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 March 31, 20202021

 

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, NC 28078
(Address of principal executive offices) (Postal Code)

 

Registrant’s telephone number, including area code: 1-704 - 997-57351-704-997-5735

 

Securities registered under Section 12(b) of the Act:

 

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 April 24, 2020,26, 2021, there were 36,389,00050,374,194 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 ENDED MARCH31, 20202021

 

TABLE OF CONTENTS

 

  Page No.
PART I — FINANCIAL INFORMATION
   
PART I — FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS1
Condensed Consolidated Balance Sheets as of March 31, 2020 and June 30, 2019 (unaudited) 1
   
Condensed Consolidated Balance Sheets as of March 31, 2021 and June 30, 2020 (unaudited)1
Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2021 and 2020 and 2019 (unaudited) 2
   
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended March 31, 2021 and 2020 and 2019 (unaudited) 3
   
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2021 and 2020 and 2019 (unaudited) 5
   
Notes to the Condensed Consolidated Financial Statements (unaudited) 6
   
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 219
0ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK25
ITEM 4.CONTROLS AND PROCEDURES25
PART II — OTHER INFORMATION
   
ITEM 3.1.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKLEGAL PROCEEDINGS 26
   
ITEM 4.1A.CONTROLS AND PROCEDURESRISK FACTORS 26
   
ITEM 2.PART II — OTHER INFORMATIONUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 1.LEGAL PROCEEDINGS 27
   
ITEM 1A. 3.RISK FACTORSDEFAULTS UPON SENIOR SECURITIES 27
   
ITEM 4.MINE SAFETY DISCLOSURES27
 
ITEM 2.5.OTHER INFORMATION27
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 6.EXHIBITS27
EXHIBIT INDEX 28
   
ITEM 3.SIGNATURESDEFAULTS UPON SENIOR SECURITIES 29
ITEM 4.MINE SAFETY DISCLOSURES29
ITEM 5.OTHER INFORMATION29
ITEM 6.EXHIBITS29
EXHIBIT INDEX29
SIGNATURES30

 

i

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS.

ITEM 1. FINANCIAL STATEMENTS.

 

Akoustis Technologies, Inc.

Condensed Consolidated Balance Sheets


(In thousands, except share data)


(Unaudited)

  March 31,  June 30, 
  2020  2019 
       
Assets      
       
Assets:      
Cash and cash equivalents $39,577  $30,054 
Accounts receivable  692   285 
Inventory  76   94 
Other current assets  812   1,289 
Total current assets  41,157   31,722 
         
Property and equipment, net  19,942   15,178 
         
Intangibles, net  494   388 
         
Assets held for sale, net  21   300 
         
Operating lease right-of-use asset, net  751   — 
Restricted cash  100   100 
Other assets  449   261 
Total Assets $62,914  $47,949 
         
Liabilities and Stockholders’ Equity        
         
Current Liabilities:        
Accounts payable and accrued expenses $3,393  $3,211 
Deferred revenue  —   5 
Contingent real estate liability  —   446 
Operating lease liability-current  223   — 
Total current liabilities  3,616   3,662 
         
Long-term Liabilities:        
Convertible notes payable, net  20,152   18,215 
Operating lease liability - non current  534   — 
Other long-term liabilities  117   117 
Total long-term liabilities  20,803   18,332 
         
Total Liabilities  24,419   21,994 
         
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; 36,351,976 and 30,140,955 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively  36   30 
Additional paid in capital  131,997   93,399 
Accumulated deficit  (93,538)  (67,474)
Total Stockholders’ Equity  38,495   25,955 
Total Liabilities and Stockholders’ Equity $62,914  $47,949 

See accompanying notes to the condensed consolidated financial statements

��

1

Akoustis Technologies, Inc.

 

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

  For the Three
Months Ended
March 31,
2020		  For the Three
Months Ended
March 31,
2019		  For the Nine
Months Ended
March 31,
2020		  For the Nine
Months Ended
March 31,
2019		 
Revenue            
Revenue with customers $363  $237  $1,424  $764 
Grant revenue  —   —   —   109 
Total revenue  363   237   1,424   873 
                 
Cost of revenue  217   299   1,340   813 
                 
Gross profit (loss)  146   (62)  84   60 
                 
Operating expenses                
Research and development  5,769   5,505   15,736   14,340 
General and administrative expenses  2,589   2,503   8,158   6,841 
Total operating expenses  8,358   8,008   23,894   21,181 
                 
Loss from operations  (8,212)  (8,070)  (23,810)  (21,121)
                 
Other (expense) income                
Interest (expense) income  (1,162)  (781)  (3,259)  (2,006)
Rental income  54   70   164   207 
Change in fair value of contingent real estate liability  480   905   446   805 
Change in fair value of derivative liabilities  1,066   (1,558)  396   (1,372)
Total other (expense) income  438   (1,364)  (2,253)  (2,366)
Net loss $(7,774) $(9,434) $(26,063) $(23,487)
                 
Net loss per common share - basic and diluted $(0.21) $(0.31) $(0.80) $(0.88)
                 
Weighted average common shares outstanding - basic and diluted  36,263,779   29,959,908   32,659,339   26,659,999 
  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

 


AkoustisAkoustis Technologies, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ EquityOperations

(In thousands)thousands, except per share data)

(Unaudited)

  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  $(67,475) $25,954 
                     
Common stock issued for services  283   —   1,703   —   1,703 
Common stock issued for exercise of warrants  6   —   —   —   — 
Vesting of restricted shares  —   —   303   —   303 
Common stock issued in payment of note interest  38   —   244   —   244 
Net loss  —   —   —   (8,975)  (8,975)
Balance, September 30, 2019  30,468  $30  $95,649  $(76,450) $19,229 
                     
Common stock issued for cash, net of issuance costs  5,520   6   32,164   —   32,170 
Common stock issued for services  178   —   1,602   —   1,602 
Common stock issued for exercise of warrants  68   —   —   —   — 
Common stock issued for exercise of options  10   —   55   —   55 
Common stock issued for equipment purchase  5   —   40   —   40 
ESPP purchase  28   —   168   —   168 
Common stock issued in payment of note interest  34   —   244   —   244 
Repurchase and retirement of common shares  (99)  —   —   —   — 
Net loss  —   —   —   (9,314)  (9,314)
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 


Akoustis Technologies, Inc.

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity - Continued

(In thousands)

(Unaudited)

  For the Nine Months Ended March 31, 2019 
  Common Stock  Additional
Paid In		  Accumulated  Stockholders’ 
  Shares  Par Value  Capital  Deficit  Equity 
                
Balance, June 30, 2018  22,203  $22  $52,074  $(38,246) $13,850 
Cumulative-effect adjustment from adoption of ASC 60  —   —   —   20   20 
Common stock issued for cash, net of issuance costs  —   —   (81)  —   (81)
Common stock issued for services  112   —   1,947   —   1,947 
Common stock issued for exercise of warrants  19   —   71   —   71 
Vesting of restricted shares  —   —   351   —   351 
Common stock issued in payment of note interest  40   —   290   —   290 
Net loss  —   —   —   (7,308)  (7,308)
Balance, September 30, 2018  22,374  $22  $54,652  $(45,534) $9,140 
                     
Common stock issued for cash, net of issuance costs  7,362   8   28,733   —   28,741 
Common stock issued for services  121   —   1,044   —   1,044 
Intrinsic value of beneficial conversion feature  —   —   3,951   —   3,951 
Vesting of restricted shares  —   —   177   —   177 
Common stock issued in payment of note interest  53   —   244   —   244 
Net loss  —   —   —   (6,745)  (6,745)
Balance, December 31, 2018  29,910  $30  $88,801  $(52,279) $36,552 
                     
Common stock issued for cash, net of issuance costs  1   —   —   —   — 
Common stock issued for services  46   —   2,125   —   2,125 
Common stock issued for exercise of warrants  16   —   —   —   — 
Common stock issued for exercise of options  19   —   133   —   133 
Vesting of restricted shares  —   —   80   —   80 
Repurchase of common shares  (21)  —   —   —   — 
Common stock issued in payment of note interest  37   —   244   —   244 
Net loss  —   —   —   (9,434)  (9,434)
Balance, March 31, 2019  30,008  $30  $91,383  $(61,713) $29,700 
                     
  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.

 


Akoustis Technologies, Inc.

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.


