What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-06-29 compared with 2021-06-29 · 588 added, 548 removed, 1173 unchanged (49% of the section changed)

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Index to Consolidated Financial Statements and Supplementary Data

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm (PCAOB 34 )

Consolidated Balance Sheets at April 30, 2022 and 2021

Consolidated Statements of Income for the Years Ended April 30, 2021, 2020 and 2019

Consolidated Statements of Comprehensive Income for the Years Ended April 30, 2021, 2020 and 2019

Consolidated Statements of (Loss) Income for the Years Ended April 30, 2022, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the Years Ended April 30, 2022, 2021 and 2020

Consolidated Statements of Stockholders’ Equity for the Years Ended April 30, 2022, 2021 and 2020

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Notes to Consolidated Financial Statements

Quarterly Results of Operations (Unaudited)

Supplementary Data

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We have audited the accompanying consolidated balance sheets of AeroVironment, Inc.

(the "Company") as of April 30, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended April 30, 2021, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 29, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company adopted Accounting Standards Update No.

2016-02, Leases (Topic 842), and all related amendments to Accounting Standard Codification 842, Leases, on May 1, 2019.

and subsidiaries (the "Company") as of April 30, 2022 and 2021, the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders' equity, and cash flows, for each of the three years in the period ended April 30, 2022, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 28, 2022, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition - Refer to Note 1 to the financial statements

Business Acquisitions – Refer to Note 1 and 21 to the financial statements

Critical Audit Matter Description

The Company’s revenue is generated pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products, and to provide related engineering, technical and other services according to the specifications of the customers.

The Company’s performance obligations under these contractual agreements are satisfied over time or at a point in time.

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.

For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress.

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.

For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its observable standalone selling price for products and services.

When the standalone selling price is not directly observable, the Company uses its best estimate of the standalone selling price of each distinct good or service in the contract using the cost-plus reasonable margin approach.

As of April 30, 2021, revenue was $394.9 million, of which 43% relates to revenue recognized over time.

We identified the assumptions related to estimating total costs and profit to be a critical audit matter given the inherent judgement involved in estimating the total costs including labor, materials, subcontractors’ costs, other direct costs and indirect costs.

Auditing such estimates of total costs and profit required extensive audit effort and a high degree of auditor judgment.

On May 3, 2021, the Company closed its acquisition of Telerob pursuant to the terms of the Telerob Purchase Agreement for total consideration of approximately $47.0 million, net of cash acquired, which includes the Company’s estimate of contingent consideration of $.9 million based on the achievement of certain revenue targets, awards and/or orders from the U.S.

military prior to the end of a 36-month post-closing period.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets

acquired and liabilities assumed based on their respective fair values, resulting in technology of $11.5 million, customer relationships of $5.0 million, backlog of $2.4 million and goodwill of $20.8 million.

Management estimated the fair value of the intangible assets using discounted cash flow analyses, which were based on the Company’s best estimate of future revenues, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance.

Determining the fair value of the intangible assets acquired required management to make significant estimates and assumptions related to future revenue projections.

We identified the assumptions related to estimating the amount and timing of expected future revenues to be a critical audit matter given the inherent judgment involved in estimating these amounts.

Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for certain performance obligations accounted for over time included the following, among others:

● We tested the effectiveness of controls for over time revenue, including management’s controls over the estimates of total costs and profit for performance obligations.

● We tested the amount of over time revenue recorded by developing an expectation for the amount based on historical profit as a percentage of costs incurred and comparing our expectation to the amount recorded by management.

● We selected a sample of contracts with customers and performed the following:

o Compared the transaction price to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

o Tested the accuracy and completeness of the costs incurred to date for the performance obligation.

o Evaluated the estimates of total cost and profit for the performance obligation by:

◾ Observing the work sites and inspecting the progress to completion.

◾ Evaluating management’s ability to achieve the estimates of total costs and profit by performing corroborating inquiries with the Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts.

◾ Comparing management’s estimates for the selected contracts to costs and profits of similar performance obligations, when applicable.

● We evaluated management’s ability to estimate total costs and profits accurately by comparing actual costs and profits to management’s historical estimates for performance obligations that have been fulfilled.

Business Acquisitions – Refer to Note 21 to the financial statements

Our audit procedures related to the expected amount and timing of future revenue used to estimate the fair value of the intangible assets acquired included the following, among others:

● We tested the effectiveness of management’s controls over the valuation of intangibles, including management’s controls over the estimates of the amount and timing of expected future revenues.

● We assessed the reasonableness of management’s forecasts of future revenues by performing inquiries of appropriate individuals outside of the accounting organization, comparing the projections to historical results, certain peer companies, third-party industry forecasts, and internal communications to management and board of directors.

● With the assistance of our fair value specialists, we compared applicable industry forecasted long-term revenue growth rates to management’s projected revenues used within the valuation model.

● We evaluated management’s ability to estimate future revenues by comparing actual revenues to estimates assumed in the valuation model.

Goodwill— Refer to Note 1 and Note 7 to the financial statements

Critical Audit Matter Description

On February 19, 2021, the Company closed its acquisition of Arcturus for total consideration of approximately $422.6 million, net of cash acquired.

Additionally, on February 23, 2021 the Company purchased certain assets of, and assumed certain liabilities of, ISG for total consideration of approximately $35.4 million, which includes the Company’s estimate of contingent consideration of $5.5 million based on the achievement of certain revenue targets by ISG during the 3 years following closing.

The Company accounted for the acquisitions under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, resulting in technology of $31.9 million, customer relationships of $67.2 million and goodwill of $307.9 million.

Management estimated the fair value of the intangible assets using discounted cash flow analyses, which were based on the Company’s best estimates of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance.

Determining the fair value of the intangible assets acquired required significant judgment, including the amount and timing of expected future cash flows and the selected discount rates.

We identified the assumptions related to estimating the amount and timing of expected future cash flows and discount rates to be a critical audit matter given the inherent judgment involved in estimating these amounts.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company estimates the fair value by weighting the results from the income approach and the market approach.

The income approach incorporates the use of cash flow projections and a discount rate that are developed using market participant-based assumptions.

The cash-flow projections are based on seven-year financial forecasts developed by management that include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth.

The selected discount rate considers the risk and nature of the respective reporting unit’s cash flows and the rates of return market participants would require to invest their capital in its reporting units.

The market approach utilizes the guideline public company and guideline transaction methods.

The goodwill balance was $334.3 million as of April 30, 2022, of which $290.2 million relates to the MUAS Reporting Unit (“MUAS”) as a result of the acquisition of Arcturus, $20.8 million relates to the UGV Reporting Unit (“UGV”) as a result of the acquisition of Telerob, and $23.3 million relates to other historical acquisitions.

The fair values of all reporting units exceeded their carrying values as of the measurement date and, therefore, no impairment was recognized.

Determining the fair values of the reporting units required management to make significant estimates and assumptions related to future revenue projections.

We identified the assumptions related to estimating the amount and timing of expected future revenue used in determining the fair values of the MUAS and UGV reporting units as a critical audit matter because of the significant judgments involved in estimating these amounts.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures applied to the amount and timing of expected future cash flows and the selection of the discount rates for intangibles included the following, among others:

● We tested the effectiveness of controls over the valuation of intangibles, including management’s controls over the amount and timing of expected future cash flows and the selection of discount rates.

● We assessed the reasonableness of management’s forecasts of future cash flows by performing inquiries of appropriate individuals outside of the finance organization, comparing the projections to historical results, contractual agreements, certain peer companies, third-party industry forecasts, and internal communications to management and board of directors.

● With the assistance of our fair value specialists, we evaluated the reasonableness of (1) the valuation methodology and (2) the discount rates utilized, including testing the source information underlying the determination of the discount rates, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rates selected by management.

● We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

Our audit procedures related to the expected amount and timing of future revenue used to estimate the fair values of the MUAS and UGV reporting units included the following, among others:

● We tested the effectiveness of management’s controls over their goodwill impairment evaluation, including those over the determination of the fair values of the MUAS and UGV reporting units, such as controls related to management’s selection of forecasts of future revenues.

● We assessed the reasonableness of management’s forecasts of future revenues by performing inquiries of appropriate individuals outside of the accounting organization, comparing the projections to historical results, certain peer companies, third-party industry forecasts, contractual agreements and internal communications to management and board of directors.

● With the assistance of our fair value specialists, we compared applicable industry forecasted long-term revenue growth rates to management’s projected revenues used within the valuation models.

● We evaluated management’s ability to estimate future revenues by comparing actual revenue to management’s historical forecasts.

/s/ Deloitte & Touche LLP

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We have served as the Company’s auditor since fiscal 2020.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of AeroVironment, Inc.

and subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows of AeroVironment, Inc.

and subsidiaries (the Company) for the year ended April 30, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended April 30, 2019, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company’s auditor from 1999 to 2019.

Los Angeles, California

June 25, 2019

AEROVIRONMENT, INC.

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Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 2,229 at April 30, 2022 and $ 544 at April 30, 2021)

Income taxes receivable

Prepaid expenses and other current assets

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Liability for uncertain tax positions

Deferred income taxes

Commitments and contingencies

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Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive (loss) income

Retained earnings

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AEROVIRONMENT, INC.

CONSOLIDATED STATEMENTS OF INCOM E

CONSOLIDATED STATEMENTS OF (LOSS) INCOM E

(In thousands except share and per share data)

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Research and development

Income from continuing operations

Other income:

(Loss) income from continuing operations

Other (loss) income:

Interest (expense) income, net

Other (expense) income, net

Income before income taxes

Provision for income taxes

Equity method investment loss, net of tax

Net income from continuing operations

Sale of ownership in HAPSMobile Inc.

joint venture

(Loss) income from continuing operations before income taxes

(Benefit from) provision for income taxes

Equity method investment income (loss), net of tax

Net (loss) income from continuing operations

Discontinued operations:

(Loss) gain on sale of business, net of tax (benefit) expense of $( 76 ) and $ 2,444 for the year ended April 30, 2020 and April 30, 2019, respectively

Loss from discontinued operations, net of tax

Net (loss) income from discontinued operations

Loss on sale of business, net of tax benefit of $ 76 for the year ended April 30, 2020

Net loss from discontinued operations

Net (loss) income

Net (income) loss attributable to noncontrolling interest

Net income attributable to AeroVironment, Inc.

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

Net (loss) income attributable to AeroVironment, Inc.

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

Continuing operations

Discontinued operations

Net income per share attributable to AeroVironment, Inc.—Basic

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

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

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

Continuing operations

Discontinued operations

Net income per share attributable to AeroVironment, Inc.—Diluted

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

Weighted-average shares outstanding:

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AEROVIRONMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOM E

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOM E

(In thousands)

Year Ended April 30,

Other comprehensive income:

Net (loss) income

Other comprehensive (loss) income:

Unrealized (loss) gain on investments, net of deferred tax expense of $ 8 , $ 1 and $ 14 for the fiscal years ended 2021, 2020 and 2019, respectively

Change in foreign currency translation adjustments

Total comprehensive income

Total comprehensive (loss) income

Net (income) loss attributable to noncontrolling interest

Comprehensive income attributable to AeroVironment, Inc.

Comprehensive (loss) income attributable to AeroVironment, Inc.

See accompanying notes to consolidated financial statements.

