The following summarizes the principal factors that make an investment in Holley speculative or risky. You should carefully consider the following risks as well as the other information included in this Annual Report on Form 10-K, including “Cautionary Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere herein, before investing in our securities. See “Risk Factors” for a more detailed discussion of the risk factors listed below.
Risk Related to Our Business and Industry
| • | A downturn in consumer spending, including as a result of a severe or prolonged economic downturn, could adversely impact our financial condition and results of operations. |
| • | Inflation and tariffs could result in higher costs and decreased profitability. |
| • | Disruptions of supply or shortages of raw materials or components used in our products could harm our business and profitability, as well as the financial condition of our distributors. |
| • | A significant disruption in the operations of our manufacturing facilities or distribution centers could have a material adverse effect on our business, sales, financial condition and results of operations. |
| • | Pandemics, epidemics or other public health crises could adversely affect our business, sales, financial condition and results of operations and our ability to access current or obtain new lending facilities. |
| • | Failure to compete effectively or to develop and market new products and a reduction in demand for our products could reduce our business, financial condition and results of operations. |
| • | Increased electric vehicles ownership could impact our financial condition and results of operations. |
| • | Inaccurate forecasting of product demand could harm our financial performance. |
| • | Our growth partially depends on attracting new customers in a cost-effective manner and expanding into additional consumer markets and we may not successfully do so. |
| • | Our failure to protect our brand could harm our financial condition and results of operations. |
| • | Our profitability may decline as a result of increasing pressure on pricing. |
| • | Our failure to maintain relationships with retail partners or increase sales through our direct-to-consumer ("DTC") channel could harm our business. |
| • | Our success depends on the continuing efforts of our employees and retention of skilled personnel, and our results of operations may be adversely affected by labor shortages, turnover and labor cost increases. |
| • | Our operations and reputation may be negatively impacted if our information technology systems fail to perform adequately or if we experience an interruption in our operations due to security threats or disruptions. |
| • | Adverse developments affecting the financial services industry, such as bank failures, could have an adverse impact on our financial condition and results of operations. |
| • | Our indebtedness may limit our ability to invest in the ongoing needs of our business, and if we are unable to comply with the covenants in our current credit agreements, our business, sales, financial condition, and results of operations could be harmed. |
| • | Our failure to maintain effective internal controls over financial reporting could harm us and we have identified a material weakness in our internal control over financial reporting and may identify additional weaknesses in the future. |
| • | We may acquire or invest in other companies to complement our organic growth, which may not be successful and may divert financial and management resources. |
| • | Our management team does not have extensive experience managing a public company. |
| • | If our goodwill, other intangible assets, or fixed assets become impaired, we may be required to record a charge to earnings. |
| • | If our estimates relating to our accounting policies prove to be incorrect, our results of operations could be harmed. |
| • | Our disclosure controls and procedures may not prevent or detect all acts of fraud. |
| • | Our business could be negatively impacted by the effects of global climate change or the increasing scrutiny and evolving expectations with respect to our environment, social and governance practices. |
| • | We are exposed to political and country risks inherent in conducting business globally and in certain regions. |
| • | Failure to adopt new technologies like artificial intelligence could expose us to risks. |
| • | Unauthorized sales of our products could harm our reputation. |
Legal, Regulatory and Compliance Risks Related to Our Business
| • | We may become involved in legal or regulatory proceedings, including intellectual property claims or lawsuits that could cause us to incur significant costs or that could prohibit us from selling our products. |
| • | We are subject to environmental, health and safety laws and regulations as well as privacy laws, regulations, and standards, which could subject us to liabilities, increase costs or restrict operations in the future. |
| • | Our insurance policies may not provide adequate levels of coverage against all claims, and we may incur losses that are not covered by our insurance. |
Risks Related to Ownership of Our Securities
| • | Certain of our stockholders, including Holley Parent Holdings, LLC (the “Holley Stockholder”) and the Empower Sponsor Holdings LLC (the “Sponsor”) (together with its affiliates), may have conflicts of interest with other stockholders and may limit your ability to influence corporate matters. |
| • | Warrants are exercisable for Common Stock, which could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. |
| • | The Warrants may never be in the money, they may expire worthless, or the terms of the Warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then-outstanding Warrants approve of such amendment. |
| • | The market price and trading volume of Common Stock and Warrants may be volatile. |
| • | Reports published by analysts could adversely affect the market price and trading volume of Common Stock and Warrants. |
| • | Future sales of Common Stock and Warrants in the public market could cause our stock price to fall. |
| • | We may redeem unexpired Warrants to their exercise at a time that is disadvantageous to the Warrant holders, thereby making the Warrants worthless. |
