As filed with the Securities and Exchange Commission
on May 25, 2017
Registration No. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Akoustis Technologies, Inc.
(Exact name of registrant as specified in its
charter)
Delaware
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3661
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33-1229046
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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9805 Northcross Center Court, Suite H
Huntersville, NC 28078
(704)-997-5735
(Address, including zip code, and telephone
number,
including area code, of registrant’s
principal executive offices)
Jeffrey B. Shealy, CEO
Akoustis Technologies, Inc.
9805 Northcross Center Court, Suite H
Huntersville, NC 28078
(704) 997-5735
(Name, address, including zip code, and telephone
number,
including area code, of agent for service)
Copy to:
Michael Hoffman, Esq., Legal Counsel
Akoustis Technologies, Inc.
9805 Northcross Center Court, Suite H
Huntersville, NC 28078
(704) 274-3597
Approximate date of commencement of proposed
sale to the public:
From time to time after the effective date of this registration statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.
þ
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller
reporting company)
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Smaller reporting company
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þ
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Emerging growth company
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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 7(a)2(B) of the Securities Act.
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Title of Each Class of Securities to be Registered
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Amount to be
Registered (1)
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Proposed
Maximum
Offering
Price
Per Share (2)
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Proposed
Maximum
Aggregate
Offering Price (2)
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Amount of
Registration Fee
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Common stock, par value $0.001 per share
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3,397,536
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$
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10.18
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$
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34,586,916
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$
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4,008.62
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(1)
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Consists of (a) 2,855,000
outstanding shares of the registrant’s common stock, (b) 251,536 shares of the registrant’s common stock which may
become issuable upon exercise of common stock purchase warrants and (c) up to 291,000 shares of common stock issuable pursuant
to the price-protected anti-dilution provision applicable to 2,805,000 of the outstanding shares referenced in (a) above. Pursuant
to Rule 416 under the Securities Act of 1933, as amended, to the extent that such outstanding shares and warrants provide for
an increase in amount issuable or exercisable to prevent dilution resulting from stock splits, stock dividends, or similar transactions,
this registration statement shall be deemed to cover such additional shares of common stock issuable in connection with any such
provision.
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(2)
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Estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(c) under the Securities Act of
1933, as amended, based on the average of the high and low prices of the registrant’s
common stock as reported by the NASDAQ Stock Market LLC on May 22, 2017. The
shares offered hereunder may be sold by the selling stockholders from time to time in
the open market, through privately negotiated transactions or a combination of these
methods, at market prices prevailing at the time of sale or at negotiated prices.
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The registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus
is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and the selling
stockholders are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated May 25, 2017
AKOUSTIS TECHNOLOGIES, INC.
Prospectus
3,397,536
Shares
Common Stock
This prospectus relates to the sale of
up to 3,397,536 shares of our common stock, par value $0.001 per share (the “Common Stock”), by the selling stockholders
of Akoustis Technologies, Inc., a Delaware corporation, listed in this prospectus. Of the shares being offered, 2,855,000 shares
are presently issued and outstanding, 251,536 shares are issuable upon exercise of Common Stock purchase warrants, and 291,000
shares represent a good faith estimate of the number of shares that may become issuable pursuant to the price-protected anti-dilution
provision applicable to 2,805,000 outstanding shares referenced above. The shares offered by this prospectus may be sold by the
selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these
methods, at market prices prevailing at the time of sale or at negotiated prices.
The distribution of the shares by the selling
stockholders is not subject to any underwriting agreement. We will not receive any proceeds from the sale of the shares by the
selling stockholders. We will bear all expenses of registration incurred in connection with this offering, but all selling and
other expenses incurred by the selling stockholders will be borne by them.
Our Common Stock is traded on the NASDAQ
Capital Market under the symbol “AKTS.” On May 22, 2017, the last reported sale price for our Common Stock was $10.04
per share.
We are an “Emerging Growth Company”
as defined in the Jumpstart our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public
company reporting requirements for this prospectus and future filings. See “Prospectus Summary - Implications of Being an
Emerging Growth Company.”
Our business and an investment in our
securities involve a high degree of risk. Before making any investment in our securities, you should read and carefully consider
risks described in the “Risk Factors” section beginning on page 7 of this prospectus.
You should rely only on the information contained
in this prospectus or any prospectus supplement or amendment thereto. We have not authorized anyone to provide you with different
information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus is
only accurate on the date of this prospectus, regardless of the time of any sale of securities.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated May 25, 2017.
You should rely only on the information
contained in this prospectus. We have not authorized any other person to provide you with information that is different from that
contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We
take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give
you. The selling stockholders are offering to sell and seeking offers to buy these securities only in jurisdictions where offers
and sales are permitted. You should assume that the information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Common Stock. Our business, financial
condition, results of operations and prospects may have changed since that date. We are not making an offer of any securities
in any jurisdiction where the offer is not permitted.
TABLE OF CONTENTS
PROSPECTUS SUMMARY
The following summary highlights information
contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that should be
considered before investing in our Common Stock. Potential investors should read the entire prospectus carefully, including the
more detailed information regarding our business provided below in the “Description of Business” section, the risks
of purchasing our Common Stock discussed under the “Risk Factors” section, and our financial statements and the accompanying
notes to the financial statements.
Unless the context indicates otherwise, all
references in this registration statement to “Akoustis Technologies,” the “Company,” “we,”
“us” and “our” refer to Akoustis Technologies, Inc. and its wholly owned consolidated subsidiary, Akoustis,
Inc., and references to Akoustis refer to Akoustis, Inc.
This prospectus includes the trademarks of
Akoustis, Inc., Akoustis
®
and BulkONE
®
, See “Description of Business - Intellectual Property”.
All references to Akoustis and BulkONE in this prospectus are intended to include reference to such trademarks.
Overview
Akoustis is an early stage company focused
on developing, designing and manufacturing innovative radio frequency (RF) filter products for the mobile wireless device industry.
We use a fundamentally new piezoelectric resonator technology that we call BulkONE in the manufacturing of bulk acoustic wave
(BAW) resonators, the building blocks of high selectivity “RF” filters required to route signals in a smartphone or
other mobile or wearable device. Filters are a critical component of the RF front-end (RFFE), and their use has multiplied with
the launch and licensing of 4G/LTE frequency bands. They are used to define the range of frequencies of radio signals that are
transmitted (the “passband”) and simultaneously reject unwanted signals.
We plan to use single crystal piezoelectric
materials to develop a new class of RF filters with a fundamental advantage to reduce losses over existing thin film technologies.
Our technology has not yet obtained market validation from Tier I mobile wireless customers or been verified in commercial manufacturing,
and our RF filters have yet to generate any sales. We have incurred accumulated net losses from our inception through March 31,
2017 of approximately $14.2 million. We have fabricated research and development (“R&D”) resonators demonstrating
the feasibility of our BulkONE technology, and are currently transitioning the technology into a production-capable wafer fabrication
facility located in Canandaigua, NY.
Once our technology is qualified for mass
production, we expect to design and sell single crystal BAW RF filter products using our BulkONE technology. Our product focus
is on innovative single-band filter products for the growing RFFE market, which can be used to make duplexer or multiplexer filter
products necessary for the mobile Internet. These products present the greatest near-term potential for commercialization of our
technology. According to a McKinsey Global Institute report dated May 2013, the Mobile Internet, the so-called “Internet
of Things” (IoT), as well as advanced materials including piezoelectric ceramics and crystals are included in the twelve
potentially economically disruptive technologies with an estimated economic value impact that could be over $25 trillion.
Recent Developments
On each of May 2, 2017, May 12, 2017, and
May 24, 2017, the Company held a closing of a private placement offering (the “2017 Offering”) in which it sold an
aggregate of 663,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at
a fixed purchase price of $9.00 per share to accredited investors, for aggregate gross proceeds of $5,967,000, before deducting
commissions of $417,700 and expenses of $2,400. In connection with this closing, the Company agreed to pay a placement agent cash
commissions not to exceed 7% of the gross proceeds raised from investors in the 2017 Offering introduced by the placement agent.
In addition, the Company agreed to issue to the placement agent warrants to purchase a number of shares of Common Stock equal to
7% of the number of shares of Common Stock sold to investors in the 2017 Offering introduced by the placement agent. In
connection with the closing, the Company issued to the placement agent warrants to purchase an aggregate of 46,410 shares of Common
Stock. The warrants have a term of five years and an exercise price of $9.00 per share. See “Description of Business-2017
Offering.”
In accordance with the terms of the subscription
agreements executed by the Company and each of the investors in connection with the 2017 Offering, if the Company issues
additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions, including but not limited to issuances
of awards under Company employee stock incentive programs and certain issuances in connection with credit arrangements, equipment
financings, lease arrangements, or similar transactions), during the period ending on May 1, 2019, for a price per share lower
than the 2017 Offering Price of $9.00, each Investor in the 2017 Offering will be entitled to receive from the Company additional
shares of Common Stock in an amount such that, when added to the number of shares of Common Stock initially purchased by such
Investor and not already sold, will equal the number of shares of Common Stock that such Investor’s investment in the Offering
would have purchased at a ten percent (10%) discount to such lower price.
On March 23, 2017, we entered into an Asset
Purchase Agreement and a Real Property Purchase Agreement (collectively, the “STC-MEMS Agreements”) with The Research
Foundation for the State University of New York (“RF-SUNY”) and Fuller Road Management Corporation (“FRMC”),
an affiliate of RFSUNY (collectively, “Sellers”), respectively, to acquire certain specified assets, including STC-MEMS,
a semiconductor wafer-manufacturing operation and microelectromechanical systems (MEMS) business with associated wafer-manufacturing
tools, as well as the real estate and improvements associated with the facility located in Canandaigua, New York, which is used
in the operation of STC-MEMs (the assets and real estate and improvements referred to together herein as the “STC-MEMS Business”).
The Company also agreed to assume substantially all of the on-going obligations of the STC-MEMS Business incurred in the ordinary
course of business.
Pursuant to the STC-MEMS Agreements, and subject
to the satisfaction or waiver of certain conditions, the Company will purchase the STC-MEMS Business from Sellers for an aggregate
purchase price of $2.75 million, subject to adjustment, payable in cash, at closing.
The Company has made various representations
and warranties and covenants in the STC-MEMS Agreements that are customary for a company acting as a buyer in its industry except
that the Company is required to pay to FRMC a penalty if the Company sells the STC-MEMS property within three (3) years after
the date of the STC-MEMS Agreements for an amount in excess of $1.75 million, subject to certain enumerated exceptions.
While the STC-MEMS Agreements contemplates
that a closing of the sale of the STC-MEMS Business will take place on or about June 26, 2017, the conditions precedent to closing
are such that there can be no assurance that the Company will complete its acquisition of the STC-MEMS Business in that time or
at all. See “Description of Business—STC-MEMS Acquisition.”
The Company held multiple closings of a
private placement offering of Common Stock that commenced on November 25, 2016 (the “2016-2017 Offering”). See “Description
of Business—2016-2017 Offering.” The Company held the final closing of the 2016-2017 Offering on February 24, 2017,
of 20,000 shares of its Common Stock at the 2016-2017 Offering Price of $5.00 for aggregate gross proceeds of $100,000. The Company
sold a total of 2,142,000 common shares of Common Stock in the 2016-2017 Offering for aggregate gross proceeds of approximately
$10.7 million before deducting commissions and expenses.
In accordance with the terms of each of the
subscription agreements executed by the Company and each of the investors in connection with the 2016-2017 Offering, if the Company
issues additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions, including but not limited
to issuances of awards under Company employee stock incentive programs and certain issuances in connection with credit arrangements,
equipment financings, lease arrangements, or similar transactions) between November 25, 2016 and the date that is 90 days after
the date on which a registration statement registering the resale of the shares is declared effective by the Securities and Exchange
Commission (the “SEC”), for a consideration per share less than the 2016-2017 Offering Price (as adjusted for any
subsequent stock dividend, stock split, distribution, recapitalization, reclassification, reorganization, or similar event) (the
“Lower Price”), each investor will be entitled to receive from the Company additional shares of Common Stock in an
amount such that, when added to the number of shares of Common Stock initially purchased by such Investor, will equal the number
of shares of Common Stock that such Investor’s investment in the Offering would have purchased at the Lower Price.
On March 13, 2017, trading of our Common Stock
transitioned from the OTC Markets Group, Inc. OTCQB quotation system to the NASDAQ Capital Market exchange under the symbol “AKTS.”
For a glossary of technical terms used herein, see “Description
of Business – Glossary” below.
Organizational History
We were incorporated as Danlax, Corp. in Nevada
on April 10, 2013. Prior to the Merger (as defined below), our business was the development and sales of mobile games.
On May 22, 2015, our wholly owned subsidiary,
Akoustis Acquisition Corp., a corporation formed in the State of Delaware on May 15, 2015, merged (the “Merger”) with
and into Akoustis, Inc., a corporation incorporated in the State of Delaware on May 12, 2014. Akoustis, Inc., was the surviving
corporation in the Merger and became our wholly owned subsidiary. All of the outstanding stock of Akoustis, Inc., was exchanged
for shares of our Common Stock, as described in more detail under “Description of Business - Organizational History.”
As a result of the Merger, we discontinued
our pre-Merger business and acquired the business of Akoustis, Inc., and we have continued the existing business operations of
Akoustis, Inc. as a publicly-traded company under the name Akoustis Technologies, Inc.
On December 15, 2016, our stockholders approved
the reincorporation of the Company from the State of Nevada to the State of Delaware pursuant to a plan of conversion. On that
same day, we filed Articles of Conversion in the State of Nevada and a Certificate of Conversion and Certificate of Incorporation
in the State of Delaware. As a result, as of December 15, 2016, Akoustis Technologies, Inc. is a Delaware corporation.
In accordance with “reverse merger”
accounting treatment, our historical financial statements as of period ends, and for periods ended, prior to the Merger were replaced
with the historical financial statements of Akoustis, Inc. in our SEC filings made subsequent to the Merger.
Capital Needs
The Company believes that it has sufficient
cash to fund its operations through June 30, 2018. This expectation does not account for any cash needs associated with the integration
and operation of the STC-MEMS Business as the Company is continuing to conduct due diligence on the operations and available financial
information associated with the STC-MEMS Business. Additionally, there is no assurance that the Company’s projections and
estimates are accurate. In the event that the Company does not receive anticipated proceeds from research grants or such grant
payments are delayed, or the Company experiences costs in excess of estimates to continue its research and development plan, it
is possible that the Company would not have sufficient resources to continue as a going concern for the next year. In order to
mitigate these risks, the Company is actively managing and controlling the Company’s cash outflows.
About This Offering
This prospectus relates to the public offering,
which is not being underwritten, by the selling stockholders listed in this prospectus, of up to 3,397,536 shares of our Common
Stock. Of the shares being offered, 2,855,000 are presently issued and outstanding and 251,536 are issuable upon exercise of Common
Stock purchase warrants, and 291,000 shares, which is a good faith estimate of the number of shares that may become issuable pursuant
to the price-protected anti-dilution provision applicable to 2,805,000 outstanding shares referenced above. The 2,855,000 shares
that are issued and outstanding that this prospectus covers includes (a) up to 2,142,000 outstanding shares of Common Stock sold
to investors in the 2016-2017 Offering, (b) up to 50,000 shares of Common Stock held by certain other stockholders and (c) up to
663,000 outstanding shares of Common Stock sold to investors in the 2017 Offering. The shares issuable upon exercise of Common
Stock purchase warrants that this prospectus covers includes up to 205,126 shares of Common Stock issuable upon exercise of Common
Stock purchase warrants issued to the placement agent in the 2016-2017 Offering and up to 46,410 shares of Common Stock issuable
upon exercise of Common Stock purchase warrants issued to the placement agent in the 2017 Offering. The shares offered by this
prospectus may be sold by the selling stockholders from time to time in the open market, through negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices. We will receive none of the proceeds from the sale of
the shares by the selling stockholders. We will bear all expenses of registration incurred in connection with this offering, but
all selling and other expenses incurred by the selling stockholders will be borne by them.
Selected Risks Associated with an Investment
in Shares of Our Common Stock
An investment in shares of our Common Stock
is highly speculative and is subject to numerous risks described in the section entitled “Risk Factors” and elsewhere
in this prospectus. You should carefully consider these risks before making an investment. Some of these risks include:
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We
have a limited operating history upon which investors can evaluate our business and future
prospects.
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The
wireless communication industry is subject to ongoing regulatory obligations and review.
Maintaining compliance with these requirements may result in significant additional expense
to us, and any failure to maintain such compliance could cause our business to suffer.
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We
have a history of losses, will need substantial additional funding to continue our operations
and may not achieve or sustain profitability in the future.
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If
we are unable to obtain additional financing on acceptable terms, we may have to curtail
our growth or cease our development plans and operations.
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You
could lose all of your investment.
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You
may experience dilution of your ownership interests because of the future issuance of
additional shares of our common or preferred stock or other securities that are convertible
into or exercisable for our common or preferred stock.
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We
may not generate revenues or achieve profitability.
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Our
products may not be able to be commercialized or accepted in the market.
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If
we are unable to establish effective marketing and sales capabilities or enter into agreements
with third parties to market and sell our RF filters, we may not be able to effectively
generate product revenues.
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If
we fail to obtain, maintain and enforce our intellectual property rights, we may not
be able to prevent third parties from using our proprietary technologies and may lose
access to technologies critical to our products.
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Corporate Information
Our principal executive offices are located
at 9805 Northcross Center Court, Suite H, Huntersville, North Carolina 28078. Our telephone number is (704) 997-5735. Our website
address is
www.akoustis.com
. The information on, or that can be accessed through, our website is not part of this prospectus.
Implications of Being an Emerging Growth
Company
We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of
(i) June 30, 2019, the last day of the fiscal year following the fifth anniversary of the date of the first sale of our Common
Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”);
(ii) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (iii) the date on which
we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed
to be a large accelerated filer under applicable SEC rules. We expect that we will remain an emerging growth company for the foreseeable
future, but cannot retain our emerging growth company status indefinitely and will no longer qualify as an emerging growth company
on or before June 30, 2019. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,”
and references herein to “emerging growth company” have the meaning associated with it in the JOBS Act. For so long
as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements
that are applicable to other public companies that are not emerging growth companies.
These exemptions include:
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not
being required to comply with the requirement of auditor attestation of our internal
control over financial reporting;
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not
being required to comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to
the auditor’s report providing additional information about the audit and the financial
statements;
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reduced
disclosure obligations regarding executive compensation; and
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not
being required to hold a nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved.
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For as long as we continue to be an emerging
growth company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of that
classification. We have taken advantage of certain of those reduced reporting burdens in this prospectus. Accordingly, the information
contained herein may be different than the information you receive from other public companies in which you hold stock.