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Balance at April 30, 2019

Adoption of ASU 2018-09

Net income (loss)

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Balance at April 30, 2020

Adoption of ASU 2018-09

Net income (loss)

Unrealized gain on investments

Unrealized loss on investments

Foreign currency translation

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Restricted stock awards forfeited

Business acquisition

Tax withholding payment related to net share settlement of equity awards

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Balance at April 30, 2021

Net (loss) income

Unrealized loss on investments

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Restricted stock awards forfeited

Business acquisition

Tax withholding payment related to net share settlement of equity awards

Change in non-controlling interest

Stock based compensation

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Operating activities

Loss (gain) on sale of business, net of tax

Loss from discontinued operations, net of tax

Net income from continuing operations

Adjustments to reconcile net income from continuing operations to cash provided by operating activities from continuing operations:

Net (loss) income

Loss on sale of business, net of tax

Net (loss) income from continuing operations

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

Depreciation and amortization

Losses from equity method investments, net

(Income) loss from equity method investments, net

Amortization of debt issuance costs

Realized gain from sale of available-for-sale investments

Impairment of long-lived assets

Provision for doubtful accounts

Other non-cash gain, net

Other non-cash expense (income)

Non-cash lease expense

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Stock-based compensation

Loss (gain) on sale of property and equipment

Loss (gain) on disposal of property and equipment

Amortization of debt securities

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Unbilled receivables and retentions

Income tax receivable

Income taxes receivable

Prepaid expenses and other assets

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Other liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Investing activities

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Business acquisitions, net of cash acquired

Proceeds from sale of business

Proceeds from sale of ownership in equity method investment

Proceeds from loan repayment

Proceeds from sale of property and equipment

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Financing activities

Principal payments of capital lease obligations

Principal payments of term loan

Payment of contingent consideration

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Proceeds from long-term debt

Net cash provided by (used in) financing activities

Discontinued operations

Operating activities of discontinued operations

Investing activities of discontinued operations

Net cash used in discontinued operations

Net cash (used in) provided by financing activities

Effects of currency translation on cash and cash equivalents

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

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AeroVironment, Inc.

supplies unmanned aircraft systems (“UAS”), tactical missile systems (“TMS”) and related services primarily to organizations within the U.S.

supplies unmanned aircraft systems (“UAS”), tactical missile systems (“TMS”), unmanned ground vehicles (“UGV”) and related services primarily to organizations within the U.S.

Department of Defense (“DoD”) and to international allied governments.

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The accompanying consolidated financial statements include the accounts of AeroVironment, Inc.

and its wholly-owned subsidiaries:

Arcturus UAV, Inc.

(“Arcturus”) and AeroVironment, Inc.

(Afghanistan), as well as the Company’s Turkish joint venture, Altoy Savunma Sanayi ve Havacilik Anonim Sirketi (“Altoy”) (collectively referred to herein as the “Company”).

In February 2019, the Company dissolved AeroVironment International PTE.

LTD., the results of which were not material to the consolidated financial statements.

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

and its wholly-owned subsidiaries Arcturus UAV, Inc.

(“Arcturus”), and Telerob Gesellschaft für Fernhantierungstechnik mbH (“Telerob”), as well as the Company’s Turkish joint venture, Altoy Savunma Sanayi ve Havacilik Anonim Sirketi (“Altoy”) (collectively referred to herein as the “Company”).

On June 29, 2018, the Company completed the sale of substantially all of the assets and related liabilities of its efficient energy systems business segment (the “EES Business”) to Webasto Charging Systems, Inc.

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The Company determined that the EES Business met the criteria for classification as an asset held for sale at April 30, 2018 and represented a strategic shift in the Company’s operations.

Therefore, the assets and liabilities and the results of operations of the EES Business are reported as discontinued operations for all periods presented.

Therefore, the results of operations of the EES Business are reported as discontinued operations for all periods presented.

Refer to Note 2—Discontinued Operations for further details.

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Refer to Note 21—Business Acquisitions for further details.

On May 3, 2021, the Company closed its acquisition of 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 consolidated financial statements.

Refer to Note 21—Business Acquisitions for further details.

Investments in Companies Accounted for Using the Equity or Cost Method

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(“HAPSMobile”).

As the Company has the ability to exercise significant influence over the operating and financial policies of HAPSMobile, the Company’s investment is accounted as an equity method investment.

In March 2022, the Company sold its 7 % share of HAPSMobile to Softbank.

Following the sale, Softbank owns 100 % of HAPSMobile.

Prior to the sale, as the Company had the ability to exercise significant influence over the operating and financial policies of HAPSMobile, the Company’s investment is accounted as an equity method investment.

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

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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.

In March 2022, the Company entered into a second related limited partnership fund also focusing on highly relevant technologies and start-up companies serving defense and industrial markets.

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.

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

The Company’s CODM, who is the Chief Executive Officer, makes operating decisions, assesses performance and makes resource allocation decisions, including the focus of research and development (“R&D”), based on UAS and MUAS operating units.

Accordingly, the Company operates its business as two reportable segments, UAS and MUAS.

Accordingly, the Company identifies four reportable segments.

Use of Estimates

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Significant estimates made by management include, but are not limited to, valuation of:

inventory, available-for-sale securities, acquired intangibles, goodwill, deferred tax assets and liabilities, useful lives of property, plant and equipment, medical and dental liabilities, warranty liabilities, long-term incentive plan liabilities and estimates of anticipated contract costs and transaction price utilized in the revenue recognition process.

anticipated contract costs and transaction price utilized in the revenue recognition process.

Actual results could differ from those estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Specifically, the Company’s existing intangible assets have been reclassified from other assets to intangibles, net on the consolidated balance sheet for all periods presented.

Cash Equivalents

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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.

Pursuant to the terms of the Arcturus Purchase Agreement, the Company maintained escrow accounts to address final purchase price adjustments post-Arcturus Closing and to address Arcturus UAV’s and/or the Sellers’ indemnification obligations.

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

During the fiscal year ended April 30, 2022, the restricted cash was released, and the Company had no restricted cash as of April 30, 2022.

As of April 30, 2021 restricted cash was $ 8,322,000 .

The Company had no restricted cash as of April 30, 2020.

The Company’s investments are accounted for as held-to-maturity reported at amortized cost and available-for-sale reported at fair value.

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government-guaranteed agency securities, U.S.

government sponsored agency debt securities, highly rated commercial paper, highly rated corporate bonds, and accounts receivable.

government sponsored agency debt securities, highly rated corporate bonds, and accounts receivable.

The Company currently invests the majority of its cash in municipal bonds, U.S.

securities, U.S.

government securities, U.S.

government-guaranteed agency securities, U.S.

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The Company’s revenue and accounts receivable are with a limited number of corporations and governmental entities.

In the aggregate, 69 %, 61 % and 58 % of the Company’s revenue came from agencies of the U.S.

In the aggregate,

66 %, 69 % and 61 % of the Company’s revenue came from agencies of the U.S.

government for the years ended April 30, 2022, 2021 and 2020, respectively.

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Additions and betterments to property and equipment are capitalized at cost.

When the Company disposes of assets, the applicable costs and accumulated depreciation and amortization thereon are removed from the accounts and any resulting gain or loss is included in selling, general and administrative (“SG&A”) expense in the period incurred.

The Company reviews the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

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If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made.

During the fiscal

year ended April 30, 2019, the Company recorded an impairment loss of $ 4,398,000 related to the long-lived assets of its commercial UAS Quantix solution.

Refer to Note 8 – Property and equipment, net.

Intangibles Assets — Acquired in Business Combinations

The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of the acquired business to the respective net tangible and intangible assets.

Acquired intangible assets include technology, in-process research and development, customer relationships, trademarks and tradenames, and non-compete agreements.

Acquired intangible assets include technology, backlog, in-process research and development, customer relationships, trademarks and tradenames, and non-compete agreements.

The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses.

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Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets.

Goodwill is tested for impairment annually during the fourth quarter of the Company’s fiscal year or when events or circumstances change in a manner that indicates goodwill might be impaired.

Goodwill is tested at the reporting unit level for impairment annually during the fourth quarter of the Company’s fiscal year or when events or circumstances change in a manner that indicates goodwill might be impaired.

Goodwill is assigned to the reporting units based on specific identification.

Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business or political climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends or significant underperformance relative to projected future results of operations.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

For the impairment test, the Company first assesses qualitative factors, macroeconomic conditions, industry and market considerations, triggering events, cost factors, and overall financial performance, to determine whether it is necessary to perform a quantitative goodwill impairment test.

Alternatively, the Company may bypass the qualitative assessment for some or all of its reporting units and apply the quantitative impairment test.

If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any).

For the quantitative impairment test the Company estimates the fair value by weighting the results from the income approach and the market approach.

These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the Company’s industry and require the Company to make certain assumptions and estimates regarding industry economic factors and future profitability of its business.

When performing the income approach for each reporting unit, the Company incorporates the use of projected financial information and a discount rate that are developed using market participant based assumptions.

least annually and reviewed by management.

When performing the market approach for each reporting unit, the Company utilizes the guideline public company method and the guideline transaction method.

The guideline public company method incorporates revenue and earnings multiples from publicly traded companies with operations and other characteristics similar to each reporting unit.

The selected multiples consider each reporting unit’s relative growth, profitability, size, and risk relative to the selected publicly traded companies.

The guideline transaction method incorporates implied multiples based on transactions from publicly traded companies with similar characteristics to each reporting unit.

No impairment was recorded for the fiscal years ended April 30, 2022, 2021 or 2020.

The MUAS reporting unit is considered at higher risk of failing future quantitative impairment tests as the estimated fair value exceeded the carrying value by 9 % for the fiscal year ended April 30, 2022.

Product Warranty

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The Company is self-insured for employee medical claims, subject to individual and aggregate stop loss policies.

The Company estimates a liability for claims filed and incurred but not reported based upon recent claims experience and an analysis of the average period of time between the occurrence of a claim and the time it is reported to

and paid by the Company.

As of April 30, 2022 and 2021, the Company estimated and recorded a self-insurance liability in wages and related accruals of approximately $ 1,653,000 and $ 1,181,000 , respectively.

5 unchanged sentences

Where applicable, associated interest and penalties are also recorded.

Customer Advances and Amounts in Excess of Cost Incurred

Customer Advances

The Company receives advances, performance-based payments and progress payments from customers that may exceed costs incurred on certain contracts, including contracts with agencies of the U.S.

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In most instances, contract modifications are for additional goods and/or services that are distinct and, therefore, accounted for as new contracts.

The Company’s performance obligations are satisfied over time, which accounted for 43 % of revenue during our fiscal year ended April 30, 2021, or at a point in time, 57 %.

The Company’s performance obligations are satisfied over time, which accounted for 57 %, 43 % and 42 % of revenue during its fiscal years ended April 30, 2022, 2021 and 2020, respectively, or at a point in time, 43 %, 57 % and 58 % during its fiscal year ended April 30, 2022, 2021 and 2020, respectively.

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 R&D contracts is recognized over time as costs are incurred.

Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs

and maintenance, training, engineering design, development and prototyping activities, and technical support services.

Revenue for TMS product deliveries, customization of UGV transport vehicles and Customer-Funded R&D contracts is recognized over time as costs are incurred.

Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities and technical support services.

Contract services revenue is recognized over time as services are rendered.

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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 and medium UAS product sales revenue is composed of revenue recognized on contracts for the delivery of small UAS systems and spare parts.

The Company’s small 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.

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.

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The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was a decrease to revenue of approximately $ 1,124,000 .

During the year ended April 30, 2021, the Company revised its estimates of the total expected costs to complete a TMS contract.

During the year ended April 30, 2020, the Company revised its estimates of the total expected costs to complete a TMS contract and a contract associated with a design and development agreement.

No adjustment on any one contract was material to the Company’s consolidated financial statements for the years ended April 30, 2019.

Revenue by Category

The following tables present the Company’s revenue disaggregated by major product line, contract type, customer category and geographic location (in thousands):

The following tables present the Company’s revenue disaggregated by segment, contract type, customer category and geographic location (in thousands):

Year Ended April 30,

Revenue by major product line/program

Revenue by segment

Total revenue

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CPFF contracts generally subject the Company to lower risk.

the associated base fees are usually lower than fees on FFP contracts.

Accordingly, the associated base fees are usually lower than fees on FFP contracts.

Under T&M contracts, the Company’s profit may vary if actual labor hour rates vary significantly from the negotiated rates.

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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 years ended April 30, 2021 or 2020 were not materially impacted by any other factors.

