What changed in this filing

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Item 1. Financial Statements

2021-12-08 compared with 2021-09-09 · 258 added, 159 removed, 668 unchanged (38% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 579 at July 31, 2021 and $ 595 at April 30, 2021

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 5,568 at July 31, 2021 and $ 544 at April 30, 2021)

Accounts receivable, net of allowance for doubtful accounts of $ 566 at October 30, 2021 and $ 595 at April 30, 2021

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 9,215 at October 30, 2021 and $ 544 at April 30, 2021)

Income taxes receivable

25 unchanged sentences

Authorized shares— 10,000,000 ;

none issued or outstanding at July 31, 2021 and April 30, 2021

none issued or outstanding at October 30, 2021 and April 30, 2021

Common stock, $ 0.0001 par value:

Authorized shares— 100,000,000

Issued and outstanding shares— 24,811,802 shares at July 31, 2021 and 24,777,295 shares at April 30, 2021

Issued and outstanding shares— 24,805,829 shares at October 30, 2021 and 24,777,295 shares at April 30, 2021

Additional paid-in capital

10 unchanged sentences

Three Months Ended

Six Months Ended

Product sales

Contract services (inclusive of related party revenue of $ 10,352 and $ 16,386 for the three months ended July 31, 2021 and August 1, 2020, respectively)

Contract services (inclusive of related party revenue of $ 10,342 and $ 11,452 for the three months ended October 30, 2021 and October 31, 2020, respectively;

and $ 20,694 and $ 27,838 for the six months ended October 30, 2021 and October 31, 2020, respectively)

Cost of sales:

6 unchanged sentences

Research and development

(Loss) income from operations

Income (loss) from operations

Other (loss) income:

3 unchanged sentences

(Benefit from) provision for income taxes

Equity method investment loss, net of tax

Net (loss) income

Equity method investment income (loss), net of tax

Net income (loss)

Net (income) loss attributable to noncontrolling interest

Net (loss) income attributable to AeroVironment, Inc.

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

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 (Loss) Income (Unaudited)

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

Three Months Ended

Net (loss) income

Other comprehensive (loss) income:

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 0 and $ 4 for the three months ended July 31, 2021 and August 1, 2020, respectively

Six Months Ended

Net income (loss)

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale investments, net of deferred tax (expense) benefit of $ 0 and $( 3 ) for the three months ended October 30, 2021 and October 31, 2020, respectively;

and $ 0 and $ 1 for the six months ended October 30, 2021 and October 31, 2020, respectively

Change in foreign currency translation adjustments

Total comprehensive (loss) income

Total comprehensive income (loss)

Net (income) loss attributable to noncontrolling interest

Comprehensive (loss) 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 three months ended July 31, 2021 and August 1, 2020 (Unaudited)

For the six months ended October 30, 2021 and October 31, 2020 (Unaudited)

(In thousands except share data)

3 unchanged sentences

Balance at April 30, 2021

Net (loss) income

Unrealized loss on investments

4 unchanged sentences

Tax withholding payment related to net share settlement of equity awards

Change in non-controlling interest

Stock based compensation

Balance at July 31, 2021

Balance at October 30, 2021

Comprehensive

10 unchanged sentences

Stock based compensation

Balance at October 31, 2020

AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

For the three months ended October 30, 2021 and October 31, 2020 (Unaudited)

(In thousands except share data)

Comprehensive

AeroVironment, Inc.

(Loss) Income

Balance at July 31, 2021

Unrealized gain on investments

Foreign currency translation

Restricted stock awards

Restricted stock awards forfeited

Change in non-controlling interest

Stock based compensation

Balance at October 30, 2021

Comprehensive

AeroVironment, Inc.

Income (Loss)

Balance at August 1, 2020

Net income (loss)

Unrealized loss on investments

Restricted stock awards forfeited

Tax withholding payment related to net share settlement of equity awards

Stock based compensation

Balance at October 31, 2020

See accompanying notes to consolidated financial statements (unaudited).

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to cash provided by operating activities:

Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:

Depreciation and amortization

Losses from equity method investments, net

(Income) losses from equity method investments, net

Amortization of debt issuance costs

1 unchanged sentence

Provision for doubtful accounts

Other non-cash expense

Other non-cash expense (income)

Non-cash lease expense

(Gain) loss on foreign currency transactions

Loss on foreign currency transactions

Deferred income taxes

Stock-based compensation

Loss on sale of property and equipment

Loss on disposal of property and equipment

Amortization of debt securities

21 unchanged sentences

Effects of currency translation on cash and cash equivalents

Net decrease in cash, cash equivalents, and restricted cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

3 unchanged sentences

Non-cash activities

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 0 and $ 4 for the three months ended July 31, 2021 and August 1, 2020, respectively

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 0 and $ 1 for the six months ended October 30, 2021 and October 31, 2020, respectively

Change in foreign currency translation adjustments

15 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 months ended July 31, 2021 are not necessarily indicative of the results for the full year ending April 30, 2022.

The results of operations for the three and six months ended October 30, 2021 are not necessarily indicative of the results for the full year ending April 30, 2022.

For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2021, included in the Company’s Annual Report on Form 10-K.

5 unchanged sentences

On February 19, 2021, the Company closed its acquisition of Arcturus UAV, Inc.