Akoustis Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, except per share data)

(Unaudited)

 

  Nine Months ended
March 31,
2020		  Nine Months ended
March 31,
2019		 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(26,063) $(23,487)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  2,194   1,815 
Common stock issued for services  5,108   5,522 
Amortization of debt discount  2,333   1,347 
Change in fair value of derivative liabilities  (396)  1,372 
Amortization of operating lease right of use asset  91   — 
Loss on disposal of fixed assets  —   (38)
Non cash interest payment  731   777 
Change in fair value of contingent real estate liability  (446)  (805)
Changes in operating assets and liabilities:        
Accounts receivable  (407)  55 
Inventory  18   (92)
Other current assets  477   (60)
Other assets  (188)  (188)
Accounts payable and accrued expenses  195   410 
Lease liabilities  (85)  — 
Change in other long-term liabilities  —   19 
Deferred revenue  (5)  (66)
Net Cash Used in Operating Activities  (16,443)  (13,419)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Cash paid for machinery and equipment  (6,340)  (4,436)
Cash received from sale of assets held for sale  28   33 
Cash paid for intangibles  (143)  (92)
Net Cash Used in Investing Activities  (6,455)  (4,495)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from issuance of common stock  32,189   28,659 
Proceeds from stock option exercises  64   133 
Proceeds from employee stock purchase plan  168   — 
Proceeds from the exercise of warrants  —   71 
Proceeds received from convertible note, net of issuance costs  —   8,867 
Net Cash Provided by Financing Activities  32,421   37,730 
         
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash  9,523   19,816 
         
Cash, Cash Equivalents and Restricted Cash - Beginning of Period  30,154   14,817 
         
Cash, Cash Equivalents and Restricted Cash - End of Period $39,677  $34,633 
         
SUPPLEMENTARY CASH FLOW INFORMATION:        
Cash Paid During the Period for:        
Interest  488   256 
         
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:        
         
Accrued interest paid in common shares  731   777 
Stock compensation payable  303   203 
ASC 606 transition adjustment  —   20 
Convertible Notes – Beneficial Conversion Feature  —   3,951 
Reclass from assets held for sale  (251)  — 
Assets purchase using common stock  40   — 
Fixed assets in accounts payable  290   — 

  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

5

 


AKOUSTIS TECHNOLOGIES, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited
(Unaudited))

 

Note 1. Organization

 

Akoustis Technologies, Inc. (“the Company”(the “Company”) was incorporated under the laws of the State of Nevada 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 subsidiary, Akoustis, Inc. (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 wireless industry, 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 has developed a family of novel, high purity acoustic piezoelectric materials as well as a unique microelectromechanical system (“MEMS”) wafer process, collectively referred to as XBAW™XBAW® technology. The Company leverages its integrated device manufacturing (“IDM”) business model to develop and sell high performance RF filters using its XBAWTM® technology. Filters are critical in selecting and rejecting signals, and their performance enables differentiation in the modules defining the RFFE.

Note 2. Liquidity

 

AtAs of March 31, 2020,2021, the Company had cash and cash equivalents of $39.6$90.4 million and working capital of $37.5$88.3 million. The Company has historically incurred recurring operating losses and has experienced net cash used in operating activities of $16.4 million for the nine months ended March 31, 2020 which raises substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date.activities.

 

As of April 24, 2020,26, 2021, the Company had $38.4$87.9 million of cash and cash equivalents, which the Company expects to be sufficient to fund its operations beyond the next twelve months from the date of 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. TheExcept pursuant to its ATM Equity OfferingSM Sales Agreement with BofA Securities, Inc. and Piper Sandler & Co., the Company has no commitments or arrangements to obtain any additional funds, and there can be no assurance such funds will be 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 Policies

 

Basis of Presentation

 

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 filing of this Form 10-Q. Operating results for the quarter ended March 31, 20202021 are not necessarily indicative of the results that may be expected for the year ending June 30, 20202021 or any future interim period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Form 10-K filed with the SEC on September 13, 2019August 21, 2020 (the “2019“2020 Annual Report”).

 

Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Akoustis, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

 


Significant Accounting Policies and Estimates

 

The Company’s significant accounting policies are disclosed in Note 3-Summary of Significant Accounting Policies in the 20192020 Annual Report. Since the date of the 20192020 Annual Report, other than adopting ASC 842 “Leases” discussed in the footnote below, there have been no material changes to the Company’s significant accounting policies. The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and the accompanying notes thereto. The 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-lived assets. Actual results could differ from the estimates.

 


Allowance for Doubtful Accounts

The Company provides 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 as of March 31, 2021 and June 30, 2020 (in thousands):

  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 the following as of March 31, 2021 and 2020. Shares of restricted stock are included in the calculation of weighted average shares outstanding. Restricted stock included in reportable shares outstanding were as follows as of March 31, 2020 and 2019.

 

  March 31,
2020		  March 31,
2019		 
Shares of restricted stock included in reportable shares outstanding  116,250   311,328 
         
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.

 

Restricted Cash

Restricted cash at March 31, 2020 and June 30, 2019 represents a retained balance obligation included in a deposit account control agreement required by the Company’s 6.5% Convertible Senior Secured Notes due 2023 issued in May 2018. The restriction on the cash will lapse in conjunction with the extinguishment of the debt.

Recently Issued Accounting Pronouncements

 

Accounting Pronouncements Recently Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” with multiple amendments subsequently issued. The new guidance requires that lease arrangements be presented on the lessee’s balance sheet by recording a right-of-use asset and a lease liability equal to the present value of the related future minimum lease payments. The Company adopted the standard in the first quarter of fiscal 2020, using the modified retrospective approach which permits lessees to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. Upon adoption, the Company recorded a right-of-use asset of $0.7 million and a lease liability of $0.7 million.

The Company elected the transition package of practical expedients, under which the CompanyManagement does not have to reassess (1) whetherbelieve that any expired or existing contracts are leases, or contain leases, (2) the lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. Further, the Company elected the practical expedientrecently issued, but not to separate lease and non-lease components for substantially all of its classes of leases and to account for the combined lease and non-lease components as a single lease component. In addition, the Company made anyet effective accounting policy election to exclude leases with an initial term of 12 months or less from the balance sheet. This standard did notpronouncements, when adopted, will have a material impacteffect on the Condensed Consolidated Statement of Operations or Condensed Consolidated Statement of Cash Flows. See Note 12 for further disclosures resulting from the adoption of this new standard.

In June 2018, the FASB issued ASU No. 2018-07,Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under the new standard, companies are no longer required to value non-employee awards differently from employee awards. Companies value all equity classified awards on their grant date under ASC718 and forgo revaluing the award after the grant date. ASU 2018-07 is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within that reporting period. The Company adopted the standard during the first quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements. Approximately $0.3 million of accrued expenses associated with share-based compensation was reclassified to equity.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,”which provides guidance about which changes to the terms or conditions of a stock-based payment award require an entity to apply modification accounting in Topic 718. The Company adopted the standard during the first quarter of fiscal year 2020 and there was no material impact on itsaccompanying condensed consolidated financial statements.


Note 4. Revenue Recognition from Contracts with Customers

 

Disaggregation of Revenue

 

The Company’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 and Non-Recurring Engineering (“NRE”).services. The Company exited the MEMS business during fiscal year 2020. Under these contracts, products are delivered to the customer at the completion of the service which represents satisfaction of the 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 point in time.

 

Product Sales

 

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

 

The following table summarizes the revenues of the Company’s reportable segments for the three months ended 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
Fabrication 

Services
Revenue

  Product Sales
Revenue		  Total
Revenue
with
Customers		 
MEMS $8  $—  $8 
NRE - RF Filters  224   —   224 
Filters/Amps  —   131   131 
Total $232  $131  $363 

  

Foundry
Fabrication

Services
Revenue

  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
Fabrication 

Services
Revenue

 Product Sales
Revenue		 Total
Revenue
with
Customers		  

Foundry
Fabrication

Services
Revenue

  Product
Sales
Revenue		  Total
Revenue
with
Customers		 
MEMS $265 $— $265  $265  $—  $265 
NRE - RF Filters 652 — 652   652   —   652 
Filters/Amps  —  507  507   —   507   507 
Total $917 $507 $1,424  $917  $507  $1,424 

 

The following table summarizes the revenues of the Company’s reportable segments for the three months ended March 31, 2019 (in thousands):

  

Foundry
Fabrication 

Services
Revenue

  Product Sales
Revenue		  

Total
Revenue
with

Customers

 
MEMS $30  $—  $30 
NRE - RF Filters  129   —   129 
Filters/Amps  —   78   78 
Total $159  $78  $237 


The following table summarizes the revenues of the Company’s reportable segments for the nine months ended March 31, 2019 (in thousands):

  

Foundry
Fabrication 

Services
Revenue

  Product Sales
Revenue		  Total
Revenue
with
Customers		 
MEMS $175  $—  $175 
NRE - RF Filters  392   —   392 
Filters/Amps  —   197   197 
Total $567  $197  $764 

Performance Obligations

 

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

 

Contract Balances

The following table summarizes the changes in the opening and closing balances of the 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 order), resulting in all receivables being contract receivables. When invoicing occurs prior to revenue recognition a contract liability is recorded (as deferred revenue on the Condensed Consolidated Balance Sheet)Sheets).

