What changed in this filing

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Item 1. Financial Statements

2021-03-10 compared with 2020-12-09 · 206 added, 149 removed, 541 unchanged (40% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 561 at October 31, 2020 and $ 1,190 at April 30, 2020

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 14,974 at October 31, 2020 and $ 15,779 at April 30, 2020)

Accounts receivable, net of allowance for doubtful accounts of $ 565 at January 30, 2021 and $ 1,190 at April 30, 2020

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 6,834 at January 30, 2021 and $ 15,779 at April 30, 2020)

Prepaid expenses and other current assets

21 unchanged sentences

Authorized shares— 10,000,000 ;

none issued or outstanding at October 31, 2020 and April 30, 2020

none issued or outstanding at January 30, 2021 and April 30, 2020

Common stock, $ 0.0001 par value:

Authorized shares— 100,000,000

Issued and outstanding shares— 24,103,980 shares at October 31, 2020 and 24,063,639 shares at April 30, 2020

Issued and outstanding shares— 24,102,691 shares at January 30, 2021 and 24,063,639 shares at April 30, 2020

Additional paid-in capital

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Product sales

Contract services (inclusive of related party revenue of $ 11,452 and $ 13,393 for the three months ended October 31, 2020 and October 26, 2019, respectively;

and $ 27,838 and $ 25,728 for the six months ended October 31, 2020 and October 26, 2019, respectively)

Contract services (inclusive of related party revenue of $ 7,480 and $ 11,762 for the three months ended January 30, 2021 and January 30, 2020, respectively;

and $ 35,318 and $ 37,491 for the nine months ended January 30, 2021 and January 25, 2020, respectively)

Cost of sales:

6 unchanged sentences

Research and development

Income from operations

(Loss) income from operations

Other income:

Interest income, net

Other income, net

Income before income taxes

Provision for income taxes

Other (expense) income, net

(Loss) income before income taxes

(Benefit from) provision for income taxes

Equity method investment loss, net of tax

Net loss (income) attributable to noncontrolling interest

Net income attributable to AeroVironment, Inc.

Net income per share attributable to AeroVironment, Inc.

Net income (loss)

Net (income) loss attributable to noncontrolling interest

Net income (loss) attributable to AeroVironment, Inc.

Net income (loss) per share attributable to AeroVironment, Inc.

Weighted-average shares outstanding:

1 unchanged sentence

AeroVironment, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

Other comprehensive income:

Nine Months Ended

Net income (loss)

Other comprehensive income (loss):

Change in foreign currency translation adjustments

Unrealized loss on available-for-sale investments, net of deferred tax (expense) benefit of ($ 3 ) and $ 1 for the three and six months ended October 31, 2020, respectively

Total comprehensive income

Unrealized gain (loss) on available-for-sale investments, net of deferred tax benefit of $ 2 for the three and nine months ended January 30, 2021

Total comprehensive income (loss)

Net loss (income) attributable to noncontrolling interest

Comprehensive income attributable to AeroVironment, Inc.

Comprehensive income (loss) attributable to AeroVironment, Inc.

See accompanying notes to consolidated financial statements (unaudited).

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

For the six months ended October 31, 2020 and October 26, 2019 (Unaudited)

For the nine months ended January 30, 2021 and January 25, 2020 (Unaudited)

(In thousands except share data)

10 unchanged sentences

Stock based compensation

Balance at October 31, 2020

Balance at January 30, 2021

Comprehensive

3 unchanged sentences

Net income (loss)

Unrealized gain on investments

Foreign currency translation

4 unchanged sentences

Stock based compensation

Balance at October 26, 2019

Balance at January 25, 2020

See accompanying notes to consolidated financial statements (unaudited).

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

For the three months ended October 31, 2020 and October 26, 2019 (Unaudited)

For the three months ended January 30, 2021 and January 25, 2020 (Unaudited)

(In thousands except share data)

1 unchanged sentence

AeroVironment, Inc.

Balance at August 1, 2020

Net income (loss)

Balance at October 31, 2020

Unrealized loss on investments

Restricted stock awards

Restricted stock awards forfeited

1 unchanged sentence

Stock based compensation

Balance at October 31, 2020

Balance at January 30, 2021

Comprehensive

AeroVironment, Inc.

Balance at July 27, 2019

Balance at October 26, 2019

Foreign currency translation

3 unchanged sentences

Stock-based compensation

Balance at October 26, 2019

Balance at January 25, 2020

See accompanying notes to consolidated financial statements (unaudited).

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

Operating activities

4 unchanged sentences

Provision for doubtful accounts

Other non-cash (income) expense

Other non-cash income

Non-cash lease expense

24 unchanged sentences

Tax withholding payment related to net settlement of equity awards

Holdback and retention payments for business acquisition

Exercise of stock options

6 unchanged sentences

Non-cash activities

Unrealized loss on available-for-sale investments, net of deferred tax (expense) benefit of ($ 3 ) and $ 1 for the three and six months ended October 31, 2020, respectively

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $2

Change in foreign currency translation adjustments

11 unchanged sentences

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements have been included.

The results of operations for the three and six months ended October 31, 2020 are not necessarily indicative of the results for the full year ending April 30, 2021.

The results of operations for the three and nine months ended January 30, 2021 are not necessarily indicative of the results for the full year ending April 30, 2021.

For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2020, included in the Company’s Annual Report on Form 10-K.

9 unchanged sentences

The Company has presented its proportion of HAPSMobile’s net loss in equity method investment loss, net of tax in the consolidated statements of operations.

The carrying value of the investment in HAPSMobile was recorded in other assets.

During the three months ended October 31, 2020, the Company recorded its proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC in the amount of $ 8,363,000 .

