UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DecemberMarch 31, 20172021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number:001-38029
AKOUSTIS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 33-1229046 | |
| (State or other jurisdiction of | ||
incorporation or organization) | (IRS Employer Identification No.) |
9805 Northcross Center Court, Suite A
Huntersville, North Carolina 28078
(Address of principal executive offices) (Zip Code)
| 9805 Northcross Center Court, Suite A | ||
| Huntersville, NC | 28078 | |
| (Address of principal executive offices) | (Postal Code) |
704-997-5735
(Registrant’s telephone number, including area code)code: 1-704-997-5735
Not ApplicableSecurities registered under Section 12(b) of the Act:
(Former name, former address and former fiscal year, if changed since last report)
| Title of Each Class: | Trading Symbol | Name of each exchange on which registered: | ||
| Common Stock, $0.001 par value | AKTS | The Nasdaq Stock Market LLC (Nasdaq Capital Market) |
Securities registered under Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | Smaller reporting company | ☒ | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
As of February 1, 2018,April 26, 2021, there were 22,320,70050,374,194 shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.
AKOUSTIS TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDEDDecember MARCH 31,, 2017 2021
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Akoustis Technologies, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 11,698,531 | $ | 9,631,520 | ||||
| Accounts receivable | 298,797 | — | ||||||
| Inventory | 74,979 | 188,476 | ||||||
| Prepaid expenses | 182,307 | 158,457 | ||||||
| Deposits | 42,549 | 42,808 | ||||||
| Total current assets | 12,297,163 | 10,021,261 | ||||||
| Property and equipment, net | 12,283,207 | 7,853,814 | ||||||
| Intangibles, net | 231,701 | 206,527 | ||||||
| Other assets | 32,861 | 10,715 | ||||||
| Total Assets | $ | 24,844,932 | $ | 18,092,317 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 3,027,331 | $ | 1,336,368 | ||||
| Deferred revenue | 77,447 | 14,500 | ||||||
| Total current liabilities | 3,104,778 | 1,350,868 | ||||||
| Long-term Liabilities: | ||||||||
| Contingent real estate liability | 1,809,847 | 1,730,542 | ||||||
| Total long-term liabilities | 1,809,847 | 1,730,542 | ||||||
| Total Liabilities | 4,914,625 | 3,081,410 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, par value $0.001: 5,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Common stock, $0.001 par value; 45,000,000 shares authorized; 22,320,700 and 19,075,050 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively | 22,321 | 19,075 | ||||||
| Additional paid in capital | 46,599,657 | 31,499,889 | ||||||
| Accumulated deficit | (26,691,671 | ) | (16,508,057 | ) | ||||
| Total Stockholders’ Equity | 19,930,307 | 15,010,907 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 24,844,932 | $ | 18,092,317 | ||||
See accompanying notes to the condensed consolidated financial statements
Akoustis Technologies, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months Ended December 31, 2017 | For the Three Months Ended December 31, 2016 | For the Six Months Ended December 31, 2017 | For the Six Months Ended December 31, 2016 | |||||||||||||
| Revenue | $ | 444,553 | $ | 159,068 | $ | 745,493 | $ | 159,068 | ||||||||
| Cost of revenue | 329,836 | — | 523,065 | — | ||||||||||||
| Gross profit | 114,717 | 159,068 | 222,428 | 159,068 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | 3,473,031 | 775,984 | 6,477,396 | 1,428,560 | ||||||||||||
| General and administrative expenses | 2,189,904 | 2,066,768 | 4,022,526 | 3,330,011 | ||||||||||||
| Total operating expenses | 5,662,935 | 2,842,752 | 10,499,922 | 4,758,571 | ||||||||||||
| Loss from operations | (5,548,218 | ) | (2,683,684 | ) | (10,277,494 | ) | (4,599,503 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | 263 | 209 | 997 | 299 | ||||||||||||
| Rental income | 86,844 | — | 172,188 | — | ||||||||||||
| Change in fair value of contingent real estate liability | (79,305 | ) | — | (79,305 | ) | — | ||||||||||
| Change in fair value of derivative liabilities | — | (712,246 | ) | — | (869,462 | ) | ||||||||||
| Total other income (expense) | 7,802 | (712,037 | ) | 93,880 | (869,163 | ) | ||||||||||
| Net loss | $ | (5,540,416 | ) | $ | (3,395,721 | ) | $ | (10,183,614 | ) | $ | (5,468,666 | ) | ||||
| Net loss per common share - basic and diluted | $ | (0.27 | ) | $ | (0.21 | ) | $ | (0.52 | ) | $ | (0.35 | ) | ||||
| Weighted average common shares outstanding -basic and diluted | 20,167,681 | 15,892,503 | 19,667,770 | 15,797,106 | ||||||||||||
See accompanying notes to the condensed consolidated financial statements
Akoustis Technologies, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
For the Six Months Ended December 31, 2017
(unaudited)
| Common Stock | Additional | |||||||||||||||||||
| Shares | Amount | Paid In Capital | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||
| Balance, July 1, 2017 | 19,075,050 | $ | 19,075 | $ | 31,499,889 | $ | (16,508,057 | ) | $ | 15,010,907 | ||||||||||
| Common stock issued for cash, net of issuance costs | 3,183,269 | 3,183 | 13,254,880 | — | 13,258,063 | |||||||||||||||
| Warrants issued to underwriter | — | — | (645,757 | ) | — | (645,757 | ) | |||||||||||||
| Common stock issued for services | 111,000 | 111 | 2,580,711 | — | 2,580,822 | |||||||||||||||
| Common stock issued for exercise of warrants | 9,533 | 10 | 47,655 | — | 47,665 | |||||||||||||||
| Vesting of restricted shares | — | — | (137,779 | ) | — | (137,779 | ) | |||||||||||||
| Repurchase of Common Shares | (58,152) | (58 | ) | 58 | — | — | ||||||||||||||
| Net loss for the six months ended December 31, 2017 | — | — | — | (10,183,614 | ) | (10,183,614 | ) | |||||||||||||
| Balance, December 31, 2017 | 22,320,700 | 22,321 | 46,599,657 | (26,691,671 | ) | 19,930,307 | ||||||||||||||
See accompanying notes to the condensed consolidated financial statements
Akoustis Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
| For the Six Months Ended | For the Six Months Ended | |||||||
| December 31, 2017 | December 31, 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (10,183,614 | ) | $ | (5,468,666 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 470,419 | 25,834 | ||||||
| Amortization of intangibles | 8,076 | 3,112 | ||||||
| Share-based compensation | 2,076,829 | 2,247,862 | ||||||
| Change in fair value of derivative liabilities | — | 869,462 | ||||||
| Change in fair value of contingent liability | 79,305 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (298,797 | ) | (29,000 | ) | ||||
| Inventory | 113,497 | 359 | ||||||
| Prepaid expenses | (23,850 | ) | (38,431 | ) | ||||
| Deposits | 259 | — | ||||||
| Other assets | (22,146 | ) | (10,000 | ) | ||||
| Accounts payable and accrued expenses | 982,729 | 244,109 | ||||||
| Deferred revenue | 62,947 | 29,000 | ||||||
| Net Cash Used In Operating Activities | (6,734,346 | ) | (2,126,359 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash paid for property and equipment | (4,471,121 | ) | (444,429 | ) | ||||
| Cash paid for intangibles | (33,250 | ) | (39,650 | ) | ||||
| Net Cash Used In Investing Activities | (4,504,371 | ) | (484,079 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from the issuance of common stock | 13,258,063 | 3,456,460 | ||||||
| Proceeds from exercise of warrants | 47,665 | — | ||||||
| Net Cash Provided By Financing Activities | 13,305,728 | 3,456,460 | ||||||
| Net Increase in Cash | 2,067,011 | 846,022 | ||||||
| Cash - Beginning of Period | 9,631,520 | 4,155,444 | ||||||
| Cash - End of Period | $ | 11,698,531 | $ | 5,001,466 | ||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Period for: | ||||||||
| Income taxes | $ | — | $ | — | ||||
| Interest | $ | 199 | $ | — | ||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Stock compensation payable | $ | 266,248 | $ | 208,699 | ||||
| Warrants issued for stock issuance costs | $ | 645,757 | $ | 107,432 | ||||
| Reclassification of derivative liability to additional paid in capital | $ | — | $ | 1,795,363 | ||||
Accrued capital expenditures | $ | 428,691 | $ | — | ||||
| March 31, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 90,392 | $ | 44,308 | ||||
| Accounts receivable | 1,620 | 351 | ||||||
| Inventory | 1,446 | 136 | ||||||
| Other current assets | 1,572 | 1,408 | ||||||
| Total current assets | 95,030 | 46,203 | ||||||
| Property and equipment, net | 28,755 | 23,605 | ||||||
| Intangibles, net | 579 | 544 | ||||||
| Operating lease right-of-use asset, net | 531 | 699 | ||||||
| Restricted cash | — | 100 | ||||||
| Other assets | 282 | 282 | ||||||
| Total Assets | $ | 125,177 | $ | 71,433 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 5,163 | $ | 5,899 | ||||
| Deferred revenue | 123 | — | ||||||
| Operating lease liability - current | 260 | 231 | ||||||
| Short term loans payable | 1,218 | — | ||||||
| Total current liabilities | 6,764 | 6,130 | ||||||
| Long-term Liabilities: | ||||||||
| Convertible notes payable, net | — | 21,628 | ||||||
| Operating lease liability - non-current | 274 | 472 | ||||||
| Long term loans payable | 392 | 1,591 | ||||||
| Other long-term liabilities | 117 | 117 | ||||||
| Total long-term liabilities | 783 | 23,808 | ||||||
| Total Liabilities | 7,547 | 29,938 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, par value $0.001: 5,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Common stock, $0.001 par value; 100,000,000 shares authorized; 50,374,194 and 37,990,380 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively | 50 | 38 | ||||||
| Additional paid in capital | 255,230 | 145,072 | ||||||
| Accumulated deficit | (137,650 | ) | (103,615 | ) | ||||
| Total Stockholders’ Equity | 117,630 | 41,495 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 125,177 | $ | 71,433 | ||||
See accompanying notes to the condensed consolidated financial statements
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | For the Nine Months Ended March 31, 2021 | For the Nine Months Ended March 31, 2020 | |||||||||||||
| Revenue | ||||||||||||||||
| Revenue with customers | $ | 2,517 | $ | 363 | $ | 4,461 | $ | 1,424 | ||||||||
| Cost of revenue | 2,973 | 217 | 7,224 | 1,340 | ||||||||||||
| Gross profit (loss) | (456 | ) | 146 | (2,763 | ) | 84 | ||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | 5,225 | 5,769 | 17,171 | 15,736 | ||||||||||||
| General and administrative expenses | 3,395 | 2,589 | 9,683 | 8,158 | ||||||||||||
| Total operating expenses | 8,620 | 8,358 | 26,854 | 23,894 | ||||||||||||
| Loss from operations | (9,076 | ) | (8,212 | ) | (29,617 | ) | (23,810 | ) | ||||||||
| Other (expense) income | ||||||||||||||||
| Interest (expense) income | (2,027 | ) | (1,162 | ) | (5,162 | ) | (3,259 | ) | ||||||||
| Rental income | — | 54 | — | 164 | ||||||||||||
| Change in fair value of contingent real estate liability | — | 480 | — | 446 | ||||||||||||
| Change in fair value of derivative liabilities | 928 | 1,066 | 744 | 396 | ||||||||||||
| Total other (expense) income | (1,099 | ) | 438 | (4,418 | ) | (2,253 | ) | |||||||||
| Net loss | $ | (10,175 | ) | $ | (7,774 | ) | $ | (34,035 | ) | $ | (26,063 | ) | ||||
| Net loss per common share - basic and diluted | $ | (0.22 | ) | $ | (0.21 | ) | $ | (0.83 | ) | $ | (0.80 | ) | ||||
| Weighted average common shares outstanding - basic and diluted | 45,620,610 | 36,236,779 | 41,047,723 | 32,659,339 | ||||||||||||
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)
(Unaudited)
| For the Three Months Ended March 31, 2021 | ||||||||||||||||||||
| Additional | ||||||||||||||||||||
| Common Stock | Paid In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2020 | 41,399 | $ | 41 | $ | 173,918 | $ | (127,475 | ) | $ | 46,484 | ||||||||||
| Common stock issued for cash, net of issuance costs | 3,582 | 4 | 52,198 | — | 52,202 | |||||||||||||||
| Common stock issued in note conversion | 4,984 | 5 | 25,265 | — | 25,270 | |||||||||||||||
| Common stock issued for services | 96 | — | 1,991 | — | 1,991 | |||||||||||||||
| Common stock issued for exercise of warrants | 187 | — | 991 | — | 991 | |||||||||||||||
| Common stock issued for exercise of options | 118 | — | 746 | — | 746 | |||||||||||||||
| Common stock issued in payment of note interest | 8 | — | 121 | — | 121 | |||||||||||||||
| Net loss | — | — | — | (10,175 | ) | (10,175 | ) | |||||||||||||
| Balance, March 31, 2021 | 50,374 | 50 | 255,230 | (137,650 | ) | 117,630 | ||||||||||||||
| For the Three Months Ended March 31, 2020 | ||||||||||||||||||||
| Common Stock | Additional Paid In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2019 | 36,212 | $ | 36 | $ | 129,922 | $ | (85,764 | ) | $ | 44,194 | ||||||||||
| Common stock issued for cash, net of issuance costs | — | — | 19 | — | 19 | |||||||||||||||
| Common stock issued for services | 105 | — | 1,803 | — | 1,803 | |||||||||||||||
| Common stock issued for exercise of options | 2 | — | 9 | — | 9 | |||||||||||||||
| Common stock issued in payment of note interest | 34 | — | 244 | — | 244 | |||||||||||||||
| Repurchase and retirement of common shares | (1 | ) | — | — | — | — | ||||||||||||||
| Net loss | — | — | — | (7,774 | ) | (7,774 | ) | |||||||||||||
| Balance, March 31, 2020 | 36,352 | 36 | 131,997 | (93,538 | ) | 38,495 | ||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
Akoustis Technologies, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)
(Unaudited)
| For the Nine Months Ended March 31, 2021 | ||||||||||||||||||||
| Additional | ||||||||||||||||||||
| Common Stock | Paid In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||
| Balance, June 30, 2020 | 37,990 | $ | 38 | $ | 145,072 | $ | (103,615 | ) | $ | 41,495 | ||||||||||
| Common stock issued for cash, net of issuance costs | 6,294 | 6 | 75,618 | — | 75,624 | |||||||||||||||
| Common stock issued in note conversion | 4,984 | 5 | 25,265 | — | 25,270 | |||||||||||||||
| Common stock issued for services | 574 | 1 | 6,083 | — | 6,084 | |||||||||||||||
| Common stock issued for exercise of options | 209 | — | 1,270 | — | 1,270 | |||||||||||||||