(“Arcturus”), a California corporation, pursuant to a Stock Purchase Agreement (the “Arcturus Purchase Agreement”) with Arcturus and each of the shareholders and other equity interest holders of Arcturus (collectively, the “Arcturus Sellers”), to purchase 100 % of the issued and outstanding equity interests of Arcturus (the “Arcturus Acquisition”).

(“Arcturus”), a California corporation, pursuant to a Stock Purchase Agreement (the “Arcturus Purchase Agreement”) with Arcturus and each of the shareholders and other equity interest holders of Arcturus (collectively, the “Arcturus Sellers”), purchasing 100 % of the issued and outstanding equity interests of Arcturus (the “Arcturus Acquisition”).

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

3 unchanged sentences

Refer to Note 18—Business Acquisitions for further details.

On May 3, 2021, the Company closed its acquisition of Telerob Gesellschaft für Fernhantierungstechnik mbH, a German company based in Ostfildern (near Stuttgart), Germany (“Telerob GmbH”), including Telerob GmbH’s wholly-owned subsidiary, Telerob USA, Inc.

(“Telerob USA,” and collectively with Telerob GmbH, “Telerob”) pursuant to its previously announced 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 Seller (collectively, the “Telerob Shareholders”), to purchase 100% of the issued and outstanding shares of Telerob Seller’s wholly-owned subsidiary Telerob GmbH (the “Telerob Acquisition”).

subsidiary, Telerob USA, Inc.

(“Telerob USA,” and collectively with Telerob GmbH, “Telerob”) pursuant to its previously announced 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 Seller (collectively, the “Telerob Shareholders”), to purchase 100% of the issued and outstanding shares of Telerob Seller’s wholly-owned subsidiary Telerob GmbH (the “Telerob Acquisition”).

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

Refer to Note 18—Business Acquisitions for further details.

On September 15, 2021, the Company entered into a Share Sale and Purchase Agreement (the “Purchase Agreement”) with Toygun Savunma Sanayi ve Havacilik Anonim Sirketi (“Toygun”) whereby the Company sold 35 % of the common shares of Altoy to Toygun.

As a result of the sale, the Company decreased its interest in Altoy from 85 % to 50 %.

The Company is considered to still have control of Altoy and therefore consolidates Altoy into the consolidated financial statements of the Company as of October 30, 2021.

Under the terms of the Purchase Agreement, the Company is expected to sell additional shares to Toygun in fiscal year 2023 at which point the Company will no longer control and therefore will no longer consolidate Altoy in the Company’s consolidated financial statements.

At that time, the Company will account for its investment in Altoy as an equity method investment and record its proportion of any gains or losses of Altoy in equity method investments, net of tax.

Recently Adopted Accounting Standards

The Company did not adopt any accounting standards during the three months ended July 31, 2021.

Effective May 1, 2021, the Company adopted ASU 2019-12 , Simplifying the Accounting for Income Taxes (Topic 740).

This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 including removing the requirement to limit income tax expense (benefit) in an interim period to the full year projected amounts.

The Company adopted ASU 2019-12 using the prospective method, applying the new guidance accounting for income taxes after adoption.

The adoption of ASU 2019-12 did not have an impact on the Company’s consolidated financial statements.

Revenue Recognition

13 unchanged sentences

Performance obligations are satisfied over time if the customer receives the benefits as the Company performs, if the customer controls the asset as it is being developed or produced, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment for the Company’s costs incurred to date plus a reasonable margin.

The contractual right to payment is generally supported by termination for convenience clauses that allow the customer to unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit, and take control of any work in process.

The contractual right to payment is generally supported by termination for convenience clauses that allow the customer to

unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit, and take control of any work in process.

Revenue for TMS product deliveries and Customer-Funded Research and Development contracts is recognized over time as costs are incurred.

7 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.

The Company’s small UAS, medium UAS (“MUAS) and UGV product sales revenue is composed of revenue recognized on contracts for the delivery of small UAS, MUAS and UGV systems and spare parts.

The Company’s small UAS, medium UAS (“MUAS”) and UGV product sales revenue is composed of revenue recognized on contracts for the delivery of small UAS, MUAS and UGV systems and spare parts, respectively.

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 61 % and 38 % of revenue during the three months ended July 31, 2021 and August 1, 2020, respectively.

Performance obligations satisfied at a point in time accounted for 39 % and 62 % of revenue during the three months ended July 31, 2021 and August 1, 2020, respectively.

On July 31, 2021, the Company had approximately $ 257,685,000 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 51 % and 55 % of revenue during the three and six months ended October 30, 2021, respectively.

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 49 % and 45 % of revenue during the three and six months ended October 30, 2021, 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 30, 2021, the Company had approximately $ 252,036,000 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 68 % of the remaining performance obligations as revenue in fiscal 2022 and an additional 32 % in fiscal 2023 .

7 unchanged sentences

Contract estimates are based on various assumptions to project the outcome of future events that may span several years.

These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer.

These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and

availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer.

The nature of the Company’s contracts gives rise to several types of variable consideration, including penalty fees and incentive awards generally for late delivery and early delivery, respectively.

7 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 month period

ended July 31, 2021 or the three month period ended August 1, 2020.

