10-Q 1 f10q0322_akoustis.htm

 

 

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, 2022

 

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: 1-704-997-5735

 

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 26, 2022, there were 55,962,798 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 MARCH 31, 2022

 

TABLE OF CONTENTS

 

    Page No.
PART I — FINANCIAL INFORMATION
     
ITEM 1. FINANCIAL STATEMENTS   1
     
Condensed Consolidated Balance Sheets as of March 31, 2022 and June 30, 2021 (unaudited)   1
     
Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2022 and 2021 (unaudited)   2
     
Condensed Consolidated Statements of Changes in Equity for the three and nine months ended March 31, 2022 and 2021 (unaudited)   3
     
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021 (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   18
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   24
     
ITEM 4. CONTROLS AND PROCEDURES   24
     
PART II — OTHER INFORMATION
     
ITEM 1. LEGAL PROCEEDINGS   25
     
ITEM 1A. RISK FACTORS   25
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   27
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES   27
     
ITEM 4. MINE SAFETY DISCLOSURES   27
     
ITEM 5. OTHER INFORMATION   27
     
ITEM 6. EXHIBITS   28
     
EXHIBIT INDEX   28
     
SIGNATURES   29

 

i

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

Akoustis Technologies, Inc.

Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)

 

   March 31,   June 30, 
   2022   2021 
Assets        
Assets:        
Cash and cash equivalents  $55,871   $88,322 
Accounts receivable   3,089    1,170 
Inventory   3,429    1,390 
Other current assets   3,884    2,314 
Total current assets   66,273    93,196 
           
Property and equipment, net   48,042    30,730 
Goodwill   8,051    
 
Intangibles, net   9,349    572 
Operating lease right-of-use asset, net   317    471 
Other assets   60    25 
Total Assets  $132,092   $124,994 
           
Liabilities and Equity          
Current Liabilities:          
Accounts payable and accrued expenses  $10,025   $6,954 
Contingent consideration   744     
Deferred revenue   115    41 
Operating lease liability   292    270 
Total current liabilities   11,176    7,265 
           
Long-term Liabilities:          
Contingent consideration   535    
 
Operating lease liability   18    202 
Deferred tax liability   1,804    
 
Other long-term liabilities   117    117 
Total long-term liabilities   2,474    319 
           
Total Liabilities   13,650    7,584 
           
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; 55,951,298 and 51,235,764 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively   56    51 
Additional paid in capital   301,554    265,130 
Accumulated deficit   (190,570)   (147,771)
Total Akoustis Technologies, Inc. Equity  $111,040   $117,410 
Noncontrolling interest   7,402    
 
Total Equity   118,442    117,410 
Total Liabilities and Equity  $132,092   $124,994 

 

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,
2022
   For the
Three Months
Ended
March 31,
2021
   For the
Nine Months
Ended
March 31,
2022
   For the
Nine Months
Ended
March 31,
2021
 
Revenue                
Revenue with customers  $4,607   $2,517   $10,146   $4,461 
                     
Cost of revenue   5,370    2,973    12,821    7,224 
                     
Gross profit (loss)   (763)   (456)   (2,675)   (2,763)
                     
Operating expenses                    
Research and development   8,314    5,225    25,481    17,171 
General and administrative expenses   5,721    3,395    14,742    9,683 
Total operating expenses   14,035    8,620    40,223    26,854 
                     
Loss from operations   (14,798)   (9,076)   (42,898)   (29,617)
                     
Other (expense) income                    
Interest (expense) income   25    (2,027)   88    (5,162)
Change in fair value of contingent consideration   (180)   
    (180)   
 
Change in fair value of derivative liabilities   
    928    
    744 
Total other (expense) income   (155)   (1,099)   (92)   (4,418)
Net loss before income taxes  $(14,953)  $(10,175)  $(42,990)  $(34,035)
                     
Income Taxes   (128)   
    (70)   
 
                     
Net Loss  $(14,825)  $(10,175)  $(42,920)  $(34,035)
                     
Net loss (income) attributable to noncontrolling interest   139    
    121    
 
Net loss attributable to common stockholders  $(14,686)  $(10,175)  $(42,799)  $(34,035)
                     
Net loss per common share - basic and diluted  $(0.27)  $(0.22)  $(0.80)  $(0.83)
                     
Weighted average common shares outstanding - basic and diluted   55,217,220    45,620,610    53,177,679    41,047,723 

 

See accompanying notes to the condensed consolidated financial statements.

 

2

 

 

Akoustis Technologies, Inc.

Condensed Consolidated Statements of Changes in Equity

(In thousands)

(Unaudited)

 

   For the Three Months Ended March 31, 2022 
           Additional       Total
Akoustis
         
   Common Stock   Paid In   Accumulated   Technologies, Inc.   Noncontrolling   Total 
   Shares   Par Value   Capital   Deficit   Equity   Interest   Equity 
                             
Balance, December 31, 2021   54,660   $55   $291,969   $(175,884)  $116,140   $7,528   $123,668 
                                    
Common stock issued for cash, net of issuance costs   1,158    1    6,840    
    6,841    
    6,841 
                                    
Stock-based compensation   69    
    2,506    
    2,506    
    2,506 
                                    
Common stock issued for exercise of warrants   12    
    10    
    10    
    10 
                                    
Common stock issued for exercise of options   52    
    229    
    229    
    229 
                                    
Noncontrolling interest acquired       
    
    
    
    13    13 
                                    
Net loss       
    
    (14,686)   (14,686)   (139)   (14,825)
                                    
Balance, March 31, 2022   55,951   $56   $301,554   $(190,570)  $111,040   $7,402   $118,442 

 

   For the Three Months Ended March 31, 2021 
           Additional       Total
Akoustis
         
   Common Stock   Paid In   Accumulated   Technologies, Inc.   Noncontrolling   Total 
   Shares   Par Value   Capital   Deficit   Equity   Interest   Equity 
                             
Balance, December 31, 2020   41,399   $41   $173,918   $(127,475)  $46,484   $
   $46,484 
                                    
Common stock issued for cash, net of issuance costs   3,582    4    52,198    
    52,202    
    52,202 
                                    
Common stock issued in note conversion   4,984    5    25,265    
    25,270    
    25,270 
                                    
Stock-based compensation   96    
    1,991    
    1,991    
    1,991 
                                    
Common stock issued for exercise of warrants   187    
    991    
    991    
    991 
                                    
Common stock issued for exercise of options   118    
    746    
    746    
    746 
                                    
Common stock issued in payment of note interest   8    
    121    
    121    
    121 
                                    
Net loss       
    
    (10,175)   (10,175)   
    (10,175)
                                    
Balance, March 31, 2021   50,374   $50   $255,230   $(137,650)  $117,630   $
   $117,630 

 

See accompanying notes to the condensed consolidated financial statements.

 

3

 

 

Akoustis Technologies, Inc.