| Common stock issued for exercise of warrants | 219 | — | 1,109 | — | 1,109 | |||||||||||||||
| ESPP purchase | 32 | — | 204 | — | 204 | |||||||||||||||
| Common stock issued in payment of note interest | 72 | — | 609 | — | 609 | |||||||||||||||
| Net loss | — | — | — | (34,035 | ) | (34,035 | ) | |||||||||||||
| Balance, March 31, 2021 | 50,374 | $ | 50 | $ | 255,230 | $ | (137,650 | ) | $ | 117,630 | ||||||||||
| For the Nine Months Ended March 31, 2020 | ||||||||||||||||||||||
| Common Stock | Additional Paid In | Accumulated | Stockholders’ | |||||||||||||||||||
| Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||||
| Balance, June 30, 2019 | 30,141 | $ | 30 | $ | 93,399 | $ | (67,474 | ) | $25,955 | |||||||||||||
| Common stock issued for cash, net of issuance costs | 5,520 | 6 | 32,184 | — | 32,190 | |||||||||||||||||
| Common stock issued for services | 567 | — | 5,108 | — | 5,108 | |||||||||||||||||
| Common stock issued for exercise of options | 12 | — | 64 | — | 64 | |||||||||||||||||
| Common stock issued for exercise of warrants | 74 | — | — | — | — | |||||||||||||||||
| ESPP purchase | 28 | — | 168 | — | 168 | |||||||||||||||||
| Common stock issued for equipment purchase | 5 | — | 40 | — | 40 | |||||||||||||||||
| Vesting of restricted shares | — | — | 303 | — | 303 | |||||||||||||||||
| Common stock issued in payment of note interest | 106 | — | 731 | — | 731 | |||||||||||||||||
| Repurchase and retirement of common shares | (101 | ) | — | — | — | — | ||||||||||||||||
| Net loss | — | — | — | (26,064 | ) | (26,064) | ||||||||||||||||
| Balance, March 31, 2020 | 36,352 | $ | 36 | $ | 131,997 | $ | (93,538 | ) | $38,495 | |||||||||||||
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(In thousands, except per share data)
(Unaudited)
| Nine Months Ended March 31, 2021 | Nine Months Ended March 31, 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (34,035 | ) | (26,063 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 3,284 | 2,194 | ||||||
| Common stock issued for services | 6,084 | 5,108 | ||||||
| Amortization of debt discount | 4,405 | 2,333 | ||||||
| Amortization of operating lease right of use asset | 168 | 91 | ||||||
| Non cash interest payments | 609 | 731 | ||||||
| Change in fair value of derivative liabilities | (744 | ) | (396 | ) | ||||
| Change in fair value of contingent real estate liability | — | (446 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,270 | ) | (407 | ) | ||||
| Inventory | (1,310 | ) | 18 | |||||
| Other current assets | (164 | ) | 477 | |||||
| Other assets | — | (188 | ) | |||||
| Accounts payable and accrued expenses | 961 | 195 | ||||||
| Lease liabilities | (170 | ) | (85 | ) | ||||
| Deferred revenue | 123 | (5 | ) | |||||
| Net Cash Used in Operating Activities | (22,059 | ) | (16,443 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash paid for machinery and equipment | (9,884 | ) | (6,340 | ) | ||||
| Cash received from sale of fixed assets | — | 28 | ||||||
| Cash paid for intangibles | (50 | ) | (143 | ) | ||||
| Net Cash Used in Investing Activities | (9,934 | ) | (6,455 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of common stock | 75,394 | 32,189 | ||||||
| Proceeds from exercise of employee stock options | 1,270 | 64 | ||||||
| Proceeds from exercise of warrants | 1,109 | — | ||||||
| Proceeds from employee stock purchase plan | 204 | 168 | ||||||
| Net Cash Provided by Financing Activities | 77,977 | 32,421 | ||||||
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 45,984 | 9,523 | ||||||
| Cash, Cash Equivalents and Restricted Cash - Beginning of Period | 44,408 | 30,154 | ||||||
| Cash, Cash Equivalents and Restricted Cash - End of Period | $ | 90,392 | $ | 39,677 | ||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Period for: | ||||||||
| Interest | 325 | 488 | ||||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Common stock issued in note conversion | (25,270 | ) | — | |||||
| Stock compensation payable | — | 303 | ||||||
| Fixed assets included in accounts payable and accrued expenses | (1,467 | ) | 290 | |||||
| Stock issuance costs included in accounts payable and accrued expenses | (230 | ) | — | |||||
| Reclass from assets held for sale | — | (251 | ) | |||||
| Assets purchased using common stock | — | 40 | ||||||
See accompanying notes to the condensed consolidated financial statements
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(Unaudited)
December 31, 2017
Note 1. Organization
Akoustis Technologies, Inc. (formerly known as Danlax, Corp.) (“the Company”(the “Company”) was incorporated under the laws of the State of Nevada, U.S. on April 10, 2013. Effective2013, and 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 frequency (“RF”) filter products for the mobile wireless device industry. The mission ofindustry, including for products such as smartphones and tablets, cellular infrastructure equipment, WiFi Customer Premise Equipment (“CPE”), and military and defense communication applications. 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 resonator devices that are the building blocks for its RF filters, the Company is to commercialize and manufacture its patented BulkONE®has developed a family of novel, high purity acoustic wave technology to address the critical frequency-selectivity requirements in today’s mobile smartphones and other wireless devices - improving the efficiency and signal quality and helping enable the Internet of Things.
The Company is listed on the Nasdaq Capital Market, effective as of March 13, 2017, under the symbol AKTS.
Acquisition of Assets
On June 26, 2017, pursuant to a Definitive Asset Purchase Agreement and Definitive Real Property Purchase Agreement (collectively, 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, the Company completed the acquisition of certain specified assets, including STC-MEMS, a semiconductor wafer-manufacturing operation and microelectromechanical systems (“MEMS”) business with associated wafer-manufacturing tools,piezoelectric materials as well as the real estatea unique microelectromechanical system (“MEMS”) wafer process, collectively referred to as XBAW® technology. The Company leverages its integrated device manufacturing (“IDM”) business model to develop and improvements associated with the facility locatedsell high performance RF filters using its XBAW® technology. Filters are critical in Canandaigua, New York, which is usedselecting and rejecting signals, and their performance enables differentiation in the operation of STC-MEMS (the assets and real estate and improvements referred to together herein asmodules defining the “STC-MEMS Business”), which 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. 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.RFFE.
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 PlansLiquidity
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 of DecemberMarch 31, 2017, the Company had working capital of $9.2 million and an accumulated deficit of $26.7 million. Since inception, the Company has recorded approximately $1,039,000 and $615,000 of revenue from contract research and government grants and engineering review services, respectively. As of February 1, 2018,2021, the Company had cash and cash equivalents of $9.7$90.4 million and working capital of $88.3 million. The Company has historically incurred recurring operating losses and experienced net cash used in operating activities.
As of April 26, 2021, the Company had $87.9 million of cash and cash equivalents, which the Company believes isexpects to be sufficient to fund its current operations intobeyond the first quarternext twelve months from the date of fiscal 2019. As a result,filing of this Form 10-Q. These funds will be used to fund the Company’s operations, including 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. Except pursuant to its ATM Equity OfferingSM Sales Agreement with BofA Securities, Inc. and Piper Sandler & Co., the Company will needhas no commitments or arrangements to obtain any additional capital to fund operations past that date. The Company is actively managingfunds, 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. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
There is no assurance that the Company’s projections and estimates are accurate. The Company’s primary sources of funds for operations since inception have been with contract research and government grants, sales of our equity securities, and debt. 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 of funds raised, if any, may not be sufficient to enable the Company to attain profitable operations. To 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. Therethere can be no assurance that such a planfunds will be successful.available on acceptable terms or at all. If the Company is unable to obtain additional financing in a timely fashion and on acceptable terms, its financial condition and results of operations may be materially adversely affected and it may not be able to continue operations or execute its stated commercialization plan.
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”) 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.GAAP for annual financial statements. 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 these financial statements.this Form 10-Q. Operating results for the six monthsquarter ended DecemberMarch 31, 20172021 are not necessarily indicative of the results that may be expected for the year ending June 30, 20182021 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 Annual Report on Form 10-K filed with the SEC on September 20, 2017August 21, 2020 (the “2017“2020 Annual Report”).
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries,wholly owned subsidiary, Akoustis, Inc. and Akoustis Manufacturing New York, Inc. 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:
Consolidated Balance Sheet June 30, 2017 | ||||||||||||
| Previously Reported | Revisions | Revised Reported | ||||||||||
| Additional paid in capital | $ | 30,774,885 | $ | 725,004 | $ | 31,499,889 | ||||||
| Accumulated deficit | (15,783,053 | ) | (725,004 | ) | (16,508,057 | ) | ||||||
Consolidated Statement of Operations Year ended June 30, 2017 | ||||||||||||
| Previously Reported | Revisions | Revised Reported | ||||||||||
| Net loss | $ | (9,108,240 | ) | $ | (725,004 | ) | $ | (9,833,244 | ) | |||
| Net loss per ordinary share: | ||||||||||||
| Basic | $ | (0.54 | ) | $ | (0.04 | ) | $ | (0.58 | ) | |||
The Company analyzed the revisions under SEC Staff Accounting Bulletin No. 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 2017 Annual Report 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 quarterly report on Form 10-Q 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 20172020 Annual Report. Since the date of the 20172020 Annual Report, 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. TheseThe policies, 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.
Allowance for Doubtful Accounts Receivable
Trade accounts receivable are stated net of allowances for doubtful accounts. Management estimates the allowance for doubtful accounts based on review and analysis of specific customer balances that may not be collectible, customer payment history and any other customer-specific information that may impact ability to collect the receivable. Accounts are considered for write-off when they become past due and when it is determined that the probability of collection is remote. There was no allowance for doubtful accounts at December 31, 2017.
Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740,Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from 35% to 21%, which will result in a reduction in our effective tax rate from approximately 36.64% to 24.16% for the fiscal year ending June 30, 2018. A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward and valuation allowance. Deferred tax assets of approximately $9.5 million were revalued to approximately $6.2 million with a corresponding decrease to the Company’s valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s fiscal year ending June 30, 2018, but the Company does not expect the Tax Act to have a material impact on the Company’s consolidated financial statements. Because the Act became effective mid-way through the Company’s tax year, the Company will have a federal statutory income tax rate of approximately 28% for the fiscal year ending June 30, 2018 and will have an approximate 21% statutory income tax rate for fiscal years thereafter.
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 and six months ended December 31, 2017 and 2016 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 hadprovides an allowance for doubtful accounts equal to the estimated losses to be incurred in the collection of accounts receivable.
Inventory
Inventory is stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) valuation method.
Inventory consisted of the following common stock equivalents at Decemberas of March 31, 20172021 and 2016:June 30, 2020 (in thousands):
| December 31, 2017 | December 31, 2016 | |||||||
| Options | 1,166,859 | 160,000 | ||||||
| Warrants | 756,809 | 510,597 | ||||||
| Totals | 1,923,668 | 670,597 | ||||||
| March 31, 2021 | June 30, 2020 | |||||||
| Raw Materials | $ | 44 | $ | 24 | ||||
| Work in Process | 1,092 | 69 | ||||||
| Finished Goods | 310 | 43 | ||||||
| Total Inventory | $ | 1,446 | $ | 136 | ||||
Shares of Restricted Stock Outstanding
Shares outstanding include shares of restricted stock with respect to which restrictions have not lapsed. Restricted stock included in reportable shares outstanding was 1,023,506 shares and 1,822,055 sharesthe following as of DecemberMarch 31, 20172021 and 2016, respectively.2020. Shares of restricted stock are included in the calculation of weighted average shares outstanding.
| March 31, 2021 | March 31, 2020 | |||||||
| Restricted stock included in reportable shares outstanding | — | 116,250 | ||||||
Reclassification
Certain prior period amounts have been reclassified to conform to current period presentation. The reclassifications did not have an impact on net loss as previously reported.
