What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-06-28 compared with 2022-06-29 · 413 added, 510 removed, 1251 unchanged (42% of the section changed)

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2023, 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.

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, 2023, 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 27, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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.

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

Critical Audit Matter Description

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 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill— Refer to Note 1 and Note 6 to the financial statements

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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 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.

Subsequent to the performance of the Company’s annual goodwill impairment test, in May 2023, a trigger event was identified that indicated that the carrying value of the medium unmanned aircraft systems (MUAS) reporting unit exceeded its fair value.

As a result, the Company updated its estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates resulted in the recognition of a goodwill impairment charge of $156.0 million in the MUAS reporting unit.

We identified goodwill for MUAS as a critical audit matter because of the significant judgments made by management to estimate the fair value of MUAS and the difference between its fair value and carrying value.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to future revenue projections.

How the Critical Audit Matter Was Addressed in 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.

Our audit procedures related to the expected amount and timing of future revenue projections used to estimate the fair value of the MUAS reporting unit 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 value of the MUAS reporting unit, such as controls related to management’s review of forecasts of future revenues.

● We inquired of appropriate individuals, both within and outside of finance, regarding the revenue projections.

● We assessed the reasonableness of management’s forecasts of future revenues by comparing the projections to historical results, certain peer companies, third-party industry forecasts, contractual agreements and internal communications to management and the Company’s 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 management’s historical forecasts.

/s/ Deloitte & Touche LLP

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Accounts receivable, net of allowance for doubtful accounts of $ 156 at April 30, 2023 and $ 592 at April 30, 2022

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

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

Inventories, net

Income taxes receivable

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Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Retained earnings

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Research and development

(Loss) income from continuing operations

Impairment of goodwill

(Loss) income from operations

Other (loss) income:

Interest (expense) income, net

Other (expense) income, net

Interest expense, net

Other expense, net

Sale of ownership in HAPSMobile Inc.

joint venture

(Loss) income from continuing operations before income taxes

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

Net loss from discontinued operations

Equity method investment (loss) income, net of tax

Net (loss) income

Net (income) loss attributable to noncontrolling interest

Net income attributable to noncontrolling interest

Net (loss) income attributable to AeroVironment, Inc.

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

Continuing operations

Discontinued operations

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

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

Weighted-average shares outstanding:

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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

Other comprehensive income (loss):

Unrealized gain (loss) on investments, net of deferred tax expense of $ 0 , $ 8 , and $ 1 for the fiscal years ended 2023, 2022 and 2021, respectively

Change in foreign currency translation adjustments

Total comprehensive (loss) income

Net (income) loss attributable to noncontrolling interest

Net income attributable to noncontrolling interest

Comprehensive (loss) income attributable to AeroVironment, Inc.

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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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Net (loss) income

Unrealized loss on investments

Unrealized gain on investments

Foreign currency translation

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Tax withholding payment related to net share settlement of equity awards

Change in non-controlling interest

Shares issued, net of issuance costs

Deconsolidation of previously controlled subsidiary

Stock based compensation

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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:

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

Depreciation and amortization

(Income) loss from equity method investments, net

Impairment of goodwill

Loss (income) from equity method investments

Loss on deconsolidation of previously controlled subsidiary

Amortization of debt issuance costs

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Provision for doubtful accounts

Other non-cash expense (income)

Reserve for inventory excess and obsolescence

Other non-cash expense (income), net

Non-cash lease expense

Loss on foreign currency transactions

Unrealized loss on available-for-sale equity securities, net

Deferred income taxes

Stock-based compensation

Loss (gain) on disposal of property and equipment

Amortization of debt securities

Loss on disposal of property and equipment

Amortization of debt securities discount

Changes in operating assets and liabilities, net of acquisitions:

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Other liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Investing activities

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Equity method investments

Equity security investments

Business acquisitions, net of cash acquired

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Proceeds from loan repayment

Proceeds from sale of property and equipment

Redemptions of held-to-maturity investments

Purchases of held-to-maturity investments

Proceeds from deconsolidation of previously controlled subsidiary, net of cash deconsolidated

Redemptions of available-for-sale investments

Purchases of available-for-sale investments

Net cash (used in) provided by investing activities

Net cash used in investing activities

Financing activities

Principal payments of term loan

Payment of contingent consideration

Tax withholding payment related to net settlement of equity awards

Holdback and retention payments for business acquisition

Proceeds from shares issued, net of issuance costs

Tax withholding payment related to net settlement of equity awards

Exercise of stock options

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Proceeds from long-term debt

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effects of currency translation on cash and cash equivalents

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

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

Cash, cash equivalents and restricted cash at beginning of period

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Non-cash activities

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

Unrealized (gain) loss on investments, net of deferred tax expense of $ 0 , $ 8 , and $ 1 for the fiscal years ended 2023, 2022 and 2021, respectively

Issuance of common stock for business acquisition

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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.

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

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 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.

On June 10, 2019, the Company purchased 100 % of the issued and outstanding member units of Pulse Aerospace, LLC (“Pulse”) pursuant to the terms of a Unit Purchase Agreement (the “Pulse Purchase Agreement”).

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

In February 2021, the Company dissolved its wholly-owned subsidiary, Pulse Aerospace, LLC, the results of which were not material to the consolidated financial statements.

Refer to Note 21—Business Acquisitions for further details.

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

(“Arcturus”), and Telerob Gesellschaft für Fernhantierungstechnik mbH (“Telerob”) (collectively referred to herein as the “Company”).

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

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

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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”).

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

On August 17, 2022, the Company purchased certain assets of, and assumed certain liabilities of Planck Aerosystems, Inc.

(“Planck”) pursuant to the purchase agreement, and post-acquisition, Planck has been incorporated into the medium UAS (“MUAS”) segment.

The assets, liabilities and operating results of Planck 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

Investments in other non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee.

When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment.

of investment.

When net losses from an investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for as the Company is not obligated to provide additional capital.

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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.

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 was accounted as an equity method investment.

The Company had presented its proportion of HAPSMobile’s net loss in equity method investment (loss) income, net of tax in the consolidated statements of (loss) income.

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

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

Refer to Note 8—Investments in Companies Accounted for Using the Equity Method for further details.

