AeroVironment Inc

Current report

The indebtedness represented by our Notes could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under the Notes.

Current report

As of August 2, 2025, we had total indebtedness of approximately $725 million consisting of aggregate principal of our Notes. We may incur additional indebtedness to meet future financing needs. We may incur additional indebtedness to meet future financing needs. The indebtedness represented by our Notes and obligations under the Indenture pursuant to which the Notes were issued could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:

Current report

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Notes, and our cash needs may increase in the future. In addition, the Indenture contains, and any future indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.

Current report

The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and the Notes.

Current report

We may conduct future offerings of common stock, preferred stock or other securities that are convertible into, or exercisable or exchangeable for, our common stock to finance our operations or fund acquisitions, or for other purposes. In addition, we have shares reserved and available for issuance pursuant to our 2023 Employee Stock Purchase Plan and our 2021 Equity Incentive Plan and issued 17,425,849 shares of common stock as consideration for the BlueHalo acquisition, substantially all of which are subject to a lock-up but will be eligible for resale upon expiration of the applicable lock-up period.

Current report

The Indenture for the Notes does not restrict our ability to issue additional equity securities in the future. If we issue additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sell a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock and, accordingly, the Notes may significantly decline. In addition, any issuance of additional shares of common stock will dilute the ownership interests of our existing common stockholders, including Noteholders who have received shares of our common stock upon conversion of their Notes.

Current report

The conversion of Notes could impair our financial position and liquidity.

Current report

Because we must settle at least a portion of our conversion obligation in cash, the conversion of Notes could materially and adversely affect our financial position and liquidity. Before April 15, 2030, Noteholders will have the right to convert their Notes only upon the occurrence of certain events. From and after April 15, 2030, Noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. However, many of the conditions that permit the conversion of Notes before April 15, 2030 are beyond our control. We could be required to expend a significant amount of cash to settle conversions, which could significantly harm our financial position and liquidity.

Previous report

Risks Relating to the Company’s Pending Acquisition of BlueHalo

Previous report

The Transactions (as defined below) are subject to closing conditions and may not be completed, the Merger Agreement (as defined below) may be terminated in accordance with its terms, and we may be required to pay a termination fee upon termination.

Previous report

On November 18, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Archangel Merger Sub LLC, a Delaware limited liability company and a direct wholly owned subsidiary of the Company (“Merger Sub”), BlueHalo Financing Topco, LLC, a Delaware limited liability company (“BlueHalo”), and BlueHalo Holdings Parent, LLC, a Delaware limited liability company and sole member of BlueHalo Financing Topco, LLC (“Seller”), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into BlueHalo, with BlueHalo continuing as a wholly owned subsidiary of the Company and the surviving company of the merger (the “Transactions”).

Previous report

The Transactions are subject to customary closing conditions that must be satisfied or waived prior to the consummation of the Transactions (the “Closing”), including, among other things, (i) the absence of any order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Transactions, (ii) the shares of common stock to be issued in the Transactions being approved for listing (subject to official notice of issuance) on Nasdaq as of the Closing, (iii) our receipt of executed joinder and lock-up agreements from holders of incentive units and restrictive common units of Seller (“Seller Members”) entitled to receive 85% of the Aggregate Closing Consideration (as defined in the Merger Agreement), as adjusted, (iv) approval by our stockholders of the issuance of shares under the Merger Agreement in accordance with the rules of Nasdaq at a special meeting, and (v) receipt of all required consents of governmental authorities pursuant to antitrust laws and foreign direct investments laws, as applicable. No assurance can be given that the required shareholder consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the consents and approvals. Any delay in completing the Transactions could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the Transactions are successfully completed within the expected time frame.

Previous report

Additionally, either party may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Transactions are not completed by August 18, 2025 (subject to certain conditions and one automatic extension period to February 18, 2026 as set forth in the Merger Agreement). The Company may be required to pay a termination fee of $200 million to Seller upon termination of the Merger Agreement under specified circumstances, including (i) termination by the Company if the Board of Directors of the Company (the “Board”) determines that an intervening event has occurred or the Board has received a proposal to acquire the Company that the Board has determined in good faith constitutes a superior offer pursuant to the terms of the Merger Agreement (an “Alternative Sale Transaction”), (ii) termination by Seller if the Board exercises its right, subject to certain limitations, to change its recommendation to the Company’s stockholders with respect to the Merger Agreement and the Transactions (a “Company Board Adverse Recommendation Change”) or (iii) if the Company consummates an Alternative Sale Transaction within nine months of termination of the Merger Agreement, subject to certain conditions as set forth in the Merger Agreement.