Changes in the contract asset and liability balances during

the years ended April 30, 2022 or 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.

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The term of the agreement was completed as of December 2020.

Costs of $ 21,833,000 have been reimbursed to the Company as the activities were performed, while the Company was responsible for funding a minimum of $ 11,225,000 .

Costs of $ 21,833,000 have been reimbursed to the Company as the activities were performed, while the Company was

responsible for funding a minimum of $ 11,225,000 .

The Company has determined that the contract meets the criteria of ASC 912-730-05 Contractors – Federal Government and, therefore, all reimbursements are recorded as an offset to research and development expense in the consolidated statements of income.

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Lease Accounting

The Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), along with several additional clarification ASU’s issued during 2018 (“New Lease Standard”) effective May 1, 2019.

The New Lease Standard requires the lessee to recognize the assets and liabilities for the rights and obligations created by leases.

At contract inception the Company determines whether the contract is, or contains, a lease and whether the lease should be classified as an operating or a financing lease.

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For these lease incentives, the Company uses the date of initial possession as the commencement date, which is generally when the Company is given the right of access to the space and begins to make improvements in preparation for intended use.

The Company does not have any finance leases.

The Company does not have any material restrictions or covenants in its lease agreements, sale-leaseback transactions, land easements or residual value guarantees.

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For the fiscal years ended April 30, 2022, 2021 and 2020, foreign currency transaction losses that are included in other (expense) income, net in the accompanying statements of income were $ 242,000 , $ 1,000 , and $ 1,000 , respectively.

Earnings Per Share

Basic earnings per share are computed using the weighted-average number of common shares outstanding and excludes any anti-dilutive effects of options, restricted stock and restricted stock units.

The dilutive effect of potential common shares outstanding is included in diluted earnings per share.

(Loss) Earnings Per Share

Basic (loss) earnings per share are computed using the weighted-average number of common shares outstanding and excludes any anti-dilutive effects of options, restricted stock and restricted stock units.

The dilutive effect of potential common shares outstanding is included in diluted (loss) earnings per share.

The reconciliation of diluted to basic shares is as follows:

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Continuing operations attributable to AeroVironment, Inc.

( 4,188,000 )

Discontinued operations, net of tax

Net income attributable to AeroVironment, Inc.

Net (loss) income attributable to AeroVironment, Inc.

( 4,188,000 )

Denominator for basic earnings per share:

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During the years ended April 30, 2022, 2021 and 2020, certain options, shares of restricted stock and restricted stock units were not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive.

Due to the net loss for the fiscal year ended April 30, 2022, 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.

The number of options, restricted stock and restricted stock units which met this anti-dilutive criterion was approximately 224,000 , 3,000 and 3,000 for the years ended April 30, 2022, 2021 and 2020, respectively.

Recently Adopted Accounting Standards

Effective May 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326):

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

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

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

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

As part of the assessment of the adequacy of the Company’s allowances for credit losses, the Company considered a number of factors including, but not limited to, customer credit ratings, age of receivables, and expected loss rates.

However, the adoption of CECL did not have a material impact to retained earnings for the Company.

Effective May 1, 2020, the Company adopted ASU 2018-15, “ Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ” (“ASU 2018-15”).

ASU 2018-15 provides guidance on the treatment of accounting for fees paid by a customer in a cloud computing arrangement.

This guidance includes the requirements for capitalizing implementation costs incurred in a hosting arrangement.

The Company adopted ASU 2018-15 using the prospective method, applying the new guidance to all implementation costs incurred after adoption.

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 a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

In December 2019, the FASB issued 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.

The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein, with early adoption permitted.

The adoption method is dependent on the specific amendment included in this update as certain amendments require retrospective adoption, modified retrospective adoption, an option of retrospective or modified retrospective, and prospective adoption.

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

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

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

These topics include measuring equity securities using the measurement alternative, how the measurement alternative should be applied to equity method accounting, and certain forward contracts and purchased options which would be accounted for under the equity method of accounting upon settlement or exercise.

The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein, with early adoption permitted.

The amendments should be adopted prospectively.

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

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).

ASU 2021-08 requires an acquirer to apply the guidance in ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities in a business combination, rather than using fair value.

The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.

ASU 2021-08 is adopted prospectively and could impact future acquisitions.

Discontinued Operations

(“Webasto”) pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) between Webasto and the Company.

In accordance with the terms of the Purchase Agreement, as amended by a side letter agreement executed at the closing, the Company received cash consideration of $ 31,994,000 upon closing, which resulted in a gain of $ 11,420,000 and has been recorded in gain on sale of business, net of tax in the consolidated statements of income.

During the year ended April 30, 2019, the Company recorded a reduction to the gain resulting from a working capital adjustment of $ 486,000 .

During the year ended April 30, 2020, the Company and Webasto engaged an independent accounting firm to resolve a working capital dispute with a maximum exposure of $ 922,000 pursuant to the terms of the Purchase Agreement.

On June 29, 2018, the Company completed the sale of substantially all of the assets and related liabilities of its EES Business to Webasto pursuant to a Purchase Agreement between Webasto and the Company.

In accordance with the terms of the Purchase Agreement, as amended by a side letter agreement executed at the closing, the Company received cash consideration of $ 31,994,000 upon closing.

During the year ended April 30, 2020, the Company and Webasto engaged an independent accounting firm to resolve a working capital dispute.

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 income 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 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 consolidated financial statements as the amount was not realized or realizable as of April 30, 2022.

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, 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.

The Company has not filed an answer to Webasto’s amended complaint filed in May 2021.

The Company believes that the allegations are generally meritless and is mounting 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.

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.

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The recall remains a significant part of the Webasto lawsuit.

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.

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) income on the consolidated statements of (loss) income and in other current liabilities on the consolidated balance sheet.

On December 2, 2021, the Company agreed in principle, subject to formal documentation with Webasto, to settle all existing claims related to the sale of its former EES business for $ 20,000,000 and Webasto keeping the Holdback.

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

The Company executed a written settlement agreement with Webasto effective December 16, 2021 to officially and fully settle all claims in the lawsuit.

Under the terms of the written settlement agreement, the Company’s payment of the settlement amount of $ 20,000,000 will occur over a 24 month period from the effective date of the settlement agreement and Webasto will retain the Holdback.

As of April 30, 2022, $ 5,000,000 of the settlement has been paid.

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 $ 38,000 , $ 551,000 and $ 2,758,000 and has been recorded in other income, net in the consolidated statements of income for the fiscal years ended April 30, 2021, 2020 and 2019, respectively.

Income from performing services under the TSA was $ 0 , $ 38,000 and $ 551,000 and has been recorded in other income, net in the consolidated statements of (loss) income for the fiscal years ended April 30, 2022, 2021 and 2020, respectively.

The Company determined that the EES Business met the criteria for classification as an asset held for sale as of April 30, 2018 and represents a strategic shift in the Company’s operations.

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Net loss from discontinued operations

(Loss) gain on sale of business, net of tax (benefit) expense of $( 76 ) and $ 2,444 for the year ended April 30, 2020 and April 30, 2019, respectively

Net (loss) income from discontinued operations

Loss on sale of business, net of tax benefit of $ 76 for the year ended April 30, 2020

Net loss from discontinued operations

Investments consist of the following:

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government securities

Total available-for-sale investments

Total long-term available-for-sale investments

Equity method investments

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government agency securities, and investment grade corporate bonds.

Interest earned from these investments is recorded in interest income.

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

Interest earned from these investments is recorded in interest (expense) income.

Realized gains on sales of these investments on the basis of specific identification is 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 April 30, (in thousands):

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Available-for-sale securities

Contingently returnable consideration

The Company’s financial liabilities measured at fair value on a recurring basis at April 30, 2022, were as follows (in thousands):

Fair Value Measurement Using

Quoted prices in

active markets for

identical assets

Contingent consideration

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

Fair Value Measurement Using

Quoted prices in

active markets for

identical assets

Available-for-sale securities

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

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Transfers to Level 3

Total (gains) losses (realized or unrealized)

Total losses (realized or unrealized)

Included in selling, general and administrative

Balance at April 30, 2022

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 April 30, 2022

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 $ 5,857,000 as of April 30, 2022.

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.

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

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.

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.

During the fiscal year ended April 30, 2022, the target for the first and second years were achieved, and the related consideration of $ 2,000,000 for the first year was released from an escrow account that is not controlled by the Company and, therefore, not recorded on the consolidated balance sheet.

The related consideration of $ 2,000,000 for the second year is in an escrow account not controlled by the Company and is expected to be released during the three months ended July 30, 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 first year earnout of € 2,000,000 was not achieved.

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

See Note 21—Business Acquisitions.

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Inventories consist of the following (in thousands):

(In thousands)

Raw materials

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Intangibles, net

Intangibles are included in other assets on the balance sheet.

The components of intangibles are as follows (in thousands):

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The Company tests identifiable intangible assets and goodwill for impairment in the fourth quarter of each fiscal year unless there are interim indicators that suggest that it is more likely than not that either the identifiable intangible assets or goodwill may be impaired.

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

The weighted average amortization period at April 30, 2022 and 2021 was four years and five years , respectively.

Amortization expense for the years ended April 30, 2022, 2021 and 2020 was $ 26,558,000 , $ 6,469,000 and $ 2,822,000 , respectively.

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

Technology and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of Arcturus on February 19, 2021.

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Additions to goodwill

Impairment of goodwill

Balance at April 30, 2022

Balance at April 30, 2020

Additions to goodwill

Balance at April 30, 2021

The addition during the fiscal year ended April 30, 2022 to the MUAS segment relates to measurement period adjustments for pre-acquisition tax returns.

The addition to All other goodwill is attributable to the Telerob acquisition, which was recorded in Euros and translated to dollars at each reporting date.

The addition during the fiscal year ended April 30, 2021 to the MUAS segment is attributable to the Arcturus Acquisition, and the addition to All other is attributable to the ISG acquisition.

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

The UAS segment goodwill addition is attributable to the ISG acquisition.

The MUAS goodwill addition is attributable to the Arcturus acquisition.

Refer to Note 21—Business Acquisitions for further details.

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Property and equipment, net

During the three months ended April 30, 2019, the Company determined that the continued less than forecasted sales of its Quantix commercial UAS solution, which launched during the fourth quarter of fiscal year 2018, was an indicator that the long-lived assets of this asset group may not be recoverable.

As a result, the company performed an analysis and concluded that the projected undiscounted cash flows were less than the carrying value of the asset group (Step 1).

As a result, the Company performed additional analysis to determine the amount of the impairment loss (Step 2) and recorded an impairment loss totaling $ 4,398,000 related to the long-lived assets of the commercial UAS Quantix solution, which is included in selling, general and administrative expense on the consolidated statements of income.

The fair value of the asset group was determined based on a discounted cash flow model reflective of the Company’s revised cash flow estimates.

Depreciation expense for the years ended April 30, 2022, 2021 and 2020 was $ 30,493,000 , $ 12,793,000 and $ 7,066,000 , respectively.

During the fiscal year ended April 30, 2022, the Company recorded losses on the disposal of in-service ISR assets which included the write-off of $ 1,378,000 of non-cash purchase accounting fair value adjustments.

Investments in Companies Accounted for Using the Equity Method

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

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

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

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

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 ).

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On December 4, 2019, the Company purchased 540,050,000 yen ($ 4,982,000 ) of additional shares of HAPSMobile to increase its ownership stake to approximately 7 %.

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.

At April 30, 2021, 2020 and 2019, the Company recorded

its ownership percentage of the net loss of HAPSMobile, or $ 10,530,000 , $ 4,982,000 and $ 3,944,000 , respectively, in equity method investment loss, net of tax in the consolidated statements of income.

In March 2022, the Company sold it’s 7 % equity interest in HAPSMobile to SoftBank, for 808,008,000 yen ($ 6,497,000 ) and a gain was recorded in sale of ownership in HAPSMobile Inc.

joint venture.

Following the sale, SoftBank owns 100 % of HAPSMobile.