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.

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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.

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

Refer to Note 8—Investments in Companies Accounted for Using the Equity Method for further details.

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

On October 14, 2022, the Company sold an additional 35 % of the common shares of Altoy to Toygun.

As a result of the share sales, the Company decreased its interest in Altoy from 85 % to 15 % and has determined that it no longer controls Altoy.

Therefore, the Company no longer consolidates Altoy in the Company’s consolidated financial statements.

As the Company has the ability to exercise significant influence over the operating and financial policies of Altoy, the Company accounts for the investment as an equity method investment and records its proportion of any gains or losses of Altoy in equity method investments (loss) income, net of tax.

Refer to Note 8— Investments in Companies Accounted for Using the Equity Method for further details.

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”).

Accordingly, the Company identifies four reportable segments.

Accordingly, the Company identifies three 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.

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.

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 reserves for inventory excess and obsolescence have been reclassified from changes in inventories to non-cash adjustments within operating activities on the consolidated statements of cash flows for all periods presented.

Cash Equivalents

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

Unrealized gains and losses are excluded from earnings and reported as a separate component of stockholders’ equity, net of deferred income taxes for available-for-sale investments.

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

During the fiscal year ended April 30, 2022, the restricted cash was released, and the Company had no restricted cash as of April 30, 2023 or 2022, respectively.

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

Unrealized gains and losses for debt securities are excluded from earnings and reported as a separate component of stockholders’ equity, net of deferred income taxes for available-for-sale investments.

Investments in equity securities and warrants are measured at fair value with net unrealized gains and losses from changes in the fair value recognized in other (expense) income, net.

Gains and losses realized on the disposition of investment securities are determined on the specific identification basis and credited or charged to income.

Premium and discount on investments are amortized and accreted using the interest method and charged or credited to investment income.

Management determines the appropriate classification of securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary.

On a quarterly basis, the Company considers available quantitative and qualitative evidence in evaluating potential impairment of its investments.

If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and its intent and ability to hold the investment to maturity.

The Company also considers potential adverse conditions related to the financial health of the issuer based on rating agency actions.

Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in earnings and a new cost basis in the investment is established.

Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date.

Fair Values of Financial Instruments

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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.

government securities, U.S.

government-guaranteed agency securities, U.S.

government sponsored agency debt securities and highly rated corporate bonds.

The Company currently invests in equity securities and limited partnership funds.

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

In the aggregate,

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

In the aggregate, 68 %, 66 % and 69 % of the Company’s revenue came from agencies of the U.S.

government for the years ended April 30, 2023, 2022 and 2021, 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 with the exception of in-service ISR assets which is included in cost of sales expense in the period incurred.

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”) in the period incurred with the exception of in-service ISR assets which is included in cost of sales in the period incurred.

Following the closure of all of the Company’s contractor-owned, contractor-operated (“COCO”) site locations, in-service intelligence, surveillance and reconnaissance (“ISR”) assets determined to have an alternate business use were reclassified to machinery and equipment as of April 30, 2023.

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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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, backlog, 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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The original estimate of an asset's useful life and the impact of an event or circumstance on either an asset's useful life or carrying value involve significant judgment.

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

Due to the closure of all the Company’s MUAS COCO sites, the Company revised the estimated useful life for the MUAS customer relationships which resulted in accelerated intangible amortization expenses of $ 34,149,000 during the fiscal year ended April 30, 2023.

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

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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.

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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.

Subsequent to the performance of the Company’s annual goodwill impairment test, in May 2023, a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value.

Specifically, the Company received notification that it was not down selected for a US DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

As a result, the Company updated its estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates resulted in the recognition of a goodwill impairment charge of $ 156,017,000 in the MUAS reporting unit.

The Company determined that it was more likely than not that the fair value of the Company’s other reporting units were more than their carrying values as of the annual goodwill impairment test date.

Product Warranty

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

The Company’s SUAS, MUAS and UGV product sales revenue is composed of revenue recognized on contracts for the delivery of SUAS, 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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These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer.

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

The nature of the Company’s contracts gives rise to several types of variable consideration, including undefinitized contract actions which are within the scope of ASC 606 with final contract values to be negotiated, penalty fees and incentive awards generally for late delivery and early delivery, respectively.

The Company generally estimates such variable consideration as the most likely amount.

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

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

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

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

Changes in cumulative revenue estimates, due to changes in the estimated transaction price or cost estimates, are recorded using a cumulative catch-up adjustment in the period identified for contracts with performance obligations recognized over time.

If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the quarter it is identified.

Changes in cumulative revenue estimates, due to changes in the estimated transaction price or cost estimates including definitization of contracts, are recorded using a cumulative catch-up adjustment in the period identified.

In the period undefinitized contract actions become definitized, a cumulative catch-up adjustment is recorded to reflect the final consideration, which could have a material positive or negative impact.

If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the quarter it is identified, and it is recorded in other current liabilities.

The balance of forward loss reserves as of April 30, 2023 and April 30, 2022 was $ 1,878,000 and $ 1,064,000 , respectively.

The Company recorded the forward loss reserves as the total estimated costs to complete the contracts are in excess of the total remaining consideration of the contracts.

No adjustment on the forward loss reserve for any one contract was material to the Company’s consolidated financial statements for the fiscal years ended April 30, 2023, 2022 or 2021.

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

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the years ended April 30, 2023, 2022 or 2021.

During the year ended April 30, 2022, the Company revised its estimates of the total expected costs to complete a TMS contract.

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.

During the years ended April 30, 2023, 2022 and 2021, the Company revised its estimates of the total expected costs to complete a TMS contract.

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 $ 1,898,000 , $ 1,124,000 and $ 1,041,000 , respectively.

Revenue by Category

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Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables, and customer advances and deposits on the consolidated balance sheet.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables, and customer advances and deposits on the consolidated balance sheets.

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

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

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

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

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

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

Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs

within a one-year period or are used to ensure the customer meets contractual requirements.

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

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

Changes in the contract asset and liability balances during

the years ended April 30, 2022 or 2021 were not materially impacted by any other factors.