Recently Issued Accounting Pronouncements
In September 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-13,Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842).The new standards, among other things, provide additional implementation guidance with respect to Accounting Standards Codification (ASC) Topic 606 and ASC Topic 842. ASU 2017-13 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of the new standard, but does not expect it to have a material impact on its implementation strategies or its consolidated financial statements upon adoption.
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 BusinessRevenue Recognition from Contracts with Customers
On March 23, 2017, the Company entered into the Agreements with RF-SUNY, a New York State education corporation, on behalfDisaggregation of The State University of New York Polytechnic Institute, and FRMC, an affiliate of RF-SUNY to acquire the STC- MEMS Business. The acquisition allows the Company to internalize manufacturing, increase capacity and control its wafer supply chain for single crystal bulk acoustic wave (“BAW”) radio frequency (“RF”) filters. The Company will utilize the NY facility to consolidate all aspects of wafer manufacturing for its high-band RF filters.Revenue
The STC-MEM’s Business was created in 2010 by RF-SUNYCompany’s primary revenue streams include foundry fabrication services and product sales.
Foundry Fabrication Services
Foundry fabrication services revenue includes Non-Recurring Engineering (“NRE”) and microelectromechanical systems (“MEMS”) foundry services. The Company exited the MEMS business during fiscal year 2020. Under these contracts, products are delivered 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 areascustomer at the completion of semiconductor and advanced manufacturing, while covering a diverse numberthe service which represents satisfaction 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,performance obligation as well as transfer of title. 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 MEMSpoint in time.
Product Sales
Product sales revenue consists of sales of RF filters and optoelectronic packaging facility.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 March 31, 2021 (in thousands):
| Foundry Fabrication Services Revenue | Product Sales Revenue | Total Revenue with Customers | ||||||||||
| NRE - RF Filters | $ | 1,537 | $ | — | $ | 1,537 | ||||||
| Filters/Amps | — | 980 | 980 | |||||||||
| Total | $ | 1,537 | $ | 980 | $ | 2,517 | ||||||
The following table summarizes the revenues of the Company’s reportable segments for the nine months ended March 31, 2021 (in thousands):
| Foundry Fabrication Services Revenue | Product Sales Revenue | Total Revenue with Customers | ||||||||||
| NRE - RF Filters | $ | 2,264 | $ | — | $ | 2,264 | ||||||
| Filters/Amps | — | 2,197 | 2,197 | |||||||||
| Total | $ | 2,264 | $ | 2,197 | $ | 4,461 | ||||||
The following table summarizes the revenues of the Company’s reportable segments for the three months ended March 31, 2020 (in thousands):
Foundry Services | Product Sales Revenue | Total Revenue with Customers | ||||||||||
| MEMS | $ | 8 | $ | — | $ | 8 | ||||||
| NRE - RF Filters | 224 | — | 224 | |||||||||
| Filters/Amps | — | 131 | 131 | |||||||||
| Total | $ | 232 | $ | 131 | $ | 363 | ||||||
The following table summarizes the revenues of the Company’s reportable segments for the nine months ended March 31, 2020 (in thousands):
Foundry Services | Product Sales Revenue | Total Revenue with Customers | ||||||||||
| MEMS | $ | 265 | $ | — | $ | 265 | ||||||
| NRE - RF Filters | 652 | — | 652 | |||||||||
| Filters/Amps | — | 507 | 507 | |||||||||
| Total | $ | 917 | $ | 507 | $ | 1,424 | ||||||
Performance Obligations
The Company acquired the STC-MEMS Business through Akoustis NY. The Company also agreed to assume substantially all the on-going obligationshas determined that contracts for product sales revenue and foundry fabrication services revenue involve one performance obligation, which is delivery of the STC-MEMS Business incurredfinal product.
Contract Balances
The following table summarizes the changes in the ordinary courseopening and closing balances of business, including with respect to the 29 employees employed by RF-SUNY. The acquisition closed on June 26, 2017.Company’s contract asset and liability for the first nine months of fiscal years 2021 and 2020 (in thousands):
Contract Assets | Contract Liability | |||||||
| Balance, June 30, 2020 | $ | 125 | $ | — | ||||
| Closing, March 31, 2021 | 6 | 123 | ||||||
| Increase/(Decrease) | $ | (119 | ) | $ | 123 | |||
| Balance, June 30, 2019 | $ | 140 | $ | 5 | ||||
| Closing, March 31, 2020 | 96 | — | ||||||
| Increase/(Decrease) | $ | (44 | ) | $ | (5 | ) | ||
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 price paidorder), 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 Sheets). The contract liability balance as of March 31, 2021 comprises various upfront payments for non-recurring engineering services that will be performed subsequent to March 31, 2021. The amount of revenue recognized in the transactionnine months ended March 31, 2020 that was an aggregate of approximately $4.58 million consisting of (i) $2.75 millionincluded in cash consideration, (ii) $96,000 in inventory, and (iii) a contingent real estatethe opening contract liability of approximately $1.73 million.balance was $5 thousand which related to product sales.
Contract assets are recorded when revenue recognized exceeds the amount invoiced. The following presentsdifference between the unaudited pro-forma combined results of operationsopening and closing balances of the Company withCompany’s contract assets and contract liabilities primarily results from the STC-MEMS Business as iftiming difference between the entities were combined on July 1, 2016.Company’s performance and the customer’s payment. The amount of contract assets invoiced in the nine months ended March 31, 2021 and 2020 that was included in the opening contract asset balance was $119 thousand, which primarily related to non-recurring engineering services and $96 thousand, which primarily related to non-recurring engineering services, respectively.
| For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||
| 2016 | 2016 | |||||||
| Revenue | $ | 817,673 | $ | 1,288,485 | ||||
| Net loss | $ | (4,139,503 | ) | $ | (7,314,370 | ) | ||
| Net loss per common share | $ | (0.26 | ) | $ | (0.46 | ) | ||
| Weighted average common shares outstanding | 15,892,503 | 15,797,106 | ||||||
Backlog of Remaining Customer Performance Obligations
Revenue expected to be recognized and recorded as sales during this fiscal year from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) was $2.8 million at March 31, 2021.
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.
Note 5. Property and equipmentEquipment, net
Property and equipment, net consisted of the following as of DecemberMarch 31, 20172021 and June 30, 2017:2020 (in thousands):
Estimated Useful Life | December 31, 2017 | June 30, 2017 | ||||||||
| Land | n/a | $ | 1,000,000 | $ | 1,000,000 | |||||
| Research and development equipment | 3 - 10 years | 6,510,343 | 1,851,427 | |||||||
| Computer equipment | 5 years | 69,642 | 16,783 | |||||||
| Furniture and fixtures | 5 - 10 years | 3,725 | 3,725 | |||||||
| STC-MEMS equipment | 3 - 5 years | 2,120,868 | 2,124,650 | |||||||
| Building | 11 years | 3,191,819 | 3,000,000 | |||||||
| Leasehold improvements | * | 3,240 | 3,240 | |||||||
| 12,899,637 | 7,999,825 | |||||||||
| Less: Accumulated depreciation | (616,430 | ) | (146,011 | ) | ||||||
| Total | $ | 12,283,207 | $ | 7,853,814 | ||||||
| Estimated Useful Life | March 31, 2021 | June 30, 2020 | ||||||||
| Land | n/a | $ | 1,000 | $ | 1,000 | |||||
| Building | 11 years | 3,000 | 3,000 | |||||||
| Equipment | 2-10 years | 32,098 | 24,746 | |||||||
| Leasehold Improvements | * | 1,815 | 964 | |||||||
| Software | 3 years | 479 | 294 | |||||||
| Furniture & Fixtures | 5 years | 11 | 11 | |||||||
| Computer Equipment | 3 years | 286 | 267 | |||||||
| Total | 38,689 | 30,282 | ||||||||
| Less: Accumulated Depreciation | (9,934 | ) | (6,677 | ) | ||||||
| Total | $ | 28,755 | $ | 23,605 | ||||||
(*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.
| (*) | Leasehold improvements 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 $237,109$1.2 million and $12,949$0.7 million for the three months ended DecemberMarch 31, 20172021 and 2016,2020, respectively.
The Company recorded depreciation expense of $470,419$3.3 million and $25,834$2.2 million for the sixnine months ended DecemberMarch 31, 20172021 and 2016,2020, respectively.
As of DecemberMarch 31, 2017, research and development fixed assets2021, equipment with a net book value totaling $5,386,457 were$7.0 million had not been placed in service and therefore was not depreciated during the period. As of June 30, 2020, fixed assets with a net book value totaling $5.6 million had not been placed in service and therefore was not depreciated during the period.
Note 6. Intangible assets
The Company’s intangible assets consisted of the following:
| Estimated useful life | December 31, 2017 | June 30, 2017 | ||||||||
| Patents | 15 years | $ | 168,541 | $ | 135,291 | |||||
| Customer relationships | 14 years | 81,773 | 81,773 | |||||||
| Less: Accumulated amortization | (20,173 | ) | (12,097 | ) | ||||||
| Subtotal | 230,141 | 204,967 | ||||||||
| Trademarks | 1,560 | 1,560 | ||||||||
| Intangible assets, net | $ | 231,701 | $ | 206,527 | ||||||
The Company recorded amortization expense of $4,161 and $1,762 for the three months ended December 31, 2017 and 2016, respectively.
The Company recorded amortization expense of $8,076 and $3,112 for the six months ended December 31, 2017 and 2016, respectively.
The following table outlines estimated future annual amortization expense for the next five years and thereafter:
| December 31, | ||||
| 2018 | $ | 17,077 | ||
| 2019 | 17,077 | |||
| 2020 | 17,077 | |||
| 2021 | 17,077 | |||
| 2022 | 17,077 | |||
| Thereafter | 144,756 | |||
| $ | 230,141 | |||
Note 7.6. Accounts payablePayable and accrued expensesAccrued Expenses
Accounts payable and accrued expenses consisted of the following at DecemberMarch 31, 20172021 and June 30, 2017:2020 (in thousands):
| December 31, 2017 | June 30, 2017 | March 31, 2021 | June 30, 2020 | |||||||||||||
| Accounts payable | $ | 1,054,169 | $ | 494,515 | $ | 897 | $ | 2,135 | ||||||||
| Accrued salaries and benefits | 141,020 | 274,050 | 3,502 | 2,478 | ||||||||||||
| Accrued bonuses | 362,589 | — | ||||||||||||||
| Accrued stock-based compensation | 678,116 | 399,157 | ||||||||||||||
| Accrued capital expenditures | 428,691 | — | ||||||||||||||
| Accrued professional fees | 98 | 193 | ||||||||||||||
| Accrued utilities | 128 | 138 | ||||||||||||||
| Accrued interest | 14 | 137 | ||||||||||||||
| Accrued goods received not invoiced | 434 | 396 | ||||||||||||||
| Other accrued expenses | 362,746 | 168,646 | 90 | 422 | ||||||||||||
| Totals | $ | 3,027,331 | $ | 1,336,368 | $ | 5,163 | $ | 5,899 | ||||||||
Note 7. Derivative Liabilities
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended March 31, 2021 (in thousands):
| Fair Value Measurement Using Level 3 Inputs Total | ||||
| Balance, June 30, 2020 | $ | 1,110 | ||
| Change in fair value of derivative liabilities | (1,110 | ) | ||
| Balance, March 31, 2021 (see note 8) | $ | — | ||
The fair value of the derivative features of the October 2018 Notes and the May 2018 Notes (as defined in Note 8 below) at the balance sheet dates were calculated using the with-and-without method, a form of the income approach, valued with the following assumptions:
June 30, 2020 | ||||
| Remaining term (years) | 2.92-3.42 | |||
| Expected volatility | 70 | % | ||
| Risk free interest rate | 0.18-0.20 | % | ||
| Dividend yield | 0.00 | % | ||
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 has not paid dividends to date and does not anticipate declaring dividends in the near future.
Volatility: The Company calculates the expected volatility of the stock price using the historical volatilities of the Company’s common stock traded on the Nasdaq Capital Market.
Remaining term: The Company’s remaining term is based on the remaining contractual term of the convertible notes.
Note 8. Derivative LiabilitiesConvertible Notes
Upon closingOn December 4, 2020, the Company provided a notice of redemption to the holders of the private placementsCompany’s outstanding $10,000,000 aggregate principal amount of 6.5% Convertible Senior Notes due 2023 (CUSIP No: 00973N AC6) (the “October 2018 Notes”) regarding the Company’s exercise of its option to redeem all October 2018 Notes on May 22, 2015 and June 9, 2015,February 1, 2021 (the “October Redemption Date”), unless earlier converted as described below, pursuant to the indenture governing the October 2018 Notes. Pursuant to the notice of redemption, the Company issued 298,551would pay holders of the October 2018 Notes that are redeemed a redemption price equal to 100% of the aggregate principal amount of October 2018 Notes being redeemed, plus accrued and 26,099 warrants, respectively,unpaid interest as well as an interest make-whole payment with respect to purchasethose October 2018 Notes that are redeemed.