No adjustment on any one contract was material to the Company’s unaudited consolidated financial statements for the three month period ended July 31, 2021 or the three month period ended August 1, 2020.

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 30, 2021 and the three or six month periods ended October 31, 2020.

Revenue by Category

1 unchanged sentence

Three Months Ended

Six Months Ended

Revenue by major product line/program

1 unchanged sentence

Three Months Ended

Six Months Ended

Revenue by contract type

7 unchanged sentences

Three Months Ended

Six Months Ended

Revenue by customer category

1 unchanged sentence

Three Months Ended

Six Months Ended

Revenue by geographic location

6 unchanged sentences

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.

liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements.

Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements.

These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.

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 three month period ended July 31, 2021 were not materially impacted by any other factors.

Changes in the contract asset and liability balances during the six month period ended October 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 month periods ended July 31, 2021 that was included in contract liability balances at the beginning of April 30, 2021 was $ 309,000 ;

and revenue recognized for the three month periods ended August 1, 2020 that was included in contract liability balances at the beginning of April 30, 2020 was $ 1,973,000 .

Revenue recognized for the three and six month periods ended October 30, 2021 that was included in contract liability balances at the beginning of April 30, 2021 was $ 580,000 and $ 889,000 , and revenue recognized for the three and six month periods ended October 31, 2020 that was included in contract liability balances at the beginning of April 30, 2020 was $ 3,451,000 and $ 5,423,000 .

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 assess performance.

The Company’s CODM, collectively the Chief Executive Officer and Chief Operations Officer, makes operating decisions, assesses performance and makes resource allocation decisions, including the allocation of research and development (“R&D”).

Accordingly, the Company identifies three reportable segments.

Refer to Note 20—Segments for further details.

Restricted Cash

The Company classifies cash accounts which are not available for general use as restricted cash.

Pursuant to the terms of

the Arcturus Purchase Agreement, the Company maintains escrow accounts to address final purchase price adjustments post-Arcturus Closing, if any and to address Arcturus UAV’s and/or the Sellers’ indemnification obligations.

The restricted funds in the escrow account are recorded in other assets on the consolidated balance sheet.

As of October 30, 2021 and April 30, 2021 restricted cash was $ 1,823,000 and $ 8,322,000 , respectively.

The Company’s investments are accounted for as available-for-sale and are reported at fair value.

12 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.

At July 31, 2021 and April 30, 2021, the Company had no reserve for incurred cost claim audits.

(Loss) Earnings Per Share

Basic (loss) 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:

At October 30, 2021 and April 30, 2021, 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 (in thousands except share data):

Three Months Ended

July 31, 2021

August 1, 2020

Net income attributable to AeroVironment, Inc.

Six Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Net income (loss) attributable to AeroVironment, Inc.

Denominator for basic earnings (loss) per share:

2 unchanged sentences

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 3,871 and 844 for the three months ended July 31, 2021 and August 1, 2020,

respectively.

Due to the net loss for the three months ended July 31, 2021, 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 276,107 for the three months ended July 31, 2021.

Due to the net loss for the six months ended October 30, 2021, 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 4,742 and 266,077 for the three and six months ended October 30, 2021, respectively.

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, respectively.

Recently Issued Accounting Standards

Accounting pronouncements issued but not effective until after July 31, 2021 are not expected to be applicable to the Company.

Accounting pronouncements issued but not effective until after October 30, 2021 are not expected to be applicable to the Company.

Discontinued Operations

5 unchanged sentences

In June 2020, the independent accounting firm determined the final adjustment to the working capital dispute to be $ 341,000 which has been recorded net of tax as a loss of discontinued operations in the consolidated statements of operations for the year ended April 30, 2020.

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 unaudited consolidated financial statements as the amount was not realized or realizable as of July 31, 2021.

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

On February 22, 2019, Webasto filed a lawsuit, which was amended in April 2019, alleging several claims against the Company for breach of contract, indemnity, and bad faith, including allegations regarding inaccuracy of certain diligence disclosures and failure to provide certain consents to contract assignments, and related to a previously announced product recall.

Webasto seeks to recover the costs of the recall and other damages totaling a minimum of $ 6,500,000 in

addition to attorneys’ fees, costs, and punitive damages.

On August 16, 2019, the Company filed a counterclaim against Webasto seeking payment of the Holdback and declaratory relief regarding Webasto’s cancellation of an assigned contract.

Webasto again amended the complaint in May 2021 to include additional claims.

On June 2, 2021, the Company filed an answer to Webasto’s second amended complaint filed in May 2021.

The Company’s evaluation remains that many of the allegations in the Webasto lawsuit are meritless, but as the discovery phase of litigation continues the Company lacks sufficient information to fully analyze other allegations at this time.

The Company continues to mount a vigorous defense.

In order to avoid the future cost, expense, and distraction of continued litigation, the Company engaged in settlement negotiations with Webasto;

however, the negotiations did not result in a settlement of any of the Company’s or Webasto’s claims.

As a result of the settlement negotiations, the Company established a litigation reserve, which reserve reflects the scope of a rejected offer intended to communicate the Company’s serious and good faith intention to attempt to reach a settlement for the stated purposes.

The offer did not reflect the Company’s view of the merits of the claims made, and the Company continues to vigorously defend all claims.

