See accompanying notes to the condensed consolidated financial statements

Akoustis Technologies, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

For the Three Months Ended September 30, 2017

(unaudited)

See accompanying notes to the condensed consolidated financial statements

Akoustis Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

See accompanying notes to the condensed consolidated financial statements

AKOUSTIS TECHNOLOGIES, INC. 

Notes to the Condensed Consolidated Financial Statements 

(Unaudited)

September 30, 2017

Note 1. Organization

Akoustis Technologies, Inc. (formerly known as Danlax, Corp.)Inc (“the Company”) was incorporated under the laws of the State of Nevada U.S. on April 10, 2013. Effective December 15, 2016, the Company changed its state of incorporation from the State of Nevada to the State of Delaware. Through its subsidiaries,subsidiary, Akoustis, Inc. and Akoustis Manufacturing New York, Inc. (each a(a Delaware corporation), the Company, headquartered in Huntersville, North Carolina, is focused on developing, designing, and manufacturing innovative radio frequencyRF filter products for the mobile wireless device industry. The mission ofindustry, including for products such as smartphones and tablets, cellular infrastructure equipment, and WiFi premise equipment. Located between the device’s antenna and its digital backend, the RF front-end (“RFFE”) is the circuitry that performs the analog signal processing and contains components such as amplifiers, filters and switches. To construct the resonators that are the building blocks for the RF filter, the Company is to commercializehas developed a fundamentally new single-crystal acoustic materials and manufacturedevice technology manufactured with its patented BulkONE® acoustic wave technology to addressproprietary XBAW process. Filters are critical in selecting and rejecting signals, and their performance enables differentiation in the critical frequency-selectivity requirements in today’s mobile smartphones - improvingmodules defining the efficiency and signal quality of mobile wireless devices and enabling the Internet of Things.RFFE.

On March 10, 2017, the Company announced that itsThe Company’s common stock was approved for listingis listed on the NASDAQNasdaq Capital Market effective March 13, 2017, under the symbol AKTS.

Acquisition of AssetsNote 2. Liquidity

On June 26, 2017, pursuantOctober 23, 2018, the Company sold 7,250,000 shares of the Company’s common stock in an underwritten public offering. The Company granted the underwriters an option to purchase, for a Definitive Asset Purchase Agreementperiod of 30 calendar days from October 19, 2018, up to an additional 1,087,500 shares of common stock. The Company estimates that the net proceeds from the common stock offering after payment of issuance costs of approximately $2.3 million are approximately $28.5 million, or approximately $32.9 million if the underwriters exercise their over-allotment option in full, in each case, after deducting the underwriting discount and Definitive Real Property Purchase Agreement (collectively,estimated offering expenses payable by the “Agreements”) with The Research Foundation for the State University of New York (“RF-SUNY”) and Fuller Road Management Corporation (“FRMC”), an affiliate of RF-SUNY, respectively,Company.

Additionally, on October 23, 2018 the Company completed the acquisitionan offering of certain specified assets, including STC-MEMS, a semiconductor wafer-manufacturing operation and microelectromechanical systems (“MEMS”) business with associated wafer-manufacturing tools, as well as the real estate and improvements associated with the facility located in Canandaigua, New York, which is used in the operation of STC-MEMS (the assets and real estate and improvements referred to together herein as the “STC-MEMS Business”), which was created in 2010 by RF-SUNY as an economic development project. The purpose$10.0 million principal amount of the initiative was to explore different technology opportunities with the goal of being a vertically integrated provider of foundry services that would offer its customers the capacity, infrastructure and operational capabilities of semiconductor and advanced manufacturing for aerospace, biomedical, communications, defense, and energy markets. Post-acquisition date, the Company also agreed to assume substantially all the on-going obligationsCompany’s 6.5% Convertible Senior Secured Notes due 2023. The net proceeds of the STC-MEMS Business incurred in the ordinary courseoffering after payment of business including with respect to the 29 employees employed by RF-SUNY.offering costs of approximately $1.1 million are approximately $8.9 million.

The Company acquired the STC-MEMS Business through its wholly-owned subsidiary, Akoustis Manufacturing New York, Inc., (“Akoustis NY”), a Delaware corporation.

See Note 4 for a detailed description of the transaction.

Note 2. Going Concern and Management Plans

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As ofAt September 30, 2017, the Company had working capital of $2.2 million and an accumulated deficit of $21.2 million. Since inception, the Company has recorded approximately $892,000 and $318,000 of revenue from contract research and government grants and engineering review services, respectively. As of November 13, 2017,2018, the Company had cash and cash equivalents of $9.1 million and working capital of $8.4 million. The Company has incurred recurring operating losses, and has experienced net cash used in operating activities of $4.7 million whichfor the Company believes is sufficient to fund its current operations through December 2017. As a result, the Company will need to obtain additional capital to fund operations past that date. The Company is actively managing and controlling the Company’s cash outflows to mitigate these risks; these mattersthree months ended September 30, 2018 which raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating toconcern within one year after the recoverabilityissuance date. However, as a result of the convertible note offering and classificationcommon stock offerings described above, as of asset amounts or the classification of liabilities that might be necessary shouldOctober 25, 2018 the Company be unablehad $45.9 million of cash and cash equivalents which alleviated any substantial doubt about the Company’s ability to continue as a going concern. The Company had $4.7 million of cash and cash equivalents on hand as of November 13, 2017These funds will be used to fund its business. 

There is no assurance that the Company’s projectionsoperations, including capital expenditures, R&D, commercialization of our technology, development of our patent strategy and estimates are accurate. The Company’s primary sourcesexpansion of our patent portfolio, as well as to provide working capital and funds for operations since inception have been private placements of equity securities, note financings and grants. The Company needs to obtain additional capital to accomplish its business plan objectives and will continue its efforts to secure additional funds. However, the amount ofother general corporate purposes. These funds raised, if any, may not beare sufficient to enablefund our operations beyond the Company to attain profitable operations. Tonext twelve months from the extent that the Company is unsuccessful in obtaining additional financing, the Company may need to curtail or cease its operations and implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.date of filing of this Form 10-Q.

Note 3. Summary of significant accounting policiesSignificant Accounting Policies

Basis of presentationPresentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

The accompanying unaudited condensed consolidated financial statements are presented in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. The Company has evaluated subsequent events through the issuancefiling of this Form 10-Q. Operating results for the quarter ended September 30, 20172018 are not necessarily indicative of the results that may be expected for the year ending June 30, 20182019 or any future interim period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Form 10-K filed with the SEC on September 20, 2017August 29, 2018 (the “2017“2018 Annual Report”). 

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries,subsidiary, Akoustis, Inc. andOn February 22, 2018, Akoustis Manufacturing New York, Inc. was merged into Akoustis, Inc., with Akoustis, Inc. as the surviving entity. All significant intercompany accounts and transactions have been eliminated in consolidation.

Revised Prior Period Amounts

The Company identified and recorded an out-of-period adjustment related to stock based compensation that should have been recorded in the year ended June 30, 2017. The adjustment was reflected as a $725,000 increase in additional paid in capital and corresponding increase in accumulated deficit. Tabular summaries of the revisions are presented below:

The Company analyzed the revisions under SEC staff guidance (Staff Accounting Bulletin 108) and determined that the revisions are immaterial on a quantitative and qualitative basis and that it is probable that the judgment of a reasonable person relying upon the financial statements would not have been changed or influenced by the inclusion or correction of the items in the year ended June 30, 2017. Therefore, amendment of the previously filed annual report on Form 10-K is not considered necessary. However, if the adjustments to correct the errors were recorded in the first quarter of 2018, the Company believes the impact would have been significant to the first quarter and would impact comparisons to prior periods. The Company has also revised in this current Form 10-Q filing the previously reported annual consolidated balance sheet as of June 30, 2017 on Form 10-K for these amounts. The Company will revise comparative prior period amounts prospectively.