Condensed Consolidated Statements of Changes in Equity

(In thousands)

(Unaudited)

 

   For the Nine Months Ended March 31, 2022 
           Additional       Total
Akoustis
         
   Common Stock   Paid In   Accumulated   Technologies, Inc.   Noncontrolling   Total 
   Shares   Par Value   Capital   Deficit   Equity   Interest   Equity 
                             
Balance, June 30, 2021   51,236   $51   $265,130   $(147,771)  $117,410   $
   $117,410 
                                    
Common stock issued for cash, net of issuance costs   3,644    3    25,627    
    25,630    
    25,630 
                                    
Stock-based compensation   662    1    7,753    
    7,754    
    7,754 
                                    
Common stock issued for exercise of warrants   21    
    67    
    67    
    67 
                                    
Common stock issued for exercise of options   72    
    369    
    369    
    369 
                                    
ESPP purchase   53    1    311    
    312    
    312 
                                    
Common stock issued in acquisition   263    
    2,297    
    2,297    
    2,297 
                                    
Noncontrolling interest acquired       
    
    
    
    7,523    7,523 
                                    
Net loss       
    
    (42,799)   (42,799)   (121)   (42,920)
                                    
Balance, March 31, 2022   55,951   $56   $301,554   $(190,570)  $111,040   $7,402   $118,442 

 

   For the Nine Months Ended March 31, 2021 
           Additional       Total
Akoustis
         
   Common Stock   Paid In   Accumulated   Technologies, Inc.   Noncontrolling   Total 
   Shares   Par Value   Capital   Deficit   Equity   Interest   Equity 
                             
Balance, June 30, 2020   37,990   $38   $145,072   $(103,615)  $41,495   $
   $41,495 
                                    
Common stock issued for cash, net of issuance costs   6,294    6    75,618    
    75,624    
    75,624 
                                    
Common stock issued in note conversion   4,984    5    25,265    
    25,270    
    25,270 
                                    
Stock-based compensation   574    1    6,083    
    6,084    
    6,084 
                                    
Common stock issued for exercise of warrants   219    
    1,109    
    1,109    
    1,109 
                                    
Common stock issued for exercise of options   209    
    1,270    
    1,270    
    1,270 
                                    
ESPP purchase   32    
    204    
    204    
    204 
                                    
Common stock issued in payment of note interest   72    
    609    
    609    
    609 
                                    
Net loss       
    
    (34,035)   (34,035)   
    (34,035)
                                    
Balance, March 31, 2021   50,374   $50   $255,230   $(137,650)  $117,630   $
   $117,630 

 

See accompanying notes to the condensed consolidated financial statements.

 

4

 

Akoustis Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, except per share data)

(Unaudited)

 

   Nine Months
Ended
March 31,
2022
   Nine Months
Ended
March 31,
2021
 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(42,920)  $(34,035)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   5,492    3,284 
Stock-based compensation   7,754    6,084 
Amortization of debt discount   
    4,405 
Amortization of operating lease right of use asset   202    168 
Non cash interest payments   
    609 
Change in fair value of derivative liabilities   
    (744)
Change in fair value of contingent consideration   180    
 
Gain on disposal of fixed assets   (204)   
 
           
Changes in operating assets and liabilities:          
Accounts receivable   (936)   (1,270)
Inventory   (1,841)   (1,310)
Other current assets   (1,558)   (164)
Accounts payable and accrued expenses   1,024    961 
Lease liabilities   (210)   (170)
Other long term liabilities   (176)   
 
Deferred revenue   (80)   123 
Net Cash Used in Operating Activities   (33,273)   (22,059)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Cash paid for machinery and equipment   (21,794)   (9,884)
Acquisition of business, net of cash acquired   (4,078)   
 
Cash received from sale of fixed assets   316    
 
Cash paid for intangibles   
    (50)
Net Cash Used in Investing Activities   (25,556)   (9,934)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from issuance of common stock   25,630    75,394 
Proceeds from exercise of employee stock options   369    1,270 
Proceeds from exercise of warrants   67    1,109 
Proceeds from employee stock purchase plan   312    204 
Net Cash Provided by Financing Activities   26,378    77,977 
           
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash   (32,451)   45,984 
           
Cash, Cash Equivalents and Restricted Cash - Beginning of Period   88,322    44,408 
           
Cash, Cash Equivalents and Restricted Cash - End of Period  $55,871   $90,392 
           
SUPPLEMENTARY CASH FLOW INFORMATION:          
Cash Paid During the Period for:          
Interest   
    325 
           
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:          
           
Common stock issued in payment of interest   
    (25,270)
Fixed assets included in accounts payable and accrued expenses   378    (1,467)
Stock issuance costs included in accounts payable and accrued expenses       (230)
Acquisition of Business   
 
    
 
 
Tangible assets, excluding cash and cash equivalents   1,346    
 
Intangibles   9,452    
 
Goodwill   8,051    
 
Deferred tax liability   (1,980)   
 
Contingent consideration   (1,099)   
 
Liabilities assumed   (1,871)   
 
Issuance of common stock for acquisition   (2,297)   
 
Noncontrolling interest   (7,523)   
 

 

See accompanying notes to the condensed consolidated financial statements

5

 

 

AKOUSTIS TECHNOLOGIES, INC.

Notes to the Condensed Consolidated Financial Statements
(Unaudited)

 

Note 1. Organization

 

Akoustis Technologies, Inc. (the “Company”) was incorporated on April 10, 2013, and effective December 15, 2016, the Company changed its state of incorporation to the State of Delaware. Through its wholly-owned 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, Wi-Fi 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 XBAWTM 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. In October 2021, the Company acquired a 51% ownership interest in RFM Integrated Device, Inc. (“RFMi”), a fabless supplier of acoustic wave RF resonators and filters. Through RFMi, the Company makes sales of surface-acoustic-wave (“SAW”) resonators, RF filters, crystal (Xtal) resonators and oscillators, and ceramic products.

 

Note 2. Liquidity

 

As of March 31, 2022, the Company had cash and cash equivalents of $55.9 million and working capital of $55.1 million. The Company has historically incurred recurring operating losses and experienced net cash used in operating activities. 

 

The Company expects cash and cash equivalents 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. 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 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, 2022 are not necessarily indicative of the results that may be expected for the year ending June 30, 2022 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 August 30, 2021 (the “2021 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. For RFMi, a consolidated entity in which we had 51% of ownership as of March 31, 2022, the Company records net loss (income) attributable to noncontrolling interest on the condensed consolidated statements of operations equal to the percentage of the ownership interest retained in such entity by the respective noncontrolling parties.

 

6

 

 

Significant Accounting Policies and Estimates

 

The Company’s significant accounting policies are disclosed in Note. 3-Summary of Significant Accounting Policies in the 2021 Annual Report. Since the date of the 2021 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. The policies, estimates and assumptions include valuing equity securities, deferred taxes and related valuation allowances, contingent consideration, goodwill, intangible assets, initial fair value of the non-controlling interest, revenue recognition, and the fair values of long-lived assets. Actual results could differ from the estimates.

 

Business Combinations - Business combinations are accounted for under the acquisition method in accordance with ASC 805, Business Combinations. The acquisition method requires identifiable assets acquired and liabilities assumed and any noncontrolling interest in the business acquired be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill. Transaction costs are expensed in a business combination.

 

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.