The following table summarizes the changes in the opening and closing balancescontract liability balance as of the Company’s contract asset and liability for the nine months ended March 31, 2020 and 2019 (in thousands):

  Contract Assets  Contract Liabilities 
Balance, June 30, 2019 $140  $5 
Closing, March 31, 2020  96   — 
Increase/(Decrease)  (44)  (5)
         
Balance, June 30, 2018 $7  $53 
Closing, March 31, 2019  57   4 
Increase/(Decrease)  50   (49)

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 nine months ended March 31, 2020 that was included in the opening contract liability balance was $5 thousand which related to filterproduct sales. The amount of revenue recognized in the nine months ended March 31, 2019 that was included in the opening contract liability balance consisted of $28 thousand that related to non-recurring engineering sales and $25 thousand that related to MEMS business.

 

Contract assets are recorded when revenue recognized exceeds the amount invoiced. The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the 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 $140$119 thousand, which primarily related to MEMS business.non-recurring engineering services and $96 thousand, which primarily related to non-recurring engineering services, respectively.

 

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 $0.3$2.8 million at March 31, 2020 and was $0.2 million at March 31, 2019.2021.

 

Grant Revenue

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

9


Note 5. Common Stock Equivalents

The Company had the following common stock equivalents at March 31, 2020 and 2019. These are excluded from the loss per share calculation as they are considered anti-dilutive.

  March 31,
2020		  March 31,
2019		 
Convertible Notes  4,960,800   4,960,800 
Options  2,265,165   2,177,314 
Warrants  541,999   708,651 
Total  7,767,964   7,846,765 

Note 6.5. Property and Equipment, net

 

Property and equipment, net consisted of the following as of March 31, 20202021 and June 30, 20192020 (in thousands):

 

 Estimated Useful Life March 31,
2020		 June 30,
2019		  Estimated
Useful Life		 March 31,
2021		  June 30,
2020		 
Land n/a $1,000 $1,000  n/a $1,000  $1,000 
Building 11 years 3,000 3,000  11 years  3,000   3,000 
Equipment 2-10 years 20,381 13,611  2-10 years  32,098   24,746 
Leasehold Improvements * 949 949  *  1,815   964 
Software 3 years 214 161  3 years  479   294 
Furniture & Fixtures 5 years 11 11  5 years  11   11 
Computer Equipment 3 years  260  203  3 years  286   267 
Total   25,815 18,935     38,689   30,282 
Less: Accumulated depreciation    (5,873)  (3,757)
Less: Accumulated Depreciation    (9,934)  (6,677)
Total   $19,942 $15,178    $28,755  $23,605 

 

(*) Leasehold improvements are 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 $0.7$1.2 million and $0.6$0.7 million for the three months ended March 31, 20202021 and 2019,2020, respectively. The Company recorded depreciation expense of $2.2$3.3 million and $1.8$2.2 million for the nine months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, equipment with a net book value totaling $7.0 million had not been placed in service and 2019, respectively.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 7.6. Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consisted of the following at March 31, 20202021 and June 30, 20192020 (in thousands):

 

  March 31,
2020		  June 30,
2019		 
Accounts payable $607  $245 
Accrued salaries and benefits  1,619   1,552 
Accrued professional fees  140   315 
Accrued utilities  117   193 
Accrued interest  135   135 
Accrued goods received not invoiced  127   69 
Other accrued expenses  648   702 
Totals $3,393  $3,211 

10

  

March 31,

2021

  

June 30,

2020

 
Accounts payable $897  $2,135 
Accrued salaries and benefits  3,502   2,478 
Accrued professional fees  98   193 
Accrued utilities  128   138 
Accrued interest  14   137 
Accrued goods received not invoiced  434   396 
Other accrued expenses  90   422 
Totals $5,163  $5,899 

 

Note 8.7. 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, 20202021 (in thousands):

 

  

Fair Value
Measurement
Using Level 3
Inputs 

Total 

 
Balance, June 30, 2019 $955 
Change in fair value of derivative liabilities (included in other (expense) income)  (396)
Balance, March 31, 2020 (see footnote 9) $559 
  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 convertible noteOctober 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 weighted average assumptions:

 

  March 31,
2020		  June 30,
2019		 
Remaining term (years)  3.16-3.67   3.92 
Expected volatility  60%  49%
Risk free interest rate  0.30%-0.32%  1.73%
Dividend yield  0.00   0.00%

June 30,

2020

Remaining term (years)2.92-3.42
Expected volatility70%
Risk free interest rate0.18-0.20%
Dividend yield0.00%

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 estimatedcalculates the expected volatility of the stock price based on a blendusing the historical volatilities of the Company’s own historic volatility andcommon stock traded on the corresponding volatility of the Company’s peer group stock price for a period consistent with the convertible notes’ expected term.Nasdaq Capital Market.

 

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


Note 9.8. Convertible Notes

 

The following table summarizes convertible debtOn December 4, 2020, the Company provided a notice of redemption to the holders of the Company’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 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 would 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 unpaid interest as well as an interest make-whole payment with respect to those October 2018 Notes that are redeemed.

All of the holders of the October 2018 Notes elected to convert the October 2018 Notes into shares of common stock of the Company prior to the October Redemption Date at a conversion rate equal to 196.08 shares of common stock per $1,000 principal amount of Notes (equivalent to a conversion price of approximately $5.10 per share).

During the quarter ended March 31, 2020 (in thousands): 2021, the Company converted approximately $10.0 million of principal into approximately 1.96 million shares of the Company’s common stock. The Company also recognized $96 thousand of unamortized debt discount as a reduction to equity.

 

  Maturity Date Stated Interested Rate Conversion Price  Face Value  Remaining Debt (Discount)  Fair Value of Embedded Conversion Option  Carrying Value 
Long Term convertible notes payable                   
6.5% convertible senior secured notes 5/31/2023 6.50% $        5.00  $15,000  $      (4,753) $          439  $10,686 
6.5% convertible senior notes 11/30/2023 6.50% $5.10   10,000   (654)  120   9,466 
Ending Balance as of March 31, 2020         $25,000  $(5,407) $559  $20,152 

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, 20192020 (in thousands):

 

 Maturity Date Stated Interested Rate Conversion Price Face Value Remaining Debt (Discount) Fair Value of Embedded Conversion Option Carrying Value  Maturity Date  

Stated
Interest
Rate

  

Conversion
Price

  

Face
Value

  

Remaining
Debt
(Discount)

  

Fair Value
of
Embedded
Conversion
Option

  

Carrying
Value

 
Long Term convertible notes payable                                         
6.5% convertible senior secured notes 5/31/2023 6.50% $      5.00 $15,000 $        (6,825) $          955 $9,130  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  (915)  —  9,085   11/30/2023   6.50% 5.10   10,000   (564)  216   9,652 
Ending Balance as of June 30, 2019   $25,000 $(7,740) $955 $18,215 
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 March 31, 20202021 and 20192020 are as follows:

 

  Three Months
Ended
03/31/20202021		  Three Months
Ended
03/31/20192020		 
Vendor 1  —18%  21%
— 

 

Vendor concentration as a percentage of purchases for the nine months ended March 31, 20202021 and 20192020 are as follows:

 

  Nine Months
Ended
03/31/20202021		  Nine Months
Ended
03/31/20192020		 
Vendor 1  13%—
   13%

 

Customers

 

Customer concentration as a percentage of revenue for the three months ended March 31, 20202021 and 20192020 are as follows:

 

  Three Months
Ended
03/31/2020		  Three Months
Ended
03/31/2019		 
Customer 1  38%  28%
Customer 2  33%  — 
Customer 3  12%  — 
Customer 4  11%  — 
Customer 5  —   21%
Customer 6  —   23%

Three Months
03/31/2021		Three Months
03/31/2020
Customer 157%—
Customer 234%—
Customer 3—38%
Customer 4—33%
Customer 5—12%
Customer 6—11%

 

Customer concentration as a percentage of revenue (excluding grant revenue) for the nine months ended March 31, 20202021 and 20192020 are as follows:

 

 Nine Months
Ended
03/31/2020		 Nine Months
Ended
03/31/2019		  Nine Months
03/31/2021		  Nine Months
03/31/2020		 
Customer 1 20% 22% 43%  22%
Customer 2 11% —  38%  — 
Customer 3 13% —  —   20%
Customer 4 17% 12% —   11%
Customer 5 22% —  —   13%
Customer 6 — 14% —   17%
Customer 7 — 11%

 

13


Note 11. Stockholders’ Equity

 

Underwritten PublicEquity Offering of Common StockProgram

 

During the nine months ended March 31,On May 8, 2020, the Company sold a total of 5,520,000entered 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 a purchase price to the public of $6.25$14.3592 per share for aggregate gross proceeds of $34.5 million before deducting the underwriting discount and$21.5 million. The offering expenses payable by the Company of approximately $2.3 million.closed on February 23, 2021. The Company expects to use the proceeds of the offering to fund the Company’s operations and growth of its business, including for capital expenditures, working capital, research and development, the commercialization of its technology and other general corporate purposes.