As of April 30, 2022, the Company had no ownership stake in HAPSMobile.

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.

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

Pursuant to the MDDA, which has a five-year term, SoftBank will issue orders to the Company for the Company to perform design and development services and produce deliverables as specified in the applicable order(s).

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

Concurrent with the execution of the MDDA, each of SoftBank and the Company agreed to lend HAPSMobile loans which are convertible into shares of HAPSMobile under certain conditions, and to cooperate with each other to explore restructuring and financing options for HAPSMobile to continue the development of Solar HAPS.

The Company committed to lend 500,000,000 yen.

On June 7, 2021 the Company funded 130,000,000 yen ($ 1,195,000 ) of the loan agreement.

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 ).

On March 1, 2022, HAPSMobile repaid the Company the loan in full plus accrued interest in the amount of 503,832,000 yen ($ 4,345,000 ).

The repayment resulted in equity method income during the fiscal year ended April 30, 2022 up to the extent of the previously recognized equity method losses associate with the loan.

Prior to the sale of the equity interest, the Company had 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, and therefore, the Company’s investment was accounted for as an equity method investment.

At April 30, 2022, 2021 and 2020, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 0 , $ 10,530,000 and $ 4,982,000 , respectively, in equity method investment loss, net of tax in the consolidated statements of income.

During the fiscal year ended April 30, 2021, the Company recorded its proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC in the amount of $ 8,363,000 .

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The impairment recorded by HAPSMobile is included in realized and unrealized losses on investments in the summarized financial information shown below.

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

At April 30, 2022 and 2021, the carrying value of the investment in HAPSMobile of $ 0 was recorded in other assets, long-term.

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.

The Company made additional contributions of $ 1,173,000 , $ 977,000 and $ 525,000 on July 15, 2020, January 4, 2021 and March 24, 2021, respectively.

Under the terms of the limited partnership agreement, the Company has committed to make additional capital contributions of $ 2,377,000 to the fund.

In July 2019, the Company made its initial capital contributions totaling $ 4,948,000 to a limited partnership fund focusing on highly relevant technologies and start-up companies serving defense and industrial markets.

The Company made additional contributions of $ 2,377,000 and $ 2,675,000 during the fiscal years ended April 30, 2022 and 2021, respectively.

Under the terms of the limited partnership agreement, there are no further contribution commitments to the fund as of April 30, 2022.

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.

At April 30, 2021 and 2020, the Company recorded its ownership percentage of the net (gain) loss of the limited partnership, or $( 49,000 ) and $ 394,000 , respectively, in equity method investment loss, net of deferred taxes of $ 11 and $ 111,000 , respectively, in the consolidated statements of income.

At April 30, 2022, 2021 and 2020, the Company recorded its ownership percentage of the net gain (loss) of the limited partnership, or $ 5,889,000 $ 49,000 and $( 394,000 ), respectively, in equity method investment income (loss), net of deferred taxes of $ 1,300,000 , $ 11 and $ 111,000 , respectively, in the consolidated statements of income.

At April 30, 2022 and 2021, the carrying value of the investment in the limited partnership of $ 15,433,000 and $ 7,168,000 , respectively, was recorded in available-for-sale long-term investments.

Summarized financial information of the equity method investments are as follows:

In March 2022, the Company entered into a limited partnership agreement with a second limited partnership fund also focusing on highly relevant technologies and start-up companies serving defense and industrial markets.

Under the terms of the limited partnership agreement, the Company is committed to contributions totaling $ 20,000,000 over an expected five year period.

In May 2022, the Company made its initial capital contribution to the second fund of $ 2,774,000 .

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.

Summarized financial information of the equity method investments, including HAPSMobile for the period of fiscal year 2022 prior to the sale of equity interest, are as follows:

(In thousands)

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Beginning balance

Balance acquired from acquisition

Warranty expense

Changes in estimates related to pre-existing warranties

Warranty costs settled

Ending balance

During the fiscal year ended April 30, 2019, the Company revised its estimates based on the results of additional engineering studies and recorded incremental warranty reserve charges totaling $ 491,000 related to the estimated costs to repair a component of certain small UAS that were delivered in prior periods.

During the fiscal year ended April 30, 2020, the Company revised its estimates based on the results of additional engineering studies to $ 302,000 .

As of April 30, 2020 and 2019, the Company had no remaining warranty reserve related to the estimated costs to repair the impacted UAS and $ 251,000 , respectively.

During the fiscal year ended April 30, 2020, the Company incurred total costs related to this warranty of $ 288,000 .

Employee Savings Plan

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

The Term Loan Facility requires payment of 5 % of the outstanding obligations in each of the first four loan years, with the remaining 80 % payable in loan year five, consisting of three quarterly payments of 1.25 % each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date.

The Term Loan Facility requires payment of 5 % of the outstanding obligations in each of the first four loan years, with the remaining 80 % payable in loan year five, consisting of three

quarterly payments of 1.25 % each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date.

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

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

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

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

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

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

In the event of a default, an additional 2 % default interest rate in addition to the applicable rate if specified or the Base Rate plus Applicable Margin if an applicable rate is not specified.

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

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

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

proceeds thereof, with customary exclusions and exceptions.

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

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

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

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

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

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).

On February 4, 2022, the Company entered into a First Amendment to Credit Agreement and Waiver relating to its existing Credit Agreement (the “First Amendment to Credit Agreement”).

The First Amendment to Credit Agreement waives any event of default that may have occurred as a result of the potential failure by the Company to comply with the consolidated leverage ratio covenant set forth in the Credit Agreement for the fiscal quarter ended January 29, 2022.

In addition, the parties amended the maximum permitted Consolidated Leverage Ratio, such that such ratio may not exceed 4.00 to 1.00 for the Company’s fiscal quarters ended January 29, 2022 and April 30, 2022;

3.50 to 1.00 for any of the Company’s fiscal quarters ending during the period from May 1, 2022 to October 31, 2022;

and 3.00 to 1.00 for any fiscal quarter ending thereafter.

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

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

The First Amendment to Credit Agreement also implemented certain secured overnight financing rate (SOFR) interest rate mechanics and interest rate reference benchmark replacement provisions in order to effectuate the transition from LIBOR as a reference interest rate.

Following the First Amendment to Credit Agreement, the Company has a choice of interest rates between (a) Term SOFR (with a 0 % floor) plus the Applicable Margin;

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

The Applicable Margin is based upon the Consolidated Leverage Ratio (as defined in the First Amendment to Credit Agreement) and whether the Company elects SOFR (ranging from 1.50 - 2.50 %) or Base Rate (ranging from 0.50 - 1.50 %).

The Company may choose interest periods of one, three or six months with respect to Term SOFR and all such rates will include a 0.10 % SOFR adjustment.

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

In the event of a default,

an additional 2 % default interest rate in addition to the applicable rate if specified or the Base Rate plus Applicable Margin if an applicable rate is not specified.

As of April 30, 2022, the Company is in compliance with all amended covenants.

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

(In thousands)

Revolving credit facility

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Unamortized debt issuance costs - revolving credit facility

Future long-term debt principle payments at April 30, 2021 were as follows:

Current period interest rate

Future long-term debt principal payments at April 30, 2022 were as follows:

(In thousands)

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The Company uses its incremental borrowing rate based on the information available at commencement date to determine the present value of future payments and the appropriate lease classification.

The Company defines the initial lease term to include renewal

options determined to be reasonably certain.

The Company’s leases have remaining lease terms of less than one year to nine years , some of which may include options to extend the lease for up to 10 years , and some of which may include options to terminate the lease after two years .

The Company defines the initial lease term to include renewal options determined to be reasonably certain.

The Company’s leases have remaining lease terms of less than one year to eight years , some of which may include options to extend the lease for up to 10 years , and some of which may include options to terminate the lease after two years .

If the Company determines it is reasonably certain of exercising an option to extend or terminate, the option is included in the Company’s determination of lease assets and liabilities.

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For rent holidays and rent escalation clauses during the lease term, the Company records rental expense on a straight-line basis over the term of the lease.

The Company does not have any finance leases.

The Company does not have any material restrictions or covenants in its lease agreements, sale-leaseback transactions, land easements or residual value guarantees.

For these lease incentives, the Company uses the date of

initial possession as the commencement date, which is generally when the Company is given the right of access to the space and begins to make improvements in preparation for intended use.

The Company does not have any material finance leases, restrictions or covenants in its lease agreements, sale-leaseback transactions, land easements or residual value guarantees.

In determining the inputs to the incremental borrowing rate calculation, the Company makes judgments about the value of the leased asset, its credit rating and the lease term including the probability of its exercising options to extend or terminate the underlying lease.

Additionally, the Company makes judgments around contractual asset substitution rights in determining whether a contract contains a lease.

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

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

Operating lease cost

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Total present value of operating lease liabilities

Rental expense under operating leases was approximately $ 4,609,000 for the year ended April 30, 2019.

Stock-Based Compensation

For the years ended April 30, 2022, 2021 and 2020, the Company recorded stock-based compensation expense of approximately $ 5,390,000 , $ 6,932,000 and $ 6,227,000 , respectively.

On September 24, 2021, the stockholders of the Company approved the 2021 Equity Incentive Plan (“2021 Plan”) effective September 24, 2021, for officers, directors, key employees and consultants.

Under the 2021 Plan,

incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation right awards, performance share awards, performance stock unit awards, dividend equivalents awards, stock payment awards, deferred stock awards, restricted stock unit awards, other stock-based awards, performance bonus awards or performance-based awards may be granted at the discretion of the compensation committee, which consists of outside directors.

The sum of any cash compensation, or other compensation, and the value of awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year may not exceed $ 500,000 , which amount is increased to $ 700,000 in the fiscal year of a non-employee director’s initial year of service as a non-employee director.

The exercise price for any incentive stock option shall not be less than 100 % of the fair market value on the date of grant.

Vesting of awards is established at the time of grant.

On January 14, 2007, the stockholders of the Company approved the 2006 Equity Incentive Plan (“2006 Plan”) effective January 21, 2007, for officers, directors, key employees and consultants.

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Vesting of awards is established at the time of grant.

The Restated 2006 Plan expired in July 2021.

The Company had an equity incentive plan (“2002 Plan”) for officers, directors and key employees.

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The 2002 Plan was terminated on the effective date of the 2006 Plan.

Awards outstanding under the 2002 Plan remain outstanding and exercisable;

No additional awards may be made under the 2002 Plan.

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The 1992 Plan expired in August 2002.

No options were granted during the fiscal years ended April 30, 2021, 2020 and 2019.

The fair value of stock options granted previously was estimated at the grant date using the Black-Scholes option pricing model.

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The risk free interest rate is based on the implied yield on a U.S.

Treasury zero-coupon bond with a remaining term that approximates the expected term of the

Treasury zero-coupon bond with a remaining term that approximates the expected term of the option.

The expected dividend yield of zero reflects that the Company has not paid any cash dividends since inception and does not anticipate paying cash dividends in the foreseeable future.

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The intrinsic value of all exercisable options at April 30, 2022 and 2021 was $ 9,229,000 and $ 24,068,000 , respectively.

A summary of the status of the Company’s non-vested stock options as of April 30, 2021 and the year then ended is as follows:

Non-vested Options

Non-vested at April 30, 2020

Non-vested at April 30, 2021

The Company had zero non-vested stock options as of April 30, 2022 and the year then ended.

As of April 30, 2022, there was approximately $ 10,583,000 of total unrecognized compensation cost related to non-vested share-based compensation awards granted under the equity plans.

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Unvested stock at April 30, 2022

Information related to the Company’s restricted stock units at April 30, 2022 and for the year then ended is as follows:

Restated 2006 Plan

Unvested stock at April 30, 2021

Stock granted

Stock canceled

Unvested stock at April 30, 2022

Long-Term Incentive Awards

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”).

