What changed in this filing

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Item 1. Business

2022-06-29 compared with 2021-06-29 · 191 added, 136 removed, 519 unchanged (39% of the section changed)

Acquisition of Telerob GmbH

On May 3, 2021, we purchased 100% of the issued and outstanding shares of 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”) pursuant to a share 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.

The disclosures and references in this Annual Report, including financial data, the description of our business operations in this Item 1, and risk factors related to our operations included in Item 1A include the Telerob Group acquisition, unless otherwise specifically noted.

The assets, liabilities and results of operations of the Telerob Group have not been consolidated into our results as of and for the period ended April 30, 2021 or any of the historical periods presented.

We design, develop, produce, deliver and support a technologically-advanced portfolio of intelligent, multi-domain robotic systems and related services for government agencies and businesses.

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Additionally, we believe that some of the innovative potential products, services and technologies in our research and development pipeline will emerge as new growth platforms in the future, creating additional market opportunities.

Our success with our current product and service offering stems from our investments in research and development to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, and in acquiring leading businesses that help our customers achieve their desired outcomes.

We develop and acquire these highly innovative solutions by working very closely with our key customers to solve their most important challenges related to our areas of expertise.

The success of our current product and service offering stems from our investments in research and development to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, and in acquiring leading businesses that help our customers achieve their desired outcomes.

We develop and acquire these highly innovative solutions by working closely with our key customers to solve their most important challenges related to our areas of expertise.

Our core technological capabilities, developed through more than 45 years of innovation, include robotics and robotics systems autonomy;

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embedded software and firmware;

miniature, low power wireless digital communications;

aerostructures;

miniature, low power, secure wireless digital communications and networks;

lightweight aerostructures;

high-altitude systems design, integration and operations;

machine vision, machine learning and autonomy;

machine vision, machine

learning and autonomy;

land, maritime and air deployment of missile and aircraft systems;

design and qualification for robotics in extreme terrestrial and space environments;

miniature internal combustion engine propulsion design and integration;

missile systems warhead integration;

low SWaP (Size, Weight and Power) system design and integration;

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Expand the market penetration of existing products and services.

Our small and medium UAS, TMS and UGV enjoy leading positions in their respective markets.

We intend to increase the penetration of our small and medium UAS and UGV products and services within the U.S.

Our small UAS and medium UAS (“MUAS”), TMS and UGV enjoy leading positions in their respective markets.

We intend to increase the penetration of our small UAS and MUAS and UGV products and services within the U.S.

military, the military forces of allied nations, other government agencies and non-government organizations, including commercial entities, and to increase the penetration of our TMS within the U.S.

military and within the military forces of allied nations.

We believe that the broad adoption of our small and medium UAS and TMS by the U.S.

We believe that the broad adoption of our small UAS and MUAS and TMS by the U.S.

military will continue to spur demand by allied nations, and that our efforts to pursue new applications are creating opportunities beyond the early adopter military market.

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We view strategic partnerships as means by which to further the reach of our innovative solutions through access to new markets, customers and complementary capabilities.

We also consider acquisitions as a method to obtain valuable products or technologies that can further enable our growth strategy.

We also consider acquisitions as a method to obtain valuable products, capabilities or technologies that can further enable our growth strategy.

Foster our entrepreneurial culture and continue to attract, develop and retain highly-skilled personnel.

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We intend to preserve this culture to encourage the development of the innovative, highly technical system solutions and business models that give us our competitive advantage.

Our values of “customer commitment,” “trust and teamwork,” “innovate and simplify,” and “ownership and results” serve as the foundation of our culture.

We believe that our values help to guide the behavior of our team members and serve to maintain a positive work

environment that inspires loyalty among them and customers.

Our values of “customer commitment,”

“trust and teamwork,” “innovate and simplify,” and “ownership and results” serve as the foundation of our culture.

We believe that our values help to guide the behavior of our team members and serve to maintain a positive work environment that inspires loyalty among our personnel and customers.

We also believe that our values facilitate the integration of new team members who join us as a result of acquisitions.

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Our production and development programs and services present numerous investment opportunities that we believe will deliver long-term growth by providing our customers with valuable new capabilities.

We evaluate each opportunity independently and within the context of other investment opportunities to determine its relative cost, timing and potential for generation of returns, and thereby its priority.

We evaluate each opportunity independently, as well as within the context of other investment opportunities, to determine its relative cost, timing and potential for generation of returns, and thereby its priority.

This process helps us to make informed decisions regarding potential growth capital requirements and supports our allocation of resources based on relative risks and returns to maximize long-term value creation, which is the key objective of our growth strategy.

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and allied government military and public safety agencies as well as to commercial entities.

We also develop High Altitude Pseudo-Satellite (“HAPS”) systems for SoftBank Corp.

and HAPSMobile Inc., a commercial joint venture of which we own approximately 7%.

We also develop High Altitude Pseudo-Satellite (“HAPS”) systems in conjunction with SoftBank Corp (“SoftBank”).

During our fiscal year ended April 30, 2022, we generated approximately 21% of our revenue from the U.S.

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government agencies and government subcontractors accounted for 37% of our sales revenue, and HAPSMobile Inc.

accounted for 11% of our sales revenue.

Sales revenue to other foreign customers, inclusive of foreign military sales made through the DoD, commercial and consumer customers accounted for the remaining 28% of sales revenue during our fiscal year ended April 30, 2021.

(“HAPSMobile”) and SoftBank together accounted for 10% of our sales revenue.

Sales revenue to foreign customers other than HAPSMobile and Softbank, inclusive of foreign military sales made through the DoD, commercial and consumer customers accounted for the remaining 32% of sales revenue during our fiscal year ended April 30, 2022.

Environmental

We are subject to various federal, state, local and non-U.S.

laws and regulations relating to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes.

We could also be affected by future laws and regulations relating to climate change, including laws related to greenhouse gas emissions and regulating energy efficiency.

These laws and regulations could lead to increased environmental compliance expenditures, increased energy and raw materials costs and new and/or additional investment in designs and technologies.

We continually assess our compliance status and management of environmental matters to ensure our operations are in compliance with all applicable environmental laws and regulations.

