Akoustis
Technologies, Inc.
Condensed
Consolidated Statements of Cash Flows
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,643,198
|
)
|
|
$
|
(2,072,945
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
233,310
|
|
|
|
12,885
|
|
Amortization of intangibles
|
|
|
3,915
|
|
|
|
1,350
|
|
Share-based compensation
|
|
|
597,880
|
|
|
|
704,220
|
|
Change in fair value of derivative liabilities
|
|
|
—
|
|
|
|
157,216
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(304,620
|
)
|
|
|
—
|
|
Inventory
|
|
|
109,194
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
(39,915
|
)
|
|
|
(38,881
|
)
|
Other current assets
|
|
|
(7,511
|
)
|
|
|
—
|
|
Other assets
|
|
|
(170,289
|
)
|
|
|
(120,000
|
)
|
Accounts payable and accrued expenses
|
|
|
2,522,208
|
|
|
|
289,036
|
|
Deferred revenue
|
|
|
22,136
|
|
|
|
—
|
|
Net Cash Used In Operating Activities
|
|
|
(1,676,890
|
)
|
|
|
(1,067,119
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash paid for machinery and equipment
|
|
|
(2,548,632
|
)
|
|
|
(20,293
|
)
|
Cash paid for intangibles
|
|
|
(11,627
|
)
|
|
|
(13,724
|
)
|
Net Cash Used In Investing Activities
|
|
|
(2,560,259
|
)
|
|
|
(34,017
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants
|
|
|
47,665
|
|
|
|
—
|
|
Net Cash Provided By Financing Activities
|
|
|
47,665
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash
|
|
|
(4,189,484
|
)
|
|
|
(1,101,136
|
)
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Period
|
|
|
9,631,520
|
|
|
|
4,155,444
|
|
|
|
|
|
|
|
|
|
|
Cash - End of Period
|
|
$
|
5,442,036
|
|
|
$
|
3,054,308
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash Paid During the Period for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation payable
|
|
$
|
60,885
|
|
|
$
|
74,457
|
|
See
accompanying notes to the condensed consolidated financial statements
AKOUSTIS
TECHNOLOGIES, INC.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited
)
September
30, 2017
Note
1. Organization
Akoustis
Technologies, Inc. (formerly known as Danlax, Corp.) (“the Company”) was incorporated under the laws of the State
of Nevada, U.S. on April 10, 2013. Effective December 15, 2016, the Company changed its state of incorporation from the State
of Nevada to the State of Delaware. Through its subsidiaries, Akoustis, Inc. and Akoustis Manufacturing New York, Inc. (each a
Delaware corporation), the Company, headquartered in Huntersville, North Carolina, is focused on developing, designing and manufacturing
innovative radio frequency filter products for the mobile wireless device industry. The mission of the Company is to commercialize
and manufacture its patented BulkONE® acoustic wave technology to address the critical frequency-selectivity requirements
in today’s mobile smartphones - improving the efficiency and signal quality of mobile wireless devices and enabling the
Internet of Things.
On
March 10, 2017, the Company announced that its common stock was approved for listing on the NASDAQ Capital Market, effective March
13, 2017, under the symbol AKTS.
Acquisition
of Assets
On
June 26, 2017, pursuant to a Definitive Asset Purchase Agreement and Definitive Real Property Purchase Agreement (collectively,
the “Agreements”) with The Research Foundation for the State University of New York (“RF-SUNY”) and Fuller
Road Management Corporation (“FRMC”), an affiliate of RF-SUNY, respectively, the Company completed the acquisition
of certain specified assets, including STC-MEMS, a semiconductor wafer-manufacturing operation and microelectromechanical systems
(“MEMS”) business with associated wafer-manufacturing tools, as well as the real estate and improvements associated
with the facility located in Canandaigua, New York, which is used in the operation of STC-MEMS (the assets and real estate and
improvements referred to together herein as the “STC-MEMS Business”), which was created in 2010 by RF-SUNY as an economic
development project. The purpose of the initiative was to explore different technology opportunities with the goal of being a
vertically integrated provider of foundry services that would offer its customers the capacity, infrastructure and operational
capabilities of semiconductor and advanced manufacturing for aerospace, biomedical, communications, defense, and energy markets.