Changes in the contract asset and liability balances during the years ended April 30, 2023 or 2022 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 assets related to costs to fulfill contracts with customers are capitalized and amortized over the period the related performance obligations are satisfied.

As of April 30, 2022 and 2021, the Company had $ 0 and $ 1,729,000 of costs to fulfill future performance obligations on contracts considered to be probable of occurrence.

Costs to fulfill a contract are recorded in prepaid expenses and other current assets on the consolidated balance sheets.

As of April 30, 2023 and 2022, the Company had no costs to fulfill future performance obligations on contracts considered to be probable of occurrence.

Stock-Based Compensation

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Research and Development

Internally funded research and development costs (“IRAD”), sponsored by the Company relate to both U.S.

Internally funded R&D costs sponsored by the Company relate to both U.S.

government products and services and those for commercial and foreign customers.

IRAD costs for the Company are recoverable and allocable under government contracts in accordance with U.S.

Internally funded R&D costs for the Company are recoverable and allocable under government contracts in accordance with U.S.

government procurement regulations.

Customer-funded research and development costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications.

Customer-funded R&D costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications.

These costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the research and development services are performed.

Revenue from customer-funded research and development was approximately $ 84,247,000 , $ 74,218,000 and $ 80,934,000 for the years ended April 30, 2022, 2021 and 2020, respectively.

The related cost of sales for customer-funded research and development totaled approximately $ 59,054,000 , $ 51,395,000 and $ 56,440,000 for the years ended April 30, 2022, 2021 and 2020, respectively.

Revenue from customer-funded R&D was approximately $ 97,880,000 , $ 84,247,000 and $ 74,218,000 for the years ended April 30, 2023, 2022 and 2021, respectively.

The related cost of sales for customer-funded R&D totaled approximately $ 70,711,000 , $ 59,054,000 and $ 51,395,000 for the years ended April 30, 2023, 2022 and 2021, respectively.

In January 2017, the Company executed a cost sharing Other Transaction Agreement type contract funded by the US Federal Government to perform certain system design, development and functional testing activities specific to a new prototype UAS on a best-efforts basis.

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 .

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.

Reimbursements under the contract were $ 3,424,000 and $ 8,102,000 for the fiscal years ended April 30, 2021 and 2020, respectively.

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 .

Reimbursements under the contract were $ 3,424,000 for the fiscal year ended April 30, 2021.

Lease Accounting

The Company leases certain buildings, land and equipment.

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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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 six 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 .

None of the Company’s options to extend or terminate are reasonably certain of being exercised, and are therefore not included in the Company’s determination of lease assets and liabilities.

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

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

For operating leases, the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

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Foreign currency transaction gains and losses are charged or credited to earnings as incurred.

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.

For the fiscal years ended April 30, 2023, 2022 and 2021, foreign currency transaction losses that are included in other (expense) income, net in the accompanying consolidated statements of (loss) income were $ 119,000 , $ 242,000 , and $ 1,000 , respectively.

(Loss) Earnings Per Share

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Year Ended April 30,

Continuing operations attributable to AeroVironment, Inc.

( 4,188,000 )

Discontinued operations, net of tax

Net (loss) income attributable to AeroVironment, Inc.

( 176,212,000 )

( 4,188,000 )

Denominator for basic earnings per share:

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During the years ended April 30, 2023, 2022 and 2021, 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.

Due to the net loss for the fiscal years ended April 30, 2023 and 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 146,000 , 224,000 and 3,000 for the years ended April 30, 2023, 2022 and 2021, respectively.

Recently Adopted Accounting Standards

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

In October 2021, the Financial Accounting Standards Board issued Accounting Standard Update (“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

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 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.

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.

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.

On August 14, 2019, Benchmark Electronics, Inc.

(“Benchmark”), the company that assembled the products subject to the recall, served a demand for arbitration to the Company and Webasto, and a third-party part supplier pursuant to its contracts with the Company and Webasto, respectively.

The Company filed a responsive pleading in the Benchmark arbitration on October 29, 2019, consisting of a general denial, affirmative defenses, and a reservation of the right to file counter-claims at a later date.

Webasto challenged the validity of the Benchmark arbitration by filing an action in New York Superior Court.

In December 2019, Webasto and Benchmark reached a settlement of their disputed claims.

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

The recall remains a significant part of the Webasto lawsuit.

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 $ 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.

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

The table below presents the statements of income data for the EES Business (in thousands).

Year Ended April 30,

Cost of sales

Selling, general and administrative

Research and development

Other income, net

Loss from discontinued operations before income taxes

Benefit for income taxes

Net loss 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

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

On May 1, 2022, the Company early adopted ASU 2021-08.

ASU 2021-08 was adopted prospectively and did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

No recently issued accounting standards are expected to have a material impact on the Company.

Investments consist of the following:

(In thousands)

Short-term investments:

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government securities

Corporate bonds

Total short-term investments

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Available-for-sale securities:

Municipal securities

government securities

Total long-term available-for-sale investments

Equity securities and warrants

Total long-term available-for-sale securities investments

Equity method investments

Investment in limited partnership fund

Investments in limited partnership funds

Total equity method investments

1 unchanged sentence

Available-For-Sale Securities

As of April 30, 2022 and 2021, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

government securities, U.S.

government agency securities, and investment grade corporate bonds.

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):

April 30, 2022

April 30, 2021

As of April 30, 2022, the balance of available-for-sale debt securities consisted of state and local government municipal securities, U.S.

government securities and U.S.

government agency securities.

Interest earned from these investments is recorded in interest expense, net.

Realized gains on sales of these investments on the basis of specific identification are recorded in interest expense, net.

As of April 30, 2023, the Company held no available-for-sale debt securities.

The following table is a summary of the activity related to the available-for-sale debt securities recorded in short-term investments as of April 30, 2022, respectively (in thousands):

Municipal securities

government securities

Corporate bonds

Total available-for-sale investments

The amortized cost and fair value of the Company’s available-for-sale securities by contractual maturity at April 30, 2022, are as follows:

Due within one year

Due after one year through five years

Total available-for-sale equity securities

Equity Securities

Equity securities and warrants are measured at fair value with net unrealized losses from changes in the fair value recognized in other expense, net.