Equity Incentive Plans

 

During the nine months ended March 31, 2020,2021, the Company granted employees and directors options to purchase an aggregate of 222,500approximately 0.5 million shares of common stock with a weighted average grant date fair value of $4.26.$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,
2020

2021
Exercise price $ 4.71 - 8.097.72 – 17.61
Expected term (years) 4.754.00 – 5.00
Risk-free interest rate 0.64%0.25% – 1.74%0.78%
Volatility 65 - 67%67 – 68%
Dividend yield 0%
Weighted Average Grant Date Fair Value of Options granted during the period $4.26 5.05

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

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

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.

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. 

 

During the nine months ended March 31, 20202021 the Company awarded certain employees and contractorsdirectors grants of an aggregate of 872,061approximately 0.8 million restricted stock units (“RSUs”) with a weighted average grant date fair value of $7.65.$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.

 


Compensation expense related to our stock-based awards described above was as follows (in thousands):

 

 Three Months Ended
March 31,		 Nine Months Ended
March 31,		  Three Months Ended
March 31,		  Nine Months Ended
March 31,		 
 2020 2019 2020 2019  2021  2020  2021  2020 
Research and Development $929 $1,468 $2,675 $3,027  $1,011  $929  $2,953  $2,675 
General and Administrative  874  787  2,433  2,495   980   874   3,131   2,433 
Total $1,803 $2,255 $5,108 $5,522  $1,991  $1,803  $6,084  $5,108 

 

Unrecognized stock-based compensation expense and weighted-average years to be recognized are as follows (in thousands):

 

  As of March 31, 2020 
  

Unrecognized stock-  

based
compensation

  Weighted-
average
years
to be recognized		 
Options $2,147   2.06 
Restricted stock awards/units $7,203   2.09 


  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 

Note 12. Commitments and Contingencies

 

Leases

 

The Company leases office space and office equipment in Huntersville, NC as well as equipment in Canandaigua, NY. On January 7, 2020, the Company entered into an amendedOur leases have remaining lease agreement with the current lessor in orderterms of up to five years, some of which include options to extend the lease term and increase office space at our Huntersville, NC corporate office. The amended lease expands our spaceleases for up to 22,000 square feet and extends the term to February 2023. This resulted in a remeasurement of the previous right of use liability which resulted in an increase of approximately $0.2 million.

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 (in thousands):follows:

 

  Three Months Ended
March 31,
2020		  Three Months Ended
March 31
2019		  Nine Months Ended
March 31,
2020		  Nine Months Ended
March 31,
2019		 
Operating Lease Expense $55  $51  $144  $161 
                 
  Three
Months Ended
March 31,
2021		  Three
Months Ended
March 31,
2020		  

Nine

Months Ended
March 31,
2021

  

Nine

Months Ended
March 31,
2020

 
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,
2020		  Classification on the
Condensed Consolidated
Balance Sheet		 

March 31,

2021

 
Assets         
Operating lease assets Other non-current assets $751  Other non-current assets $531 
         
Liabilities         
Other current liabilities Current liabilities 223  Current liabilities  260 
Operating lease liabilities Other non-current liabilities 534  Other non-current liabilities  274 
      
Weighted Average Remaining Lease Term:      
Operating leases    2.01 
      
Weighted Average Discount Rate:      
Operating leases    12.47%

 

Weighted Average Remaining Lease Term:
Operating leases2.9 Years
Weighted Average Discount Rate:
Operating leases12.47%


The following table outlines the minimum future lease payments for the next five years and thereafter, (in thousands):

 

For the year ending June 30,      
2020 $76 
2021 305  $78 
2022 312   312 
2023 204   204 
2024 7   7 
2025  — 
Thereafter  —   — 
Total lease payments (Undiscounted cash flows) 904 
Total lease payments (undiscounted cash flows)  601 
       
Less imputed interest  (147)  (67)
Total $757  $534 

 


Ontario County Industrial Development Authority AgreementAgreement

 

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 Lease and Project Agreement, the “Agreements”), each dated as of February 1, 2018, with the Ontario County Industrial Development Agency, a public benefit corporation of the State of New York (the “OCIDA”). Pursuant to the 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 transferredtransfer title to certain related equipment and personal property to the OCIDA (collectively, the “Facility”). The OCIDA leases the Facility back to the Company for annual rent payments specified in the Lease and Project Agreement for the Company’s primary use as research and development, manufacturing, warehouse and professional office space in its business, and to be subleased, in part, by the Company to various existing tenants. The Company estimates substantial tax savings during the term of the Agreements, which expire on December 31, 2028. In addition, subject to the terms of the Lease and Project Agreement, certain purchases and leases of eligible items will be exempt from the imposition of sales and use taxes. Subject to the terms of the Lease and Project Agreement, the OCIDA has also granted to the Company an exemption from certain mortgage recording taxes for one or more mortgages securing an aggregate principal amount not to exceed $12.0 million, or such greater amount as approved by the OCIDA in its sole and absolute discretion. The benefits provided to the Company pursuant to the terms of the Lease and Project Agreement are subject to clawbackclaw back over the life of the Agreements upon certain recapture events, including certain events of default.

 

Real Estate Contingent Liability

On March 23, 2017, we entered into an Asset Purchase Agreement and a Real Property Purchase Agreement (collectively, the “STC-MEMS 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 (collectively, “Sellers”), respectively, to acquire certain specified assets, including STC-MEMS, a semiconductor wafer-manufacturing and MEMS operation with associated wafer-manufacturing tools, and the associated real estate and improvements located in Canandaigua, NY used in the operation of STC-MEMS (the assets and real estate and improvements referred to together herein as the “STC-MEMS Business”).

In connection with the acquisition of the STC-MEMS Business, the Company agreed to pay to FRMC a penalty, if the Company sold 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 $1.75 million, subject to certain enumerated exceptions. The penalty imposed would have been equivalent to the amount that the sales price of the property exceeded $1.75 million up to a maximum penalty. Due to the lapse of the three-year penalty period, the maximum penalty as of March 31, 2020 was $0.

Maximum
Penalty
Year 3, ending March 23, 2020$     —

The fair value of the contingent liability was reduced to zero due to the lapse of the sale restriction period. As of March 31, 2020, and June 30, 2019, the fair value of the contingent liability was $0.0 million and $0.4 million, respectively. During the three months ended March 31, 2020 and 2019, the Company marked the contingent liability to fair value and recorded a gain of $0.48 million and $0.91 million, respectively, relating to the change in fair value. During the nine months ended March 31, 2020 and 2019, the Company marked the contingent liability to fair value and recorded a gain of $0.45 million and $0.80 million, respectively, relating to the change in fair value.

Litigation, Claims and Assessments

 

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

Effective November 5, 2018, the employment by the Company of its former principal financial officer, John T. Kurtzweil (the “Former CFO”), ended, after which the Former CFO filed for an arbitration hearing pursuant to the terms of his employment agreement and filed a complaint under the whistleblower provisions of the Sarbanes-Oxley Act of 2002 with the Occupational Safety and Health Administration (“OSHA”) of the U.S. Department of Labor.  On October 28, 2019, the Company and the Former CFO entered into a Settlement Agreement that resolved all pending disputes between the parties with no admission of liability by either party. OSHA approved the Settlement Agreement and closed its investigation of the Former CEO’s whistleblower complaint on November 26, 2019. Pursuant to the Settlement Agreement, the Company paid the Former CFO an all-inclusive settlement amount of $375 thousand in cash. As part of the Settlement Agreement, all unvested restricted stock units and stock options were acknowledged as forfeited as of such date. The arbitration was closed on December 30, 2019.


Tax Credit Contingency

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

The Company’s gross unrecognized indirect tax credits totaled $0.1 million as of March 31, 2020 and $0.1 million as of June 30, 2019 and is recorded on the Consolidated Balance Sheet as a long-term liability.

 

Note 13. Related Party Transactions

 

Consulting ServicesAsset Purchase and Sale

 

Total stock-based compensation expense

On September 30, 2020, Akoustis, Inc. sold to a third party certain of its inventory, together with related to stock-based awards granted in prior yearswarranty obligations, delivery commitments and design data and files (the “Designs”) for consulting services provided$215,000. This transaction was enabled by a firm ownedthe purchase by oneAkoustis, Inc. under an Asset Purchase Agreement dated September 30, 2020 with Big Red, LLC of the Co-ChairmenDesigns for $25,000. Members of the Company’s board of directors was $8 thousand and $17 thousand for the three months ended March 31, 2020 and 2019, respectively, and $32 thousand and $32 thousand for the nine months ended March 31, 2020 and 2019, respectively.