Post-acquisition date, the Company also agreed to assume substantially all the on-going obligations of the STC-MEMS Business
incurred in the ordinary course of business including with respect to the 29 employees employed by RF-SUNY.
The
Company acquired the STC-MEMS Business through its wholly-owned subsidiary, Akoustis Manufacturing New York, Inc., (“Akoustis
NY”), a Delaware corporation.
See
Note 4 for a detailed description of the transaction.
Note
2. Going Concern and Management Plans
The accompanying condensed consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. As of September 30, 2017, the Company had working capital of $2.2 million and an accumulated
deficit of $21.2 million. Since inception, the Company has recorded approximately $892,000 and $318,000 of revenue from contract
research and government grants and engineering review services, respectively. As of November 13, 2017, the Company had cash and
cash equivalents of $4.7 million which the Company believes is sufficient to fund its current operations through December 2017.
As a result, the Company will need to obtain additional capital to fund operations past that date. The Company is actively managing
and controlling the Company’s cash outflows to mitigate these risks; these matters raise substantial doubt about the Company’s
ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating
to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company had $4.7 million of cash and cash equivalents on hand as of
November 13, 2017 to fund its business.
There is no assurance that the Company’s projections and estimates are accurate. The Company’s
primary sources of funds for operations since inception have been private placements of equity securities, note financings and
grants. The Company needs to obtain additional capital to accomplish its business plan objectives and will continue its efforts
to secure additional funds. However, the amount of funds raised, if any, may not be sufficient to enable the Company to attain
profitable operations. To the extent that the Company is unsuccessful in obtaining additional financing, the Company may need to
curtail or cease its operations and implement a plan to extend payables or reduce overhead until sufficient additional capital
is raised to support further operations. There can be no assurance that such a plan will be successful.
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”).
The accompanying unaudited condensed consolidated financial statements are presented in conformity with U.S.
GAAP and pursuant to the rules and regulations of the SEC for interim financial information and the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all
adjustments (consisting of normal accruals) considered for a fair presentation have been included. The Company has evaluated subsequent
events through the issuance of this Form 10-Q. Operating results for the quarter ended September 30, 2017 are not necessarily indicative
of the results that may be expected for the year ending June 30, 2018 or any future interim period. The accompanying unaudited
condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial
statements and notes thereto included in the Company’s Form 10-K filed with the SEC on September 20, 2017 (the “2017
Annual Report”).
Principles
of Consolidation
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries,
Akoustis, Inc. and Akoustis Manufacturing New York, Inc. All significant intercompany accounts and transactions have been eliminated
in consolidation.
Revised Prior Period Amounts
The Company identified and recorded an out-of-period
adjustment related to stock based compensation that should have been recorded in the year ended June 30, 2017. The adjustment
was reflected as a $725,000 increase in additional paid in capital and corresponding increase in accumulated deficit. Tabular summaries
of the revisions are presented below:
|
|
Consolidated Balance Sheet
June 30, 2017
|
|
|
|
Previously Reported
|
|
|
Revisions
|
|
|
Revised Reported
|
|
Additional paid in capital
|
|
$
|
30,774,885
|
|
|
$
|
725,004
|
|
|
$
|
31,499,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(15,783,053
|
)
|
|
|
(725,004
|
)
|
|
|
(16,508,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
Year ended June 30, 2017
|
|
|
|
Previously Reported
|
|
|
Revisions
|
|
|
Revised Reported
|
|
Net loss
|
|
$
|
(9,108,240
|
)
|
|
$
|
(725,004
|
)
|
|
$
|
(9,833,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per ordinary share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.54
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.58
|
)
|
The Company analyzed the revisions under SEC staff
guidance (Staff Accounting Bulletin 108) and determined that the revisions are immaterial on a quantitative and qualitative basis
and that it is probable that the judgment of a reasonable person relying upon the financial statements would not have been changed
or influenced by the inclusion or correction of the items in the year ended June 30, 2017. Therefore, amendment of the previously
filed annual report on Form 10-K is not considered necessary. However, if the adjustments to correct the errors were recorded
in the first quarter of 2018, the Company believes the impact would have been significant to the first quarter and would impact
comparisons to prior periods. The Company has also revised in this current Form 10-Q filing the previously reported annual consolidated
balance sheet as of June 30, 2017 on Form 10-K for these amounts. The Company will revise comparative prior period amounts prospectively.