 

Recently Issued Accounting Pronouncements

 

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. 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. 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, 2022 (in thousands):

 

   Foundry
Fabrication
Services
Revenue
   Product
 Sales
Revenue
   Total
Revenue
with
 Customers
 
NRE  $         407    
   $407 
Filters/Amps   
    4,200    

4,200

 
Total  $407   $4,200   $4,607 

 

7

 

 

The following table summarizes the revenues of the Company’s reportable segments for the nine months ended March 31, 2022 (in thousands):

 

   Foundry
Fabrication
Services
Revenue
   Product  
Sales
 Revenue
   Total
Revenue
with
Customers
 
NRE  $1,204    
   $1,204 
Filters/Amps   
    8,942    8,942 
Total  $1,204   $8,942   $10,146 

 

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 

 

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 2022 and 2021 (in thousands):

 

   Contract
Assets
   Contract
Liability
 
Balance, June 30, 2021  $411   $41 
Closing, March 31, 2022   936    115 
Increase/(Decrease)  $525   $74 
           
Balance, June 30, 2020  $125   $
 
Closing, March 31, 2021   6    123 
Increase/(Decrease)  $(119)  $123 

 

8

 

 

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 Sheets). The amount of revenue recognized in the nine months ended March 31, 2022 that was included in the opening contract liability balance was $41 thousand which related to non-recurring engineering services.

 

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, 2022 that was included in the opening contract asset balance was $293 thousand, which primarily related to non-recurring engineering services.

 

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 $9.2 million at March 31, 2022.

 

Note 5: 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, 2022 and June 30, 2021 (in thousands):

 

   March 31, 2022   June 30,
2021
 
Raw Materials  $833   $124 
Work in Process   1,811    1,188 
Finished Goods   785    78 
Total Inventory  $3,429   $1,390 

 

Note 6. Property and Equipment, net

 

Property and equipment, net consisted of the following as of March 31, 2022 and June 30, 2021 (in thousands):

 

   Estimated
Useful Life
  March 31,
2022
   June 30,
2021
 
Land  n/a  $1,000   $1,000 
Building  11 years   3,000    3,000 
Equipment  2-10 years   53,563    35,120 
Leasehold Improvements  *   
4,237
    1,946 
Software  3 years   737    580 
Furniture & Fixtures  5 years   216    73 
Computer Equipment  3 years   740    310 
Total      63,493    42,029 
Less: Accumulated Depreciation      (15,451)   (11,299)
Total     $48,042   $30,730 

 

(*) 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 $1.7 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively. The Company recorded depreciation expense of $4.8 million and $3.3 million for the nine months ended March 31, 2022 and 2021, respectively.

 

As of March 31, 2022, equipment with a net book value totaling $12.0 million had not been placed in service and therefore was not depreciated during the period. As of June 30, 2021, fixed assets with a net book value totaling $4.9 million had not been placed in service and therefore was not depreciated during the period.

 

9

 

 

Note 7. Business Acquisition

 

On October 15, 2021, the Company acquired a majority ownership position in RFM Integrated Device, Inc. (“RFMi”), a fabless supplier of acoustic wave RF resonators and filters, to expand product offerings and provide access to new markets. The Company acquired a 51% ownership interest in RFMi from Tai-Saw Technology Co., Ltd. (“TST”) in exchange for $6.0 million in cash and approximately $2.5 million payable in common stock of the Company. On April 29, 2022, as described under Note 17. Subsequent Events, the Company exercised its option to acquire the remaining 49% ownership interest in RFMi from TST for an additional $3.5 million in cash and approximately 420,053 shares of common stock of the Company with a fair value at closing of $1.9 million.

 

Additionally, earn-out payments payable in cash and/or shares of common stock of the Company may be payable to TST based on the achievement of sales targets for RFMi products in each of calendar year 2022 and 2023, with potential payouts in the range of $0 to $3.0 million. The estimated fair value of the associated liability was based on the present value of the expected future payouts resulting from the projected RFMi product sales, applying a volatility rate of 30% against those future projected revenues and, using a discount rate of 9.9% and 10.2% for the first and second earnouts, respectively, and thus represented a Level 3 fair value measurement. The contingent consideration is re-measured to fair value at each reporting date until the contingency is resolved, and those changes in fair value are recognized in earnings. The fair value of the contingent consideration increased $180 thousand during the nine months ended March 31, 2022.

 

The purchase price was preliminarily allocated based on the estimated fair values of the assets acquired and liabilities assumed as follows (in thousands):

 

Consideration:    
Cash paid  $6,000 
Common stock   2,297 
Fair value of contingent consideration   1,099 
Total consideration  $9,396 
      
Cash  $1,921 
Other tangible assets   1,346 
Intangible assets   9,452 
Goodwill   8,051 
Liabilities assumed   (1,871)
Deferred tax liability  $(1,980)
Total assets acquired  $16,919 
Noncontrolling interest   (7,523)
Net assets acquired  $9,396 

 

The Company will continue to evaluate the fair market value and other estimates of certain assets, liabilities and tax estimates over the measurement period (up to one year from the acquisition date) as provided for in ASC 805-10.

 

The provisional values of the intangible assets acquired included trademarks of $0.7 million, developed technology of $1.3 million and customer relationships of $7.5 million.

 

The fair value of the trademarks acquired was determined based on an income approach using the “relief-from-royalty” method which estimated the value of the intangible asset by discounting the future cash flows of the asset to present value. Key inputs include a royalty rate of 3% and a discount rate of 18.0% as of the valuation date. The acquired trademarks assets are being amortized on a straight-line basis over their estimated useful lives of five years.

 

The fair value of the developed technology acquired was determined based on an income approach using the “relief-from-royalty” method which estimated the value of the intangible asset by discounting the future cash flows of the asset to present value. Key inputs include a royalty rate of 4% and a discount rate of 18.0% as of the valuation date. The acquired developed technology assets are being amortized on a straight-line basis over their estimated useful lives of seven years.

 

10

 

 

The fair value of the customer relationships acquired was determined based on an income approach using the “multi-period excess earnings” method in which the value of the intangible asset is determined by discounting the future cash flows of the asset to present value. Key inputs include a discount rate of 18.0%, an attrition rate of 5% and an operating expense adjustment factor of 5% as of the valuation date. These customer relationships are being amortized on a straight-line basis over their estimated useful life of seven years.

 

The fair value of the noncontrolling interest was determined by applying a lack of control discount of 16.7% to the implied fair value based on the total consideration paid for the 51% ownership.

 

The goodwill resulting from the acquisition of RFMi, which has been recorded in the RF Product segment, is attributed to synergies and other benefits that are expected to be generated from this transaction and is not deductible for income tax purposes. During the three and nine months ended March 31, 2022, the Company recorded acquisition costs associated with the acquisition of RFMi totaling $0.1 million in “General and administrative expenses” in the Condensed Consolidated Statements of Operations. 

 

Pro Forma Results

 

The following unaudited pro forma financial information summarizes the revenues for the three and nine months ended March 31, 2022 and 2021, as if the acquisition had been completed as of July 1, 2020 (in thousands). The unaudited pro forma information does not purport to be indicative of the results that would have been obtained if the acquisitions had actually occurred at the beginning of the year prior to acquisition, nor of the results that may be reported in the future. Pro-forma earnings were not materially different from reported results for the periods presented and thus have not been included.