Net loss recognized during the period on equity securities

Net loss recognized during the period on equity securities sold during the period

Unrealized loss recognized during the period on equity securities still held at the reporting date

Fair Value Measurements

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identical assets

Available-for-sale securities

Contingently returnable consideration

Equity securities

The Company’s financial liabilities measured at fair value on a recurring basis at April 30, 2023, were as follows (in thousands):

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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 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):

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Transfers to Level 3

Total losses (realized or unrealized)

Total fair value measurement adjustments (realized or unrealized)

Included in selling, general and administrative

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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, 2023

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.

Pursuant to the ISG Purchase Agreement, the sellers could receive up to a maximum of $ 6,000,000 in additional cash consideration (“contingent consideration”), if certain revenue targets were achieved during the three 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.

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.

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 targets for the first and second year were achieved, and during the fiscal year ended April 30, 2023, the target for the third year was achieved.

The consideration was held and released from an escrow account not controlled by the Company and, therefore, not recorded on the consolidated balance sheets.

The related consideration of $ 2,000,000 for the first year target was released from the escrow account during the fiscal year ended April 30, 2022.

The related consideration of $ 2,000,000 for both the second and third year targets were released from the escrow account during the fiscal year ended April 30, 2023.

Pursuant to the Telerob Purchase Agreement, the Telerob Sellers may receive up to a maximum of € 6,000,000 (approximately $ 6,609,000 ) in additional cash consideration if specific revenue and contract award targets for Telerob are achieved during the 36 month period after closing.

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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.

During the fiscal year ended April 30, 2023, the second year earnout of € 2,000,000

(approximately $ 2,203,000 ) was achieved.

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

Refer to Note 21—Business Acquisitions.

On September 12, 2022, the Company invested $ 5,000,000 and acquired 500,000 shares and 500,000 privately placed, redeemable warrants of Amprius Technologies, Inc.

The privately placed, redeemable warrants have an exercise price of $ 12.50 and redemption price of $ 20.00 .

The Company measures the fair value of the privately placed, redeemable warrants using the quoted market price of the public warrants which have an exercise price of $ 11.50 and a redemption price of $ 18.00 and classifies the warrants as a level 2 fair value measurement.

On September 9, 2022, the Company acquired 10,000 shares of Nauticus Robotics, Inc.

for $ 100,000 .

Inventories, net

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For the fiscal years ended April 30, 2023, 2022 and 2021, the Company recorded inventory reserve charges of $ 8,136,000 , $ 2,271,000 and $ 1,178,000 , respectively.

Of the $ 5,377,000 inventory reserve recorded during fiscal year ended April 30, 2020, approximately $ 2,600,000 related to an impairment of the remaining net book value of the Company’s Quantix commercial UAS solution.

Intangibles, net

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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, 2022 and 2021 was four years and five years , respectively.

The weighted average amortization period at April 30, 2023 and 2022 was four years , respectively.

Amortization expense for the years ended April 30, 2023, 2022 and 2021 was $ 58,121,000 , $ 26,558,000 and $ 6,469,000 , respectively.

Due to the closure of all of the Company’s MUAS COCO sites during the three months ended April 30, 2023, we revised the estimated useful life for MUAS customer relationships which resulted in accelerated intangible amortization expenses of $ 34,149,000 during the fiscal year ended April 30, 2023.

Technology and backlog intangible assets were recognized in conjunction with the Company’s acquisition of Planck on August 17, 2022.

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

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Technology and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of ISG on February 23, 2021.

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

Refer to Note 21 - Business Combinations for further details.

Refer to Note 21—Business Acquisitions for further details.

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

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Additions to goodwill

Impairment of goodwill

Balance at April 30, 2023

2 unchanged sentences

Balance at April 30, 2022

The addition during the fiscal year ended April 30, 2023 to the MUAS segment relates to the Planck Acquisition.

The addition during the fiscal year ended April 30, 2023 to All other goodwill is attributable to the translation of the goodwill related 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, 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 addition to All other goodwill during the fiscal year ended April 30, 2022 is attributable to the Telerob Acquisition.

Refer to Note 21—Business Acquisitions for further details.

Specifically, the Company received notification that it was not down selected for a US DOD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

As a result, the Company updated its estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates resulted in the recognition of a goodwill impairment charge of $ 156,017,000 in the MUAS reporting unit.

Property and Equipment, net

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Depreciation expense for the years ended April 30, 2023, 2022 and 2021 was $ 41,803,000 , $ 30,493,000 and $ 12,793,000 , 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.

During the fiscal year ended April 30, 2023, the Company recorded accelerated the depreciation of $ 16,597,000 related to in-service ISR assets associated with the closure of all of the Company’s MUAS COCO sites.

The Company reclassified certain in-service ISR assets determined to have an alternate business use to machinery and equipment.

At April 30, 2023, the reclassified assets had a carrying value of $ 4,586,000 .

During the fiscal years ended April 30, 2023, 2022 and 2021, the Company recorded losses on the disposal of in-service ISR assets which included the write-off of $ 192,000 , $ 1,378,000 and $ 298,000 of non-cash purchase accounting fair value adjustments, respectively.

Investments in Companies Accounted for Using the Equity Method

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.

Under the terms of the limited partnership agreement, the Company contributed a total of $ 10,000,000 during the fiscal years ended April 30, 2021 and 2022, and there were no further contribution commitments to this fund as of April 30, 2022.

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.

During the fiscal year ended April 30, 2023, the Company made total contributions of $ 5,778,000 .

Under the terms of the limited partnership agreement, the Company has committed to make additional capital contributions of $ 14,222,000 to the fund.

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

For the fiscal years ended April 30, 2023, 2022 and 2021, the Company recorded its ownership percentage of the net gain (loss) of the limited partnership, or $( 2,453,000 ), $ 5,889,000 and $ 49,000 , respectively, in equity method investment (loss) income, net of deferred taxes of $ 0 , $ 1,300,000 and $ 11 , respectively, in the consolidated statements of (loss) income.

At April 30, 2023 and 2022, the carrying value of the investment in the limited partnership of $ 18,644,000 and $ 15,433,000 , respectively, was recorded in available-for-sale long-term investments.