Significant Accounting Policies and Estimates

The Company’s significant accounting policies are disclosed in Note 3-Summary of Significant Accounting Policies in the 20172018 Annual Report. Since the date of the 20172018 Annual Report, other than adopting ASC 606 “Revenue From Contracts With Customers” discussed in the footnote below, there have been no material changes to the Company’s significant accounting policies. The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and the accompanying notes thereto. These estimates and assumptions include valuing equity securities and derivative financial instruments issued in financing transactions, deferred taxes and related valuation allowances, revenue recognition, contingent real estate liability and the fair values of long livedlong-lived assets. Actual results could differ from the estimates.

Revenue Recognition from Contracts with Customers

On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted in the U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

Accounts ReceivableThe Company adopted this guidance and related amendments as of the first quarter of fiscal 2019, applying the modified retrospective transition method. The Company has determined that there was a $20,415 adjustment needed to retained earnings due to the application of the standard on contracts not completed at the date of initial application.

TradeTo achieve this core principle, the Company applies the following five steps:

Step l - Identify the Contract with the Customer - A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and (e) it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

Step 2 - Identify Performance Obligations in the Contract - Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation. The Company considers the performance obligation in a product sale to be title transfer of the specified product to the customer. The transfer of title occurs according to the purchase order (contract) specification. The Company considers performance obligations related to foundry fabrication services to be title transfer of the specified product or prototype to the customer. The transfer of title occurs according to the purchase order (contract) specification. In the absence of title transfer language, transfer occurs at the time of shipment.

Step 3 - Determine the Transaction Price - The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur.

Step 4 - Allocate the Transaction Price - After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception.  

Step 5 - Satisfaction of the Performance Obligations (and Recognition of Revenue) - When an asset is transferred, and the customer obtains control of the asset (or the services are rendered), the Company recognizes revenue. At contract inception, the Company determines if each performance obligation is satisfied at a point in time or over time. The Company will recognize sales of its product in the period that title of the product is transferred to the customer. The Company will evaluate foundry fabrication services contracts on a case by case basis as they vary with regards to enforceable right and alternative use. If an unrestricted, enforceable right and no alternative use exists, the Company will recognize revenue over time utilizing the input method which the Company considers to be the best method of measuring progress toward complete satisfaction of the performance obligation. However, if either of these does not exist, the Company will recognize revenue at a point in time based on title transfer of the final prototype or specified product.

Disaggregation of Revenue

The Company’s primary revenue streams include Foundry Fabrication Services, and Product Sales.

Foundry Fabrication Services

Foundry fabrication services revenue includes MEMS foundry services and Non Recurring Engineering (NRE). Under these contracts, products are delivered to the customer at the completion of the service which represents satisfaction of the performance obligation. Depending on language with regards to enforceable right to payment for performance completed to date, related revenue will either be recognized over time or at a point in time.

Product Sales

Product sales revenue consists of sales of RF filters and amps which are sold with contract terms stating that title passes and the customer takes control at the time of shipment. Revenue is then recognized when the devices are shipped and the performance obligation has been satisfied. If devices are sold under contract terms that specify that the customer does not take ownership until the goods are received, revenue is recognized when the customer receives the goods.

The following table summarizes the revenues of the Company’s reportable segments for the three months ended September 30, 2018:

Performance Obligations

The Company has determined that contracts for product sales revenue and foundry fabrication services revenue involve one performance obligation, which is delivery of the final product.

Contract Balances

The Company records a receivable when the title for goods has transferred. Generally, all sales are contract sales (with either an underlying contract or purchase order), resulting in all receivables being contract receivables. When invoicing occurs prior to revenue recognition a contract liability is recorded (as deferred revenue on the Condensed Consolidated Balance Sheet). Revenues recognized during the quarter that were included in the beginning balance of deferred revenue were $25,438. Deferred revenues increased by $43,041 due to invoicing in excess of revenue recognition for NRE projects with point in time treatment. Additionally, contract assets, which represents contracts in which more revenue has been recognized than invoiced, increased by $6,612.

The Company’s accounts receivable balance from contracts with customers represents an unconditional right to receive consideration. Payments are stated netdue within one year of allowances for doubtful accounts. Management estimatescompletion of the allowance for doubtfulperformance obligation and subsequent invoicing and therefore do not include significant financing components. To date there have been no impairment losses on accounts basedreceivable , and contract assets and contract liabilities recorded on reviewthe Condensed Consolidated Balance Sheets were immaterial in the periods presented.

Backlog of Remaining Customer Performance Obligations

Revenue expected to be recognized and analysisrecorded as sales during this fiscal year from the backlog of specific customer balancesperformance obligations that may not be collectible, customer payment history and any other customer-specific information that may impact ability to collectare unsatisfied (or partially unsatisfied) at the receivable. Accounts are considered for write-off when they become past due and when it is determined thatend of the probability of collection is remote. Therereporting period was no allowance for doubtful accounts$0.4 million at September 30, 2017.2018.

Grant Revenue

The Company applies for the grants from various government bodies (state & federal), such as the National Science Foundation (“NSF”) to support research and development. In addition, the Company is eligible for “matching awards” from state boards to provide additional funds to the Company to supplement the funds awarded under the Federal grant program. The Company records grant revenue as a part of revenue from operations due to the fact that grant revenue is viewed as an ongoing function of its intended operations. The revenue from grants is not viewed as “incidental” or “peripheral” which would result in the presentation of grant revenue as “Other income”. The Company recognizes nonrefundable grant revenue when the performance obligations have been met, application has been submitted and approval is reasonably assured.

Loss Per Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three months ended September 30, 20172018 and 20162017 presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

The Company had the following common stock equivalents at September 30, 20172018 and 2016:2017:

Shares Outstanding

Shares outstanding include shares of restricted stock with respect to which restrictions have not lapsed. Restricted stock included in reportable shares outstanding was 1,566,078513,425 shares and 1,834,055 shares1,566,078 as of September 30, 20172018 and 2016,2017, respectively. Shares of restricted stock are included in the calculation of weighted average shares outstanding.

Reclassification

Certain prior period amounts have been reclassified to conform to current period presentation. The reclassifications, including the reclassification related to an amendment of warrant agreements to eliminate a derivative liability feature, did not have an impact on net loss as previously reported.

Recently Issued Accounting Pronouncements

In September 2017,May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers (Topic 606), and in May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients. These standards and their effect on the Company’s consolidated financial statements and related disclosures are discussed above under “Revenue Recognition.”

In February 2016, the Financial Accounting Standards Board (FASB)(“FASB”) issued ASU No. 2016-02, “Leases”(Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted, and entities may also elect the optional transition method provided under ASU 2018-11, Leases, Topic 842: Targeted Improvement, issued in July 2018, allowing for application of the standard at the adoption date, with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company does not expect the new standard will have a material effect on the consolidated financial statements and related disclosures

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is evaluating the effect that ASU 2017-11 will have on its financial statements and related disclosures.

In June 2018, the FASB issued Accounting Standards Update (ASU) No. 2017-13,2018-07,Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)Compensation – Stock Compensation (Topic718): Improvements to Nonemployee Share-Based Payment Accounting.The Under the new standard, among other things, provides additional implementation guidance with respectcompanies will no longer be required to Accounting Standards Codification (ASC) Topic 606value non-employee awards differently from employee awards. Companies will value all equity classified awards at their grant-date under ASC718 and ASC Topic 842.forgo revaluing the award after the grant date. ASU 2017-032018-07 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017.2018, including interim reporting periods within that reporting period. Early adoption is permitted, but no earlier than the Company’s adoption date of Topic 606,Revenue from Contracts with Customers(as described above under “Revenue Recognition”). The Company does not believe the new standard will have a significant impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. This update is to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity’s financial statements. The amendments in this update apply to all entities that are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating this guidance and the impact of the new standard, but does not expect it to have a material impactthis update on its implementation strategies or its consolidated financial statements upon adoption.statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements.

Note 4. Acquisition of the STC-MEMS Business

On March 23, 2017, the Company entered into the Agreements with RF-SUNY, a New York State education corporation, on behalf of The State University of New York Polytechnic Institute, and FRMC, an affiliate of RF-SUNY to acquire the STC- MEMS Business. The acquisition will allow the Company to internalize manufacturing, increase capacity and control its wafer supply chain for single crystal bulk acoustic wave (“BAW”) radio frequency (“RF”) filters. Akoustis will utilize the NY facility to consolidate all aspects of wafer manufacturing for its high-band RF filters.