All of the same numberholders of the October 2018 Notes elected to convert the October 2018 Notes into shares of common stock with an exercise price of $1.50 and a five-year termthe Company prior to the placement agent. Upon closing ofOctober Redemption Date at a private placement in April 2016, the Company issued 153,713 warrantsconversion rate equal to purchase the same number of196.08 shares of common stock with an exerciseper $1,000 principal amount of Notes (equivalent to a conversion 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.approximately $5.10 per share).
During the yearquarter ended June 30, 2017,March 31, 2021, the Company amended the warrant agreements to eliminate the derivative feature. Upon executionconverted approximately $10.0 million of principal into approximately 1.96 million shares of the revised agreements,Company’s common stock. The Company also recognized $96 thousand of unamortized debt discount as a total of 471,697 warrants with a fair value of $2,200,219 were reclassified from liabilityreduction to equity.
On January 25, 2021, the Company provided a notice of redemption to the holders of the Company’s outstanding $15,000,000 aggregate principal amount of 6.5% Convertible Senior Secured Notes due 2023 (CUSIP No: 00973N AA0) (the “May 2018 Notes”) regarding the Company’s exercise of its option to redeem all Notes on March 1, 2021 (the “May Redemption Date”), unless earlier converted as described below, pursuant to the indenture governing the Notes. Pursuant to the notice of redemption, the Company would pay holders of the Notes that are redeemed a redemption price equal to 100% of the aggregate principal amount of Notes being redeemed, plus accrued and unpaid interest.
All of the holders of the May 2018 Notes elected to convert the May 2018 Notes into shares of common stock of the Company prior to the May Redemption Date at a conversion rate equal to 200 shares of common stock per $1,000 principal amount of notes (equivalent to a conversion price of $5.00 per share). The holders of the May 2018 Notes also received an interest make-whole payment at a weighted average rate of 1.52 shares per $1,000 principal amount of notes with respect to those May 2018 Notes that were converted.
During the quarter ended March 31, 2021, the Company converted approximately $15.0 million of principal and $366 thousand of make whole payment liability into approximately 3.02 million shares of the Company’s common stock. The Company also recognized $477 thousand of unamortized debt discount as additional interest expense during the conversion.
The following table summarizes convertible debt as of June 30, 2020 (in thousands):
| Maturity Date | Stated | Conversion | Face | Remaining | Fair Value | Carrying | ||||||||||||||||||||||
| Long Term convertible notes payable | ||||||||||||||||||||||||||||
| 6.5% convertible senior secured notes | 5/31/2023 | 6.50 | % | $ | 5.00 | $ | 15,000 | $ | (3,918 | ) | $ | 894 | $ | 11,976 | ||||||||||||||
| 6.5% convertible senior notes | 11/30/2023 | 6.50 | % | 5.10 | 10,000 | (564 | ) | 216 | 9,652 | |||||||||||||||||||
| Ending Balance as of June 30, 2020 | $ | 25,000 | $ | (4,482 | ) | $ | 1,110 | $ | 21,628 | |||||||||||||||||||
Note 9. Loans Payable
Promissory Note
On May 20, 2020, Akoustis, Inc., the operating subsidiary of the Company, issued a promissory note (the “Promissory Note”) in favor of Bank of America, NA (the “Lender”) that provided for a loan in the principal amount of $1.6 million pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Promissory Note accrued interest at a rate of 1.00% per annum. On November 20, 2020, Akoustis, Inc. applied to the Lender for forgiveness of the full amount of the Promissory Note. The Company treated the Promissory Note as debt and included the future monthly repayment amounts payable within 12 months as a short-term liability and the remainder of the Promissory Note debt as a long-term liability on the balance sheet. As described in Note 16 below, the Promissory Note was forgiven pursuant to the PPP on April 9, 2021.
The following table summarizes the Promissory Note debt as of March 31, 2021 (in thousands):
| Maturity Date | Stated Interest Rate | Face Value | Remaining Debt (Discount) | Carrying Value | ||||||||||||||
| Short Term Loans payable | ||||||||||||||||||
| Promissory Note | 10/31/2021 - 12/31/2021 | 1.00 | % | $ | 1,240 | $ | (22 | ) | $ | 1.218 | ||||||||
| Ending Balance as of March 31, 2021 | $ | 1,240 | $ | (22 | ) | $ | 1,218 | |||||||||||
| Long Term Loans payable | ||||||||||||||||||
| Promissory Note | 05/20/2022 | 1.00 | % | $ | 393 | $ | (1 | ) | $ | 392 | ||||||||
| Ending Balance as of March 31, 2021 | $ | 393 | $ | (1 | ) | $ | 392 | |||||||||||
The following table summarizes the Promissory Note debt as of June 30, 2020 (in thousands):
| Maturity Date | Stated Interest Rate | Face Value | Remaining Debt (Discount) | Carrying Value | ||||||||||||||
| Long Term Loans payable | ||||||||||||||||||
| Promissory Note | 05/20/2022 | 1.00 | % | $ | 1,633 | $ | (42 | ) | $ | 1,591 | ||||||||
| Ending Balance as of June 30, 2020 | $ | 1,633 | $ | (42 | ) | $ | 1,591 | |||||||||||
The amortization of the Promissory Note debt discount of $6.3 thousand and $19.1 thousand for the three month and nine month periods ending March 31, 2021, respectively, was treated as interest expense on the statement of operations.
Note 10. Concentrations
Vendors
Vendor concentration as a percentage of purchases for the three months ended DecemberMarch 31, 20172021 and 2016, the Company marked the derivative feature of the warrants to fair value and recorded a loss of $0 and $712,246, respectively, relating to the change in fair value.2020 are as follows:
| Three Months 03/31/2021 | Three Months 03/31/2020 | |||||||
| Vendor 1 | 18 | % | — | |||||
During
Vendor concentration as a percentage of purchases for the sixnine months ended DecemberMarch 31, 20172021 and 2016, the Company marked the derivative feature of the warrants to fair value and recorded a loss of $0 and $869,462, respectively, relating to the change in fair value.2020 are as follows:
| Nine Months 03/31/2021 | Nine Months 03/31/2020 | |||||||
| Vendor 1 | — | 13 | % | |||||
Note 9. ConcentrationsCustomers
ForCustomer concentration as a percentage of revenue for the three months ended DecemberMarch 31, 2017, no vendors represented greater than 10%2021 and 2020 are as follows:
| Three Months 03/31/2021 | Three Months 03/31/2020 | |||||||
| Customer 1 | 57 | % | — | |||||
| Customer 2 | 34 | % | — | |||||
| Customer 3 | — | 38 | % | |||||
| Customer 4 | — | 33 | % | |||||
| Customer 5 | — | 12 | % | |||||
| Customer 6 | — | 11 | % | |||||
Customer concentration as a percentage of revenue for the Company’s purchases. For the threenine months ended DecemberMarch 31, 2016, two vendors represented 28%2021 and 14% of the Company’s purchases.2020 are as follows:
| Nine Months 03/31/2021 | Nine Months 03/31/2020 | |||||||
| Customer 1 | 43 | % | 22 | % | ||||
| Customer 2 | 38 | % | — | |||||
| Customer 3 | — | 20 | % | |||||
| Customer 4 | — | 11 | % | |||||
| Customer 5 | — | 13 | % | |||||
| Customer 6 | — | 17 | % | |||||
For the six months ended December 31, 2017, no vendors represented greater than 10% of the Company’s purchases. For the six months ended December 31, 2016, two vendors represented 28% and 14% of the Company’s purchases.
Note 10.11. Stockholders’ Equity
Equity issuancesOffering Program
During the quarter ended December 31, 2017,On May 8, 2020, the Company sold a total of 2,640,819entered into an ATM Equity OfferingSM Sales Agreement with BofA Securities, Inc. and Piper Sandler & Co. (the “Sales Agreement”) pursuant to which the Company may sell from time-to-time shares of its common stock having an aggregate offering price of up to $50,000,000 (the “Equity Offering Program”). On February 22, 2021, the Company entered into Amendment No. 1 to the Sales Agreement , which increased the amount of shares of common stock the Company may sell from time-to-time under the Equity Offering Program by an incremental $50,000,000.
| Three months ended | Avg price per share | Number of Shares | Gross Proceeds (in millions) | Offering Expenses (in millions) | Net Proceeds (in millions) | |||||||||||||||
| September 30, 2020 | $ | 8.09 | 416,221 | $ | 3.4 | $ | 0.1 | $ | 3.3 | |||||||||||
| December 31, 2020 | $ | 8.93 | 2,296,023 | $ | 20.5 | $ | 0.4 | $ | 20.1 | |||||||||||
| March 31, 2021 | $ | 14.99 | 2,082,148 | $ | 31.2 | $ | 0.5 | $ | 30.7 | |||||||||||
| Total | $ | 11.49 | 4,794,392 | $ | 55.1 | $ | 1.0 | $ | 54.1 | |||||||||||
February 2021 Registered Direct Offering
On February 19, 2021, the Company entered into securities purchase agreements to sell a total of 1,500,000 shares of its common stock to a limited number of institutional investors in a registered direct offering at the $5.50a purchase price of $14.3592 per share for aggregate gross proceeds of $14.5 million before deducting commissions and expenses of approximately $1.2$21.5 million. The offering closed on February 23, 2021. The Company expects to use the proceeds of the offering will be used to fund the Company’s operations and growth of its business, including for capital expenditures, working capital, research and development, andthe commercialization of the Company’sits technology capital expenditures and other general corporate expenditures. In addition topurposes.
Equity Incentive Plans
During the commissions and expenses paid,nine months ended March 31, 2021, the Company issued to the placement agents warrantsgranted employees options to purchase 154,177an aggregate of approximately 0.5 million shares of the Company’s common stock. The warrants representstock with a cost of the offering, have aweighted average grant date fair value of $645,757 and are shown as an offset on the consolidated statements of changes in stockholders’ equity.
The fair values of the warrants were estimated at the dates of grant using a binomial option pricing model with the following weighted average assumptions:
During the quarter ended December 31, 2017, the Company also issued 542,450 shares of its common stock to investors in the Company’s private placement offering that closed in May 2017. These issuances were made pursuant to the price-protection provisions granted to such investors in their subscription agreements.
Stock incentive plans
During the six months ended December 31, 2017, the Company granted employees and directors options to purchase 1,006,859 shares of common stock.$5.05 per share. 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:
| Nine Months Ended March 31, 2021 | ||||
| Exercise price | $ | |||
| Expected term (years) | 4.00 – | |||
| Risk-free interest rate | 0.25% – 0.78% | |||
| Volatility | 67 – 68% | |||
| Dividend yield | 0% | |||
| Weighted Average Grant Date Fair Value of Options granted during the period | $ 5.05 |
Expected term: The Company’s expected term is based onDuring the period the options are expected to remain outstanding. The Company estimated this amount utilizing the “Simplified Method” in thatnine months ended March 31, 2021 the Company does not have sufficient historical experience to provideawarded certain employees and directors grants of an aggregate of approximately 0.8 million restricted stock units (“RSUs”) with a reasonable basis to estimate an expected term.weighted average grant date fair value of $9.74. 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 – 5 years.
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.Compensation expense related to our stock-based awards described above was as follows (in thousands):
Volatility: The Company calculates the expected volatility of the stock price using the historical volatilities of the Company’s common stock traded on the Nasdaq Capital Market.
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Research and Development | $ | 1,011 | $ | 929 | $ | 2,953 | $ | 2,675 | ||||||||
| General and Administrative | 980 | 874 | 3,131 | 2,433 | ||||||||||||
| Total | $ | 1,991 | $ | 1,803 | $ | 6,084 | $ | 5,108 | ||||||||
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:
| Options | Weighted Average Exercise Price | ||||||||
| Outstanding - June 30, 2017 | 160,000 | $ | 1.50 | ||||||
| Exercisable - June 30, 2017 | 80,000 | $ | 1.50 | ||||||
| Granted | 1,006,859 | 6.74 | |||||||
| Exercised | — | — | |||||||
| Forfeited/Cancelled | — | — | |||||||
| Outstanding – December 31, 2017 | 1,166,859 | $ | 6.02 | ||||||
| Exercisable – December 31, 2017 | 80,000 | $ | 1.50 | ||||||
As of December 31, 2017, the total intrinsic value of options outstanding and exercisable was $756,800 and $378,400, respectively. As of December 31, 2017, the Company has approximately $3.8 million in unrecognizedUnrecognized stock-based compensation expense attributableand weighted-average years to the outstanding options, which will be amortized over a period of 2.94 years.recognized are as follows (in thousands):
For the three months ended December 31, 2017 and 2016, the Company recorded $466,177 and $7,040, respectively, in stock-based compensation related to stock options, which is reflected in the condensed consolidated statements of operations.
| As of March 31, 2021 | ||||||||
| Unrecognized stock-based compensation | Weighted- average years to be recognized | |||||||
| Options | $ | 2,820 | 2.21 | |||||
| Restricted stock awards/units | $ | 9,064 | 2.29 | |||||
For the six months ended December 31, 2017Note 12. Commitments and 2016, the Company recorded $484,840 and $14,080, respectively, in stock-based compensation related to stock options, which is reflected in the condensed consolidated statements of operations.Contingencies
Issuance of restricted shares - employees and consultantsLeases
Restricted stock awards are considered outstanding at the time of execution by the Company and the recipient of a restricted stock agreement, as the holders of such restricted stock award are entitled to dividend and voting rights. As of December 31, 2017, the number of shares granted for which the restrictions have not lapsed was 1,023,506 shares.