However, as a result of the preparation of the good faith offer and the Company’s willingness to pursue settlement for that amount, the Company recorded litigation reserve expenses in the amount of $ 9,300,000 during the year ended April 30, 2021 recorded in other expense on the consolidated statements of operations and in other non-current liabilities on the consolidated balance sheet.

The Company was 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 unaudited consolidated financial statements as the amount was not realized or realizable as of October 30, 2021.

During the three months ended October 27, 2018, Webasto filed a recall report with the National Highway Traffic Safety Administration that named certain of the Company’s EES products as subject to the recall.

The Company is continuing to assess the facts giving rise to the recall.

Under the terms of the Purchase Agreement, the Company may be responsible for certain costs of such recall of named products the Company manufactured, sold or serviced prior to the closing of the sale of the EES Business.

5 unchanged sentences

Benchmark withdrew its Notice of Arbitration against Webasto and the Company, but reserved its right to pursue indemnity claims against suppliers.

The recall remains a significant part of the Webasto lawsuit.

The recall remains a significant part of the Webasto lawsuit described below.

Webasto seeks to recover the costs of the recall and other damages totaling a minimum of $ 6,500,000 in addition to attorneys’ fees, costs, and punitive damages.

On August 16, 2019, the Company filed a counterclaim against Webasto seeking payment of the Holdback and declaratory relief regarding Webasto’s cancellation of an assigned contract.

Webasto again amended the complaint in May 2021 to include additional claims.

On June 2, 2021, the Company filed an answer to Webasto’s second amended complaint filed in May 2021.

In order to avoid the future cost, expense, and distraction of continued litigation, the Company engaged in settlement negotiations with Webasto in May 2021.

While the negotiations did not result in a settlement of any of the Company’s or Webasto’s claims at such time, as a result of the settlement negotiations, the Company established a litigation reserve, which reflected the scope of a rejected offer intended to communicate the Company’s serious and good faith intention to attempt to reach a settlement for the stated purposes.

The offer did not reflect the Company’s view of the merits of the claims made;

however, as a result of the preparation of the good faith offer and the Company’s willingness to pursue settlement for that amount, the Company recorded litigation reserve expenses in the amount of $ 9,300,000 during the year ended April 30, 2021 recorded in other expense on the consolidated statements of operations and in other non-current liabilities on the consolidated balance sheet.

In December 2021, the Company agreed in principle subject to formal documentation with Webasto to settle all existing claims related to the sale of our former EES business for $ 20,000,000 and Webasto keeping the Holdback.

Under the terms of the expected written settlement agreement that is being negotiated by the Company and Webasto, the Company’s payment of the settlement amount will occur over a 24 month period after the execution of the settlement agreement.

As a result of the agreement in principle to settlement the litigation, the Company recorded additional litigation reserve expenses in the amount of $ 10,000,000 during the three months ended October 30, 2021 recorded in other expense on the consolidated statements of operations and in other current liabilities on the consolidated balance sheet.

Should the Company not be able to negotiate and sign a mutually acceptable settlement agreement with Webasto, the Company will continue with discovery in the litigation and defend itself vigorously.

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 (expense) income, net in the unaudited consolidated statements of operations for the three months ended July 31, 2021 and August 1, 2020, respectively.

Income from performing services under the TSA was $ 0 for the three and six months ended October 30, 2021, and $ 0 and $ 38,000 and has been recorded in other (expense) income, net in the unaudited consolidated statements of operations for the three and six months ended October 31, 2020, respectively.

Investments consist of the following (in thousands):

15 unchanged sentences

Available-For-Sale Securities

As of July 31, 2021 and April 30, 2021, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

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

government securities, U.S.

1 unchanged sentence

Interest earned from these investments is recorded in interest income.

Realized gains on sales of these investments on the basis of specific identification are recorded in (expense) 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 July 31, 2021 and April 30, 2021, respectively (in thousands):

July 31, 2021

Realized gains on sales of these investments on the basis of specific identification are recorded in interest (expense) 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 30, 2021 and April 30, 2021, respectively (in thousands):

October 30, 2021

Municipal securities

Corporate bonds

Total available-for-sale investments

4 unchanged sentences

Total available-for-sale investments

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at July 31, 2021 were as follows (in thousands):

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at October 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 July 31, 2021, were as follows (in thousands):

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

Fair Value Measurement Using

3 unchanged sentences

Available-for-sale securities

Contingently returnable consideration

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

Fair Value Measurement Using

Quoted prices in

active markets for

identical assets

Contingent consideration

5 unchanged sentences

Available-for-sale securities

Contingent consideration

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value

on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):

Contingently returnable consideration

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):

Measurements Using

Unobservable Inputs

Balance at May 1, 2021

3 unchanged sentences

Included in selling, general and administrative

Balance at July 31, 2021

The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at July 31, 2021

Balance at October 30, 2021

The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at October 30, 2021

The fair value measurement tables above have been corrected to present the fair value of the contingently returnable consideration associated with the acquisition of ISG of $ 479,000 as of April 30, 2021 and subsequent changes in fair value, which is recorded in other assets on the consolidated balance sheet.

The tables previously included the fair value of the contingent consideration, rather than the returnable contingent consideration.