Investigation, remediation and operation and maintenance costs associated with environmental compliance and management of sites are a normal, recurring part of our operations.

These costs often are allowable costs under our contracts with the U.S.

While environmental protection regulations have not had a significant adverse effect on our overall operations, it is reasonably possible that costs incurred to ensure continued environmental compliance in the future could have a material impact on our results of operations, financial condition or cash flows if additional work requirements or more stringent clean-up standards are imposed by regulators, new areas of soil, air and groundwater contamination are discovered and/or expansions of work scope are prompted by the results of investigations.

Technology, Research and Development

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Strongly linking our technology and business development activities to customer needs in attractive growth markets constitutes an important element of this process.

Through the process we revisit our customer requirement assumptions to evaluate continued investment and to help ensure that our products and services deliver high value.

Through this process we revisit our customer requirement assumptions to evaluate continued investment and to seek to ensure that our products and services deliver high value.

As of April 30, 2022, we had issued and retained 256 U.S.

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Our marketing strategy is based on establishing leadership positions in new markets that we create through the introduction or acquisition of innovation solutions that improve customer operational effectiveness and efficiency.

Our ability to operate in an agile, flexible manner helps us achieve first mover advantage and work closely with early customers to achieve the successful adoption of our solutions.

Our ability to operate in an agile, flexible manner helps us achieve first mover advantage and work closely with early

customers to achieve the successful adoption of our solutions.

Once we establish a market position, we work to maintain our leadership, while seeking to grow our revenue by expanding sales and through continuous innovation and customer support.

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We have many U.S.

registered trademarks including those for AeroVironment, AV, Switchblade, Raven, Wasp, Quantix, VAPOR, ArcturusUAV and Jump and have several pending applications for trademark registration.

registered trademarks including those for AeroVironment, AV, Switchblade, Raven, Wasp, Quantix, VAPOR, Arcturus UAV, Crysalis and Jump and have several pending applications for trademark registration.

International Sales

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We rely on both single and multiple suppliers for certain components and subassemblies.

(See “Risk Factors—If critical components or raw materials used to manufacture our products become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products, which could damage our business” for more information.) A majority of our production systems operate in accordance with our AS9100D registered Quality Management System, which is focused on continuous improvement in order to increase acceptance rates, reduce lead times and lower cost.

(See Part 1A, “Risk Factors—If critical components or raw materials used to manufacture our products or used in our development programs become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products and in completing our development programs, which could damage our business.” for more information.) A majority of our production systems operate in accordance with our AS9100D registered Quality Management System, which focuses on continuous improvement in order to increase acceptance rates, reduce lead times and lower cost.

Customer Funded Research and Development

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We carefully manage the volume of customer funded research and development projects based on projects’ available resources and expect to expand our team to support growth in this area of our business.

No material portion of our business is considered to be seasonal.

Historically, our revenue in the second half of our fiscal years has exceeded our revenue in the first half of our fiscal years.

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Raw Materials and Suppliers

Historically, we have not experienced significant delays in the supply or availability of our key raw materials or components provided by our suppliers;

however, we have recently experienced shortages of certain components in our TMS product line which caused short term delays in production.

Historically, we not experienced a significant price increase for raw materials or components.

We are dependent upon the availability of materials and major components and the performance of our suppliers.

Historically, we have been successful in obtaining the materials required in our manufacturing processes.

We seek to manage materials supply risk through long term non-binding contracts with certain key suppliers that establish pricing, minimize lead times and to some degree mitigate risk.

We have recently experienced supply chain challenges including shortages of certain electronic and other components, increased lead times, increased costs for components, and increased shipping, warehousing and inventory costs.

We believe all of these raw materials and components are available to meet our needs from various suppliers;

We have not yet been materially impacted by the global shortage in semiconductor chips, but if the shortage were to worsen or continue for an extended period of time, we could experience material delays.

The table below shows our revenue for the periods indicated by major product line:

however, we expect inflationary and supply chain constraint trends to continue throughout our fiscal year 2023, which could cause delays in production and development programs and negatively impact our operating results.

The table below shows our revenue for the periods indicated by segment:

Fiscal Year Ended

Medium UAS ("MUAS")

The table below shows our revenue for the periods indicated by contract type, including both government and commercial sales:

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For this reason, we aspire to be an employer that is known for cultivating a positive and welcoming work environment – one that fosters growth, provides a safe place to work, supports diversity and embraces inclusion.

We believe that this kind of corporate culture results in employees who are happier, more creative, and more productive, supporting our ongoing innovation.

We believe that this kind of corporate culture results in employees who are happier, more creative, and more productive,

supporting our ongoing innovation.

We work to make our employees’ experience a priority, and we take tremendous pride in being certified by Great Place to Work Institute, Inc.

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As of April 30, 2022, we had 1,214 full time employees and 9 part time employees, of whom 434 were in research and development and engineering, 53 were in sales and marketing, 521 were in operations and 206 were general and administrative personnel.

Not included in the above totals are 94 full time employees who joined AeroVironment as part of our acquisition of Telerob in May 2021.

Talent Acquisition, Retention and Development

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We regularly conduct confidential surveys to seek feedback from our employees and use those results to improve our workplace.

We attract and reward our employees by providing market competitive compensation and benefit practices, including incentives and recognition plans that extend to all levels in our organization.

We invest in our workforce through education, training and development programs and offering tuition assistance programs for continuing education or industry certifications.

Additionally, we regularly conduct succession planning to ensure that we continue to cultivate the leadership pipeline of talent needed to execute our strategy.

We attract and reward our employees by providing market competitive compensation and benefits, including incentives and recognition plans that extend to all levels in our organization.

We invest in our workforce through education, training and development programs and offer tuition assistance programs for continuing education or industry certifications.

Additionally, we regularly conduct succession planning for management to ensure that we continue to cultivate the leadership pipeline of talent needed to execute our strategy.

Diversity and Inclusion

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Our safety and health program seeks to optimize our operations through targeted safety, health and wellness opportunities designed to ensure safe work conditions, create a healthy work environment, promote workforce resiliency and enhance business value.

We have taken extraordinary measures to protect our workforce in response to the COVID-19 pandemic.