During the nine months ended January 25, 2021, the Company recorded its proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC in the amount of $ 8,363,000 .

The Company’s investment has been written down to zero.

Refer to Note 6—Equity Method Investments for further details.

1 unchanged sentence

The assets, liabilities and operating results of Pulse have been included in the Company’s consolidated financial statements.

On February 12, 2021, the Company dissolved its wholly-owned subsidiary, Pulse Aerospace, LLC, the results of which were not material to the consolidated financial statements as the Company has integrated the assets and operations.

Refer to Note 17—Business Acquisitions for further details.

During the three months ended October 27, 2019, the Company dissolved its wholly-owned subsidiary, Skytower, Inc., the results of which were not material to the consolidated financial statements.

During the nine months ended January 25, 2020, the Company dissolved its wholly-owned subsidiary, Skytower, Inc., the results of which were not material to the consolidated financial statements.

Recently Adopted Accounting Standards

1 unchanged sentence

Measurement of Credit Losses on Financial Instruments , along with several additional clarification ASU’s issued during 2018 and 2019, collectively “CECL”.

CECL requires the reporting entity to estimate expected credit losses over the life of a financial asset.

CECL requires the credit loss to be recognized upon initial

recognition of the financial asset.

CECL requires the reporting entity to estimate

expected credit losses over the life of a financial asset.

CECL requires the credit loss to be recognized upon initial recognition of the financial asset.

ASU 2016-13 requires the entity to adopt CECL using the modified retrospective transition approach through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

29 unchanged sentences

Incurred costs represent work performed, which correspond with, and thereby best depict, transfer of control to the customer.

Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts.

Contract costs include labor, materials, subcontractors’

costs, other direct costs, and indirect costs applicable on government and commercial contracts.

For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied.

1 unchanged sentence

Revenue is recognized at the point in time when control transfers to the customer, which generally occurs when title and risk of loss have passed to the customer.

Performance obligations satisfied over time accounted for 40 % and 39 % of revenue during the three and six months ended October 31, 2020, respectively.

Performance obligations satisfied at a point in time accounted for 60 % and 61 % of revenue during the three and six months ended October 31, 2020, respectively.

On October 31, 2020, the Company had approximately $ 130,588,000 of remaining performance obligations under fully funded contracts with its customers, which the Company also refers to as funded backlog.

Performance obligations satisfied over time accounted for 39 % of revenue during the three and nine months ended January 30, 2021.

Performance obligations satisfied at a point in time accounted for 61 % of revenue during the three and nine months ended January 30, 2021.

On January 30, 2021, the Company had approximately $ 103,869,000 of remaining performance obligations under fully funded contracts with its customers, which the Company also refers to as funded backlog.

The Company currently expects to recognize approximately 73 % of the remaining performance obligations as revenue in fiscal 2021 , an additional 26 % in fiscal 2022, and the balance thereafter.

12 unchanged sentences

These estimates are based on historical award experience, anticipated performance and the Company’s best judgment at the time.

Because of the certainty in estimating these amounts, they are included in the transaction price of the Company’s contracts and the associated remaining performance obligations.

Based on experience in estimating these amounts, they are included in the transaction price of the Company’s contracts and the associated remaining performance obligations.

As a significant change in one or more of these estimates could affect the profitability of the Company’s contracts, the Company regularly reviews and updates its contract-related estimates.

2 unchanged sentences

The impact of adjustments in contract estimates on the Company’s operating earnings can be reflected in either operating costs and expenses, or revenue.

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the three or six month periods ended October 31, 2020 or the three or six month periods ended October 26, 2019.

No adjustment on any one

contract was material to the Company’s unaudited consolidated financial statements for the three or six month periods ended October 31, 2020.

During the three and six month periods ended October 26, 2019, the Company revised its estimates of the total expected costs to complete a contract associated with a design and development agreement.

The impact of the revised estimate on this contract on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase of approximately $ 1,118,000 and $ 976,000 , respectively.

periods ended January 30, 2021.

No adjustment on any one contract was material to the Company’s unaudited consolidated financial statements for the three or nine month periods ended January 30, 2021.

The aggregate net favorable impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was approximately $ 1,152,000 and $ 1,169,000 for the three and nine month periods ended January 25, 2020, respectively.

No adjustment on any one contract was material to the Company’s unaudited consolidated financial statements for the three month period ended January 25, 2020.

During the nine month period ended January 25, 2020, the Company revised its estimates of the total expected costs to complete a contract associated with a design and development agreement.

The impact of the revised estimate on this contract on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase of approximately $ 1,036,000 .

Revenue by Category

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by major product line/program

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by contract type

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by customer category

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by geographic location

4 unchanged sentences

In the Company’s services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, which is generally monthly, or upon the achievement of contractual milestones.

Generally, billing occurs subsequent to

revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheet.

Generally, billing occurs subsequent to revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheet.

However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities recorded in customer advances on the consolidated balance sheet.

2 unchanged sentences

For the Company’s product revenue, the Company generally receives cash payments subsequent to satisfying the performance obligation via delivery of the product, resulting in billed accounts receivable.

Changes in the contract asset and liability balances during the six month period ended October 31, 2020 were not materially impacted by any other factors.

Changes in the contract asset and liability balances during the nine month period ended January 30, 2021 were not materially impacted by any other factors.

For the Company’s contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration.

Revenue recognized for the three and six month periods ended October 31, 2020 that was included in contract liability balances at the beginning of each year was $ 3,451,000 and $ 5,423,000 , respectively;

and revenue recognized for the three and six month periods ended October 26, 2019 that was included in contract liability balances at the beginning of each year was $ 828,000 and $ 1,658,000 , respectively.