Equipment Purchase

On October 11, 2019, the Company issued 2,500 shares of common stock toBig Red, LLC include the brother of the Company’s Chief Executive Officer in exchange for equipment with a fair market valueand two non-executive employees of $20,000.the Company.


Note 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, and RF Product, 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 nine months ended March 31, 20202021 and 20192020 are as follows (in thousands):

 

 Foundry/
Fabrication
Services		 RF Product Total  Foundry/
Fabrication
Services		 RF
Product		 Total 
       
Three months ended March 31, 2020       
Three months ended March 31, 2021            
Revenue with customers $232 $131 $363  $1,537  $980  $2,517 
Total Revenue  232  131  363 
Cost of revenue  138  79  217   400   2,573   2,973 
Gross margin 94 52 146   1,137   (1,593)  (456)
Research and development — 5,769 5,769   —   5,225   5,225 
General and administrative  —  2,589  2,589   —   3,395   3,395 
Income (Loss) from Operations $94  (8,306)  (8,212) $1,137  $(10,213) $(9,076)
                   
Three months ended March 31, 2019       
Three months ended March 31, 2020            
Revenue with customers $159 $78 $237  $232  $131  $363 
Total Revenue  159  78  237 
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  176  123  299   803   6,421   7,224 
Gross margin (17) (45) (62)  1,461   (4,224)  (2,763)
Research and development — 5,505 5,505   —   17,171   17,171 
General and administrative  —  2,503  2,503   —   9,683   9,683 
Income (Loss) from Operations $(17) $(8,053) (8,070) $1,461  $(31,078) $(29,617)
                   
Nine months ended March 31, 2020                   
Revenue with customers $917 $507 $1,424  $917  $507  $1,424 
Total Revenue  917  507  1,424 
Cost of revenue  545  795  1,340   545   795   1,340 
Gross margin 372 (288) 84   372   (288)  84 
Research and development — 15,736 15,736   —   15,736   15,736 
General and administrative  —  8,158  8,158   —   8,158   8,158 
Income (Loss) from Operations $372  (24,182)  (23,810) $372  $(24,182) $(23,810)
                   
Nine months ended March 31, 2019       
Revenue with customers $567 $197 $764 
Grant revenue  —  109  109 
Total Revenue  567  306  873 
Cost of revenue  666  147  813 
Gross margin (99) 159 60 
Research and development — 14,340 14,340 
General and administrative  —  6,841  6,841 
Income (Loss) from Operations $(99) $(21,022) (21,121)
       
As of March 31, 2020       
As of March 31, 2021            
Accounts receivable $574 $118 $692  $1,498  $122  $1,620 
Property and equipment, net — $19,942 $19,942   —  $28,755  $28,755 
                   
As of June 30, 2019       
As of June 30, 2020            
Accounts receivable $150 $135 $285  $71  $280  $351 
Property and equipment, net $54 $15,124 $15,178  $—  $23,605  $23,605 

 


Note 15. 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 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 had the following common stock equivalents at March 31, 2021 and 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

 

Supplemental IndenturesOn 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.

 

On April 17, 2020, the Company entered into supplemental indentures to the indentures governing its outstanding 6.5% Convertible Senior Secured Notes due 2023 and its outstanding 6.5% Convertible Senior Notes due 2023. Among other things, the supplemental indentures permit the incurrence of indebtedness made available through the CARES Act and regulations thereunder. 


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 subsidiary, Akoustis, Inc., each of which is a Delaware 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 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”) filters, (ii) projections 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 (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 (v) above.

 

Forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates, and assumptions and are subject to a number of risks and uncertainties and other influences, many of which are beyond our control. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation: our ability to continue as a going concern;limitation, our inability to obtain adequate financing;financing and sustain our status as a going concern; our limited operating history; our inability to generate revenues or achieve profitability; the results of our research and development (“R&D”) activities; our inability to achieve acceptance of our products in the market; the impact of the COVID-19 pandemic on our operations, financial condition and the worldwide economy;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 scale our New York wafer fabrication facility and related operations while 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 weaknesses 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 the section of this report titled “Risk Factors” and in our Annual Report on Form 10-K, filed with the SEC on September 13, 2019August 21, 2020 (the “2019“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

 

Akoustis® is an emerging commercial product company focused on developing, designing, and manufacturing innovative RF filter productssolutions for the wireless industry, including for products such as smartphones and tablets, network infrastructure equipment, WiFi Customer Premise Equipment (“CPE”) and 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 “RFFE”RFFE is the circuitry that performs the analog signal processing and contains components such as amplifiers, filters and switches. We have developed a proprietary microelectromechanical system (“MEMS”) based bulk acoustic wave (“BAW”) technology and a unique manufacturing process flow, called “XBAW”“XBAW®”, for our filters produced for use in RFFE modules. Our XBAWTM® filters incorporate optimized high purity piezoelectric materials for high power, high frequency and wide bandwidth operation.

We believe owning the core resonator device technology, manufacturing facility and intellectual property (“IP”) to produce our RF filter designs is the most direct and efficient means of delivering our solutions to the market. Furthermore, our technology is based upon bulk-mode acoustic resonance, which we believe is superior to surface-mode resonance for high-band applications that include 4G/LTE, 5G, WiFi, and defense applications. Although some of our target customers utilize or make the RFFE module, they may lack access to critical ultra-high-band (UHB) filter technology needed to compete in high frequency applications. We seek to design, manufacture, and market our RF filter products to mobile phone original equipment manufacturers (“OEMs”), defense OEMs, network infrastructure OEMs, and WiFi CPE OEM’s to enable broader competition among the front-end module manufacturers. We operate as a “pure-play” RF filter supplier and align with the front-end module manufacturers who seek to acquire high performance filters to expand their module business.

We currently build high performance RF filter circuits, using our first generation XBAWTM wafer process, in our 120,000-square foot wafer-manufacturing facility located in Canandaigua, New York, which we acquired in June 2017. As of April 24, 2020, our intellectual property (IP) portfolio included 31 patents, including a blocking patent that we have licensed from Cornell University. Additionally, as of April 24, 2020, we have 61 pending patent applications. These patents cover our XBAWTMRF filter technology from raw materials through the system architectures. Where possible, we leverage both federal and state level R&D grants to support development and commercialization of our technology. 

We are developing RF filters for 4G/LTE, 5G, WiFi and defense bands using our proprietary resonator device models and product design kits (PDKs). As we qualify our first 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 loss, bandwidth, power handling, and isolation) created by the growing number of frequency bands in the RFFE of mobile devices, infrastructure and premise equipment to support 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 own and/or have filed applications for patents on the core resonator device technology, manufacturing facility and intellectual property (“IP”) necessary to produce our RF 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 efficient means of delivering our solutions to the market.

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, 5G, WiFi, and defense bands. applications. Although some of our target customers utilize or manufacture the RFFE module, they may lack access to critical UHB filter technology that we produce, which is necessary to compete in high 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 marketing our RF filter products to mobile phone OEMs, defense OEMs, network infrastructure OEMs, and WiFi CPE OEMs, we seek to enable broader competition among the front-end module manufacturers.

Since Akoustis owns itswe own and/or have filed applications for patents on the core technology and controlscontrol access to itsour intellectual property, we expect to offer several ways to engage with potential customers. First, we intend to engage with multiple wireless markets, providing standardized filters that we design and offer as standard catalog components. Second, we expect to deliver unique filters to customer-supplied specifications, which we will design and fabricate on a customized basis. Finally, we may offer our models and design kits for our customers to design their own filters utilizing our proprietary technology.

 

We have earned minimal revenue from operations since inception, and we have funded our operations primarily with development contracts, RF filter and production orders, government grants, MEMS foundry and engineering services, and sales of debt and equity securities. We haveThe Company has incurred losses, totaling approximately $93.5 million from inception through March 31, 2020. These losses are primarily the result of material and 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 design solutions.

Impact of COVID-19 on our Business

Although the ultimate impact of the COVID-19 pandemic on our business is unknown, in an effort to protect the health and safety of our employees, we have taken proactive, precautionary action and adopted social distancing policies at our locations, including the implementation of new staffing plans in our facilities whereby many employees work remotely and the remaining on-site force is divided into multiple shifts or segregated in different parts of the facility. 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 obtain certain materials or equipment from suppliers.

We anticipate that these actions and the global health crisis caused by COVID-19 will negatively impact business activity across the globe. We have observed declining demand and price reductions in the electronics industry as business and consumer activity decelerates across the globe. 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 in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential 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 year 2020 or beyond.