 

    Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
    2022     2021     2022     2021  
   

Unaudited

Reported

   

Unaudited

Proforma

   

Unaudited

Proforma

   

Unaudited

Proforma

 
Revenues   $ 4,607     $ 3,746     $ 12,048     $ 7,287  
                                 

 

Note 8: Goodwill and Intangible Assets

 

Intangible assets consisted of the following as of March 31, 2022 (in thousands):

 

   Gross
Carrying
Amount
   Accumulated
Amortization
   Net
Carrying
Amount
   Weighted
Average Useful
Life in Years
 
Goodwill  $8,051   $
   $8,051    
indefinite
 
Trademarks  $700   $(64)  $636    5 
Developed Technology  $1,913   $(167)  $1,746    10 
Customer Relationships  $7,455   $(488)  $6,967    7 
Total  $18,119   $(719)  $17,400      

 

Intangible assets consisted of the following as of June 30, 2021 (in thousands):

 

   Gross
Carrying
Amount
   Accumulated
Amortization
   Net
Carrying
Amount
   Weighted
Average Useful
Life in Years
 
Developed Technology  $634   $(62)  $572    15 
                     

11

 

 

Amortization expense totaled $355 thousand for the three months ended March 31, 2022 and $658 thousand for the nine months ended March 31, 2022. Estimated future amortization expense of intangible assets for each of the next five fiscal years and thereafter are as follows (in thousands):

 

2022   $ 358  
2023   $ 1,431  
2024   $ 1,431  
2025   $ 1,431  
2026   $ 1,431  
Thereafter   $ 3,267  
Total   $ 9,349  

 

Note 9. Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consisted of the following at March 31, 2022 and June 30, 2021 (in thousands):

 

   March 31,
2022
   June 30,
2021
 
Accounts payable  $3,790   $1,188 
Accrued salaries and benefits   5,041    4,415 
Accrued professional fees   548    49 
Accrued utilities   116    127 
Accrued goods received not invoiced   167    761 
Other accrued expenses   363    414 
Totals  $10,025   $6,954 

 

Note 10. Concentrations

 

Vendors

 

Vendor concentration as a percentage of purchases for the three months ended March 31, 2022 and 2021 are as follows:

 

   Three Months
03/31/2022
   Three Months
03/31/2021
 
Vendor 1   18%   
 
Vendor 2   
    18%

 

Vendor concentration as a percentage of purchases for the nine months ended March 31, 2022 and 2021 are as follows:

 

   Three Months
03/31/2022
   Three Months
03/31/2021
 
Vendor 1   12%   
 
           

 

Customers

 

Customer concentration as a percentage of revenue for the three months ended March 31, 2022 and 2021 are as follows:

 

   Three Months
03/31/2022
   Three Months
03/31/2021
 
Customer 1   
    57%
Customer 2   23%   34%

 

Customer concentration as a percentage of revenue for the nine months ended March 31, 2022 and 2021 are as follows:

 

   Nine Months
03/31/2022
   Nine Months
03/31/2021
 
Customer 1   
    43%
Customer 2   25%   38%
Customer 3   11%   
 

 

12

 

 

Note 11. Equity

 

Equity Offering Program

 

Pursuant to an ATM Equity OfferingSM Sales Agreement with BofA Securities, Inc. and Piper Sandler & Co. (the “Sales Agreement”), the Company was able to sell from time-to-time shares of its common stock having an aggregate offering price of up to $100 million (the “Equity Offering Program”). As of March 31, 2022, the Company had sold all $100.0 million of its shares available to be sold in the Equity Offering Program.

 

The following table summarizes sales through the Equity Offering Program during the nine months ended March 31, 2022:

 

Three months ended  Avg price
per share
   Number of
Shares
   Gross
Proceeds
(in millions)
   Offering
Expenses
(in millions)
   Net
Proceeds
(in millions)
 
September 30, 2021  $9.99    555,455   $5.5   $0.1   $5.4 
December 31, 2021  $7.04    1,931,022   $13.6   $0.2   $13.4 
March 31, 2022  $6.03    1,157,919   $7.0   $0.2   $6.8 
Total  $7.17    3,644,396   $26.1   $0.5   $25.6 

 

Equity Incentive Plans

 

During the nine months ended March 31, 2022, the Company granted employees options to purchase an aggregate of approximately 0.6 million shares of common stock. 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 assumptions:

 

   Nine Months
Ended
March 31,
2022
 
Exercise price  $ 5.6310.15 
Expected term (years)   4.755.00 
Volatility   66-67%
Risk-free interest rate   0.76% – 2.18%
Dividend yield   0%
Weighted Average Grant Date Fair Value of Options granted during the period  $4.94 

  

During the nine months ended March 31, 2022 the Company awarded certain employees and directors grants of an aggregate of approximately 1.1 million restricted stock units (“RSUs”) with a weighted average grant date fair value of $8.83. 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 45 years.

 

13

 

 

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,
 
   2022   2021   2022   2021 
Research and Development  $1,327   $1,011   $4,275   $2,953 
General and Administrative   1,179    980    3,479    3,131 
Total  $2,506   $1,991   $7,754   $6,084 

 

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

 

   As of March 31, 2022 
   Unrecognized
stock-based
compensation
   Weighted-
average years
to be recognized
 
Options  $3,714    2.47 
Restricted stock units  $10,788    2.30 

 

Note 12. Commitments and Contingencies

 

Leases

 

The Company leases office space and office equipment in Huntersville, NC as well as equipment in Canandaigua, NY. Our leases have remaining lease terms of up to five years, some of which include options to extend the leases for up to twenty-four months. Following adoption of ASC 842, lease expense excludes capital area maintenance and property taxes.

 

The components of lease expense were as follows:

 

   Three
Months Ended
March 31,
2022
   Three
Months Ended
March,
2021
  

Nine

Months Ended
March 31,
2022

  

Nine

Months Ended
March 31,
2021

 
Operating Lease Expense  $84   $75   $241   $225 
                     

Supplemental balance sheet information related to leases was as follows (in thousands):

 

   Classification on the
Condensed Consolidated
Balance Sheet
  March 31, 2022   June 30,
2021
 
Assets             

Operating lease right-of-use asset, net

  Other non-current assets  $317   $471 
              
Liabilities             

Operating lease liability - current

  Current liabilities   292    270 

Operating lease liability – long term

  Other non-current liabilities   18    202 
              
Weighted Average Remaining Lease Term:             
Operating leases      1.00    1.76 
              
Weighted Average Discount Rate:             
Operating leases      11.6%   12.5%

 

14

 

 

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

 

For the year ending June 30,    
2022  $89 
2023   232 
2024   7 
2025   
 
Thereafter   
 
Total lease payments (undiscounted cash flows)   328 
      
Less imputed interest   (18)
Total  $310 

 

Ontario County Industrial Development Authority Agreement

 

On February 27, 2018, the Company entered into a Lease and Project Agreement (the “Lease and Project Agreement”) and a Company Lease Agreement (the “Company Lease Agreement” and together with the 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 transfer 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 claw back over the life of the Agreements upon certain recapture events, including certain events of default.