The Company recognizesleases office space and office equipment in Huntersville, NC as well as equipment in Canandaigua, NY. Our leases have remaining lease terms of up to five years, some of which include options to extend the compensationleases for up to twenty-four months. Following adoption of ASC 842, lease expense excludes capital area maintenance and property taxes.
The components of lease expense were as follows:
| Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Nine Months Ended | Nine Months Ended | |||||||||||||
| Operating Lease Expense | $ | 75 | $ | 55 | $ | 225 | $ | 144 | ||||||||
Supplemental balance sheet information related to leases was as follows (in thousands):
| Classification on the Condensed Consolidated Balance Sheet | March 31, 2021 | |||||
| Assets | ||||||
| Operating lease assets | Other non-current assets | $ | 531 | |||
| Liabilities | ||||||
| Other current liabilities | Current liabilities | 260 | ||||
| Operating lease liabilities | Other non-current liabilities | 274 | ||||
| Weighted Average Remaining Lease Term: | ||||||
| Operating leases | 2.01 | |||||
| Weighted Average Discount Rate: | ||||||
| Operating leases | 12.47 | % | ||||
The following table outlines the minimum future lease payments for all share-based compensation granted based on the grant date fair value for directorsnext five years and employeesthereafter, (in thousands):
| For the year ending June 30, | ||||
| 2021 | $ | 78 | ||
| 2022 | 312 | |||
| 2023 | 204 | |||
| 2024 | 7 | |||
| 2025 | — | |||
| Thereafter | — | |||
| Total lease payments (undiscounted cash flows) | 601 | |||
| Less imputed interest | (67 | ) | ||
| Total | $ | 534 | ||
Ontario County Industrial Development Authority Agreement
On February 27, 2018, the Company entered into a Lease and Project Agreement (the “Lease and Project Agreement”) and a Company Lease Agreement (the “Company Lease Agreement” and together with the reporting period remeasured fair value for consultants. Share-based compensation expense is recognized onLease and Project Agreement, the “Agreements”), each dated as of February 1, 2018, with the Ontario County Industrial Development Agency, a straight-line basis over the requisite service period for each separately vesting portionpublic benefit corporation of the award as ifState of New York (the “OCIDA”). Pursuant to the award was, in-substance, multiple awards.Agreements, the Company leases 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 Company’s New York fabrication facility), and transfer title to certain related equipment and personal property to the OCIDA (collectively, the “Facility”). The fair value ofOCIDA leases the award is recorded as share-based compensation expense over the respective restricted period. Any portion of the grant awardedFacility back to consultants, directors, employees, and other service providers as to which the repurchase option has not lapsed is accrued on the condensed consolidated balance sheet as a component of accounts payable and accrued expenses. As of December 31, 2017 and June 30, 2017, the accrued stock-based compensation was $678,116 and $399,157, 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 upannual 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 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,be subleased, in part, by the Company amendedto various existing tenants. The Company estimates substantial tax savings during the original restricted stock award agreement for certain award recipients. Pursuant to the amendment, 75%term of the shares as toAgreements, which the repurchase option had not lapsed as of September 30, 2015 were released from the repurchase optionexpire on the third anniversary of the original effective date of the respective agreements. The remaining 25% of the shares will be released from the repurchase option on the fourth anniversary of the original effective date.
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”) areDecember 31, 2028. In addition, subject to repurchase options upon certain terminations of the respective recipient’s service with the Company. Under the terms of the respective award agreements, repurchasesLease and Project Agreement, certain purchases and leases of eligible items will generally be made for no value or for par value. In connection withexempt from the resignationsimposition of two employees,sales and use taxes. Subject to the terms of the Lease and Project Agreement, the OCIDA has also granted to the Company delivered notices to such employees in September 2017, notifying them that the Company would repurchasean exemption from certain mortgage recording taxes for one or more mortgages securing an aggregate 58,152 shares of restricted stock from themprincipal amount not to exceed $12.0 million, or such greater amount as approved by the OCIDA in its sole and absolute discretion. The benefits provided to the Company pursuant to the terms of their respective award agreements.the Lease and Project Agreement are subject to claw back over the life of the Agreements upon certain recapture events, including certain events of default.
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 completed these repurchases duringbelieves it has meritorious defenses against all pending claims and intends to vigorously pursue them. While it is not possible to predict or determine the second quarteroutcomes of fiscal 2018.
The following is a summary of restricted stock units (“RSU’s”) and restricted stock awards (“RSA’s”):
| Grant Date | Shares Issued | Fair Value (1) | Shares Vested | |||||||||
| June 2014 (RSA) | 307,876 | $ | 483,284 | 247,111 | ||||||||
| July 2014 (RSA) | 32,408 | 48,612 | 24,306 | |||||||||
| August 2014 (RSA) | 81,020 | 121,179 | 63,296 | |||||||||
| September 2014 (RSA) | 129,633 | 196,313 | 121,531 | |||||||||
| March 2015 (RSA) | 72,919 | 378,109 | 18,230 | |||||||||
| October 2015 (RSA) | 293,000 | 411,000 | 146,500 | |||||||||
| November 2015 (RSA) | 36,200 | 54,300 | 18,100 | |||||||||
| December 2015 (RSA) | 300,000 | 105,000 | 247,500 | |||||||||
| January 2016 (RSA) | 40,000 | 68,000 | 10,000 | |||||||||
| March 2016 (RSA) | 60,000 | — | 60,000 | |||||||||
| June 2016 (RSA) | 118,000 | 533,160 | 45,000 | |||||||||
| August 2016 (RSA) | 351,000 | 1,218,110 | 40,000 | |||||||||
| January 2017 (RSA) | 192,000 | 1,153,951 | 25,000 | |||||||||
| February 2017 (RSA) | 110,000 | 697,500 | — | |||||||||
| March 2017 (RSA) | 20,000 | — | — | |||||||||
| September 2017 (RSA) | 111,000 | 790,320 | — | |||||||||
| September 2017 (RSU) | 253,000 | 1,796,910 | — | |||||||||
| October 2017 (RSU) | 301,000 | 1,872,220 | — | |||||||||
| November 2017 (RSU) | 97,494 | 608,362 | — | |||||||||
| December 2017 (RSU) | 120,000 | 775,800 | — | |||||||||
| 3,026,550 | $ | 11,312,130 | 1,066,574 | |||||||||
In relation to the above restricted stock agreements for the three months ended December 31, 2017 and 2016,any pending actions, the Company recorded stock-based compensation expense for the shares that have vested of $931,894 and $1,536,602, respectively.
In relation to the above restricted stock agreements for the six months ended December 31, 2017 and 2016, the Company recorded stock-based compensation expense for the shares that have vested of $1,450,226 and $2,233,782, respectively.
As of December 31, 2017, the Company had approximately $7.0 million in unrecognized stock-based compensation expense related to the unvested shares.
Note 11. Commitments
Operating leases
The Company leases two office locations in Huntersville, NC pursuant to five- and three-year lease agreements. The three-year lease agreement expires in April 2018. The operating leases provide for annual real estate tax and cost of living increases and contain predetermined increases in the rentals payable during the terms of the leases. The aggregate rent expense is recognized on a straight-line basis over the lease term. The total lease rental expense was $51,718 and $28,404 for the six months ended December 31, 2017 and 2016, respectively. The total lease rental expense was $34,611 and $14,202 for the three months ended December 31, 2017 and 2016, respectively.
The Company currently leases equipment for its Canandaigua, NY facility on a month-to-month basis. The original lease agreement had a three-month term beginning on June 16, 2017. The aggregate rent expense is recognized on a straight-line basis over the lease term. The total lease rental expense was $70,087 and $0 for the six months ended December 31, 2017 and 2016, respectively. The total lease rental expense was $35,087 and $0 for the three months ended December 31, 2017 and 2016, respectively.
Real Estate Contingent Liability
In connection with the acquisition of the STC-MEMS Business, the Company agreed to pay to FRMC 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 tobelieves the amount that the sales price of the property exceeds $1,750,000 upliability, if any, with respect to the maximum penalty (“Maximum Penalty”) defined below:
| Maximum Penalty | |||||
| Year 1 | $ | 5,960,000 | |||
| Year 2 | $ | 3,973,333 | |||
| Year 3 | $ | 1,986,667 | |||
The fair valuesuch actions, would not materially affect its financial position, results 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 16.1%. The 16.1% discount rate was derived from a weighted average cost of capital, modified to include the effects of the bargain purchase price. As of December 31, 2017 and June 30, 2017, the fair value of the contingent liability was $1,809,847 and $1,730,542, respectively. During the three months ended December 31, 2017 and 2016, the Company marked the contingent liability to fair value and recorded a loss of $79,305 and $0, respectively, relating to the change in fair value. During the six months ended December 31, 2017 and 2016, the Company marked the contingent liability to fair value and recorded a loss of $79,305 and $0, respectively, relating to the change in fair value.operations or cash flows.
Note 12.13. Related Party Transactions
Consulting ServicesAsset Purchase and Sale
AEG Consulting,On September 30, 2020, Akoustis, Inc. sold to a firm ownedthird party certain of its inventory, together with related warranty obligations, delivery commitments and design data and files (the “Designs”) for $215,000. This transaction was enabled by onethe purchase by Akoustis, Inc. under an Asset Purchase Agreement dated September 30, 2020 with Big Red, LLC of the Co-ChairmenDesigns for $25,000. Members of Big Red, LLC include the Company’s Board of Directors received $10,245 and $8,100 for consulting fees for the six months ended December 31, 2017 and 2016, respectively. On September 27, 2017, the Company granted the Co-Chairman restricted stock units for 5,000 shares of the Company’s common stock with a fair value on the grant date of $35,600, and stock options to purchase 10,000 shares of the Company’s common stock with a fair value on the grant date of $46,292 for consulting services provided by AEG Consulting. Both awards vest 25% on each of the first four anniversaries of the grant date. The options carry an exercise price of $7.12 and have an expiration period of 7 years.
On September 27, 2017, the Company granted a restricted stock award of 11,000 shares of the Company’s common stock with a fair value on the grant date of $78,320 to a 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. The award vests 25% on each of the first four anniversaries of the grant date.
Private Placement
On November 14, 2017, certain members of the Company’s Board of Directors purchased shares of the Company’s Common Stock at a price of $5.50 per share in a private placement. One of the Company’s Co-Chairmen purchased 154,545 shares at a price of $5.50 per share for an aggregate purchase price of $849,998. The other Co-Chairman purchased 1,818 shares at a price of $5.50 per share for an aggregate purchase price of $9,999. Three additional members of the Company’s Board of Directors each purchased 5,454 shares at a price of $5.50 per share for an aggregate purchase price of $29,997 for each such Board member.
On December 1, 2017 a brother of the Company’s Chief Executive Officer purchased 12,000 sharesand two non-executive employees of the Company’s common stock in a private placement at a price of $5.50 per share for an aggregate purchase price of $66,000.Company.
Note 13.14. Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available and 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 its Chief Executive Officer. The Company operates in two segments, Foundry Fabrication Services, which consists of engineering review services and STC-MEMS foundry services;services, and RF FiltersProduct, which consists of amplifier and filter product sales, and grant revenue. The Company records all general and administrative costs in the RF Product segment.