During the three months ended July 31, 2021, the Company granted awards under its amended and restated 2006 Equity Incentive Plan (the “Restated 2006 Plan”) to key employees (“Fiscal 2022 LTIP”).

Awards under the Fiscal 2022 LTIP consist of:

(i) time-based restricted stock awards, which vest in equal tranches in July 2021, July 2022 and July 2023, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2023.

(i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2022, July 2023 and July 2024, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2024.

At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100 % for each such metric.

Threshold achievement levels for which the PRSUs would vest at 50 % for each such metric and maximum achievement levels for which such awards would vest at 250 % for each such metric were also established.

Threshold achievement levels for which the

PRSUs would vest at 50 % for each such metric and maximum achievement levels for which such awards would vest at 250 % for each such metric were also established.

The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period.

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At April 30, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP is $ 10,473,000 .

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

Awards under the Fiscal

2020 LTIP consist of:

Awards under the Fiscal 2021 LTIP consist of:

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

During the fiscal years ended April 30, 2021 and 2020, the Company recorded $ 620,000 and $ 649,000 of compensation expense related to the Fiscal 2020 LTIP.

During the fiscal year ended April 30, 2022, the Company recorded a reversal of $( 634,000 ) compensation expense related to the Fiscal 2021 LTIP.

During the fiscal year ended April 30, 2021, the Company recorded $ 1,072,000 of compensation expense related to the Fiscal 2021 LTIP.

At April 30, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 6,021,000 .

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

Awards under the Fiscal 2020 LTIP consist of:

(i) time-based restricted stock awards which vest in equal tranches in July 2019, July 2020 and July 2021, and (ii) PRSUs which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2021.

(i) time-based restricted stock awards, which vest in equal tranches in July 2020, July 2021 and July 2022, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2022.

At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100 % for each such metric.

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

During the fiscal year ended April 30, 2022, the Company recorded a reversal of $( 701,000 ) compensation expense related to the Fiscal 2020 LTIP.

During the fiscal years ended April 30, 2021 and 2020, the Company recorded $ 620,000 and $ 649,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

During the first quarter of fiscal 2022, the Company expects to issue a total of 18,541 fully-vested shares of common stock to settle the Fiscal 2019 LTIP.

At April 30, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 3,335,000 .

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

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At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100 % for each such metric.

Threshold achievement levels for which the PRSUs would vest at 50 % for each such metric and maximum achievement levels for which such awards would vest at 200 % for each such metric were also established.

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

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

No compensation expense was recorded during fiscal year ended April 30, 2021 for the Fiscal 2018 LTIP.

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

Awards under the Fiscal 2017 LTIP consist of:

(i) time-based restricted stock awards, which vested in equal tranches in July 2017, July 2018 and July 2019, and (ii) PRSUs, which vested based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2019.

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.

No compensation expense was recorded during fiscal year ended April 30, 2022 for the Fiscal 2019 LTIP.

During the fiscal years ended April 30, 2021 and 2020, the Company recorded $ 368,000 , and $ 386,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

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

Awards under the Fiscal 2018 LTIP consist of:

(i) time-based restricted stock awards which vest in equal tranches in July 2018, July 2019 and July 2020, and (ii) PRSUs which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2020.

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

PRSUs in the Fiscal 2018 LTIP.

No compensation expense was recorded during fiscal years ended April 30, 2022 or 2021 for the Fiscal 2018 LTIP.

During the fiscal years ended April 30, 2020, the Company recorded $ 193,000 of compensation expense related to the Fiscal 2018 LTIP

At April 30, 2022 and 2021, the Company recorded cumulative stock-based compensation expense from these long-term incentive awards of $ 4,594,000 and $ 5,177,000 , respectively.

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

The estimation of whether the performance targets will be achieved requires judgment, and, to the extent actual results or updated estimates differ from the Company’s current

estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised.

The estimation of whether the performance targets will be achieved requires judgment, and, to the extent actual results or updated estimates differ from the Company’s current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised.

The components of income before income taxes are as follows (in thousands):

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federal statutory income tax rate

Foreign rate differential

State and local income taxes, net of federal benefit

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Fixed asset basis

Revenue recognition

Right-of-use asset

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Net deferred tax assets

At April 30, 2021 and 2020 the Company recorded a valuation allowance of $ 17,453,000 and $ 14,149,000 , respectively, against state R&D credits as the Company is currently generating more tax credits than it will utilize in future years and against the outside basis difference in an equity method investee.

At April 30, 2022 and 2021 the Company recorded a valuation allowance of $ 24,840,000 and $ 17,453,000 , respectively, primarily against state R&D credits as the Company is currently generating more tax credits than it will utilize in future years and against capital loss carryforward.

The valuation allowance increased by $ 7,387,000 and $ 3,304,000 for April 30, 2022 and April 30, 2021, respectively.

At April 30, 2021 the Company had state credit carryforwards of $ 28,530,000 that do not expire and federal tax credit carryforwards of $ 2,260,000 that expire in 2041.

At April 30, 2022 the Company had state credit carryforwards of $ 31,379,000 that do not expire and federal tax credit carryforwards of $ 5,875,000 that begin to expire in 2041.

At April 30, 2022, the Company had federal, state and foreign net operating loss carryforwards of approximately $ 88,863,000 , $ 93,485,000 and $ 64,000 , respectively.

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Utilization of federal and state net operating loss carryforwards may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code, as amended and similar state provisions.

At April 30, 2021 and 2020, the Company had approximately $ 17,556,000 and $ 14,347,000 , respectively, of unrecognized tax benefits all of which would impact the Company’s effective tax rate if recognized.

At April 30, 2022 and 2021, the Company had approximately $ 17,806,000 and $ 17,556,000 , respectively, of unrecognized tax benefits of which $ 4,969,000 would impact the Company’s rate and $ 9,956,000 would result in an increase in valuation allowance.

The Company estimates that $ 3,263,000 of its unrecognized tax benefits will decrease in the next twelve months due to statute of limitation expiration.

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Total accumulated other comprehensive income balance as of April 30, 2021

Changes in foreign currency translation adjustments

Unrealized losses, net of $ 8 of taxes

Changes in foreign currency translation adjustments

Amounts reclassified to other (expense) income, net

Total accumulated other comprehensive income balance as of April 30, 2022

Changes in Accounting Estimates

During the year ended April 30, 2022, the Company revised its estimates of the achievement of the performance metrics of the Company’s long term incentive plans, which resulted in a cumulative adjustment to reduce previously recognized compensation expense of $ 1,602,000 .

During the years ended April 30, 2022, 2021 and 2020, the Company revised its estimates at completion of various contracts recognized using the over time method, which resulted in cumulative catch up adjustments during the year in which the change in estimate occurred.

The change in estimate was a result of the Company changing the total costs required to complete the contracts due to having more accurate cost information as work progressed in subsequent periods on the various contracts.

During the year ended April 30, 2022,

the Company revised its estimates of the total expected costs to complete a TMS variant contract.

During the year ended April 30, 2021, the Company revised its estimates of the total expected costs to complete a TMS variant contract.

During the year ended April 30, 2020, the Company revised its estimates of the total

expected costs to complete a TMS contract and a contract associated with a design and development agreement.

During the year ended April 30, 2020, the Company revised its estimates of the total expected costs to complete a TMS contract and a contract associated with a design and development agreement.

The changes in estimates resulted in cumulative catch-up adjustments to revenue for the years ended April 30, 2019 were not material.

Related Party Transactions

Pursuant to a consulting agreement, the Company paid a board member approximately $ 36,000 , $ 29,000 and $ 59,000 for fiscal years ended April 30, 2022, 2021 and 2020, respectively, for consulting services independent of his board service.

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

Under the DDA and related efforts, the Company will use its best efforts, up to a maximum value of $ 180,806,000 , to design and build prototype solar powered high altitude aircraft and ground control stations for HAPSMobile and conduct low altitude and high altitude flight tests of the prototype aircraft.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 42,426,000 , $ 60,864,000 and $ 55,407,000 for the fiscal years ended April 30, 2021, 2020 and 2019, respectively.

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 and preliminary design agreements between the Company and SoftBank of $ 43,325,000 , $ 42,426,000 and $ 60,864,000 for the fiscal years ended April 30, 2022, 2021 and 2020, respectively.

At April 30, 2022 and 2021, the Company had unbilled related party receivables from HAPSMobile of $ 2,229,000 and $ 544,000 recorded in unbilled receivables and retentions on the consolidated balance sheet, respectively.

As of April 30, 2021, the Company owned approximately a 7 % stake.

As of April 30, 2022, the Company had no ownership stake in HAPSMobile and SoftBank and HAPSMobile are no longer considered related parties.

Refer to Note 9 – Equity Method Investments for further details.

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Although adverse decisions or settlements may occur, the Company, in consultation with legal counsel, believes that the final disposition of such matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

The Company has recorded a litigation reserve related to the settlement offer made to Webasto.

During the fiscal year ended April 30, 2022 the Company entered into a settlement agreement with Webasto to settle all claims.

Refer to Note 2—Discontinued Operations for further details.

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

Historically, the Company has not experienced material disallowed costs as a result of government

Historically, the Company has not experienced material disallowed costs as a result of government audits.

However, the Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future.

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

During the fiscal year ended April 30, 2019, the Company settled rates for its incurred cost claims with the DCAA for fiscal years 2016 and 2017 without payment of any consideration.

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

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Business Acquisitions

Telerob Acquisition

On May 3, 2021, the Company closed its acquisition of Telerob pursuant to the terms of the Telerob Purchase Agreement.

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

Pursuant to the Telerob Purchase Agreement at closing, the Company paid € 37,455,000 (approximately $ 45,400,000 ) in cash to the Telerob Seller (subject to certain purchase price adjustments as set forth in the Telerob Purchase Agreement), less (a) € 3,000,000 (approximately $ 3,636,000 ) to be held in escrow for breaches of the Telerob Seller’s fundamental warranties or any other of Telerob Seller’s warranties to the extent not covered by a representation and warranty insurance policy (the “RWI Policy”) obtained by the Company in support of certain indemnifications provided by the Telerob Seller;

(b) transaction-related fees and costs incurred by the Telerob Seller, including change in control payments triggered by the transaction;

and (c) 50% of the cost of obtaining the RWI Policy.

In addition, at closing the Company paid off approximately € 7,811,000 (approximately $ 9,468,000 ), of certain indebtedness of Telerob, which amount was paid in combination to the Telerob Seller and the lender under an agreement between Telerob GmbH and the lender providing for a reduced payoff amount.

This indebtedness was offset by cash on hand at Telerob at closing.

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

In addition to the consideration paid at closing, the Telerob Seller may receive € 2,000,000 (approximately $ 2,424,000 ) in additional cash consideration if specific revenue targets for Telerob are achieved during the 12 month period after closing beginning on the first day of the calendar month following the closing (the “First Earnout Year”) and an additional € 2,000,000 (approximately $ 2,424,000 ) in cash consideration if specific revenue targets for Telerob are achieved in the 12 month period following the First Earnout Year.

The Telerob Seller may also receive up to € 2,000,000 (approximately $ 2,424,000 ) in additional cash consideration if specific awards and/or orders from the U.S.

military are achieved prior to the end of a 36-month post-closing period.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

During the fiscal year ended April 30, 2022, the Company finalized its determination of the fair value of the assets and liabilities assumed as of the acquisition date, which is summarized in the following table (in thousands):

Fair value of assets acquired:

Accounts receivable

Unbilled receivable

Inventories, net

Prepaid and other current assets

Property and equipment, net

Operating lease assets

Customer relationships

Other intangible assets

Total assets acquired

Fair value of liabilities assumed:

Accounts payable

Wages and related accruals

Customer advances

Current operating lease liabilities

Other current liabilities

Non-current operating lease liabilities

Other non-current liabilities

Deferred income taxes

Total liabilities assumed

Total identifiable net assets

Fair value of consideration:

Cash consideration, net of cash acquired

Contingent consideration

Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates.

The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s best estimate of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance.