 


Plan of Operation

We plan to commercialize our technology by designing and manufacturing single-band and multi-band BAW RF filter solutions in our New York wafer fabrication facility. We expect our filter solutions will address problems (such as loss, bandwidth, power handling, and isolation) created by the growing number of frequency bands in the RFFE of mobile devices, infrastructure and premise equipment to support 4G/LTE, 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.

To succeed, we must convince mobile phone OEMs, RFFE module manufacturers, cellularnetwork infrastructure OEMs, WiFi CPE OEMs and militarydefense customers to use our XBAWTM® filter technology in their systems and modules. However, since there are 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.

 

We plan to pursue RF filter design and R&D development agreements and potentially joint ventures with target customers and other strategic 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.

 

Impact of COVID-19 on our Business

As

Although the ultimate impact of April 24, 2020, the Company had $38.4 million of cashCOVID-19 pandemic on our business is unknown, in an effort to protect the health and cash equivalents to fund our operations, including capital expenditures, 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. Our anticipated expenses include employee salariesus to manufacture our products and benefits, compensation paidin certain vendors’ ability to consultants, capital costsdeliver equipment for researchinstallation at our facilities. When COVID-19 is demonstrably contained, we anticipate a rebound in economic activity, depending on the rate, pace, and other equipment, costs associated with development activities (including traveleffectiveness of the containment efforts deployed by various national, state, and administration), costs associated withlocal governments; however, the integrationtiming and operationextent 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 in the best interests of our New York wafer fabrication facilityemployees, customers, partners, suppliers, and related operations, legal expenses, salesstakeholders, or as required by federal, state, or local authorities. It is not clear what the ultimate effects any such alterations or modifications may have on our business, including the effects on our customers, employees, 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 dependentprospects, or on the nature of our development efforts, and our success in commercialization. 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 between $8 million and $10 millionfinancial results for the purchaseremainder of equipment and software during the next 12 months.

fiscal year 2021 or beyond.

 

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

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.


Recent Developments

On January 7, 2020, the Company announced that it had received an order and shipped its 5.2 GHz and 5.6 GHz coexistence WiFi filters to an original equipment manufacturer (OEM).

 

On January 30, 2020,26, 2021, Akoustis announced that it had lockedissued a redemption notice on the designremaining $15 million principal amount of its Citizen’s Broadband Radio Service 5G network infrastructure filter and had shipped samples to three OEM’s.the Company’s outstanding 6.5% convertible senior secured notes due in 2023.

 

On February 3, 2020, the Company announced that it had received its first volume commercial order for 5G network infrastructure filters from a small cell base station provider focused on markets in Asia.

In mid-February, Akoustis announced the entry into a new market with an order for the design and development of XBAW filters for a customer for unmanned aircraft systems (UAS), commonly referred to as drones. The filters will be used for control and non-payload communication links.

On April 8, 2020,January 27, 2021, the Company announced that it had achieved design-lock on its 5.5 GHz and 6.5 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 6.5 GHz WiFi 6E coexistence filter modules.


On February 1, 2021, the Company announced that it had locked the process flow for its first non-defense commercialwafer-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 in the 5G small cell network equipment market.

from a Citizens Broadband Radio Service (CBRS) customer.

 

Underwritten Public OfferingOn March 8, 2021, Akoustis announced the discharge of Common Stockthe indentures associated with the $15 million 6.5% convertible senior secured notes due 2023.

 

During the nine months endedOn March 31, 2020,29, 2021, the Company soldannounced it had secured a total of 5,520,000 shares of its common stock atWiFi 6E reference design with a price to the public of $6.25 per share for aggregate gross proceeds of $34.5 million before deducting the underwriting discount and offering expenses payable by the Company of approximately $2.3 million. The Company expects to use the proceeds of the offering to fund the Company’s operations and growth of its business, including for capital expenditures, working capital, research and development, the commercialization of its technology and other general corporate purposes.tier-1 WiFi system-on-chip (SoC) maker.

 

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,” under the heading “Critical Accounting Policies” included in our 20192020 Annual Report.

 

Results of Operations

 

Three Months Ended March 31, 20202021 and 20192020

 

Revenue

 

The Company recorded revenue of $0.4$2.5 million duringfor the three months ended March 31, 20202021 as compared to $0.4 million for the three months ended March 31, 2020. The increase of $2.1 million was primarily due to an increase in non-recurring engineering services of $1.3 million or 584% as well as an increase in RF product revenue of $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 $3.0 million for the three months ended March 31, 2021 as compared to $0.2 million for the three months ended March 31, 2019. Revenue recorded during the three months ended March 31, 2020 included $0.12020. The $2.8 million ofincrease is primarily due to costs associated with RF filter and amplifier sales and $0.2product revenue which increased by $2.5 million ofin addition to non-recurring engineering services. The RF filters sales were primarily sales of defense filters. Revenue for the three months ended March 31, 2019 consisted of $0.1 million of non-recurring engineering services and $0.1 million of RF filter and amplifier sales.costs which increased by $0.3 million.

 

Cost of Revenue

The Company recorded cost of revenue of $0.2 million in the three months ended March 31, 2020 and $0.3 million in the three months ended March 31, 2019, which included direct labor, direct materials and facility costs. The decrease in cost of revenue was primarily related to a lower amount of sales of WiFi filters during the third quarter of fiscal year 2020.

Research and Development Expenses

 

R&D expenses were $5.8$5.2 million for the three months ended March 31, 20202021 and were $0.3$0.6 million, or 5%, higher9.4% lower than the prior year amount for the same period of $5.5$5.8 million. The period-over-period increase wasPersonnel costs, including stock-based compensation, were $3.1 million compared to $3.4 million in the prior year period, a decrease of $0.3 million or 8.9%. Facility costs of $1.9 million primarily dueassociated 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 an increase in parts and equipment expense and equipment depreciation atproduction activities when compared to the Company’s Canandaigua NY wafer-manufacturing facility (the “NY Facility”).prior period.

 

General and Administrative Expense

 

General and administrative (“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 three months ended March 31, 20202021 were $2.6$3.4 million, which is an increase of $0.1$0.8 million compared to the three months ended March 31, 2019. Year over year2020. Year-over-year changes within G&A expenses include an increase in employee compensation including(including stock-based compensationcompensation) of $0.2 million. In addition, bad debt expense and marketing$0.4 million as well as increased general expenses increased by a total of $0.1 million. These increases were partially offset by a decrease in$0.3 million, primarily professional fees of $0.2 million.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 waswere $0.4 million, which was comprisedconsisting of $0.8 million of debt discount amortization and interest expense, net of $0.3 million, a gain on the change in the fair value of the derivative liability valuation of $1.1 million and a gain on the change in the fair value of our real estate contingent liability of $0.5 million. Offsetting these income items was debt discount amortization

Net Loss

The Company recorded a net loss of $0.8$10.2 million and interest expense, net of $0.3 million. Other (expense) for the three months ended March 31, 2019 was $1.4 million, which included a gain on the contingent real estate liability of $0.9 million, interest income of $0.2 million and rental income of $0.1 million, offset by $1.0 million of interest expense related2021, compared to the amortization of debt issuance costs and interest on the convertible notes and a loss of $1.6 million on the change in the fair value of the derivative liability related to our convertible senior secured notes.

Net Loss

The Company recorded a net loss of $7.8 million for the three months ended March 31, 2020, compared to a net2020. The period-over-period incremental loss of $9.4 million for the three months ended March 31, 2019. The period-over-period change of $1.7$2.4 million, or 18%31%, was primarily driven by the changean increase in derivative valuationcost of $2.6revenue, and G&A expenses of $3.0 million as well as an increase in debt discount amortization of $1.2 million. This change wasThese expense increases were partially offset by a change in the gain on real estate liability valuationrevenue increase of $0.4 million and an increase in interest expense, net of $0.4 million and real estate contingent liability of $0.5$2.1 million.

 

Nine Monthsmonths Ended March 31, 20202021 and 20192020

 

Revenue

 

The Company recorded revenue of $1.4 million during the nine months ended March 31, 2020 as compared to $0.9$4.5 million for the nine months ended March 31, 2019. Revenue recorded during the nine months ended March 31, 2020 included $0.5 million of RF filter and amplifier sales, $0.3 million of foundry services, and $0.6 million of revenue for non-recurring engineering services. The revenue for the nine months ended March 31, 2019 consisted of $0.4 million of revenue for non-recurring engineering services, $0.2 million of revenue for foundry services, $0.1 million of grant revenue and $0.2 million of RF filter and amplifier sales.

Cost of Revenue

The Company recorded cost of revenue of $1.3 million in the nine months ended March 31, 2020 and $0.8 million in the nine months ended March 31, 2019, which included direct labor, direct materials and facility costs. The increase in cost of sales was primarily related2021 as compared to sales of infrastructure and WiFi filters which was partially offset by a decrease in the cost of foundry services.