The STC-MEM’s Business was created in 2010 by RF-SUNY to form a vertically integrated “one-stop-shop” in smart system and smart-device innovation and manufacturing. The facility was designed to provide its customers the capacity, infrastructure and operational capabilities in all areas of semiconductor and advanced manufacturing, while covering a diverse number of markets including aerospace, biomedical, communications, defense, and energy. Located in Canandaigua, New York, just outside of Rochester, the STC-MEMS facility includes certified cleanroom manufacturing, advanced test and metrology, as well as a MEMS and optoelectronic packaging facility.

The Company acquired the STC-MEMS Business through Akoustis NY. Post-acquisition date, the Company also agreed to assume substantially all the on-going obligations of the STC-MEMS Business incurred in the ordinary course of business, including with respect to the 29 employees employed by RF-SUNY. The acquisition closed on June 26, 2017.

The purchase price paid for the transaction was an aggregate of approximately $4.58 million consisting of (i) $2.75 million in cash consideration, (ii) $96,000 in inventory, and (iii) a contingent real estate liability of approximately $1.73 million.

The following presents the unaudited pro-forma combined results of operations of the Company with the STC-MEMS Business as if the entities were combined on July 1, 2016.

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisitions been completed as of July 1, 2016 or to project potential operating results as of any future date or for any future periods.

The Company consolidated STC-MEMS as of the closing date of the agreement, and the results of operations of the Company include that of Akoustis NY. The Company recognized revenues attributable to Akoustis NY of $298,000 and recognized net losses of $1.8 million during the period July 1, 2017 through September 30, 2017, driven by wages and fringe benefits of $1.0 million and facilities expense of $715,000.

Note 5.4. Property and equipmentEquipment

Property and equipment consisted of the following:following as of September 30, 2018 and June 30, 2018:

(*) AmortizedUseful lives vary from 3-10 years, as well as leasehold improvements which are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

The Company recorded depreciation expense of $233,310$578,184 and $12,885$233,310 for the three months ended September 30, 20172018 and 2016,2017, respectively.

As of September 30, 2017, research and development fixed assets totaling $3,585,478 were not placed in service and therefore not depreciated during the period.

Note 6. Intangible assets

The Company’s intangible assets consisted of the following:

The Company recorded amortization expense of $3,915 and $1,350 for the three months ended September 30, 2017 and 2016, respectively.

The following table outlines estimated future annual amortization expense for the next five years and thereafter:

Note 7.5. Accounts payablePayable and accrued expensesAccrued Expenses

Accounts payable and accrued expenses consisted of the following at September 30, 20172018 and June 30, 2017:2018: 

Note 8.6. Derivative Liabilities

Upon closingThe Company’s 6.5% Convertible Senior Secured Notes due 2023 issued in May 2018 contain certain derivative features, as described in Note 7 - Convertible Notes. The table below provides a summary of the private placements on May 22, 2015 and June 9, 2015, the Company issued 298,551 and 26,099 warrants, respectively, to purchase the same number of shares of common stock with an exercise price of $1.50 and a five-year term to the placement agent. Upon closing of a private placementchanges in April 2016, the Company issued 153,713 warrants to purchase the same number of shares of common stock with an exercise price of $1.60 and a five-year term to the placement agent. The Company identified certain put features embedded in the warrants that potentially could result in a net cash settlement, requiring the Company to classify the warrants as a derivative liability.

During the year ended June 30, 2017, the Company amended the warrant agreements to eliminate the derivative feature. Upon execution of the revised agreements, a total of 471,697 warrants with a fair value, including net transfers in and/or out, of $2,200,219 were reclassified from liability to equity.

As of September 30, 2017all financial assets and June 30, 2017, the derivative liabilities related to these warrants was $0.

Duringmeasured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2017 and 2016,2018:

The fair value of the derivative features of the convertible note at the balance sheet dates were calculated using the with-and-without method, a form of the income approach, valued with the following weighted average assumptions: 

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Bill with a similar term on the date of the issuance.

Dividend yield: The Company uses a 0% expected dividend yield as the Company markedhas not paid dividends to date and does not anticipate declaring dividends in the derivative featurenear future.

Volatility:The Company estimated the expected volatility of the warrantsstock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the convertible notes’ expected term.

Remaining term: The Company’s remaining term is based on the remaining contractual term of the convertible notes.

Note 7.  Convertible Notes

On May 14, 2018 the Company completed the offering of $15.0 million principal amount of the Company’s 6.5% Convertible Senior Secured Notes due 2023. The net proceeds of the offering after payment of offering costs were approximately $13.1 million. The notes will mature on May 31, 2023, unless earlier converted, redeemed or repurchased. Interest on the notes accrues at the rate of 6.5% per year and is payable at the Company’s option quarterly in cash and/or freely tradable shares of the Company’s common stock, subject to certain limitations.

The Company analyzed the components of the convertible notes for embedded derivatives and the application of the corresponding accounting treatment. This analysis determined that certain features of the notes (i.e, the interest make-whole payment and the qualifying fundamental change payments) represented derivatives that require bifurcation from the host contract. The fair value of these components of $1,158,800 was recorded as a debt discount and will be adjusted to fair value and recorded a lossat the end of $0 and $157,216, respectively, relating to the change in fair value.each future reporting period.

Note 9.8.  Concentrations

Vendors

For the three months ended September 30, 2018, one vendor represented approximately 27% of the Company’s purchases.

For the three months ended September 30, 2017, no vendors represented greater than 10% or more of the Company’s purchases.

Customers

For the three months ended September 30, 2016, two vendors2018, four customers represented 28%40%, 17%, 15%, and 14%, respectively, of the Company’s purchases.non-grant related revenue.

For the three months ended September 30, 2017, three customers represented 59%, 25%, and 12%, respectively, of the Company’s non-grant related revenue.

Note 10.9. Stockholders’ Equity

StockEquity incentive plans

On

During the three months ended September 27, 2017,30, 2018, the Company granted 515,000employees and directors options to employees and directors.purchase an aggregate of 26,000 shares of common stock with a (weighted average) grant date fair value of $4.57. The fair values of the Company’s options were estimated at the dates of grant using a Black-Scholes option pricing model with the following weighted average assumptions:

Expected term: The Company’s expected term is based on the period the options are expected to remain outstanding. The Company estimated this amount utilizing the “Simplified Method” in that the Company does not have sufficient historical experience to provide a reasonable basis to estimate an expected term.

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.model.

Volatility: The Company calculates the expected volatility of the stock price was estimated using the historical volatilities of the Company’s common stock traded on the NASDAQ exchange.

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

The following is a summary of the option activity:

As of September 30, 2017, the total intrinsic value of options outstanding and exercisable was $803,200 and $401,600, respectively. As of September 30, 2017, the Company has approximately $2.6 million in unrecognized stock-based compensation expense attributable to the outstanding options, which will be amortized over a period of 3.43 years.

ForDuring the three months ended September 30, 2017 and 2016,2018 the Company recorded $18,663 and $7,040, respectively, in stock-based compensation related to stock options, which is reflected in the condensed consolidated statements of operations.

Issuance of restricted shares -awarded certain employees and consultants

Restricted stock awards are considered outstanding at the timecontractors grants of execution by the Company and the recipientan aggregate of a164,000 restricted stock agreement, as the stock award holders are entitled to dividend and voting rights. As of September 30, 2017, the number of shares granted for which the restrictions have not lapsed was 1,271,378 shares.

The Company recognizes the compensation expense for all share-based compensation granted based on theunits (“RSUs”) with a weighted average grant date fair value for directors andof $8.46. The RSUs will be expensed over the requisite service period. The terms of the RSUs include vesting provisions based solely on continued service. If the service criteria are satisfied, the RSUs will generally vest over 4 years.

During the three months ended September 30, 2018 the Company granted 119,500 performance-based restricted stock units (“PBRSU”) to employees and the reporting period remeasuredwith a (weighted average) grant date fair value per share of $8.30. The PBRSU awards contain performance and service conditions which must be satisfied for consultants. The fair value ofan employee to earn the award is recorded as share-based compensation expense over the respective restriction period. award.