Investment in Altoy

On September 15, 2021, the Company entered into a Share Sale and Purchase Agreement with Toygun whereby the Company sold 35 % of the common shares of Altoy to Toygun.

On October 14, 2022, the company sold an additional 35 % of the common shares of Altoy to Toygun.

As a result of the sales, the Company decreased its interest in Altoy from 85 % to 15 %.

The Company no longer controls Altoy, and therefore, has deconsolidated Altoy in the Company’s consolidated financial statements, which resulted in a loss of $ 189,000 during the fiscal year ended April 30, 2023.

Company maintains significant influence, accounts for its investment in Altoy as an equity method investment and records its proportion of any gains or losses of Altoy in equity method investment (loss) income, net of tax.

For the fiscal year ended April 30, 2023, the Company’s proportion of the net income of Altoy for the Company’s ownership was not significant.

At April 30, 2023, the carrying value of the investment in Altoy of $ 114,000 was recorded in other assets on the consolidated balance sheets.

Investment in HAPSMobile Inc.

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 ).

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

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

On January 29, 2019, the Company invested an additional 209,500,000 yen ($ 1,926,000 ) to maintain its 5 % ownership stake.

On February 9, 2019, the Company elected to purchase 632,800,000 yen ($ 5,671,000 ) of additional shares of HAPSMobile to increase the Company’s ownership in the joint venture from 5 % to 10 %, and on May 10, 2019, the Company purchased 500,000,000 yen ($ 4,569,000 ) of additional shares of HAPSMobile to maintain its 10 % ownership stake.

The Company’s ownership percentage was subsequently diluted from 10 % to approximately 5 %.

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 %.

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.

In connection with the formation of the joint venture on December 27, 2017, the Company initially purchased shares of HAPSMobile representing a 5 % ownership.

On December 4, 2019, the Company purchased additional shares of HAPSMobile to increase its ownership stake to approximately 7 %.

In March 2022, the Company sold its 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.

Following the sale, SoftBank owns 100 % of HAPSMobile, and, therefore, the Company no longer applies the equity method of accounting.

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).

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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.

For the fiscal years ended April 30, 2022 and 2021, the Company recorded its proportionate net loss of HAPSMobile, or $ 0 and $ 10,530,000 , respectively, in equity method investment (loss) income, net of tax in the consolidated statements of (loss) 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, 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 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, 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.

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:

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(In thousands)

Realized and unrealized losses on investments

Realized and unrealized (losses) gains on investments

Net (loss) income

Warranty Reserves

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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.

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and 3.00 to 1.00 for any fiscal quarter ending thereafter.

On June 6, 2023, the Company entered into a Second Amendment to Credit Agreement relating to its existing credit Agreement which increased the sublimit from $ 10 million to $ 25 million.

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).

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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 Applicable Margin is based upon the Consolidated Leverage Ratio (as defined in the 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.

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(In thousands)

The Company leases certain buildings, land and equipment.

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.

Operating leases are recorded in operating lease right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

The Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease term at commencement date.

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 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.

For operating leases, the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Many of the Company’s real estate lease agreements contain incentives for tenant improvements, rent holidays, or rent escalation clauses.

For tenant improvement incentives, if the incentive is determined to be a leasehold improvement owned by the lessee, the Company generally records incentive as a reduction to fixed lease payments thereby reducing rent expense.

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.

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 SG&A expense were as follows (in thousands):

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

Operating lease cost

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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.

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.

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The Restated 2006 Plan expired in July 2021.

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

Under the 2002 Plan, incentive stock options or nonqualified stock options were granted, as determined by the administrator at the time of grant.

Stock purchase rights were also granted under the 2002 Plan.

Options under the 2002 Plan were granted at their fair market value (as determined by the board of directors).

The options became exercisable at various times over a five-year period from the grant date.

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

No additional awards may be made under the 2002 Plan.

The Company had a 1992 nonqualified stock option plan (“1992 Plan”) for certain officers and key employees.

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The expected volatility is based on historical volatility for the Company’s stock.

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

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 option.

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The total intrinsic value of all options exercised during the years ended April 30, 2023, 2022 and 2021 was approximately $ 7,369,000 , $ 4,785,000 , and $ 4,828,000 , respectively.

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

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

The intrinsic value of all options outstanding and exercisable at April 30, 2023 and 2022 was $ 4,822,000 and $ 9,229,000 , respectively.

The Company had zero non-vested stock options as of April 30, 2023 and the year then ended.

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Proceeds from all option exercises under all stock option plans for the years ended April 30, 2023, 2022 and 2021 were approximately $ 2,278,000 , $ 2,776,000 and $ 1,522,000 , respectively.

The tax benefit realized from stock-based compensation was $ 0 during the years ended April 30, 2022, 2021 and 2020, respectively.

The tax benefit realized from stock-based compensation was $ 3,387,000 during the years ended April 30, 2023, and $ 0 during the years ended April 30, 2022 and 2021, respectively.

The following tabulation summarizes certain information concerning outstanding and exercisable options at April 30, 2023:

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Restated 2021 Plan

Restated 2006 Plan

Unvested stock at April 30, 2022

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Awards under the Fiscal 2023 LTIP consist of:

(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.

(i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2023, July 2024 and July 2025, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and non-GAAP operating income targets for the three-year period ending April 30, 2025.

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 non-

GAAP operating income targets for the performance period.

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

During the fiscal year ended April 30, 2023, the Company recorded $ 2,690,000 of compensation expense related to the Fiscal 2023 LTIP PRSUs.

At April 30, 2023, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2023 LTIP PRSUs is $ 12,342,000 .

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 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 non-GAAP 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.

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.

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 $ 752,000 of compensation expense related to the Fiscal 2022 LTIP.

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 .

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

During the fiscal years ended April 30, 2023 and 2022, the Company recorded $ 846,000 and $ 752,000 of compensation expense related to the Fiscal 2022 LTIP PRSUs, respectively.

At April 30, 2023, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP PRSUs is $ 9,823,000 .

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

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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 $( 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 .

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

During the fiscal year ended April 30, 2023 and 2021, the Company recorded $ 354,000 and $ 1,072,000 of compensation expense related to the Fiscal 2021 LTIP PRSUs, respectively.