Research and Development Expenses

R&D expenses were $15.7$1.4 million for the nine months ended March 31, 20202020. The increase of $3.1 million was primarily due to an increase in RF product revenue of $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 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 $7.2 million for the nine months ended March 31, 2021 as compared to $1.3 million for the nine months ended March 31, 2020. The $5.9 million increase is primarily due to costs associated with the production of RF 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 nine months ended March 31, 2021.

Research and Development Expenses

R&D expenses were $17.2 million for the nine months ended March 31, 2021 and were $1.4 million, or 10%9.1%, higher than the prior year amount for the same period of $14.3$15.7 million. The period-over-period increase was primarily in the areas of R&D personnel costs, R&D materials and facility costs as well as R&D equipment depreciation. Personnel costs, including stock-based compensation, were $9.2$9.6 million compared to $8.5$9.2 million in the prior year period, an increase of $0.7$0.4 million or 8%4.5%. The higher personnel cost was primarily due to additional R&Dincreased headcount at both the Huntersville, NC location and the NY Facility. R&DMaterial and Fabrication materials totaled $2.6facility costs of $7.0 million which represents an increase of $0.5 million overprimarily associated with the prior year. Depreciation expense of $2.1 million was $0.3NY Facility were $1.0 million higher than the prior year. These increases were partially offset by a decrease in facility costs of $0.2 million compared to the prior year.

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, 20202021 were $8.2$9.7 million, which is an increase of $1.4$1.5 million compared to the nine months ended March 31, 2019.2020. Year over year changes within G&A expenses include an increaseincreases in employee compensation including stock compensation(including stock-based compensation) of $0.8 million, an increase in professional fees of $0.3$1.2 million and an increase in other administrativesales and marketing expenses of $0.2 million. These increases were partially offset by lower general expenses, primarily professional fees, as well as a reduction in severance expense.

 


Other (Expense)/Income

 

Other (expense)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 waswere ($2.3) million, consisting of $2.3 million which includedof debt discount amortization of $2.3 million and interest expense, net of $1.2 million. These expenses were partially offset by a reduction in the$0.9 million as well as gains on fair value of our derivative liability and contingent liability of $0.4 million the expiration of the real estate contingent liability, resulting inand $0.4 million, of income, and interest income of $0.3 million. Other (expense) for the nine months ended March 31, 2019 were $2.4 million, primarily consisting of $1.3 million of debt discount amortization, interest expense of $1.0 million and an increase to our derivative liability of $1.4 million. These were partially offset by interest income of $0.3 million and a reduction to our real estate contingent liability of $0.8 million.respectively.

 

Net Loss

 

The Company recorded a net loss of $26.1$34.0 million for the nine months ended March 31, 2020,2021, compared to a net loss of $23.5$26.0 million for the nine months ended March 31, 2019.2020. The period-over-period incremental loss of $2.5$8.0 million, or 11%31%, was primarily driven by an increase in cost of revenue, R&D expenses of $1.4 million and an increase in G&Ageneral and administrative expenses of $1.4$8.8 million. In addition, interest expense, including debt discount amortization, increased by $1.9 million. These expensesexpense increases were partially offset by an increase in revenue of $3.0 million as well as a decrease in other expenses.gain on the fair value of derivative liability of $0.3 million.

 

Liquidity and Capital Resources

 

Financing Activities

During the three months ended March 31, 2021, the Company sold 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 $31.2 million, before deducting compensation paid to the sales agents and other offering expenses of approximately $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 resulted in gross proceeds of approximately $21.5 million.

Balance Sheet and Working Capital

 

The Company had $39.6$90.4 million of cash and cash equivalents on hand as of March 31, 2020,2021, which reflects an increase of $9.5$46.0 million compared to $30.1$44.3 million as of June 30, 2019.2020. The $9.5 million increase is primarily due to $32.5cash proceeds from common stock issuance of $75.4 million of financing activities, primarily comprised of $32.3which was partially offset by $22.1 million in net cash proceeds from the December 2019 underwritten offering of common stock. The Company used $16.4 million forin operating activities and $6.3$9.9 million in capital expenditures for the nine months ended March 31, 2020.2021. The Company estimates that cash on hand will be sufficient to fund its operations, including current capital expense commitments, beyond the next twelve months from the date of filing of this Form 10-Q.

Balance Sheet However, the Company has historically incurred recurring operating losses and Working Capitalwill continue to do so until it generates sufficient revenues from operations; as a result, we may need to obtain additional capital through the sale of additional equity securities, debt, or otherwise, to fund operations past that date. There is no assurance that the Company’s projections and estimates are accurate. The Company is actively managing and controlling the Company’s cash outflows to mitigate liquidity risks.

 

March 31, 20202021 compared to June 30, 20192020

 

As of March 31, 2020,2021, the Company had current assets of $41.2$95.0 million made up primarily of total cash on hand of $39.6$90.4 million. As of June 30, 2019,2020, current assets were $31.7$46.2 million comprised primarily of total cash on hand of $30.1$44.3 million.

 

Property, Plant and Equipment was $19.9$28.8 million as of March 31, 20202021 as compared to a balance of $15.2$23.6 million as of June 30, 2019. The approximate $4.7 million increase is primarily due to the purchase of R&D and manufacturing equipment of $6.9 million, offset by depreciation of $2.2 million.  2020.

 

Total assets as of March 31, 20202021 and June 30, 20192020 were $62.9$125.2 million and $47.9$71.4 million, respectively.

 

Current liabilities as of March 31, 20202021 and June 30, 20192020 were $3.6$6.8 million and $3.6$6.1 million, respectively. The increase of $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 $20.8$0.8 million as of March 31, 2020,2021, compared to $18.3$23.8 million as of June 30, 2019.2020. The increasedecrease of $2.5$23.0 million was due to the increase in convertibleconversion of notes net of debt discount and issuance costs, as well aspayable during the establishment of a right of use liability upon adoption of ASC 842 which totaled $0.5 million.

reporting period.

 

Stockholders’ equity was $38.5$117.6 million as of March 31, 2020,2021, compared to $26.0$41.5 million as of June 30, 2019,2020, an increase of $12.5$76.1 million, or 48%183%. This increase was primarily due to common stock issuedthe increase in additional paid-in-capital (“APIC”) of $110.2 million for cash, net of issuance costs of $32.2 million, common stock issued for services of $5.1 million, vesting of restricted shares of $0.3 million, employee stock purchases of $0.2 million and common stock issued for payment of note interest of $0.7 million. These werethe nine months ended March 31, 2021 which was partially offset by the net loss for the nine months ended March 31, 20202021 of $26.1$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.

 


Cash Flow Analysis

 

Operating activities used cash of $16.4$22.1 million during the nine months ended March 31, 20202021 and $13.4$16.4 million during the 2019 comparative period.period ended March 31, 2020. The $3.0$5.6 million period-over-periodperiod- over-period increase in cash used was attributable to higher operating expenses associated with the ramp up of development and commercialization activities (primarily R&D and production personnel and material costs).

 

Investing activities used cash of $6.5$9.9 million for the nine months ended March 31, 20202021 compared to $4.5$6.5 million for the comparative period ended March 31, 2019.2020. The $2.0$3.4 million period-over-period increase was primarily due to increased spend on R&Dpurchases of production equipment.

 

Cash provided

Financing activities increased cash by financing activities was $32.4$78.0 million forduring the nine months ended March 31, 20202021 compared to $37.7 million for the comparative period ended March 31, 2019. The $5.3 million period-over-period decrease was2020 due a reductionto proceeds from issuance of common stock pursuant to the 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 received from equity and convertible note issuances in the comparative period.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements asproceeds of March 31, 2020.$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

 

OurWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, is responsible for establishingincluding our principal executive officer and maintaining a systemprincipal financial officer, to allow timely decisions regarding required disclosure.

As of March 31, 2021, our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosureany controls and procedures, include, without limitation,no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We conducted an evaluation under the supervision and with the participation of our Chief Executive Officer and our Interim Chief Financial Officer (our principal executive officer and principal financial officer) of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2020. Based on that evaluation, ourprocedures. 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 toat the material weaknesses described below with respect to our internal control over financial reporting.reasonable assurance level.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed in our 2019 Annual Report, we identified the following material weaknesses in the Company’s internal controls over financial reporting as of June 30, 2019:

1.The Company did not design and implement effective Information Technology General Controls (“ITGC”) for certain information systems that are relevant to the preparation of the Company’s financial statements. Specifically, applications supporting the processes of payroll, cash management, fixed assets and financial close included deficiencies related to user access controls, change management, information technology operations and third-party service providers.  These ITGC deficiencies, combined with inadequate compensating review controls, create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis. 

