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Item 4. Controls and Procedures

2026-09-10 compared with 2026-03-11 · 20 added, 32 removed, 7 unchanged (88% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of January 31, 2026, the end of the period covered by this Quarterly Report on Form 10-Q.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2026, the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

As part of the ongoing integration of BlueHalo, we are in the process of incorporating the disclosure controls and procedures of BlueHalo.

Management’s evaluation of our disclosure controls and procedures as of January 31, 2026 excludes an evaluation of BlueHalo’s disclosure controls and procedures that are subsumed by its internal control over financial reporting of BlueHalo.

Notwithstanding the material weaknesses described below in Acquisition of BlueHalo, management has concluded that the financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with U.S.

Acquisition of BlueHalo

On May 1, 2025, we completed the acquisition of BlueHalo, a U.S.

non-public reporting company.

Prior to the acquisition, in connection with the preparation of its audited consolidated financial statements for the year ended December 31, 2024, BlueHalo identified three material weaknesses in its internal control over financial reporting.

A material weakness is 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 a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

First, BlueHalo did not design and maintain effective information technology (“IT”) general controls for information systems that are relevant to the preparation of its financial statements.

Specifically, BlueHalo did not design and maintain:

(i) program change management controls to ensure that program and data changes are identified, tested, authorized, and implemented appropriately;

and (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel.

Second, BlueHalo did not design and maintain an effective control environment commensurate with our financial reporting requirements.

Specifically, it did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience, and training commensurate with its accounting and financial reporting requirements.

The limited personnel resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in the finance and accounting functions.

Third, BlueHalo did not design and maintain effective monitoring activities of the design and operation of controls on a timely basis, or take necessary corrective action to ensure that controls continue to operate effectively and are modified for changes in conditions as appropriate.

As of the date of this report, management’s remediation efforts are ongoing, and management has committed to a remediation plan to address the deficiencies and enhance the internal control environment.

Based on this assessment, and in light of the material weaknesses identified in our internal control over financial reporting as disclosed in our Form 10-K for the fiscal year ended April 30, 2026, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of August 1, 2026, due to the material weaknesses in internal control over financial reporting described below.

Notwithstanding the material weaknesses described below, management has concluded that the financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with U.S.

Material Weaknesses

A material weakness is 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.

We identified a material weakness in controls over the financial close and reporting process as a result of the BlueHalo acquisition.

BlueHalo did not design and maintain effective information technology (“IT”) general controls for certain information systems that are relevant to information used the preparation of BlueHalo’s financial reporting that is included in the consolidated financial statements of AeroVironment.

Specifically, BlueHalo did not design and maintain user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel.

As a result, the automated controls and IT dependent manual business process controls that rely upon BlueHalo’s financial reporting information from the affected applications were deemed not effective.

In addition, we determined that the error resulting in the restatement of our unaudited condensed consolidated financial statements for the quarter ended January 31, 2026 in the Amendment No.

1 on Form 10-Q/A, filed with the SEC on June 22, 2026, originated from a material weakness.

The material weakness relates to the design of controls over the preparation and review of our goodwill impairment analysis.

Specifically, we did not have a properly designed control requiring preparation and review of a reconciliation of goodwill by reporting unit.

Remediation Plan

As of the date of this report, management’s remediation efforts are ongoing, and management has committed to a remediation plan to address the material weaknesses noted above.

The remediation plan includes, but is not limited to, the following activities which have been performed or are in process:

● Reviewed and restricted administrator-level access to financial systems, ensuring that elevated privileges are granted only to authorized personnel with a documented business need;

● Implemented periodic user access reviews to verify appropriateness of access rights and to promptly remove access for terminated or transferred employees;

● Implementing management review of audit logs relating to critical data and processes, such as vendor master file changes, user role modifications, and rate changes;

● Enhanced authentication controls by utilizing Okta and Single Sign-On (SSO) to centralize authentication, strengthen password and multi-factor authentication controls, and improve monitoring of user activity;

● Established processes utilizing the ticketing system to document, approve, and track system changes, configuration updates, and data modifications;

● Evaluated systems for integration with enterprise-wide monitoring tools, enabling real-time alerts for unauthorized access or unusual activity;

● Strengthened segregation of duties reviews within key business cycles to ensure that no single individual has control over all aspects of a financial transaction;

● Provided targeted training to personnel on internal control requirements, documentation standards, and change management protocols;

● Evaluated internal skill sets and are actively recruiting experienced personnel with expertise in internal controls and accounting;

However, remedial controls must operate for a sufficient period of time for a definitive conclusion, through testing, that the deficiencies have been fully remediated and, as such, management can give no assurance that the measures it has undertaken have fully remediated the material weaknesses that it has identified or that additional material weaknesses will not arise in the future.

● With respect to the material weakness related to information technology general controls over BlueHalo’s financial reporting, we have designed and implemented enhancements to user access and program change management controls, including restricting administrator-level access, performing periodic user access reviews, and formalizing change management and data modification processes through documented and approved workflows.

● With respect to the material weakness related to design of controls over the preparation and review of our goodwill impairment analysis, we have implemented a control over the preparation and review of a quarterly reconciliation of goodwill by reporting unit.

Remedial controls must operate for a sufficient period of time for a definitive conclusion, through testing, that the deficiencies have been remediated and, as such, management can give no assurance that the measures it has undertaken have remediated the material weaknesses that it has identified or that additional material weakness will not arise in the future.

Management will continue to monitor the effectiveness of these and other processes, procedures, and controls and will make any further changes that management determines to be appropriate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended January 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Except for the ongoing remediation activities related to the material weaknesses described above, there were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended August 1, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

OTHER INFORMATIO N

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

What changed 10-Q

Item 4. Controls and Procedures