Significant
Accounting Policies and Estimates
The
Company’s significant accounting policies are disclosed in Note 3-Summary of Significant Accounting Policies in the 2017
Annual Report. Since the date of the 2017 Annual Report, there have been no material changes to the Company’s significant
accounting policies. The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated
financial statements and the accompanying notes thereto. These estimates and assumptions include valuing equity securities and
derivative financial instruments issued in financing transactions, deferred taxes and related valuation allowances, contingent
real estate liability and the fair values of long lived assets. Actual results could differ from the estimates.
Accounts Receivable
Trade accounts receivable are stated net of allowances for doubtful
accounts. Management estimates the allowance for doubtful accounts based on review and analysis of specific customer balances that
may not be collectible, customer payment history and any other customer-specific information that may impact ability to collect
the receivable. Accounts are considered for write-off when they become past due and when it is determined that the probability
of collection is remote. There was no allowance for doubtful accounts at September 30, 2017.
Loss
Per Share
Basic
net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number
of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number
of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when
losses are reported, which is the case for the three months ended September 30, 2017 and 2016 presented in these condensed consolidated
financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their
inclusion would be anti-dilutive.
The
Company had the following common stock equivalents at September 30, 2017 and 2016:
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
Options
|
|
|
675,000
|
|
|
|
160,000
|
|
Warrants
|
|
|
602,632
|
|
|
|
471,697
|
|
Totals
|
|
|
1,277,632
|
|
|
|
631,697
|
|
Shares
Outstanding
Shares
outstanding include shares of restricted stock with respect to which restrictions have not lapsed. Restricted stock included in
reportable shares outstanding was 1,566,078 shares and 1,834,055 shares as of September 30, 2017 and 2016, respectively. Shares
of restricted stock are included in the calculation of weighted average shares outstanding.
Reclassification
Certain
prior period amounts have been reclassified to conform to current period presentation. The reclassifications did not have an impact
on net loss as previously reported
.
Recently
Issued Accounting Pronouncements
In
September 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-13,
Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842).
The
new standard, among other things, provides additional implementation guidance with respect to Accounting Standards Codification
(ASC) Topic 606 and ASC Topic 842. ASU 2017-03 is effective for annual and interim fiscal reporting periods beginning after December
15, 2017. The Company is currently evaluating the impact of the new standard, but does not expect it to have a material impact
on its implementation strategies or its consolidated financial statements upon adoption.
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material
effect on the accompanying condensed consolidated financial statements.
Note
4. Acquisition of the STC-MEMS Business
On March 23, 2017, the Company entered into the Agreements with RF-SUNY, a New York State education
corporation, on behalf of The State University of New York Polytechnic Institute, and FRMC, an affiliate of RF-SUNY to acquire
the STC- MEMS Business. The acquisition will allow the Company to internalize manufacturing, increase capacity and control its
wafer supply chain for single crystal bulk acoustic wave (“BAW”) radio frequency (“RF”) filters. Akoustis
will utilize the NY facility to consolidate all aspects of wafer manufacturing for its high-band RF filters.
The STC-MEM’s Business was created in 2010 by RF-SUNY to form a vertically integrated “one-stop-shop”
in smart system and smart-device innovation and manufacturing. The facility was designed to provide its customers the capacity,
infrastructure and operational capabilities in all areas of semiconductor and advanced manufacturing, while covering a diverse
number of markets including aerospace, biomedical, communications, defense, and energy. Located in Canandaigua, New York,
just outside of Rochester, the STC-MEMS facility includes certified cleanroom manufacturing, advanced test and metrology, as well
as a MEMS and optoelectronic packaging facility.
The
Company acquired the STC-MEMS Business through Akoustis NY. Post-acquisition date, the Company also agreed to assume substantially
all the on-going obligations of the STC-MEMS Business incurred in the ordinary course of business, including with respect to the
29 employees employed by RF-SUNY. The acquisition closed on June 26, 2017.
The
purchase price paid for the transaction was an aggregate of approximately $4.58 million consisting of (i) $2.75 million in cash
consideration, (ii) $96,000 in inventory, and (iii) a contingent real estate liability of approximately $1.73 million.