Previous report

Moreover, if the Transactions are not completed for any reason, including as a result of failure to obtain all requisite regulatory approvals or if the Company stockholders fail to approve the applicable proposals, our ongoing business may be adversely affected and, without realizing any of the expected benefits of having completed the Transactions, we would be subject to a number of risks, including the following:

Previous report

The business relationships of the Company and BlueHalo may be subject to disruption due to uncertainty associated with the Transactions, which could have a material adverse effect on the results of operations, cash flows and financial position of the Company or BlueHalo pending and following the Transactions.

Previous report

Parties with which the Company or BlueHalo do business may experience uncertainty associated with the Transactions, including with respect to current or future business relationships with the combined company following the Transactions. The Company’s and BlueHalo’s business relationships may be subject to disruption as customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners may attempt to delay or defer entering into new business relationships, negotiate changes in existing business relationships or consider entering into business relationships with parties other than the Company or BlueHalo prior to or following the Transactions. These disruptions could have a material and adverse effect on the results of operations, cash flows and financial position of the Company or BlueHalo, regardless of whether the Transactions are completed, as well as a material and adverse effect on the Company’s ability to realize the expected cost savings and other benefits of the Transactions. The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the Transactions or termination of the Merger Agreement.

Previous report

The consideration payable under the Merger Agreement will not be adjusted based on our performance.

Previous report

Under the Merger Agreement, the aggregate merger consideration payable by us consists of 18,548,698 shares of our common stock, subject to downward adjustments as set forth in the Merger Agreement based on the excess closing indebtedness share amount of 1,098,133 shares and the closing leakage share amount to be determined at Closing. Leakage is defined as the aggregate amount of all distributions or payments of cash or other property made by the BlueHalo and each subsidiary of BlueHalo for certain transactions specified in the Merger Agreement between June 30, 2024 and the Closing Date. The aggregate merger consideration will not be adjusted for changes in the market price of our common stock or the economic performance of the Company or BlueHalo. If the market price of our common stock increases or the economic performance of BlueHalo relative to us declines (or the economic performance of BlueHalo relative to us improves), the consideration will not be adjusted to account for any such changes or any effective increase or decrease in the value of the consideration issued or paid under the Merger Agreement.

Previous report

We will be subject to business uncertainties and contractual restrictions, including the risk of litigation, while the Transactions are pending that may cause disruption and may make it more difficult to maintain relationships with employees, suppliers or customers.

Previous report

Uncertainty about the effect of the Transactions on employees, suppliers and customers may have an adverse effect on us or BlueHalo, which uncertainties may impair our or BlueHalo’s ability to attract, retain and motivate key personnel until the Transactions are completed and for a period of time thereafter, and could cause customers, suppliers and others that deal with us or BlueHalo to seek to change existing business relationships with any of us.

Previous report

Employee retention and recruitment may be challenging before the completion of the Transactions, as employees and prospective employees may experience uncertainty about their future roles following the Transactions. Key employees may depart or prospective key employees may fail to accept employment with us or BlueHalo because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the Transactions, any of which could have a material adverse effect on our business, financial condition and results of operations.

Previous report

The pursuit of the Transactions and the preparation for the integration may place a significant burden on management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on our business, financial condition and results of operations.

Previous report

Until the completion of the Transactions or the termination of the Merger Agreement in accordance with its terms, we are prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to us and our stockholders, and may find other transactions or actions impractical to undertake during such period.

Previous report

During the period between the date of the Merger Agreement and the Closing, which, under the Merger Agreement, could take until August 18, 2025 (subject to certain conditions and one automatic extension period to February 18, 2026 as set forth in the Merger Agreement), the Merger Agreement restricts us from taking specified actions or from pursuing what might otherwise be attractive business opportunities or making other changes to our business, in each case without the consent of BlueHalo or Seller. These restrictions may prevent us from taking actions during the pendency of the Transactions that would have been beneficial. Adverse effects arising from these restrictions during the pendency of the Transactions could be exacerbated by any delays in consummation of the Transactions or termination of the Merger Agreement.

Previous report

Additionally, even if the Merger Agreement does not expressly restrict us from taking a certain action prior to the completion of the Transactions or the termination of the Merger Agreement, the pendency of the Transactions may make it impractical for us to do so. For example, while we may wish to raise capital for strategic or other reasons and would not be prohibited from doing so under the Merger Agreement, our ability to do so may be limited, or may adversely affect the terms on which we are able to raise such capital.