Any portion of the grantgrants awarded to consultants directors, employees, and other service providers as to which the repurchase option for restricted stock awards has not lapsed or for which an option or restricted stock unit has not vested is accrued on the Condensed Consolidated Balance Sheet as a component of accounts payable and accrued expenses. As of September 30, 20172018 and June 30, 2017,2018, the accrued stock-based compensation was $342,997$195,786 and $399,157,$395,539, respectively. The Company has the right to repurchase some or all of such shares in certain circumstances upon termination of the recipient’s service with the Company, for up to 60 months from the date of termination (“repurchase option”). The shares as to which the repurchase option has not lapsed are subject to forfeiture upon certain terminations of consulting and employment relationships.

In September 2015, the Company amended the original restricted stock agreement for certain award recipients. PursuantCompensation expense related to the amendment, 75% of the sharesour stock-based awards described above was as to which the repurchase option had not lapsed as of September 30, 2015 will be released from the repurchase option on the third anniversary of the original effective date of the agreement. The remaining 25% of the shares will be released from the repurchase option on the fourth anniversary of the original effective date.follows:

The following is a summary of restricted shares:

In relation to the above restricted stock agreements for the three months ended September 30, 2017 and 2016, the Company recordedUnrecognized stock-based compensation expense for the shares that have vested of $518,332 and $697,180, respectively.weighted-average years to be recognized are as follows:

Note 10. Grant Agreement

On July 24, 2018 the Company executed a grant agreement with the Town of Canandaigua, through the Community Development Block Grant. The purpose of the grant is to provide financing in support of the purchase and installation of new machinery and equipment at its fabrication facility in Canandaigua, New York (the “NY Facility”) made between June 27, 2017 and June 27, 2019. The grant is subject to certain terms and conditions and allows for disbursement of up to $734,000 in grants. As of September 30, 2017,2018, the Company had approximately $3.3 million in unrecognized stock-based compensation expense relatedutilized $0 to support the unvested shares.

purchase and installation of new machinery and equipment.

Note 11. Commitments and Contingencies

Operating leasesLeases

The Company leasesleased three office spacelocations in Huntersville, NC pursuant to athree- and five-year lease agreements, and one month-to-month lease. The three-year lease agreement.agreement expired in April 2018 in connection with a move in corporate office location, and the five-year lease agreement expires in November 2022. The operating lease providesleases provide for annual real estate tax and cost of living increases and containscontain predetermined increases in the rentals payable during the termterms of the lease.leases. The aggregate rent expense is recognized on a straight-line basis over the lease term. The total lease rental expense was $17,107$36,803 and $14,202$17,107 for the three months ended September 30, 2018 and 2017, and 2016, respectively.

The Company leasesaggregate rent expense on various equipment for its Canandaigua,the Huntersville, NC location and the NY facility pursuant to a three-month lease agreement beginning on June 16, 2017. The aggregate rent expenseFacility is recognized on a straight-line basis over the lease term. The total lease rental expense was $35,000$19,712 and $0$59,399 for the three months ended September 30, 2018 and 2017, respectively.  

Ontario County Industrial Development Authority Agreement

Industrial Development Agency, a public benefit corporation of the State of New York (the “OCIDA”). Pursuant to the OCIDA Agreements, the Company will lease for $1.00 annually to the OCIDA an approximately 9.995-acre parcel of land in Canandaigua, New York, together with the improvements thereon (including the NY Facility), and 2016, respectively.transfer title to certain related equipment and personal property to the OCIDA. The OCIDA will lease such land and improvements back to the Company for annual rent payments specified in the Lease and Project Agreement for the Company’s primary use as research and development, manufacturing, warehouse and professional office space in its business, and to be subleased, in part, by the Company to various existing tenants. The Company is currently leasingexpects substantial tax savings during the equipmentterm of the OCIDA Agreements, which expire on a monthDecember 31, 2028. In addition, subject to month basisthe terms of the Lease and isProject Agreement, certain purchases and leases of eligible items will be exempt from the imposition of sales and use taxes. Subject to the terms of the Lease and Project Agreement, the OCIDA has also granted to the Company an exemption from certain mortgage recording taxes for one or more mortgages securing an aggregate principal amount not to exceed $12.0 million, or such greater amount as approved by the OCIDA in processits sole and absolute discretion. The benefits provided to the Company pursuant to the terms of negotiating termsthe Lease and conditionsProject Agreement are subject to renewclaw back over the lease.life of the OCIDA Agreements upon certain recapture events, including certain events of default.

Real Estate Contingent Liability

In connection with the acquisition of the NY Facility and related assets, including STC-MEMS, Business,a semiconductor wafer-manufacturing and microelectromechanical systems (“MEMS”) operation with associated wafer-manufacturing tools, the Company agreed to pay to Fuller Road Management Corporation, an affiliate of The Research Foundation for the State University of New York, a penalty, as set forth below, if the Company sells the property subject to the related Definitive Real Property Purchase Agreement within three (3) years after the date of such agreement for an amount in excess of $1,750,000, subject to certain enumerated exceptions. The penalty imposed shall be equivalent to the amount that the sales price of the property exceeds $1,750,000 up to the maximum penalty (“Maximum Penalty”) defined below:

The fair value of the contingent liability was calculated by an independent third-party appraisal firm, utilizing a present value calculation based on the probability the Company sells the property triggering the contingent penalty and a discount rate of 14.1%17.2%. The 14.1% discount rate was derived from a weighted average cost of capital, modified to include the effects of the bargain purchase price. As of September 30, 20172018 and June 30, 2017,2018, the fair value of the contingent liability was $1,730,542.$1,276,890 and $1,229,966 respectively. During the three months ended September 30, 2018 and 2017, the Company marked the contingent liability to fair value and recorded a loss of ($46,924) and $0, respectively, relating to the change in fair value.

Litigation, Claims and Assessments

From time to time, the Company may become involved in lawsuits, investigations and claims that arise in the ordinary course of business. The Company believes it has meritorious defenses against all pending claims and intends to vigorously pursue them. While it is not possible to predict or determine the outcomes of any pending actions, the Company believes the amount of liability, if any, with respect to such actions, would not materially affect its financial position, results of operations or cash flows.

Tax Credit Contingency

The Company accrues a liability for indirect tax contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period in which such determination is made.

The Company’s gross unrecognized indirect tax credits totaled $0.1 million and $0.1 million as of September 30, 2018 and June 30, 2018, respectively, and is recorded on the Condensed Consolidated Balance Sheet as a long-term liability.

Note 12. Related Party Transactions

Consulting Services

AEG Consulting, a firm owned by one of the Company’s Co-Chairmen of the Company’s Board of Directors, received $0 and $5,475 and $4,050cash compensation for consulting fees for the three months ended September 30, 2018 and 2017, and 2016, respectively. On September 27, 2017In addition, share based compensation expense related to stock based awards granted for the Company granted a Co-Chairman restricted stock units for 5,000 shares and stock options to purchase 10,000 shares of the Company’s common stock forCo-Chairman’s consulting services provided by AEG Consulting. Both awards vest 25% on each ofwas $15,829 and $0 for the first four anniversaries of the grant date. The options carry an exercise price of $7.12three months ended September 30, 2018 and have an expiration period of 7 years.2017, respectively 

On September 27, 2017, the Company granted a restricted stock award of 11,000 shares of the Company’s common stock to a certain director for board advisory services provided from January 2017 to June 2017, prior to the director’s appointment to the Board of Directors on July 14, 2017. TheShare based compensation expense related to this award vests 25% on each ofwas $10,121 and $0 for the first four anniversaries of the grant date. three months ended September 30, 2018 and 2017, respectively.

Note 13. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is theits Chief Executive Officer. The Company operates in two segments, Foundry Fabrication Services which consists of engineering review services and STC-MEMS foundry services; and RF Filters.Filters which consists of amplifier and filter product sales, and grant revenue. The Company records all of its general and administrative costs in the RF Filters segment.