The Company evaluates performance of its operating segments based on revenue and operating profit (loss). Segment information for the three and sixnine months ended DecemberMarch 31, 20172021 and 20162020 are as follows:follows (in thousands):
| Foundry/ Fabrication Services | RF Product | Total | ||||||||||
| Three months ended March 31, 2021 | ||||||||||||
| Revenue with customers | $ | 1,537 | $ | 980 | $ | 2,517 | ||||||
| Cost of revenue | 400 | 2,573 | 2,973 | |||||||||
| Gross margin | 1,137 | (1,593 | ) | (456 | ) | |||||||
| Research and development | — | 5,225 | 5,225 | |||||||||
| General and administrative | — | 3,395 | 3,395 | |||||||||
| Income (Loss) from Operations | $ | 1,137 | $ | (10,213 | ) | $ | (9,076 | ) | ||||
| Three months ended March 31, 2020 | ||||||||||||
| Revenue with customers | $ | 232 | $ | 131 | $ | 363 | ||||||
| Cost of revenue | 138 | 79 | 217 | |||||||||
| Gross margin | 94 | 52 | 146 | |||||||||
| Research and development | — | 5,769 | 5,769 | |||||||||
| General and administrative | — | 2,589 | 2,589 | |||||||||
| Income (Loss) from Operations | $ | 94 | $ | (8,306 | ) | $ | (8,212 | ) | ||||
| Nine months ended March 31, 2021 | ||||||||||||
| Revenue with customers | $ | 2,264 | $ | 2,197 | $ | 4,461 | ||||||
| Cost of revenue | 803 | 6,421 | 7,224 | |||||||||
| Gross margin | 1,461 | (4,224 | ) | (2,763 | ) | |||||||
| Research and development | — | 17,171 | 17,171 | |||||||||
| General and administrative | — | 9,683 | 9,683 | |||||||||
| Income (Loss) from Operations | $ | 1,461 | $ | (31,078 | ) | $ | (29,617 | ) | ||||
| Nine months ended March 31, 2020 | ||||||||||||
| Revenue with customers | $ | 917 | $ | 507 | $ | 1,424 | ||||||
| Cost of revenue | 545 | 795 | 1,340 | |||||||||
| Gross margin | 372 | (288 | ) | 84 | ||||||||
| Research and development | — | 15,736 | 15,736 | |||||||||
| General and administrative | — | 8,158 | 8,158 | |||||||||
| Income (Loss) from Operations | $ | 372 | $ | (24,182 | ) | $ | (23,810 | ) | ||||
| As of March 31, 2021 | ||||||||||||
| Accounts receivable | $ | 1,498 | $ | 122 | $ | 1,620 | ||||||
| Property and equipment, net | — | $ | 28,755 | $ | 28,755 | |||||||
| As of June 30, 2020 | ||||||||||||
| Accounts receivable | $ | 71 | $ | 280 | $ | 351 | ||||||
| Property and equipment, net | $ | — | $ | 23,605 | $ | 23,605 | ||||||
Note 15. Loss Per Share
| Foundry Fabrication Services | �� | RF Filters | Total | |||||||||
| Three months ended December 31, 2017 | ||||||||||||
| Revenue | $ | 291,833 | $ | 5,488 | $ | 297,321 | ||||||
| Grant revenue | — | 147,232 | 147,232 | |||||||||
| Cost of revenue | 329,556 | 280 | 329,836 | |||||||||
| Gross margin | (37,723 | ) | 152,440 | 114,717 | ||||||||
| Research and development | — | 3,473,031 | 3,473,031 | |||||||||
| General and administrative | — | 2,189,904 | 2,189,904 | |||||||||
| Loss from Operations | $ | (37,723 | ) | $ | (5,510,495 | ) | $ | (5,548,218 | ) | |||
| Three months ended December 31, 2016 | ||||||||||||
| Revenue | $ | — | $ | 159,068 | $ | 159,068 | ||||||
| Cost of revenue | — | — | — | |||||||||
| Gross margin | — | 159,068 | 159,068 | |||||||||
| Research and development | — | 775,984 | 775,984 | |||||||||
| General and administrative | — | 2,066,768 | 2,066,768 | |||||||||
| Loss from Operations | $ | — | $ | (2,683,684 | ) | $ | (2,683,684 | ) | ||||
| Foundry Fabrication Services | RF Filters | Total | ||||||||||
| Six months ended December 31, 2017 | ||||||||||||
| Revenue | $ | 589,733 | $ | 8,528 | $ | 598,261 | ||||||
| Grant revenue | — | 147,232 | 147,232 | |||||||||
| Cost of revenue | 522,585 | 480 | 523,065 | |||||||||
| Gross margin | 67,148 | 155,280 | 222,428 | |||||||||
| Research and development | — | 6,477,396 | 6,477,396 | |||||||||
| General and administrative | — | 4,022,526 | 4,022,526 | |||||||||
| Loss from Operations | $ | 67,148 | $ | (10,344,642 | ) | $ | (10,277,494 | ) | ||||
| Six months ended December 31, 2016 | ||||||||||||
| Revenue | $ | — | $ | 159,068 | $ | 159,068 | ||||||
| Cost of revenue | — | — | — | |||||||||
| Gross margin | — | 159,068 | 159,068 | |||||||||
| Research and development | — | 1,428,560 | 1,428,560 | |||||||||
| General and administrative | — | 3,330,011 | 3,330,011 | |||||||||
| Loss from Operations | $ | — | $ | (4,599,503 | ) | $ | (4,599,503 | ) | ||||
| As of December 31, 2017 | ||||||||||||
| Accounts receivable | $ | 296,909 | $ | 1,888 | $ | 298,797 | ||||||
| Property and Equipment | 424,174 | 12,475,463 | 12,899,637 | |||||||||
| As of June 30, 2017 | ||||||||||||
| Accounts receivable | $ | — | $ | — | $ | — | ||||||
| Property and Equipment | 424,174 | 7,575,651 | 7,999,825 | |||||||||
Note 14. Subsequent EventsBasic 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 nine months ended March 31, 2021 and March 31, 2020 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 has evaluated subsequent events throughhad the date of issuance of these financial statementsfollowing common stock equivalents at March 31, 2021 and has determined that there have been no subsequent events which require accounting or disclosure through such date.2020:
| March 31, 2021 | March 31, 2020 | |||||||
| Convertible Notes | — | 4,960,800 | ||||||
| Options | 2,484,477 | 2,265,165 | ||||||
| Warrants | 167,809 | 541,999 | ||||||
| Total | 2,652,286 | 7,767,964 | ||||||
Note. 16. Subsequent Events
On April 9, 2021, Akoustis, Inc. received notice from the Lender that the full amount of the Promissory Note was forgiven pursuant to the PPP Loan.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 areis a Delaware corporations.corporation.
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 projectionprojections 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 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), (iii), (iv) or (iii)(v) above.
The forward-looking
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 abilityinability to continueobtain adequate financing and sustain our status 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)(“R&D”) activities; our inability to achieve acceptance of our products in the market; the impact of the COVID-19 pandemic on our operations, financial condition and the worldwide economy, including its impact on our ability to access the capital markets; general economic conditions, including upturns and downturns in the industry; shortages in supplies needed to manufacture our products, or needed by our customers to manufacture devices incorporating our products; 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 integratescale our New York wafer fabrication facility and related operations intowhile maintaining quality control and assurance and avoiding delays in output; contracting with customers and other parties with greater bargaining power and agreeing to terms and conditions that may adversely affect our business; risks related to doing business in foreign countries; any security breaches or other disruptions compromising our proprietary information and exposing us to liability; 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.effective internal control over financial reporting.
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 21, 2020 (the “2017“2020 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-stageemerging commercial product company focused on developing, designing, and manufacturing innovative RF filter productssolutions for the mobile wireless device industry, including for products such as smartphones and tablets, cellularnetwork infrastructure equipment, WiFi Customer Premise Equipment (“CPE”) and WiFi premise equipment.defense applications. Filters are critical in selecting and rejecting signals, and their performance enables differentiation in the modules defining the RF front-end (“RFFE”). 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, weWe have developed a fundamentally new single-crystalproprietary microelectromechanical system (“MEMS”) based bulk acoustic wave (“BAW”) technology and a unique manufacturing process flow, called “XBAW®”, for our filters produced for use in RFFE modules. Our XBAW® filters incorporate optimized high purity piezoelectric materials for high power, high frequency and wide bandwidth operation. We are developing RF filters for 5G, WiFi and defense bands using our proprietary resonator device technology thatmodels and product design kits (PDKs). As we referqualify our RF filter products, we are engaging with target customers to evaluate our filter solutions. Our initial designs target UHB, sub 7 GHz 5G, WiFi and defense bands. We expect our filter solutions will address problems (such as BulkONE®. Filters are critical in selectingloss, bandwidth, power handling, and rejecting signals, and their performance enables differentiationisolation) created by the growing number of frequency bands in the modules defining the RFFE.RFFE of mobile devices, infrastructure and premise equipment to support 5G, and WiFi. We have prototyped, sampled and begun commercial shipment of our single-band low loss BAW filter designs for 5G frequency bands and 5 GHz and 6 GHz WiFi bands which are suited to competitive BAW solutions and historically cannot be addressed with low-band, lower power handling surface acoustic wave (“SAW”) technology.
We believe owningown and/or have filed applications for patents on the core resonator device technology, manufacturing facility and manufacturingintellectual property (“IP”) necessary to produce our designsRF filter chips and operate as a “pure-play” RF filter supplier, providing discrete filter solutions direct to Original Equipment Manufacturers (“OEMs”) and aligning with the front- end module manufacturers that seek to acquire high performance filters to expand their module businesses. We believe this business model is the most direct and effectiveefficient means of delivering our solutions to the market. Furthermore, our
Technology. Our device technology is based upon bulk-mode acoustic resonance, which we believe is superior to surface-mode resonance for high-band and ultra-high- band (“UHB”) applications that include 4G/LTE, emerging 5G, WiFi, and WiFi frequency bands. Whiledefense applications. Although some of our target customers utilize or makemanufacture the RFFE module, several customersthey may lack access to critical high-bandUHB filter technology that we produce, which is necessary to compete in high-band applicationshigh frequency applications.
Manufacturing. We currently manufacture our high-performance RF filter circuits, using our first generation XBAW® wafer process, in our 120,000-square foot wafer- manufacturing facility located in Canandaigua, New York (the “NY Facility”), which we acquired in June 2017.
Intellectual Property. As of April 19, 2021, our IP portfolio included 46 patents, including a blocking patent that we have licensed from Cornell University. Additionally, as of April 19, 2021, we have 79 pending patent applications. These patents cover our XBAW® RF filter technology from raw materials through the system architectures.
By designing, manufacturing, and other traditional surface-mode solutions where higher power performance is required. We intend to design, manufacture, and marketmarketing our RF filter products to multiple mobile phone original equipment manufacturers (OEMs), cellularOEMs, defense OEMs, network infrastructure OEMs, and WiFi router customers andCPE OEMs, we seek 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.
WeSince we own and/or have built prototype resonators using our proprietary single-crystal materials. We are currently optimizing our BulkONE® technology in our 120,000-square foot wafer-manufacturing plant located in Canandaigua, New York, which we acquired in June 2017. We leverage both federal and state level, non-dilutive R&D grants to support development and commercialization of our technology. We are developing resonatorsfiled applications for 4G/LTE, emerging 5G, and WiFi bands andpatents on the associated proprietary models and design kits required to design our RF filters. As we stabilize the wafer process technology, we plan to engage with strategic customers to evaluate our filter prototypes. Our initial designs will target high-band 4G/LTE, emerging 5G, and WiFi frequency bands. Since Akoustis owns its core technology and controlscontrol access to itsour 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 standardized filters that we design and offer as a standard catalog component to multiple customers.components. Second, we could start with aexpect to deliver unique filters to customer-supplied filter specification,specifications, which we will design and fabricate foron a specific customer.customized basis. Finally, we couldmay offer our models and design kits for our customers to design their own filter intofilters utilizing 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 and production orders, government grants, foundry and engineering services, and sales of ourdebt and equity securities, and debt. We havesecurities. The Company has incurred losses, totaling approximately $26.7 million from inception through December 31, 2017. 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. design solutions.
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 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 sampled filter product prototypes to prospective customers that cover LTE-Band 41, Radar and 5GHz WiFi applications. 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, cellularnetwork infrastructure OEMs, WiFi CPE OEMs and WiFi router OEMsdefense customers 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.
Once we complete customer validation of our technology, we expect to complete qualification of our BulkONE® process technology in the first half of calendar 2018 to support an initial product family of 4G/LTE, and WiFi filter solutions. Once we have stabilized our process technology in a manufacturing environment, we intend to complete a production release of our high-band filter products in the frequency range from 2.5 GHz to 6.0 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, although 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.
AsImpact of February 1, 2018,COVID-19 on our Business
Although the Company had $9.7 millionultimate impact of cashthe COVID-19 pandemic on our business is unknown, in an effort to protect the health and cash equivalents to fund our operations, including R&D, commercializationsafety of our technology, developmentemployees, we have taken proactive, precautionary action and adopted social distancing measures, daily self-health attestations, and mandatory mask policies at our locations, including when warranted by state and local guidelines, the implementation of new staffing plans in our patent strategyfacilities whereby certain employees work remotely and expansionthe remaining on-site force is divided into multiple shifts or segregated in different parts of our patent portfolio,the facility. Our actions continue to evolve in response to new government measures and scientific knowledge regarding COVID-19. In an effort to contain COVID-19 or slow its spread, governments around the world have also enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities. These measures have impacted the method and timing of certain business meetings and deliverables to certain customers, as well as our ability to provide working capitalobtain certain materials, equipment and fundsservices from suppliers.
These actions and the global health crisis caused by COVID-19 have negatively impacted business activity across the globe. We have observed declining demand and price reductions in the electronics industry as business and consumer activity has decelerated. Additionally, we have observed delays in certain suppliers’ shipment of materials necessary for other general corporate purposes. These fundsus to manufacture our products and in certain vendors’ ability to deliver equipment for installation at our facilities. When COVID-19 is demonstrably contained, we anticipate a rebound in economic activity, depending on the rate, pace, and effectiveness of the containment efforts deployed by various national, state, and local governments; however, the timing and extent of any such rebound is uncertain.
We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are expected to be sufficient to fundin the best interests of our operations intoemployees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the first quarterultimate effects any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial results for the remainder of fiscal 2019. However, there is no assurance thatyear 2021 or beyond.