Revenue recognized for the three and nine month periods ended January 30, 2021 that was included in contract liability balances at the beginning of April 30, 2020 was $ 0 and $ 5,423,000 , respectively;

and revenue recognized for the three and nine month periods ended January 25, 2020 that was included in contract liability balances at the beginning of April 30, 2019 was $ 12,000 and $ 1,670,000 , respectively.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance.

17 unchanged sentences

The cost audits result in the negotiation and determination of the final indirect cost rates that the Company may use for the period(s) audited.

The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company for

CPFF and T&M contracts.

The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company for CPFF and T&M contracts.

For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs.

2 unchanged sentences

The Company’s revenue recognition policy calls for revenue recognized on all cost reimbursable government contracts to be recorded at actual rates unless collectability is not reasonably assured.

During the fiscal year ended April 30, 2020, the Company settled rates for its incurred cost claims with the DCAA for fiscal year 2015 for an amount not significant.

At October 31, 2020 and April 30, 2020, the Company had no reserve for incurred cost claim audits.

Earnings Per Share

Basic earnings per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock.

The reconciliation of basic to diluted shares is as follows (in thousands except share data):

During the fiscal year ended April 30, 2020, the Company settled rates for its incurred cost claims with the DCAA for fiscal year 2015 for an amount that was not significant.

At January 30, 2021 and April 30, 2020, the Company had no reserve for incurred cost claim audits.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock.

The reconciliation of basic to diluted shares is as follows:

Three Months Ended

Six Months Ended

October 31, 2020

October 26, 2019

October 31, 2020

October 26, 2019

Denominator for basic earnings per share:

Nine Months Ended

January 30, 2021

January 25, 2020

January 30, 2021

January 25, 2020

Denominator for basic earnings (loss) per share:

Weighted average common shares

Dilutive effect of employee stock options, restricted stock and restricted stock units

Denominator for diluted earnings per share

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 23 and 269 for the three and six months ended October 31, 2020.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 8,402 and 4,358 for the three and six months ended October 26, 2019, respectively.

Denominator for diluted earnings (loss) per share

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 0 and 24 for the three and nine months ended January 30, 2021.

Due to the net loss for the three months ended January 25, 2020, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 287,408 and 3,076 for the three and nine months ended January 25, 2020, respectively.

Recently Issued Accounting Standards

4 unchanged sentences

The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (Topic 321, Topic 323, and Topic 815) .

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions between Topic 321, Topic 323, and Topic

815 (Topic 321, Topic 323, and Topic 815) .

This ASU clarifies accounting certain topics impacted by Topic 321 Investments—Equity Securities.

11 unchanged sentences

The Company is entitled to receive additional cash consideration of $ 6,500,000 (the “Holdback”) upon tendering consents to assignment of two remaining customer contracts to Webasto.

The Holdback was not recorded in the Company’s consolidated financial statements as the amount was not realized or realizable as of October 31, 2020.

The Holdback was not recorded in the Company’s consolidated financial statements as the amount was not realized or realizable as of January 30, 2021.

The Company’s satisfaction of the requirements for the payment of the Holdback is currently in dispute.

14 unchanged sentences

Concurrent with the execution of the Purchase Agreement, the Company entered into a transition services agreement (the “TSA”) to provide certain general and administrative services to Webasto for a defined period.

Income from performing services under the TSA was $ 0 and $ 38,000 and has been recorded in other income, net in the consolidated statements of operations for three and six months ended October 31, 2020, respectively, and $ 45,000 and $ 489,000 for three and six months ended October 26, 2019, respectively.

Income from performing services under the TSA was $ 0 and $ 38,000 and has been recorded in other income, net in the consolidated statements of operations for the three and nine months ended January 30, 2021, respectively, and $ 57,000 and $ 545,000 and has been

recorded in other income, net in the consolidated statements of operations for the three and nine months ended January 25, 2020, respectively.

Investments consist of the following (in thousands):

15 unchanged sentences

Available-For-Sale Securities

As of October 31, 2020 and April 30, 2020, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

As of January 30, 2021 and April 30, 2020, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

government securities, U.S.

2 unchanged sentences

Realized gains on sales of these investments on the basis of specific identification is recorded in interest income.

The following table is a summary of the activity related to the available-for-sale investments recorded in short-term and long-term investments as of October 31, 2020 and April 30, 2020, respectively (in thousands):

October 31, 2020

The following table is a summary of the activity related to the available-for-sale investments recorded in short-term and long-term investments as of January 30, 2021 and April 30, 2020, respectively (in thousands):

January 30, 2021

Municipal securities

7 unchanged sentences

Total available-for-sale investments

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at October 31, 2020 were as follows (in thousands):

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at January 30, 2021 were as follows (in thousands):

Due within one year

6 unchanged sentences

● Level 3—Inputs to the valuation that are unobservable inputs for the asset or liability.

The Company’s financial assets measured at fair value on a recurring basis at October 31, 2020, were as follows (in thousands):

The Company’s financial assets measured at fair value on a recurring basis at January 30, 2021, were as follows (in thousands):

Fair Value Measurement Using

19 unchanged sentences

In December of 2017, the Company and SoftBank formed a joint venture, HAPSMobile, which is a Japanese corporation.

As of October 31, 2020, the Company’s ownership stake in HAPSMobile was approximately 7 %, with the remaining 93 % held by SoftBank.

As of January 30, 2021, the Company’s ownership stake in HAPSMobile was approximately 7 %, with the remaining 93 % held by SoftBank.

In connection with the formation of the joint venture on December 27, 2017, the Company initially purchased shares of HAPSMobile representing a 5 % ownership interest in exchange for an investment of 210,000,000 yen ($ 1,860,000 ).