We implemented extensive safety protocols to support our essential employees required to work onsite.

Within our production and office areas we have established a number of safety protocols, including face covering and physical distance requirements, enhanced cleaning, encouraging daily self-health checks and voluntary temperature screening stations.

We have implemented a flexible teleworking policy for employees who can meet our customer commitments remotely;

a significant portion of our workforce began teleworking in mid-March 2020 and were continuing to telework as of June 15, 2021.

In addition, we have sought to ensure that they have the technology, flexible work schedules, office equipment and other services needed during this time to enable them to work effectively from home.

We have also implemented a coronavirus reporting mechanism for illness or exposure and positive COVID-19 tests.

As part of that reporting process, we have developed a robust contact tracing program to identify employees who were in close contact with the ill employee in the workplace.

We provide several channels for all employees to speak up, ask for guidance, and report concerns related ethics or safety violations.

We monitor employee health and safety measures, including monthly and yearly targets for employee injury and illness incidents, incidents that result in work days lost, and the number of work days lost due to workplace injuries and illness.

We also provide our employees with health and wellness benefits.

We took and continue to take various measures to protect our workforce in response to the ongoing COVID-19 pandemic.

We implemented and continue to maintain extensive safety protocols to support our employees working onsite, such as enhanced cleaning of common areas.

Additionally, in mid-March 2020, a significant portion of our workforce began teleworking in accordance with the implementation of government orders and guidance affecting our facilities.

We have implemented a COVID-19 reporting mechanism for illness or exposure and positive COVID-19 tests.

As part of that reporting process, we have a robust contact tracing program to identify employees who were in close contact with the ill employee in the workplace.

In addition, we implemented a COVID-19 vaccination requirement for our employees, allowing for exceptions as required under applicable law and regulations, and continue to monitor potential vaccine mandates.

We provide several channels for all employees to speak up, ask for guidance, and report concerns related ethics or safety concerns, including identifying areas for improvement.

We address employee concerns and take appropriate actions that uphold our AeroVironment values.

We have also implemented a flexible work location policy to allow employees who can meet our customer commitments while working remotely to continue to work remotely.

We continue to ensure that employees working remotely have the technology, office equipment and other services needed to enable them to work effectively.

Consistent with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we define backlog as remaining unsatisfied performance obligations under firm orders for which work has not been performed.

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Management believes that unfunded backlog does not provide a reliable measure of future estimated revenue under our contracts.

Unfunded backlog, with the exception of the remaining potential value of the FCS domain, does not include the remaining potential value associated with a U.S.

Unfunded backlog does not include the remaining potential value associated with a U.S.

Army IDIQ-type contract for small UAS because values for each of the other domains within the contract have not been disclosed by the customer, and we cannot be certain that we will secure all task orders issued against the contract.

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was originally incorporated in California in July 1971 and reincorporated in Delaware in 2006.

Effective June 2021, our principal executive offices are located at 241 18 th Street South, Suite 415 Arlington, Virginia 22202.

Our principal executive offices are located at 241 18 th Street South, Suite 415 Arlington, Virginia 22202.

Our telephone number is (805) 520-8350.

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The recent shift of U.S.

and allied defense planning toward countering peer and near-peer adversaries requires a portfolio of capabilities that can operate effectively in areas where the battlespace, including the air, radio frequency spectrum and Global Positioning Satellite (“GPS”) signals, may be contested, driving the need for more intelligent robotic systems capable of autonomous operation.

spectrum and Global Positioning Satellite (“GPS”) signals, may be contested, driving the need for more intelligent robotic systems capable of autonomous operation.

Industry Background

Small and Medium UAS

The defense market for small and medium UAS has grown significantly since the early 2000s, driven largely by the demands associated with the global threat environment and resulting procurement by military customers, the early adopters for this technology.

Small and medium UAS now represent accepted and enduring capabilities for military forces around the world.

Small UAS and MUAS

The defense market for small UAS and MUAS has grown significantly since the early 2000s, driven largely by the demands associated with the global threat environment and resulting procurement by military customers, the early adopters for this technology.

Small UAS and MUAS now represent accepted and enduring capabilities for military forces around the world.

military’s transformation into a smaller, more agile force that operates via a network of observation, communication and precision targeting technologies accelerated following the terrorist attacks of September 11, 2001, as it required improved, distributed observation and targeting of enemy combatants who operate in small groups, often embedded in dense population centers or dispersed in remote locations, to operate effectively in a counterinsurgency threat environment.

We believe that UAS, which range from large systems, such as Northrop Grumman’s Global Hawk and General Atomics’ Predator, Sky Warrior, Reaper and Gray Eagle, to medium systems such as our Puma LE, T-20 and JUMP 20, Boeing’s ScanEagle and Integrator and Textron’s Shadow, to small systems, such as our Raven, Wasp AE, Puma AE, and VAPOR, serve as integral components of today’s military force.

These systems provide critical observation and communications capabilities serving the increasing demand for actionable intelligence, while reducing risk to individual “warfighters.” Small and medium UAS can provide real-time observation and communication capabilities to commanders and directly to the small units who control them.

These systems provide critical observation and communications capabilities serving the increasing demand for actionable intelligence, while reducing risk to individual “warfighters.” Small UAS and MUAS can provide real-time observation and communication capabilities to commanders and directly to the small units who control them.

As airspace regulations in the U.S.

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Unmanned Ground Vehicles

In situations where improvised explosive devices (“IEDs”), caustic chemicals, radiological or biological hazards or violent individuals represent significant danger to humans, UGVs can help responders remove, contain or neutralize these hazards without putting people in harm’s way.

In situations where improvised explosive devices, caustic chemicals, nuclear, radiological or biological hazards or violent individuals represent significant danger to humans, UGVs can help responders remove, contain or neutralize these hazards without putting people in harm’s way.

We believe that as enabling technologies continue to advance, UGVs will become more autonomous, more capable and more effective in dealing with hazardous threats, expanding the market potential for this set of applications to include non-defense applications such as facility security, infrastructure inspection, delivery of goods and many others.