Recent Developments
On January 26, 2021, Akoustis issued a redemption notice on the remaining $15 million principal amount of the Company’s projectionsoutstanding 6.5% convertible senior secured notes due in 2023.
On January 27, 2021, the Company announced that it had achieved design-lock on its 5.5 GHz and estimates are accurate. Our anticipated expenses include employee salaries6.5 GHz WiFi 6E coexistence filter modules.
On January 29th, 2021, Akoustis announced that it had received a volume order from a tier-1 customer for its 5.5 GHz and benefits, compensation paid to consultants, capital costs6.5 GHz WiFi 6E coexistence filter modules.
On February 1, 2021, the Company announced that it had locked the process flow for research and other equipment, costs associated with development activities (including travel and administration), costsits first wafer-level-chip-scale-package for XBAW® filters.
On March 3, 2021, the Company announced that it had been awarded a new design win for XBAW® filters from a Citizens Broadband Radio Service (CBRS) customer.
On March 8, 2021, Akoustis announced the discharge of the indentures associated with the integration and operation of our New York wafer fabrication facility and related operations, legal expenses, sales and marketing costs, G&A expenses, and other costs associated with an early stage, public technology company. We anticipate increasing the number of employees; however, this is highly dependent on the nature of our development efforts, our success in commercialization, and our ability to source additional funds. We anticipate adding employees for R&D in both our New York and North Carolina facilities, as well as G&A functions, to support our efforts. We expect capital expenditures to be approximately $5.93$15 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. 6.5% convertible senior secured notes due 2023.
The amounts we actually spend for any specific purpose may vary significantly and will depend onOn March 29, 2021, the Company announced it had secured a number of factors, including, but not limited to, the pace of progress of our commercialization and development efforts, actual needsWiFi 6E reference design 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.a tier-1 WiFi system-on-chip (SoC) maker.
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, we are unable to source additional funds on terms acceptable to the Company (or at all), or we experience costs in excess of estimates to continue our R&D plan, it is possible that we would not have sufficient resources to continue as a going concern and we may be required to curtail or suspend our 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 20172020 Annual Report.
Results of Operations
Three Months Ended DecemberMarch 31, 20172021 and 20162020
Revenue
The Company recorded revenue of $444,553 during$2.5 million for the three months ended DecemberMarch 31, 2017,2021 as compared to $0.4 million for the three months ended March 31, 2020. The increase of which $291,833$2.1 million was revenue for foundryprimarily due to an increase in non-recurring engineering services provided at our New York facility, acquired on June 26, 2017. The remaining revenue consisted primarily of grant revenue. The Company recorded$1.3 million or 584% as well as an increase in RF product revenue of $159,068 in the comparative three-month period ended December 31, 2016, primarily consisting of grant revenue.$0.9 million, or 1,742%.
Cost of Revenue
Cost of revenue includes direct labor, material, net realizable value (NRV) adjustments, and facility costs primarily associated with foundry services revenue, manufacturing of filter products and engineering services. The Company recorded cost of revenue of $329,836 for the three months ended December 31, 2017 which included direct labor, direct materials and facility costs associated with the foundry services revenue. The Company did not record any cost of revenue for the comparative three-month period of 2016.
Operating Expenses
Total operating expenses for the three-month period ended December 31, 2017 were $5.7 million and included R&D expenses of $3.5 million and G&A expenses of $2.2 million. Total operating expenses for the three-month period ended December 31, 2016 were $2.8 million and included R&D expenses of $0.8 million and G&A expenses of $2.0 million.
Research and Development Expenses
R&D expenses of $3.5$3.0 million for the three months ended DecemberMarch 31, 2017 were comprised primarily of salaries and wages for R&D personnel of $1,116,000, stock-based compensation of $831,000, material and third-party processing costs of $220,000, facility costs of $1,078,000, and depreciation of $164,000. R&D expense for the three months ended December 31, 2016 was $0.8 million. The period over period increase was $2.7 million, or 348%. The higher spend was due2021 as compared 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 $562,000, or 209%, in stock-based compensation associated with R&D personnel due to restricted stock grants made to personnel hired since December 31, 2016 and additional issuances to personnel on the payroll as of December 31, 2016. Facility costs of $1,078,000 were associated with the NY facility acquired in June 2017 and include utilities of $207,000, repair and maintenance costs of $408,000, and supplies and parts costs of $463,000. Depreciation expense of $164,000 was higher over the comparative period by $152,000, mainly due to higher deprecation recorded for assets included in the NY facility acquisition.
General and Administrative Expense
G&A expenses were $2.2$0.2 million for the three months ended DecemberMarch 31, 2017, as compared2020. The $2.8 million increase is primarily due to $2.0costs associated with RF product revenue which increased by $2.5 million in addition to non-recurring engineering costs which increased by $0.3 million.
Research and Development Expenses
R&D expenses were $5.2 million for the three months ended DecemberMarch 31, 2016, an increase of $123,000,2021 and were $0.6 million, or 6%. G&A expense9.4% lower than the prior year amount for the quarter was comprised primarilysame period of salary and wages of $526,000,$5.8 million. Personnel costs, including stock-based compensation, were $3.1 million compared to $3.4 million in the prior year period, a decrease of $648,000, professional fees (primarily legal$0.3 million or 8.9%. Facility costs of $1.9 million primarily associated with the NY Facility were $0.3 million lower than the prior period. These decreases are a result of a shift from R&D activities to production activities when compared to the prior period.
General and accounting) of $429,000, recruiting fees of $120,000, depreciation of $73,000,Administrative Expense
General and travel of $82,000. We recorded an increase of $269,000, or 105%, inadministrative (“G&A”) expenses include salaries and wages due to the onboarding of newfor executive and administrative personnel since December 31, 2016. Stock-basedstaff, stock-based compensation, of $648,000 decreased from the comparative period by $627,000, or 49%. Professionalprofessional fees, increased by $85,000, or 25%, mainly for accounting fees due toinsurance costs and other general costs associated with the valuationadministration of the NY fabrication facility and the feesour business. G&A expenses for the review and auditthree months ended March 31, 2021 were $3.4 million, which is an increase of the associated filings. Travel expense for G&A personnel increased by $39,000, or 89%, due to increased travel$0.8 million compared to the NY facility for transition activities,three months ended March 31, 2020. Year-over-year changes within G&A expenses include an increase in employee compensation (including stock-based compensation) of $0.4 million as well as increased travel associated with investor conferences and customer outreach. general expenses of $0.3 million, primarily professional fees.
Other (Expense)/Income
Other expenses for the three months ended March 31, 2021 were ($1.1) million, which included debt discount amortization of $2.1 million. Offsetting this expense was a gain on derivative liability valuation of $0.9 million related to the conversion of notes payable. Other income for the three months ended March 31, 2020 were $0.4 million, consisting of $0.8 million of debt discount amortization and interest expense, net of $0.3 million, a gain on derivative liability valuation of $1.1 million and a gain on contingent liability of $0.5 million.
Net Loss
The Company recorded a net loss of $5.5$10.2 million for the three months ended DecemberMarch 31, 2017,2021, compared to a net loss of $3.4$7.8 million for the three months ended DecemberMarch 31, 2016.2020. The primary drivers of the additionalperiod-over-period incremental loss of $2.4 million, or 31%, was primarily driven by an increase in cost of revenue, and G&A expenses of $3.0 million as well as an increase in debt discount amortization of $1.2 million. These expense increases were partially offset by a revenue increase of $2.1 million were higher personnel cost primarily in the NY facility acquired on June 26, 2017 (higher by $1.1 million), higher depreciation and facility costs of $224,000 and $1,072,000, respectively, both mainly due to the ramp up of R&D activities and the acquisition of our NY facility in June 2017.
Six Months Ended December 31, 2017 and 2016million.
Nine months Ended March 31, 2021 and 2020
Revenue
The Company recorded revenue of $745,493 during$4.5 million for the sixnine months ended DecemberMarch 31, 2017,2021 as compared to $1.4 million for the nine months ended March 31, 2020. The increase of which $589,733$3.1 million was revenue for foundry services provided at our New York facility, acquired on June 26, 2017. The remaining revenue consisted primarily of grant revenue. The Company recordeddue to an increase in RF product revenue of $159,068$1.6 million, or 386%. In addition, non-recurring engineering services increased by $1.6 million, or 247%. Partially offsetting these increases was a decrease in MEMS revenue of $0.3 million, a product line that the comparative six-month period ended December 31, 2016, primarily consisting of grant revenue.Company exited during fiscal year 2020.
Cost of Revenue
Cost of revenue includes direct labor, material, net realizable value (NRV) adjustments, and facility costs primarily associated with foundry services revenue, manufacturing of filter products and engineering services. The Company recorded cost of revenue of $523,065 for the six months ended December 31, 2017, which included direct labor, direct materials and facility costs associated with the foundry services revenue. The Company did not record any cost of revenue for the comparative six-month period of 2016.
Operating Expenses
Total operating expenses for the six-month period ended December 31, 2017 were $10.5 million and included R&D expenses of $6.5 million and G&A expenses of $4.0 million. Total operating expenses for the six-month period ended December 31, 2016 were $4.8 million and included R&D expenses of $1.4 million and G&A expenses of $3.4 million.
Research and Development Expenses
R&D expenses of $6.5$7.2 million for the sixnine months ended DecemberMarch 31, 2017 were comprised primarily of salaries and wages for R&D personnel of $2,369,000, stock-based compensation of $1,113,000, material and third-party processing costs of $808,000, facility costs of $1,783,000 and depreciation of $321,000. R&D expense for the six months ended December 31, 2016 was $1.4 million. The period-over-period increase was $5.1 million, or 353%. The higher spend was due2021 as compared 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 $648,000, or 139%, in stock-based compensation associated with R&D personnel due to restricted stock grants made to personnel hired since December 31, 2016 and additional issuances to personnel on the payroll as of December 31, 2016. Material and third-party material processing costs increased over the comparative six-month period by $435,000, or 116%, as the result of the ramp up of development activities, primarily in our NY facility. Facility costs of $1,783,000 were associated with the NY facility acquired in June 2017 and included utilities of $600,000, repair and maintenance costs of $605,000, and supplies and parts costs of $578,000. Depreciation expense of $321,000 for the six months ended December 31, 2017 was higher over the comparative six-month period ended December 31, 2016 by $298,000, mainly due to higher deprecation recorded for assets included in the NY facility acquisition.
General and Administrative Expense
G&A expenses were $4.0$1.3 million for the sixnine months ended DecemberMarch 31, 2017, compared to $3.42020. The $5.9 million for the six months ended December 31, 2016, an increase of $693,000, or 21%. G&A expense for the six months ended December 31, 2017 was comprisedis primarily of salary and wages of $930,000, stock-based compensation of $964,000, professional fees (primarily legal and accounting) of $949,000, insurance of $163,000, depreciation of 149,000, recruiting and relocation fees of $305,000, and travel of $191,000. We recorded an increase of $343,000, or 58%, in salaries and wages, and an increase of $299,000 in relocation and recruiting fees due to the onboarding of new administrative personnel since December 31, 2016. Stock-based compensation of $964,000 decreased from the comparative period by $819,000, or 46%. Professional fees increased by $339,000, or 55%, mainly for accounting fees due to costs associated with the valuationproduction of the NY fabrication facility and the feesRF products, which increased by $5.6 million as well as cost related to non-recurring engineering services which increased by $0.3 million for the reviewnine months ended March 31, 2021.
Research and auditDevelopment Expenses
R&D expenses were $17.2 million for the nine months ended March 31, 2021 and were $1.4 million, or 9.1%, higher than the prior year amount for the same period of $15.7 million. The period-over-period increase was primarily in the associated filings. Travel expense for G&Aareas of R&D personnel increased by $124,000,costs, R&D materials and facility costs as well as R&D equipment depreciation. Personnel costs, including stock-based compensation, were $9.6 million compared to $9.2 million in the prior year period, an increase of $0.4 million or 185%,4.5%. The higher personnel cost was primarily due to increased travelheadcount at both the Huntersville, NC location and the NY Facility. Material and facility costs of $7.0 million primarily associated with the NY Facility were $1.0 million higher than the comparative period.
General and Administrative Expense
G&A expenses 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 our business. G&A expenses for the nine months ended March 31, 2021 were $9.7 million, which is an increase of $1.5 million compared to the NY facility for transition activities,nine months ended March 31, 2020. Year over year changes within G&A expenses include increases in employee compensation (including stock-based compensation) of $1.2 million and sales and marketing expenses of $0.2 million. These increases were partially offset by lower general expenses, primarily professional fees, as well as increased travel associated with investor conferences and customer outreach.a reduction in severance expense.
Other (Expense)/Income
Other expenses for the nine months ended March 31, 2021 were ($4.4) million, which included debt discount amortization of $4.4 million, interest expense, net of $0.8 million, and a gain on fair value of derivative liability of $0.7 million. Other expenses for the nine months ended March 31, 2020 were ($2.3) million, consisting of $2.3 million of debt discount amortization and interest expense, net of $0.9 million as well as gains on fair value of derivative liability and contingent liability of $0.4 million and $0.4 million, respectively.