The returnable contingent consideration represents the difference between the $ 6,000,000 cash consideration paid to the sellers in escrow and the fair value of the contingent consideration of $ 5,521,000 as of April 30, 2021.

Pursuant to the ISG Purchase Agreement, the sellers may receive up to a maximum of $ 6,000,000 in additional cash consideration (“contingent consideration”), if certain revenue targets are achieved during the 3 years following closing.

1 unchanged sentence

The analysis considered, among other items, contractual terms of the ISG Purchase Agreement, the Company’s discount rate, the timing of expected future cash flows and the probability that the revenue targets required for payment of the contingent consideration will be achieved.

Pursuant to the Telerob Purchase Agreement, the Telerob Seller may receive up to a maximum of € 6,000,000 (approximately $ 7,272,000 ) in additional cash consideration if specific revenue and contract award targets for Telerob are achieved during the 36 month period after closing.

During the three months ended October 30, 2021, the target for the first year was achieved, and the related consideration of $ 2,000,000 is expected to be released from an escrow account that is not controlled by the Company and therefore not recorded on the consolidated balance sheet, during the three months ended January 29, 2022.

The fair value of the contingently returnable consideration is equal to the difference between the maximum value of the contingent consideration and the fair value of the contingent consideration and is recorded in other assets on the consolidated balance sheet.

Pursuant to the Telerob Purchase Agreement, the Telerob Sellers may receive up to a maximum of € 6,000,000 (approximately $ 7,272,000 ) in additional cash consideration if specific revenue and contract award targets for Telerob are achieved during the 36 month period after closing.

The contingent consideration was valued using a Black-Scholes option-pricing model.

The analysis considered, among other items, contractual terms of the Telerob Purchase Agreement, the Company’s discount rate, the timing of expected future cash flows and the probability that the revenue and contract award targets required for payment of the contingent consideration will be achieved.

The fair value of the contingent consideration is recorded in other accrued liabilities on the consolidated balance sheet.

Refer to Note 18—Business Acquisitions.

12 unchanged sentences

Concurrent with the formation of HAPSMobile, the Company executed a Design and Development Agreement (the “DDA”) with HAPSMobile.

As of July 31, 2021, the Company’s ownership stake in HAPSMobile was approximately 7 %, with the remaining 93 % held by SoftBank.

As of October 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 ).

subsequently purchased additional shares of HAPSMobile in order to maintain a 5 % ownership stake in the joint venture.

The Company subsequently purchased additional shares of HAPSMobile in order to maintain a 5 % ownership stake in the joint venture.

The first such purchase occurred on April 17, 2018, at which time the Company invested 150,000,000 yen ($ 1,407,000 ) for the purchase of additional shares of HAPSMobile.

4 unchanged sentences

On May 29, 2021, the Company entered into an amendment to the DDA with HAPSMobile.

The parties agreed to the amendment in anticipation of the Company and SoftBank entering into a Master Design and Development Agreement (“MDDA”) with each other to continue the design and development of the Solar High Altitude Pseudo-Satellite (“Solar HAPS”) aircraft developed under the DDA.

The parties agreed to the amendment in anticipation of the Company and SoftBank entering into a Master Design and Development Agreement

(“MDDA”) with each other to continue the design and development of the Solar High Altitude Pseudo-Satellite (“Solar HAPS”) aircraft developed under the DDA.

On May 29, 2021, the Company and SoftBank entered into a MDDA to continue the development of Solar HAPS.

5 unchanged sentences

On August 13, 2021, the Company made the second payment of the loan agreement in the amount of 180,000,000 yen ($ 1,638,000 ).

On October 29, 2021, the Company made the final payment under the loan agreement in the amount of 190,000,000 yen ($ 1,674,000 ).

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 months ended July 31, 2021 and August 1, 2020, the Company recorded its proportionate net loss of HAPSMobile, or $ 1,655,000 and $ 1,008,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations.

At July 31, 2021 and April 30, 2021, the carrying value of the investment in HAPSMobile was a liability of $ 415,000 and an asset of $ 10,455,000 , respectively, was recorded in other current liabilities and other assets, respectively.

The equity method losses recognized during the three months ended July 31, 2021 exceeded the Company’s loan contributions to date resulting in the recording of an accrued liability in the amount of $ 415,000 recorded in other current liabilities on the unaudited consolidated balance sheet as of July 31, 2021.

For the three and six months ended October 30, 2021, the Company recorded its proportionate net loss of HAPSMobile, or $ 190,000 and $ 1,845,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations.

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 operations, of which $ 8,363,000 related to the Company’s proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC.

At October 30, 2021 and April 30, 2021, the carrying value of the investment in HAPSMobile was $ 2,661,000 and $ 0 , respectively, was recorded in other assets.

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.

During the three months ended July 31, 2021 and August 1, 2021, the Company made additional contributions of $ 1,497,000 and $ 1,173,000 , respectively.

During the six months ended October 30, 2021 and October 31, 2020, the Company made additional contributions of $ 1,738,000 and $ 1,173,000 , respectively.

Under the terms of the limited partnership agreement, the Company has committed to make additional capital contributions of $ 639,000 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 months ended July 31, 2021 and August 1, 2020, the Company recorded its ownership percentage of the net gain (loss) of the limited partnership, or $ 514,000 and $( 280,000 ), respectively, in equity method investment loss in the unaudited consolidated statements of operations.