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Existing solutions such as terrestrial cellular towers, communications satellites and manned and unmanned aircraft address some of the emerging demand for this capability but do so at relatively high financial and resource costs.

Next generation mobile telephony, referred to as 5G, can use higher frequencies than those currently employed by 4G and LTE networks.

Next generation mobile telephony, referred to as 5G, can use higher frequencies than those currently employed by existing 4G and LTE networks.

These higher frequencies are not capable of traveling long distances as compared to the frequencies associated with existing networks.

As a result, 5G deployment requires the installation of a large number of base stations and cellular towers to complement existing infrastructure, resulting in a significant investment of time, resources and capital.

Geosynchronous satellites provide fixed, continuous communications capabilities to large portions of the globe, but they operate more than 20,000 miles from the surface of the earth, therefore limiting the bandwidth they can provide, introducing latency in communications signals and requiring relatively larger, higher power ground stations.

As a result, 5G deployment requires the installation of a large number of base stations and cellular towers to complement

existing infrastructure, resulting in a significant investment of time, resources and capital.

Geosynchronous satellites provide fixed, continuous communications capabilities to large portions of the globe, but because they operate more than 20,000 miles from the surface of the earth, the bandwidth they can provide is limited, introducing latency in communications signals and requiring relatively larger, higher power ground stations.

Remote sensing satellites typically operate at lower altitudes, but are unable to maintain geosynchronous positions, meaning they are moving with respect to the surface of the earth, resulting in a limited presence over specific areas of interest and significant periods of time during which they are not present over those areas.

A new category of constellations consisting of a large number of very small and low earth orbiting satellites is proposed to provide a lower cost alternative with more ubiquitous coverage for reconnaissance and communication but is only beginning to be deployed in meaningful quantities and may not be capable of providing the uninterrupted service and quality required by commercial mobile carriers.

All satellites require special ground based receiving hardware that may further limit their telecommunication applications.

High-altitude balloons carrying communication payloads are subject to wind direction and speed and, therefore, may not be able to deliver the continuous, uninterrupted service and connection quality required by commercial mobile carriers but may be suitable for other applications.

UAS that are capable of operating in an affordable manner for extended periods of time over an area of interest without gaps in availability while carrying a communications or observation payload could help to satisfy this need.

UAS that are capable of operating in an affordable manner for extended periods of time over an area of interest while communicating directly with available handheld mobile devices without gaps in availability and carrying a communications or observation payload could help to satisfy this need.

Advanced Artificial Intelligence and Autonomy

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For defense applications, this could require other navigation methods to ensure location accuracy and incorporating computer vision capabilities to respond to changes on the ground or in the air.

Such higher levels of autonomy will become increasingly valuable to enable the effective use of robotic systems.

Such higher levels of autonomy will become increasingly more valuable in enabling the effective use of robotic systems.

Our Solutions

We supply our UAS and TMS products and services to multiple customers within and outside of the United States, our TMS products and services to organizations within the U.S.

government and allied nations and our UGV solutions to organizations in the U.S.

and allied nations.

We supply our UAS, TMS and UGV products and services to multiple customers within and outside of the United States, as well as supply our TMS products and services to defense related organizations within the U.S.

government and allied nations.

Small UAS Products

Our small UAS, including Raven, Wasp AE, Puma AE, Puma LE, VAPOR and Quantix Recon are designed to operate reliably at very low altitudes in a wide range of environmental conditions, providing a vantage point from which to collect and deliver valuable information.

Our small UAS, including Raven, Wasp AE, Puma AE, Puma LE, and VAPOR are designed to operate reliably at very low altitudes in a wide range of environmental conditions, providing a vantage point from which to collect and deliver valuable information.

Military forces employ our small UAS to deliver ISR and communications, including real-time tactical reconnaissance, tracking, combat assessment and geographic data, directly to the small tactical unit or individual operator, thereby increasing flexibility in mission planning and execution.

Our small UAS wirelessly transmit critical live video and other information generated by their payload of electro-optical, infrared or other sensors directly to a hand-held ground control unit, enabling the operator to view and capture images, during the day or at night, on the control unit.

Our Quantix Recon mapping drone generates a volume of high-resolution data significantly larger than wireless bandwidth can accommodate, requiring the onboard storage and subsequent transfer of data once the air vehicle has landed.

With the exception of Quantix Recon, our ground control systems allow the operator to control the aircraft by programming it for GPS-based autonomous navigation using operator-designated way-points, or by manual flight operation.

Our ground control systems allow the operator to control the aircraft by programming it for GPS-based autonomous navigation using operator-designated way-points, or by manual flight operation.

The ground control systems are designed for durability and ease of use in harsh environments and incorporate a user-friendly, intuitive user interface.

All of our fixed wing small UAS currently in production for military customers operate from our common ground control system.

Our Quantix Recon system plots its own flight path and launches, flies and lands autonomously to complete its mission.

All of our fixed wing small UAS currently in production for military customers operate from our Crysalis common ground control system.

Our VAPOR helicopter UAS currently employs a distinct portable ground control system.

We designed our small UAS to be transportable by as few as a single person, assembled in minutes and launched and operated by one or two people, with limited training required.

We designed our small UAS to be transportable by a single person, assembled in minutes and launched and operated by one or two people, with limited training required.

The efficient and reliable electric motors used in all of our small UAS are powered by modular battery packs that can be replaced quickly, enabling rapid return to flight.

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In emerging commercial applications, our small UAS enable enterprises to manage valuable assets such as crops, powerlines and railroad infrastructure, more effectively and safely than previously possible.

Our Quantix Mapper and VAPOR helicopter systems are designed to provide more accurate and timely information to individuals or organizations for more informed decision-making.

Our VAPOR helicopter systems are designed to provide more accurate and timely information to individuals or organizations for more informed decision-making.

Better and more timely information can translate into more efficient activities that facilitate more efficient use of resources such as maintenance operations.

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We provide training by our highly-skilled instructors, who typically possess extensive military experience, and continuous refurbishment and repair services for our products.

By maintaining close contact with our customers and users in the field, we gather critical feedback on our products and incorporate that information

into ongoing product development and research and development efforts.

By maintaining close contact with our customers and users in the field, we gather critical feedback on our products and incorporate that information into ongoing product development and research and development efforts.

