Akoustis Technologies(AKTS) - 2022 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements reflect the RFMi acquisition, higher operating expenses, and a net loss of $15.2 million for the quarter Condensed Consolidated Balance Sheets Total assets grew to $134.1 million, driven by goodwill and intangibles from the RFMi acquisition, while total equity rose to $123.7 million Key Balance Sheet Metrics | | December 31, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $75,413 | $93,196 | | Total Assets | $134,112 | $124,994 | | Total Current Liabilities | $7,112 | $7,265 | | Total Liabilities | $10,444 | $7,584 | | Total Equity | $123,668 | $117,410 | - Goodwill of $7.8 million and net intangibles of $10.2 million were recorded as of December 31, 2021, primarily resulting from the RFMi acquisition, compared to zero goodwill and $0.6 million in intangibles at June 30, 2021[7] Condensed Consolidated Statements of Operations Revenue grew to $3.7 million, but the net loss widened to $15.2 million due to increased R&D and G&A expenses Quarterly Operating Results | Metric (in thousands, except per share data) | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Revenue | $3,672 | $1,308 | | Gross profit (loss) | $(877) | $(1,294) | | Loss from operations | $(15,215) | $(10,221) | | Net loss | $(15,245) | $(11,910) | | Net loss per common share | $(0.29) | $(0.30) | - Research and development expenses increased by 65% YoY to $9.2 million, and general and administrative expenses rose by 53% YoY to $5.1 million[9] Condensed Consolidated Statements of Changes in Equity Total equity increased to $123.7 million, driven by stock issuances and the RFMi acquisition, offsetting a $28.1 million net loss for the six-month period - For the six months ended December 31, 2021, the company issued common stock for cash, raising net proceeds of $18.8 million[11][12] - A noncontrolling interest of $7.5 million was recorded in the quarter ended December 31, 2021, following the acquisition of a 51% stake in RFMi[12] Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $20.9 million to $67.5 million, reflecting cash used in operations and investing activities Six-Month Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(23,538) | $(16,170) | | Net Cash Used in Investing Activities | $(16,615) | $(4,491) | | Net Cash Provided by Financing Activities | $19,298 | $24,038 | | Net (Decrease) Increase in Cash | $(20,855) | $3,377 | | Cash at End of Period | $67,467 | $47,785 | Notes to the Condensed Consolidated Financial Statements Notes detail the RFMi acquisition, segment performance, a patent infringement lawsuit, and management's assessment of liquidity - On October 15, 2021, the Company acquired a 51% ownership interest in RFM Integrated Device, Inc ("RFMi") for $6.0 million in cash and approximately $2.5 million in common stock[48] - The company operates in two segments; for the three months ended Dec 31, 2021, the RF Product segment generated $3.3 million in revenue and an operating loss of $15.2 million[89][90] - On October 4, 2021, Qorvo, Inc. filed a complaint against the company alleging patent infringement, false advertising, and unfair competition, which the company believes is without merit[87] - As of December 31, 2021, the company had cash and cash equivalents of $67.5 million, which it believes is sufficient to fund operations for more than twelve months[23][24] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses rising revenue driven by RF product sales, a widening net loss from increased expenses, and sufficient liquidity Overview The company develops RF filter solutions using its XBAW™ technology and recently expanded its portfolio through the RFMi acquisition - The company develops, designs, and manufactures RF filter solutions for wireless applications using its proprietary XBAW™ technology[104] - Recent developments include a design win for Wi-Fi 6E filters, entering the timing control market, acquiring a majority position in RFMi, and receiving a purchase order from a new tier-1 5G mobile customer[117] Results of Operations Quarterly revenue rose to $3.7 million, but the net loss increased to $15.2 million due to higher costs and operating expenses Quarterly Results Comparison | Metric (in millions) | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $3.7 | $1.3 | +$2.4 | | Cost of Revenue | $4.5 | $2.6 | +$1.9 | | R&D Expenses | $9.2 | $5.6 | +$3.6 | | G&A Expenses | $5.1 | $3.3 | +$1.8 | | Net Loss | $15.2 | $11.9 | +$3.3 | Six-Month Results Comparison | Metric (in millions) | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $5.5 | $1.9 | +$3.6 | | Cost of Revenue | $7.5 | $4.3 | +$3.2 | | R&D Expenses | $17.2 | $11.9 | +$5.3 | | G&A Expenses | $9.0 | $6.3 | +$2.7 | | Net Loss | $28.1 | $23.9 | +$4.2 | Liquidity and Capital Resources The company holds $67.5 million in cash, deemed sufficient for the next year, despite a decrease from operating and investing activities - The company had $67.5 million in cash and cash equivalents as of December 31, 2021[133] - During the six months ended December 31, 2021, the company raised gross proceeds of approximately $19.1 million from its ATM Equity Offering Sales Agreement[132] - Cash flow for the six months ended Dec 31, 2021: Operating activities used $23.5 million, investing activities used $16.6 million, and financing activities provided $19.3 million[137][138][139] Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required as the company qualifies as a smaller reporting company - This disclosure is not applicable to smaller reporting companies[140] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[142] - There were no changes in internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[143] PART II — OTHER INFORMATION Legal Proceedings The company is defending a patent infringement lawsuit filed by Qorvo, Inc, which it believes is without merit - The company is a defendant in a lawsuit filed by Qorvo, Inc. alleging patent infringement and other claims, as described in Note 12 of the financial statements[87][145] Risk Factors Key risks include potential negative impacts from intellectual property litigation and challenges related to integrating acquisitions - The company faces risks from intellectual property infringement claims, such as the lawsuit filed by Qorvo, Inc, which could lead to substantial damages, injunctions, or costly settlements[147][148] - Recent and future acquisitions, including the RFMi transaction, present risks such as integration problems, increased expenses, assumption of unknown liabilities, and potential dilution to existing shareholders[150][151][152] Unregistered Sales of Equity Securities and Use of Proceeds The company issued 262,533 unregistered shares of common stock as partial payment for the acquisition of RFMi - On November 12, 2021, the Company issued 262,533 shares of its common stock to Tai-Saw Technology Co Ltd as partial payment for its 51% ownership interest in RFMi in an exempt transaction[154] Defaults Upon Senior Securities The company reports that this item is not applicable - Not applicable[156] Mine Safety Disclosures The company reports that this item is not applicable - Not applicable[156] Other Information The company reports that this item is not applicable - Not applicable[156] Exhibits This section lists exhibits filed with the report, including officer certifications and interactive data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and Interactive Data Files (Exhibit 101)[158]