2.Management review controls designed to address risks associated with complex accounting matters that arise from significant routine and non-routine transactions – related to revenue, share-based compensation, research and development expense, and debt – to ensure that those transactions are properly accounted for in accordance with U.S. GAAP did not operate effectively.

Remediation Plan

IT General Controls: During the first quarter of fiscal year 2020, key mitigating controls were designed and implemented to mitigate risks in the absence of full year coverage of SSAE-18 (SOC1) reports. These controls are being tested for design and operating effectiveness.

Non-Routine Transaction Review: During the first quarter of fiscal year 2020, controls were designed and implemented to mitigate risks related to review of all non-routine, material transactions specifically around revenue, share-based compensation, research and development expense and debt. These controls are being tested for design and operating effectiveness.

Changes in Internal Control over Financial Reporting

 

Other thanDuring the mitigating controls referenced above,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.

 


PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

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

 

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

 

ITEM 1A. RISK FACTORS.

 

In addition to the risk factorfactors 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, 2019.2020. 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 described below,follows, there have been no material changes to the risk factors described in Part I, Item 1A, “Risk“Risk Factors,” included in our 20192020 Annual Report.

 

We are dependentOur 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 proper functioningNasdaq 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 critical facilities, our supply chaincommon stock on the Nasdaq Capital Market ranged from $7.52 to $18.58 per share. Between December 1, 2020 and distribution networks andMarch 31, 2021, the financial stabilityintra-day sales price of our customers, allcommon stock fluctuated between a reported low sale price of which could be negatively impacted by the COVID-19 pandemic in$7.40 and a manner materially adverse to our business, financial condition or resultsreported high sales price of operations.

Our ability to manufacture products may be materially adversely impacted by COVID-19.$19.15.

 

The COVID-19 pandemic is impacting worldwide economic activity. Estimates for economic growthstock market and development-stage public companies in particular have been reducedsubject 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 COVID-19, which may have a corresponding effect on our sales activity. The virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 100 countries, including the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, and has resulted in and will likely continue toprice volatility. Litigation could result in significant disruptions to the global economy, as well as businessessubstantial costs and capital markets around the world. With the spread of the COVID-19 pandemic to the United Statesdivert our management’s attention and other countries, it is unclear how economic activity and workflows might be impacted on a worldwide basis. Many employers in the United States are requiring their employees to workresources from home or not come into their offices or facilities. We manufacture primarily out of one facility in Canandaigua, New York. In order to mitigate the risk posed by COVID-19, we have implemented a new staffing plan whereby many employees work remotely, and the remaining on-site force is divided into two shifts. If the manufacturing capabilities of this facility are adversely impacted as a result of COVID-19, whether by a decrease in productivity caused by precautionary measures or by one or more employees becoming ill, it may not be possible for us to timely manufacture relevant products at required levels or at all. A reduction or interruption in any of our manufacturing processesbusiness. This could have a material adverse effect on our business, results of operations and financial conditioncondition.

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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 cash flows.

We also might be unable to obtain certain supplies, product components, or equipment fromon our suppliers and vendors due to constraints created by COVID-19. For instance, we have observed delayssuccess in certain suppliers’ deliveries of materials necessary for us to manufacturediversifying our products and in certain vendors’ abilitycustomer 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 equipment used in our production process. Additionally, travel restrictions and stay-at-home orders or similar mandates of foreign and domestic governments have prevented us from visiting suppliers’ facilities as parttheir device. Most of our quality control processes. These impacts may delaycustomers can cease incorporating our launchproducts into their devices with little notice to us and with little or no penalty. The loss of new products, adversely affect our abilitya large customer and failure to deliver customers’ orders timely or in the requested quantities and inhibit our ability to ensure the quality of supplies used in our products.

Our sales may be materially adversely impacted by COVID-19.

Our sales efforts typically function by in-person meetings with customers and potentialadd new customers to discuss our products. The method and timing of these meetings has been altered due to stay-at-home orders and travel restrictions relating to COVID-19. This limitation on the ability of our sales personnel to maintain their customary interaction with customers for a period of time may negatively affect demand for our products. We have also found that potential customers have been forced to slow and reprioritize various product development projects as a result of COVID-19. This disruption to our sales activity and our customers’ businesses, and the resulting delay in the growth of our business, mayreplace lost revenue would have a material adverse effect on our results of operations,business, financial condition and cash flows. Furthermore, a reduction or delay in revenues will prolong our dependence on capital raising to finance ourresults of operations.

 


Our ability to raise capital may be materially adversely impacted by COVID-19.

A sustained disruptionGlobal shortages in the capital markets from the COVID-19 pandemicmanufacturing capacities could negatively affect our operations and negatively impact our abilityresults 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 raise capital. Insuch manufacturers, we are subject to the past, webusiness cycles that characterize the industry. Recent sharp increases in demand for semiconductor products have financedresulted in a global shortage of manufacturing capacities and it is unclear how long this shortage may last. If our operations bycustomers are forced to reduce the issuanceamount of equity and debt securities. However, we cannot predict when the macro-economic disruption stemming from COVID-19 will ebbtheir products they manufacture or when the economy will returnplan to pre-COVID-19 levels, if at all. This macro-economic disruption may disrupt our abilitymanufacture due to raise additional capital to finance our operations in the future, which could materially and adversely affecta limited supply of semiconductors, our business, financial condition and prospects, andresults of operations could ultimately cause our business to fail.be negatively affected.

COVID-19 may heighten other risks.


The COVID-19 pandemic may have the effect of heightening many of the other risks described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, such as risks related to the operation of our manufacturing facility, acceptance of our products into the market, doing business in foreign countries, attracting and retaining qualified personnel, our reliance on third parties to complete certain processes in connection with the manufacture of products, product quality and defects, successfully scaling the New York fabrication facility, stock volatility and illiquidity and maintaining effective internal control over financial reporting.

 

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

 

Unregistered Sales of Equity Securities

 

Other than any 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.

 

ITEM 5. OTHER INFORMATION.

 

The Company is disclosing under this Item 5 the following information otherwise disclosable in a Current Report on Form 8-K under “Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year”:Not applicable.

On May 1, 2020, the Company’s Board of Directors (the “Board”) approved the Company’s Amended and Restated Bylaws (the “Amended and Restated Bylaws”), effective immediately. The Amended and Restated Bylaws amend and restate in their entirety the Company’s bylaws to, among other things: (i) amend the description of certain information a stockholder must provide with respect to a proposal to nominate a person for election or reelection as a Company director or business to be considered at a stockholders meeting and the procedure for making such proposal; (ii) revise requirements and procedures for stockholder actions by written consent; (iii) require the majority of the entire Board to approve certain actions; (iv) require a two-thirds vote for stockholders to amend the Amended and Restated Bylaws; (v) provide that the forum for the resolution of internal corporate claims shall be the Court of Chancery in the State of Delaware; and (vi) make other technical amendments.

The foregoing summary is subject to, and qualified in its entirety by, the full text of the Amended and Restated Bylaws, a copy of which is filed as Exhibit 3.5 to this Quarterly Report on Form 10-Q and is incorporated by reference into this Item 5.

 

ITEM 6. EXHIBITS.

 

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

 


EXHIBIT INDEX

 

Exhibit
Number		 Description
3.1 Articles of Conversion of the Company, as filed with the Nevada Secretary of State on December 15, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2016)
   
3.2 Certificate of Conversion of the Company, as filed with the Delaware Secretary of State on December 15, 2016 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2016)
   
3.3 

Certificate of Incorporation, as filed with the Delaware Secretary of State on December 15, 2016 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2016)

3.4Certificate of Amendment to the Certificate of Incorporation of the Company, as filed with the Delaware Secretary of State on November 4, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2019)
3.5* 

Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.5 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 1, 2020)

10.1*†Akoustis Technologies, Inc. Director Compensation Program, effective August 28, 2020 
10.2Form of Securities Purchase Agreement, dated February 19, 2021, by and among the Company and the Purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on From 8-K filed with the SEC on February 22, 2021)
   
31.1* Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer
   
31.2* Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial Officer
   
32.1* Section 1350 Certification of Principal Executive Officer
   
32.2* Section 1350 Certification of Principal Financial Officer
   
101* Interactive Data Files of Financial Statements and Notes
   
101.INS* Instant Document
   
101.SCH* XBRL Taxonomy Schema Document
   
101.CAL* XBRL Taxonomy Calculation Linkbase Document
   
101.DEF* XBRL Taxonomy Definition Linkbase Document
   
101.LAB* XBRL Taxonomy Label Linkbase Document
   
101.PRE* XBRL Taxonomy Presentation Linkbase Document

 

*Filed herewith

 

†Management contract or compensatory plan or arrangement


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: May 1, 20203, 2021Akoustis Technologies, Inc.
   
 By:/s/ Kenneth E. Boller
  Kenneth E. Boller
  Interim Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

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By:/s/ Kenneth E. Boller

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