6 unchanged sentences

As the Company has the ability to exercise significant influence over the operating and financial policies of HAPSMobile pursuant to the applicable Joint Venture Agreement and related organizational documents, the Company’s investment is accounted for as an equity method investment.

For the three and six months ended October 31, 2020, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 9,522,000 and $ 10,810,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of income, of which $ 8,363,000 related to the Company’s proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC.

During the nine months ended January 25, 2021, the Company recorded its proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC in the amount of $ 8,363,000 .

For the three and nine months ended January 30, 2021, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 0 and $ 10,810,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of income.

HAPSMobile initially made its investment in Loon LLC in April 2019.

For the three and six months ended October 26, 2019, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 863,000 and $ 2,210,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations.

At October 31, 2020 and April 30, 2020, the carrying value of the investment in HAPSMobile of $ 0 and $ 10,455,000 , respectively, was recorded in other assets.

As the Company’s investment has been written down to zero, no future losses of HAPSMobile Inc.

will be recorded in equity method investment loss, net of tax in subsequent periods.

For the three and nine months ended January 25, 2020, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 1,200,000 and $ 3,410,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations.

At January 30, 2021 and April 30, 2020, the carrying value of the investment in HAPSMobile of $ 0 and $ 10,455,000 , respectively, was recorded in other assets.

As the Company’s investment has been written down to zero, no future losses of HAPSMobile will be recorded in equity method investment loss, net of tax in subsequent periods.

Investment in Limited Partnership Fund

In July 2019, the Company made its initial capital contribution to a limited partnership fund focusing on highly relevant technologies and start-up companies serving defense and industrial markets.

On July 15, 2020, the Company made an additional contribution of $ 1,173,000 .

On July 15, 2020 and January 4, 2021, the Company made additional contributions of $ 1,173,000 and $ 977,000 , respectively.

Under the terms of the limited partnership agreement, the Company has committed to make additional capital contributions of $ 2,904,000 to the fund.

The Company accounts for investments in limited partnerships as equity method investments as the Company is deemed to have influence when it holds more than a minor interest.

For the three and six months ended October 31, 2020, the Company recorded its ownership percentage of the net loss of the limited partnership, or $ 0 and $ 280,000 , respectively, in equity method investment loss in the consolidated statements of income.

For the three and six months ended October 26, 2019, the Company recorded no net loss of the limited partnership.

At October 31, 2020 and April 30, 2020, the carrying value of the investment in the

limited partnership of $ 5,335,000 and $ 4,442,000 , respectively, was recorded in long-term investments.

For the three and nine months ended January 30, 2021, the Company recorded its ownership percentage of the net loss of the limited partnership, or $ 81,000 and $ 361,000 , respectively, in equity method investment loss in the consolidated statements of income.

For the three and nine months

ended January 25, 2020, the Company recorded no net loss of the limited partnership.

At January 30, 2021 and April 30, 2020, the carrying value of the investment in the limited partnership of $ 6,230,000 and $ 4,442,000 , respectively, was recorded in long-term investments.

Warranty Reserves

2 unchanged sentences

The related expense is included in cost of sales.

Warranty reserve activity is summarized as follows for the three and six months ended October 31, 2020 and October 26, 2019, respectively (in thousands):

Warranty reserve activity is summarized as follows for the three and nine months ended January 30, 2021 and January 25, 2020, respectively (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Beginning balance

12 unchanged sentences

Intangibles, net

The weighted average amortization period at October 31, 2020 and April 30, 2020 was four years .

Amortization expense for the three and six months ended October 31, 2020 was $ 715,000 and $ 1,424,000 , respectively.

Amortization expense for the three and six months ended October 26, 2019 was $ 755,000 and $ 1,327,000 , respectively.

The weighted average amortization period at January 30, 2021 and April 30, 2020 was four years .

Amortization expense for the three and nine months ended January 30, 2021 was $ 662,000 and $ 2,086,000 , respectively.

Amortization expense for the three and nine months ended January 25, 2020 was $ 775,000 and $ 2,102,000 , respectively.

Technology, in-process research and development, customer relationships, trademarks and tradenames, and non-compete agreements were recognized in conjunction with the Company’s acquisition of Pulse on June 10, 2019.

1 unchanged sentence

Estimated amortization expense for the next five years is as follows (in thousands):

At October 31, 2020 and April 30, 2020, the goodwill balance was $ 6,340,000 , which represents the goodwill attributable to the acquisition of Pulse.

The following table presents the changes in the Company’s goodwill balance (in thousands):

Balance at April 30, 2020

Additions to goodwill

Impairment of goodwill

Balance at January 30, 2021

The goodwill balance at April 30, 2020 is attributable to the acquisition of Pulse.

Refer to Note 17—Business Acquisitions for further details.

17 unchanged sentences

The components of lease costs recorded in cost of sales for product sales and contract services and selling, general and administrative (“SG&A”) expense were as follows (in thousands):

Six Months Ended

Nine Months Ended

Operating lease cost

4 unchanged sentences

Supplemental lease information were as follows:

Six Months Ended

Nine Months Ended

(In thousands)

4 unchanged sentences

Weighted average discount rate

Maturities of operating lease liabilities as of October 31, 2020 were as follows (in thousands):

Maturities of operating lease liabilities as of January 30, 2021 were as follows (in thousands):

Total lease payments

3 unchanged sentences

The components of accumulated other comprehensive income and adjustments are as follows (in thousands):

Six Months Ended

Nine Months Ended

Balance, net of $ 0 deferred taxes, as of April 30, 2020 and April 30, 2019

Changes in foreign currency translation adjustments

Unrealized losses, net of $ 1 of deferred taxes for the six months ended October 31, 2020

Balance, net of $ 1 and $ 0 deferred taxes, as of October 31, 2020 and October 26, 2019, respectively

Unrealized losses, net of $ 2 of deferred taxes for the nine months ended January 30, 2021

Balance, net of $ 2 and $ 0 deferred taxes, as of January 30, 2021 and January 25, 2020, respectively

Customer-Funded Research & Development

2 unchanged sentences

Revenue from customer-funded R&D contracts are recognized in accordance with Topic 606 over time as costs are incurred.