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

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”).

1 unchanged sentence

(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.

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 July 30, 2022, the Company issued a total of 5,678 fully-vested shares of the Company’s common stock to settle the PRSUs in the Fiscal 2020 LTIP.

No compensation expense was recorded during fiscal year ended April 30, 2023 for the Fiscal 2020 LTIP PRSUs.

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.

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”).

Awards under the Fiscal 2019 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.

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.

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

At April 30, 2023 and 2022, the Company recorded cumulative stock-based compensation expense from these long-term incentive award PRSUs of $ 8,495,000 and $ 4,594,000 , 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 components of income before income taxes are as follows (in thousands):

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

Year Ended April 30,

Income from continuing operations before income taxes

Equity method investment loss

Total income from continuing operations before income taxes

(Loss) income before income taxes

Equity method investment (loss) income

Total (loss) income before income taxes

The Company expects any foreign earnings to be reinvested in such foreign jurisdictions and, therefore, no deferred tax liabilities for U.S.

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Excess benefit of equity awards

Goodwill impairment

Unrecognized tax benefit

Effective income tax rate

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Year Ended April 30,

Total income tax expense

Total income tax (benefit) expense

Significant components of the Company’s deferred income tax assets and liabilities are as follows (in thousands):

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Net operating loss and credit carry-forwards

Section 174 Capitalization

Intangibles basis

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At April 30, 2023 and 2022 the Company recorded a valuation allowance of $ 22,503,000 and $ 24,840,000 , 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, 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.

The valuation allowance decreased by $ 2,337,000 and increased by $ 7,387,000 for April 30, 2023 and April 30, 2022, respectively.

At April 30, 2023 the Company had federal credit carryforwards of $ 2,809,000 that will begin to expire in 2042 and state credit carryforwards of $ 23,330,000 that do not expire.

At April 30, 2023, the Company had federal, state and foreign net operating loss carryforwards of approximately $ 7,001,000 , $ 93,289,000 and $ 64,000 , respectively.

The federal and $ 47,000 of the state net operating losses carry forward indefinitely.

$ 93,438,000 of state net operating losses will begin expiring in fiscal year 2032, and the foreign loss carryforward will begin expiring in fiscal year 2023.

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.

The federal net operating losses carry forward indefinitely.

The state net operating losses will begin expiring in fiscal year 2035, and the foreign loss carryforward will begin expiring in fiscal year 2024.

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

At April 30, 2023 and 2022, the Company had approximately $ 12,841,000 and $ 17,806,000 , respectively, of unrecognized tax benefits of which $ 5,076,000 would impact the Company’s rate and $ 5,986,000 would result in an increase in valuation allowance.

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As of April 30, 2023 and 2022, the Company had accrued approximately $ 282,000 and $ 302,000 , respectively, of interest and penalties related to uncertain tax positions.

The Company is currently under audit by various state jurisdictions.

The 2019 to 2022 tax years remain open to examination by the IRS for federal income taxes.

The tax years 2010 to 2012 and 2018 to 2021 remain open for major state taxing jurisdictions.

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, a $2 trillion relief package comprising a combination of tax provisions and other stimulus measures.

The CARES Act broadly provides entities tax payment relief and significant business incentives and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, or the Tax Act.

The tax relief measures for entities include a five-year net operating loss carry back, increases interest expense deduction limits, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property.

The Act also provides other non-income tax benefits, including federal funding for a range of stabilization measures and emergency funding to assist those impacted by the COVID-19 pandemic.

Similar legislation is being enacted in other jurisdictions in which the Company operates.

ASC Topic 740, Income Taxes , requires the effect of changes in tax rates and laws on deferred tax balances to be recognized in the period in which new legislation is enacted.

The enactment of the CARES Act and similar legislation in other jurisdictions in which the Company operates was not material to the Company’s income tax benefit for the year ended April 30, 2022.

Accumulated Other Comprehensive Income

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

The tax years 2012 and 2018 to 2022 remain open for major state taxing jurisdictions.

Share Repurchase Plan and Issuances

The Company’s share repurchase program announced September 2015 was terminated by the Company’s Board of Directors in September 2022.

There were no repurchases of the Company’s common stock during the year ended April 30, 2023.

On September 8, 2022 the Company filed an S-3 shelf registration statement to offer and sell shares of the Company’s common stock, including a prospectus supplement in relation to an Open Market Sale Agreement SM , also dated September 8, 2022, with Jefferies LLC relating to the proposed offer and sale of shares of our common stock having an aggregate offering price of up to $ 200,000,000 from time to time through Jefferies LLC as the sales agent.

As of April 30, 2023, the Company has sold 1,109,730 of its shares for total gross proceeds of $ 108,686,000 , total proceeds received of $ 105,425,000 , net of commission expense and $ 104,649,000 net of equity issuance costs.

The Company has $ 91,314,000 aggregate offering price remaining available under the registration.

Accumulated Other Comprehensive Loss

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

Total Accumulated

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Translation Adjustments

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

Unrealized losses, net of $ 8 of taxes

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

Unrealized gain, net of $ 0 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

Total accumulated other comprehensive loss balance as of April 30, 2023

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, 2023, 2022 and 2021, 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 years ended April 30, 2023, 2022 and 2021, the Company revised its estimates of the total expected costs to complete a TMS variant contract.

During the fiscal year ended

April 30, 2023, due to the closure of all of the Company’s MUAS COCO sites, the Company revised the estimated useful life of the MUAS customer relationship intangible asset which resulted in accelerated intangible amortization expenses of $ 34,149,000 , increasing net loss by $ 26,158,000 , or loss per diluted share of $ 1.04 .

Related Party Transactions

Pursuant to a consulting agreement, the Company paid a board member approximately $ 76,000 , $ 36,000 and $ 29,000 for fiscal years ended April 30, 2023, 2022 and 2021, respectively, for consulting services independent of his board service.

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 .

Related party transactions are defined as transactions between the Company and entities either controlled by the Company or that the Company can significantly influence.

Prior to the Company’s sale of all of its equity interest in HAPSMobile in March 2022, the Company determined that it had the ability to exercise significant influence over HAPSMobile.