 

Litigation, Claims and Assessments

 

On October 4, 2021, the Company and its subsidiary, Akoustis, Inc., were named as defendants in a complaint filed by Qorvo, Inc. in the United States District Court for the District of Delaware alleging, among other things, patent infringement, false advertising, false patent marking, and unfair competition. The complaint alleges that the defendants misappropriated proprietary information, made misleading statements about the characteristics of certain of its products, and sold products infringing on the certain of the plaintiff’s patents. The plaintiff seeks an injunction enjoining the defendants from the alleged infringement and damages, including punitive and statutory enhanced damages, in an unspecified amount. The Company believes this lawsuit is without merit and intends to defend against it vigorously. However, it can provide no assurance as to the outcome of such dispute, and such action may result in judgments against the Company for an injunction, significant damages or other relief, such as future royalty payments to Qorvo, Inc. Even if ultimately settled or resolved in the Company’s favor, this action may result in significant expenses, diversion of management and technical personnel attention and disruptions and delays in the Company’s business, all of which could have a material adverse effect on its business, financial condition and results of operations.

  

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 that, as of March 31, 2022, the amount of liability, if any, with respect to such actions, would not materially affect its financial position, results of operations or cash flows.

 

15

 

 

Note 13. 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, 2022 and 2021 are as follows (in thousands):

 

   Foundry/
Fabrication
Services
   RF Product   Total 
Three months ended March 31, 2022            
Revenue with customers  $407   $4,200   $4,607 
Cost of revenue   534    4,836    5,370 
Gross margin   (127)   (636)   (763)
Research and development   
    8,314    8,314 
General and administrative   
    5,721    5,721 
Income (Loss) from Operations  $(127)   (14,671)   (14,798)
                
Three months ended March 31, 2021               
Revenue with customers  $1,537   $980   $2,517 
Cost of revenue   400    2,573    2,973 
Gross margin   1,137    (1,593)   (456)
Research and development   
    5,225    5,225 
General and administrative   
    3,395    3,395 
Income (Loss) from Operations  $1,137    (10,213)   (9,076)
                
Nine months ended March 31, 2022               
Revenue with customers  $1,203   $8,943   $10,146 
Cost of revenue   1,481    11,340    12,821 
Gross margin   (278)   (2,397)   (2,675)
Research and development   
    25,481    25,481 
General and administrative   
    14,742    14,742 
Income (Loss) from Operations  $(278)   (42,620)   (42,898)
                
Nine months ended March 31, 2021               
Revenue with customers  $2,264   $2,197   $4,461 
Cost of revenue   803    6,421    7,224 
Gross margin   1,461    (4,224)   (2,763)
Research and development   
    17,171    17,171 
General and administrative   
    9,683    9,683 
Income (Loss) from Operations  $1,461    (31,078)   (29,617)
                
As of March 31, 2022               
Accounts receivable  $27   $3,062   $3,089 
                
As of June 30, 2021               
Accounts receivable  $242   $928   $1,170 

 

Note 14. Loss Per Share

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three and nine months ended March 31, 2022 and March 31, 2021 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.

 

16

 

  

The Company had the following common stock equivalents at March 31, 2022 and 2021:

 

   March 31, 2022   March 31, 2021 
Options   2,996,264    2,484,477 
Warrants   78,555    167,809 
Total   3,074,819    2,652,286 

 

Note 15. Income Taxes 

 

On October 15, 2021, the Company acquired a majority ownership position in RFMi, a fabless supplier of acoustic wave RF resonators and filters. The Company acquired a 51% ownership interest in RFMi from Tai-Saw Technology Co., Ltd. (“TST”) in exchange for $6.0 million in cash and approximately $2.5 million payable of common stock of the Company. The Company’s preliminary allocation of purchase price for this acquisition is included in Note 7 – Business Acquisition, and includes an approximately $2.0 million deferred tax liability related to the acquired identifiable intangible assets. AKTS and RFMi will not file a consolidated tax return. Therefore, the valuation allowance remains in place on the net AKTS deferred tax assets.

 

The Company’s income tax expense (benefit) was ($128) thousand and ($70) thousand for the three and nine months ended March 31, 2022 respectively and ($0) for the three and nine months ended March 31, 2021. The Company’s effective tax rate was 0.9% and 0.2% for the three and nine months ended March 31, 2022 and 0.0% for the three and nine months ended March 31, 2021.

 

The Company’s effective tax rate for the three and nine months ended March 31, 2022 and March 31, 2021, differed from the statutory rate primarily due to state taxes and the recording of a valuation allowance against certain separate company deferred tax assets.

 

Note 16. Fair Value Measurement 

 

Fair value is defined as the price that would be received upon selling an asset or the price paid to transfer a liability on the measurement date. It focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

 

Level 1: Observable prices in active markets for identical assets and liabilities.

 

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities.

 

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

 

The following table sets forth a summary of the changes in the fair value of Level 3 contingent consideration that are measured at fair value on a recurring basis:

 

Contingent consideration  March 31,
2022
   March 31,
2021
 
Beginning balance  $
   $
           —
 
Initial fair value of contingent consideration   1,099    
 
Change in fair value of contingent consideration   

180

    
 
Ending balance  $1,279   $
 

 

The fair value of contingent consideration liabilities that was classified as Level 3 in the table above was estimated using a Monte Carlo simulation in an option pricing framework with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future sales revenue of RFMi products in each of calendar year 2022 and 2023 and the volatility of those revenues, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the acquisition agreements. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer.

 

Note. 17. Subsequent Events

 

RFMi Second Closing

 

The Company previously announced its acquisition of a 51% ownership interest in RFMi. On April 29, 2022, the Company acquired the remaining 49% ownership interest in RFMi by exercising its option to do so under the acquisition agreement, for an additional $3.5 million in cash and 420,053 shares of the Company’s common stock with a fair value at closing of $1.9 million.

 

ATM Sales Agreement

 

On May 2, 2022 the Company entered into an ATM Sales Agreement with Oppenheimer & Co. Inc., Craig-Hallum Capital Group LLC and Roth Capital Partners, LLC 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.

 

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

 

References in this report to “Akoustis,” the “Company,” “we,” “us,” and “our” refer to Akoustis Technologies, Inc. and its consolidated subsidiaries.

 

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 inability to obtain adequate 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, 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; claims of infringement, misappropriation or misuse of third party intellectual property that, regardless of merit, could result in significant expense and loss of our intellectual property rights; our inability to attract and retain qualified personnel; the outcome of current and any future litigation; 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 manufacture, market and sell products based on our technologies; our ability to meet the required specifications of customers and achieve qualification of our products for commercial manufacturing in a timely manner; 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; the possibility that the anticipated benefits from our business acquisitions (including the acquisition of RFM Integrated Device, Inc. (“RFMi”)) will not be realized in full or at all or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of acquired businesses’ (including RFMi’s) operations will be greater than expected and the possibility of disruptions to our business during integration efforts and strain on management time and resources; risks related to doing business in foreign countries, including China; any security breaches, cyber-attacks 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; and our failure to maintain effective internal control over financial reporting.