Use of different estimates and judgments could yield materially different results.

The goodwill is attributable to the synergies the Company expects to achieve through leveraging the acquired technology to its existing customers, the workforce of Telerob and expected future customers in the UGV market.

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

Supplemental Pro Forma Information (unaudited)

Telerob revenue and loss from operations for the year ended April 30, 2022 since acquisition on May 3, 2021 was $ 29,177,000 and $ 12,115,000 , respectively.

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):

Net (loss) income attributable to AeroVironment, Inc.

The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings.

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 $ 1,186,000 of acquisition-related expenses for the fiscal year ended April 30, 2022.

These expenses are included in selling, general and administrative on the Company’s 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 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

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

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

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

During the fiscal year ended April 30, 2022, the Adjustment Escrow of $ 6,500,000 , less $ 509,000 of post-closing adjustments, and Indemnification Escrow of $ 1,822,500 was released to the Arcturus Sellers.

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

The following table summarizes the provisional allocation of the purchase price over the estimated fair value of the assets and liabilities assumed in the acquisition of Arcturus (in thousands):

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Fair value of assets acquired:

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These expenses are included in selling, general and administrative expense on the Company’s 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

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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.

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.

During the fiscal year ended April 30, 2022, the target for the first year was achieved and the related consideration of $ 2,000,000 was released from an escrow account that is not controlled by the Company and, therefore, not recorded on the consolidated balance sheet.

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 through February 2023 and two subleases pursuant to which the ISG Seller will provide the Company certain services and facilities space to accommodate the transition of ISG to the Company.

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

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

The following table summarizes the provisional allocation of the purchase price over the estimated fair value of the assets and liabilities assumed in the ISG Acquisition (in thousands):

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Fair value of assets acquired:

Customer relationships

Total net identified assets acquired

Fair value of consideration:

Total identifiable net assets

Fair value of consideration transferred:

Contingent consideration

Total consideration

Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates.

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On February 26, 2020, $ 2,500,000 of contingent consideration was paid to the sellers for the achieved milestone.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

During the fiscal year ended April 30, 2020, the Company finalized its determination of the fair value of the assets and liabilities assumed as of the acquisition date, which is summarized in the following table (in thousands):

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The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings.

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

that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2018 with the consequential tax effects, and including the results of Pulse prior to acquisition.

The Company did not incur significant acquisition-related expenses for the year ended April 30, 2020.

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

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, 2018, nor are they indicative of results of operations that may occur in the future.

The Company’s product segments are as follows:

Unmanned Aircraft Systems—The UAS segment focuses primarily on the design, development, production, delivery and support of a technologically advanced portfolio of intelligent, multi-domain robotic systems and related services for government agencies and businesses.

AeroVironment, Inc.

supplies unmanned aircraft systems (“UAS”), tactical missile systems (“TMS”) and related services primarily to organizations within the U.S.

Department of Defense (“DoD”) and to international allied governments.

Medium Unmanned Aircraft Systems—The MUAS segment, which originates with the acquisition of Arcturus, focuses on designs, engineers, tools, and manufactures unmanned aerial and aircraft systems including airborne platforms, payloads and payload integration, ground control systems, and ground support equipment and other items and services related generally to unmanned aircraft systems including ISR services.

The accounting policies of the segments are the same as those described in Note 1, “Organization and Significant Accounting Policies.” The operating segments do not make sales to each other.

The segment results are as follows (in thousands):

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, 2018, 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.

The Rheinmetall-Zusatzversorgung (“RZV”) service plan covers three former employees based on individual contracts issued to the employees.

No other employees are eligible to participate.

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 April 30, 2022.

The table below includes the projected benefit obligation and fair value of plan assets as of April 30, 2022.

The net projected benefit obligation (in thousands) is recorded in other assets on the consolidated balance sheet.

Projected benefit obligation

Fair value of plan assets

Funded status of the plan

Change in projected benefit obligation (in thousands):

Pension benefit obligation balance as of May 3, 2021

Interest cost

Actuarial gain

Benefits paid

Foreign currency exchange rate changes

Pension benefit obligation balance as of April 30, 2022

Change in plan assets (in thousands):

Fair value of plan assets as of May 3, 2021

Expected return on plan assets

Benefits paid

Foreign currency exchange rate changes

Fair value of plan assets as of April 30, 2022

The projected benefit obligation includes assumptions of a discount rate of 1.7 % and pension increase for in-payment benefits of 1.5 % for April 30, 2022.

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

The plan assets consist of reinsurance policies for each of the three pension commitments.

The reinsurance policies are fixed-income investments considered a level 2 fair value hierarchy based on observable inputs of the policy.

The Company does not expect to make any contributions to the Plan in the fiscal year ending April 30, 2023.

The Company assumed expected return on plan assets of 2.9 % for April 30, 2022.

Expected benefits payments as of April 30, 2022 (in thousands):

Total expected benefit payments

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

(In thousands)

Expected return on plan assets

Interest cost

Actuarial gain

Net periodic benefit cost

The Company’s reportable segments are as follows:

Small Unmanned Aircraft Systems —The Small UAS segment focuses primarily on products 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 as well as related support services including training, spare parts, product repair, product replacement, and the customer contracted operation.

Tactical Missile Systems – The TMS segment focuses primarily on TMS products, which are tube-launched aircraft that deploy with the push of a button, fly at higher speeds than small UAS products, and perform either effects delivery or reconnaissance missions, and related support services including training, spare parts, product repair, and product replacement.

The TMS segment also includes customer-funded research and development programs.

platforms, payloads and payload integration, ground control systems, and ground support equipment and other items and services related generally to unmanned aircraft systems including ISR services.

High Altitude Pseudo-Satellite Unmanned Aircraft Systems (“HAPS”)—The HAPS segment consists of the Company’s existing development of High Altitude Pseudo-Satellite systems in conjunction with SoftBank.

All other—All other segments include MacCready Works and the recently acquired ISG and Telerob businesses.

The accounting policies of the segments are the same as those described in Note 1–Organization and Significant Accounting Policies.

The operating segments do not make sales to each other.

The following table (in thousands) sets forth segment revenue, gross margin, operating (loss) income and adjusted operating (loss) income from operations for the periods indicated.

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.

Year Ended April 30, 2022

Gross margin:

Income (loss) from continuing operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Year Ended April 30, 2021

Income (loss) from continuing operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Year Ended April 30, 2020

Income (loss) from continuing 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.

April 30, 2022

Identifiable assets

April 30, 2021

Identifiable assets

Geographic Information

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government foreign military sales in which an end user is a foreign government, accounted for 41 %, 39 % and 45 % of revenue for each of the fiscal years ended April 30, 2022, 2021 and 2020, respectively.

With the acquisition of Arcturus, the Company deploys in-service assets internationally, which as of April 30, 2020 was $ 36,047,000 .

Subsequent Events

Telerob Acquisition

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”), including Telerob’s wholly owned subsidiary, Telerob USA, Inc.

(“Telerob USA,” and collectively with Telerob, the “Telerob Group”) pursuant to its previously announced Share Purchase Agreement (the “Purchase Agreement”) with Unmanned Systems Investments GmbH, a German limited liability company incorporated under the laws of Germany (the “Seller”), and each of the unit holders of the Seller (collectively, the “Shareholders”), to purchase 100 % of the issued and outstanding shares of Seller’s wholly-owned subsidiary Telerob (the “Acquisition”).

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

Pursuant to the Purchase Agreement at closing, the Company paid € 37,455,000 (approximately $ 45,400,000 ) in cash to the Seller (subject to certain purchase price adjustments as set forth in the Purchase Agreement), less (a) € 3,000,000 (approximately $ 3,636,000 ) to be held in escrow for breaches of the Seller’s fundamental warranties or any other of Seller’s warranties to the extent not covered by a representation and warranty insurance policy (the “RWI Policy”) obtained by the Company in support of certain indemnifications provided by the Seller;

(b) transaction-related fees and costs incurred by the Seller, including change in control payments triggered by the transaction;

and (c) 50% of the cost of obtaining the RWI Policy.

In addition, at closing the Company paid off approximately € 7,811,000 (approximately $ 9,468,000 ), of certain indebtedness of the Telerob Group, which amount was paid in combination to the Seller and the lender under an agreement between Telerob and the lender providing for a reduced payoff amount.

This indebtedness was offset by cash on hand at the Telerob Group at closing.

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

In addition to the consideration paid at closing, the Seller may receive € 2,000,000 (approximately $ 2,424,000 ) in additional cash consideration if specific revenue targets for the Telerob Group are achieved during the 12 month period after closing beginning on the first day of the calendar month following the closing (the “First Earnout Year”) and an additional € 2,000,000 (approximately $ 2,424,000 ) in cash consideration if specific revenue targets for the Telerob Group are achieved in the 12 month period following the First Earnout Year.

The Seller may also receive up to € 2,000,000 (approximately $ 2,424,000 ) in additional cash consideration if specific awards and/or orders from the U.S.

military are achieved prior to the end of a 36-month post-closing period.

SoftBank Agreement

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 with each other to continue the design and development of the Solar HAPS aircraft developed under the DDA.

On May 29, 2021, the Company and SoftBank entered into a Master Design and Development Agreement (“MDDA”) to continue the development of Solar HAPS.

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

Concurrent with the execution of the MDDA, each of SoftBank and the Company agreed to lend HAPSMobile JPY 500,000,000 ($ 4,600,000 ), which loans are convertible into shares of HAPSMobile under certain conditions, and to cooperate with each other to explore restructuring and financing options for HAPSMobile to continue the development of Solar HAPS.

Quarterly Results of Operations (Unaudited )

The following tables present selected unaudited consolidated financial data for each of the eight quarters in the two-year period ended April 30, 2021.

In the Company’s opinion, this unaudited information has been prepared on the same basis as the audited information and includes all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the financial information for the period presented.

The Company’s fiscal year ends on April 30.

Due to the fixed year end date of April 30, the first and fourth quarters each consist of approximately 13 weeks.

The second and third quarters each consist of exactly 13 weeks.

The first three quarters end on a Saturday.

Three Months Ended

August 1, 2020

October 31, 2020

January 30, 2021

April 30, 2021

(In thousands except per share data)

Year ended April 30, 2021

Net income attributable to AeroVironment, Inc.

from continuing operations

Net income per share attributable to AeroVironment, Inc.

from continuing operations—basic(3)

Net income per share attributable to AeroVironment, Inc.

from continuing operations—diluted(3)

Three Months Ended

(In thousands except per share data)

Year ended April 30, 2020

Net (loss) income attributable to AeroVironment, Inc.

from continuing operations

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

from continuing operations—basic(3)

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

from continuing operations—diluted(3)

(1) Includes a loss of $ 8.4 million for the Company’s proportionate share of the HAPSMobile Inc.

joint venture’s impairment of its investment in Loon LLC recorded to “Equity method investment loss, net of tax” in the consolidated statement of operations.

(2) Includes a $ 9.3 million legal accrual related to our former EES Business recorded to “Other (expense) income, net” in the consolidated statement of operations.

(3) Earnings per share is computed independently for each of the quarters presented.

The sum of the quarterly earnings per share may not equal the total earnings per share computed for the year due to rounding.

With the acquisition of Arcturus and Telerob, the Company deploys in-service assets internationally, which as of April 30, 2022 was $ 48,496,000 and $ 1,601,000 , respectively.

As of April 30, 2021, the Company deployed in-service assets internationally for Arcturus of $ 36,047,000 .

SUPPLEMENTARY DATA

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

As required by Rule 13a-15(b) under the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and were operating at a reasonable level.

As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.

Management’s Report on Internal Control Over Financial Reporting

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed our internal control over financial reporting as of April 30, 2021, based on criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”).

Based on this assessment, management concluded that the Company maintained effective internal control over financial reporting as of April 30, 2021 based on the specified criteria.

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred.