At July 31, 2021 and April 30, 2021, the carrying value of the investment in the limited partnership of $ 9,178,000 and $ 7,168,000 , respectively, was recorded in long-term investments.

For the three and six months ended October 30, 2021, the Company recorded its ownership percentage of the net gain of the limited partnership, or $ 1,852,000 and $ 2,365,000 , respectively, net of $ 529,000 of tax expense, respectively, in equity method investment income (loss) in the unaudited consolidated statements of operations.

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 income (loss) in the unaudited consolidated statements of operations.

At October 30, 2021 and April 30, 2021, the carrying value of the investment in the limited partnership of $ 11,271,000 and $ 7,168,000 , respectively, was recorded in long-term investments.

Warranty Reserves

1 unchanged sentence

The warranty reserve is included in other current liabilities.

The related expense is

included in cost of sales.

Warranty reserve activity is summarized as follows for the three months ended July 31, 2021 and August 1, 2020, respectively (in thousands):

The related expense is included in cost of sales.

Warranty reserve activity is summarized as follows for the three and six months ended October

30, 2021 and October 31, 2020, respectively (in thousands):

Three Months Ended

Six Months Ended

Beginning balance

12 unchanged sentences

Intangibles, net

The weighted average amortization period at July 31, 2021 and April 30, 2021 was five years , respectively.

Amortization expense for the three months ended July 31, 2021 and August 1, 2020 was $ 6,973,000 and $ 709,000 , respectively.

The weighted average amortization period at October 30, 2021 and April 30, 2021 was five years , respectively.

Amortization expense for the three and six months ended October 30, 2021 was $ 6,843,000 and $ 13,816,000 , respectively.

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

Technology, backlog and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of Telerob on May 3, 2021.

7 unchanged sentences

Impairment of goodwill

Balance at July 31, 2021

Balance at October 30, 2021

The goodwill balance at April 30, 2021 is attributable to the acquisitions of Pulse, ISG, and Arcturus acquisitions.

The All other goodwill addition is attributable to the Telerob acquisition.

The MUAS addition to goodwill relates to measurement period adjustments for pre-acquisition tax returns.

The addition to All other goodwill is attributable to the Telerob acquisition.

Refer to Note 18—Business Acquisitions for further details.

15 unchanged sentences

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.

with customary exclusions and exceptions.

The Company’s existing and future domestic subsidiaries, including Arcturus, are guarantors for the Credit Facilities.

1 unchanged sentence

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.

As of July 31, 2021, the Company is in compliance with all covenants.

As of October 30, 2021, the Company is in compliance with all covenants.

Based upon the Company’s revised projections, there is a substantial risk that it may be required to make a prepayment to reduce the outstanding balance of its Term Loan Facility or to obtain an amendment to the Credit Agreement to remain in compliance with all of the financial covenants in the Credit Agreement during the fiscal quarter ending January 29, 2022.

The Company currently estimates the range of the potentially required prepayment to be $ 50,000,000 to $ 60,000,000 .

The Company is in discussion with the lenders regarding obtaining an amendment to the Credit Agreement to allow it to remain in compliance with the financial covenants;

however, if the Company is not able to obtain such an amendment to the Credit Agreement, it has both the ability and intent to make any required prepayment.

The Company expects to be in compliance with all financial covenants under the terms of its Credit Agreement, including any amendment to such agreement, during the quarter ending April 30, 2022 regardless of whether a required prepayment is made or loan amendment is obtained.

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).

1 unchanged sentence

Long-term debt and the current period interest rates were as follows:

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

Current period interest rate

Future long-term debt principal payments at July 31, 2021 were as follows:

Future long-term debt principal payments at October 30, 2021 were as follows:

(In thousands)

16 unchanged sentences

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

Three Months Ended

Six Months Ended

Operating lease cost

4 unchanged sentences

Supplemental lease information were as follows:

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

Weighted average discount rate

Maturities of operating lease liabilities as of July 31, 2021 were as follows (in thousands):

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

Total lease payments

1 unchanged sentence

Total present value of operating lease liabilities

Accumulated Other Comprehensive (Loss) Income and Reclassifications Adjustments

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

Three Months Ended

Accumulated Other Comprehensive Income (Loss) and Reclassifications Adjustments

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

Six Months Ended

Balance, net of $ 1 and $ 0 deferred taxes, as of April 30, 2021 and April 30, 2020, respectively

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 0 and $ 4 for the three months ended July 31, 2021 and August 1, 2020, respectively

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 0 and $ 1 for the six months ended October 30, 2021 and October 31, 2020, respectively

Change in foreign currency translation adjustments

Balance, net of $ 1 and $ 4 deferred taxes, as of July 31, 2021 and August 1, 2020, respectively

Balance, net of $ 1 and $ 1 deferred taxes, as of October 30, 2021 and October 31, 2020, respectively

Customer-Funded Research & Development

1 unchanged sentence

These costs are direct contract costs and are expensed to cost of sales as costs are incurred.

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 $ 16,911,000 and $ 23,426,000 for the three months ended July 31, 2021 and August 1, 2020, respectively.