 

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These and other risks and uncertainties, which are described in more detail in Part II, Item 1A. “Risk Factors” of this report and in our Annual Report on Form 10-K, filed with the SEC on August 30, 2021 (the “2021 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 solutions for the wireless industry, including for products such as smartphones and tablets, network infrastructure equipment, Wi-Fi 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 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®”, for our filters produced for use in RFFE modules. Our XBAW® filters incorporate optimized high purity piezoelectric materials for high power, high frequency and wide bandwidth operation. We are developing RF filters for 5G, Wi-Fi and defense bands using our proprietary resonator device models and product design kits (PDKs). As we qualify our RF filter products, we are engaging with target customers to evaluate our filter solutions. Our initial designs target UHB, sub 7 GHz 5G, Wi-Fi 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 Wi-Fi. 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 Wi-Fi bands which are suited to competitive BAW solutions and historically cannot be addressed with low-band, lower power handling surface acoustic wave (“SAW”) technology. Additionally, through our majority-owned subsidiary, RFMi, we make sales of complementary SAW resonators, RF filters, crystal (Xtal) resonators and oscillators, and ceramic products.

 

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, Wi-Fi, and defense 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 Akoustis’ 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. RFMi products are manufactured by a third party and sold either directly to consumers or sold and shipped with Akoustis products.

 

Intellectual Property. As of April 15, 2022, our IP portfolio included 58 patents, including a blocking patent that we have licensed from Cornell University. Additionally, as of April 15, 2022, we have 100 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 Wi-Fi CPE OEMs, we seek to enable broader competition among the front-end module manufacturers.

 

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Since we own and/or have filed applications for patents on the core technology and control access to our 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, foundry and engineering services, and sales of debt and equity securities. The Company has incurred losses, 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.

 

To succeed, we must convince mobile phone OEMs, RFFE module manufacturers, network infrastructure OEMs, Wi-Fi CPE OEMs and defense customers to use our XBAW® filter technology in their systems and modules. 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

 

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, including when warranted by state and local guidelines. 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 obtain certain materials, equipment and services 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, COVID-19 has contributed to some of the delays we have observed in certain suppliers’ shipment of materials necessary for us to manufacture our products and in certain vendors’ ability to deliver equipment for installation at our facilities. When COVID-19 is demonstrably contained, we anticipate that its effects on global commerce will subside; however, the timing and extent of this 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 ultimate 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 2022 or beyond.

 

20

 

 

Recent Developments

 

On January 31, 2022, Akoustis announced that it had received five new design wins, increasing the total number of Wi-Fi design wins from eight to thirteen.

 

On February 10, 2022, the Company announced the appointment of Ken Boller as its new Chief Financial Officer. 

 

On February 22, 2022, Akoustis announced that it had received a 5G mobile XBAW filter order form a new Tier-1 radio frequency module and filter 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,” included in our 2021 Annual Report.

 

Results of Operations

 

Three Months Ended March 31, 2022 and 2021

 

Revenue

 

The Company recorded revenue of $4.6 million for the three months ended March 31, 2022 as compared to $2.5 million for the three months ended March 31, 2021. The increase of $2.1 million was primarily due to an increase in RF product revenue of $3.2 million or 328%, which includes revenue from sales of RFMi products. Partially offsetting this increase was a decrease in non-recurring engineering services of $1.1 million.

 

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 $5.4 million for the three months ended March 31, 2022 as compared to $3.0 million for the three months ended March 31, 2021. The $2.4 million increase is primarily due to costs associated with RF product revenue which increased by $2.3 million, which includes cost of revenue from sales of RFMi products.

 

Research and Development Expenses

 

R&D expenses were $8.3 million for the three months ended March 31, 2022 and were $3.1 million, or 59% higher than the prior year amount for the same period of $5.2 million. Personnel costs, including stock-based compensation, were $4.1 million compared to $3.1 million in the prior year period, an increase of $1.0 million or 33.8%. Facility costs, including depreciation, of $1.8 million primarily associated with the NY Facility were $0.9 million higher than the prior period. Lastly, R&D material costs were $1.3 million higher than the 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, 2022 were $5.7 million, which is an increase of $2.3 million compared to the three months ended March 31, 2021. Year-over-year changes within G&A expenses include an increase in employee compensation (including stock-based compensation) of $0.9 million as well as increased general expenses of $1.5 million, primarily professional fees and intangible amortization.

 

21

 

 

Other (Expense)/Income

 

Other expense for the three months ended March 31, 2022 was $155 thousand, which was comprised of a loss the change in fair value of contingent consideration of $180 thousand partially offset by interest income. Other expenses for the three months ended March 31, 2021 were $1.1 million, consisting of $2.0 million of debt discount amortization and interest expense which was partially offset by a gain on fair value of derivative liability of $0.9 million.

 

Net Loss

 

The Company recorded a net loss of $14.8 million for the three months ended March 31, 2022, compared to a net loss of $10.2 million for the three months ended March 31, 2021. The period-over-period incremental loss of $4.6 million, or 45%, was primarily driven by an increase in cost of revenue of $2.4 million, an increase in G&A expenses and R&D expenses of $5.4 million. These expense increases were partially offset by a revenue increase of $2.1 million and a decrease in other expenses of $0.9 million.

 

Nine Months Ended March 31, 2022 and 2021

 

Revenue

 

The Company recorded revenue of $10.1 million for the nine months ended March 31, 2022 as compared to $4.5 million for the nine months ended March 31, 2021. The increase of $5.7 million was primarily due to an increase in RF product revenue of $7.0 million or 350%, which includes revenue from sales of RFMi products. This increase was partially offset by a decrease in non-recurring engineering services of $1.1 million.

 

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 $12.8 million for the nine months ended March 31, 2022 as compared to $7.2 million for the nine months ended March 31, 2021. The $5.6 million increase is primarily due to costs associated with RF product revenue which increased by $5.0 million, which includes cost of revenue from sales of RFMi products. In addition, non-recurring engineering costs increased by $0.6 million.

 

Research and Development Expenses

 

R&D expenses were $25.5 million for the nine months ended March 31, 2022 and were $8.3 million, or 48.4% higher than the prior year amount for the same period of $17.2 million. Personnel costs, including stock-based compensation, were $13.7 million compared to $9.6 million in the prior year period, an increase of $4.1 million or 42.7%. Facility costs, including depreciation, of $5.8 million primarily associated with the NY Facility were $2.7 million higher than the prior period. R&D material costs of $5.6 million were $1.6 million higher than the 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 nine months ended March 31, 2022 were $14.7 million, which is an increase of $5.0 million compared to the nine months ended March 31, 2021. Year-over-year changes within G&A expenses include an increase in employee compensation (including stock-based compensation) of $2.1 million as well as increased general expenses of $3.1 million, primarily related to professional fees, insurance expense and intangible amortization.

 

22

 

 

Other (Expense)/Income

 

Other expense for the nine months ended March 31, 2022 was $92 thousand, which was comprised of a loss on the fair value of contingent consideration of $180 thousand partially offset by interest income. Other expenses for the nine months ended March 31, 2021 were $4.4 million, consisting of $5.2 million of debt discount amortization and interest expense offset by a gain on derivative liability valuation of $0.7 million.

 

Net Loss

 

The Company recorded a net loss of $42.9 million for the nine months ended March 31, 2022, compared to a net loss of $34.0 million for the nine months ended March 31, 2021. The period-over-period incremental loss of $8.9 million, or 26.1%, was primarily driven by an increase in cost of revenue of $5.6 million, an increase in G&A expenses and R&D expenses of $13.4 million. These expense increases were partially offset by a revenue increase of $5.7 million and a decrease in other expenses of $4.3 million.