The Company evaluates performance of its operating segments based on revenue and operating profit (loss). Segment information for the three months ended September 30, 20172018 and 20162017 are as follows:

Note 14. Subsequent Events

Public Offering of Common Stock

On October 23, 2018, the Company completed the offering of 7,250,000 shares of its common stock pursuant to an underwriting agreement with Oppenheimer & Co. Inc., as the representative of several underwriters. In October 2017,addition, pursuant to the underwriting agreement the Company granted restrictedthe underwriters in the offering an option to purchase, for a period of 30 calendar days from October 19, 2018, up to an additional 1,087,500 shares of common stock units totaling 301,000solely to cover over-allotments, if any. The net proceeds from the common stock offering are approximately $28.5 million, or approximately $32.9 million if the underwriters exercise the over-allotment option in full, in each case, after deducting the underwriting discount and estimated offering expenses payable by the Company.

Convertible Notes Offering

On October 23, 2018 the Company completed the offering of $10.0 million principal amount of the Company’s 6.5% Convertible Senior Secured Notes due 2023. The notes are unsecured and rank pari passu with the Company’s outstanding unsubordinated liabilities. The net proceeds of the offering after payment of offering costs are approximately $8.9 million. The notes will mature on November 30, 2023, unless earlier converted, redeemed or repurchased. Interest on the notes accrues at the rate of 6.5% per year and is payable in cash on each February 28, May 31, August 31 and November 30, beginning February 28, 2019. The notes are convertible into common stock at the option of the holder at any time prior to maturity at an initial conversion price of $5.10 per share, subject to adjustment under certain circumstances.

The holders of the notes will have a one-time right exercisable prior to November 30, 2021 (the “put date”), in the manner described in the indenture, to require us to repurchase for cash all (but not less than all) of such holders’ notes on the put date at a purchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, and including, the put date.

The Company may redeem the notes in certain cases, in whole or in part, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest on such principal, if any, up to the redemption date so long as the closing price of the Company’s common stock exceeds a certain amount in excess of the then-effective conversion price of the notes. If the Company redeems the notes, the holders of the notes will also receive an interest make-whole payment equal to the remaining scheduled interest payments that would have been made on the notes redeemed had such notes remained outstanding through the maturity date, which shall be paid in cash and, in certain cases, may be paid in shares of the Company’s common stockstock.

Additionally, if a “fundamental change” (as defined in the indenture governing the notes) occurs at any time prior to employees at its New York Fabrication facility. The awards vest 50% on the second anniversarymaturity date, subject to certain conditions, holders of the grant date and 25% onnotes will have the eachright, at their option, to require the Company to repurchase for cash all or part of such holder’s notes at a purchase price equal to 100% of the thirdprincipal amount of the notes to be repurchased, plus accrued and fourth anniversaries.

The Company received subscription agreements forunpaid interest to the fundamental change repurchase date. In addition, if a private placement offering forholder elects to convert its notes following the saleoccurrence of shares of its common stock for a per share price of $5.50 per share. As of November 14, 2017,“qualifying fundamental change” (as defined in the indenture governing the notes) prior to the maturity date, the Company has closed on the salewill, under certain circumstances, make a payment to such holder for conversion equal to $130 per $1,000 of sharesaggregate principal of notes so surrendered for total proceeds of approximately $950,000 of the total $1.0 million. There were no fees or warrants associated with this closing. The proceeds of the offering willconversion, which shall be used to fund developmentpaid in cash and, commercializationin certain cases, may be paid in shares of the Company’s technology, capital expenditures and general corporate expenditures. 

common stock. 

References in this report to “Akoustis,” the “Company,” “we,” “us,” and “our” refer to Akoustis Technologies, Inc. and its consolidated subsidiaries,subsidiary, Akoustis, Inc. and Akoustis Manufacturing New York, Inc., each of which are Delaware corporations.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that relate to our plans, objectives, estimates, and goals. Any and all statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of commercially viable radio frequency (RF)(“RF”) filters, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in this management’s discussion and analysis of financial condition or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (SEC)(the “SEC”), (iv) our ability to efficiently utilize cash and (iv)cash equivalents to support our operations for a given period of time, (v) our ability to engage customers while maintaining ownership of our intellectual property, and (vi) the assumptions underlying or relating to any statement described in (i), (ii) or (iii) above.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates, and assumptions and are subject to a number of risks and uncertainties and other influences, many of which are beyond our control. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our ability to continue as a going concern; our inability to obtain adequate financing; our limited operating history; our inability to generate revenues or achieve profitability; the results of our research and development (R&D) activities; our inability to achieve acceptance of our products in the market; general economic conditions, including upturns and downturns in the industry; our limited number of patents; failure to obtain, maintain, and enforce our intellectual property rights; our inability to attract and retain qualified personnel; our reliance on third parties to complete certain processes in connection with the manufacture of our products; product quality and defects; existing or increased competition; our ability to market and sell our products; our inability to successfully integrate our New York wafer fabrication facility and related operations into our business; our failure to innovate or adapt to new or emerging technologies; our failure to comply with regulatory requirements; results of any arbitration or litigation that may arise; stock volatility and illiquidity; our failure to implement our business plans or strategies; our failure to remediate the material weakness in our internal control over financial reporting; and our failure to maintain the Trusted Foundry accreditation of our New York wafer fabrication facility.

These and other risks and uncertainties, which are described in more detail in our Annual Report on Form 10-K, filed with the SEC on September 20, 2017August 29, 2018 (the “Annual Report on Form 10-K”“2018 Annual Report”), could cause our actual results to differ materially from those expressed or implied by the forward-looking statements in this report. Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them. Except as may be required by law, we do not undertake any obligation to update the forward-looking statements contained in this report to reflect any new information or future events or circumstances or otherwise.

Overview

AkoustisAkoustis® is an early-stagea development-stage company focused on developing, designing, and manufacturing innovative RF filter products for the mobile wireless device industry, including for products such as smartphones and tablets, cellular infrastructure equipment, WiFi customer premise equipment (CPE) and WiFi premise equipment.military and defense communications applications. Located between the device’s antenna and its digital backend, the RF front-end (RFFE)(“RFFE”) is the circuitry that performs the analog signal processing and contains components such as amplifiers, filters and switches. To construct the resonators that are the building blocks for the RF filter, we have developed a fundamentally new single-crystal acousticswitches microelectromechanical systems (“MEMS”)-based (“BAW”) technology and unique manufacturing flow, called XBAW. Our XBAW process incorporates high purity piezoelectric materials to explore high power, high frequency and device technology that we refer to as BulkONE®.wide bandwidth applications. Filters are critical in selecting and rejecting signals, and their performance enables differentiation in the modules defining the RFFE.

We believe owning the core resonator technology and manufacturing our designs is the most direct and effectiveefficient means of delivering our solutions to the market. Furthermore, our technology is based upon bulk-mode resonance, which is superior to surface-mode resonance for high-band applications and emergingthat include 4G/LTE, emerging 5G, WiFi, and WiFi frequency bands.military applications. While some of our target customers utilize or make the RFFE module, several customersthey may lack access to critical high-band filter technology to compete in high-band applications and other traditional surface-mode solutions where higher power performance is required. We intend to design, manufacture, and market our RF filter products to multiple mobile phone original equipment manufacturers (OEMs)(“OEMs”), military and defense OEMs, cellular infrastructure OEMs, and WiFi routerpremise equipment customers and to enable broader competition among the front-end module manufacturers. We plan to operate as a “pure-play” RF filter supplier and align with the front-end module manufacturers who seek to acquire high performance filters to grow their module business.

We have built prototype resonatorscurrently build pre-production RF filter circuits, using our proprietary single-crystal materials. We are currently optimizing our BulkONE® technologyfirst generation XBAW wafer process, in our 120,000-square122,000-square foot wafer-manufacturing plant located in Canandaigua, New York, which we acquired in June 2017. WeTo date, we have been awarded 18 patents including two blocking patents that we have licensed from Cornell University and the University of California, Santa Barbara and we have over 38 additional patents pending. These patents cover our XBAW process and technology from the substrate level through the system application layer. Where possible, we leverage both federal and state level non-dilutive R&D grants to support development and commercialization of our technology. 