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

Revenue from customer-funded R&D was approximately $ 19,175,000 and $ 36,086,000 for the three and six months ended October 30, 2021, respectively.

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.

Long-Term Incentive Awards

6 unchanged sentences

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

For the three months ended July 31, 2021, the Company recorded $ 308,000 of compensation expense related to the Fiscal 2022 LTIP.

The Company recorded no compensation expense related to the Fiscal 2022 LTIP for the three months ended August 1, 2020.

At July 31, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP is $ 13,314,000 .

For the three and six months ended October 30, 2021, the Company recorded $ 201,000 and $ 509,000 of compensation expense related to the Fiscal 2022 LTIP.

The Company recorded no compensation expense related to the Fiscal 2022 LTIP for the three and six months ended October 31, 2020.

At October 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP is $ 13,111,000 .

During the three months ended August 1, 2020, the Company granted awards under its amended and restated 2006 Equity Incentive Plan (the “Restated 2006 Plan”) to key employees (“Fiscal 2021 LTIP”).

5 unchanged sentences

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

For the three months ended July 31, 2021 and August 1, 2020, the Company recorded $ 65,000 and $ 91,000 of compensation expense related to the Fiscal 2021 LTIP, respectively.

At July 31, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 7,337,000 .

For the three and six months ended October 30, 2021, the Company recorded a reversal of $( 572,000 ) and $( 507,000 ) of compensation expense related to the Fiscal 2021 LTIP, respectively, due to a change in estimate resulting from a decrease in the estimated achievement.

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, respectively.

At October 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 7,337,000 .

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 months ended July 31, 2021 and August 1, 2020, the Company recorded $(1,000) and $80,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

At July 31, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 3,983,000 .

For the three and six months ended October 30, 2021, the Company recorded a reversal of $( 617,000 ) and $( 619,000 ) of compensation expense

related to the Fiscal 2020 LTIP, respectively, due to a change in estimate resulting from a decrease in the estimated achievement.

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.

At October 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 3,983,000 .

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

2 unchanged sentences

During the three months ended July 31, 2021, the Company issued a total of 12,101 fully-vested shares of common stock to settle the PRSUs in the Fiscal 2019 LTIP.

For the three months ended July 31, 2021 and August 1, 2020, the Company recorded $ 0 and $ 75,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

For the three and six months ended October 30, 2021, the Company recorded no compensation expense.

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.

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

1 unchanged sentence

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

For the three months ended July 31, 2021 and August 1, 2020, the Company recorded a (benefit from) and provision for income taxes of $( 957,000 ) and $ 1,207,000 , respectively, yielding effective tax rates of 7.0 % and 9.6 %, respectively.

The variance from statutory rates for the three months ended July 31, 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 months ended August 1, 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.

For the three and six months ended October 30, 2021, the Company recorded a benefit from income taxes of $( 9,511,000 ) and $( 10,468,000 ), respectively, yielding effective tax rates of 117.6 % and 48.0 %, respectively.

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 effective tax rates of 17.7 % and 13.9 %, respectively.

The variance from statutory rates for the three months ended October 30, 2021 was primarily due to a change in estimate of full year projected income (loss) before income taxes, federal R&D credits 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 six months ended October 30, 2021 was primarily due to federal R&D credits 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 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.

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 months ended July 31, 2021 or August 1, 2020.

As of July 31, 2021 and April 30, 2021, approximately $ 21,200,000 remained authorized for future repurchases under this program.

No shares were repurchased under the program during the three and six months ended October 30, 2021 or October 31, 2020.

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

Related Party Transactions

2 unchanged sentences

As such, HAPSMobile and SoftBank are considered related parties of the Company.

Under the DDA and related efforts with HAPSMobile, the Company will use its best efforts, up to a maximum net value of $ 185,202,000 , 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.

Under the DDA and related efforts with HAPSMobile, the Company designed and built prototype solar powered high altitude aircraft and ground control stations for HAPSMobile and conducted low altitude and high altitude flight tests of the prototype aircraft on a best efforts basis, up to a maximum net value of $ 185,202,000 .

The Company will continue the development of Solar HAPS with Softbank under the MDDA.

Upon the execution of the MDDA, SoftBank issued the first order under the MDDA, which has a maximum value of approximately $ 51,200,000 .

The Company recorded revenue under both the MDDA and DDA of $ 10,352,000 and $ 16,386,000 for the three months ended July 31, 2021 and August 1, 2020, respectively.

At July 31, 2021 and April 30, 2021, the Company had unbilled related party receivables from HAPSMobile of $ 5,568,000 and $ 544,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

The Company recorded revenue under both the MDDA and DDA of $ 10,342,000 and $ 20,694,000 for the three and six months ended October 30, 2021, respectively.

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.

At October 30, 2021 and April 30, 2021, the Company had unbilled related party receivables from HAPSMobile of $ 9,215,000 and $ 544,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

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

42 unchanged sentences

For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible.

Supplemental Pro Forma Information (unaudited)

Telerob Supplemental Pro Forma Information (unaudited)

The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2020 (in thousands):

Three Months Ended

Six Months Ended

Net (loss) income attributable to AeroVironment, Inc.

1 unchanged sentence

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 August 1, 2020, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2020 with the consequential tax effects and including the results of Telerob prior to acquisition.