As such, HAPSMobile and SoftBank were considered related parties of the Company prior to the sale.

Subsequent to the sale, the Company had no ownership stake in HAPSMobile, and SoftBank and HAPSMobile are no longer considered related parties.

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

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The Company recorded revenue under both the MDDA and DDA and preliminary design agreements between the Company and SoftBank of $ 43,325,000 and $ 42,426,000 for the fiscal years ended April 30, 2022 and 2021, 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.

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

As of April 30, 2023, 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.

Refer to Note 8— Investments in Companies Accounted for Using the Equity Method for further details.

Commitments and Contingencies

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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.

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.

At April 30, 2023 and 2022, the Company had outstanding letters of credit totaling $ 8,076,000 and $ 5,968,000 , respectively.

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

announced product recall.

Webasto sought 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 $ 6,500,000 in additional cash consideration due under the Purchase Agreement (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.

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

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

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

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 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 occurred over a 24 month period from the effective date of the settlement agreement, and Webasto retained the Holdback.

As of April 30, 2023, the entire settlement amount has been paid

Contract Cost Audits

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

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

At April 30, 2023 and 2022, the Company had no reserve for open incurred cost claim audits.

Business Acquisitions

Planck Acquisition

On August 17, 2022 the Company closed its acquisition of Planck, a leading provider of advanced unmanned aircraft navigation solutions based in San Diego, California.

Pursuant to the purchase agreement, the Company paid a total purchase price of $ 5,105,000 from cash-on-hand plus a $ 500,000 holdback for certain assets of Planck.

Planck is a small technology company and post-acquisition was incorporated into the Company’s MUAS segment to focus on integrating its flight autonomy solutions, such as ACE™, or Autonomous Control Engine, into the Company’s offerings to enable safe, autonomous takeoff and landing from moving platforms on land or at sea in GPS-denied environments.

Other solutions include AVEM™, a fully integrated mobile tethered sensor platform designed for persistent autonomous

operation from moving vehicles and vessels in any environment, and a suite of machine-learning object detection and tracking systems that are customized for specific end-user needs.

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

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 Planck.

The purchase price allocation is expected to be finalized as soon as practicable within the measurement period, but not later than one year following the acquisition date (in thousands):

Fair value of assets acquired:

Property and equipment, net

Total identifiable net assets

Fair value of liabilities assumed:

Customer advances

Total liabilities assumed

Total identifiable net assets

Fair value of consideration transferred:

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.

The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s preliminary 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.

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 Planck and expected future customers in the MUAS market.

For tax purposes the acquisition was treated as an asset acquisition and the goodwill is deductible.

Planck Supplemental Pro Forma Information (unaudited)

Planck revenue since acquisition on August 17, 2022 was $ 368,000 .

Other than the aforementioned revenue and intangible asset amortization expense of $ 542,000 for the year ended April 30, 2023 since the acquisition on August 17, 2023, the Planck financial results were not significant.

The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2021 (in thousands):

Net loss 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 July 31, 2021, reflecting the additional amortization that would have been charged and including the results of Planck prior to acquisition.

The Company incurred approximately $ 1,009,000 of acquisition-related expenses for the fiscal year ended April 30, 2023.

These expenses are included in selling, general and administrative on the Company’s consolidated statements of (loss) income.

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, 2021, nor are they indicative of results of operations that may occur in the future.

Telerob Acquisition

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

The first year earnout of € 2,000,000 (approximately $ 2,203,000 ) was not achieved.

The second year earnout of € 2,000,000 (approximately $ 2,203,000 ) was achieved, which the Company expects to pay during the first half of the fiscal year ending April 30, 2024.

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

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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.

Net 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.

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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.

These expenses are included in selling, general and administrative on the Company’s consolidated statements of (loss) income.

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.

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

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

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.

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The Company incurred approximately $ 6,015,000 acquisition-related expenses for the year ended April 30, 2021.

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

These expenses are included in selling, general and administrative expense on the Company’s consolidated statements of (loss) income.

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.

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

In connection with the ISG Acquisition, the Company (i) paid a base purchase price of $ 29,700,000 in cash at closing and (ii) may pay additional cash consideration of up to $ 6,000,000 , which is held in escrow account not controlled by the Company, based on the achievement of certain revenue targets by ISG during the 3 years following closing, in each case, subject to the terms and conditions of the ISG Purchase Agreement, including certain customary adjustments.

During the 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.

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

The related consideration of $ 2,000,000 for both the second and third year targets was released from the escrow account during the fiscal year ended April 30, 2023.

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.

Company and the ISG Seller.

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

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

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

The Company incurred approximately $ 954,000 acquisition-related expenses for the year ended April 30, 2021.

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

These expenses are included in selling, general and administrative expenses on the Company’s consolidated statements of (loss) income.

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.

Pulse Acquisition

On June 10, 2019, the Company purchased 100 % of the issued and outstanding member units of Pulse pursuant to the terms of the Pulse Purchase Agreement.

The Company’s acquisition of Pulse’s helicopter UAS product family strengthens AeroVironment’s leading family of fixed-wing small unmanned aircraft systems and increases the mission capabilities of AeroVironment’s family of systems.

Pursuant to the Pulse Purchase Agreement, at closing, the Company paid $ 20,650,000 in cash, less closing indebtedness and transaction costs as defined in the Pulse Purchase Agreement, less a $ 250,000 retention to cover any post-closing indemnification claims, and less a $ 1,250,000 holdback amount, with the retention and holdback to be released to the member unit holders of Pulse, less any amounts paid or reserved, 18 months after the closing of the transactions in accordance with the terms of the Pulse Purchase Agreement.

The closing cash consideration included the payoff of the outstanding indebtedness of Pulse as of the closing date.

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

During fiscal year ended April 30, 2021, the Company paid a total of $ 1,492,000 in holdback and retention payments.

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

Amounts were payable upon the achievement of the milestones.

The range of the undiscounted amounts the Company could pay under each of the contingent consideration agreements was zero or $ 2,500,000 ($ 5,000,000 in total if both milestones are achieved and specific key employees continued employment).

The fair value of the contingent consideration recognized on the acquisition date of $ 1,703,000 was estimated by applying the income approach.