We are developing resonatorsRF filters for 4G/LTE, emerging 5G, military and WiFi bands and the associated proprietary models and design kits required to design our RF filters. OnceAs we have stabilized the wafer process technology,qualify our first RF filter products, we plan to engage with strategictarget customers to evaluate first our resonators and then our filter prototypes.solution. Our initial designs will target high-band 4G/LTE, emerging 5G, and WiFi frequency bands. Since Akoustis owns its core technology and controls access to its intellectual property, we expect to offer several ways to engage with potential customers. First, we couldintend to engage with the mobilemultiple wireless market,markets, providing filters that we design and offer as a standard catalog component to multiple customers.components. Second, we could start with aexpect to deliver filters to customer-supplied filter specification,specifications, which we will design and fabricate for a specific customer. Finally, we couldwill offer our models and design kits for our customers to design their own filter intoutilizing our proprietary technology.

We have earned minimal revenue from operations since inception, and we have funded our operations primarily with contract researchdevelopment contracts, RF filter prototype orders, government grants, MEMS foundry and government grants,engineering services, sales of our equity securities, and issuance of debt. We have incurred losses totaling approximately $21.2$45.5 million from inception through September 30, 2017.2018. These losses are primarily the result of material and material processing costs associated with developing and commercializing our technology, as well as personnel costs, professional fees (primarily accounting and legal), and other general and administrative (“G&A”) expenses. We expect to continue to incur substantial costs for commercialization of our technology on a continuous basis because our business model involves materials and solid-state device technology development and engineering of catalog and custom filter designs.  

Plan of Operation

We plan to commercialize our technology by designing and manufacturing single-band and multi-band BAW RF filter solutions in our New York wafer fabrication facility. We expect our filter solutions will address problems (such as loss, bandwidth, power handling, and isolation) created by the growing number of frequency bands in the RFFE of mobile devices, infrastructure and premise equipment to support 4G/LTE, emerging 5G, and WiFi. We have prototyped our first single-band low-loss BAW filter designs for 4G/LTE frequency bands, which are dominated by competitive BAW solutions and historically cannot be addressed with low-band, lower power handling surface acoustic wave (SAW) technology. During the second half of calendar 2017 we have sampled filter product prototypes to prospective customers that cover LTE-Band 41,LTE, Radar and 5GHz WiFi applications. In March and April of 2018, we announced our first two commercial products, the AKF-1252 and the AKF-1938, which we are currently sampling with customers involved in the WiFi market and military market, respectively. In May we announced a Non Recurring Engineering (“NRE”) contract and purchase order for a 4G/LTE infrastructure customer that we expect will ship in early calendar 2019. Additionally, in June 2018 we announced a 5.2 GHz BAW WiFi filter for the handset market, the AKF-1652. We added our first 5G cellular infrastructure customer for the Citizen’s Broadband Radio Service in August 2018. In September, we recorded our first XBAW filter revenue from our military customer for pre-production units and received a follow-on order in addition to the original purchase order for production units scheduled to ship before the end of calendar 2018. As we receive customer evaluations, we will do further iterations on the designs and provide next generation samples for evaluation and characterization.

In order toTo succeed, we must convince mobile phone OEMs, RFFE module manufacturers, cellular infrastructure OEMs, military and WiFi routerCPE OEMs to use our BulkONE®XBAW filter technology in their systems and modules. However, since there are only two dominant BAW filter suppliers in the industry that have high-band technology, and both utilize such technology as a competitive advantage at the module level, we expect customers that lack access to high-band filter technology will be open to engage with our pure-play filter company.

OnceIn June 2018 we complete customer validation of our technology, we expect to completecompleted the qualification of our BulkONE®high purity piezoelectric materials process technology in the in the first half of calendar 2018and our XBAW manufacturing process to support aan initial product family of 4G/LTE, emerging 5G mobile, military and WiFi filter solutions. OnceNow that we have stabilized our process technology in a manufacturing environment, we willintend to complete a production release of our high-band filter products in the frequency range from 2.51 GHz to 6.0GHz.7 GHz. The target frequency bands will be prioritized based upon customer priority. We expect this will require recruiting and hiring additional personnel and capital investments.

We plan to pursue RF filter design and R&D development agreements and potentially joint ventures with target customers and other strategic partners.partners, but we cannot guarantee we will be successful in these efforts. These types of arrangements may subsidize technology development costs and qualification, filter design costs, and offer complementary technology and market intelligence and other avenues to revenue. However, we intend to retain ownership of our core technology, intellectual property, designs, and related improvements. We expect to pursue development of catalog designs for multiple customers and to offer such catalog products in multiple sales channels.

As of November 13, 2017,October 25, 2018, the Company had $4.7$45.9 million of cash and cash equivalents to fund our operations, including research and product development,capital expenditures, R&D, commercialization of our technology, development of our patent strategy and expansion of our patent portfolio, as well as to provide working capital and funds for other general corporate purposes. These funds are expected to be sufficient to fund our operations through December 2017. However, there is no assurance thatbeyond the Company’s projections and estimates are accurate.next twelve months from the date of filing of this Form 10-Q. Our anticipated expenses include employee salaries and benefits, compensation paid to consultants, capital costs for research and other equipment, costs associated with development activities (including travel and administration), costs associated with the integration and operation of our New York wafer fabrication facility and related operations, legal expenses, sales and marketing costs, general and administrativeG&A expenses, and other costs associated with an early stage, public technology company. We anticipate increasing the number of employees by approximately 15 to 20 employees in the next 12 months;employees; however, this is highly dependent on the nature of our development efforts, and our success in commercialization, and our ability to source additional funds.commercialization. We anticipate adding employees for R&D in both our New York and North Carolina facilities, as well as accounting and general and administrativeG&A functions, to support our efforts. We expect capital expenditures to be approximately $5.25$13.0 million for the purchase of equipment and software during the next 12 months, and we are currently investigating the feasibility of using debt facilities, equipment leases, or government grants to fund all or part of the purchase of the equipment.months. 

The amounts we actually spend for any specific purpose may vary significantly and will depend on a number of factors, including, but not limited to, the pace of progress of our commercialization and development efforts, actual needs with respect to product testing, R&D, market conditions, changes in or revisions to our marketing strategies, and the integration of our New York wafer fabrication facility and related operations into our business.

Commercial development of new technology, by its nature, is unpredictable. Although we will undertake development efforts with commercially reasonable diligence, there can be no assurance that our current cash position will be sufficient to enable us to commercialize our technology to the extent needed to create future sales to sustain operations. If our current cash is insufficient for these purposes, the Company iswe are unable to source additional funds on terms acceptable to the Company (or at all), or the Company experienceswe experience costs in excess of estimates to continue itsour R&D plan, it is possible that the Companywe would not have sufficient resources to continue as a going concern and the Companywe may be required to curtail or suspend itsour operations. Even if we are able to source sufficient funds to continue as a going concern, our technology may not be accepted, we may never earn revenues sufficient to support our operations, and we may never be profitable.

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2018 Annual ReportReport.

Recent Events

On October 23, 2018, the Company sold 7,250,000 shares of the Company’s common stock in an underwritten public offering pursuant to the Registration Statement. In addition, pursuant to the underwriting agreement entered into with Oppenheimer & Co. Inc., as representative of the several underwriters, relating to the common stock offering the Company granted the underwriters an option to purchase, for a period of 30 calendar days from October 19, 2018, up to an additional 1,087,500 shares of common stock solely to cover over-allotments, if any. The Company estimates that the net proceeds from the common stock offering will be approximately $28.5 million, or approximately $32.9 million if the underwriters exercise their over-allotment option in full, in each case, after deducting the underwriting discount and estimated offering expenses payable by the Company.

On October 23, 2018 the Company completed the offering of $10.0 million principal amount of our 6.5% Convertible Senior Secured Notes due 2023 in an underwritten offering pursuant to a Registration Statement on Form 10-K.S-3 (File No. 333-227637) (the “Registration Statement”). The net proceeds of the offering after payment of offering costs are approximately $8.9 million. The notes will mature on November 30, 2023, unless earlier converted, redeemed or repurchased. Interest on the notes accrues at the rate of 6.5% per year and is payable at the Company’s option quarterly in cash and/or freely tradable shares of the Company’s common stock, subject to certain limitations.