An emerging growth company can take advantage
of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period,
and as a result, we will not be required to adopt new or revised accounting standards on the dates on which adoption of such standards
is required for other public reporting companies.
We are also a “smaller reporting company”
as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage
of certain of the scaled disclosure requirements available for smaller reporting companies.
The Offering
Common stock currently outstanding
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19,075,050 shares (1)
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Preferred stock currently outstanding
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None
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Common stock offered by the Company
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None
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Common stock offered by the selling stockholders
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3,397,536 shares (2)
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Use of proceeds
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We will not receive any of the proceeds from the sales of our Common Stock by the selling stockholders.
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Nasdaq Capital Market symbol
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AKTS
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Risk Factors
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You should carefully consider the information set forth in this
prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 7 of
this prospectus before deciding whether or not to invest in shares of our Common Stock.
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(1) As of May 24, 2017. This
number excludes outstanding warrants and options to purchase an aggregate of 772,165 shares of Common Stock. This number also excludes
shares of Common Stock that may become issuable pursuant to the price-protected anti-dilution provision applicable to 2,805,000
of the outstanding shares. See “Description of Business—2016-2017 Offering and —2017 Offering.”
(2) Consists of 2,855,000 outstanding shares
of Common Stock and 251,536 shares of Common Stock issuable upon exercise of Common Stock purchase warrants and 291,000
shares, which is a good faith estimate of the number of shares that may become issuable pursuant to the price-protected
anti-dilution provision applicable to 2,805,000 outstanding shares referenced above.
NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking statements,
including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any
and all statements contained in this prospectus that are not statements of historical fact may be deemed forward-looking statements.
Terms such as “may,” “might,” “would,” “should,” “could,” “project,”
“estimate,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,”
“develop,” “plan,” “help,” “believe,” “continue,” “intend,”
“expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be
intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these
identifying terms. Forward-looking statements in this prospectus 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 filters, (ii) a projection 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 a discussion and analysis of financial condition by management or in the results of operations
included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described
in points (i), (ii) or (iii) above.
The 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:
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our inability
to obtain adequate financing,
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our limited
operating history,
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our inability
to generate revenues or achieve profitability,
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our inability
to achieve acceptance of our products in the market or commercialize our products,
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upturns and
downturns in the industry,
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our
planned acquisition of STC-MEMS, and such acquisition may not be closed, could disrupt
our business, may not be successfully integrated and harm our financial condition,
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our limited
number of patents,
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failure to
obtain, maintain and enforce our intellectual property rights,
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our inability to attract and retain qualified personnel,
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our substantial reliance on third parties to manufacture
products,
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existing or increased competition,
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failure to innovate or adapt to new or emerging technologies,
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results of arbitration and litigation,
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stock volatility and illiquidity, and
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our failure to implement our business plans or strategies.
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A description of some of the risks and uncertainties
that could cause our actual results to differ materially from those described by the forward-looking statements in this prospectus
appears in the section captioned “Risk Factors” and elsewhere in this prospectus. 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 prospectus to reflect any
new information or future events or circumstances or otherwise.
RISK FACTORS
An investment in shares of our Common Stock
is highly speculative and involves a high degree of risk. We face a variety of risks that may affect our operations or financial
results and many of those risks are driven by factors that we cannot control or predict. Before investing in our Common Stock,
you should carefully consider the following risks, together with the financial and other information contained in this prospectus.
If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be
materially adversely affected. In that case, the trading price of our Common Stock would likely decline and you may lose all or
a part of your investment. Only those investors who can bear the risk of loss of their entire investment should invest in our
Common Stock.
This prospectus contains certain statements
relating to future events or the future financial performance of our company. Prospective investors are cautioned that such statements
are only predictions and involve risks and uncertainties, and that actual events or results may differ materially. In evaluating
such statements, prospective investors should specifically consider the various factors identified in this prospectus, including
the matters set forth below, which could cause actual results to differ materially from those indicated by such forward-looking
statements.
If any of the following or other risks materialize,
our business, financial condition, and results of operations could be materially adversely affected which, in turn, could adversely
impact the value of our Common Stock. In such a case, investors in our Common Stock could lose all or part of their investment.
Prospective investors should consider carefully
whether an investment in the Company is suitable for them in light of the information contained in this prospectus and the financial
resources available to them. The risks described below do not purport to be all the risks to which the Company or the Company
could be exposed. This section is a summary of the risks that we presently believe are material to the operations of the Company.
Additional risks of which we are not presently aware or which we presently deem immaterial may also impair the Company’s
business, financial condition or results of operations.
Risks Related to our Business and the Industry
in Which We Operate
We have a limited operating history
upon which investors can evaluate our business and future prospects.
We are an early stage company that has
not yet begun any commercial operations. Historically, we have been a shell company with no operating history and no assets other
than cash. Upon consummation of the Merger with Akoustis, Inc., we redirected our business focus towards the development of advanced
single crystal bulk acoustic wave filter products for RF front-ends for use in the mobile wireless device industry. Although Akoustis
since its inception focused its activity on research and development (“R&D”) of high efficiency acoustic wave
resonator technology utilizing single crystal piezoelectric materials, this technology has not yet obtained market acceptance
or been verified in commercial manufacturing, and its RF filters have not generated any sales.
Since our expectations of potential customers
and future demand for our products are based on estimates of planned operations rather than experience, it is difficult for our
management and our investors to accurately forecast and evaluate our future prospects and our revenues. Our proposed operations
are therefore subject to all of the risks inherent in light of the expenses, difficulties, complications and delays frequently
encountered in connection with the formation of any new business and the development of a product, as well as those risks that
are specific to our business in particular. An investment in an early stage company such as ours involves a degree of risk, including
the possibility that your entire investment may be lost. The risks include, but are not limited to, the possibility that we will
not be able to develop functional and scalable products, or that although functional and scalable, our products and/or services
will not be accepted in the market. To successfully introduce and market our products at a profit, we must establish brand name
recognition and competitive advantages for our products. There are no assurances that the Company can successfully address these
challenges. If it is unsuccessful, the Company and its business, financial condition and operating results will be materially
and adversely affected.
We may not generate revenues or achieve
profitability.
We have incurred operating net losses since
our inception and expect to continue to have negative cash flow from operations. We have not generated any significant revenues.
Our primary source of income has been from R&D grants. We have experienced net losses of approximately $14.2 million for the
period from May 12, 2014 (inception) to March 31, 2017. Our future profitability will depend on our ability to create a sustainable
business model and generate revenues, which is subject to a number of factors, including our ability to successfully implement
our strategies and execute our R&D plan, our ability to implement our improved design and cost reductions into manufacturing
of our RF filters, the availability of funding, market acceptance of our products, consumer demand for end products incorporating
our products, our ability to compete effectively in a crowded field, our ability to respond effectively to technological advances
by timely introducing our new technologies and products and global economic and political conditions.
Our future profitability also depends on our
expense levels, which are influenced by a number of factors, including the resources we devote to developing and supporting our
projects and potential products, the continued progress of our research and development of potential products, our ability to
improve research and development efficiencies, license fees or royalties we may be required to pay, and the potential need to
acquire licenses to new technology, the availability of intellectual property for licensing or acquisition, or to use our technology
in new markets, which could require us to pay unanticipated license fees and royalties in connection with these licenses.
Our development and commercialization efforts
may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenues to offset higher expenses.
These expenses, among other things, may cause our net income and working capital to decrease. If we fail to generate revenue and
manage our expenses, we may never achieve profitability, which would adversely and materially affect our ability to provide a
return to our investors.
The industry and the markets in which
the Company operates are highly competitive and subject to rapid technological change.
The industry and the markets in which the
Company operates are highly competitive and subject to rapid technological change.
The markets in which we intend to compete
are intensely competitive. We will operate primarily in the industry that designs and produces semiconductor components for wireless
communications and other wireless devices, which is subject to rapid changes in both product and process technologies based on
demand and evolving industry standards. The intended markets for our products are characterized by:
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rapid
technological developments and product evolution,
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rapid
changes in customer requirements,
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frequent
new product introductions and enhancements,
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continuous
demand for higher levels of integration, decreased size and decreased power consumption,
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short
product life cycles with declining prices over the life cycle of the product, and
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evolving
industry standards.
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The continuous evolutions of these technologies
and frequent introduction of new products and enhancements have generally resulted in short product life cycles for wireless semiconductor
products, in general, and for RF front-end products, in particular. Our products could become obsolete or less competitive sooner
than anticipated because of a faster than anticipated change in one or more of the above-noted factors. Therefore, in order for
our RF filters to be competitive and achieve market acceptance, we need to keep pace with rapid development of new process technologies,
which requires us to:
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respond
effectively to technological advances by timely introducing our new technologies and
products,
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successfully
implement our strategies and execute our R&D plan in practice,
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improve
the efficiency of our technology, and
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implement
our improved design and cost reductions into manufacturing of our RF filters.
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Our products may not be accepted in the market.
Although we believe that our BulkOne acoustic
wave resonator technology that utilizes single crystal piezoelectric materials will provide material advantages over existing
RF filters and are currently developing various methods of integration suitable for implementation of this technology to RF filters,
we cannot be certain that our RF filters will be able to achieve or maintain market acceptance. While we have fabricated R&D
resonators that demonstrate the feasibility of our BulkONE technology, we are still in the process of transitioning this technology
into a production-capable wafer fabrication facility for manufacturing of our RF filters, and this technology is not verified
yet in practice or on a commercial scale. There are also no records that can demonstrate our ability to successfully overcome
many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields. In addition to our
limited operating history, we will depend on a limited number of manufacturers and customers for a significant portion of our
revenue in the future. Each of these factors may adversely affect our ability to implement our business strategy and achieve our
business goals.
The successful development of our BulkOne
technology and market acceptance of our RF filters will be highly complex and will depend on the following principal competitive
factors, including our ability to:
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comply
with industry standards and effectively compete against current technology for producing
RF acoustic wave filters,
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differentiate
our products from offerings of our competitors by delivering RF filters that are higher
in quality, reliability and technical performance,
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anticipate
customer and market requirements, changes in technology and industry standards and timely
develop improved technologies that meet high levels of satisfaction of our potential
customers,
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maintain,
grow and manage our internal teams to the extent we increase our operations and develop
new segments of our business,
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develop
and maintain successful collaborative, strategic, and other relationships with manufacturers,
customers and contractors,
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protect,
develop or otherwise obtain adequate intellectual property for our technology and our
filters, and
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obtain
strong financial, sales, marketing, technical and other resources necessary to develop,
test, manufacture, commercialize and market our filters.
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If we are unsuccessful in accomplishing these
objectives, we may not be able to compete successfully against current and potential competitors. As a result, our BulkOne technology
and our RF filters may not be accepted in the market and we may never attain profitability.
We will face intense competition, which
may cause pricing pressures, decreased gross margins and loss of potential market share and may materially and adversely affect
our business, financial condition and results of operations.
We will compete with U.S. and international
semiconductor manufacturers and mobile semiconductor companies of all sizes in terms of resources and market share, some of whom
have significantly greater financial, technical, manufacturing and marketing resources than we do. We expect competition in our
markets to intensify as new competitors enter the RF component market, existing competitors merge or form alliances, and new technologies
emerge. Our competitors may introduce new solutions and technologies that are superior to our BAW technology, are verified on
a commercial scale, and have achieved widespread market acceptance. Certain of our competitors may be able to adapt more quickly
than we can to new or emerging technologies and changes in customer requirements or may be able to devote greater resources to
the development, promotion and sale of their products than we can. This implementation may require us to modify the manufacturing
process for our filters, design new products to more stringent standards, and redesign some existing products, which may prove
difficult for us and result in delays in product deliveries and increased expenses.
Increased competition could also result in
pricing pressures, declining average selling prices for our RF filters, decreased gross margins and loss of market share. We will
need to make substantial investments to develop these enhancements and technologies, and we cannot assure investors that we will
have funds available for these investments or that these enhancements and technologies will be successful. If a competing technology
emerges that is, or is perceived to be, superior to our existing technology and we are unable to adapt to these changes and to
compete effectively, our market share and financial condition could be materially and adversely affected, and our business, revenue,
and results of operations could be harmed.
Changes in general economic conditions,
together with other factors, cause significant upturns and downturns in the industry, and
our business, therefore, may also experience
cyclical fluctuations in the future.
From time to time, changes in general economic
conditions, together with other factors, may cause significant upturns and downturns in the semiconductor industry. These fluctuations
are due to a number of factors, many of which are beyond our control:
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levels of inventory
in our end markets,
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availability and
cost of supply for manufacturing of our RF filters using our design,
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changes in end-user
demand for the products manufactured with our technology and sold by our prospective
customers,
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industry production
capacity levels and fluctuations in industry manufacturing yields,
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market acceptance
of our future customers’ products that incorporate our RF filters,
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the gain or loss
of significant customers,
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the effects of competitive
pricing pressures, including decreases in average selling prices of our RF filters,
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new product and technology
introductions by competitors,
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changes in the mix
of products produced and sold, and
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intellectual property
disputes.
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As a result, the demand for our products can
change quickly and in ways we may not anticipate, and our business, therefore, may also experience cyclical fluctuations in future
operating results. In addition, future downturns in the electronic systems industry could adversely impact our revenue and harm
our business, financial condition and results of operations.
If we are unable to attract and retain
qualified personnel to contribute to the development, manufacture and sale of our products, we may not be able to effectively
operate our business.
As the source of our technological and
product innovations, our key technical personnel represent a significant asset. We believe that our future success is highly dependent
on the continued services of our current key officers, employees, and Board members, as well as our ability to attract and retain
highly skilled and experienced technical personnel. The loss of their services could have a detrimental effect on our operations.
Specifically, the loss of the services of our President and Chief Executive Officer, our Chief Financial Officer, our Vice President
of Operations, our Vice President of Business Development, any major change in our Board or management, or our inability to attract,
retain and motivate qualified personnel could have a material adverse effect on our ability to operate our business.
On
May 12, 2017, the Company delivered notice to its Chief Financial Officer, its Vice President of Business Development, and its
Vice President of Operations, that their employment agreements with the Company would not automatically renew pursuant to the terms
therein. Accordingly, their employment agreements will expire June 15, 2017.
The competition for management and technical
personnel is intense in the wireless semiconductor industry, and therefore, we cannot assure you that we will be able to attract
and retain qualified management and other personnel necessary for the design, development, manufacture and sale of our products.
We substantially rely on third parties
to manufacture our RF filters.
We employ a “fabless” business
strategy, meaning that we do not own a semiconductor fabrication facility, or fab, and do not currently have the infrastructure
or capability internally, such as our own manufacturing facilities, to manufacture our wafers and our filters for use in commercial
quantities. Instead, we leverage the capital investments and capacity of manufacturers to fabricate our wafers. Therefore,
success of implementation of our single-crystal BAW technology for manufacturing our RF filters and its commercial production will
substantially depend on our ability to develop, maintain and expand our strategic relationships with manufacturers that will fabricate
wafers or our ability to put in place the infrastructure and internal capacity necessary to fabricate wafers. Any impairment in
our relationship with these manufacturers could have a material adverse effect on our business, results of operations, cash flow
and financial condition. Although we have entered into a joint development agreement and a foundry agreement with Global Communication
Semiconductors, LLC (“GCS”), and may explore other plans to enter into agreements with more manufacturers, to fabricate
our RF filters for R&D and for commercial sales, there can be no assurance that we will be able to retain those relationships
on commercially reasonable terms, if at all. Since we expect to depend upon one or a limited number of these manufacturers for
a signification portion of our revenue in the future, we could experience delays in the launch and commercial productions of our
RF filters if we are unable to maintain those relationships.
Reliance on a limited number of manufacturers
also may expose us to the following risks:
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We
may be unable to identify manufacturers on acceptable terms, or at all, because the number
of potential manufacturers is limited. In addition, a new manufacturer would have to
be educated in, or develop substantially equivalent processes for manufacturing of, our
wafers.
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Our
manufacturers might be unable to formulate and manufacture wafers in the volume and of
the quality required to meet demands of our R&D and commercial needs.
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Our
manufacturers may not perform as contractually agreed or may not remain in the manufacturing
business for the time required to successfully produce, store and distribute our products.
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Since
our filters are not sold directly to the end-user, but are components of other products,
we highly depend upon selection of our design and technology by these manufacturers from
among alternative offerings and including and incorporating our filters into their final
product.
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Each of these risks could delay the commercialization
of our RF filters and its market acceptance, result in higher costs or deprive us of potential product revenues.
We rely on our independent contractors
in adequately performing their contractual obligations, meeting expected deadlines and applicable regulatory requirements.
We depend on our independent contractors to
adequately perform a substantial part of our projects and successfully carry their contractual duties and obligations. However,
these contractors may not assign as a great priority a process of developing our technology in accordance with our levels of quality
control, may not meet expected deadlines, may not devote sufficient time to develop our technology, or may not pursue their contractual
obligations as diligently as we would if we were undertaking such activities ourselves. They may also establish relationships
with other commercial entities, some of which may compete with us. If our contractors assist our competitors to our detriment,
our competitive position would be harmed. If our independent contractors fail to perform their contractual duties at acceptable
quality levels or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the data they obtain
is compromised due to a failure to adhere to our protocols, legal and regulatory requirements or for other reasons, the development
and commercialization of our filters could be stopped, delayed, or made less profitable. As a result, our operations and the commercial
prospects for marketing of our RF filters would be harmed, our costs could increase, and our ability to generate revenues could
be delayed.
Product defects could adversely affect
the results of our operations and may expose us to product liability claims.
The fabrication of RF filters is a complex
and precise process. While we intend to supply design and to monitor fabrication of our RF filters by our manufacturers, we may
not be able to monitor their quality control, their quality assurance and their qualified personnel. If any of our manufacturers
fails to successfully manufacture wafers that conform to our design specifications and the strict regulatory requirements of the
Federal Communications Commission (“FCC”), it may result in substantial risk of undetected flaws in components or
other materials used by our manufacturers during fabrication of our filters and could lead to product defects and costs to repair
or replace these parts or materials. Any such failure by our manufacturers would significantly impact our ability to develop and
implement our technology and to improve performance of our RF filters. Our inability to timely find a substitute manufacturer
that can comply with such requirements could result in significant costs, as well as negative publicity and damage to our reputation
that could reduce demand for our products.
We also could be subject to product liability
lawsuits if the wireless devices containing our RF filters cause injury. Recently, interest groups have requested that the FCC
investigate claims that wireless communications technologies pose health concerns and cause interference with airbags, hearing
aids and medical devices. Any such product liability claims may include allegations of defects in manufacturing, defects in design,
a failure to warn of dangers inherent in the product or inadequate disclosure of risks related to the use of our product, negligence,
strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts.
If we are unable to establish effective
marketing and sales capabilities or enter into agreements with third parties to market and sell our RF filters, we may not be
able to effectively generate product revenues.