That measure was based on significant Level 3 inputs not observable in the market.

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

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

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

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):

In-process R&D

Non-compete agreements

Other assets, net of liabilities assumed

Total net identified assets acquired

Fair value of consideration:

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 Pulse and expected future customers in the helicopter UAS market.

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

Supplemental Pro Forma Information (unaudited)

Pulse revenue for the year ended April 30, 2020 since acquisition on June 10, 2019 was $ 6,607,000 .

Other than the aforementioned revenue and intangible asset amortization expense of $ 2,461,000 for the year ended April 30, 2020 since the acquisition on June 10, 2019, the Pulse financial results were not significant.

The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2018 (in thousands):

Net 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 July 28, 2018, reflecting the additional amortization

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

The Company 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 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.

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

The measurement date for the Company’s pension plan was April 30, 2023.

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.

The table below includes the projected benefit obligation and fair value of plan assets.

The net fair value of plan assets is recorded in other assets on the consolidated balance sheets.

(In thousands)

Projected benefit obligation

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Change in projected benefit obligation (in thousands):

Pension benefit obligation balance as of May 3, 2021

Pension benefit obligation balance as of April 30, 2022 and May 3, 2021, respectively

Interest cost

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Foreign currency exchange rate changes

Pension benefit obligation balance as of April 30, 2022

Pension benefit obligation balance as of April 30, 2023 and April 30, 2022, respectively

Change in plan assets (in thousands):

Fair value of plan assets as of May 3, 2021

Fair value of plan assets as of April 30, 2022 and May 3, 2021, respectively

Expected return on plan assets

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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.

Fair value of plan assets as of April 30, 2023 and April 30, 2022, respectively

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

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The Company does not expect to make any contributions to the Plan in the fiscal year ending April 30, 2024.

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

The projected benefit obligation and projected fair value of plan assets include the assumptions in the table below.

Discount rate

In-payment benefits

Expected return on plan assets

Expected benefits payments as of April 30, 2023 (in thousands):

Total expected benefit payments

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

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

(In thousands)

Expected return on plan assets

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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.

Small Unmanned Aircraft Systems —The SUAS 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 SUAS 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 R&D programs.

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.

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.

All other—All other segments include High Altitude Pseudo-Satellite Unmanned Aircraft Systems (“HAPS”), MacCready Works and UGV.

Effective May 1, 2023, the Company reorganized its product lines into the following segments:

Unmanned Systems segment consisting of SUAS, MUAS and UGV product lines;

Loitering Munition Systems segment, the renamed TMS segment;

and the MacCready Works segment, consisting of the HAPS and the MacCready Works 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.

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

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

Year Ended April 30, 2023

Income (loss) from continuing operations

Income (loss) from operations

Impairment of goodwill and accelerated amortization

Acquisition-related expenses

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Year Ended April 30, 2022

Income (loss) from continuing operations

Income (loss) from operations

Acquisition-related expenses

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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.

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

April 30, 2023

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government foreign military sales in which an end user is a foreign government, accounted for 53 %, 41 % and 39 % of revenue for each of the fiscal years ended April 30, 2023, 2022 and 2021, respectively.

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 .

The Company’s internationally deployed in-service assets for MUAS was $ 0 and $ 48,496,000 as of April 30, 2023 and 2022, respectively.

The Company’s internationally deployed in-service assets for UGV was $ 1,798,000 and $ 1,601,000 as of April 30, 2023 and 2022, respectively.

SUPPLEMENTARY DATA

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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.

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.

Management’s Report on Internal Control Over Financial Reporting

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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, 2023, 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.

Based on this assessment, management concluded that the Company maintained effective internal control over financial reporting as of April 30, 2023 based on the specified criteria.

The effectiveness of our internal control over financial reporting as of April 30, 2023 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Remediation of Previously Disclosed Material Weaknesses

We previously identified and disclosed in our Form 10-K for the fiscal year ended April 30, 2022, as well as in our Quarterly Report on Form 10-Q filed for the quarters ended July 30, 2022, October 29, 2022 and January 28, 2023, the material weaknesses over 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.

As of April 30, 2023, we have completed the implementation of our remediation efforts of the material weaknesses.

The remediation activities included, but are not limited to:

● rationalized access privileges for all system users and critical transactions based on job responsibilities considering segregation of duties (“SOD”);

● limited excess rights and access for all system users;

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

● enhanced system monitoring controls to confirm the adequacy of program change management and security controls;

● trained personnel on the design and operation of our internal controls over financial reporting, as well as hired additional resources with experience with the Committee of Sponsoring Organizations, or COSO, guidance;

Changes in Internal Control over Financial Reporting

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Other Informatio n.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Not applicable.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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and subsidiaries (the “Company”) as of April 30, 2023, 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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2023, 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, 2023, of the Company and our report dated June 27, 2023, expressed an unqualified opinion on those financial statements.

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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.

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

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Amended and Restated Certificate of Incorporation of AeroVironment, Inc.

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

Fourth Amended and Restated Bylaws of AeroVironment, Inc., amended as of December 1, 2022

Form of AeroVironment, Inc.’s Common Stock Certificate

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

Second Amendment to Lease dated October 26, 2018 between AeroVironment, Inc., Princeton Avenue Holdings, LLC and Princeton Avenue Holdings II, LLC for property located at 14501 Princeton Avenue, Moorpark, California

Retiree Medical Plan

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Bank National Association

Second Amendment to Credit Agreement and Waiver, dated June 6, 2023, 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

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

Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q filed December 7, 2022 (File No.

Incorporated by reference herein to the exhibits to the Company's Annual Report on Form 10-K filed June 28, 2022 (File No.

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.

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Financial Statement Schedules and Separate Financial Statements of Subsidiaries Not Consolidated and Fifty Percent or Less Owned Persons

HAPSMobile was deemed a significant equity investee under Rule 3-09 of Regulation S-X for the fiscal year ended April 30, 2021.

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.

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.

Not applicable.

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.

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June 27, 2023

/s/ Charles R.

June 28, 2022

/s/ Catharine Merigold

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Charles Thomas Burbage

/s/ Philip S.

June 27, 2023

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