This approach enables us to improve our solutions in response to, and in anticipation of, evolving customer needs.

Certain systems within our small UAS portfolio include multiple aircraft, our common and interoperable hand-held ground control system and an array of spare parts and accessories.

Other systems, namely, Puma LE, VAPOR and Quantix Recon, consist of a single air vehicle, as well as a ground control system, spare parts and accessories.

Certain systems within our small UAS portfolio include multiple aircraft, our common and interoperable hand-held Crysalis ground control system and an array of spare parts and accessories.

Other systems, namely, Puma LE, and VAPOR, consist of a single air vehicle, as well as a ground control system, spare parts and accessories.

Our current small UAS portfolio for defense applications consists of the following aircraft:

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Ability to integrate multiple third party payloads

Vertical take-off and landing

Ability to integrate multiple third party payloads

Quantix Recon

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Our digital data links (“DDL”) relay can enable operational modes that can extend range significantly.

The ground control system serves as the primary interface between the operator and our small UAS and allows the operator of each system, with the exception of Quantix Recon, to control the direction, speed and altitude of the aircraft as well as the orientation of the sensors to view the visual information they produce through real-time, streaming video and metadata.

The ground control system serves as the primary interface between the operator and our small UAS and allows the operator of each system to control the direction, speed and altitude of the aircraft as well as the orientation of the sensors to view the visual information they produce through real-time, streaming video and metadata.

Our common ground control system interfaces with each of our fixed wing air vehicles, providing a common user experience.

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Small UAS incorporating our DDL are optimized for the low-power, low-latency, and streaming bandwidth efficiency required for UAS.

Additionally, our DDL enables each air vehicle to operate as an Internet-Protocol addressable hub capable of routing and relaying video, voice and data to and from multiple other nodes on this ad hoc network.

Additionally, our DDL enables each air vehicle to operate as an Internet-Protocol addressable hub capable of routing and relaying video, voice and data to and from multiple other nodes

on this ad hoc network.

This capability enables beyond line-of-sight operation of our small UAS, further enhancing their value proposition to our customers.

Medium UAS Products

Providing similar capabilities to our small UAS, our field-deployable medium UAS, including T-20 and JUMP 20, deliver extended endurance and expanded payload capacity to support a broader set of missions that benefit from aerial surveillance and the use of specialized payloads.

The portable, hand or bungee-launched Puma LE can operate in ground and maritime environments.

MUAS Products

Providing similar capabilities to our small UAS, our field-deployable MUAS, including T-20 and JUMP 20, deliver extended endurance and expanded payload capacity to support a broader set of missions that benefit from aerial surveillance and the use of specialized payloads.

The internal combustion-powered T-20 and JUMP 20 offer significantly greater endurance and payload capacity than our small UAS, with larger airframes that can also accommodate a wider variety of payloads.

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The T-20 launches from a catapult, lands on a short runway and provides more than 24 hours of endurance.

Puma LE operates from the same ground control system as our small UAS, making it interoperable with Puma AE, Raven and Wasp AE.

T-20 and JUMP 20 operate from their own portable common ground control system.

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Patented wave-off and recommit

Direct fire weapon with 10km range

5.5 (includes munition, payload, launcher and transport bag)

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anti-armor warhead

120 (includes case, launcher, munition)

Direct fire weapon with 40km range

68 (includes launcher, munition)

Single or multi-pack tube launch, single use loitering munition

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Deployed from submerged submarine

Multi-pack tube launch or underwater-to-surface delivery canister;

Underwater-to-surface delivery canister;

launch tube, single use

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Not disclosed

We currently operate our medium UAS, such as JUMP 20, in overseas locations to support U.S.

We currently operate our MUAS, such as JUMP 20, in overseas locations to support U.S.

military operations under ISR services contracts.

Under these services contracts we deliver the information our medium UAS produce to our customers, who use that information to support their missions.

Under these services contracts we deliver the information our MUAS produce to our customers, who use that information to support their missions.

These contracts specify a location and number of hours per month of services to perform.

This contractor-owned, contractor-operated (“COCO”) arrangement represents a new business model for AeroVironment as a result of the acquisition of Arcturus and provides access to alternative customer funding sources, while also providing a way for customers who may not wish to own and operate their UAS to benefit from their differentiated capabilities.

This contractor-owned, contractor-operated (“COCO”) arrangement represents a new

business model for the company as a result of the acquisition of Arcturus and provides access to alternative customer funding sources, while also providing a way for customers who may not wish to own and operate their UAS to benefit from their differentiated capabilities.

This COCO business model may expand to include other AeroVironment solutions in the future.

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We also offer fully equipped service vehicles for the transport, service and operation of our UGV solutions.

All of our UGVs feature the intuitive and operationally simplified Robo Command Ground Control System (GCS) with multi-touch screen, pre-programmed motion sequences and ergonomically designed hand controllers for precision control of the robot, manipulator and accessories.

All of our UGVs feature the intuitive and operationally simplified Robo Command Ground control stations with multi-touch screen, pre-programmed motion sequences and ergonomically designed hand controllers for precision control of the robot, manipulator and accessories.

Select Unmanned

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four video feeds;

various EOD, CBRN and tactical sensors

Dual-track independent high-torque motors

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four video feeds;

various EOD, CBRN and tactical sensors

4-track running gear with individually adjustable flippers

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four video feeds;

various EOD, CBRN and tactical sensors

4-track running gear with individually adjustable flippers and optional wheels

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four video feeds;

various EOD, CBRN and tactical sensors

4-track running gear with individually adjustable flippers and optional wheels

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MacCready, Jr., to ensure that creativity and long-term thinking remain at the core of our culture.

With a focus on the future, this group of select, visionary scientists and engineers partners with our customers to explore breakthrough technologies that open new, more powerful ways to tackle difficult challenges.

Together, they research and develop advanced technologies in robotics, sensors, software analytics and connectivity to identify innovative solutions that push beyond the current applications.

These revenue-generating projects significantly contribute to the growth of the company and stretch our imaginations to spawn new inventions.