We have limited experience selling, marketing
or distributing products and currently have a small internal marketing and sales force. In order to launch and commercialize our
technology and our RF filters, we must build on a territory-by-territory basis marketing, sales, distribution, managerial and
other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful
in doing so. Therefore, we may choose to collaborate, either globally or on a territory-by-territory basis, with third parties
that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems
or in lieu of our own sales force and distribution systems. If so, our success will depend, in part, on our ability to enter into
and maintain collaborative relationships for such capabilities, such collaborator’s strategic interest in the products under
development and such collaborator’s ability to successfully market and sell any such products.
If we are unable to enter into such arrangements
when needed on acceptable terms or at all, we may not be able to successfully commercialize our filters. Further, to the extent
that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third
parties, and there can be no assurance that such efforts will be successful. If we decide in the future to establish an internal
sales and marketing team with technical expertise and supporting distribution capabilities to commercialize our RF filters, it
could be expensive and time consuming and would require significant attention of our executive officers to manage. We may also
not have sufficient resources to allocate to the sales and marketing of our filters. Any failure or delay in the development of
sales, marketing and distribution capabilities, either through collaboration with one or more third parties or through internal
efforts, would adversely impact the commercialization of any of our products that we obtain approval to market. As a result, our
future product revenue would suffer and we may incur significant additional losses.
Risks Related to Our Intellectual Property
If we fail to obtain, maintain and enforce
our intellectual property rights, we may not be able to prevent third parties from using our proprietary technologies and may
lose access to technologies critical to our products.
Our long-term success largely depends on our
ability to market technologically competitive products which, in turn, largely depends on our ability to obtain and maintain adequate
intellectual property protection and to enforce our proprietary rights without infringing the proprietary rights of third parties.
While we rely upon a combination of our patent applications currently pending with the United States Patent and Trademark Office
(“USPTO”), our trademarks, copyrights, trade secret protection and confidentiality agreements to protect the intellectual
property related to our technologies, there can be no assurance that:
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our
currently pending or future patent applications will result in issued patents,
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our
limited patent portfolio will provide adequate protection to our core technology,
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we
will succeed in protecting our technology adequately in all key jurisdictions, or
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we
can prevent third parties from disclosure or misappropriation of our proprietary information
which could enable competitors to quickly duplicate or surpass our technological achievements,
thus eroding any competitive advantage we may derive from the proprietary information.
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We have a limited number of patent applications
which may not result in issued patents.
In the United States and internationally,
we have 11 patents, of which three (3) patents are the subject to a license agreement requiring further negotiation and 17 pending
patent applications; however, there is no assurance that any of the pending applications or our future patent applications will
result in patents being issued, or that any patents that may be issued as a result of existing or future applications will provide
meaningful protection or commercial advantage to us.
The process of seeking patent protection in
the United States and abroad can be long and expensive. Since patent applications in the United States and most other countries
are confidential for a period of time after filing, we cannot be certain at the time of filing that we are the first to file any
patent application related to our single crystal acoustic wave filter technology. In addition, patent applications are often published
as part of the patent application process, even if such applications do not issue as patents. When published, such applications
will become publicly available, and proprietary information disclosed in the application will become available to others. While
at present we are unaware of competing patent applications, competing applications could potentially surface.
Even if all of our pending patent applications
are granted and result in registration of our patents, we cannot predict the breadth of claims that may be allowed or enforced,
or that the scope of any patent rights could provide a sufficient degree of protection that could permit us to gain or keep our
competitive advantage with respect to these products and technologies. For example, we cannot predict:
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the
degree and range of protection any patents will afford us against competitors, including
whether third parties will find ways to make, use, sell, offer to sell or import competitive
products without infringing our patents,
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if
and when patents will be issued,
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if
third parties will obtain patents claiming inventions similar to those covered by our
patents and patent applications,
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if
third parties have blocking patents that could be used to prevent us from marketing our
own patented products and practicing our own technology, or
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whether
we will need to initiate litigation or administrative proceedings (
e.g.
, at the
USPTO) in connection with patent rights, which may be costly whether we win or lose.
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As a result, the patent applications we own
may fail to result in issued patents in the United States. Third parties may challenge the validity, enforceability or scope of
any issued patents or patents issued to us in the future, which may result in those patents being narrowed, invalidated or held
unenforceable. Even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual
property or prevent others from developing similar products that do not infringe the claims made in our patents. If the breadth
or strength of protection provided by the patents we hold or pursue is threatened, we may not be able to prevent others from offering
similar technology and products in the RF front-end mobile market and our ability to commercialize our RF filters with technology
protected by those patents could be threatened.
Our pending patent applications may fail to
result in issued patents outside of the United States, which may significantly limit our ability to prevent misappropriation of
our proprietary information or infringement of our intellectual property rights in countries outside of the United States where
our filters may be sold in the future. If we file foreign patent applications related to our pending U.S. patent applications
or to our issued patents in the United States, these applications may be contested and fail to result in issued patents outside
of the United States or we may be required to narrow our claims. Even if some or all of our patent applications are granted outside
of the United States and result in issued patents, effective enforcement of rights granted by these patents in some countries
may not be available due to the differences in foreign patent and other laws concerning intellectual property rights, a relatively
weak legal regime protecting intellectual property rights in these countries, and because it is difficult, expensive and time-consuming
to police unauthorized use of our intellectual property when infringers are overseas. This failure to obtain or maintain adequate
protection of our intellectual property rights outside of the United States could have a materially adverse effect on our business,
results of operations and financial conditions.
We may be involved in lawsuits to protect
or enforce our patents, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe our patents or the
patents of our potential licensors. To attempt to stop infringement or unauthorized use, we may need to file infringement claims,
which can be expensive and time consuming and distract management.
If we pursue any infringement proceeding,
a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party
from using the relevant technology on the grounds that our patents do not cover the technology in question. Additionally, any
enforcement of our patents may provoke third parties to assert counterclaims against us. Some of our current and potential competitors
have the ability to dedicate substantially greater resources to enforcing their intellectual property rights than we have. Moreover,
the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, which
could reduce the likelihood of success of, or the amount of damages that could be awarded resulting from, any infringement proceeding
we pursue in any such jurisdiction. An adverse result in any infringement litigation or defense proceedings could put one or more
of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications
at risk of not issuing, which could limit the ability of our filters to compete in those jurisdictions.
Interference proceedings could be provoked
by third parties or brought by the USPTO to determine the priority of inventions with respect to our patents or patent applications.
An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to use it from the
prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable
terms, or at all.
We need to protect our trademark rights
and disclosure of our trade secrets to prevent competitors from taking advantage of our goodwill.
We believe that the protection of our trademark
rights is an important factor in product recognition, protecting our brand, maintaining goodwill, and maintaining or increasing
market share. We currently have two trademarks that are registered with the USPTO — the Akoustis and BulkONE marks —
and we may expend substantial cost and effort in an attempt to register new trademarks and maintain and enforce our trademark
rights. If we do not adequately protect our rights in our trademarks from infringement, any goodwill that we have developed in
those trademarks could be lost or impaired.
Third parties may claim that the sale or promotion
of our products, when and if we have any, may infringe on the trademark rights of others. Trademark infringement problems occur
frequently in connection with the sale and marketing of products in the RFFE mobile industry. If we become involved in any dispute
regarding our trademark rights, regardless of whether we prevail, we could be required to engage in costly, distracting and time-consuming
litigation that could harm our business. If the trademarks we use are found to infringe upon the trademark of another company,
we could be liable for damages and be forced to stop using those trademarks, and as result, we could lose all the goodwill that
has been developed in those trademarks.
In addition to the protection afforded by
patents and trademarks, we seek to rely on copyright, trade secret protection and confidentiality agreements to protect proprietary
know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our processes
that involve proprietary know-how, information or technology that is not covered by patents. For Akoustis, this includes chip
layouts, circuit designs, resonator layouts and implementation, and membrane definition. Although we require all of our employees
and certain consultants and advisors to assign inventions to us, and all of our employees, consultants, advisors and any third
parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, our trade
secrets and other proprietary information may be disclosed or competitors may otherwise gain access to such information or independently
develop substantially equivalent information. If we are unable to prevent material disclosure of the intellectual property related
to our technologies to third parties, we will not be able to establish or maintain the competitive advantage that we believe is
provided by such intellectual property, which would weaken our competitive market position, and materially adversely affect our
business and operational results.
Development of certain technologies
with our manufacturers may result in restrictions on jointly-developed intellectual property.
In order to maintain and expand our strategic
relationship with manufacturers of our filters, we may, from time to time, develop certain technologies jointly with these manufacturers
and file for further intellectual property protection and/or seek to commercialize such technologies. We entered into the Joint
Development Agreement with GCS and may enter in the future into joint development agreements with other manufacturers to provide
for joint development works and joint intellectual property rights by us and by such manufacturer. Such agreements may restrict
our commercial use of such intellectual property, or may require written consent from, or a separate agreement with, that manufacturer.
In other cases, we may not have any rights to use intellectual property solely developed and owned by such manufacturer or another
third party. If we cannot obtain commercial use rights for such jointly-owned intellectual property or intellectual property solely
owned by these manufacturers, our future product development and commercialization plans may be adversely affected.
We may be 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 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:
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pay
substantial damages, including treble damages if we were held to have willfully infringed;
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cease
the manufacture, offering for sale or sale of the infringing technology or processes;
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expend
significant resources to develop non-infringing technology or processes;
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obtain
a license from a third party, which may not be available on commercially reasonable terms,
or may not be available at all; or
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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.
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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.
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 a 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 dates 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.
Risks Related to our Financial Condition
We have a history of losses, will need
substantial additional funding to continue our operations and may not achieve or sustain profitability in the future.
Our operations have consumed substantial amounts
of cash since inception. We have incurred net losses totaling approximately $14.2 million from May 12, 2014 (inception) through
March 31, 2017. We do not expect meaningful revenues from our filter sales until at least the first half of the calendar year
2018. If our forecasts for the Company prove incorrect, the business, operating results and financial condition of the Company
will be materially and adversely affected. We anticipate that our operating expenses will increase in the foreseeable future as
we continue to pursue the development of our patent-pending single crystal acoustic wave filter technology, invest in marketing,
sales and distribution of our RF filters to grow our business, acquire customers, commercialize our technology in the mobile wireless
market. These efforts may prove more expensive than we currently anticipate, and we may not succeed in generating sufficient revenues
to offset these higher expenses. In addition, we expect to incur significant expenses related to regulatory requirements and our
ability to obtain, protect, and defend our intellectual property rights.
We may also encounter unforeseen expenses,
difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our
cash resources faster than we expect. Accordingly, we will need to obtain substantial additional funding in order to continue
our operations.
To date, we have financed our operations through
a mix of investments from private investors, the incurrence of debt, and grant funding, and we expect to continue to utilize such
means of financing for the foreseeable future. Additional funding from those or other sources may not be available when or in
the amounts needed, on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible
into equity, it would result in dilution to our then existing stockholders, which could be significant depending on the price
at which we may be able to sell our securities. If we raise additional capital through the incurrence of indebtedness, we would
likely become subject to covenants restricting our business activities, and holders of debt instruments may have rights and privileges
senior to those of our equity investors. In addition, servicing the interest and principal repayment obligations under debt facilities
could divert funds that would otherwise be available to support research and development, or commercialization activities. If
we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our R&D
programs for our acoustic wave filter technology or any future commercialization efforts. Any of these events could materially
and adversely affect our business, financial condition and prospects, and could cause our business to fail.
Our independent registered public accounting
firm has expressed doubt about our ability to continue as a going concern.
The Company’s historical financial
statements have been prepared under the assumption that we will continue as a going concern. In the Company’s Annual Report
on Form 10-K for the transition period of April 1, 2016 through June 30, 2016, filed on October 31, 2016, our independent registered
public accounting firm has issued a report that included an explanatory paragraph referring to our recurring net losses and accumulated
deficit and expressing substantial doubt about our ability to continue as a going concern. Subsequently, we raised approximately
$9.9 million in net proceeds from the 2016-2017 Offering and additional net proceeds of $5.5 million from the 2017 Offering. The
Company believes that it has sufficient cash to fund its operations through June 30, 2018. This expectation does not account for
any cash needs associated with the integration and operation of the STC-MEMS Business as the Company is continuing to conduct due
diligence on the operations and available financial information associated with the STC-MEMS Business. Additionally, there is no
assurance that the Company’s projections and estimates are accurate.
Risk Related to Managing Any Growth We
May Experience
We are planning to acquire a semiconductor
facility and such acquisition and other acquisitions could disrupt our business, cause dilution to our stockholders and harm our
financial condition and operating results.
On March 23, 2017, we entered into the
STC-MEMS Agreements with RF-SUNY and FRMC, an affiliate of RF-SUNY, to acquire certain specified assets, including STC-MEMS, a
semiconductor wafer-manufacturing operation and microelectromechanical systems (MEMS) business with associated wafer-manufacturing
tools, as well as the real estate and improvements associated with the facility located in Canandaigua, New York, which is used
in the operation of STC-MEMs (the assets and real estate and improvements referred to together herein as the “STC-MEMS Business”).
The Company also agreed to assume substantially all of the on-going obligations of the STC-MEMS Business incurred in the ordinary
course of business. The Company will purchase the STC-MEMS Business from Sellers for an aggregate purchase price of $2.75 million,
subject to adjustment, payable in cash, at closing, which will take place on or about June 26, 2017. Consummation of the transactions
contemplated by the STC-MEMS Agreements is subject to the satisfaction of certain conditions precedent, including, but not limited
to, delivery to the Company of the financial books and records of the STC-MEMS Business sufficient for the completion of an audit
or financial information as necessary to satisfy any SEC filing requirements in connection with the acquisition, certain third-party
consents, and other customary conditions of closing. The Company has made various representations and warranties and covenants
in the STC-MEMS Agreements that are customary for a company acting as a buyer in its industry except that the Company is required
to pay to FRMC a penalty, as set forth below, if the Company sells the STC-MEMS property within three (3) years after the date
of the STC-MEMS Agreements for an amount in excess of $1.75 million, subject to certain enumerated exceptions. The penalty imposed
shall be equivalent to the amount that the sales price of the property exceeds $1.75 million up to the maximum penalty defined
below:
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Maximum Penalty
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Year 1
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$
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5,960,000
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Year 2
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$
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3,973,333
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Year 3
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$
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1,986,667
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Year 4
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$
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0
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While the STC-MEMS Agreements contemplates
that a closing of the sale of the STC-MEMS Business will take place on or about June 26, 2017, the conditions precedent to closing
are such that there can be no assurance that the Company will complete its acquisition of the STC-MEMS Business in that time or
at all. A delay or failure in the closing of this transaction or a penalty may have a material adverse effect on our stock price,
business, financial condition, and operating results.
While we currently have no specific plans
to acquire any other businesses, we may, in the future, make 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:
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issue
Common Stock or other forms of equity that would dilute our existing stockholders’
percentage of ownership and incur additional expense for stock based compensation
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incur
debt and assume liabilities, and
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incur
amortization expenses related to intangible assets or incur large and immediate write-offs.
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We may not be able to complete acquisitions
on favorable terms, if at all. If we do complete an acquisition, we cannot assure you that it will ultimately strengthen our competitive
position or that it will be viewed positively by customers, financial markets or investors. Furthermore, future acquisitions could
pose numerous additional risks to our expected operations, including:
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problems
integrating the purchased business, products or technologies,
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challenges
in achieving strategic objectives, cost savings and other anticipated benefits,
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increases
to our expenses,
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the
assumption of significant liabilities that exceed the limitations of any applicable indemnification
provisions or the financial resources of any indemnifying party,
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inability
to maintain relationships with prospective key customers, vendors and other business
partners of the STC-MEMS Business,
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diversion
of management’s attention from their day-to-day responsibilities,
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difficulty
in maintaining controls, procedures and policies during the transition and integration,
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entrance
into marketplaces where we have no or limited prior experience and where competitors
have stronger marketplace positions,
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potential
loss of key employees, particularly those of the acquired entity, and
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that
historical financial information may not be representative or indicative of our results
as a combined company.
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We may not be able to satisfy all
conditions to complete the acquisition of the STC-MEMS Business.
The closing of the acquisition of the STC-MEMS
Business is subject to the satisfaction of certain conditions precedent. A number of the conditions are not within our
control and may prevent, delay, or otherwise materially adversely affect the closing of the acquisition. These conditions
include, among other things, delivery to the Company of the financial books and records of the STC-MEMS Business sufficient for
completion of an audit or financial information as necessary to satisfy any SEC filing requirements related to the acquisition,
certain third-party consents, and other customary conditions of closing. We cannot predict with certainty whether and
when any of the required closing conditions will be satisfied or if another uncertainty may arise. A delay or failure
in the closing of the acquisition may have a material adverse effect on our stock price, business, financial condition, and operating
results.
While the acquisition of the STC-MEMS
Business is pending, we are subject to business uncertainties that could disrupt our business.
Whether or not we complete the acquisition
of the STC-MEMS Business, the fact that it is pending may disrupt our current plans and operations, which could have an adverse
effect on our business, plan of operation, and results of operations. The pendency of the acquisition may also divert
management’s attention and our resources from our ongoing business operations. We may incur significant costs,
charges, or expenses relating to the acquisition, regardless of whether or not it is completed. Further, we cannot predict
how our suppliers and third-party manufacturers with whom we do business will view or react to the acquisition. If we
are unable to maintain our normal relationships as a result of the pending acquisition, or in the event that we are unable to complete
the acquisition, our business may be adversely affected.
We will incur substantial expenses
in connection with the successful acquisition of the STC-MEMS Business.
We expect to incur substantial expenses
in connection with the successful acquisition of the STC-MEMS Business. Specifically, we have agreed to assume substantially
all of the ongoing obligations of the STC-MEMS Business incurred in the ordinary course of business. In addition, we
expect to incur substantial expenses in connection with the integration of the STC-MEMS Business with our current operations. We
may not be able to control the amount or timing of these expenses, which are difficult to estimate at the present time. Any
failure to generate sufficient funds from operations or to otherwise obtain additional funds as needed to satisfy these expenses
may have a material adverse effect on our business, financial condition, and operating results.
Following the successful completion,
if at all, of the acquisition of the STC-MEMS Business, we may be unable to successfully integrate the STC-MEMS Business with our
current operations and strategic business plan.
Following the successful completion, if
at all, of the STC-MEMS Business, we will be required to devote significant management attention and resources to integrating the
STC-MEMS Business with our current operations and to developing the integrated operations in accordance with our strategic business
plan. There is no guarantee that we will maintain existing customer/other relationships or the revenue stream of the STC-MEMS Business.
We may fail to realize some or all of the anticipated benefits of the acquisition of the STC-MEMS Business if the integration and
development process takes longer than expected or is more costly than expected. Such failure may have a material adverse
effect on our stock price, business, plan of operation, and results of operations.