Results of Operations

Three Months Ended September 30, 20172018 and 20162017

Revenue

The Company recorded revenue of $301,000$313,000 during the three months ended September 30, 2017,2018 as compared to $301,000 for the three months ended September 30, 2017. Revenue recorded during the three months ended September 30, 2018 included $148,000 of which $298,000 was revenue for foundry services provided at our New York facility, acquired on June 26, 2017.the NY Facility, with the remaining revenue consisting primarily of grant revenue. The Company did not record any revenue infor the comparative three-month periodthree months ended September 30, 2016.2017 included $298,000 of revenue for foundry services provided at the NY Facility. 

Cost of Revenue

The Company recorded cost of revenue of $193,000 for$144,000 in the quarterthree months ended September 30, 20172018 which includedincludes direct labor, direct materialsmaterial, and facility costs primarily associated with the foundry services revenue. The Company did not record any revenues or associated cost of revenue, foras compared to $193,000 in the comparative three-month period of 2016.three months ended September 30, 2017.

Operating Expenses

Total operating expenses for the three-month period ended September 30, 2017 were $4.8 million and included research and development (“R&D”) expenses of $3.0 million and general and administrative (“G&A”) expenses of $1.8 million. Total operating expenses for the three-month period ended September 30, 2016 were $1.9 million and included R&D expenses of $0.7 million and G&A expenses of $1.3 million. 

Research and Development Expenses

R&D expenses of $3.0 million were comprised primarily of salaries and wages for R&D personnel of $1.3 million, stock-based compensation of $282,000, material and third-party processing costs of $587,000, facility costs of $704,000 and depreciation of $158,000. R&D expense in the comparative three-month period ended September 30, 2016, was $653,000. The period over period increase was $2.7 million or 356%. The higher spend was due to the increase in salaries and wages for the assumed R&D personnel in our recently acquired NY fabrication facility as well as incremental R&D hires made since the closing of the acquisition. In addition, we saw an increase of $86,000 or 44% in stock-based compensation associated with R&D personnel due to restricted stock grants made to personnel hired since September 30, 2016 and additional issuances to personnel on the payroll as of September 30, 2016. There was no additional stock-based compensation expense recorded in the quarter for the NY personnel. Material and third-party material processing costs increased over the comparative quarter by $416,000 or 243% as the result of the ramp up of development activities, primarily in our NY facility. Facility costs of $704,000 compared to $0 in the comparative quarter, were associated with the NY facility acquired in June 2017 and include utilities of $389,000, repair and maintenance costs of $197,000, and supplies and parts $113,000. Depreciation expense of $158,000 was higher over the comparative period by $146,000 or 1230% mainly due to higher deprecation recorded for assets included in the NY facility acquisition. 

General and Administrative Expense

G&A expenses were $1.8 million for the quarter as compared to $1.3$4.4 million for the three months ended September 30, 2016,2018 and were $1.4 million, or 47%, higher than the prior year amount for the same period of $3.0 million. The period-over-period increase was primarily in the areas of R&D personnel, stock-based compensation, depreciation, and facility costs. Personnel costs were $1.8 million compared to $1.3 million in the comparative period in the prior year, an increase of $575,000$541,000 or 46%43%. G&A expense for the quarterThe higher spend was comprised primarily of salary and wages of $404,000, stock-based compensation of $316,000, professional fees (primarily legal and accounting) of $520,000, and travel of $109,000. We recorded an increase of $74,000 or 22% in salaries and wages due to additional R&D personnel at both the onboarding of new administrative personnel since September 30, 2016.NC location and NY Facility. Stock-based compensation of $316,000 decreased from the comparative period by $192,000 or 38% because$0.9 million for the three months ended September 30, 2016 included2018 was $633,000, or 224%, higher than the three months ended September 30, 2017 due to new stock awards made to R&D personnel and the change in the fair value of awards from prior periods. Facility and material costs of $1.1 million primarily associated with the NY Facility include utilities of $322,000, facility costs of $282,000, and supplies, materials and parts costs of $523,000. In addition, depreciation costs were $0.6 million as compared to $0.2 million in the comparative period ended September 30, 2017 which was an increase of $412,000, or 261% attributed primarily to the NY Facility acquisition and additional capital expenditures made during the year.

General and Administrative Expense

General and administrative (“G&A”) costs include salaries and wages for executive and administrative staff, stock-based compensation, professional fees, insurance costs and other general costs associated with the administration of $213,000our business. General and administrative expenses for the three months ended September 30, 2018 were $2.5 million versus $1.8 million for the comparative period in the prior year. The increase of $0.6 million, or 34%, was associated mainly with increases in personnel costs, professional fees, insurance expense, stock-based compensation and travel. Personnel costs of $0.8 million were higher by $277,000, or 49%, compared to the same period in the prior year due to the increase in the number of administrative personnel, while professional fees of $0.2 million, associated with legal, accounting and investor relations, services. Professional fees increasedwere lower by $253,000$295,000, or 95% mainly56%. Stock-based compensation for accounting fees duethe three months ended September 30, 2018 was $1.2 million and higher by $868,000, or 275%, compared to costs associated the valuationsame period in the prior year as a result of the NY fabrication facility and the fees for the review and auditissuance of the associated filings. Travel expensenew awards for G&A personnel increased by $85,000 or 363% dueand the recording of the change in the fair value of stock grants issued to increasedinvestor relations consultants. Additionally, G&A costs for the three months ended September 30, 2018 included travel to the NY facility for transition activities, as well as increased travel associated with investor conferencescosts of $55,000 and customer outreach. insurance costs of $63,000.

Other (Expense)/Income

Other expense for the three months ended September 30, 2018 was $611,000 and included rental income of $69,000, offset by $482,000 in interest expense related to the amortization of debt issuance costs and interest on the convertible note, a $47,000 loss on change in fair value of our contingent real estate liability, and a $151,000 loss on the change in the fair value of our derivative liability. Other income for the three months ended September 30, 2017 was $86,100 and included rental income of $85,300.

Net Loss

The Company recorded a net loss inof $7.3 million for the quarter of $4.6 million versus a net loss of $2.1 million in the comparative three months ended September 30, 2016. The primary drivers of the additional2018, compared to a net loss of $2.6$4.6 million werefor the three months ended September 30, 2017. The period-over-period incremental loss of $2,665,000, or 57%, was driven by higher personnel cost in the NYcosts of $818,000, increased stock compensation costs of $1,500,000, decreased other income (net) of $697,000, and increased depreciation of $340,000, offset by decreased facility acquired on June 26, 2017 (higher by $1.1 million), higher material and material processing costs and facility costs of $416,000$48,000, and $704,000, respectively, both mainly due to the ramp updecreased professional fees of R&D activities and the acquisition of our NY facility in June 2017. $284,000.

Liquidity and Capital Resources

Financing Activities

Since inception, the Company has recorded approximately $1.1 million and $1.2 million inof revenue mainly from contract research and government grants, (approximately $892,000) and minimalfoundry services revenue, from operations from sale of product or foundry services.respectively. Our operations thus far have been funded primarily with capital contributions, private placementscontract research and government grants, foundry services, sales of stock, grantsour equity securities, and debt.

The Company estimates the $4.7had $9.1 million of cash on hand as of November 13, 2017 willSeptember 30, 2018, which reflects a decrease of $5.7 million compared to $14.8 million as of June 30, 2018. The $5.7 million decrease is primarily due to $4.7 million in net cash used in operating activities and $1.1 million in capital expenditures for the three months ended September 30, 2018, offset by the receipt of $0.1 million in net proceeds from sales of our common stock. As of October 25, 2018, the Company had $45.9 million of cash and cash equivalents to fund itsour operations, including current capital expense commitments through December 2017. As a result, we will needexpenditures, R&D, commercialization of our technology, development of our patent strategy and expansion of our patent portfolio, as well as to obtain additionalprovide working capital through the sale of additional equity securities, debt and additional grants, or otherwise,funds for other general corporate purposes. These funds are expected to be sufficient to fund our operations past that date. There is no assurance thatbeyond the Company’s projections and estimates are accurate. Althoughnext twelve months from the Company is actively managing and controlling the Company’s cash outflows to mitigate these risks, these matters raise substantial doubt about the Company’s ability to continue as a going concern. date of filing of this Form 10-Q.