Previous report

The Company and BlueHalo must obtain certain regulatory approvals and clearances to consummate the Transactions, which, if delayed, not granted or granted with unacceptable conditions, could prevent, substantially delay or impair consummation of the Transactions, result in additional expenditures of money and resources or reduce the anticipated benefits of the Transactions.

Previous report

Completion of the Transactions is conditioned upon the expiration or early termination of the waiting period relating to the Transactions under the HSR Act (which expiration occurred on January 3, 2025) and other similar antitrust laws in certain other countries as well as certain other applicable laws or regulations and the governmental authorizations required to complete the Transactions having been obtained and being in full force and effect. Although the Company and BlueHalo have agreed in the Merger Agreement to use their reasonable best efforts, subject to certain limitations, to make certain governmental filings or obtain the required governmental authorizations, as the case may be, there can be no assurance that the relevant waiting periods will expire or authorizations will be obtained, and if such authorizations are not obtained, the Transactions will not be completed.

Previous report

At any time before or after consummation of the Transactions, the DOJ or the FTC, any state attorney general, or a governmental authority in another country could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including but not limited to seeking to enjoin the completion of the Transactions, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying or impeding consummation of the Transactions or of imposing additional costs or limitations on the Company or BlueHalo following completion of the Transactions, any of which might have an adverse effect on the Company or BlueHalo following completion of the Transactions and may diminish the anticipated benefits of the Transactions.

Previous report

The Merger Agreement limits our ability to pursue alternatives to the Transactions and may discourage a potential competing acquirer of the Company, including the payment by the Company of a termination fee.

Previous report

The Merger Agreement contains provisions that, subject to limited exceptions, restrict our ability to directly or indirectly (i) solicit, initiate or knowingly encourage, or take any action to facilitate any inquiries, announcements or communications relating to, or the making of any submission, proposal or offer that constitutes or that could reasonably be expected to lead to, a Parent Acquisition Proposal (as defined the Merger Agreement), (ii) enter into, participate in, cooperate with any person with respect to, maintain or continue any discussions or negotiations relating to, any Parent Acquisition Proposal with any person other than Seller, BlueHalo or their affiliates, (iii) furnish to any person other than Seller, BlueHalo or their affiliates any non-public information in connection with or in response to a Parent Acquisition

Previous report

Proposal, (iv) accept any Parent Acquisition Proposal or enter into any agreement, arrangement, term sheet, letter of intent, or understanding (whether written or oral) providing for the consummation of any transaction contemplated by any Parent Acquisition Proposal or otherwise relating to any Parent Acquisition Proposal, (v) adopt, approve or recommend or make any public statement approving or recommending any inquiry, proposal or offer that constitutes, or could reasonably be expected to lead to, a Parent Acquisition Proposal, (vi) take any action or exempt any person (other than the Company and its subsidiaries) from the restriction on “business combinations” or any similar provision contained in applicable takeover laws or the Company’s organizational or other governing documents, or (vii) resolve, propose or agree to do any of the foregoing. The Company shall, and shall cause each of its representatives and each of its subsidiaries (and each of their respective representatives) to, immediately cease and cause to be terminated any and all existing activities, discussions or negotiations with any persons conducted prior to or on the date of the Merger Agreement with respect to any Parent Acquisition Proposal. The Company may be required to pay a termination fee of $200 million to Seller upon termination of the Merger Agreement under specified circumstances, including (i) termination by the Company to accept an Alternative Sale Transaction, (ii) termination by Seller due to the occurrence of a Company Board Adverse Recommendation Change or (iii) if the Company consummates an Alternative Sale Transaction within nine months of termination of the Merger Agreement, subject to certain conditions as set forth in the Merger Agreement.

Previous report

These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of us from considering or proposing that acquisition, even if it were prepared to pay above market value, or might otherwise result in a potential third-party acquirer proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

Previous report

If the Merger Agreement is terminated and we decide to seek another merger transaction, we may not be able to negotiate or consummate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.

Previous report

The Transactions will involve substantial costs.

Previous report

We have incurred and expect to incur substantial non-recurring costs associated with the Transactions and combining the operations of the two companies, as well as transaction fees and other costs related to the Transactions. These costs and expenses include fees paid to legal, financial and accounting advisors, regulatory and public relations advisors, filing fees, printing costs and other costs and expenses. Portions of these transaction costs are contingent upon the Closing occurring, although some have been and will be incurred regardless of whether the Transactions are consummated.

