in Delaware, we are governed by Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company and may discourage bids for our Class A common stock at a premium over its market price. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of your choosing and cause us to take other corporate actions than stockholders desire.
Our Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware and the U.S. federal courts are the exclusive forums for substantially all disputes between us and our stockholders.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of Delaware General Corporation Law, our Certificate of Incorporation or our Bylaws or as to which Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware and (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware; provided that the foregoing provision does not apply to claims brought to enforce a duty or liability created by the Securities Act or the Exchange Act or any claim for which the U.S. federal courts have exclusive jurisdiction. In addition, our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the U.S. federal courts are the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act or the Exchange Act. Any person or entity holding, purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and to have consented to these forum selection provisions.
These forum selection provisions may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware and limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

 
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While Delaware courts have determined that forum selection provisions are facially valid, it is possible that a court of law in another jurisdiction could rule that the forum selection provisions contained in our Certificate of Incorporation are inapplicable or unenforceable if they are challenged in a proceeding or otherwise. If a court were to find the forum selection provision in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
We do not anticipate paying any cash dividends in the foreseeable future.
We intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. The declaration, amount, and payment of any future dividends will be at the sole discretion of our board of directors, and will depend on, among other things, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant. As a result, capital appreciation in the price of our Class A common stock, if any, will be your only source of gain on an investment in our Class A common stock.
Any future issuance of our Class C common stock may have the effect of further concentrating voting control in our Class B common stock, may discourage potential acquisitions of our business and could have an adverse effect on the market price of our Class A common stock.
Any future issuance of our Class C common stock may have the effect of further concentrating voting control in our Class B common stock, may discourage potential acquisitions of our business and could have an adverse effect on the market price of our Class A common stock. Although we have no current plans to issue any shares of our Class C common stock, we may in the future issue shares of our Class C common stock for a variety of corporate purposes, including financings, acquisitions, investments and equity incentives to our employees, consultants and directors. Our authorized but unissued shares of Class C common stock are available for issuance with the approval of our board of directors without stockholder approval, except as may be required by Nasdaq corporate governance standards. Because our Class C common stock carries no voting rights on matters on which stockholders generally are entitled to vote (except as otherwise provided by our Certificate of Incorporation or otherwise required by applicable law), if we issue shares of our Class C common stock in the future, the holders of our Class B common stock may be able to hold significant voting control over most matters submitted to a vote of our stockholders for a longer period of time than would be the case if we issued our Class A common stock rather than our Class C common stock in such transactions. In addition, our Class C common stock will automatically convert into Class A common stock on a one-for-one basis upon the earliest to occur of (i) the date on which no shares of Class B common stock are outstanding and (ii) the affirmative vote of the holders of a majority of the then-outstanding shares of Class B common stock entitled to vote thereon, voting separately as a class. If we issue shares of our Class C common stock in the future, such issuances would have a dilutive effect on the economic interests of our Class A and Class B common stock and cause the market price of our Class A common stock to decline.
ITE M 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
None.
(b)
Use of Proceeds
None.
(c)
Repurchases of Capital Stock
We did not repurchase any shares of Arxis, Inc. Class A common stock, in open market purchases during the three months ended March 31, 2026.

 
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IT EM 5. OTHER INFORMATION
During the first quarter of 2026, no executive officer or director of the Company adopted , modified or terminated any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

 
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ITE M 6. EXHIBITS
 

 

 

 

 

Incorporated by Reference

Exhibit
Number

 

Description

 

Form

 

Exhibit

 

Filing Date

2.1

†

Reorganization Agreement, dated as of April 16, 2026, by and among Arxis, Inc. and the parties thereto †

 

8-K

 

10.1

 

April 17, 2026

3.1

 

Amended and Restated Certificate of Incorporation of Arxis, Inc.

 

8-K

 

3.1

 

April 17, 2026

3.2

 

Amended and Restated Bylaws of Arxis, Inc.

 

8-K

 

3.2

 

April 17, 2026

10.2

 

Stockholders Agreement, dated as of April 16, 2026, by and between Arxis, Inc. and the investors party thereto

 

8-K

 

10.2

 

April 17, 2026

10.3

 

Registration Rights Agreement, dated as of April 16, 2026, by and between Arxis, Inc. and the investors party thereto

 

8-K

 

10.3

 

April 17, 2026

10.4

 

Amended and Restated Advisory and Consulting Services Agreement, dated as of April 16, 2026, by and between Arxis, Inc. and Arcline Arxis Advisory I, L.P.

 

8-K

 

10.4

 

April 17, 2026

10.5

 

Convertible-Related Tax Receivable Agreement, dated as of April 16, 2026, by and between Arxis, Inc. and Arcline Arxis Advisory I, L.P.

 

8-K

 

10.5

 

April 17, 2026

10.6

 

Convertible Common Award Agreement, dated as of April 16, 2026, by and between Arxis, Inc. and Arcline Arxis Advisory I, L.P.

 

8-K

 

10.6

 

April 17, 2026

10.7

+

Arxis, Inc. 2026 Omnibus Incentive Plan

 

S-1/A

 

10.11

 

April 10, 2026

10.8

+

Arxis, Inc. 2026 Employee Stock Purchase Plan

 

S-8

 

99.2

 

April 16, 2026

10.9

+

Form of Restricted Stock Agreement (MIUs) under the Arxis, Inc. 2026 Omnibus Incentive Plan

 

S-1/A

 

10.10

 

April 8, 2026

10.11

+

Form of Restricted Stock Unit Agreement (VCBs/GPUs) under the Arxis, Inc. 2026 Omnibus Incentive Plan

 

S-1/A

 

10.11

 

April 8, 2026

10.12

+

Executive Employment Agreement dated as of April 6, 2026, by and between Kevin Perhamus and Arxis, Inc.

 

S-1/A

 

10.12

 

April 8, 2026

10.13

+

Executive Employment Agreement dated as of April 6, 2026, by and between Azad Badakhsh and Arxis, Inc.

 

S-1/A

 

10.13

 

April 8, 2026

10.14

+

Executive Employment Agreement dated as of April 6, 2026, by and between Jennifer Allen and Arxis, Inc.

 

S-1/A

 

10.14

 

April 8, 2026

10.15

+

Executive Employment Agreement dated as of April 6, 2026, by and between Jason Roth and Arxis, Inc.

 

S-1/A

 

10.15

 

April 8, 2026

10.16

+

Executive Employment Agreement dated as of April 6, 2026, by and between Ross Sealfon and Arxis, Inc.

 

S-1/A

 

10.16

 

April 8, 2026

10.17

+

Arxis, Inc. Executive Annual Incentive Plan

 

S-1/A

 

10.18

 

April 10, 2026

31.1

*

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

 

 

 

 

 

 

31.2

*

Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

 

 

 

 

 

 

32.1

*

Certification by Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

32.2

*

Certification by Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

101.INS

#

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

 

 

 

 

101.SCH

#

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

 

 

 

 

 

 

104

#

Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

 

 

 
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
† Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided on a supplemental basis to the SEC upon request
# Filed electronically with the Report.

 
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SIG NATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 

ARXIS, INC.

 

 

By:

/s/ Azad Badakhsh

 

Azad Badakhsh

 

Chief Financial Officer

 
Dated: May 28, 2026

 
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