AXON ENTERPRISE, INC.

Current report

Our 2027 Note Hedge, 2027 Warrant, and 2031 Capped Call transactions may impact the value of our common stock.

Current report

In connection with the pricing of the 2027 Notes, we entered into 2027 Note Hedge transactions and 2027 Warrant transactions with certain investment banks (together with the 2031 Option Counterparties, the “Option Counterparties”). We entered into agreements with the 2027 Option Counterparties in March 2025 to leave the 2027 Note Hedge transactions outstanding until the original maturity of the 2027 Notes in respect of the 2027 Notes we exchanged in March 2025. Further, we unwound a portion of the 2027 Note Hedge and 2027 Warrant transactions in conjunction with our redemption of all of our outstanding 2027 Notes. As of the date of filing this Quarterly Report on Form 10-Q, a portion of the 2027 Note Hedge and 2027 Warrant transactions were still outstanding, notwithstanding the extinguishment of our 2027 Notes. As a result, the 2027 Warrant transactions could have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the 2027 Warrants.

Current report

In September 2026, in connection with the pricing of the 2031 Notes, we entered into the 2031 Capped Calls with the 2031 Option Counterparties, which may reduce potential dilution to our common stock or offset any potential cash payments we are required to make in excess of the principal amount of converted 2031 Notes, as the case may be, with such reduction or offset subject to a cap. The 2031 Capped Calls do not offset any potential dilutive effect for purposes of calculating diluted income per common share. Additionally, the Option Counterparties or their affiliates may adjust their hedge positions by entering into or unwinding various derivatives linked to our common stock, or by buying or selling our common stock or other securities in secondary market transactions. Such actions could cause fluctuations in the market price of our common stock, potentially causing it to rise or fall. If any of the 2027 Note Hedge, 2027 Warrant or 2031 Capped Call transactions do not perform as anticipated, the 2027 Option Counterparties or 2031 Option Counterparties, as the case may be, may unwind their positions, which could adversely affect our stock price.

Current report

The effect of these transactions and related activities on the market price of our common stock will depend in part on market conditions and other factors beyond our control, and their impact cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.

Current report

We are exposed to counterparty risk with respect to the 2027 Note Hedge and 2031 Capped Call transactions.

Current report

The Option Counterparties are financial institutions, and we face the risk that any or all of them might default on their obligations under the 2027 Note Hedge transactions or the 2031 Capped Call transactions. Our exposure to this credit risk is unsecured, as the Option Counterparties have not secured their obligations by any collateral.

Current report

If an Option Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure under the 2027 Note Hedge transactions or the 2031 Capped Call transactions, as applicable, at that time. Our exposure will depend on many factors, including an increase in the market price and volatility of our common stock. An Option Counterparty default could also have tax consequences, could reduce the anticipated benefits of the 2027 Note Hedge transactions or the 2031 Capped Call transactions, as applicable, and could increase dilution relative to our current expectations. We cannot provide assurances as to the financial stability or solvency of the Option Counterparties, and any default could materially and adversely affect our financial results.

Current report

Our indebtedness contains restrictive covenants that could limit our operational flexibility and adversely affect the value of our common stock.

Current report

Our revolving credit facility, as amended in September 2026, and the indentures governing our 2030 Notes, 2031 Notes and 2033 Notes (collectively, the “Notes”) impose certain restrictions, as applicable, on our ability to, among other matters, incur additional debt and liens, make distributions to our shareholders in certain circumstances, dispose of assets and enter into mergers, consolidations, and transfers of all or substantially all of our assets. In addition, the revolving credit facility requires us to maintain specified financial ratios and satisfy other financial condition tests. Further, following certain change of control events, we would be required to offer to repurchase the Notes, and such events would also constitute an event of default under our revolving credit facility. The indenture governing the 2031 Notes contains customary provisions relating to consolidation, merger, and sale of assets and certain protections in connection with a “Fundamental Change” and certain make-whole events, as described therein.

Current report

These limitations may restrict our ability to operate our business, pursue strategic transactions, or otherwise respond to changing business or economic conditions. Consequently, compliance with these covenants could adversely affect our business and the value of our common stock.

Current report

The conditional conversion and settlement features of the 2031 Notes may adversely affect our liquidity, financial condition, and existing stockholders. Prior to June 15, 2031, holders of the 2031 Notes may convert their notes only during specified periods under specified conditions. If the conditional conversion feature is triggered, holders may convert their 2031 Notes at any time during specified periods. On or after June 15, 2031, holders of the 2031 Notes may convert their 2031 Notes at any time. If one or more holders elect to convert their 2031 Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

Current report

Even if no holders convert their 2031 Notes, under applicable accounting rules we may be required, in certain circumstances, to reclassify some or all of the outstanding principal amount of the 2031 Notes from a long-term to a current liability, which would reduce our reported working capital. If we settle our conversion obligations or any repurchase obligations arising upon a “Fundamental Change” under the 2031 Notes, in whole or in part, through the issuance of shares of our common stock, that issuance could dilute the ownership interests of our existing stockholders and could depress the market price of our common stock.

Current report

Conversion of the 2031 Notes, or any issuance or delivery of our common stock in connection with the Holder Repurchase Option under the 2031 Notes, may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.

Current report

The conversion of some or all of the 2031 Notes, or any issuance or delivery of our common stock in connection with the Holder Repurchase Option under the 2031 Notes, may dilute the ownership interests of our stockholders. Upon conversion of the 2031 Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. In addition, we may elect to satisfy some or all of our obligation in respect of the principal amount of the repurchase price for holders exercising any Holder Repurchase Option by issuing or delivering shares of our common stock in certain circumstances. If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, or to deliver any shares of our common stock in connection with the Holder Repurchase Option, any sales in the public market of our common stock so issuable could adversely affect prevailing market prices of our common stock. In addition, the existence of the 2031 Notes may encourage short selling by market participants because the shares of our common stock issuable or deliverable upon conversion of the 2031 Notes or in connection with the Holder Repurchase Option, as the case may be, could be used to satisfy short positions, or anticipated conversion of the 2031 Notes into shares of our common stock, or anticipated issuance or delivery of shares of our common stock in connection with the Holder Repurchase Option, could depress the price of our common stock.

Current report

Fulfilling our debt obligations requires significant cash resources, which may exceed our available cash flow.

Current report

Our ability to meet our debt obligations, including making scheduled principal and interest payments, refinancing obligations, and satisfying conversion or repurchase obligations under our 2031 Notes, depends on our future performance and external factors beyond our control. In particular, we may need cash to satisfy obligations arising from the maturity or refinancing of our outstanding notes, conversions of the 2031 Notes to the extent we elect or are required to settle any portion of our conversion obligations in cash, repurchases of the 2031 Notes following a fundamental change, or repurchases of the 2031 Notes for cash in connection with any exercises of the Holder Repurchase Option under the 2031 Notes. If our business fails to generate sufficient cash flow from operations to meet these obligations and fund capital expenditures, we may be required to adopt alternatives (for example, asset sales, debt restructuring or equity financing) that may be on unfavorable or dilutive terms. Further, our ability to refinance our indebtedness will depend on market conditions and our financial standing at such time, which may be unfavorable. If we are unable to identify or pursue acceptable alternatives on commercially reasonable terms, we could be unable to meet our debt obligations, which could result in a default.