Revenue from customer-funded R&D was approximately $ 20,742,000 and $ 44,168,000 for the three and six months ended October 31, 2020, respectively.

Revenue from customer-funded R&D was approximately $ 17,506,000 and $ 32,626,000 for the three and six months ended October 26, 2019, respectively.

Revenue from customer-funded R&D was approximately $ 14,811,000 and $ 58,979,000 for the three and nine months ended January 30, 2021, respectively.

Revenue from customer-funded R&D was approximately $ 17,939,000 and $ 50,565,000 for the three and nine months ended January 25, 2020, respectively.

Long-Term Incentive Awards

6 unchanged sentences

Settlement of the PRSUs will be made in fully-vested shares of common stock.

For the three and six months ended October 31, 2020, the Company recorded $ 347,000 and $ 438,000 of compensation expense related to the Fiscal 2021 LTIP.

The Company recorded no compensation expense related to the Fiscal 2021 LTIP for the three and six months ended October 26, 2019.

At October 31, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 7,946,000 .

For the three and nine months ended January 30, 2021, the Company recorded $ 126,000 and $ 564,000 of compensation expense related to the Fiscal 2021 LTIP.

The Company recorded no compensation expense related to the Fiscal 2021 LTIP for the three and nine months ended January 25, 2020.

At January 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 7,946,000 .

During the three months ended July 27, 2019, the Company granted awards under the Restated 2006 Plan to key employees (“Fiscal 2020 LTIP”).

5 unchanged sentences

Settlement of the PRSUs will be made in fully-vested shares of common stock.

For the three and six months ended October 31, 2020, the Company recorded $ 264,000 and $ 345,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

For the three and six months ended October 26, 2019, the Company recorded $166,000 and $297,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

At October 31, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 4,263,000 .

For the three months ended January 30, 2021, the Company recorded a reduction of $ 26,000 of compensation expense related to the Fiscal 2020 LTIP, and for the nine months ended January 30, 2021, the Company recorded $ 319,000 of compensation expense related to the Fiscal 2020 LTIP.

For the three and nine months ended January 25, 2020, the Company recorded $215,000 and $512,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

At January 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 4,263,000 .

During the three months ended July 28, 2018, the Company also granted awards under the Restated 2006 Plan to key employees (“Fiscal 2019 LTIP”).

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Settlement of the PRSUs will be made in fully-vested shares of common stock.

For the three and six months ended October 31, 2020, the Company recorded $ 189,000 and $ 264,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

For the three and six months ended October 26, 2019, the Company recorded $ 16,000 and $ 48,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

At October 31, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2019 LTIP is $ 2,478,000 .

During the three months ended July 29, 2017, the Company also granted awards under the Restated 2006 Plan to key

employees (“Fiscal 2018 LTIP”).

For the three and nine months ended January 30, 2021, the Company recorded $ 27,000 and $ 291,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

For the three and nine months ended January 25, 2020, the Company recorded $ 246,000 and $ 294,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

At January 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2019 LTIP is $ 2,478,000 .

During the three months ended July 29, 2017, the Company also granted awards under the Restated 2006 Plan to key employees (“Fiscal 2018 LTIP”).

Awards under the Fiscal 2018 LTIP consist of:

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During the three months ended August 1, 2020, the Company issued a total of 16,228 fully-vested shares of common stock to settle the PRSUs in the Fiscal 2018 LTIP.

For the three and six months ended October 31, 2020, the Company recorded no compensation expense.

For the three and six months ended October 26, 2019, the Company reversed $ 46,000 and $ 39,000 of compensation expense related to the Fiscal 2018 LTIP, respectively.

At October 31, 2020 and April 30, 2020, the Company recorded cumulative stock-based compensation expense from the Fiscal 2021 LTIP, Fiscal 2020 LTIP and Fiscal 2019 LTIP of $ 2,653,000 and $ 1,607,000 , respectively.

For the three and nine months ended January 30, 2021, the Company recorded no compensation expense.

For the three and nine months ended January 25, 2020, the Company recorded $ 201,000 and $ 162,000 of compensation expense related to the Fiscal 2018 LTIP, respectively.

At January 30, 2021 and April 30, 2020, the Company recorded cumulative stock-based compensation expense from the Fiscal 2021 LTIP, Fiscal 2020 LTIP and Fiscal 2019 LTIP of $ 2,780,000 and $ 1,607,000 , respectively.

At each reporting period, the Company reassesses the probability of achieving the performance targets for the PRSUs.

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No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited.

For the three and six months ended October 31, 2020, the Company recorded a provision for income taxes of $ 2,491,000 and $ 3,698,000 , respectively, yielding an effective tax rate of 17.7 % and 13.9 %, respectively.

For the three and six months ended October 26, 2019, the Company recorded a provision for income taxes of $ 1,108,000 and $ 3,241,000 , respectively, yielding an effective tax rate of 11.7 % and 10.8 %, respectively.

The variance from statutory rates for the three and six months ended October 31, 2020 was primarily due to federal R&D credits, foreign derived intangible income deductions and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

The variance from statutory rates for the three and six months ended October 26, 2019 was primarily due to federal R&D credits, foreign derived intangible income deduction and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

For the three and nine months ended January 30, 2021, the Company recorded a (benefit from) and provision for income taxes of $( 924,000 ) and $ 2,774,000 , respectively, yielding effective tax rates of 157.9 % and 10.7 %, respectively.