The
following presents the unaudited pro-forma combined results of operations of the Company with the STC-MEMS Business as if the
entities were combined on July 1, 2016.
|
|
For the Three Months Ended September 30,
|
|
|
|
2016
|
|
Revenues, net
|
|
$
|
470,812
|
|
Net loss allocable to common shareholders
|
|
$
|
(3,174,868
|
)
|
Net loss per share
|
|
$
|
(0.20
|
)
|
Weighted average number of shares outstanding
|
|
|
15,701,709
|
|
The
unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations
are not intended to present actual results that would have been attained had the acquisitions been completed as of July 1, 2016
or to project potential operating results as of any future date or for any future periods.
The
Company consolidated STC-MEMS as of the closing date of the agreement, and the results of operations of the Company include that
of Akoustis NY. The Company recognized revenues attributable to Akoustis NY of $298,000 and recognized net losses of $1.8 million
during the period July 1, 2017 through September 30, 2017, driven by wages and fringe benefits of $1.0 million and facilities
expense of $715,000.
Note
5. Property and equipment
Property
and equipment consisted of the following:
|
|
Estimated
Useful Life
|
|
September 30,
2017
|
|
|
June 30,
2017
|
|
Land
|
|
n/a
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
Research and development equipment
|
|
3 - 10 years
|
|
|
4,374,409
|
|
|
|
1,851,427
|
|
Computer equipment
|
|
5 years
|
|
|
21,933
|
|
|
|
16,783
|
|
Furniture and fixtures
|
|
5 - 10 years
|
|
|
3,725
|
|
|
|
3,725
|
|
STC-MEMS equipment
|
|
3 - 5 years
|
|
|
2,124,650
|
|
|
|
2,124,650
|
|
Building
|
|
11 years
|
|
|
3,020,500
|
|
|
|
3,000,000
|
|
Leasehold improvements
|
|
*
|
|
|
3,240
|
|
|
|
3,240
|
|
|
|
|
|
|
10,548,457
|
|
|
|
7,999,825
|
|
Less: Accumulated depreciation
|
|
|
|
|
(379,321
|
)
|
|
|
(146,011
|
)
|
Total
|
|
|
|
$
|
10,169,136
|
|
|
$
|
7,853,814
|
|
(*)
Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.
The
Company recorded depreciation expense of $233,310 and $12,885 for the three months ended September 30, 2017 and 2016, respectively.
As
of September 30, 2017, research and development fixed assets totaling $3,585,478 were not placed in service and therefore not
depreciated during the period.
Note
6. Intangible assets
The
Company’s intangible assets consisted of the following:
|
|
Estimated
useful life
|
|
September 30, 2017
|
|
|
June 30, 2017
|
|
Patents
|
|
15 years
|
|
$
|
146,918
|
|
|
$
|
135,291
|
|
Customer relationships
|
|
14 years
|
|
|
81,773
|
|
|
|
81,773
|
|
Less: Accumulated amortization
|
|
|
|
|
(16,012
|
)
|
|
|
(12,097
|
)
|
Subtotal
|
|
|
|
|
212,679
|
|
|
|
204,967
|
|
Trademarks
|
|
|
|
|
1,560
|
|
|
|
1,560
|
|
Intangible assets, net
|
|
|
|
$
|
214,239
|
|
|
$
|
206,527
|
|
The
Company recorded amortization expense of $3,915 and $1,350 for the three months ended September 30, 2017 and 2016, respectively.