The Company incurred approximately $ 411,000 of acquisition-related expenses for the three months ended July 31, 2021.

The Company incurred approximately $ 137,000 and $ 548,000 of acquisition-related expenses for the three and six months ended October 30, 2021.

These expenses are included in selling, general and administrative on the Company’s unaudited consolidated statement of operations.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisitions been consolidated in the tables above as of May 1, 2020, nor are they indicative of results of operations that may occur in the future.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2020, nor are they indicative of results of operations that may occur in the future.

Arcturus Acquisition

35 unchanged sentences

For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible.

Supplemental Pro Forma Information (unaudited)

Arcturus Supplemental Pro Forma Information (unaudited)

The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2019 (in thousands):

Three Months Ended

Six Months Ended

Net income attributable to AeroVironment, Inc.

1 unchanged sentence

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 27, 2019, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2019 with the consequential tax effects, and including the results of Arcturus prior to acquisition.

The Company incurred approximately $ 1,384,000 and $ 0 acquisition-related expenses for the three months ended July 31, 2021 and August 1, 2020, respectively.

The Company incurred approximately $ 108,000 and $ 1,492,000 acquisition-related expenses for the three and six months ended October 30, 2021, respectively.

These expenses are included in selling, general and administrative expense on the Company’s unaudited consolidated statement of operations.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisitions been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future.

ISG Acquisition

2 unchanged sentences

In connection with the ISG Acquisition, the Company (i) paid a base purchase price of $ 29,700,000 in cash at closing and (ii) may pay additional cash consideration of up to $ 6,000,000 , which is held in escrow account not controlled by the Company, 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.

During the three months ended October 30, 2021, the revenue target for the first year was achieved and $ 2,000,000 of the additional cash consideration was earned.

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.

13 unchanged sentences

For tax purposes the acquisition was treated as an asset purchase and the goodwill is deductible ratably over a period of fifteen years.

Supplemental Pro Forma Information (unaudited)

ISG Supplemental Pro Forma Information (unaudited)

The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2019 (in thousands):

Three Months Ended

Six Months Ended

Net income attributable to AeroVironment, Inc.

1 unchanged sentence

The Company incurred approximately $ 651,000 and $ 0 acquisition-related expenses for the three months ended July 31, 2021 and August 1, 2020, respectively.

The Company incurred approximately $ 85,000 and $ 736,000 acquisition-related expenses for the three and six months ended October 30, 2021, respectively.

These expenses are included in selling, general and administrative expenses on the Company’s unaudited consolidated statement of operations.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisitions been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future.

As part of the Telerob acquisition, the Company acquired a small foreign-based defined benefit pension plan.

1 unchanged sentence

No other employees are eligible to participate.

In January 2011, reinsurance policies were taken out, which were pledged to the employees.

The Company has reinsurance policies were taken out for participating former employees, which were pledged to the employees.

The measurement date for the Company’s pension plan was May 3, 2021 in conjunction with the acquisition.

4 unchanged sentences

Unfunded status of the plan

The projected benefit obligation includes assumptions of a discount rate of 1 % and pension increase for in-payment benefits of 1.5 % for May 3, 2021 and July 31, 2021.

The projected benefit obligation includes assumptions of a discount rate of 1 % and pension increase for in-payment benefits of 1.5 % for May 3, 2021 and October 30, 2021.

The accumulated benefit obligation is approximately equal to our projected benefit obligation.

2 unchanged sentences

The Company does not expect to make any contributions to the Plan in the fiscal year ending April 30, 2022.

The Company assumed expected return on plan assets of 2.15% for May 3, 2021 and July 31, 2021.

Expected benefits paid as of May 3, 2021 (in thousands):

The Company assumed expected return on plan assets of 2.15% for May 3, 2021 and October 30, 2021.

Expected benefits payments as of May 3, 2021 (in thousands):

Total expected benefit payments

Net benefit income (in thousands) is recorded in interest (expense) income, net.

Net periodic benefit cost (in thousands) is recorded in interest (expense) income, net.

Three Months Ended

Six Months Ended

(In thousands)

Expected return on plan assets

1 unchanged sentence

Foreign currency exchange rate changes

Net benefit income

Net periodic benefit cost

The Company’s product segments are as follows:

7 unchanged sentences

Adjusted operating (loss) income is defined as operating (loss) income before intangible amortization, amortization of purchase accounting adjustment related to increasing the carrying value of certain assets to fair value, and acquisition related expenses.

Three Months Ended July 31, 2021

Three Months Ended October 30, 2021

Income (loss) from operations

2 unchanged sentences

Adjusted income (loss) from operations

Three Months Ended August 1, 2020

Three Months Ended October 31, 2020

Income (loss) from operations

2 unchanged sentences

Adjusted income (loss) from operations

Six Months Ended October 30, 2021

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Six Months Ended October 31, 2020

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Segment assets are summarized in the table below.

Corporate assets primarily consist of cash and cash equivalents, short-term investments, prepaid expenses and other current assets, long-term investments, property and equipment, net, operating lease right-of-use assets, deferred income taxes and other assets managed centrally on behalf of the business segments.

July 31, 2021

October 30, 2021

Identifiable assets

2 unchanged sentences

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