For the three and nine months ended January 25, 2020, the Company recorded a (benefit from) and provision for income taxes of $( 38,000 ) and $ 3,203,000 , respectively, yielding effective tax rates of ( 28.4 )% and 10.6 %, respectively.

The variance from statutory rates for the three and nine months ended January 30, 2021 was primarily due to federal R&D credits, foreign derived intangible income deductions and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

The variance from statutory rates for the three and nine months ended January 25, 2020 was primarily due to federal R&D credits, foreign derived intangible income deductions and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

Share Repurchase

In September 2015, the Company’s Board of Directors authorized a program to repurchase up to $ 25,000,000 of the Company’s common stock with no specified termination date for the program.

No shares were repurchased under the program during the three and six months ended October 31, 2020 or October 26, 2019.

As of October 31, 2020 and April 30, 2020, approximately $ 21,200,000 remained authorized for future repurchases under this program.

No shares were repurchased under the program during the three and nine months ended January 30, 2021 or January 25, 2020.

As of January 30, 2021 and April 30, 2020, approximately $ 21,200,000 remained authorized for future repurchases under this program.

Related Party Transactions

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Under the DDA and related efforts, the Company will use its best efforts, up to a maximum net value of $ 181,320,000 , to design and build prototype solar powered high altitude aircraft and ground control stations for HAPSMobile and conduct low altitude and high altitude flight tests of the prototype aircraft.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 11,452,000 and $ 27,838,000 for the three and six months ended October 31, 2020, respectively.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 13,393,000 and $ 25,728,000 for the three and six months ended October 26, 2019, respectively.

At October 31, 2020 and April 30, 2020, the Company had unbilled related party receivables from HAPSMobile of $ 14,974,000 and $ 15,779,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

At April 30, 2019, the Company owned a 10 % stake in accordance with the Joint Venture Agreement which was diluted to approximately 5 % during the first three months ended July 27, 2019.

On December 4, 2019, the Company purchased

540,050,000 yen ($ 4,982,000 ) of additional shares of HAPSMobile to increase its ownership stake to approximately 7 %.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 7,480,000 and $ 35,318,000 for the three and nine months ended January 30, 2021, respectively.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 11,762,000 and $ 37,491,000 for the three and nine months ended January 25, 2020, respectively.

At January 30, 2021 and April 30, 2020, the Company had unbilled related party receivables from HAPSMobile of $ 6,834,000 and $ 15,779,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

Refer to Note 6—Equity Method Investments for further details.

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The Company financed the acquisition entirely from available cash on hand.

During the three months ended January 30, 2021, the Company paid a total of $1,492,000 in holdback and retention payments.

In addition to the consideration paid at closing, the acquisition of Pulse included contingent consideration arrangements that required additional consideration to be paid by the Company to the sellers of Pulse if two specified research and development milestones were achieved by December 10, 2021 and the continued employment of specified employees.

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Key assumptions include (1) a discount rate of 4.5 % and (2) the probability that each of the milestones would be achieved.

During the year ended April 30, 2020, one of the research and development milestones was achieved, and the requirements for the payout of remaining contingent consideration were concluded to not have been met.

During the three months ended January 25, 2020, one of the research and development milestones was achieved, and the requirements for the payout of remaining contingent consideration were concluded to not have been met.

As a result, the Company recorded a gain of $ 832,000 which was recorded in selling, general, and administrative expense in the consolidated statements of income.

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Three Months Ended

Six Months Ended

Nine Months Ended

Net income attributable to AeroVironment, Inc.

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These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended July 28, 2018, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2018 with the consequential tax effects, and including the results of Pulse prior to acquisition.

The Company incurred approximately $ 18,000 and $ 359,000 of acquisition-related expenses for the three and six months ended October 26, 2019, respectively.

The Company incurred approximately $ 344,000 and $ 1,036,000 of acquisition-related expenses for the three and nine months ended January 25, 2020, respectively.

These expenses are included in selling, general and administrative, research and development, and product cost of sales on the Company’s consolidated statement of operations.

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Subsequent Events

On December 3, 2020, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Unmanned Systems Investments GmbH, a German limited liability company incorporated under the laws of Germany (the “Seller”), and each of the unit holders of the Seller (collectively, the “Shareholders”), to purchase 100 % of the issued and outstanding shares of Seller’s wholly-owned subsidiary, Telerob Gesellschaft für Fernhantierungstechnik mbH, a German company based in Ostfildern (near Stuttgart), Germany (“Telerob”), including Telerob’s wholly owned subsidiary, Telerob USA, Inc.

Arcturus Acquisition

On February 19, 2021, the Company closed its acquisition of Arcturus UAV, Inc., a California corporation (“Arcturus UAV”) pursuant to the Stock Purchase Agreement (the “Arcturus Purchase Agreement”) with Arcturus UAV and each of the shareholders and other equity interest holders of Arcturus UAV (collectively, the “Arcturus Sellers”), to purchase 100 % of the issued and outstanding equity of Arcturus UAV (the “Arcturus Acquisition”).

Arcturus UAV, headquartered in Petaluma, California, designs, engineers, tools, and manufactures unmanned aerial and aircraft systems including airborne platforms, payloads and payload integration, ground control systems, and ground support equipment and other items and services related generally to unmanned aircraft systems.

Arcturus UAV became a wholly-owned subsidiary of the Company as of February 19, 2021.