The
following table outlines estimated future annual amortization expense for the next five years and thereafter:
September 30,
|
|
|
|
2018
|
|
$
|
15,586
|
|
2019
|
|
|
15,586
|
|
2020
|
|
|
15,586
|
|
2021
|
|
|
15,586
|
|
2022
|
|
|
15,586
|
|
Thereafter
|
|
|
134,749
|
|
|
|
$
|
212,679
|
|
Note
7. Accounts payable and accrued expenses
Accounts
payable and accrued expenses consisted of the following at September 30, 2017 and June 30, 2017:
|
|
September 30, 2017
|
|
|
June 30, 2017
|
|
Accounts payable
|
|
$
|
1,612,826
|
|
|
$
|
494,515
|
|
Accrued salaries and benefits
|
|
|
272,560
|
|
|
|
274,050
|
|
Accrued bonuses
|
|
|
119,962
|
|
|
|
—
|
|
Accrued stock-based compensation
|
|
|
342,997
|
|
|
|
399,157
|
|
Accrued capital expenditures
|
|
|
813,678
|
|
|
|
—
|
|
Other accrued expenses
|
|
|
640,393
|
|
|
|
168,646
|
|
Totals
|
|
$
|
3,802,416
|
|
|
$
|
1,336,368
|
|
Note
8. Derivative Liabilities
Upon
closing of the private placements on May 22, 2015 and June 9, 2015, the Company issued 298,551 and 26,099 warrants, respectively,
to purchase the same number of shares of common stock with an exercise price of $1.50 and a five-year term to the placement agent.
Upon closing of a private placement in April 2016, the Company issued 153,713 warrants to purchase the same number of shares of
common stock with an exercise price of $1.60 and a five-year term to the placement agent. The Company identified certain put features
embedded in the warrants that potentially could result in a net cash settlement, requiring the Company to classify the warrants
as a derivative liability.
During
the year ended June 30, 2017, the Company amended the warrant agreements to eliminate the derivative feature. Upon execution of
the revised agreements, a total of 471,697 warrants with a fair value of $2,200,219 were reclassified from liability to equity.
As
of September 30, 2017 and June 30, 2017, the derivative liabilities related to these warrants was $0.
During
the three months ended September 30, 2017 and 2016, the Company marked the derivative feature of the warrants to fair value and
recorded a loss of $0 and $157,216, respectively, relating to the change in fair value.
Note
9. Concentrations
For
the three months ended September 30, 2017, no vendors represented greater than 10% of the Company’s purchases. For the three
months ended September 30, 2016, two vendors represented 28% and 14% of the Company’s purchases.
Note
10. Stockholders’ Equity
Stock
incentive plans
On
September 27, 2017, the Company granted 515,000 options to employees and directors. The fair values of the Company’s options
were estimated at the dates of grant using a Black-Scholes option pricing model with the following weighted average assumptions:
Expected term (years)
|
|
|
6.25
|
|
Risk-free interest rate
|
|
|
1.72
|
%
|
Volatility
|
|
|
88
|
%
|
Dividend yield
|
|
|
0
|
%
|
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 was estimated using the historical volatilities of the Company’s
common stock traded on the NASDAQ exchange.
Dividend
yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring
dividends in the near future.
The
following is a summary of the option activity:
|
|
|
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding - June 30, 2017
|
|
|
|
160,000
|
|
|
$
|
1.50
|
|
Exercisable - June 30, 2017
|
|
|
|
80,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
|
515,000
|
|
|
|
7.12
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited/Cancelled
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding - September 30, 2017
|
|
|
|
675,000
|
|
|
$
|
5.79
|
|
Exercisable - September 30, 2017
|
|
|
|
80,000
|
|
|
$
|
1.50
|
|
As of September 30, 2017, the total intrinsic value of options outstanding and exercisable was $803,200 and
$401,600, respectively. As of September 30, 2017, the Company has approximately $2.6 million in unrecognized stock-based compensation
expense attributable to the outstanding options, which will be amortized over a period of 3.43 years.
For
the three months ended September 30, 2017 and 2016, the Company recorded $18,663 and $7,040, respectively, in stock-based compensation
related to stock options, which is reflected in the condensed consolidated statements of operations.
Issuance
of restricted shares - employees and consultants
Restricted
stock awards are considered outstanding at the time of execution by the Company and the recipient of a restricted stock agreement,
as the stock award holders are entitled to dividend and voting rights. As of September 30, 2017, the number of shares granted
for which the restrictions have not lapsed was 1,271,378 shares.
The Company recognizes the compensation expense for all share-based compensation granted based on the
grant date fair value for directors and employees and the reporting period remeasured fair value for consultants. The fair value
of the award is recorded as share-based compensation expense over the respective restriction period. Any portion of the grant awarded
to consultants, directors, employees, and other service providers as to which the repurchase option has not lapsed is accrued on
the Balance Sheet as a component of accounts payable and accrued expenses. As of September 30, 2017 and June 30, 2017, the accrued
stock-based compensation was $342,997 and $399,157, respectively. The Company has the right to repurchase some or all of such shares
in certain circumstances upon termination of the recipient’s service with the Company, for up to 60 months from the date
of termination (“repurchase option”). The shares as to which the repurchase option has not lapsed are subject to forfeiture
upon certain terminations of consulting and employment relationships.