Our management’s evaluation of internal control over financial reporting excluded the internal control activities of Arcturus, which we acquired in February 19, 2021 and ISG, which we acquired in February 23, 2021, as discussed in Note 21 – Business Acquisitions, of the notes to the consolidated financial statements.

We have included the financial results of these in the consolidated financial statements from the date of acquisition.

Total assets (excluding goodwill and intangible assets) and total revenues subject to Arcturus’ and ISG’s internal control over financial reporting represented approximately 24% and 4% of our consolidated total assets and total revenues as of and for the fiscal year ended April 30, 2021, respectively.

In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our principal executive and financial officers, we have assessed our internal control over financial reporting as of April 30, 2022, based on criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”).

Based on this assessment, management concluded that its internal control over financial reporting was not effective as of April 30, 2022, due to the material weaknesses as described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses, related to certain newly acquired businesses, have been identified:

Management identified deficiencies related to inadequate design and operation of certain controls at certain newly acquired businesses.

Specifically, management did not effectively select and develop certain information technology (“IT”) general controls related to access, computer operations and change management controls that led to deficiencies in the design and operation of control activities, including segregation of duties at certain newly acquired businesses.

The Company also had deficiencies in the design and operation of account reconciliations at certain newly acquired businesses.

The material weaknesses within certain IT systems at certain newly acquired businesses had a pervasive impact to various business activity level processes and accounts, including but not limited to financial reporting, inventory and cost of sales, fixed assets and depreciation.

The material weaknesses could also impact the effectiveness of IT-dependent controls, such as automated controls that address the risk of a material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports.

These deficiencies and a lack of sufficient resources contributed to the potential for there to have been material errors in the Company’s financial statements and therefore resulted in the following additional material weaknesses:

● Control Environment – control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to:

(i) establishing structures with the appropriate segregation of duties in the pursuit of objectives and (ii) demonstrating a commitment to attract, develop, and retain competent individuals in alignment with objectives;

● Risk Assessment – control deficiencies constituting material weaknesses, relating to identifying and analyzing risks to achieve their objectives;

● Control Activities – control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to:

(i) selecting and developing general control activities over technology to support the achievement of objectives, and (ii) selecting and developing control activities that contribute to the mitigation of risks to the achievement of objectives to acceptable levels;

● Information and Communication – control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to:

(i) obtaining, generating, and using relevant quality information used in business process and related control activities, and (ii) internally communicating information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control;

● Monitoring – control deficiencies constituting material weaknesses relating to monitoring activities to ascertain whether the components of internal control are present and functioning.

While these deficiencies did not result in any material misstatements of the Company’s consolidated financial statements, they did, however, collectively represent material weaknesses in internal control over financial reporting.

The effectiveness of our internal control over financial reporting as of April 30, 2022 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Remediation of Material Weakness

As of the date of this report, management has implemented measures it believes will remediate the identified deficiencies for one of the newly acquired businesses as certain IT systems at certain newly acquired businesses related to inventory and cost of sales was transitioned to the Corporate ERP system in late May 2022.

Regarding the material weakness identified in the other acquisition, management’s remediation efforts are ongoing, and management has

committed to a remediation plan to address the deficiencies and enhance the internal control environment.

The remediation plan includes, but is not limited to:

● rationalizing access privileges for all system users and documenting the assignment of access privileges and the rationale for allowing access for each authorized user to address segregation of duties;

● implementing controls that require the periodic re-evaluation of user access privileges, including administrative access;

● enhancing system monitoring controls to confirm the adequacy of program change management controls;

● training of personnel on the design and operation of our internal controls over financial reporting, as well as the hiring of additional resources with experience with COSO.

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

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended April 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except for the identification of the material weaknesses described above, there were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15(f) or 15d-15(f) that occurred during the quarter ended April 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Informatio n.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of AeroVironment, Inc.

To the shareholders and the Board of Directors of AeroVironment, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of AeroVironment, Inc.

(the “Company”) as of April 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended April 30, 2021, of the Company and our report dated June 29, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

As described in Management’s Report on Internal Controls Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Arcturus, which was acquired on February 19, 2021, and ISG, which was acquired on February 23, 2021.

Total assets (excluding goodwill and intangible assets) and total revenues subject to Arcturus’ and ISG’s internal control over financial reporting represented approximately 24% and 4% of consolidated total assets and total revenues as of and for the fiscal year ended April 30, 2021, respectively.

Accordingly, our audit did not include the internal control over financial reporting at Arcturus and ISG.

and subsidiaries (the “Company”) as of April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended April 30, 2022, of the Company and our report dated June 28, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

14 unchanged sentences

Material Weaknesses

not be prevented or detected on a timely basis.

The following material weaknesses, related to certain newly acquired businesses, have been identified and included in management's assessment:

The Company identified deficiencies related to inadequate design and operation of certain controls at certain newly acquired businesses.

Specifically, the Company did not effectively select and develop certain information technology (“IT”) general controls related to access, computer operations and change management controls that led to deficiencies in the design and operation of control activities, including segregation of duties at certain newly acquired businesses.

The Company also had deficiencies in the design and operation of account reconciliations at certain newly acquired businesses.

These deficiencies and a lack of sufficient resources contributed to the potential for there to have been material errors in the Company’s consolidated financial statements and therefore resulted in the following additional material weaknesses:

● Control Environment – control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to:

● Risk Assessment – control deficiencies constituting material weaknesses, relating to identifying and analyzing risks to achieve their objectives;

● Control Activities – control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to:

● Information and Communication – control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to:

● Monitoring – control deficiencies constituting material weaknesses relating to monitoring activities to ascertain whether the components of internal control are present and functioning.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended April 30, 2022, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

5 unchanged sentences

We have adopted a Code of Business Conduct and Ethics (“Code of Conduct”).

The Code of Conduct is posted on our website, http://investor.avinc.com.

The Code of Conduct is posted on our website, http://investor.avinc.com/corporate-governance.

We intend to disclose on our website any amendments to, or waivers of, the Code of Conduct covering our Chief Executive Officer, Chief Financial Officer and/or Controller promptly following the date of such amendments or waivers.

12 unchanged sentences

Principal Accounting Fees and Services.

The information required by Item 14 of Form 10-K will be included in the definitive proxy statement for our 2021 Annual Meeting of Stockholders, and that information is incorporated by reference herein.

Our independent public accounting firm is Deloitte & Touche LLP, Los Angeles, California, PCAOB Auditor ID 34.

The information required by this Item 14 of Form 10-K will be included in the definitive proxy statement for our 2022 Annual Meeting of Stockholders, and that information is incorporated by reference herein.

Exhibits, Financial Statement Schedules.

4 unchanged sentences

● Consolidated Balance Sheets at April 30, 2022 and 2021

● Consolidated Statements of Income for the Years Ended April 30, 2021, 2020 and 2019

● Consolidated Statements of Comprehensive Income for the Years Ended April 30, 2021, 2020 and 2019

● Consolidated Statements of (Loss) Income for the Years Ended April 30, 2022, 2021 and 2020

● Consolidated Statements of Comprehensive (Loss) Income for the Years Ended April 30, 2022, 2021 and 2020

● Consolidated Statements of Stockholders’ Equity for the Years Ended April 30, 2022, 2021 and 2020

7 unchanged sentences

Amended and Restated Certificate of Incorporation of AeroVironment, Inc.

Third Amended and Restated Bylaws of AeroVironment, Inc.

Third Amended and Restated Bylaws of AeroVironment, Inc., amended as of February 25, 2022

Form of AeroVironment, Inc.’s Common Stock Certificate

2 unchanged sentences

AeroVironment, Inc.

Nonqualified Stock Option Plan

Form of Nonqualified Stock Option Agreement pursuant to the AeroVironment, Inc.

Nonqualified Stock Option Plan

AeroVironment, Inc.

Directors’ Nonqualified Stock Option Plan

Form of Directors’ Nonqualified Stock Option Agreement pursuant to the AeroVironment, Inc.

Directors’ Nonqualified Stock Option Plan

AeroVironment, Inc.

2006 Equity Incentive Plan

Form of AeroVironment, Inc.

2002 Equity Incentive Plan Stock Option Agreement

AeroVironment, Inc.

2006 Equity Incentive Plan

AeroVironment, Inc.

2006 Equity Incentive Plan, as amended and restated effective September 29, 2011

15 unchanged sentences

2006 Equity Incentive Plan

Standard Industrial/Commercial Single-Tenant Lease, dated February 12, 2007, between AeroVironment, Inc.

and OMP Industrial Moreland, LLC, for the property located at 85 Moreland Road, Simi Valley, California, including the addendum thereto

First Amendment to Lease Agreement dated October 10, 2011 and Second Amendment to Lease Agreement dated June 2, 2017 by and between AeroVironment, Inc.

and Simi Valley-NCR, LLC for the property located at 85 Moreland Road, Simi Valley, California

AeroVironment, Inc.

2021 Equity Incentive Plan

Form of Stock Option Grant Notice and Stock Option Agreement pursuant to the AeroVironment, Inc.

2021 Equity Incentive Plan

Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement pursuant to the AeroVironment, Inc.

2021 Equity Incentive Plan (Severance Plan Participants)

Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement pursuant to the AeroVironment, Inc.

2021 Equity Incentive Plan (Non-Severance Plan Participants)

Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement pursuant to the AeroVironment, Inc.

2021 Equity Incentive Plan (Non-Employee Directors)

Form of Performance Restricted Stock Award Grant Notice and Performance Restricted Stock Award Agreement pursuant to the AeroVironment, Inc.

2021 Equity Incentive Plan

Lease, dated March 11, 2022, between AeroVironment, Inc.

and BCORE Defender CA1W01, LLC, for the property located at 85 Moreland Road, Simi Valley, California

Standard Industrial/Commercial Single-Tenant Lease, dated March 3, 2008, between AeroVironment, Inc.

and Hillside Associates III, LLC, for the property located at 900 Enchanted Way, Simi Valley, California, including the addendum thereto

First Amendment to Lease Agreement (900 Enchanted Way, Simi Valley, CA 93065) dated as of December 1, 2013, by and between the Company and Hillside III LLC, and related agreements

Second Amendment to Lease Agreement dated as of May 13, 2020, by and between the Company and Hillside III LLC for the property located at 900 Enchanted Way, Simi Valley, CA 93065

Standard Industrial/Commercial Single-Tenant Lease, dated April 21, 2008, between AeroVironment, Inc.

and Hillside Associates II, LLC, for the property located at 994 Flower Glen Street, Simi Valley, California, including the addendum thereto

First Amendment to Lease Agreement (900 Enchanted Way, Simi Valley, CA 93065) dated as of December 1, 2013, by and between the Company and Hillside III LLC, and related agreements

First Amendment to Lease Agreement (994 Flower Glen Street, Simi Valley, CA 93065) dated as of December 1, 2013, by and between the Company and Hillside II LLC, and related agreements

Second Amendment to Lease Agreement (994 Innovators Way, Simi Valley, CA 93065) dated as of June 1, 2021, by and between the Company and Hillside Associates II, LLC, and related agreements

Lease Agreement (996 Flower Glen Street, Simi Valley, CA 93065) dated as of December 1, 2013, by and between the Company and Hillside II LLC, and related agreements

Standard Multi-Tenant Office Lease — Gross, dated September 24, 2015, between AeroVironment, Inc.

and Monrovia Technology Campus LLC for property at 800 Royal Oaks Dr.