With the addition of the Progeny ISG team we are accelerating our development of advanced Artificial Intelligence, computer vision and active perception technologies to boost the intelligence and autonomy of our robotic systems.

With a focus on the future, this group of select, visionary scientists and engineers partners with our diverse customer base to explore innovative breakthrough solutions to difficult challenges.

Primarily focused on customer funded research and development in the areas of robotics, sensors, software analytics and connectivity, this segment seeks to identify new products, services and businesses for the company.

While the revenue generated from these customer funded projects sustain this segment, there is potential that new businesses incubated here could significantly contribute to the growth of the company.

Support Services

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We provide spare parts as well as repair, refurbishment and replacement services in a manner that seeks to minimize supply chain delays and support our customers whenever and wherever needed.

Our facilities in Simi Valley, CA also serve as primary depots for small UAS and Puma LE repairs and spare parts, while we support our medium UAS from our Petaluma, CA facilities and our UGV solutions from our Erie, PA and Stuttgart, Germany facilities.

Our facilities in Simi Valley, CA also serve as primary depots for small UAS and Puma LE repairs and spare parts, while we support our MUAS from our Petaluma, CA facilities and our UGV solutions from our Erie, PA and Stuttgart, Germany facilities.

We provide comprehensive training services to support all of our small UAS and TMS for defense applications.

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● sensor design, development, miniaturization and integration;

● embedded software and firmware, analytics processing, database systems, web, desktop and mobile applications, standards-based interfaces;

● miniature, low power wireless digital communications;

● embedded software and firmware, analytics processing, database systems, web, desktop and mobile applications and standards-based interfaces;

● miniature, low power, secure wireless digital communications and networks;

● lightweight, low speed aerostructures and aerodynamic design;

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● machine vision, machine learning, advanced auto flight control, auto target recognition, autonomous mission planning and teaming;

● land, maritime and air deployment of missile and aircraft systems;

● design and qualification for robotics in extreme terrestrial and space environments;

● missile systems warhead integration;

● low SWaP (Size, Weight and Power) system design and integration;

● manned-unmanned teaming, unmanned-unmanned teaming;

● manned-unmanned teaming and unmanned-unmanned teaming;

● power electronics and electric propulsion systems;

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We performed a number of successful demonstrations and are now developing several variants of Switchblade 300 for new customers and applications, including deployment from sea and air vehicles.

Blackwing, a submarine-

launched reconnaissance system, represents one of the variants that has now generated meaningful procurement demand.

Another variant is Switchblade 600, a larger version that delivers longer endurance, greater range, a larger payload and more significant mission effects.

Blackwing, a submarine-launched reconnaissance system, represents one of the variants that has now generated meaningful procurement demand.

Another variant, Switchblade 600, is a larger version that delivers longer endurance, greater range, a larger payload and more significant mission effects.

We believe these new variants have the potential to expand our TMS opportunities significantly.

HAPS Unmanned Aircraft Systems.

Building on our decades of groundbreaking development and demonstration of high altitude solar-powered UAS, in fiscal year 2018 we established a joint venture with SoftBank Corp.

to create a global broadband and telecommunications company to demonstrate and deploy HAPS UAS around the world.

As of April 30, 2021, AeroVironment owned a 7% share of HAPSMobile Inc., while SoftBank Corp.

owned a majority 93% share.

The joint venture is funding AeroVironment’s development and demonstration of solar-powered HAPS UAS.

AeroVironment possesses exclusive rights to manufacture and supply the solar HAPS UAS developed by the joint venture to HAPSMobile Inc., subject to meeting contractual performance criteria.

HAPSMobile Inc.

possesses exclusive rights to market the solar HAPS UAS for commercial markets globally, while AeroVironment possesses exclusive rights to market the solar HAPS UAS for non-commercial markets globally, with the exception of Japan.

Building on our decades of groundbreaking development and demonstration of high altitude solar-powered UAS, in fiscal year 2018 we established a joint venture, HAPSMobile, Inc (“HAPSMobile”).

with SoftBank to create a global broadband and telecommunications company to demonstrate and deploy HAPS UAS around the world.

In October 2020, we completed a fifth successful test flight of the HAPS UAS, which included a broadband mobile communication demonstration on consumer smart phones from the stratosphere.

As part of a restructuring of the HAPS development program in May 2021, we and SoftBank entered into a Master Design and Development Agreement (“MDDA”) to continue the development of HAPS UAS and agreed to cooperate with each other to explore restructuring and financing options for HAPSMobile.

In furtherance of this restructuring, we sold our 7% share of HAPSMobile to SoftBank, which already owned a majority 93% share of the joint venture, on March 18, 2022.

Despite the sale of shares in HAPSMobile, the HAPS UAV development relationship continues with SoftBank now directly funding the development and demonstration of solar-powered HAPS UAS.

During the term of the MDDA, AeroVironment possesses exclusive rights from SoftBank for future design and manufacturing work for the Solar HAPS UAS and future variants thereof, subject to meeting contractual performance criteria.

Sales and Marketing

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We organize our U.S.

business development team members by target market and customer, and we locate team members in close proximity to the customers they support, where possible.

business development team members by target market and customer, and we locate team members in close proximity to the customers they support when possible.

We organize our program managers by product and focus on designing optimal solutions and contract fulfillment, as well as internalizing feedback from customers and users.

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By drawing upon experienced personnel across various manufacturing industries including aerospace, automotive and volume commodities, we have instituted lean production systems and leverage our International Organization for Standardization (“ISO”) certification for Quality Management, integrated supply chain strategy, document control systems and process control methodologies for production.

Presently, we perform small UAS manufacturing at the 85,000 square foot manufacturing facility we established in 2005.

Presently, we perform small UAS

manufacturing at the 85,000 square foot manufacturing facility we established in 2005.

Our ISO 9001:2015 + AS9100D certified manufacturing facilities are designed to accommodate demand of up to 1,000 aircraft per month.

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Our current principal small UAS competitors include Elbit Systems Ltd., Teledyne Technologies, Inc., L3 Technologies, Inc., and Lockheed Martin Corporation.

We do not view large UAS such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and its derivatives as direct competitors to our small

UAS because they perform different missions, do not typically deliver their information directly to front-line ground forces and are not hand-launched and controlled.