Our business and operations would suffer
in the event of system failures, and our operations are vulnerable to interruption by natural disasters, terrorist activity, power
loss and other events beyond our control, the occurrence of which could materially harm our business.
Despite the implementation of security measures,
our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized
access as well as telecommunication and electrical failures. While we have not experienced any such system failure, accident or
security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material
disruption of our R&D. If any disruption or security breach resulted in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary information, we could incur liability and/or the further development of
our technology for RF filters could be delayed.
We are also vulnerable to accidents, electrical
blackouts, labor strikes, terrorist activities, war and other natural disasters and other events beyond our control, and we have
not undertaken a systematic analysis of the potential consequences to our business as a result of any such events and do not have
an applicable recovery plan in place. We currently do not carry other business interruption insurance that would compensate us
for actual losses from interruptions of our business that may occur, and any losses or damages incurred by us could cause our
business to materially suffer.
Risks Related to Regulatory Requirements
The wireless communication industry
is subject to ongoing regulatory obligations and review. Maintaining compliance with these requirements may result in significant
additional expense to us, and any failure to maintain such compliance could cause our business to suffer.
Our business and products in development are
subject to regulation by various federal and state governmental agencies, including the radio frequency emission regulatory activities
of the FCC, the consumer protection laws of the Federal Trade Commission, the import/export regulatory activities of the Department
of Commerce, the product safety regulatory activities of the Consumer Products Safety Commission, and the environmental regulatory
activities of the Environmental Protection Agency.
The rules and regulations of the FCC limit
the RF used by, and level of power emitting from, electronic equipment. Our RF filters, as a key element enabling consumer electronic
smartphone equipment, are required to comply with these FCC rules, and may require certification, verification or registration
of our RF filters with the FCC. Certification and verification of new equipment requires testing to ensure the equipment’s
compliance with the FCC’s rules. The equipment must be labeled according to the FCC’s rules to show compliance with
these rules. Testing, processing of the FCC’s equipment certificate or FCC registration and labeling may increase development
and production costs and could delay the implementation of our BulkOne acoustic wave resonator technology for our RF filters and
the launch and commercial productions of our filters into the U.S. market. Electronic equipment permitted or authorized to be
used by us through FCC certification or verification procedures must not cause harmful interference to licensed FCC users, and
may be subject to RF interference from licensed FCC users. Selling, leasing or importing non-compliant equipment is considered
a violation of FCC rules and federal law, and violators may be subject to an enforcement action by the FCC. Any failure to comply
with the applicable rules and regulations of the FCC could have an adverse effect on our business, operating results and financial
condition by increasing our compliance costs and/or limiting our sales in the United States.
The semiconductor and electronics industries
also have been subject to increasing environmental regulations. A number of domestic and foreign jurisdictions seek to restrict
the use of various substances, a number of which have been used in our products in development or processes. For example, the
European Union Restriction of Hazardous Substances in Electrical and Electronic Equipment (RoHS) Directive now requires that certain
substances be removed from all electronics components. Removing such substances requires the expenditure of additional research
and development funds to seek alternative substances, as well as increased testing by third parties to ensure the quality of our
products and compliance with the RoHS Directive. While we have implemented a compliance program to ensure our product offering
meets these regulations, there may be instances where alternative substances will not be available or commercially feasible, or
may only be available from a single source, or may be significantly more expensive than their restricted counterparts. Additionally,
if we were found to be non-compliant with any such rule or regulation, we could be subject to fines, penalties and/or restrictions
imposed by government agencies that could adversely affect our operating results. Our cost to maintain compliance with existing
environmental regulations is expected to be nominal based on our business structure in which we outsource a majority of our operations
to suppliers that are responsible for meeting environmental regulations. We will continue to monitor our quality program and expand
as required to maintain compliance and ability to audit our supply chain.
Noncompliance with applicable regulations
or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of
profits, fines, damages, civil and criminal penalties, or injunctions. An adverse outcome in any such litigation could require
us to pay contractual damages, compensatory damages, punitive damages, attorneys’ fees and costs. These enforcement actions
could harm our business, financial condition and results of operations. If any governmental sanctions are imposed, or if we do
not prevail in any possible civil or criminal litigation, our business, financial condition and results of operations could be
materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s
attention and resources and an increase in professional fees.
Compliance with regulations regarding
the use of “conflict minerals” could limit the supply and increase the cost of certain metals used in manufacturing
our products.
Regulations in the United States require that
we determine whether certain materials used in our products, referred to as conflict minerals, originated in the Democratic Republic
of the Congo or adjoining countries, or originated from recycled or scrap sources. We anticipate that we will first be required
to comply with the SEC’s conflict minerals rules for the 2017 calendar year, and we expect to incur costs associated with
implementing policies and procedures to comply with the applicable rules and due diligence procedures. In addition, the verification
and reporting requirements could affect the sourcing and availability of minerals that are used in the manufacture of our products,
and we may face reputational and competitive challenges if we are unable to sufficiently verify the origins of all conflict minerals
used in our products. We may also face challenges with government regulators, potential customers, suppliers and manufacturers
if we are unable to sufficiently verify that the metals used in our products are conflict free.
There could be an adverse change or
increase in the laws and/or regulations governing our business.
We and our operating subsidiary are subject
to various laws and regulations in different jurisdictions, and the interpretation and enforcement of laws and regulations are
subject to change. We also will be subject to different tax regulations in each of the jurisdictions where we will conduct our
business or where our management or the management of our operating subsidiary is located. We expect that the scope and extent
of regulation in these jurisdictions, as well as regulatory oversight and supervision, will generally continue to increase. There
can be no assurance that future regulatory, judicial and legislative changes in any jurisdiction will not have a material adverse
effect on us or hinder us in the operation of our business. In addition, we may incur substantial costs in order to comply with
current or future environmental, health and safety laws and regulations applicable to us.
These current or future laws and regulations
may impair our research, development or production efforts or impact the research activities we pursue. Our failure to comply with
these laws and regulations also may result in substantial fines, penalties or other sanctions, which could cause our financial
condition to suffer.
Investment Risks
You could lose all of your investment.
An investment in our securities is speculative
and involves a high degree of risk. Potential investors should be aware that the value of an investment in the Company may go
down as well as up. In addition, there can be no certainty that the market value of an investment in the Company will fully reflect
its underlying value. You could lose your entire investment.
You may experience dilution of your
ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that
are convertible into or exercisable for our common or preferred stock.
In the future, we may issue our authorized
but previously unissued equity securities, resulting in the dilution of the ownership interests of our stockholders. The Company
is authorized to issue an aggregate of 45,000,000 shares of Common Stock and 5,000,000 shares of “blank check” preferred
stock. We may issue additional shares of our Common Stock or other securities that are convertible into or exercisable for our
Common Stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital
raising purposes, or for other business purposes. In addition, certain of our stockholders also have anti-dilution protections,
as discussed below under “Description of Business—The “2016-2017 Offering” and “2017 Offering.”
The future issuance of any such additional shares of our Common Stock may create downward pressure on the trading price of the
Common Stock. We will need to raise additional capital in the near future to meet our working capital needs, and there can be
no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in
conjunction with these capital raising efforts, including at a price (or exercise prices) below the price you paid for your stock.
The ability of our Board of Directors
to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.
Our Board of Directors is authorized to issue up to 5,000,000 shares
of preferred stock with powers, rights and preferences designated by it. Shares of voting or convertible preferred stock could
be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to
effect a takeover or otherwise gain control of the Company. The ability of the Board to issue such additional shares of preferred
stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the Company
by tender offer or other means. Such issuances could therefore deprive stockholders of benefits that could result from such an
attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase
in market price that such an attempt could cause. Moreover, the issuance of such additional shares of preferred stock to persons
friendly to the Board of Directors could make it more difficult to remove incumbent managers and directors from office even if
such change were to be favorable to stockholders generally.
We do not anticipate paying dividends
on our Common Stock, and investors may lose the entire amount of their investment.
Cash dividends have never been declared or
paid on our Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use
future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares
of Common Stock. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only
occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their
shares, nor can we assure that stockholders will not lose the entire amount of their investment.
We are an emerging growth company, and
we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock
less attractive to investors.
We are an emerging growth company under the
JOBS Act. For as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of
holding a nonbinding advisory stockholder vote on executive compensation and any golden parachute payments not previously approved,
exemption from the requirement of auditor attestation in the assessment of our internal control over financial reporting and exemption
from any requirement that may be adopted by the Public Company Accounting Oversight Board. Accordingly, the information that we
provide stockholders may be different than what is available with respect to other public companies. We cannot predict if investors
will find our Common Stock less attractive because we will rely on these exemptions. If some investors find our Common Stock less
attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
Under the JOBS Act, emerging growth companies
can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have
irrevocably elected to take advantage of this extended transition period. Since we will not be required to comply with new or
revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies,
our financial statements may not be comparable to the financial statements of companies that comply with the effective dates of
those accounting standards.
We will remain an emerging growth company
until the earliest of (1) the end of the fiscal year in which the market value of our Common Stock that is held by non-affiliates
exceeds $700 million as of the end of the second fiscal quarter, (2) the end of the fiscal year in which we have total annual
gross revenues of $1 billion or more during such fiscal year, (3) the date on which we issue more than $1 billion in non-convertible
debt in a three-year period or (4) June 30, 2019, the end of the fiscal year following the fifth anniversary of the date of the
first sale of our Common Stock pursuant to an effective registration statement filed under the Securities Act. Decreased disclosures
in our SEC filings due to our status as an “emerging growth company” may make it harder for investors to analyze our
results of operations and financial prospects.
Even after we no longer qualify as an emerging
growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many
of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation. Some investors may
find our Common Stock less attractive because we rely on these exemptions, there may be a less active trading market for our Common
Stock and our stock price may be more volatile.
Being a public company is expensive
and administratively burdensome.
As a public reporting company, we are subject
to the information and reporting requirements of the Securities Act, the Exchange Act and other federal securities laws, rules
and regulations related thereto, including compliance with the Sarbanes-Oxley Act. Complying with these laws and regulations requires
the time and attention of our Board of Directors and management, and increases our expenses. Among other things, we are required
to:
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maintain
and evaluate a system of internal control over financial reporting in compliance with
the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations
of the SEC and the Public Company Accounting Oversight Board;
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maintain
policies relating to disclosure control and procedures;
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prepare
and distribute periodic reports in compliance with our obligations under federal securities
laws;
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institute
a more comprehensive compliance function, including with respect to corporate governance;
and
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involve,
to a greater degree, our outside legal counsel and accountants in the above activities.
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The costs of preparing and filing annual and
quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive
and much greater than that of a privately-held company, and compliance with these rules and regulations may require us to hire
additional financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory,
legal and accounting expenses and the attention of management. There can be no assurance that we will be able to comply with the
applicable regulations in a timely manner, if at all. In addition, being a public company makes it more expensive for us to obtain
director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially
higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives
and members of our Board of Directors, particularly directors willing to serve on an audit committee, which we expect to establish.
Any failure to maintain effective internal
control over our financial reporting could materially adversely affect us.
Section 404 of the Sarbanes-Oxley Act of 2002
requires us to include in our annual reports on Form 10-K an assessment by management of the effectiveness of our internal control
over financial reporting. In addition, at such time, if any, as we are no longer a “smaller reporting company” or
an “emerging growth company,” our independent registered public accounting firm will have to attest to and report
on management’s assessment of the effectiveness of such internal control over financial reporting. If and when we are required
to have our independent registered public accounting firm attest to management’s assessment of the effectiveness of our
internal control over financial reporting, if our independent registered public accounting firm is not satisfied with the adequacy
of our internal control over financial reporting, or if the independent auditors interpret the requirements, rules or regulations
differently than we do, then they may decline to attest to management’s assessment or may issue a report that is qualified.
Any of these events could result in a loss of investor confidence in the reliability of our financial statements, which in turn
could negatively affect the price of our Common Stock.
In
particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow
management and (if required in the future) our independent registered public accounting firm to report on the effectiveness of
our internal control over financial reporting, as required by Section 404. Our compliance with Section 404 may require that we
incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group
and we will need to retain the services of additional accounting and financial staff or consultants with appropriate public company
experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404. We intend to review the effectiveness
of our internal controls and procedures and make any changes management determines appropriate, including to achieve compliance
with Section 404 by the date on which we are required to so comply.
***
The risks above do not necessarily comprise
all of those associated with an investment in the Company. This prospectus contains forward-looking statements that involve unknown
risks, uncertainties and other factors that may cause the actual results, financial condition, performance or achievements of
the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking
statements. Factors that might cause such a difference include, but are not limited to, those set out above.
SELLING STOCKHOLDERS
This prospectus covers the resale from
time to time by the selling stockholders identified in the table below of (a) up to 2,142,000 outstanding shares of Common Stock
sold to investors in the 2016-2017 Offering, (b) up to 50,000 shares of Common Stock held by certain other stockholders, (c) up
to 205,126 shares of Common Stock issuable upon exercise of Common Stock purchase warrants issued to the placement agents in the
2016-2017 Offering, (d) up to 663,000 outstanding shares of Common Stock sold to investors in the 2017 Offering and (e) up to 46,410
shares of Common Stock issuable upon exercise of Common Stock purchase warrants issued to the placement agents in the 2017 Offering.
The selling stockholders identified in the
table below may from time to time offer and sell under this prospectus any or all of the shares of Common Stock described under
the columns “Shares of Common Stock owned prior to this Offering and Registered hereby” and “Shares Issuable
Upon Exercise of Warrants owned Prior to this Offering and Registered hereby” in the table below.
Certain selling stockholders may be deemed
to be “underwriters” as defined in the Securities Act. Any profits realized by such selling stockholders may be deemed
to be underwriting commissions.
The table below has been prepared based upon
the information furnished to us by the selling stockholders and/or our transfer agent as of the date of this prospectus. The selling
stockholders identified below may have sold, transferred or otherwise disposed of some or all of their shares since the date on
which the information in the following table is presented in transactions exempt from or not subject to the registration requirements
of the Securities Act. Information concerning the selling stockholders may change from time to time and, if necessary, we will
amend or supplement this prospectus accordingly. We cannot give an estimate as to the number of shares of Common Stock that will
actually be held by the selling stockholders upon termination of this offering because the selling stockholders may offer some
or all of their Common Stock under the offering contemplated by this prospectus or acquire additional shares of Common Stock.
The total number of shares that may be sold hereunder will not exceed the number of shares offered hereby. Please read the section
entitled “Plan of Distribution” in this prospectus.
The following table sets forth the name of
each selling stockholder, the number of shares of our Common Stock beneficially owned by such stockholder before this offering,
the number of shares to be offered for such stockholder’s account and the number and (if one percent or more) the percentage
of the class to be beneficially owned by such stockholder after completion of the offering. The number of shares owned are those
beneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes any shares of our Common Stock as to which a
person has sole or shared voting power or investment power and any shares of Common Stock which the person has the right to acquire
within 60 days after May 22, 2017 (as used in this section, the “Determination Date”), through the exercise of any
option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or
revocation of a trust, discretionary account or similar arrangement, and such shares are deemed to be beneficially owned and outstanding
for computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed
outstanding for computing the percentage of any other person. For shares subject to repurchase options, as indicated in the notes
to the table below, see “Executive Compensation — Employment Agreements” and “— Restricted Stock
Agreements” below for a description of the repurchase option.
Unless otherwise set forth below, based upon
the information furnished to us, (a) the persons and entities named in the table have sole voting and sole investment power with
respect to the shares set forth opposite the selling stockholder’s name, subject to community property laws, where applicable,
(b) no selling stockholder had any position, office or other material relationship within the past three years, with us or with
any of our predecessors or affiliates, and (c) no selling stockholder is a broker-dealer or an affiliate of a broker-dealer. Selling
stockholders who are broker-dealers or affiliates of broker-dealers are indicated by footnote. We have been advised that these
broker-dealers and affiliates of broker-dealers who hold shares of Common Stock included in the table below purchased our Common
Stock in the ordinary course of business, not for resale. These broker-dealers and affiliates of broker-dealers who hold warrants
to purchase shares of Common Stock included in the table below received such warrants as compensation to the placement agents
in the 2016-2017 Offering and the 2017 Offering. We have been advised that, in either case, at the time of such purchase of shares
or receipt of warrants, such persons did not have any agreements or understandings, directly or indirectly, with any person to
distribute such Common Stock. The number of shares of Common Stock shown as beneficially owned before the offering is based on
information furnished to us or otherwise based on information available to us at the timing of the filing of the registration
statement of which this prospectus forms a part.
Selling Stockholder
|
|
Shares of
Common Stock
Beneficially
Owned Prior to
this Offering
3
|
|
|
Shares of Common Stock owned
Prior to this Offering and
Registered hereby
|
|
|
Shares issuable upon
Exercise of Warrants
owned Prior to this
Offering and
Registered hereby
|
|
|
Shares of Common
Stock Beneficially
Owned Upon
Completion of this
Offering
1
|
|
|
Percentage of
Common Stock
Beneficially
Owned Upon
Completion of
this Offering
2
|
|
Agharta Capital Ltd.
4
|
|
|
20,625
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
15,625
|
|
|
|
*
|
|
Alexander J. Brown Trust, dtd April 11, 1996
5
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Anthony Sica
6
|
|
|
930
|
|
|
|
-
|
|
|
|
930
|
|
|
|
-
|
|
|
|
*
|
|
Ardara Capital, LP
7
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Arthur E Geiss
8
|
|
|
78,307
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
76,307
|
|
|
|
*
|
|
Barclay Armitage
|
|
|
19,000
|
|
|
|
4,000
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
*
|
|
Benjamin Bowen
9
|
|
|
11,288
|
|
|
|
-
|
|
|
|
11,288
|
|
|
|
-
|
|
|
|
*
|
|
Brendan McAninch
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Bruce Seyburn
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Clayton A. Struve
|
|
|
121,000
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
96,000
|
|
|
|
*
|
|
Columbus Capital Partners, L.P.
10
|
|
|
398,200
|
|
|
|
398,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Columbus Capital QP Partners, L.P.