 

Liquidity and Capital Resources

 

Financing Activities

 

During the nine months ended March 31, 2022, the Company sold a total of 3,644,396 shares of its common stock at a price to the public of an average of $7.17 per share under the ATM Equity OfferingSM Sales Agreement with BofA Securities, Inc. and Piper Sandler & Co., as amended on February 19, 2021 (the “Sales Agreement”) for aggregate gross proceeds of approximately $26.1 million, before deducting compensation paid to the sales agents and other offering expenses of approximately $0.5 million.

 

Balance Sheet and Working Capital

 

The Company had $55.9 million of cash and cash equivalents on hand as of March 31, 2022, which reflects a decrease of $32.4 million compared to $88.3 million as of June 30, 2021. The decrease is primarily due to cash used in operations of $33.3 million and cash used for investing activities of $25.6 million. These cash uses were partially offset by cash provided by financing activities of $26.4 million. 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. However, the Company has historically incurred recurring operating losses and will continue to do so until it generates sufficient revenues from operations; as a result, we 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, 2022 compared to June 30, 2021

 

As of March 31, 2022, the Company had current assets of $66.3 million made up primarily of cash on hand of $55.9 million. As of June 30, 2021, current assets were $93.2 million comprised primarily of cash on hand of $88.3 million.

 

Property, Plant and Equipment was $48.0 million as of March 31, 2022 as compared to a balance of $30.7 million as of June 30, 2021.

 

Total assets as of March 31, 2022 and June 30, 2021 were $132.1 million and $125.0 million, respectively.

 

Current liabilities as of March 31, 2022 and June 30, 2021 were $11.2 million and $7.3 million, respectively.

 

Long-term liabilities totaled $2.5 million as of March 31, 2022, compared to $0.3 million as of June 30, 2021. The increase is primarily due to the contingent liability and deferred tax liability which are discussed in Note 7 – Business Acquisition.

 

Equity was $118.4 million as of March 31, 2022, compared to $117.4 million as of June 30, 2021, an increase of $1.0 million, or 0.8%. This increase was primarily due to the increase in additional paid-in-capital (“APIC”) of $36.4 million for the nine months ended March 31, 2022 which was offset by the net loss for the nine months ended March 31, 2022 of $42.9 million. The increase in APIC was primarily due to common stock issued for cash of $25.6 million and common stock issued for services of $7.8 million.

 

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Cash Flow Analysis

 

Operating activities used cash of $33.3 million during the nine months ended March 31, 2022 and $22.1 million during the comparative period ended March 31, 2021. The $11.2 million period- over-period increase in cash used was attributable to higher operating expenses associated with the ramp of development and commercialization activities (primarily R&D and production personnel and material costs).

 

Investing activities used cash of $25.6 million for the nine months ended March 31, 2022 compared to $9.9 million for the comparative period ended March 31, 2021. The $15.6 million period-over-period increase was primarily due to increased purchases of production equipment of $11.9 million and net cash paid for acquisitions of $4.1 million. On October 15, 2021, the Company acquired a 51% ownership interest in RFMi from Tai-Saw Technology Co., Ltd. (“TST”) in exchange for $6.0 million in cash and approximately $2.5 million payable in common stock of the Company.  On April 29, 2022, the Company acquired the remaining 49% ownership interest in RFMi from TST for an additional $3.5 million in cash and 420,053 shares of the Company’s common stock with a fair value at closing of $1.9 million. Additionally, earn-out payments aggregating up to $3.0 million payable in cash and/or shares of common stock of the Company may be payable to TST based on the future operating results of RFMi.

 

Financing activities increased cash by $26.4 million during the nine months ended March 31, 2022 primarily due to proceeds from issuance of common stock pursuant to the Sales Agreement. In addition, stock option grants, warrant exercises and the employee stock purchase plan resulted in cash proceeds of $0.7 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

 

We 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, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

 

As of March 31, 2022, our management, with the participation of our Chief Executive Officer and 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 any controls and procedures, 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. Our Chief Executive Officer and Chief Financial Officer have concluded based upon the evaluation described above that, as of March 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended March 31, 2022, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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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.

 

Except for the matter described under “Litigation, Claims and Assessments” in “Note-12 – Commitments and Contingencies” of the condensed consolidated financial statements in this Item 1 of Part I of this Quarterly Report on Form 10-Q, which description is incorporated in this “Item 1. Legal Proceedings” by reference, 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 factors set forth below and the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021. 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. Except as set forth below, there have been no material changes to the risk factors described in Part I, Item 1A, “Risk Factors,” included in our 2021 Annual Report.

 

We are, and may become, subject to claims of infringement, misappropriation or misuse of third party intellectual property that, regardless of merit, could result in significant expense and loss of our intellectual property rights.

 

The semiconductor industry is characterized by the vigorous pursuit and protection of intellectual property rights. We have not undertaken a comprehensive review of the rights of third parties in our field. From time to time, we may be named in lawsuits or receive notices or inquiries from third parties regarding our products or the manner in which we conduct our business suggesting that we may be infringing, misappropriating or otherwise misusing patent, copyright, trademark, trade secret and other intellectual property rights. Any claims that our technology infringes, misappropriates or otherwise misuses the rights of third parties, regardless of their merit or resolution, could be expensive to litigate or settle and could divert the efforts and attention of our management and technical personnel, cause significant delays and materially disrupt the conduct of our business. We may not prevail in such proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation. If such proceedings result in an adverse outcome, we could be required to:

 

pay substantial damages, including treble damages if we were held to have willfully infringed;

 

cease the manufacture, offering for sale or sale of the infringing technology or processes;

 

expend significant resources to develop non-infringing technology or processes;

 

obtain a license from a third party, which may not be available on commercially reasonable terms, or may not be available at all; or

 

lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others.

 

On October 4, 2021, the Company was named as a defendant in a complaint filed by Qorvo, Inc. in the United States District Court for the District of Delaware alleging, among other things, patent infringement, false advertising, false patent marking, and unfair competition. The plaintiff seeks an injunction enjoining us from the alleged infringement and damages, including punitive and statutory enhanced damages, in an unspecified amount. We believe this lawsuit is without merit and intend to defend against it vigorously. However, we can provide no assurance as to the outcome of such dispute, and such action may result in judgments against us for an injunction, significant damages or other relief, such as future royalty payments to Qorvo, Inc. or restrictions on certain of our activities. Resolution of such matter may be prolonged and costly, and the ultimate result or judgment is uncertain due to the inherent uncertainty in litigation and other proceedings. Even if ultimately settled or resolved in our favor, this and other possible future actions may result in significant expenses, diversion of management and technical personnel attention and disruptions and delays in our business and product development, and other collateral consequences, all of which could have a material adverse effect on our business, financial condition and results of operations. Any out-of-court settlement of this or other actions may also have an adverse effect on our business, financial condition and results of operations, including, but not limited to, substantial expenses, the payment of royalties, licensing or other fees payable to third parties, or restrictions on our ability to develop, manufacture and sell our products.

