Item 8.01Other Events.
On December 5, 2022, Axon Enterprise, Inc. (the “Company”) issued a press release announcing that the Company plans to commence, subject to market conditions and other factors, a private offering (the “Notes Offering”) of $500 million aggregate principal amount of convertible senior notes due 2027 (the “Notes”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the “Securities Act”). The Company also expects to grant the initial purchasers of the Notes an option to purchase up to an additional $75 million aggregate principal amount of the Notes for settlement within a 13-day period beginning on, and including, the first date on which the Notes are issued. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report and is incorporated herein by reference.
In connection with the pricing of the Notes, the Company expects to enter into privately negotiated convertible note hedge transactions with one or more of the initial purchasers of the Notes, their respective affiliates and/or other financial institutions (the “option counterparties”). The Company also expects to enter into warrant transactions with the option counterparties.
In connection with the Notes Offering, the Company received a waiver from the lender under its revolving line of credit to permit the Notes Offering and the related bond hedge and warrant transactions. The Company expects to enter into a new unsecured revolving credit facility in an aggregate principal amount of up to $200 million, which it may increase to an aggregate principal amount of up to $300 million, in the near term. Affiliates of one or more of the initial purchasers are expected to act as agents and/or lenders under the new revolving credit facility. The Company expects any such revolving credit facility to contain affirmative and negative covenants and financial maintenance ratios customary for a company of its size. These covenants may be more restrictive than the covenants under the Company’s existing line of credit.
In connection with the Notes Offering, the Company is updating the following risk factor contained in its Annual Report on Form 10-K for the year ended December 31, 2022:
A variety of new and existing laws and/or interpretations could materially and adversely affect our business.
As detailed in “Business – Government Regulation” in our Annual Report on Form 10-K for the year ended December 31, 2021, we are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, electronic contracts and other communications, competition, consumer protection, telecommunications, product liability, taxation, labor and employment, economic or other trade prohibitions or sanctions, securities law compliance, and online payment services. The introduction of new products, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.
These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. New laws and regulations (or new interpretations of existing laws and regulations) may require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices.
The costs of compliance with these laws and regulation are high and are likely to increase in the future. Additionally, these laws and regulations, or any associated inquiries or investigations or other government actions, may delay or impede the development of new products, result in negative publicity, require significant management time and attention, and subject us to remedies that may harm our business, including fines or demands or orders that we modify or cease existing business practices. For example, as has been reported in the press, there is a grand jury investigation being conducted by the U.S. Attorney’s Office for the Northern District of Illinois. We have fully cooperated with the investigation and continue to do so. While we conducted an extensive internal investigation into, among other things, lobbying activities, and have found no indication of any wrongdoing by any Axon employee, there can be no assurance that this matter will not harm our business.