10
|
|
|
112,900
|
|
|
|
112,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Craig Skop
11
|
|
|
775
|
|
|
|
-
|
|
|
|
775
|
|
|
|
-
|
|
|
|
*
|
|
Daniel Salvas
|
|
|
122,625
|
|
|
|
57,000
|
|
|
|
-
|
|
|
|
65,625
|
|
|
|
*
|
|
Daniel W. and Allaire Hummel, JTWROS
12
|
|
|
27,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
17,000
|
|
|
|
*
|
|
David Blau
|
|
|
17,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
7,000
|
|
|
|
*
|
|
Dennis Quaintance
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Devi Capital Partners, LP
13
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Douglas Francis Spellman
|
|
|
32,400
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
7,400
|
|
|
|
*
|
|
Drexel Hamilton, LLC
14
|
|
|
55,163
|
|
|
|
-
|
|
|
|
55,163
|
|
|
|
-
|
|
|
|
*
|
|
Dyke Rogers
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
EFD Capital Inc
15
|
|
|
5,700
|
|
|
|
-
|
|
|
|
5,700
|
|
|
|
-
|
|
|
|
*
|
|
Eric Lord
65
|
|
|
1,938
|
|
|
|
-
|
|
|
|
1,938
|
|
|
|
-
|
|
|
|
*
|
|
Ernest W. Moody Revocable Trust, DTD Jan 14 2009
16
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Euroatlantic Investments Ltd.
17
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Fidelity Management Trust Co. FBO SEP IRA Stephen Arthur Renaud
18
|
|
|
6,000
|
|
|
|
6,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Gibralt Capital Corporation
19
|
|
|
110,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
60,000
|
|
|
|
*
|
|
Greenstone LLC
20
|
|
|
359,260
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
339,260
|
|
|
|
1.78
|
%
|
Herald Investment Trust Plc
21
|
|
|
535,000
|
|
|
|
60,000
|
|
|
|
-
|
|
|
|
475,000
|
|
|
|
2.49
|
%
|
Iroquois Capital Investment Group, LLC
22
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Iroquois Master Fund Ltd.
22
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
James R Shealy
23
|
|
|
484,502
|
|
|
|
14,000
|
|
|
|
-
|
|
|
|
470,502
|
|
|
|
2.47
|
%
|
Jason Diamond
24
|
|
|
25,190
|
|
|
|
-
|
|
|
|
25,190
|
|
|
|
-
|
|
|
|
*
|
|
Jeffrey Peterson
25
|
|
|
22,225
|
|
|
|
-
|
|
|
|
22,225
|
|
|
|
-
|
|
|
|
*
|
|
Jeffrey B. Shealy
26
|
|
|
3,486,586
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
3,466,586
|
|
|
|
18.17
|
%
|
Jerry D. Neal
27
|
|
|
367,000
|
|
|
|
200,000
|
|
|
|
-
|
|
|
|
167,000
|
|
|
|
1.92
|
%
|
Jessica Greenfield
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
John V. Wagner, Jr
|
|
|
56,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
36,000
|
|
|
|
*
|
|
Jonathan & Gina Blatt Childrens' Trust UA 02.20.2002
28
|
|
|
14,000
|
|
|
|
4,000
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
*
|
|
Jonathan & Gina Blatt, JTWROS
28
|
|
|
52,500
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
32,500
|
|
|
|
*
|
|
Joseph A. Alagna, Jr
29
|
|
|
2,325
|
|
|
|
-
|
|
|
|
2,325
|
|
|
|
-
|
|
|
|
*
|
|
Joseph Schump
|
|
|
68,750
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
18,750
|
|
|
|
*
|
|
Kevin Mangan
30
|
|
|
1,704
|
|
|
|
-
|
|
|
|
1,704
|
|
|
|
-
|
|
|
|
*
|
|
Kevin Patrick Spellman
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
L1 Capital Global Opportunities Master Fund
31
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Lai Family Trust
32
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Lee Harrison Corbin
|
|
|
109,110
|
|
|
|
35,000
|
|
|
|
-
|
|
|
|
74,110
|
|
|
|
*
|
|
Lina Kay
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Lynn Orenstein
33
|
|
|
1,000
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
*
|
|
Mark Boomgarden
34
|
|
|
245,441
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
243,441
|
|
|
|
1.28
|
%
|
Mark Rubin
35
|
|
|
3,500
|
|
|
|
-
|
|
|
|
3,500
|
|
|
|
-
|
|
|
|
*
|
|
Martillo Finance Limited
36
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Matthew D. Ockner
10
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Michael J. Shealy
37
|
|
|
250,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
230,000
|
|
|
|
1.21
|
%
|
Michael Silverman
38
|
|
|
57,210
|
|
|
|
35,000
|
|
|
|
22,210
|
|
|
|
-
|
|
|
|
*
|
|
Michael Zimmerman
|
|
|
17,606
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
15,606
|
|
|
|
*
|
|
Monoc Capital Ltd.
39
|
|
|
20,625
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
15,625
|
|
|
|
*
|
|
Monte D. & Janet S. Anglin, JTWROS
40
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Morgan Janssen
41
|
|
|
2,700
|
|
|
|
-
|
|
|
|
2,700
|
|
|
|
-
|
|
|
|
*
|
|
Northland Securities, Inc.
42
|
|
|
700
|
|
|
|
-
|
|
|
|
700
|
|
|
|
-
|
|
|
|
*
|
|
Paul Ehrenstein
43
|
|
|
1,800
|
|
|
|
-
|
|
|
|
1,800
|
|
|
|
-
|
|
|
|
*
|
|
Paul Tompkins
44
|
|
|
95,000
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
55,000
|
|
|
|
*
|
|
Pauline M. Howard Trust dtd 01.02.98, Candy D'Azevedo TTEE
45
|
|
|
11,000
|
|
|
|
4,000
|
|
|
|
-
|
|
|
|
7,000
|
|
|
|
*
|
|
Peter Backus
|
|
|
394,187
|
|
|
|
35,000
|
|
|
|
-
|
|
|
|
359,187
|
|
|
|
1.88
|
%
|
Peter Bennett
46
|
|
|
10,938
|
|
|
|
-
|
|
|
|
10,938
|
|
|
|
-
|
|
|
|
*
|
|
Peter K. Janssen
47
|
|
|
26,625
|
|
|
|
5,000
|
|
|
|
18,500
|
|
|
|
3,125
|
|
|
|
*
|
|
Peter M. Knapp, Jr.
|
|
|
3,000
|
|
|
|
3,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Peter W. Janssen
|
|
|
51,250
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
31,250
|
|
|
|
*
|
|
Priyanka Mahajan
48
|
|
|
1,550
|
|
|
|
-
|
|
|
|
1,550
|
|
|
|
-
|
|
|
|
*
|
|
Ramnarain Jaigobind
49
|
|
|
4,883
|
|
|
|
-
|
|
|
|
4,883
|
|
|
|
-
|
|
|
|
*
|
|
Richard A. Brown
5
|
|
|
32,000
|
|
|
|
32,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Robert Burkhardt
|
|
|
33,000
|
|
|
|
15,000
|
|
|
|
-
|
|
|
|
18,000
|
|
|
|
*
|
|
Robert D. Frankel
|
|
|
23,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
18,000
|
|
|
|
*
|
|
Robert Max Terhune, III
50
|
|
|
4,000
|
|
|
|
-
|
|
|
|
4,000
|
|
|
|
-
|
|
|
|
*
|
|
Robert R. Thomas, Jr
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Roger Elsas
51
|
|
|
2,000
|
|
|
|
-
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
*
|
|
Rohan Houlden
52
|
|
|
120,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
*
|
|
Roman Livson
53
|
|
|
10,850
|
|
|
|
-
|
|
|
|
10,850
|
|
|
|
-
|
|
|
|
*
|
|
Ryan McGaver
54
|
|
|
18,472
|
|
|
|
-
|
|
|
|
18,472
|
|
|
|
-
|
|
|
|
*
|
|
S2 Partners, L.P.
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Saverio Flemma
55
|
|
|
1,000
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
*
|
|
Stephen A. Stein
56
|
|
|
1,395
|
|
|
|
-
|
|
|
|
1,395
|
|
|
|
-
|
|
|
|
*
|
|
Stephen Renaud
18
|
|
|
473,797
|
|
|
|
31,000
|
|
|
|
18,800
|
|
|
|
423,997
|
|
|
|
2.22
|
%
|
Steven P Miller
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
TATS of WA, Inc, 401k
57
|
|
|
90,840
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
50,840
|
|
|
|
*
|
|
Technology Opportunity Partners L.P.
58
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
The Precept Fund, LP
59
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Thomas A. McGurk, Jr.
|
|
|
31,000
|
|
|
|
14,000
|
|
|
|
-
|
|
|
|
17,000
|
|
|
|
*
|
|
Tim Elmes
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Tim Schamberger
|
|
|
76,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
66,000
|
|
|
|
*
|
|
Veronica Marano and Thomas M. Volckening, JTWROS
60
|
|
|
7,000
|
|
|
|
7,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Vicap Ltd.
61
|
|
|
20,625
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
15,625
|
|
|
|
*
|
|
Warberg WF IV LP
62
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
William Strawbridge
|
|
|
85,690
|
|
|
|
55,000
|
|
|
|
-
|
|
|
|
30,690
|
|
|
|
*
|
|
Rovida West Coast Investments Ltd
10
|
|
|
488,900
|
|
|
|
488,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Alex Partners, LLC
63
|
|
|
388,900
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
368,900
|
|
|
|
1.93
|
%
|
Del Mar Consulting Group, Inc.
64
|
|
|
204,000
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
174,000
|
|
|
|
*
|
|
Total
|
|
|
|
|
|
|
2,855,000
|
|
|
|
251,536
|
|
|
|
|
|
|
|
|
|
|
**
|
Affiliate of registered broker-dealer
|
|
***
|
Registered broker-dealer
|
|
(1)
|
Assumes all of the shares
of Common Stock to be registered on the registration statement of which this prospectus is a part, including all shares of Common
Stock underlying Common Stock purchase warrants held by the selling stockholders, are sold in the offering and that shares of
Common Stock beneficially owned by such selling stockholder but not being registered by this prospectus (if any) are not sold.
|
|
(2)
|
Percentages are based on
the 19,075,050 shares of Common Stock issued and outstanding as of the Determination Date. Shares of our common stock subject
to options that are currently exercisable or exercisable within 60 days of May 24, 2017 are deemed to be outstanding for
the purpose of computing the percentage ownership of the person holding those options, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person.
|
|
(3)
|
Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of
common stock underlying shares of preferred stock, options or warrants currently exercisable or convertible, or exercisable within
60 days of the Determination Date are deemed outstanding for the computing of percentages of the person holding such shares of
preferred stock, options or warrants but are not deemed outstanding for computing the percentage of any other person.
|
|
4
|
Keith Gillard is the President of Agharta Capital Ltd and
may be deemed to have voting and investment power over the shares held thereby.
|
|
5
|
Robin Brown is the Trustee of Alexander J. Brown Trust,
dtd April 11, 1996 and may be deemed to have voting and investment power over the shares held thereby. Richard A. Brown and Robin
are joint tenants with a right of survivorship and have equal voting and investment power over shares held thereby. Richard also
beneficially owns 32,000 shares in his name; combination of 40,000 shares.
|
|
6
|
Consists of 930 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
7
|
Patrick M. Mullin is the managing partner of Ardara Capital,
LP and may be deemed to have voting and investment power of the shares held thereby.
|
|
8
|
Arthur Geiss is a Director of the Company and provides
consulting services to the Company through his company, AEG Consulting LLC. Includes 20,000 shares of Common Stock issuable upon
exercise of an option that vested in May 2016 and is exercisable until May 22, 2025 and 29,596 shares subject to a repurchase
agreement.
|
|
9
|
Consists of 11,288 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
10
|
Matthew D. Ockner is the General Partner of Columbus Capital
Partners, L.P., Columbus Capital QP Partners, L.P., and Rovida West Coast Investments Ltd. and may be deemed to have voting and
investment power over the shares held thereby. Matthew Ockner also beneficially owns 100,000 shares in his name.
|
|
11
|
Consists of 775 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
12
|
Daniel and Allaire Hummel are joint tenants with a right
of survivorship and have equal voting and investment power over shares held thereby.
|
|
13
|
John P. McPeake is the CEO of Devi Capital Partners, LP
and may be deemed to have voting and investment power of the shares held thereby.
|
|
14
|
Jason Diamond is the Head of Investment Banking and may
be deemed to have voting and investment powers over the shares held thereby. Drexel Hamilton, LLC acted as a Placement Agent in
the 2016-2017 Offering and in the 2017 Offering. Includes 55,163 shares of Common Stock issuable upon exercise of warrants currently
exercisable or exercisable within 60 days.
|
|
15
|
Barbara J. Glenns has the power to vote and dispose of
the shares being registered on behalf of EFD Capital, Inc. Includes 5,700 shares of Common Stock issuable upon exercise of warrants
currently exercisable or exercisable within 60 days.
|
|
16
|
Ernest W. Moody is the Trustee of Ernest W. Moody Revocable
Trust, DTD Jan 14 2009 and may be deemed to have voting and investment power of the shares held thereby.
|
|
17
|
Charalampos Charalampous is the representing Carina Vera
Ltd. Director for Euroatlantic Investments Ltd and may be deemed to have voting and investment power of the shares held thereby.
|
|
18
|
Stephen A. Renaud is the Trustee of Stephen Arthur Renaud
IRA and may be deemed to have voting and investment power over the shares held thereby. Stockholder also beneficially owns 462,797
shares in his name; combination of 468,797 shares. Consists of 18,800 shares of Common Stock issuable upon exercise of warrants
currently exercisable or exercisable within 60 days.
|
|
19
|
Ryan Chan has the power to vote and dispose of the shares
being registered on behalf of Gibralt Capital Corporation.
|
|
20
|
David Ngo has the power to vote and dispose of the shares
being registered on behalf of Greenstone, LLC.
|
|
21
|
Katherine Potts is the Manager of Herald Investment Trust
Plc, the beneficial owner of Hare & Co LLC, and may be deemed to have voting and investment power over the shares held thereby.
|
|
22
|
Richard Abbe is a Director of Iroquois Capital Investment
Group, LLC and Iroquois Master Fund Ltd and may be deemed to have voting and investment power over the shares held thereby.
|
|
23
|
James R. Shealy is the brother of the Company’s President
and Chief Executive Officer. Includes 54,093 restricted shares that are subject to repurchase options.
|
|
24
|
Consists of 25,190 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
25
|
Consists of 22,225 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
26
|
Jeffrey Shealy is Chief Executive Officer and a Director
of the Company. Includes 36,000 shares subject to the repurchase option.
|
|
27
|
Jerry Neal is a Director of the Company. Includes 20,000
shares of Common Stock issuable upon exercise of an option that vested in May 2016 and is exercisable until May 22, 2025 and 22,000
shares subject to a repurchase agreement.
|
|
28
|
Jonathan and Gina Blatt are joint tenants with a right
of survivorship and have equal voting and investment power over shares held thereby.
|
|
29
|
Consists of 2,325 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
30
|
Consists of 1,704 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
31
|
David Feldman is a Director of L1 Capital Global Opportunities
Master Fund and may be deemed to have voting and investment power of the shares held thereby.
|
|
32
|
Gregory R. Lai and Cindy Lai are joint tenants with a right
of survivorship and have equal voting and investment power over shares held thereby.
|
|
33
|
Consists of 1,000 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
34
|
Mark D. Boomgarden is Vice President of Operations of the
Company. Includes 177,505 restricted shares that are subject to repurchase options.
|
|
35
|
Consists of 3,500 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
36
|
Du Preez Vermuelen is an Authorized Signatory of Martillo
Finance Limited and may be deemed to have voting and investment power of the shares held thereby.
|
|
37
|
Michael Shealy is the brother of our President and Chief
Executive Officer.
|
|
38
|
Includes 22,210 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
39
|
Andrew Haughian is President of Monoc Capital Ltd. and
may be deemed to have voting and investment power over the shares held thereby.
|
|
40
|
Monte D. Anglin and Janet S. Anglin are joint tenants with
a right of survivorship and have equal voting and investment power over shares held thereby.
|
|
41
|
Includes 2,700 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
42
|
Northland Securities, Inc. acted as placement agent for
private placements completed by the Company in 2015, 2016-2017, and 2017. Jeffrey Peterson has the power to vote and dispose of
the shares being registered on behalf of Northland Securities, Inc. Consists of 700 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
43
|
Includes 1,800 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
44
|
Paul Tompkins is the brother of Mark Tompkins, who holds
approximately 12.5% of our issued and outstanding shares of Common Stock.
|
|
45
|
Candy D’Azevedo Bathon is Trustee of Pauline M. Howard
Trust dtd 01.02.98, Candy D’Azevdo TTEE and may be deemed to have voting and investment power over the shares held thereby.
|
|
46
|
Includes 10,938 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
47
|
Includes 18,500 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
48
|
Includes 1,550 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
49
|
Includes 4,883 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
50
|
Includes 4,000 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
51
|
Includes 2,000 shares of Common Stock issuable upon exercise
of warrants currently exercisable or exercisable within 60 days.
|
|
52
|
Rohan Houlden is Divisional Vice President of Product Engineering
of the Company. Includes 100,000 restricted shares that are subject to repurchase options.
|
|
53
|
Consists of 10,850 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
54
|
Consists of 18,472, shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
55
|
Consists of 1,000 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
56
|
Consists of 1,395 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
|
57
|
Don Stangle is Trustee of TATS of WA, Inc., 401(k) and
may be deemed to have voting and investment power over the shares held thereby.
|
|
58
|
Steven L. Fingerhood is a General Partner of Technology
Opportunity Partners, L.P. and may be deemed to have voting and investment power over the shares held thereby.
|
|
59
|
Nick Roossien is the Chief Compliance Officer of The Precept
Fund, LP and may be deemed to have voting and investment power over the shares held thereby.
|
|
60
|
Veronica Marano and Thomas M. Volckening are joint tenants
with a right of survivorship and have equal voting and investment power over shares held thereby.
|
|
61
|
Chris Erickson is the Director of Vicap Ltd. and may be
deemed to have voting and investment power over the shares held thereby.
|
|
62
|
Daniel Warsh is a Manager of Warberg WF IV, L.P. and may
be deemed to have voting and investment power over the shares held thereby.
|
|
63
|
Scott Wilfong is the President of Alex Partners, LLC and
may be deemed to have voting and investment power over the shares held thereby. Includes 136,000 shares issued to Alex Partners,
LLC in connection with a consulting agreement with the Company. Scott also beneficially owns 253,050 shares in his name; combination
of 388,900 shares.
|
|
64
|
Robert Prag is the President of Del Mar Consulting Group,
Inc. and may be deemed to have voting and investment over the shares held thereby. Includes 204,000 shares issued to Del Mar Consulting
Group, Inc. in connection with a consulting agreement with the Company. Robert also beneficially owns 129,000 shares in his name;
combination of 333,000 shares.
|
|
65
|
Consists of 1,938 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60 days.
|
USE OF PROCEEDS
We will not receive proceeds from sales of
Common Stock made under this prospectus.
DETERMINATION OF OFFERING
PRICE
There currently is a limited public market
for our Common Stock. The selling stockholders will determine at what price they may sell the offered shares, and such sales may
be made at prevailing market prices or at privately negotiated prices. See “Plan of Distribution” below for more information.