Previous report

In addition, the combined company will also incur significant restructuring and integration costs in connection with the integration of the Company and BlueHalo and the execution of our business plan, including costs relating to formulating and implementing integration plans and eliminating duplicative costs, as well as potential employment-related costs. The costs related to restructuring will be expensed as a cost of the ongoing results of operations of either us or the combined company. There are processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Transactions and the integration of BlueHalo’s business. While we have assumed a certain level of expenses would be incurred to integrate the Company and BlueHalo and achieve synergies and efficiencies and we continue to assess the magnitude of these costs, many of these expenses are, by their nature, difficult to estimate accurately and there are many factors beyond our control that could affect the total amount or timing of these costs. Although we expect that the elimination of duplicative costs, as well as the realization of strategic benefits, additional income, synergies and other efficiencies should allow the combined company to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

Previous report

Securities class action and derivative lawsuits may be filed against us, or against our directors, challenging the Transactions, and an adverse ruling in any such lawsuit may prevent the Closing from occurring at all or from occurring within the expected time frame.

Previous report

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements. Transactions like the Transactions are frequently subject

Previous report

to litigation or other legal proceedings, including actions alleging that our Board breached their fiduciary duties to our stockholders by entering into the Merger Agreement. We cannot provide assurance that such litigation or other legal proceedings will not be brought. If litigation or other legal proceedings are in fact brought against us, or against our Board, we will defend against it, but we may not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the business, results of operations or financial position of us or the combined company, including through the possible diversion of each company’s resources or distraction of key personnel.

Previous report

Lawsuits that may be brought against us, BlueHalo or our or its directors could also seek, among other things, injunctive relief or other equitable relief, including a request to enjoin us from consummating the Transactions. One of the conditions to the Closing is that no order, award or judgment by any court or other tribunal of competent jurisdiction has been entered and continues to be in effect and no law has been adopted or is effective, in either case, that prohibits or makes illegal the Closing. Consequently, if a plaintiff is successful in obtaining an order, award or judgment prohibiting completion of the Transactions, that order, award or judgment may delay or prevent the Closing from being completed within the expected time frame or at all, which may adversely affect our business, financial position and results of operations.

Previous report

The Transactions may be completed even though a material adverse effect may result from the announcement of the Transactions, industry-wide changes or other causes.

Previous report

In general, neither we nor BlueHalo is obligated to complete the Transactions if there is a material adverse effect impacting the other party between the date of the Merger Agreement and the Closing. However, certain types of changes are excluded from the concept of a “material adverse effect” as it is defined in the Merger Agreement. Such exclusions include but are not limited to changes in general economic or political conditions, industry wide changes, changes resulting from the announcement of the Transactions, natural disasters, pandemics, other public health events and changes in GAAP. Therefore, if any of these events were to occur affecting us or BlueHalo, the other party would still be obliged to effect the Closing. If any such adverse changes occur and we and BlueHalo execute the Closing, the stock price of the combined company may suffer. This in turn may reduce the value of the Transactions to the stockholders of the Company, BlueHalo or both.

Previous report

Our stockholders may not realize a benefit from the Transactions commensurate with the ownership dilution they will experience in connection with the Transactions.

Previous report

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Transactions, our stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Transactions.

Previous report

Combining the businesses of the Company and BlueHalo may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated synergies and other benefits of the Transactions, which may adversely affect the combined company’s business results and negatively affect the value of our common stock following the Closing.

Previous report

The Company and BlueHalo have operated and, until the completion of the Transactions will continue to operate, independently. The success of the Transactions will depend on, among other things, the ability of the Company and BlueHalo to combine their respective businesses in a manner that facilitates growth opportunities and realizes expected cost savings. We have entered into the Merger Agreement because we believe that the Transactions are fair to and in the best interests of our stockholders and that combining the businesses of the Company and BlueHalo will produce benefits as well as cost savings and other cost and capital expenditure synergies.

Previous report

Following the Closing, the Company and BlueHalo must successfully combine their respective businesses in a manner that permits these benefits to be realized. For example, the following issues, among others, must be addressed in integrating the operations of the two companies in order to realize the anticipated benefits of the Transactions:

Previous report

It is possible that the integration process could result in the loss of key AeroVironment or BlueHalo employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. In addition, the actual integration may result in additional and unforeseen expenses. If the combined company is not able to adequately address integration challenges, we may be unable to successfully integrate operations and the anticipated benefits of the integration plan may not be realized.