In
September 2015, the Company amended the original restricted stock agreement for certain award recipients. Pursuant to the amendment,
75% of the shares as to which the repurchase option had not lapsed as of September 30, 2015 will be released from the repurchase
option on the third anniversary of the original effective date of the agreement. The remaining 25% of the shares will be released
from the repurchase option on the fourth anniversary of the original effective date.
The
following is a summary of restricted shares:
Grant Date
|
|
Shares
Issued
|
|
|
Fair
Value (1)
|
|
|
Shares
Vested
|
|
June 2014
|
|
|
307,876
|
|
|
$
|
389,568
|
|
|
|
121,530
|
|
July 2014
|
|
|
32,408
|
|
|
|
48,612
|
|
|
|
36,956
|
|
August 2014
|
|
|
81,020
|
|
|
|
153,348
|
|
|
|
24,306
|
|
September 2014
|
|
|
129,633
|
|
|
|
180,874
|
|
|
|
15,185
|
|
March 2015
|
|
|
72,918
|
|
|
|
243,713
|
|
|
|
—
|
|
October 2015
|
|
|
293,000
|
|
|
|
411,000
|
|
|
|
—
|
|
November 2015
|
|
|
36,200
|
|
|
|
42,150
|
|
|
|
—
|
|
December 2015
|
|
|
300,000
|
|
|
|
105,000
|
|
|
|
230,000
|
|
January 2016
|
|
|
40,000
|
|
|
|
68,000
|
|
|
|
—
|
|
March 2016
|
|
|
60,000
|
|
|
|
—
|
|
|
|
60,000
|
|
June 2016
|
|
|
118,000
|
|
|
|
512,990
|
|
|
|
—
|
|
August 2016
|
|
|
351,000
|
|
|
|
1,179,274
|
|
|
|
40,000
|
|
January 2017
|
|
|
192,000
|
|
|
|
973,675
|
|
|
|
50,000
|
|
February 2017
|
|
|
110,000
|
|
|
|
697,500
|
|
|
|
—
|
|
March 2017
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
July 2017
|
|
|
100,000
|
|
|
|
745,000
|
|
|
|
—
|
|
|
|
|
2,244,055
|
|
|
$
|
5,750,704
|
|
|
|
577,977
|
|
(1)
|
The fair value of the restricted stock awards as shown above is based on either the balance sheet date for consultants or
grant date for employees.
|
In
relation to the above restricted stock agreements for the three months ended September 30, 2017 and 2016, the Company recorded
stock-based compensation expense for the shares that have vested of $518,332 and $697,180, respectively.
As of September 30, 2017, the Company had approximately $3.3 million in unrecognized stock-based compensation
expense related to the unvested shares.
Note
11. Commitments
Operating
leases
The
Company leases office space in Huntersville, NC pursuant to a three-year lease agreement. The operating lease provides for annual
real estate tax and cost of living increases and contains predetermined increases in the rentals payable during the term of the
lease. The aggregate rent expense is recognized on a straight-line basis over the lease term. The total lease rental expense was
$17,107 and $14,202 for the three months ended September 30, 2017 and 2016, respectively.
The Company leases equipment for its Canandaigua, NY facility pursuant to a three-month lease agreement
beginning on June 16, 2017. The aggregate rent expense is recognized on a straight-line basis over the lease term. The total lease
rental expense was $35,000 and $0 for the three months ended September 30, 2017 and 2016, respectively. The Company is currently
leasing the equipment on a month to month basis and is in process of negotiating terms and conditions to renew the lease.
Real
Estate Contingent Liability
In
connection with the acquisition of the STC-MEMS Business, the Company agreed to pay to Fuller Road Management Corporation a penalty,
as set forth below, if the Company sells the property subject to the related Definitive Real Property Purchase Agreement within
three (3) years after the date of such agreement for an amount in excess of $1,750,000, subject to certain enumerated exceptions.