Monrovia, California, including addendums thereto

First Amendment to Lease Agreement (996 Innovators Way, Simi Valley, CA 93065) dated as of June 1, 2021, by and between the Company and Hillside Associates II, LLC, and related agreements

Lease dated March 28, 2018 between AeroVironment, Inc.

and Princeton Avenue Holdings, LLC for property located at 14501 Princeton Avenue, Moorpark, California, including addendums thereto

First Amendment to Lease dated October 26, 2018 between AeroVironment, Inc.

and Princeton Avenue Holdings, LLC for property located at 14501 Princeton Avenue, Moorpark, California

Retiree Medical Plan

Award Contract, dated March 1, 2011, between AeroVironment, Inc.

and United States Army Contracting Command

Contract modification P00015 dated September 5, 2013 under the base contract with the US Army Contracting Command—Redstone Arsenal (Missile) dated August 30, 2012

Contract modification P00074 dated September 27, 2016 under the base contract with the US Army Contracting Command — Redstone Arsenal (Missile) dated August 30, 2012

Form of Director Letter Agreement by and between AeroVironment, Inc.

and each non-employee director

Consulting Agreement by and between AeroVironment, Inc.

and Charles R.

Holland executed as of March 7, 2016

Task Order #FY16-001 to Consulting Agreement by and between AeroVironment, Inc.

and Charles R.

Holland executed as of March 7, 2016

Amendment No.

1 dated November 28, 2016, Amendment No.

2 dated June 7, 2017, Amendment No.

3 dated April 23, 2018, Amendment No.

4 dated April 30, 2019, Amendment No.

5 dated December 2, 2019, Amendment No.

6 dated May 29, 2020, Amendment No.

7 dated June 1, 2021 to Standard Consulting Agreement and corresponding Task Orders by and between AeroVironment, Inc.

and Charles R.

Joint Venture Agreement by and between AeroVironment, Inc.

and SoftBank Corp.

dated as of December 1, 2017

Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of December 27, 2017

Amendment No.1 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of March 30, 2018

Amendment No.2 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of June 25, 2018

Amendment No.3 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of August 28, 2018

Amendment No.4 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of December 5, 2018

Amendment No.5 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of March 19, 2019

Amendment No.6 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of March 29, 2019

Amendment No.7 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of April 24, 2019

Amendment No.

8 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of June 20, 2019

Amendment No.

9 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of December 2, 2019

Amendment No.

10 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of February 25, 2020

Amendment No.

11 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile, Inc.

dated as of April 30, 2020

Amendment No.

12 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile Inc., dated as of September 18, 2020

Amendment No.

13 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile Inc., dated as of October 28, 2020

Amendment No.

14 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile Inc., dated as of January 11, 2021

Amendment No.

15 to the Design and Development Agreement by and between AeroVironment, Inc.

and HAPSMobile Inc., dated as of May 29, 2021

Amendment No.

1 to the Joint Venture Agreement by and between AeroVironment, Inc.

and Softbank Corp.

dated as of November 29, 2018

Amendment No.

2 to the Joint Venture Agreement by and between AeroVironment, Inc.

and Softbank Corp.

dated as of February 8, 2019

Amendment No.

3 to the Joint Venture Agreement by and between AeroVironment, Inc.

and Softbank Corp.

dated as of June 21, 2019

Amendment No.

4 to the Joint Venture Agreement by and between AeroVironment, Inc.

and Softbank Corp.

dated as of October 30, 2019

Amendment No.

5 to the Joint Venture Agreement by and between AeroVironment, Inc.

and Softbank Corp.

dated as of March 31, 2021

Amendment No.

6 to the Joint Venture Agreement by and between AeroVironment, Inc.

and Softbank Corp.

dated as of May 29, 2021

and certain non-employee director

Asset Purchase Agreement by and between Webasto Charging Systems, Inc.

4 unchanged sentences

dated as of June 29, 2018

First Amendment to Lease dated October 26, 2018 between AeroVironment, Inc.

and Princeton Avenue Holdings, LLC for property located at 14501 Princeton Avenue, Moorpark, California

AeroVironment, Inc.

2 unchanged sentences

and Kirk Flittie dated as of July 13, 2019

Special Consulting Agreement by and between AeroVironment, Inc.

and Teresa Covington dated as of October 18, 2019

Offer Letter to Kevin McDonnell executed January 13, 2020

Second Amendment to Lease Agreement dated as of May 13, 2020, by and between the Company and Hillside III LLC

Second Amendment to Lease Agreement (994 Innovators Way, Simi Valley, CA 93065) dated as of June 1, 2021, by and between the Company and Hillside Associates II, LLC, and related agreements

First Amendment to Lease Agreement (996 Innovators Way, Simi Valley, CA 93065) dated as of June 1, 2021, by and between the Company and Hillside Associates II, LLC, and related agreements

Stock Purchase Agreement, dated January 11, 2021, by and among AeroVironment, Inc., Arcturus UAV, Inc., and the shareholders and other equity interest holders of Arcturus UAV, Inc.

4 unchanged sentences

Security and Pledge Agreement, dated February 19, 2021, by and among AeroVironment, Inc., certain obligors, and Bank of America, N.A., as the administrative agent

First Amendment to Credit Agreement and Waiver, dated February 4, 2022, by and among AeroVironment, Inc., certain lenders, letter of credit issuers, Bank of America, N.A., as the administrative agent and the swingline lender, and BofA Securities, Inc., JPMorgan Chase Bank, N.A., and U.S.

Bank National Association

Share Purchase Agreement, dated December 3, 2020, by and between AeroVironment, Inc., Unmanned Systems Investments GmbH, and each of the unit holders of Unmanned Systems Investments GmbH

Subsidiaries of AeroVironment, Inc.

Consent of Deloitte & Touche LLP, independent registered public accounting firm

Consent of Ernst & Young LLP, independent registered public accounting firm

Power of Attorney (incorporated by reference to the signature page of this Annual Report)

3 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Label Linkbase Document

XBRL Taxonomy Presentation Linkbase Document

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Label Linkbase Document

Inline XBRL Taxonomy Presentation Linkbase Document

Cover Page Interactive Data File formatted as Inline XBRL and contained in Exhibit 101

(1) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed March 9, 2007 (File No.

(2) Incorporated by reference herein to the exhibits to the Company’s Annual Report on Form 10-K filed July 1, 2015 (File No.

(2) Incorporated by reference herein to the exhibits to the Company’s Current Report on Form 8-K filed March 3, 2022 (File No.

(3) Incorporated by reference herein to the exhibits to the Company’s Registration Statement on Form S-1 (File No.

(4) Incorporated by reference herein to the exhibits to the Company's Annual Report on Form 10-K filed June 24, 2020 (File No.

(5) Incorporated by reference herein to the exhibits to the Company’s Annual Report on Form 10 K filed on June 29, 2016 (File No.

2 unchanged sentences

(8) Incorporated by reference herein to the exhibits to the Company’s Current Report on Form 8-K filed July 28, 2010 (File No.

(8) Incorporated by reference herein to the exhibits on the Company’s Annual Report on Form 10-K filed June 29, 2007 (File No.

(9) Incorporated by reference herein to the exhibits to the Company’s Annual Report on Form 10-K filed June 26, 2019 (File No.

(10) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed March 5, 2014 (File No.

(11) Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q filed December 9, 2015 (File No.

(12) Incorporated by reference herein to the exhibits to the Company’s Annual Report on Form 10-K filed on June 21, 2011 (File No.

(13) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed November 27, 2013 (File No.

(14) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10 Q filed December 7, 2016 (File No.

(15) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed March 9, 2016 (File No.

(10) Incorporated by reference herein to the exhibits to the Company’s Registration Statement on Form S-8 filed October 13, 2021 (File No.

(11) Incorporated by reference herein to the exhibits to the Company’s Annual Report on Form 10-K filed June 26, 2008 (File No.

(12) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed March 5, 2014 (File No.

(17) Incorporated by reference herein to the exhibits to the Company’s Annual Report on Form 10-K filed on June 26, 2019 (File No.

(13) Incorporated by reference herein to the exhibits to the Company’s Annual Report on Form 10-K filed June 29, 2021 (File No.

(14) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed September 6, 2018 (File No.

(15) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed November 30, 2018 (File No.

(16) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed March 9, 2016 (File No.

(20) Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q filed September 6, 2018 (File No.

The representations and warranties contained in the Asset Purchase Agreement were made for the purposes of allocating contractual risk between the parties and not as a means of establishing facts and are qualified by information in disclosure schedules that the parties exchanged in connection with the signing of the Asset

Purchase Agreement.

Moreover, the representations and warranties were made only as of the date of execution of the Asset Purchase Agreement and information concerning the subject matter of the representations and warranties may change after the date of the Asset Purchase Agreement.

3 unchanged sentences

The Company will furnish copies of any schedules to the Securities and Exchange Commission upon request.

(21) Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q filed September 6, 2018 (File No.

(22) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed November 30, 2018 (File No.

(17) Incorporated by reference herein to the exhibits to the Company’s Quarterly Report on Form 10-Q filed March 7, 2018 (File No.

(24) Incorporated by reference herein to the exhibits to the Company’s Current Report on Form 8-K filed on July 27, 2019 (File No.

(18) Incorporated by reference herein to the exhibits to the Company’s Current Report on Form 8-K/A filed October 22, 2019 (File No.

(19) Incorporated by reference herein to the exhibits to the Company's Annual Report on Form 10-K filed June 29, 2021 (File No.

(27) Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q filed December 9, 2020 (File No.

The representations and warranties contained in the Stock Purchase Agreement were made for the purposes of allocating contractual risk between the parties and not as a means of establishing facts and are qualified by information in disclosure schedules that the parties exchanged in connection with the signing of the Stock Purchase Agreement.

Moreover, the representations and warranties were made only as of the date of execution of the Stock Purchase Agreement and information concerning the subject matter of the representations and warranties may change after the date of the Stock Purchase Agreement.

Only parties to the Stock Purchase Agreement have a right to enforce the agreement.

Accordingly, security holders should not rely on the representations and warranties in the Stock Purchase Agreement.

All schedules (or similar attachments) have been omitted from this filing pursuant to Item 601 of Regulation S-K.

The Company will furnish copies of any schedules to the Securities and Exchange Commission upon request.

(20) Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q filed March 4, 2022 (File No.

Confidential treatment has been granted for portions of this exhibit.

(21) Incorporated by reference herein to the exhibits to the Company's Annual Report on Form 10-K filed June 29, 2021 (File No.

The representations and warranties contained in the Share Purchase Agreement were made for the purposes of allocating contractual risk between the parties and not as a means of establishing facts and are qualified by information in disclosure schedules that the parties exchanged in connection with the signing of the Share Purchase Agreement.

Moreover, the representations and warranties were made only as of the date of execution of the Share Purchase Agreement and information concerning the subject matter of the representations and warranties may change after the date of the Stock Purchase Agreement.

Only parties to the Share Purchase Agreement have a right to enforce the agreement.

Accordingly, security holders should not rely on the representations and warranties in the Share Purchase Agreement.

All schedules (or similar attachments) have been omitted from this filing pursuant to Item 601 of Regulation S-K.

The Company will furnish copies of any schedules to the Securities and Exchange Commission upon request.

Pursuant to Items 601(b)(2) and/or 601(b)(10) of Regulation S-K, certain immaterial provisions of the agreement that would likely cause competitive harm to the Company if publicly disclosed have been redacted or omitted.

5 unchanged sentences

As such, financial statements of HAPSMobile are required to be filed by amendment to this Annual Report on Form 10-K, within six months of HAPSMobile's fiscal year end.

Accordingly, HAPSMobile financial statements for its fiscal year ended March 31, 2021 will be filed via an amendment to this Annual Report on Form 10-K on or before September 30, 2021.

HAPSMobile financial statements for its fiscal year ended March 31, 2021 will be filed via an amendment to this Annual Report on Form 10-K on or before September 30, 2021.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

11 unchanged sentences

June 28, 2022

Executive Officer and Director

Executive Officer and Chairman

(Principal Executive Officer)

2 unchanged sentences

Chief Financial Officer (Principal

Financial and Accounting Officer)

/s/ Timothy E.

Financial Officer)

Vice President and

June 28, 2022

Chief Accounting Officer (Principal

Accounting Officer)

/s/ Edward R.

June 28, 2022

/s/ Arnold L.

/s/ Cindy Lewis

June 28, 2022

10 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-K

Item 8. Financial Statements and Supplementary Data