Pursuant to the Arcturus Purchase Agreement, at the closing of the Arcturus Acquisition, the Company paid approximately $ 431,000,000 (subject to certain customary adjustments and escrow arrangements set forth in the Arcturus Purchase Agreement), financed with a combination of approximately $ 159,000,000 of cash-on-hand, $ 200,000,000 of financing pursuant to the Term Loan Facility, described below, and the issuance of approximately $ 72,000,000 of unregistered, restricted shares of common stock.

As specified in the Arcturus Purchase agreement, the number of shares issued was determined based on a value of $50,000,000 and a calculated average price as of the last business day prior to execution of the Arcturus Purchase Agreement.

The final cash consideration is subject to certain customary adjustments, including for net working capital, cash, debt and unpaid transaction expenses (including change in control related payments triggered by the transaction) of Arcturus UAV at the Arcturus Closing, less $ 6,500,000 to be held in escrow to address final purchase price adjustments post-Arcturus Closing, if any (the “Adjustment Escrow”), and $ 1,822,500 to be held in escrow to address Arcturus UAV’s and/or the Sellers’ indemnification obligations (the “Indemnification Escrow”).

The Adjustment Escrow, less any negative post-Closing adjustment to the cash consideration paid at Closing, is to be released to the Arcturus Sellers upon completion of the post-Arcturus Closing purchase price adjustment process;

the Indemnification Escrow, less any amounts paid or reserved, is to be released to the Arcturus Sellers 12 months following the Arcturus Closing.

To further address potential breaches of Arcturus UAV’s and the Sellers’ representations and warranties beyond the application of the Indemnification Escrow, the Company also obtained representation and warranty insurance policies providing $ 40,000,000 in coverage, subject to customary terms, exclusions and retention amounts.

Due to the timing of the close of the acquisition, the purchase accounting for the business combination is incomplete at the time of this filing.

As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, pre-acquisition contingencies and goodwill.

In addition, the Company is unable to provide pro forma revenues and earnings of the combined entity.

All required disclosures will be included in the Company's Annual Report on Form 10-K for the fiscal year quarter ending April 30, 2021.

Credit Facilities

In connection with the consummation of the Arcturus Acquisition on February 19, 2021, the Company, as borrower, and Arcturus UAV, as guarantor, entered into a Credit Agreement with certain lenders, letter of credit issuers, Bank of America, N.A., as the administrative agent and the swingline lender, and BofA Securities, Inc., JPMorgan Chase Bank, N.A., and U.S.

Bank National Association, as joint lead arrangers and joint bookrunners (the “Credit Agreement”).

The Credit Agreement and its associated Security and Pledge Agreement set forth the terms and conditions for (i) a five-year $ 100 million revolving credit facility, which includes a $ 10 million sublimit for the issuance of standby and commercial letters of credit (the “Revolving Facility”), and (ii) a five-year amortized $ 200 million term A loan (the “Term Loan Facility”, and together with the Revolving Facility, the “Credit Facilities”).

Certain existing letters of credit issued by JPMorgan Chase Bank were reserved for under the Revolving Facility at closing and remain outstanding under the terms thereof.

Upon execution of the Credit Agreement, the Company drew the full principal of the Term Loan Facility for use in the acquisition of Arcturus UAV.

The Term Loan Facility requires payment of 5 % of the outstanding obligations in each of the first four loan years, with the remaining 80.0 % payable in loan year five, consisting of three quarterly payments of 1.25 % each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date.

Proceeds from the Term Loan Facility were used in part to finance a portion of the cash consideration for the Arcturus Acquisition.

Borrowings under the Revolving Facility may be used for working capital and other general corporate purposes.

The Credit Facilities provide the Company with a choice of interest rates between (a) LIBOR (with a 0 % floor) plus the Applicable Margin;

or (b) Base Rate (defined as the highest of (a) the Federal Funds Rate plus one-half percent ( 0.50 %), (b) the Bank of America prime rate, and (c) the one (1) month LIBOR plus one percent ( 1.00 %)) plus the Applicable Margin.

The Applicable Margin is based upon the Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether the Company elects LIBOR (ranging from 1.50 - 2.25%) or Base Rate (ranging from 0.50 - 1.25%).

The Company is also responsible for certain commitment fees from 0.20 - 0.35 % depending on the Consolidated Leverage Ratio, and administrative agent expenses incurred in relation to the Credit Facilities.

In the event of a default, an additional 2 % default interest rate would apply.

Any borrowing under the Credit Agreement may be repaid, in whole or in part, at any time and from time to time without premium or penalty other than customary breakage costs, and any amounts repaid under the Revolving Facility may be reborrowed.

Mandatory prepayments are required under the revolving loans when borrowings and letter of credit usage exceed the aggregate revolving commitments of all lenders.

Mandatory prepayments are also required in connection with the disposition of assets to the extent not reinvested and unpermitted debt transactions.

In support of its obligations pursuant to the Credit Facilities, the Company has granted security interests in substantially all of the personal property of the Company and its domestic subsidiaries, including a pledge of the equity interests in its subsidiaries (limited to 65 % of outstanding equity interests in the case of foreign subsidiaries), and the proceeds thereof, with customary exclusions and exceptions.

The Company’s existing and future domestic subsidiaries, including Arcturus UAV (as of the closing of its acquisition by the Company), will be guarantors for the Credit Facilities.

The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants, including certain restrictions on the ability of the Company and its Subsidiaries (as defined in the Credit Agreement) to incur any additional indebtedness or guarantee indebtedness of others, to create liens on properties or assets, or to enter into certain asset and stock-based transactions.

In addition, the Credit Agreement includes certain financial maintenance covenants, requiring that (x) the Consolidated Leverage Ratio (as defined in the Credit Agreement) shall not be more than 3.00 to 1.00 as of the end of any fiscal quarter and (y) the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) shall not be less than 1.25 to 1.00 as of the end of any fiscal quarter.