The penalty imposed shall be equivalent to the amount that the sales price of the property exceeds $1,750,000 up to the maximum
penalty (“Maximum Penalty”) defined below:
|
|
|
Maximum Penalty
|
|
Year 1
|
|
|
$
|
5,960,000
|
|
Year 2
|
|
|
$
|
3,973,333
|
|
Year 3
|
|
|
$
|
1,986,667
|
|
The fair value of the contingent liability was calculated by an independent third-party appraisal firm, utilizing
a present value calculation based on the probability the Company sells the property triggering the contingent penalty and a discount
rate of 14.1%. The 14.1% discount rate was derived from a weighted average cost of capital, modified to include the effects of
the bargain purchase price. As of September 30, 2017 and June 30, 2017, the fair value of the contingent liability was $1,730,542.
Note
12. Related Party Transactions
Consulting
Services
AEG Consulting, a firm owned by one of
the Company’s Co-Chairmen of the Company’s Board of Directors received $5,475 and $4,050 for consulting fees for
the three months ended September 30, 2017 and 2016, respectively. On September 27, 2017 the Company granted a Co-Chairman
restricted stock units for 5,000 shares and stock options to purchase 10,000 shares of the Company’s common stock for
consulting services provided by AEG Consulting. Both awards vest 25% on each of the first four anniversaries of the grant
date. The options carry an exercise price of $7.12 and have an expiration period of 7 years.
On September 27, 2017 the Company granted a restricted stock award of 11,000 shares of the Company’s
common stock to a certain director for board advisory services provided from January 2017 to June 2017, prior to the director’s
appointment to the Board of Directors on July 14, 2017. The award vests 25% on each of the first four anniversaries of the grant
date.
Note
13. Segment Information
Operating segments are defined as components of an enterprise about which separate financial information
is available and that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding
how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive
Officer. The Company operates in two segments, Foundry Fabrication Services and RF Filters.
The
Company evaluates performance of its operating segments based on revenue and operating profit (loss). Segment information for
the three months ended September 30, 2017 and 2016 are as follows:
|
|
Foundry Fabrication Services
|
|
|
RF Filters
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
297,900
|
|
|
$
|
3,040
|
|
|
$
|
300,940
|
|
Cost of revenue
|
|
|
193,029
|
|
|
|
200
|
|
|
|
193,229
|
|
Gross margin
|
|
|
104,871
|
|
|
|
2,840
|
|
|
|
107,711
|
|
Research and development
|
|
|
—
|
|
|
|
3,004,365
|
|
|
|
3,004,365
|
|
General and administrative
|
|
|
—
|
|
|
|
1,832,622
|
|
|
|
1,832,622
|
|
Loss from Operations
|
|
$
|
104,871
|
|
|
$
|
(4,834,147
|
)
|
|
$
|
(4,729,276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of revenue
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gross margin
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Research and development
|
|
|
—
|
|
|
|
652,576
|
|
|
|
652,576
|
|
General and administrative
|
|
|
—
|
|
|
|
1,263,243
|
|
|
|
1,263,243
|
|
Loss from Operations
|
|
$
|
—
|
|
|
$
|
(1,915,819
|
)
|
|
$
|
(1,915,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
301,580
|
|
|
$
|
3,040
|
|
|
$
|
304,620
|
|
As of June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Note 14. Subsequent Events
In October 2017, the Company granted restricted stock units totaling
301,000 shares of the Company’s common stock to employees at its New York Fabrication facility. The awards vest 50% on the
second anniversary of the grant date and 25% on the each of the third and fourth anniversaries.
The Company received subscription agreements for a private placement offering for the sale of shares
of its common stock for a per share price of $5.50 per share. As of November 14, 2017, the Company has closed on the sale of
shares for total proceeds of approximately $950,000 of the total $1.0 million. There were no fees or warrants associated with this
closing. The proceeds of the offering will be used to fund development and commercialization of the Company’s technology,
capital expenditures and general corporate expenditures.
|
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|
References
in this report to “Akoustis,” the “Company,” “we,” “us,” and “our”
refer to Akoustis Technologies, Inc. and its consolidated subsidiaries, Akoustis, Inc. and Akoustis Manufacturing New York, Inc.,
each of which are Delaware corporations.