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information and Holders
Our Common Stock is currently quoted on the
NASDAQ Capital Market under the symbol “AKTS.” Prior to May 1, 2015, our Common Stock was quoted under the symbol
“DNLX.” Quotations of our Common Stock began on May 28, 2015. Our Common Stock was listed and commenced trading on
the NASDAQ Capital Market on March 13, 2017.
As of May 24, 2017, we had 19,075,050 shares
of our Common Stock issued and outstanding held by approximately 146 stockholders of record. To date, we have not paid dividends
on our Common Stock.
The following table sets forth the high and
low closing bid prices for our Common Stock for the fiscal quarter indicated as reported on OTC Market and NASDAQ Capital Market.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Our Common Stock is very thinly traded and, thus, pricing of our Common Stock on OTC Markets does not necessarily represent its
fair market value.
Period
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
Quarter ended June 30, 2015 (from May 28, 2015)
|
|
$
|
7.00
|
|
|
$
|
3.00
|
|
Quarter ended September 30, 2015
|
|
|
5.00
|
|
|
|
2.75
|
|
Quarter ended December 31, 2015
|
|
|
4.15
|
|
|
|
1.55
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2016
|
|
|
2.00
|
|
|
|
1.50
|
|
Quarter ended June 30, 2016
|
|
|
4.40
|
|
|
|
1.90
|
|
Quarter ended September 30, 2016
|
|
|
4.49
|
|
|
|
3.50
|
|
Quarter ended December 31, 2016
|
|
|
5.85
|
|
|
|
3.91
|
|
|
|
|
|
|
|
|
|
|
Quarter end March 31, 2017
|
|
|
13.50
|
|
|
|
5.44
|
|
Quarter end June 30, 2017 (as of May 22, 2017)
|
|
|
12.84
|
|
|
|
9.08
|
|
Dividends
We have never paid any cash dividends on our
capital stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain
future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will
be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital
requirements and such other factors as the Board of Directors deems relevant.
Warrants and Options
As of May 24, 2017, we had outstanding
warrants and options to purchase 612,165 and 160,000 shares of our Common Stock, respectively.
Securities Authorized for Issuance under
Equity Compensation Plans
On December 15, 2016, our stockholders approved
the 2016 Stock Incentive Plan (the “2016 Plan”), which reserves 3,000,000 shares of our Common Stock, plus any shares
subject to outstanding awards granted under the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2014 Equity Incentive
Plan (the “2014 Plan”) that are forfeited, for issuance under the 2016 Plan. Accordingly, we will no longer grant
awards under the 2014 Plan or the 2015 Plan, although awards that are outstanding under such plans will continue in accordance
with their terms
The following table provides information as
of March 31, 2017, with respect to the shares of Common Stock that were issuable under our equity compensation plans as of such
date:
Equity Compensation Plan Information
Plan category
|
|
Number of
securities
to be
issued upon exercise
of outstanding
options, warrants
and rights
|
|
|
Weighted-
average
exercise price
of outstanding
options,
warrants and
rights
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by
security holders
|
|
|
160,000
|
(1)
|
|
$
|
1.50
|
|
|
|
2,698,000
|
(2)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
160,000
|
(1)
|
|
|
|
|
|
|
2,698,000
|
(2)
|
|
(1)
|
The
160,000 shares of Common Stock to be issued upon the exercise of outstanding options
are issuable under the 2015 Plan.
|
|
(2)
|
As
of March 31, 2017, 2,698,000 additional shares of Common Stock remained available for
future issuance under the 2016 Plan.
|
Other Convertible Securities
As of March 31, 2017, other than the securities
described above, the Company does not have any outstanding convertible securities.
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion
and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in
this prospectus. The management’s discussion and analysis contains forward-looking statements, such as statements of our
plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking
statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,”
“estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,”
“may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking
statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors”
in this prospectus that could cause actual results or events to differ materially from those expressed or implied by the forward-looking
statements. The Company’s actual results and the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of several factors. Except as required by law, the Company does not undertake any obligation
to update forward-looking statements to reflect events or circumstances occurring after the date of this prospectus.
As the result of the Merger and the change
in business and operations of the Company, a discussion of the past financial results of the Company prior to the Merger is not
pertinent, and under applicable accounting principles, the historical financial results of Akoustis, Inc., the accounting acquirer,
prior to the Merger are considered the historical financial results of the Company.
On August 11, 2016, our Board of Directors
adopted a change in our fiscal year end from March 31 of each year to June 30 of each year, effective immediately. The financial
statements and related discussion and analysis and results of operations included in this prospectus cover the three-month transition
period from April 1, 2016 to June 30, 2016, the years ended June 30, 2016 and 2015 (to conform to our new fiscal year), the year
ended March 31, 2016 (our prior fiscal year), and the period from May 12, 2014 (inception) through March 31, 2015. Such discussion
highlights the results of operations and the principal factors that have affected our financial condition, as well as our liquidity
and capital resources for the periods described, and provides information that management believes is relevant for an assessment
and understanding of the statements of financial condition and results of operations presented herein. You should read the discussion
and analysis together with such financial statements and the related notes thereto.
Overview
Akoustis is an early-stage company that designs
and manufactures innovative radio frequency (RF) filters enabling the RF front-end (RFFE) of Mobile Wireless devices, such as
smartphones and tablets. 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. To construct the resonators that
are the building blocks for the RF filter, we have developed a fundamentally new single-crystal acoustic materials and device
technology that we refer to as BulkONE. Filters are critical in selecting and rejecting signals, and their performance enables
differentiation in the modules defining the RFFE.
We believe owning the core resonator technology
and manufacturing our designs is the most direct and effective means of delivering our solutions to the market. Furthermore, our
technology is based upon bulk-mode resonance, which is superior to surface-mode resonance for high band applications and emerging
4G/LTE and WiFi frequency bands. While our target customers utilize or make the RFFE module, several customers lack access to
critical high band technology to compete in high band applications and other traditional surface-mode solutions where higher power
performance is required. We intend to design and manufacture our RF filter products to multiple mobile phone OEM customers and
enable broader competition among the front-end module manufacturers. We plan to operate as a “pure-play” RF filter
supplier and align with the front-end module manufacturers who seek to acquire high performance filters to grow their module business.
We have built prototype resonators using our
proprietary single-crystal materials. We are currently optimizing our BulkONE technology with our wafer-manufacturing partner
under a joint development agreement (JDA) and a manufacturing agreement. We leverage both federal and state level, non-dilutive
research and development (“R&D”) grants to support development and commercialization of our technology. We are
developing resonators for 4G/LTE and WiFi bands and the associated proprietary models and design kits required to design our RF
filters. Once we have stabilized the wafer process technology, we plan to engage with strategic customers to evaluate first our
resonators and then our filter prototypes. Our initial designs will target high band 4G/LTE and WiFi frequency bands. Since Akoustis
owns its core technology and controls access to its IP, we can offer several ways to engage with potential customers. First, we
can engage with the mobile wireless market, providing filters that we design and offer as a standard catalog component to multiple
customers. Second, we can start with a customer-supplied filter specification, which we design and fabricate for a specific customer.
Finally, we can offer our models and design kits for our customers to design their own filter into our proprietary technology.
We plan to utilize the STC-MEMS Business
to optimize our BulkONE technology and to consolidate all aspects of wafer manufacturing for its disruptive and patented high
band RF filters targeting the multi-billion dollar mobile and other wireless markets. This planned consolidation of the Company’s
supply chain into the STC-MEMS Business is expected to occur on or about June 26, 2017, and is expected to shorten time-to-market
for our RF products, greatly enhancing our ability to service customers upon completion of development and design specifications.
We believe that shorter time-to-market cycles provide us with the opportunity to increase the number of its customer engagements.
As of March 31, 2017, we have received revenue
of $890,365 from contract research, government grants and engineering services since inception, and our operations have been funded
with this revenue, sales of our equity securities and debt. We have incurred net losses totaling approximately $14.2 million from
inception through March 31, 2017. These losses are primarily the result of material and material processing costs associated with
developing and commercializing our technology, as well as personnel costs, including stock-based compensation, professional fees
(primarily accounting and legal), cost of director and officer liability insurance, and losses due to a change in the fair value
of derivatives. We expect to continue to incur substantial costs for commercialization of our technology on a continuous basis
because our business model involves materials and solid state device technology development and engineering of catalog and custom
filter designs.
Plan of Operation
We plan to commercialize our technology by
designing and manufacturing single-band and multi-band bulk acoustic wave (BAW) RF filter solutions that address problems (such
as loss, bandwidth, power handling and isolation) created by the growing number of frequency bands in the RFFE of mobile devices
to support 4G/LTE and WiFi. We have prototyped our first series of single-band low-loss BAW filter designs for 4G/LTE frequency
bands, which are dominated by competitive BAW solutions and historically cannot be addressed with low band, lower power handling
surface acoustic wave (SAW) technology. We also plan to develop, by the second half of calendar 2017, a series of filter solutions
that can cover multiple frequency bands. In order to succeed, we must convince mobile phone OEMs and RFFE module manufacturers
to use our BulkONE® technology in their systems and modules. However, since there are only two dominant BAW filter suppliers
in the industry that have high band technology, and both utilize such technology as a competitive advantage at the module level,
we expect customers that lack access to high band filter technology will be open to engage with our pure-play filter company.
Once we complete customer validation of
our technology, we expect to complete qualification of our BulkONE® process technology in the second half of calendar 2017
to support a product family of 4G/LTE filter solutions. Once we have stabilized our process technology in a manufacturing environment,
we will complete a production release of our high band filter products in the frequency range from 1.5GHz to 4.0GHz. The target
frequency bands will be prioritized based upon customer priority. We expect this will require recruiting and hiring additional
personnel and capital investments.
We plan to pursue filter design and R&D
development agreements with target customers and other strategic partners. These types of arrangements may subsidize technology
development costs and qualification, filter design costs, as well as 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 offer such catalog products in multiple
sales channels.
The Company had $9.8 million of cash and
cash equivalents on hand as of May 19, 2017 to fund our business and research and product development, to commercialize our technology,
to develop and expand our patent portfolio, to complete the acquisition of the STC-MEMS Business, and to provide working capital
and funds for other general corporate purposes. Our anticipated expenses include employee salaries and benefits, compensation paid
to consultants, capital costs for research and other equipment, costs associated with development activities (including travel
and administration), costs associated with the acquisition, integration, and operation of the STC-MEMS Business, legal expenses,
sales and marketing costs, general and administrative expenses, and other costs associated with an early stage, public technology
company. The amounts we actually spend for any specific purpose may vary significantly and will depend on a number of
factors including, but not limited to, the pace of progress of our commercialization and development efforts, actual needs with
respect to product testing, development and research, market conditions, changes in or revisions to our marketing strategies, and
our ability to successfully close the acquisition of the STC-MEMS Business and to integrate the STC-MEMS Business into our operations.
Commercial development of new technology,
by its nature, is unpredictable, and our technology may not be accepted, we may never earn revenues sufficient to support our
operations, and we may never be profitable. Furthermore, since we have no committed source of financing, we may not be able to
raise funds as and when we needed to continue our product development and operations. If we cannot raise funds as and when needed,
or produce operating profits, we may be required to severely curtail, or even to cease, our operations.
Critical Accounting Policies
The following discussion and analysis are
based on the financial statements contained in this prospectus, which we have prepared in accordance with United States generally
accepted accounting principles (“U.S. GAAP”). Certain accounting policies and estimates are particularly important
to the understanding of our financial position and results of operations and require the application of significant judgment by
our management or can be materially affected by changes from period to period in economic factors or conditions that are outside
of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management
uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates
are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts,
our observance of trends in the industry, information provided by our customers and information available from other outside sources,
as appropriate.
Derivative Liability
The Company evaluates its convertible debt,
options, warrants and other contracts, if any, to determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting
Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market
each balance sheet date and recorded as either an asset or a liability. The change in fair value is recorded in the consolidated
statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the
instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified
to equity.
In circumstances where the embedded conversion
option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the
convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single,
compound derivative instrument.
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting
period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to
liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified
in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected
within 12 months of the balance sheet date.
The Company adopted Section 815-40-15 of the
FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature)
is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach
to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating
the instrument’s contingent exercise and settlement provisions.
The Company utilizes a binomial option pricing
model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet
date. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements
of operations.
Fair Value of Financial Instruments
The carrying amounts of cash and cash
equivalents and accounts payable approximate fair value due to the short-term nature of these instruments.
The Company measures the fair value of financial
assets and liabilities based on the guidance of ASC 820, “Fair Value Measurements and Disclosures,” which defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also
establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
Fair value measurements are categorized using
a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad levels:
Level 1 - Quoted prices are available in active
markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset
or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Pricing inputs are other than quoted
prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date, and
include those financial instruments that are valued using models or other valuation methodologies.
Level 3 - Pricing inputs include significant
inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies
that result in management’s best estimate of fair value.
Equity-based compensation
The Company recognizes compensation expense
for all equity–based payments in accordance with ASC 718 “
Compensation – Stock Compensation
”. Under
fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and
recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.
Restricted stock awards are granted at the
discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service
periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal
to the fair market value of a share of Company stock on the grant date.
The fair value of an option award is estimated
on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires
the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected
stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock
and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the
expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded
risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared
any cash dividends on its Common Stock and does not intend to pay dividends on its Common Stock in the foreseeable future. The
expected forfeiture rate is estimated based on management’s best estimate.
Determining the appropriate fair value model
and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described
above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best
estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change
and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In
addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected
to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation
could be significantly different from what the Company has recorded in the current period.
The Company accounts for share–based
payments granted to non–employees in accordance with ASC 505-40, “
Equity Based Payments to Non–Employees
”.
The Company determines the fair value of the stock–based payment as either the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments
issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date
at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which
the counterparty’s performance is complete. The fair value of the equity instruments is re-measured each reporting period
over the requisite service period.
Results of Operations
Three Months Ended March 31, 2017 and
2016
Revenue
The Company recorded revenue of $309,000
during the three months ended March 31, 2017 from contract research and government grants due to the receipt from the National
Science Foundation (NSF) of $294,000 for the Phase II grant and the recognition of $15,000 of engineering review services revenue
previously recorded in deferred revenue. For the comparative three months in 2016, we recorded $234,000 in revenue from
contract research and government grants, which included the final payment on the Phase I grant from the NSF of $50,000 and a $184,000
payment from the NSF for the initial Phase II grant.
Expenses
Research and Development Expenses
Research and Development (“R&D”)
expenses were approximately $1.2 million for the three months ended March 31, 2017 compared to $376,000 for the three months ended
March 31, 2016, an increase of $786,000, or 209%. The increase was primarily attributable to an increase of $277,000, or 218%,
in stock-based compensation due to new grants of restricted stock awards to R&D employees and contractors, as well as a revaluation
of grants issued to contractors in prior periods to account for the stock price fluctuation from $2.14 as of March 31, 2016 to
$12.84 as of March 31, 2017. In addition, we recorded an increase in salary and wage expense of $281,000, or 354%, and
an increase in R&D materials and supplies expense of $172,000, or 149%, as the result of the ramp up of product development
activities.
General and Administrative Expenses
General and Administrative (“G&A”)
expenses for the three months ended March 31, 2017 were $1.2 million, compared to $481,000 for the three months ended March 31,
2016. The increase of $723,000, or 150%, occurred mainly in stock-based compensation, which increased by $186,000, or
162%, over the $115,000 recorded for the comparable three months in 2016. The increase was driven by new restricted stock awards
granted to non-R&D employees and consultants, as well as the revaluation of grants issued to non-R&D consultants in prior
periods to account for the stock price fluctuation from $2.14 as of March 31, 2016 to $12.84 as of March 31, 2017. Professional
fees were $293,000, as compared to $128,000 for the comparative three months in 2016. The increase of $165,000, or 129%, was due
mainly to higher accounting and legal fees, as well as $70,000 in fees for the Company’s uplist to the Nasdaq Capital Market
(NASDAQ) as announced on March 10, 2017.
Other Income and Expense
Other Expense for the three months ended
March 31, 2017 was $7,000, compared to $127,000 in the comparative three months of 2016. During the prior period, the
Company amended warrant agreements issued in the 2015 and the first 2016 private placement offerings to eliminate the derivative
feature for all but 85,222 of the outstanding warrants. The final 85,222 warrants were amended in January 2017, and as a result,
there was a decrease in the amount of loss recorded for derivative liabilities as compared to the three months ended March 31,
2016.
Net Loss
Net Loss was $2.1 million for the three
months ended March 31, 2017, compared to a net loss of $749,000 for the three months ended March 31, 2016. The higher year over
year loss of $1.3 million, or 175%, was mainly driven by higher stock-based compensation expense for both R&D and G&A employees
and contractors of $277,000 and $186,000, respectively, higher spend on R&D material and supplies expense of $172,000, higher
professional fees of $165,000, and higher salary and wage expense for R&D and G&A employees of $562,000 in aggregate.
Nine months Ended March 31, 2017
and 2016
Revenue
The Company recorded revenue of $468,000
for the nine months ended March 31, 2017. Of that amount, the Company received $454,000 from NSF Phase II grant and $15,000 from
engineering review services revenue previously recorded in deferred revenue. Revenue in the comparative nine months of 2016 was
$234,000, all of which came from the NSF Phase I and Phase II grants.
Expenses
Research and Development Expenses
R&D expenses for the nine-month period
ended March 31, 2017 were $2.6 million which was an increase of $1.5 million, or 147%, over the comparative 2016 period. The increase
was primarily associated with salaries and benefits, stock-based compensation, and R&D materials and supplies. Salaries and
benefit costs were $891,000 and were $421,000, or 90%, higher over the comparative nine-month period ended March 31, 2016 due to
increased headcount for technical personnel. Stock-based compensation was $871,000, which was a $744,000, or 586%, increase over
the $127,000 recorded for the nine months ended March 31, 2016. The increase was due to new grants of restricted stock
awards to R&D employees and contractors and the revaluation of grants made to contractors in prior periods to account for the
stock price fluctuation from $2.14 as of March 31, 2016 to $12.84 as of March 31, 2017. In addition, we recorded an increase in
R&D materials and supplies expense of $281,000, or 84%, due to the ramp up of product development activities.