We do not view large UAS such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and its derivatives as direct competitors to our small UAS because they perform different missions, do not typically deliver their information directly to front-line ground forces and are not hand-launched and controlled.

However, we cannot be certain that these platforms will not become direct competitors in the future.

Potential competition from consumer-focused drone manufacturers is emerging as their capabilities increase and their prices remain low relative to existing defense solutions, which is resulting in some level of military consideration even if such drones do not meet traditional military performance or security specifications.

Potential competition from consumer and commercially focused drone manufacturers is emerging as their capabilities increase and their prices remain low relative to existing defense solutions, which is resulting in some level of military consideration even if such drones do not meet traditional military performance or security specifications.

Such potential competitors include Skydio, Inc.

and Shield AI.

defense market for medium UAS has been addressed primarily by The Boeing Company’s ScanEagle and Textron Inc.’s Shadow UAS.

Our current principal medium UAS competitors include those competing with us for the U.S.

defense market for MUAS has been addressed primarily by The Boeing Company’s ScanEagle and Textron Inc.’s Shadow UAS.

Our current principal MUAS competitors include those competing with us for the U.S.

Army’s Future Tactical UAS (FTUAS) program:

Martin UAV and Northrop Grumman’s V-Bat, Textron’s Aerosonde and L3Harris’ FVR-90.

International medium UAS competitors include Elbit Systems Ltd.

International MUAS competitors include Elbit Systems Ltd.

and Israeli Aircraft Industries.

We do not view large UAS such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and its derivatives as direct competitors to our medium UAS because they perform different missions, require a larger logistical footprint and cost considerably more to procure and operate.

However, we cannot be certain that these platforms will not become direct competitors in the future as we expand the capabilities of our medium UAS products to, potentially, impinge upon the lower end of the large UAS market segment.

We do not view large UAS such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and its derivatives as direct competitors to our MUAS because they perform different missions, require a larger logistical footprint and cost considerably more to procure and operate.

However, we cannot be certain that these platforms will not become direct competitors in the future as we expand the capabilities of our MUAS products to, potentially, impinge upon the lower end of the large UAS market segment.

The market for TMS is in an early stage of development, but it is evolving rapidly.

Competitors in this market include Textron Inc., Raytheon Technologies, Lockheed Martin Corporation, Anduril Industries and UVision Air Ltd.

The market for UGV spans the global defense, first responder, security and logistics market segments.

The UGV opportunity in the U.S.

Department of Defense has grown with recent U.S.

DoD has grown with recent U.S.

Army procurement awards and a pending U.S.

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Companies pursuing airships (high altitude aircraft that are kept buoyant by a body of gas that is lighter than air) as a solution for this market include Lockheed Martin Corporation and Northrop Grumman Corporation.

A number of telecommunications, aerospace and technology companies, including AeroVironment and HAPSMobile Inc.

launched the HAPS Alliance to promote the benefits of HAPS to the global population.

Companies pursuing conventional satellites as a solution for this market include The Boeing Company, Lockheed Martin Corporation, General Dynamics Corporation, EADS N.V., Ball Corporation and Northrop Grumman Corporation.

Companies pursuing Low Earth Orbit (“LEO”), micro or cubesat satellite constellations for global communication and remote sensing include Amazon, OneWeb, SpaceX and The Boeing Company.

A number of telecommunications, aerospace and technology companies, including the company and its former joint venture partner HAPSMobile launched the HAPS Alliance to promote the benefits of HAPS to the global population.

Companies pursuing conventional satellites as a solution for this

market include The Boeing Company, Lockheed Martin Corporation, General Dynamics Corporation, EADS N.V., Ball Corporation and Northrop Grumman Corporation.

Companies pursuing Low Earth Orbit (“LEO”), micro or cubesat satellite constellations for global communication and remote sensing include Amazon, Planet, OneWeb, SpaceX and The Boeing Company.

Companies owning and operating terrestrial cellular tower networks include American Tower Corporation, Crown Castle International Corp.

and SBA Communications Corporation.

The market for TMS is in an early stage of development, but it is evolving rapidly.

Competitors in this market include Textron Inc., Raytheon Technologies, Lockheed Martin Corporation and Uvision.

The market for commercial UAS products and services is in an early stage of development, but is evolving rapidly, generating a great deal of interest as government regulations evolve to accommodate commercial UAS operations in the National Airspace System and in the airspace systems of other countries.

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The rules limit flights to visual-line-of-sight daylight operation, unless the UAS has anti-collision lights in which case twilight operation is permitted.

The final rule also addresses height and speed restrictions, operator certification, optional use of a visual observer, aircraft registration and marking and operational limits, including prohibiting flights over unprotected people on the ground who are not directly participating in the operation of the UAS.

participating in the operation of the UAS.

Current FAA regulations require drone operators to register their systems with the FAA and secure operating licenses for their drones as per the Part 107 specifications.

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Additionally, in February 2020, the FAA issued a public request for comment on its proposed policy for the creation of a new type certification of certain UAS as a special class of aircraft under FAA regulations.

Currently the Part 107 Rules allow for the operation of small UAS without the need for FAA airworthiness certification as long as the UAS meets certain specified criteria and certain flight rules are followed;

larger UAS and operations of small UAS outside the scope of the Part 107 Rules require a waiver from the FAA.

The FAA’s proposed policy proposes a new

special class of UAS for which airworthiness certification can be obtained, however, the proposed policy only applies to the procedures for the type certification of the new class of UAS, not the criteria that will be needed for the UAS or the flight operations to be followed to operate.

Currently the Part 107 Rules (as defined below) allow for the operation of small UAS without the need for FAA airworthiness certification as long as the UAS meets certain specified criteria and certain flight rules are followed;

larger UAS and operations of small UAS outside the scope of the Part 107 Rules (as defined below) require a waiver from the FAA.

The FAA’s proposed policy proposes a new special class of UAS for which airworthiness certification can be obtained, however, the proposed policy only applies to the procedures for the type certification of the new class of UAS, not the criteria that will be needed for the UAS or the flight operations to be followed to operate.