The Credit Agreement contains certain customary events of default, which include failure to make payments when due thereunder, the material inaccuracy of representations or warranties, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events, invalidity of loan documents, or a Change of Control (as defined in the Credit Agreement).

Upon the occurrence and continuation of an event of default, the Lenders may cease making future loans under the Credit Agreement and may declare all amounts owing under the Credit Agreement to be immediately due and payable.

Intelligent Systems Group Acquisition

On February 23, 2021, the Company purchased certain assets of, and assumed certain liabilities of, the Intelligent Systems Group business segment (“ISG”) of Progeny Systems Corporation (the “ISG Acquisition”), a Virginia corporation (the “ISG Seller”), pursuant to the terms of an Asset Purchase Agreement (the “ISG Purchase Agreement”) of the same date by and among the Company, Seller and the sole shareholder of Seller (the “Beneficial Owner”).

ISG is engaged in development of artificial intelligence-enabled computer vision, machine learning and perceptive autonomy technologies and provides related services to United States government customers.

In connection with the ISG Acquisition, the Company (i) paid a base purchase price of $ 30,000,000 in cash at closing and (ii) may pay additional cash consideration of up to $ 6,000,000 based on the achievement of certain revenue targets by ISG during the 3 years following closing, in each case, subject to the terms and conditions of the ISG Purchase Agreement, including certain customary adjustments.

As a condition to closing pursuant to the ISG Purchase Agreement, the Company and the ISG Seller entered into certain ancillary agreements, including a transition services agreement and two subleases pursuant to which the ISG Seller will provide the Company certain services and facilities space to accommodate the transition of ISG to the Company.

The parties to the ISG Purchase Agreement have made representations, warranties, and covenants that are customary for a transaction of this type, including, among other things, restrictions on the ISG Seller and the Beneficial Owner from engaging in certain competitive activities, as well as mutual indemnification obligations between the Company and the ISG Seller.

To supplement certain indemnifications provided by the ISG Seller, the Company obtained a representation and warranty insurance policy.

Due to the timing of the close of the acquisition, the purchase accounting for the business combination is incomplete at the time of this filing.

In addition, the Company is unable to provide pro forma revenues and earnings of the combined entity.

All required disclosures will be included in the Company's Annual Report on Form 10-K for the fiscal year quarter ending April 30, 2021.

Telerob Acquisition

On December 3, 2020, the Company entered into a Share Purchase Agreement (the “Telerob Purchase Agreement”) with Unmanned Systems Investments GmbH, a German limited liability company incorporated under the laws of Germany (the “Telerob Seller”), and each of the unit holders of the Telerob Seller (collectively, the “Shareholders”), to purchase 100% of the issued and outstanding shares of Seller’s wholly-owned subsidiary, Telerob Gesellschaft für Fernhantierungstechnik mbH, a German company based in Ostfildern (near Stuttgart), Germany (“Telerob”), including Telerob’s wholly owned subsidiary, Telerob USA, Inc.

(“Telerob USA,” and collectively with Telerob, the “Telerob Group”).

The Telerob Group develops, manufactures, sells, and services remote-controlled ground robots and transport vehicles for civil and defense applications.

Upon closing of the transactions contemplated by the Purchase Agreement, Telerob will become a wholly-owned subsidiary of the Company.

Pursuant to the Purchase Agreement, the Company will pay approximately € 37,455,000 (approximately $ 45.4 million) in cash at the closing to the Seller, subject to certain purchase price adjustments, less (a) € 3,000,000 (approximately $ 3.6 million) to be held in escrow for breaches of the Seller’s warranties;

(b) transaction-related fees and costs incurred by the Seller;

Upon closing of the transactions contemplated by the Telerob Purchase Agreement, which is anticipated in the fourth quarter, Telerob will become a wholly-owned subsidiary of the Company.

Pursuant to the Telerob Purchase Agreement, the Company will pay approximately € 37,455,000 (approximately $ 45.4 million) in cash at the closing to the Telerob Seller, subject to certain purchase price adjustments, less (a) € 3,000,000 (approximately $ 3.6 million) to be held in escrow for breaches of the Telerob Seller’s warranties;

(b) transaction-related fees and costs incurred by the Telerob Seller;

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This indebtedness may be offset by any cash on hand at the Telerob Group at closing.

The escrow amount is to be released to the Seller, less any amounts paid or reserved, 30 months following the closing date.

In addition, the Seller may receive up to a total of € 6,000,000 (approximately $ 7.3 million) in additional cash consideration over a three year period contingent upon the achievement of three distinct milestones.

The escrow amount is to be released to the Telerob Seller, less any amounts paid or reserved, 30 months following the closing date.

In addition, the Telerob Seller may receive up to a total of € 6,000,000 (approximately $ 7.3 million) in additional cash consideration over a three year period contingent upon the achievement of three distinct milestones.

The first two milestones are the achievement of specific revenue targets and the third milestone is obtaining certain contract awards from the U.S.

military are achieved.

The transactions contemplated by the Purchase Agreement are subject to certain closing conditions, including:

The transactions contemplated by the Telerob Purchase Agreement are subject to certain closing conditions, including:

(i) clearance by the German government;

(ii) the accuracy of each party’s warranties (subject to customary materiality qualifiers);

(iii) each party’s compliance with its covenants and agreements contained in the Purchase Agreement (subject to customary materiality qualifiers);

(iii) each party’s compliance with its covenants and agreements contained in the Telerob Purchase Agreement (subject to customary materiality qualifiers);

and (iv) other customary closing conditions.

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 1. Financial Statements