 

Defense of any intellectual property infringement claims against us, regardless of their merit, would involve substantial litigation expense and would be a significant diversion of resources from our business. In the event of the foregoing or another successful claim of infringement against us, we may have to pay substantial damages, obtain one or more licenses from third parties, limit our business to avoid the infringing activities, pay royalties and/or redesign our infringing technology or alter related formulations, processes, methods or other technologies, any or all of which may be impossible or require substantial time and monetary expenditure. The occurrence of any of the above events could prevent us from continuing to develop and commercialize our filters and our business could materially suffer.

 

25

 

 

In addition, our agreements with prospective customers and manufacturing partners may require us to indemnify such customers and manufacturing partners for third party intellectual property infringement claims. Pursuant to such agreements, we may be required to defend such customers and manufacturing partners against certain claims that could cause us to incur additional costs. While we endeavor to include as part of such indemnification obligations a provision permitting us to assume the defense of any indemnification claim, not all of our current agreements contain such a provision and we cannot provide any assurance that our future agreements will contain such a provision, which could result in increased exposure to us in the case of an indemnification claim.

 

We have recently engaged, and may in the future engage, in acquisitions that could disrupt our business, cause dilution to our shareholders and harm our financial condition and operating results.

 

In October 2021, we acquired a majority ownership position in RFM Integrated Device, Inc. (“RFMi”) and, on April 29, 2022, exercised the right to acquire the remaining 49%. The consideration for the acquisition includes cash and common stock as well as possible earn-out payments that may be paid in cash or common stock based on its future trading price. We may in the future make additional acquisitions of, or investments in, companies that we believe have products or capabilities that are a strategic or commercial fit with our current business or otherwise offer opportunities for our company. In connection with these acquisitions or investments, we may:

 

issue common stock or other forms of equity that would dilute our existing shareholders’ percentage of ownership,

 

incur debt and assume liabilities, and

 

incur amortization expenses related to intangible assets or incur large and immediate write-offs.

 

We may not be able to complete acquisitions on favorable terms, if at all. If we do complete an acquisition, such as of RFMi, we cannot assure you that it will ultimately strengthen our competitive position, that it will be viewed positively by customers, financial markets or investors or that we will otherwise realize the expected benefits of such an acquisition to the anticipated extent or at all. Furthermore, the acquisition of RFMi and any future acquisitions could pose numerous additional risks to our expected operations, including, but not limited to:

 

problems integrating the purchased business, products or technologies,

 

challenges in achieving strategic objectives, cost savings and other anticipated benefits,

 

increases to our expenses,

 

the assumption of significant liabilities, which may have been previously unknown or not discoverable through diligence, that exceed the limitations of any applicable indemnification provisions or the financial resources of any indemnifying party,

 

inability to maintain relationships with prospective key customers, vendors and other business partners of the acquired businesses,

 

diversion of management’s attention from its day-to-day responsibilities,

 

difficulty in maintaining controls, procedures and policies during the transition and integration,

 

entrance into marketplaces where we have no or limited prior experience and where competitors have stronger marketplace positions,

 

potential loss of key employees, particularly those of the acquired entity, and

 

historical financial information may not be representative or indicative of our results as a combined company.

 

The ongoing COVID-19 pandemic and a supply shortage experienced by the semiconductor industry have disrupted and will likely continue to disrupt normal business activity, and may have an adverse effect on our results of operations.

 

The global spread of COVID-19 and the efforts to control it have disrupted, and reduced the efficiency of, normal business activities in much of the world. The pandemic has resulted in authorities around the world implementing numerous unprecedented measures such as travel restrictions, quarantines, shelter in place orders, factory and office shutdowns and vaccine mandates. COVID-19 measures have impacted, and will likely continue to impact, our operations and those of our customers, contract manufacturers, suppliers and logistics providers. At the same time, and to some extent relatedly, the global silicon semiconductor industry is experiencing a shortage in supply and difficulties in ability to meet customer demand. In particular, the recent government-mandated COVID-19 containment measures in China have impacted supply shipments and created ongoing risk and uncertainty. These issues have led to an increase in lead-times of the production of semiconductor chips and components.

 

We have experienced, and expect to continue to experience, disruption to parts of our semiconductor supply chain, including procuring necessary components and inputs, such as wafers and substrates, in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices. We have also incurred higher costs to secure available inventory, or have extended our purchase commitments or placed non-cancellable orders with suppliers, which introduces inventory risk if our forecasts and assumptions are inaccurate. In addition, disruptions to commercial transportation infrastructure have increased delivery times for materials and components to our facilities and, in some cases, our ability to timely ship our products to customers. We have seen some of our customers become more conservative in response to these complications by reducing their purchases and inventories or postponing capital expenditures, including product orders from us.

 

We believe the global supply chain challenges and their adverse impact on our business will persist and the degree to which the pandemic ultimately impacts our business and results of operations will depend on future developments beyond our control.

 

26

 

 

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.

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

The information set forth below is included herein for the purpose of providing disclosure under Item 1.01 (Entry into a Material Definitive Agreement) of Form 8-K.

 

On May 2, 2022, the Company entered into an ATM Sales Agreement (the “Sales Agreement”) with Oppenheimer & Co. Inc., Craig-Hallum Group LLC and Roth Capital Partners, LLC (each, a “Sales Agent” and, together, the “Sales Agents”). Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through the Sales Agents shares of the Company’s common stock having an aggregate offering price of up to $50,000,000 (the “Shares”). Sales of Shares, if any, may be made by means of transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including block trades, ordinary brokers’ transactions on the Nasdaq Capital Market or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices or by any other method permitted by law. The Company intends to use the net proceeds from the offering, after deducting the Sales Agents’ commissions and the Company’s offering expenses, for general corporate purposes.

 

Under the terms of the Sales Agreement, the Company may also sell Shares to any of the Sales Agents as principal for its own accounts at a price to be agreed upon at the time of sale. Any sale of Shares to a Sales Agent as principal would be pursuant to the terms of a separate terms agreement between the Company and such Sales Agent.

 

The Company has no obligation to sell any of the Shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement.

 

The Shares will be offered and sold pursuant to the Company’s registration statement on Form S-3 (File No. 333-262540), as supplemented by the prospectus supplement dated May 2, 2022.

 

The foregoing summary of the Sales Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Sales Agreement, which is attached as a Exhibit 1.1 to this Quarterly Report on Form 10-Q and incorporated by reference into this Item 5.


A copy of the opinion of K&L Gates LLP relating to the legality of the issuance and sale of the Shares is attached as Exhibit 5.1 hereto.

 

27

 

 

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
1.1*   ATM Sales Agreement, dated May 2, 2022 by and among the Company, as issuer, and Oppenheimer & Co. Inc., Craig-Hallum Group LLC and Roth Capital Partners, LLC, as sales agents.
     
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)
     
3.4   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) 
     
5.1*   Opinion of K&L Gates LLP with respect to the Shares.
     
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*   Inline XBRL Instance Document
     
101.SCH*   Inline XBRL Taxonomy Extension Schema Document.
     
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
     
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document.
     
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document.
     
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
     
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*Filed herewith

 

Management contract or compensatory plan or arrangement

 

28

 

 

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 02, 2022 Akoustis Technologies, Inc.
     
  By: /s/ Kenneth E. Boller
    Kenneth E. Boller
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

 

29

 

 

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