Balance Sheet and Working Capital

September 30, 20172018 compared to June 30, 20172018

As of September 30, 2017,2018, the Company had current assets of $6.1$10.6 million made up primarily of cash on hand of $5.4$9.1 million. As of June 30, 2018, current assets were $15.9 million accounts receivablecomprised primarily of $305,000 and prepaid expensescash on hand of $198,000. Current assets as of the end of the prior quarter were $10.0$14.8 million. The quarter over quarter decrease in current assets of $3.9 million was due to a $4.2$5.7 million decrease in cash on hand, which was partially offset by an increasedue to $4.7 million of cash expended for operations and the investment in accounts receivablemachinery and equipment of $305,000.$1.1 million.

Property, plantPlant and equipmentEquipment was $10.2$13.3 million as of September 30, 20172018 as compared to $7.9a balance of $12.8 million as of June 30, 2017.2018. The $2.3approximate $0.5 million increase is primarily due to the purchase of R&D equipment for the NY facility.and leasehold improvements of $1.1 million, offset by depreciation of $0.6 million.

Other assets, primarily intangibles and deposits, were $395,000 as of September 30, 2017 compared to $217,000 as of June 30, 2017. The increase is primarily attributable to a deposit on equipment as of September 30, 2017.

Total assets as of September 30, 2017 were $16.6 million as compared $18.1 million at2018 and June 30, 2017.2018 were $24.6 million and $29.3 million, respectively.

Current liabilities as of September 30, 20172018 were $3.8$2.2 million and increaseddecreased by $2.5$0.4 million compared to $1.4 million as ofsince June 30, 2017. The increase was mainly2018. We saw a decrease in accounts payable and accrued expenses ($2.4 million)of $0.5 million due mainly to accruals recorded for fixed assets in process.less accrued compensation expenses.

Long-term liabilities totaled $1.7$13.3 million as of September 30, 20172018, compared to $12.8 million for the prior year end. The increase of  $0.5 million was mainly due to the increase in the derivative liabilities of $0.2 million, and June 30, 2017convertible notes of $0.3 million, net of debt discount and represent the long-term contingent real estate liability associated with the acquisition of the STC-MEMS Business that closed on June 26, 2017.issuance costs.

Stockholders’ equity was $11.1$9.1 million as of September 30, 2017,2018, compared to $15.0$13.8 million as of June 30, 2017. The2018, a decrease of $3.9$4.7 million. Additional paid-in-capital (“APIC”) was $54.7 million as of September 30, 2018 and increased by $2.6 million from June 30, 2018. The increase was due to an increase of $2.6 million of APIC recorded due to the $4.6vesting of restricted stock agreements granted to employees and contractors in lieu of cash compensation and common stock issued in payment of note interest. The $4.7 million decrease in stockholders’ equity consisted of the $2.6 million increase in APIC reduced by the $7.3 million net loss recorded for the quarter offset by a $702,000 million increase in additional paid-in-capital primarily due to the recording of stock-based compensation. 

Working capital as ofthree months ended September 30, 2017 was $2.2 million, compared to $8.7 million as of June 30, 2017. The primary use of cash was to fund operations as well as invest in additional R&D equipment.2018.

Cash Flow Analysis

Operating activities used cash of $1.7$4.7 million forduring the three months ended September 30, 2017 compared to $1.12018 and $1.7 million for the 20162017 comparative three-month period. The $600,000$3.1 million period-over-period increase in cash used was attributable to higher operating expenses of $3.0 million associated with the ramp up of development and commercialization activities (primarily R&D personnel and the increasedmaterial costs), higher spend on G&A costs associated with the New York facility acquiredfor support personnel and professional fees and increase in June 2017. This was partially offset by an increase of accounts payable and accrued expenses of $2.2 million and higher period over period depreciation expense of $220,000. expense.

Investing activities used cash of $2.6$1.1 million for the three months ended September 30, 20172018 compared to $34,000$2.6 million for the comparative period.period ended September 30, 2017. The increase$1.5 million period-over-period decrease was primarily due to investments in fixed assets for our NY facility to enhance our developmentdecreased spend on R&D equipment and commercialization efforts.leasehold improvements.

Financing activities provided cash of $48,000 compared to $0 in$0.1 million for the comparative period due to cash from the exercise of broker warrants during the three-monthsthree months ended September 30, 2017.2018 versus $48,000 for the 2017 comparative period.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’sCommission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to ourthe issuer’s management, including ourits principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We conducted an evaluation under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial officer) of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017.2018. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of such date due to (i the material weakness in our internal control over financial reporting described in Part II, Item 9A of our Annual Report on Form 10-K, which material weakness relates to our acquisition accounting and reporting practices in connection with the acquisition of our New York wafer fabrication facility and related operations; and (ii) a material weakness in the design of our internal controls related to our accounting for and reporting of stock-based compensation.date.

Remediation Plan

We cannot yet estimate when the material weakness in our internal control over financial reporting will be fully remediated. In order to remediate the material weakness, we intend to take the following actions to improve the overall process of our acquisition and stock-based compensation accounting and reporting practices:

Since the filing of our Annual Report on Form 10-K, we have hired two additional individuals into the finance and accounting team and continue to recruit other qualified candidates.

Changes in Internal Control over Financial Reporting

Other than as set forth above in this Item 4, thereThere have been no changes in our internal control over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may have an adverse effect on our business, financial condition or results of operations and prospects.

We are currently not aware of any material pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

ITEM 1A. RISK FACTORS.

ThereIn addition to the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2018. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report.  Other than as set forth below, there have been no material changes to the risk factors described in Part I, Item 1A, “Risk“Risk Factors,” included in our 2018 Annual Report on Form 10-K.Report.  

Problems in scaling our manufacturing operations could have a material adverse effect on our business.

Future customer demand may require us to significantly increase our manufacturing capacity. There are substantial technical challenges to increasing manufacturing capacity, including equipment acquisition lead times, materials procurement, scaling our manufacturing process, manufacturing site expansion, and the need to significantly increase production yields while maintaining or improving quality control and assurance. Developing commercial-scale manufacturing facilities will require the investment of substantial additional funds and the hiring and retention of additional management, quality assurance, quality control and technical personnel who have the necessary manufacturing experience. The scaling of manufacturing capacity is subject to numerous risks and uncertainties, and may lead to variability in product quality or reliability, increased construction timelines, as well as resources required to acquire, install and maintain manufacturing equipment, among others, all of which can lead to unexpected delays in manufacturing output. Additionally, the production of our products must occur in a highly controlled and clean environment to minimize particles and other yield- and quality-limiting contaminants. Weaknesses in process control or minute impurities in materials may cause a substantial percentage of defective products. We may not be able to maintain stringent quality controls and contamination problems could arise. Material defects in our products could result in loss or delay of revenues, delayed market acceptance, damage to our reputation, lost customers, legal claims, increased insurance costs or increased service and warranty costs. If we are unable to successfully scale up our manufacturing operations to meet customer demand, our business growth could be materially adversely affected.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.¹

Unvested restricted stock awards granted under the Akoustis, Inc. 2014 Stock Plan (the “2014 Plan”) and the Akoustis Technologies, Inc. 2015 Equity Incentive Plan (the “2015 Plan”) are subject to repurchase options upon certain terminations of the respective recipient’s service with the Company. Under the terms of the respective award agreements, repurchases will generally be made for no value or for par value. In connection with the resignations of two employees, the Company delivered notices to them in September 28, 2017, respectively, that the Company would repurchase an aggregate 58,152 shares of restricted stock from them pursuant to the terms of their respective award agreements. We expect to complete these repurchases during the second quarter of fiscal 2018.Repurchases

As of September 30, 2017, approximately 195,873 shares and 771,075 shares remain subject to repurchase options under the 2014 Plan and the 2015 Plan, respectively. The repurchase options expire as the restricted shares vest and generally extend through August 2020.None.

TheUnregistered Sales of Equity Securities

Other than as previously reported in the Company’s Current Reports on Form 8-K, the Company did not sell any unregistered securities during the period covered by this report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

The exhibits in the Exhibit Index below are filed or furnished, as applicable, as part of this report.

EXHIBIT INDEX

* Filed herewith

† Management contract or compensatory arrangement

SIGNATURES

Pursuant to the requirements 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.