General and Administrative Expenses
G&A expenses for the nine months ended
March 31, 2017 were $4.5 million, compared to $2.0 million for the nine months ended March 31, 2016. The higher spend
of $2.6 million, or 130%, was primarily driven by increases in stock-based compensation and professional fees. Stock-based compensation
was $2.1 million, compared to $287,000 for the comparative nine months in 2016, an increase of $1.8 million, or 625%. The change
was due to new grants of restricted stock awards to non-R&D employees, directors, and consultants, as well as the revaluation
of the grants issued to consultants in prior periods to account for the stock price fluctuation from $2.14 as of March 31, 2016
to $12.84 as of March 31, 2017. We recorded professional fees of $903,000 for the nine months ended March 31, 2017. This was an
increase of $456,000, or 102%, over the comparative nine-month period in 2016. The higher professional fee spends occurred mainly
in accounting fees (an increase of $85,000) and legal fees (an increase of $262,000), as well as $70,000 in fees for the Company’s
uplist to the Nasdaq Capital Market.
Other Income and Expense
Other expense for the nine months ended
March 31, 2017 was $877,000, compared to $107,000 for the nine months ended March 31, 2016, and was made up primarily of the loss
recorded for the change in the fair value of derivatives-warrants, as described above under “Other Income and Expense”
for the three months ended March 31, 2017. Other expense for the comparative nine-month period in 2016 included a loss of $107,000
and a loss for the change in fair value of derivatives-warrants due to the stock price fluctuation from $2.14 per share as of March
31, 2016 to $12.84 per share as of March 31, 2017.
Net Loss
Net Loss was $7.5 million for the nine months
ended March 31, 2017, compared to a net loss of $2.9 million in the nine months ended March 31, 2016. The higher loss of $4.6
million was due to increases in stock-based compensation expense for R&D and G&A personnel and contractors of $744,000
and $1.8 million, respectively, the higher loss recorded for the change in fair value of derivatives-warrants of $769,000, and
increases in wages and benefits of $596,000, professional fees of $456,000, and R&D materials and supplies expense of $281,000.
Liquidity and Capital Resources
We have received $876,000 from contract
research and grants since inception, and our operations have been primarily funded with these grants, sales of our equity securities,
and debt financing.
As of March 31, 2017, we had current assets
of $10.3 million, primarily consisting of approximately $9.4 million in cash and $689,000 in deposits. Current liabilities were
$1.3 million and included accounts payable and other accrued expenses of $263,000, as well as accrued payroll, including accrued
bonuses and stock based compensation, of $1.0 million. Working capital as of the quarter ended March 31, 2017 was $9.0 million,
compared to $3.7 million as of June 30, 2016. The increase in working capital as of March 31, 2017 was primarily attributable
to an increase of $5.3 million in cash due to the receipt of $9.8 million in net proceeds from the 2016-2017 Offering.
Long-term liabilities were $0 as of March
31, 2017, a decrease of $1.3 million from June 30, 2016. The change was due to the decrease in derivative-warrants, as described
above under “Results of Operations.”
Stockholder’s equity was $9.8 million
as of March 31, 2017. The $7.1 million increase over $2.7 million as of June 30, 2016 was primarily attributable to the receipt
of $9.8 million in net proceeds from the 2016-2017 Offering (as discussed in Note 1 to the consolidated financial statements),
the issuance of Common Stock for services valued at $3.1 million, and the reclassification of the derivative-warrants as equity
valued at $2.2 million (as discussed in Note 7 to the consolidated financial statements). These increases were offset
by the $7.5 million net loss for the nine-month period ending March 31, 2017.
In total, we sold 2,142,000 shares of Common
Stock in the 2016-2017 Offering for total aggregate gross proceeds of $10,710,000 before commissions and fees of $854,010. In
addition, we sold 663,000 shares of Common Stock in the 2017 Offering for aggregate gross proceeds of $5,967,000 before deducting
commissions of approximately $418,000 and expense of approximately $2,400. As of May 24, 2017, the Company has $14.2
million in cash and cash equivalents on hand; we expect our existing funds will be sufficient to fund our current operations through
June 30, 2018. This expectation does not account for any capital expenditures associated with the integration and operation
of the Acquired Business as the Company is continuing to conduct due diligence on the operations and available financial information
associated with the Acquired Business. Consummation of the acquisition is conditioned, in part, on delivery to the Company of the
financial books and records of the Acquired Business sufficient for the completion of an audit or financial information as necessary
to satisfy any SEC filing requirements related to the acquisition
Three-Month Transition Period Ended
June 30, 2016 Compared to Three-Month Period Ended June 30, 2015
Revenue
The Company did not have any revenues
from operations during the three months ended June 30, 2016 and the three months ended June 30, 2015.
Expenses
Research and Development Expenses
Research and Development expenses consist
of costs for technical and engineering personnel, travel expense for R&D personnel and costs to develop and commercialize
our technology including materials, material processing, and contractors. Research and Development expenses were $709,314 for
the three-month transition period ended June 30, 2016 and were $481,189, or 210.9%, higher than the three-months ended June 30,
2015. The period over period increase was due to the ramp up of research and development activity in the Company’s second
year of operations. The increased expenditures occurred primarily in areas of R&D personnel, stock based compensation, and
material costs. Personnel costs increased by $247,490 versus $0 in the comparative period due to the technical and engineering
new hires. Stock-based compensation of $75,686 increased by $38,774, or 105.0%, over the three-month comparative period due to
new restricted stock awards made to technical and engineering contractors and the calculation of the change in the fair market
value of awards made in prior periods. In addition, material and material processing costs for the transition period were $320,204
and were $163,314, or 104.1%, higher than the comparative period due to the ramp up of material purchases and material processing
costs for product development activities.
General and Administrative Expenses
General and Administrative costs 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. General and Administrative expenses for the three-month transition
period ended June 30, 2016 were $968,734 versus $625,917 for the 2015 comparative period. The increase of $342,817, or 54.8%,
was associated with increases in personnel costs, professional fees, insurance expense, stock-based compensation and travel. Personnel
costs of $330,436 were higher by $92,484, or 38.9%, due to the increase in the number of administrative personnel, while professional
fees of $125,322, associated with legal, accounting and investor relations, were higher by $22,519, or 21.9%, as a result of the
Company becoming a public reporting company in May 2015. Insurance expense of $42,698, which includes coverage for Directors and
Officers, Keyman and Property & Casualty, was higher by $24,685, or 137.0%, due to the higher cost of Directors and Officers
(“D&O”) coverage which was not in place for the full three-month 2015 comparative period. Stock-based compensation
for the transition period was $359,956 and higher by $171,208 or 90.7% as a result of the issuance of new awards for G&A personnel
executed after June 2015 and the change in the fair market value of stock grants issued to consultants in the three-month comparative
period (change from $1.50 per common share to $4.19 per common share as of June 30, 2016). Travel expense for the transition period
of $33,513 increased over the comparative period by $8,221 or 32.5%, due to more frequent executive travel to meet with potential
investors, potential customers and strategic partners.
Other Income and Expense
Other Expense for the three-month transition
period totaled $839,589 and included a $860,275 loss on fair value of derivatives associated with the change in fair market value
of warrants issued in the “2015 Offering” (as defined below under “Description of Business — The 2015
Offering”), due to change in stock price per share from $1.50 per common share to $4.19 per common share on June 30, 2016.
For the three-month 2015 comparative period, we recorded Other Income of $31,745, consisting primarily of grant income.
Net Loss
The Company recorded a net loss of $2,517,637
for the transition period ended June 30, 2016 compared to a net loss of $822,297 for the three-months ended June 30, 2015. The
year over year incremental loss of $1,695,340, or 206.2%, was driven by higher material costs due to the ramp up of research and
development activities, increased insurance costs and professional fees due to the Company becoming a public reporting company
in May 2015 and higher personnel costs for both R&D and Administrative headcount.
Year Ended June 30, 2016 Compared
to Year Ended June 30, 2015
Revenue
The Company did not have any revenues
from operations during the year ended June 30, 2016 and the year ended June 30, 2015.
Expenses
Research and Development Expenses
Research and Development expenses were
$1,758,701 for the year ended June 30, 2016 compared to $470,987 for the year ended June 30, 2015. The $1,287,714, or 273.4%,
increase occurred primarily in the areas of materials, personnel and stock-based compensation. Materials and material processing
costs were $640,281 for the year ended June 30, 2016 versus $345,894 for the 2015 comparative period. The increased spend was
due to the ramp up of product development activity. Personnel costs were $716,800 versus $0 in the 2015 comparative period as
a result of the technical and engineering hires made as the Company ramped up operations in its second year. We also saw a year-over-year
increase of $165,825, or 449.2%, in stock based compensation for the year ended June 30, 2016 as a result of the full year effect
of restricted stock grants issued in the year ended June 30, 2016 to R&D employees and contractors, as well as the change
in the fair market value of grants issued in prior periods.
General and Administrative Expenses
General and Administrative expenses for
the year ended June 30, 2016 were $2,935,299 compared to $920,031 for the year ended June 30, 2015. The increase of $2,015,268,
or 219.0%, was reflected primarily in the following areas: (1) Personnel expense, (2) stock-based compensation, (3) professional
fees, (4) insurance, and (5) travel. Personnel costs were $1,150,362 for the year ended June 30, 2016 and were $725,509, or 170.8%,
higher than the 2015 comparative period. The key driver of the increase was the addition of executive and administrative headcount
as the Company added support personnel in its second year. We also saw a year-over-year increase in stock-based compensation of
$451,923, or 231.8%, ($646,890 for the year ended June 30, 2016 versus $194,967 for the 2015 comparative period). This increase
was due to the costs of new restricted stock awards and the change in the fair market value of grants issued in the 2015 comparative
period. We saw a year-over-year increase in professional fees, including legal, accounting/auditing and investor relations, of
$422,820, or 281.9%, over the $149,999 recorded for the year ended June 30, 2015. In addition, we recorded an increase of $147,472
in insurance costs, ($167,990 versus $20,518 for the 2015 comparative period). The increase in professional fees and insurance
are both attributable to the Company becoming a public reporting company in May 2015. Travel expense for the year ended June 30,
2016 was $136,474 and increased $100,317 or 277.5%, over the year ended June 30, 2015 as a result of increased executive travel
to investor conferences, and meetings with potential customers and strategic partners.
Other Income and Expense
Other Income and Expense for the year
ended June 30, 2016 included expense of $968,840 for the loss from the change in the fair value of derivatives. The derivatives
are placement agent warrants issued for both the 2015 Offering (as defined below under “Description of Business —
The 2015 Offering”) and the First 2016 Offering. The expense associated with the change in the fair value was partially
offset by grant income of $254,834. Other Income/Expense for the year ended June 30, 2015 was $169,245, which consisted of grant
income of $167,499, change in fair value of derivative liabilities of $1,571 and interest income of $175.
Net Loss
The Company recorded a net loss of $5,406,167
for the year ended June 30, 2016 compared to a net loss of $1,221,773 for the year ended June 30, 2015. The incremental loss of
$4,184,394 was due to the ramp up of operations in the Company’s second year of operations including higher material and
material processing costs, higher R&D and G&A personnel costs, and higher insurance costs and professional fees due to
the Company becoming a public reporting company in May 2015.
Year Ended March 31, 2016 Compared
to the Period from May 12, 2014 (Inception) Through March 31, 2015
Revenue
The Company did not have any revenues
from operations during the year ended March 31, 2016 and the period from May 12, 2014 (inception) through March 31, 2015.
Expenses
Research and Development Expenses
Research and Development expenses were
$1,222,194 for the year ended March 31, 2016, which was an increase of $977,559, or 399.6%, over the $244,635 for the comparative
period of May 12, 2014 (inception) to March 31, 2015. The increase was due to the ramp up of research and development activity
during the Company’s second year of operations. The increased expenditures occurred primarily in areas of R&D personnel
costs, stock-based compensation, and material costs. Personnel costs increased by $469,310 versus $0 in the comparative period
due to new hires of technical and engineering personnel. Stock-based compensation increased $124,389 over the comparative period
due to the issuance of new restricted stock awards made to R&D employees and contractors. In addition, material costs of $478,858
were $289,560, or 152.9%, higher in the year ended June 30, 2016 due to the increase in material purchases and material processing
costs associated with product development activities.
General and Administrative Expenses
General and Administrative expenses for
the year ended March 31, 2016 were $2,647,800 versus $339,214 for the period of May 12, 2014 (inception) to March 31, 2015. The
period-over-period increase of $2,308,586, or 680.6%, was associated with officer and staff personnel costs that were higher by
$852,096, or 441.1%, due to an increase in headcount in the Company’s second year of operations. In addition, we incurred
professional fees of $550,300, associated with legal, accounting and investor relations functions, which were higher over the
prior year period by $505,757, or 1135.4%. Insurance expense, primarily driven by the cost of D&O coverage, was higher over
the prior year period by $140,800, or 5620.8%. The increases in both professional fees and D&O insurance were driven by the
incremental expenses of the Company becoming a public reporting company in May 2015. Stock-based compensation expense of $512,594
for the year ended March 31, 2016 was $509,077, or 14474.8%, higher than the comparative period as a result of the full year effect
of expense for agreements executed in the prior year as well as the expense for newly issued grants. Travel expense of $128,253
also increased over the comparative period by $116,096, or 955%, due to increased executive travel.
Other Income and Expense
Other Income for the year ended March
31, 2016 totaled $159,167 (versus $137,500 recorded in the comparative period) and included grant income of $264,333. The grant
income recorded was offset by the loss in fair value of derivatives of $106,994 on warrants issued in the 2015 Offering (as defined
below under “Description of Business — The 2015 Offering”) as a result of the change in stock price from $1.50
to $2.11, the price per share on the balance sheet date.
Net Loss
The Company recorded a net loss of $3,710,827
for the year ended March 31, 2016 and a net loss of $446,349 for the period from inception month through March 31, 2015. The incremental
loss of $3.26 million, or 731.4%, was driven by higher R&D personnel costs, higher material costs due to the ramp up of research
and development activities, increased general and administrative personnel costs due to an increase in support headcount, higher
period-over-period stock-based compensation, and increased insurance costs and professional fees due to the Company becoming a
public reporting company in May 2015.
Cash Flow Analysis
Nine-Month Period Ended March 31, 2017
Compared to Nine-Month Period Ended March 31, 2016
Operating activities used cash of $4.0
million during the nine months ended March 31, 2017, compared to $2.2 million for the nine months ended March 31, 2016. The primary
components of the cash used in operations included the $7.5 million net loss for the nine months ended March 31, 2017 and a deposit
paid for future production of wafer inventory of $684,000, offset by non-cash items of stock-based compensation of $3.0 million,
change in the fair value of derivatives of $877,000, and an increase in trade payables and accrued expenses of $340,000. For
the nine months ended March 31, 2016, the primary components of the cash used in operations included $2.9 million net loss, offset
by non-cash items of stock-based compensation of $441,000, the change in the fair value of derivatives of $109,000, and an increase
in trade payables and accrued expenses of $144,000.
Investing activities used cash of $594,000
for the nine months ended March 31, 2017 due to purchases of R&D machinery and equipment of $543,000 and cash paid for patents
of $52,000. For the nine months ended March 31, 2016, investing activities used cash of $156,000 for the purchase of R&D machinery
and equipment for $125,000 and for patent expense of $32,000.
Cash flows from financing activities for
the nine months ended March 31, 2017 included $9.8 million in net proceeds from the sale of 2,142,000 shares of Common Stock in
the 2016-2017 Offering. Additionally, the Company received $55,000 upon the exercise of warrants for 34,375 shares of Common Stock
at $1.60 per share. For the nine months ended March 31, 2016, cash flows from financing totaled approximately $770,000 in net proceeds
from the sale of 494,125 shares of Common Stock.
Three-Month Transition Period Ended
June 30, 2016 Compared to Three Months Ended June 30, 2015
Operating activities used cash of $1,100,342
in the transition period ended June 30, 2016 and $576,492 in the three-month 2015 comparative period. The increase in cash used
was attributable to the ramp up of the Company’s activities in the development and commercialization of its technology (R&D
personnel and material costs), higher spend on general and administrative costs for support personnel and higher period-over-period
costs for professional fees and D&O insurance.
Investing activities used cash of $47,215
in the transition period compared to $23,378 for the 2015 comparative period. The increase in the transition period was the result
of additional investments in fixed assets and patents.
Financing activities provided cash of $2,572,896,
which was $1,668,731 lower than the $4,241,627 provided in the 2015 comparative period. We held private placement offerings in
both three-month periods. The second close of the First 2016 Offering was held during the transition period (April 2016) and provided
net proceeds of $2,562,896, whereas the 2015 Offering (as defined below under “Description of Business — The 2015
Offering”), which closed in the 2015 comparative period (May 2015) provided net proceeds of $4,241,627.
Year Ended June 30, 2016 Compared to
Year Ended June 30, 2015
Operating activities used cash of $3,312,969
during the year ended June 30, 2016 and $980,044 for the 2015 comparative period. The year-over-year increase in use of cash of
$2,332,925 was attributable to higher operating expenses associated with the ramp up of development and commercialization activities
(primarily R&D personnel and material costs), higher spend on G&A costs for support personnel, professional fees and D&O
Insurance.
Investing activities used cash of $203,667
compared to $111,727 for the comparative year ended June 30, 2015 primarily due to the increased spend on R&D equipment (higher
by $79,897).
Financing activities provided cash of $3,342,584
for the year ended June 30, 2016 versus $4,931,627 for the 2015 comparative period. The year-over-year decrease in cash from financing
activities is the primary difference between the net proceeds of the First 2016 Offering of $3,332,584 (closings held in March
and April of 2016) as compared to the net proceeds of the 2015 Offering (as defined below under “Description of Business
— The 2015 Offering”) of $4,241,627 (held in May and June 2015) and the conversion of $655,000 of convertible notes
to stock in May 2015.
Year Ended March 31, 2016 Compared to
the Period from May 14, 2014 (Inception) Through March 31, 2015
Operating activities used cash of $2,789,118
for the year ended March 31, 2016 and $433,065 for the comparative period of May 12, 2014 (inception) to March 31, 2015. The higher
use of cash was due to the ramp up of the Company’s activities in the development and commercialization of its technology
(R&D personnel and material costs), higher spend on administrative personnel and increased costs for professional fees and
D&O Insurance as the result of the company becoming a public reporting company in May 2015.
Investing activities used cash of $179,830
in the year ended June 30, 2016 versus $99,197 for the comparative period. The period-over-period increase of $80,633 was due
primarily to increased investment in R&D equipment (higher by $72,246).
Financing activities provided cash of $5,011,314
during the year ended March 31, 2016, which was $3,791,313 higher than provided in the comparative period ended March 31, 2015.
The cash provided during the year ended March 31, 2016 was the result of net proceeds of the first closing of the First 2016 Offering,
held March 2016, as well as the net proceeds from the first and second closings of the 2015 Offering (as defined below under “Description
of Business — The 2015 Offering”), held in May and June 2015. The Company raised $1,220,001 in the comparative period,
which was prior to the Merger in May 2015, through the sale of preferred stock ($530,000) and the issuance of convertible notes
for $655,000.
Off-Balance Sheet Transactions
The Company did not engage in any “off-balance
sheet arrangements” (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of March 31, 2017.