Further rulemaking by the FAA is anticipated regarding the particular criteria for the airworthiness certification standards under the new special class proposed by the new policy.

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While it is currently anticipated that the enactment of remote identification, operation of small UAS over people, and a new airworthiness certification process for a newly created special class of UAS will help formalize the process for manufacturing and obtaining airworthiness certification for UAS within the newly created class and accelerate the development of commercial UAS in the U.S., it is uncertain whether the FAA’s actions, if any, will have such effects.

Additionally, it is unclear when, if ever, the FAA will implement final rules regarding remote UAS identification and whether they will differ from the proposed rules.

It is also unclear when, if at all, the FAA will create a new class of UAS and what the final rules regarding the certification of such UAS will look like.

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Government Contracting Process

We sell the significant majority of our small and medium UAS and TMS products and services as the prime contractor under contracts with the U.S.

Certain important aspects of our government contracts are described below.

We sell the significant majority of our small UAS, MUAS and TMS products and services under contracts with the U.S.

Certain important aspects of our U.S.

government contracts are described below.

Bidding Process

Most of our current government contracts were awarded through a competitive bidding process.

Most of our current U.S.

government contracts were awarded through a competitive bidding process.

government awards competitive-bid contracts based on proposal evaluation criteria established by the procuring agency.

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government programs is subject to congressional appropriations.

Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis, even though a program may continue for many years.

Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal

year basis, even though a program may continue for many years.

Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations.

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Despite being included in the five-year budget cycle, funding for these programs is subject to annual approval.

Material Government Contract Provisions

Material U.S.

Government Contract Provisions

All contracts with the U.S.

government contain provisions, and are subject to laws and regulations, that give the government rights and remedies not typically found in commercial contracts, including rights that allow the government to:

government contain provisions, and are subject to laws and regulations, that give the government rights and remedies not typically found in commercial contracts, including rights that allow the U.S.

government to:

● terminate existing contracts for convenience, in whole or in part, when it is in the interest of the government to do so;

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In some cases, depending on the urgency of the project and the complexity of the contract negotiation, we will enter into a Letter Contract prior to finalizing the terms of a definitive fixed-price, cost reimbursable or time-and-materials definitive contract.

A Letter Contract is a written preliminary contractual instrument that provides limited initial funding and authorizes us to begin immediately manufacturing supplies or performing services while negotiating the definitive terms of the procurement.

A Letter Contract is a written preliminary contractual instrument that provides

limited initial funding and authorizes us to begin immediately manufacturing supplies or performing services while negotiating the definitive terms of the procurement.

These contracts are not subject to adjustment by reason of costs incurred in the performance of the contract.

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government to purchase substantial amounts of products and services from one or more contractors.

International Contracting Process

We supply our UAS, TMS, and UGV products and services to international allied governments..

Certain important aspects of our international contracts are described below.

Each international customer has its own laws, regulations, bureaucracy and forms of procurement agreements that present challenges in our international contracting process.

Bidding Process

Our international contracts generally result from a competitive bidding process, and to a lesser extent, sole source awards for urgent requirements or sustainment and typically begin with the receipt of a request for proposal, information or quotation from an international government procurement agency.

Numerous of our technical and administrative personnel are involved in responding to such request.

Competitive bid contracts are awarded after a formal bid and proposal competition among providers.

Interested contractors prepare a bid and proposal in response to a procurement agency’s request for proposal or request for information, which proposals are then reviewed by the applicable procurement agency based on the established evaluation criteria for the proposal.

Following award, competitive bid contracts may be challenged by unsuccessful bidders.

International competitive bidding processes are highly competitive and sometimes we face disadvantages in the bidding and evaluation process in comparison to local, domestic bidders that may receive priority or more favorable evaluations than non-domestic suppliers due to stated requirements in the local regulations that promote domestic procurements.

Sole source awards are direct engagements with the procuring agency.

Contractors receive requests for proposal or quotation and respond to such request.

If accepted by the customer, the resulting contract is for a defined quantity of goods or services for a specific time period.

Generally sole source awards are utilized by our existing customers to sustain or augment their fleets of our products, commonly through multi-year support agreements.

These agreements allow for customer logistics organizations to tailor procurement and support efforts to the needs of the end users.

International customers have individualized funding processes that are generally allocated during the applicable country’s fiscal year.

Funding may be broadly allocated to a governmental agency or military branch responsible for procurement, targeted for a specific purpose like unmanned systems, or earmarked to a specific requirement for our products.

Funding allocations are typically confidential, making it challenging for us to forecast demand for our products or whether funding is available.

Additionally, funding may be reallocated when higher needs arise, such as what occurred in many countries during the COVID-19 pandemic when such countries shifted defense funding to measures to address the pandemic.

Forecasted requirements are then delayed until the next fiscal year or cancelled.

Competitive bidding opportunities for our products and services typically have budgets and timelines which require significant investment from the customer.

Initial procurement or replacement programs for our products and services may not be considered necessities for some international customers, which makes such procurements susceptible to a reduction in available funding or a complete reallocation of funds to other government programs or initiatives.

When funds are reduced, it is common for the reduced funds to be utilized to support the sustainment of the customer’s existing fleet of UAS, rather than for new procurements.

Many of our international customers have established fleets of our UAS, which generally allows them to seek and obtain budget for yearly incremental allocations of funding.

These allocations are contracted through existing multi-year support agreements which provide the customer flexibility to procure products and services when funding is available.

Contract Types and Provisions

Our typical international customer contracts taken the form of fixed price contracts and time and materials contracts.

Most of our international contracts are fixed-price contracts as their finite nature is desired by customers.

Time-and-materials contracts are more common for our service work with a defined limit on funding and period of performance.

With a wide range of international customers, it is common for our customer contracts to contain customer advantageous provisions which are governed by applicable local laws and regulations that may differ from industry standard provisions and contracting norms in the United States.

The contractual provisions may, among other things, result in more difficulties enforcing such agreements and collecting receivables and provide us with fewer remedies in a contractual dispute and lesser protections for our intellectual property.

We assess the unique risks for each contract on a contract-by-contract basis.

We use and require banking guarantees and/or advance payments to minimize risk.

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-K

Item 1. Business