Net Loss
The Company recorded a net loss of $10.2$34.0 million for the sixnine months ended DecemberMarch 31, 2017,2021, compared to a net loss of $5.5$26.0 million for the sixnine months ended DecemberMarch 31, 2016.2020. The primary drivers of the additionalperiod-over-period incremental loss of $4.7$8.0 million, were higher personnel costsor 31%, was primarily driven by an increase in the NY facility acquired on June 26, 2017 (higher by $2.2 million), higher material and material processing costs and facility costscost of $435,000 and $1,770,000, respectively, both mainly due to the ramp up ofrevenue, R&D activitiesexpenses and general and administrative expenses of $8.8 million. In addition, interest expense, including debt discount amortization, increased by $1.9 million. These expense increases were partially offset by an increase in revenue of $3.0 million as well as a gain on the acquisitionfair value of our NY facility in June 2017.derivative liability of $0.3 million.
Liquidity and Capital Resources
Since inception,Financing Activities
During the three months ended March 31, 2021, the Company has recordedsold a total of 2,082,148 shares of its common stock at a price to the public of an average of $14.99 per share under the Sales Agreement for aggregate gross proceeds of approximately $1,039,000$31.2 million, before deducting compensation paid to the sales agents and $615,000other offering expenses of revenue from contract researchapproximately $0.5 million. As of March 31, 2021, the Company had sold common stock for aggregate gross proceeds of $55.1 million under the Sales Agreement.
On February 19, 2021, the Company entered into a securities purchase agreement with a limited number of institutional investors for the registered direct offering of an aggregate of 1,500,000 shares of common stock at a purchase price of $14.3592 per share (the “Registered Direct Offering”). The Registered Direct Offering closed on February 23, 2021 and government grantsresulted in gross proceeds of approximately $21.5 million.
Balance Sheet and engineering review services, respectively. Our operations thus far have been funded primarily with contract research and government grants, sales of our equity securities, and debt.Working Capital
The Company has $9.7had $90.4 million of cash and cash equivalents on hand as of February 1, 2018,March 31, 2021, which reflects an increase of $0.1$46.0 million compared to $9.6$44.3 million as of June 30, 2017.2020. The $0.1 million increase is mostlyprimarily due to the receipt of $13.3 million in netcash proceeds from sales of our common stock during the three months ended December 31, 2017,issuance of $75.4 million which was partially offset primarily by $13.2$22.1 million in net cash used in operating activities and $9.9 million in capital expenditures from July 1, 2017 to February 1, 2018.for the nine months ended March 31, 2021. The Company estimates that cash on hand will be sufficient to fund its operations, including current capital expense commitments, intobeyond the first quarternext twelve months from the date of fiscal 2019. Asfiling of this Form 10-Q. However, the Company has historically incurred recurring operating losses and will continue to do so until it generates sufficient revenues from operations; as a result, we willmay need to obtain additional capital through the sale of additional equity securities, debt, and additional grants, or otherwise, to fund operations past that date. There is no assurance that the Company’s projections and estimates are accurate. Although theThe 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.
Balance Sheet and Working Capitalliquidity risks.
DecemberMarch 31, 20172021 compared to June 30, 20172020
As of DecemberMarch 31, 2017,2021, the Company had current assets of $12.3$95.0 million made up primarily of cash on hand of $11.7 million, accounts receivable$90.4 million. As of $299,000 and prepaid expenses of $182,000. Current assets as of the end of the prior year were $10.0 million. The increase inJune 30, 2020, current assets of $2.3were $46.2 million was due to a $2.1 million increase incomprised primarily of cash on hand and an increase in receivables of $299,000, which was partially offset by a decrease in inventory.$44.3 million.
Property, plantPlant and equipment, netEquipment was $12.3$28.8 million as of DecemberMarch 31, 2017,2021 as compared to $7.9a balance of $23.6 million as of June 30, 2017. The $4.4 million increase is mostly due to the purchase of R&D equipment for the NY facility.
Other assets, primarily intangibles and deposits, were $265,000 as of December 31, 2017, compared to $217,000 as of June 30, 2017. The increase is primarily attributable to additional intangibles, and a deposit on an asset not yet in service as of December 31, 2017.2020.
Total assets as of DecemberMarch 31, 2017 were $24.8 million, compared to $18.1 million at2021 and June 30, 2017.2020 were $125.2 million and $71.4 million, respectively.
Current liabilities as of DecemberMarch 31, 20172021 and June 30, 2020 were $3.1$6.8 million anand $6.1 million, respectively. The increase of $1.7$0.7 million was due to the reclassification of a portion of our loans payable from long term liabilities to current liabilities offset by a decrease in accounts payable and accrued expenses.
Long-term liabilities totaled $0.8 million as of March 31, 2021, compared to $1.4$23.8 million as of June 30, 2017.2020. The increasedecrease of $23.0 million was mainly in accounts payable and accrued expenses ($1.7 million) mostly due to payroll-related accruals, stock-based compensation accruals, and accruals recorded for fixed assets in process.the conversion of notes payable during the reporting period.
Long-term liabilities totaled $1.8Stockholders’ equity was $117.6 million as of DecemberMarch 31, 2017 and $1.72021, compared to $41.5 million as of June 30, 2017, representing the long-term contingent real estate liability associated with the acquisition of the STC-MEMS Business on June 26, 2017.
Stockholders’ equity was $19.9 million as of December 31, 2017, compared to $15.0 million as of June 30, 2017. The2020, an increase of $4.9$76.1 million, or 183%. This increase was primarily due to the $15.1 million increase in additional paid-in-capital primarily due to(“APIC”) of $110.2 million for the recording of stock-based compensation $2.6 million, and net proceeds from the issuance of common stock of $13.3 million,nine months ended March 31, 2021 which was partially offset by the $10.2 million net loss recorded for the sixnine months ended DecemberMarch 31, 2017.2021 of $34.0 million. The increase in APIC was primarily due to common stock issued for cash and the conversion of notes payable of $100.5 million, common stock issued for services of $6.1 million and stock options exercised of $1.3 million.
Working capital as of December 31, 2017 was $9.2 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.
Cash Flow Analysis
Operating activities used cash of $6.7$22.1 million forduring the sixnine months ended DecemberMarch 31, 2017, compared to $2.12021 and $16.4 million forduring the six monthscomparative period ended DecemberMarch 31, 2016.2020. The $4.6$5.6 million period- over-period increase in cash used was attributable to higher operating expenses of $4.7 million associated with the ramp up of development and commercialization activities (primarily R&D and commercialization activitiesproduction personnel and the increased costs associated with the New York facility acquired in June 2017, in addition to $0.9 million less in fair value of contingent liability. This was partially offset by an increase of accounts payable and accrued expenses of $0.7 million, and higher period-over-period depreciation expense of $0.4 million. material costs).
Investing activities used cash of $4.5$9.9 million for the sixnine months ended DecemberMarch 31, 2017,2021 compared to $0.5$6.5 million for the six monthscomparative period ended DecemberMarch 31, 2016.2020. The $3.4 million period-over-period increase was mostlyprimarily due to investments in fixed assets for our NY facility to enhance our development and commercialization efforts.
increased purchases of production equipment.
Financing activities providedincreased cash of $13.3by $78.0 million forduring the sixnine months ended DecemberMarch 31, 2017,2021 compared to $3.5 million for the six monthscomparative period ended DecemberMarch 31, 20162020 due to proceeds we received from the issuance of common stock duringpursuant to the six months ended December 31, 2017.Sales Agreement as well as proceeds from the Registered Direct Offering. In addition, stock option grants, warrant exercises and proceeds from our employee stock purchase plan (“ESPP”) resulted in cash proceeds of $2.6 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system ofWe maintain disclosure controls and procedures (as definedthat are designed to ensure that information required to be disclosed in Rules 13a-15(e) and 15d-15(e)the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange 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(1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controlsforms 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(2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
We conducted an evaluation under the supervision andAs of March 31, 2021, our management, with the participation of our Chief Executive Officer and ourInterim Chief Financial Officer, (our principal executive officer and principal financial officer) ofevaluated the effectiveness of the design and operation of our disclosure controls and procedures as(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of December 31, 2017. Based on that evaluation, ourachieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our Chief Executive Officer and Interim Chief Financial Officer have concluded based upon the evaluation described above that, as of March 31, 2021, our disclosure controls and procedures were not effective as of such date due to (i)at the material weakness in our internal control over financial reporting described in Part II, Item 9A of our 2017 Annual Report, 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.reasonable assurance level.
Remediation Plan
We cannot yet estimate when the material weaknesses in our internal control over financial reporting will be fully remediated. Since the filing of our 2017 Annual Report, we have hired three additional individuals into the finance and accounting team, including a new Corporate Controller, Director of Tax and Treasury, and Accounting Manager. While these new hires increase the size and capabilities of our accounting department in accordance with our previously disclosed remediation plan, in order to fully remediate the material weaknesses, we intend to take the following additional actions to improve the overall process of our acquisition and stock-based compensation accounting and reporting practices:
Changes in Internal Control over Financial Reporting
Other than as set forth above in this Item 4,During the quarter ended March 31, 2021, there have beenwere no changes in our internal control over financial reporting, that occurred duringas such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the quarterly period covered by this reportSecurities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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.
ThereIn addition to the risk factors set forth below and 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 fiscal year ended June 30, 2020. 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 follows, there have been no material changes to the risk factors described in Part I, Item 1A, “Risk“Risk Factors,” included in our 20172020 Annual Report.
Our common stock has been thinly traded and its share price in the public markets has experienced, and may in the future experience, extreme volatility.
Our common stock has traded on the Nasdaq Capital Market, under the symbol “AKTS,” since March 13, 2017. Since that date, our common stock has been relatively thinly traded and at times been subject to price volatility. Recently, from December 1, 2020 to March 31, 2021, the closing price of our common stock on the Nasdaq Capital Market ranged from $7.52 to $18.58 per share. Between December 1, 2020 and March 31, 2021, the intra-day sales price of our common stock fluctuated between a reported low sale price of $7.40 and a reported high sales price of $19.15.
The stock market and development-stage public companies in particular have been subject to extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. Additionally, technical factors in the public trading market for our stock may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), speculation in the press, in the investment community, or on the internet, including on online forums and social media, about our Company, our industry or our securities, the amount and status of short interest in our securities (including a “short squeeze”), access to margin debt, trading in options and other derivatives on our common stock and other technical trading factors. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance or prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than the sales price in this offering.
The daily trading volume of our common stock has historically been relatively low. If we are unable to develop and maintain a liquid market for our common stock, you may not be able to sell your common stock at prices you consider to be fair or at times that are convenient for you, or at all. This situation may be attributable to a number of factors, including but not limited to the fact that we are a development-stage company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investor community. In addition, investors may be risk averse to investments in development-stage companies. The low trading volume is outside of our control and may not increase or, if it increases, may not be maintained. In addition, following periods of volatility in the market price of a company’s securities, litigation has often been brought against that company and we may become the target of litigation as a result of price volatility. Litigation could result in substantial costs and divert our management’s attention and resources from our business. This could have a material adverse effect on our business, results of operations and financial condition.
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We depend on a few large customers for a substantial portion of our revenue.
A substantial portion of our revenue comes from large purchases by a small number of customers. Our future operating results depend on both the success of our largest customers and on our success in diversifying our products and customer base.
The concentration of our revenue with a relatively small number of customers makes us particularly dependent on factors, both positive and negative, affecting those customers. If demand for their devices incorporating our products increases, our results are favorably impacted, while if demand for their devices decreases, they may reduce their purchases of, or stop purchasing, our products and our operating results would suffer. Even if we achieve a design win, our customers can delay, temporarily suspend, or cancel the manufacture or release of a new device for any reason, such as a shortage of supply of other components needed to manufacture their device. Most of our customers can cease incorporating our products into their devices with little notice to us and with little or no penalty. The loss of a large customer and failure to add new customers to replace lost revenue would have a material adverse effect on our business, financial condition and results of operations.
Global shortages in manufacturing capacities could negatively affect our operations and negatively impact our results of operations.
Our business depends in significant part upon manufacturers of products requiring semiconductors, as well as the current and anticipated production of these products. As a supplier to such manufacturers, we are subject to the business cycles that characterize the industry. Recent sharp increases in demand for semiconductor products have resulted in a global shortage of manufacturing capacities and it is unclear how long this shortage may last. If our customers are forced to reduce the amount of their products they manufacture or plan to manufacture due to a limited supply of semiconductors, our business, financial condition and results of operations could be negatively affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.1
Repurchases
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 such employees in September 2017, notifying them 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 completed these repurchases during the second quarter of fiscal 2018, as shown in the table below.
| Period | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) | |||||||||||||
| October 2017 | — | — | — | 831,030 | |||||||||||||
| November 2017 | — | — | — | 821,030 | |||||||||||||
| December 2017 | 58,152 | — | 58,152 | 685,506 | |||||||||||||
| Total | 58,152 | — | 58,152 | 685,506 | |||||||||||||
Unregistered Sales of Equity Securities
Other than asany sales 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. Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
None.Not applicable.
The exhibits in the Exhibit Index below are filed or furnished, as applicable, as part of this report.
| * | Filed herewith |
* Filed herewith
| † | Management contract or compensatory plan or arrangement |
† Management contract or compensatory arrangement
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.
| Dated: | Akoustis Technologies, Inc. | |
| By: | /s/ | |
| Interim Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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