DESCRIPTION OF BUSINESS
Overview
Akoustis is an early stage company focused
on developing, designing and manufacturing innovative radio frequency (RF) filter products for the mobile wireless device industry.
We use a fundamentally new piezoelectric resonator technology that we call BulkONE
TM
in the manufacturing of bulk acoustic
wave (BAW) resonators, the building blocks of high selectivity “RF” filters required to route signals in a smartphone
or other mobile or wearable device. Filters are a critical component of the RF front-end (RFFE), and their use has multiplied
with the launch and licensing of 4G/LTE frequency bands. They are used to define the range of frequencies of radio signals that
are transmitted (the “passband”) and simultaneously reject unwanted signals. The increasing demand for wireless data
and user applications is driving an increase in the number of wireless channels or frequency bands in a single device. Each new
band introduced creates an increase in a demand for filters. A high-end smartphone, for example, must filter the transmit and
receive paths for 2G, 3G and 4G wireless access methods in up to 15 bands, as well as Wi-Fi, Bluetooth and in some cases GPS.
Signals in the receive paths must be isolated from one another. The filters also must reject other extraneous signals from numerous
sources. The current approach to RF filter manufacturing utilizes thin-film polycrystalline materials (thin-film bulk acoustic
resonators, or “FBARs”) with relatively high resistance that dissipate a significant amount of the energy in the signal
(referred to as “lossy”), resulting in front-end heat generation and reduced battery life. In order to compensate
for such losses, the power amplifier specifications are increased, by as much as a factor of two, which reduces further the battery
life and puts more demands on the thermal management of the mobile device.
As the filter count per mobile device increases,
these inefficiencies will become more limiting. We plan to use single crystal piezoelectric materials to develop a new class of
RF filters with a fundamental advantage to reduce losses over existing thin film technologies. Our technology has not yet obtained
market validation from Tier I mobile wireless customers or been verified in commercial manufacturing and our RF filters have yet
to generate any sales. We have incurred accumulated net losses from our inception through March 31, 2017 of approximately $14.2
million. We have fabricated research and development (“R&D”) resonators demonstrating the feasibility of our BulkONE
technology, and have transitioned the technology into a production-capable wafer fabrication facility.
Once our technology is qualified for manufacturing,
we expect to design and sell single crystal BAW RF filter products using our BulkONE technology. We believe our technology is
disruptive to the RF front-end (RFFE) market through the following expected advantages:
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Wider
Bandwidth Coverage,
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Improved
power compression and linearity,
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Reduced
power amplifier cost, for the ultimate purpose of manufacturing our BAW RF filters,
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Reduced
heat generation and reduced battery loading, and
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Reduced
guard band between adjacent frequency bands.
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Once our BulkONE technology is qualified for
production, our product focus is on innovative single-band filter products for the growing RFFE market, which can be used to make
duplexer or multiplexer filter products necessary for the mobile Internet. These products present the greatest near-term potential
for commercialization of our technology. According to a McKinsey Global Institute report dated May 2013, the Mobile Internet,
the so-called “Internet of Things” (IoT), as well as advanced materials including piezoelectric ceramics and crystals
are included in the twelve potentially economically disruptive technologies with an estimated economic value impact that could
be over $25 trillion.
In early 2015, we signed a joint development
agreement and supply agreement with a foundry partner, and since that time, we have transferred our R&D resonator process
flow to this partner and have evaluated single crystal piezoelectric materials ranging from Aluminum Gallium Nitride (AlGaN) to
Aluminum Nitride (AlN) to determine the material with the highest performance potential. During the past year, Akoustis
has evaluated single crystal group-III element nitride piezoelectric materials from at least six suppliers. In August of 2016,
the Company announced it had signed multiple non-exclusive collaborative business agreements with a Chinese tier one RF front-end
(“RFFE”) module manufacturer to supply its premium RF filter products. The agreements signed between the Company and
its tier one collaborator include a Joint Development Agreement (JDA), a Statement of Work (SOW), and a strategic Product Supply
Agreement (PSA). In addition, we have signed agreements with two distributors, one in China and one in Israel, who will be responsible
for promotion and selling of our filter products. We will continue discussions with additional prospective customers, although
these discussions may not result in any agreements.
On March 23, 2017, we entered into the
STC-MEMS Agreements to acquire certain specified assets, including the STC-MEMS Business. The Company also agreed to assume substantially
all of the on-going obligations of the STC-MEMS Business incurred in the ordinary course of business.
Regarding technical performance, Akoustis achieved an
experimental, two-port series-configured resonator configured with on-chip passive elements with K-squared of 12.5% for
undoped single crystal AlN, approximately two-times higher than incumbent polycrystalline, undoped AlN. K-squared is the
electromechanical coupling factor that determines the effective bandwidth of a filter. We are currently focused on improving
the accuracy of our library models as well as increasing the quality factor (Q) of our resonator. We have demonstrated a Q of
up to 2090 for our fabricated resonators, which is suitable for BAW RF filters targeting 4G/LTE WiFi mobile wireless
applications, and we continue to improve design and process to achieve a Q of greater than 2500 as our next milestone. We
expect significant progress toward this goal over the coming months. As we transition to production, we expect to
optimize our process for the best combination of K-squared and Q. Additionally, on May 16, 2017, the Company announced that
5.8GHz devices were measured from 150-mm wafers. These wafers were the first produced for the Company by STC-MEMS
in Canandaigua, New York and will expand Akoustis ’single crystal technology to cover emerging 5GHz wireless
applications.
Glossary
The following is a glossary of technical terms
used herein:
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Acoustic
wave
— a mechanical wave that vibrates in the same direction as its direction
of travel.
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AlGaN
— Aluminum Gallium Nitride
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Acoustic
wave filter
— an electromechanical device that provides radio frequency control
and selection, in which an electrical signal is converted into a mechanical wave in a
device constructed of a piezoelectric material and then back to an electrical signal.
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Band,
channel or frequency band
— a designated range of radio wave frequencies used
to communicate with a mobile device.
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Bulk
acoustic wave (BAW)
— an acoustic wave traveling through a material exhibiting
elasticity, typically vertical or perpendicular to the surface of a piezoelectric material.
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Digital
baseband
— the digital transceiver, which includes the main processor for the
communication device.
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Duplexer
— a bi-directional device that connects the antenna to the transmitter and
receiver of a wireless device and simultaneously filters both the transmit signal and
receive signal.
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Filter
— a series of interconnected resonators designed to pass (or select) a desired
radio frequency signal and block unwanted signals.
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Group
III element nitrides
— a dielectric material comprised of group IIIA element,
such as boron (B), aluminum (Al) or gallium (Ga), combined with group VA nitrogen to
form a compound semiconductor nitride such as BN, AlN, or GaN. For resonators, the dielectric
is typically chosen based upon the piezoelectric constant of the material in order to
generate the highest electromechanical coupling.
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Monolithic
topology
— a description of an electrical circuit whereby all the elements
of the circuit are fabricated at the same time using the same process flow.
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Power
Amplifier Duplexer (PAD)
— an RF module containing a power amplifier and duplex
filter components for the RF front-end of a smartphone.
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Piezoelectric
materials
— certain solid materials (such as crystals and certain ceramics)
that produce a voltage in response to applied mechanical stress, or that deform when
a voltage is applied to them.
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Quality
factor, or Q
— energy stored divided by the energy dissipated per cycle. Higher
Q represents a higher caliber of resonance, and implies mechanical and electrical factors
responsible for energy dissipation are minimal. For a given amount of energy stored in
a resonator, Q represents the number of cycles resonance will continue without additional
input of energy into the system.
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Resonator
— a device whose impedance sharply changes over a narrow frequency range and
is characterized by one or more ‘resonance frequency’ due to a standing wave
across the resonator’s electrodes. The vibrations in a resonator can be characterized
by mechanical “acoustic” waves which travel without a characteristic sound
velocity. Resonators are the building blocks for RF filters used in mobile wireless devices.
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RF front-end (RFFE)
—
the circuitries in a mobile device responsible for processing the analog radio signals and is located between the device’s
antenna and the digital baseband.
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RF Spectrum
—
a defined range of frequencies.
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STC-MEMS
— a semiconductor wafer-manufacturing
operation and microelectromechanical systems (MEMS) business with associated wafer-manufacturing tools, as well as the real estate
and improvements associated with the facility located in Canandaigua, New York.
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STC-MEMS Agreements –
Asset Purchase Agreement and a Real Property Purchase Agreement (collectively, the “STC-MEMS Agreements”) with
The Research Foundation for the State University of New York (“RF-SUNY”) and Fuller Road Management Corporation (“FRMC”),
an affiliate of RFSUNY (collectively, “Sellers”).
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STC-MEMS Business —
the business with associated
wafer-manufacturing tools, as well as the real estate and improvements associated with the facility located in Canandaigua, New
York, which is used in the operation of STC-MEMs
.
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Surface acoustic wave
(SAW)
— an acoustic sound wave traveling horizontally along the surface of a piezoelectric material.
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Wafer
— a thin
slice of semiconductor material used in electronics for the fabrication of integrated circuits.
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Our Technology
Current RF filters utilize a technology that
is limited by the material properties of the base filter component. Existing bulk acoustic wave filters use an “acoustic
wave ladder” that is based on a monolithic topology approach using lossy polycrystalline materials. By contrast, our BulkONE
technology uses a single crystal material, which provides 30% higher piezoelectric properties, compared to conventional polycrystalline
materials used in the industry today. We have fabricated R&D resonators that demonstrate the feasibility of our approach and
believe our technology will yield a new generation of filter products.
BulkONE Technology consists of novel single-crystal
piezoelectric materials, which are fabricated into bulk-mode, acoustic wave resonators and RF filters. Our patented piezoelectric
materials contain high-purity Group III element nitride materials and possess a unique signature, which can be detected by conventional
material metrology tools. We utilize analytical modeling techniques to aid in the design of our materials and our material specifications
are typically outsourced to a third party for manufacturing. Once our materials are ready for processing, we supply our wafer
manufacturing partner raw materials, a mask design file, and unique process sequence in order to fabricate our resonators and
filters. Our wafer process flow is compatible with wafer level packaging (WLP) that allows for low profile, cost effective filters
to be produced.
Challenges Faced by the Mobile Device Industry
Rising consumer demand for always-on wireless
broadband connectivity is creating an unprecedented need for high performance RF Front End for mobile devices. Mobile devices
such as smartphones and tablets are quickly driving the IoT. The rapid growth in mobile data traffic is testing the limits of
existing wireless bandwidth. Carriers and regulators have responded by opening new spectrums of RF frequencies, driving up the
number of frequency bands in mobile devices. This substantial increase in frequency bands has created a demand for more filters,
as well as a demand for filters with higher selectivity. The global transition to LTE and adoption of LTE-Advanced with more sophisticated
carrier aggregation and multiple-input, multiple-output (MIMO) techniques will continue to push the requirements for increased
supply of high performance filters.
Furthermore, the new spectrum introduced by
4G/LTE is driving licensing at higher frequencies than previous 3G smartphone models. For example, new TDD LTE frequencies allocated
for 4G wireless cover frequencies nearly twice as high as covered in previous generation phones. As a result, the demand for filters
represents the single largest growth opportunity in the RFFE industry according to a Mobile Experts May 2016 report. For traditional
“low band” frequencies, SAW filters have been the primary choice, while high band solutions have utilized BAW filters
due to their performance and yield. While there are multiple sources of supply for SAW technology, the source of supply for BAW
filters is more limited and essentially dominated by two manufacturers worldwide.
The first problem is that signal loss of current
generation acoustic wave filters is excessively high, and up to half of the transmit power is wasted as heat, which ultimately
constrains battery life. The second challenge is that the allocated spectrum for mobile communication bands requires high bandwidth
RF Filters, which, in turn, requires wide bandwidth core resonator technology. In addition, filters with inferior selectivity
either reduce the available operating bands the mobile device can support or increase the noise in the operating bands. Each of
these problems negatively impacts the end-user’s experience when using the mobile device.
Our Solutions
Our immediate focus is on the commercialization
of wide bandwidth RF filters operating in the high frequency portion of the RFFE (called high band). Using our BulkONE technology,
we believe these filters enable new PAD module or RFFE competition for high band modules as well as performance-driven low band
applications. Initially, we expect to target select strategic RFFE market leaders as well as Tier 2 mobile phone original equipment
manufacturers (“OEMs”) and/or RFFE module suppliers. Longer term, our focus will be to expand our market share by
engaging with multiple mobile phone OEMs and RFFE module manufacturers. We are working with our foundry partner, STC-MEMS located
in Canandaigua, NY to transition our technology to their facility and commercialize our filters using our BulkONE technology.
This will be the first in a series of R&D activities that will set the foundation for filter products that we believe can
disrupt the high band filter market. We will develop a series of filter designs used in the manufacturing of duplexers or more
complex multiplexers targeting the 4G/LTE frequency bands. We believe our filter designs will create an alternative and replace
filters currently manufactured using materials with fundamentally inferior performance.
Our Business Model
We anticipate that our target customers will
be mobile phone OEMs and/or those companies that make part of or the entire RFFE module. We expect sales to these companies of
our filters, along with a recently released family of broadband amplifiers, to be the source of our revenue. We further expect
to principally provide design and development resources and manage our outsourced partners to support our product realization
process. There are two companies specializing in manufacturing of BAW filters that dominate this market. See “Competition”
below. We believe our BulkONE technology provides a competitive filter alternative and that there will be factors creating significant
barriers to entry for potential additional competitors, including:
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Our
growing portfolio of intellectual property (see “Intellectual Property” below);
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Our
highly experienced leadership and technical team; and
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Being
first to market with a competitive high performance BAW filter alternative.
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The Mobile Internet
Rising consumer demand for always-on wireless
broadband connectivity is creating an unprecedented need for high performance RFFE for mobile devices. Mobile devices such as
smartphones and tablets are quickly becoming the primary means of accessing the Internet. The exponential growth in mobile data
traffic is testing the limits of existing wireless back-up bandwidth. Carriers and regulators have responded by opening new RF
spectrum, driving up the number of frequency bands in mobile devices. As a prime example, a Presidential directive was issued
in 2010 to the FCC and other agencies to make available an additional 500 MHz of RF spectrum to meet the growing demand in the
United States. Similar initiatives are occurring worldwide. Adding RF spectrum is not a complete solution. The added spectrum
does not come in large contiguous blocks, but rather in small channels or bands of varying size and frequency. Thus, more data
means more bands, and the result is a rapid and substantial increase in the number of filters in mobile devices.
The Challenge
Moore’s Law predicts that transistor
density on integrated circuits will double approximately every two years, and the digital baseband of mobile devices has improved
exponentially as predicted by Moore’s Law. However, improvements to the analog RFFE have been limited by existing filter
technology, with only incremental updates to existing technology. Consequently, the RFFE is taking up an ever-growing share of
the total cost of mobile devices. Most mobile devices sold today operate on “fourth generation” wireless technology,
or 4G. There are nearly fifty 4G bands recognized worldwide today, and the list is growing. The RFFE must meet these growing data
demands while reducing cost and improving battery life. Our solution involves a new approach to RFFE component manufacturing,
enabled by BulkONE technology. We expect our technology to produce filters that will reduce the overall system cost and improve
performance of the RFFE.
Figure 1-Our Solution
Single-Band Designs for Duplexers and Multiplexers
SAW filters have been preferred in modern
RFFE because of their high performance, small size and low cost. However, traditional SAW ladder designs do not perform well in
high frequency bands or bands with closely spaced receive and transmit channels, typical of many new bands. Therefore, BAW filters
are needed for these bands. We have demonstrated in a development environment our ability to fabricate BAW resonators, the building
block of BAW filters, that are more efficient than existing available BAW resonators, and we believe the improved efficiency will
reduce the total cost of RFFE as well as reduce the battery demand for mobile devices. Additionally, we believe that our BulkONE
filters will allow for a single manufacturing method that will support all of the BAW filter band range and a significant portion
of the SAW band range. Figure 2 below illustrates what we believe will be the frequency range of our BulkONE technology.
Figure 2- The potential range of our technology
Pure-Play Filter Provider Enables New Module
Competition
Given the high sound velocity in our piezoelectric
materials, our technology allows for a wide range of frequency coverage, and we plan to supply filters that will support 4G/LTE
and beyond. We have successfully demonstrated resonators that will support the design and fabrication of 4G/LTE filters, and our
current focus is on completing the development required to transition this single-crystal BAW technology to high volume manufacturing.
We will be a pure-play filter supplier that will address the increasing RF complexity placed on RF front-end manufacturers supporting
4G/LTE and WIFI.
Figure 3- Increase in average number of
RF filters per each mobile device from 2005 - 2015 (Source: Ericsson)
Commercialization
Our immediate focus is to address problems
in the RFFE with innovative single-band designs using our BulkONE technology. We are currently developing our first commercial
single-band filter in collaboration with our foundry partner, GCS, under the terms of a signed development agreement. We are focused
on developing fixed-band filters because we believe these designs present the greatest near-term potential for commercialization
of our technology, and that once demonstrated, the foundry can be more efficiently readied for production compared to alternative
technologies.
The development agreement with our foundry
partner contains the following milestones:
|
·
|
Milestone
1 (Manufacturing Partner Gap Analysis) — Validate required materials, people, process
and equipment are present for volume manufacturing.
|
|
·
|
Milestone
2 (Process Transfer to Foundry Partner) — Design of filters, technology transfer
and fabrication on GCS’s high-volume manufacturing equipment, fully tested wafers,
and delivery of prototypes.
|
|
·
|
Milestone
3 (Complete Filter Process Capability) — Update design with process feedback, fabricate
multiple wafers using the approved manufacturing process flow, fully tested wafers, calculated
yield and delivery of initial product.
|
|
·
|
Milestone
4 (Production-Ready Filter Design) — Filter design complete and manufacturing process
locked.
|
|
·
|
Milestone
5 (Product Packaging and Ramp) — Product fully packaged and ready for production,
focus shift to revenue generation from filter sales.
|
Milestones 1 and 2 are complete. We continue
to work on Milestone 3, with expected completion in the first half of 2017. We expect to generate revenue from the sale of our
filters in the second half of 2017, after completion of Milestone 4 and Milestone 5.
Our Foundry Agreement was made effective as
of February 27, 2015 and carries a term of five years. At the end of the original term, the Foundry Agreement will be extended
automatically for one additional year unless within 180 days prior to the end of the initial term, either party gives written
notice of its intention to terminate the agreement. The Foundry Agreement outlines proposed activities for development support
that could be requested by us and provided by our foundry partner. The Foundry Agreement also covers the agreement to manufacture,
test and deliver wafers manufactured using our resonator process flow pursuant to purchase orders issued by us.
The Joint Development Agreement we entered
into with GCS in connection with the Foundry Agreement was made effective as of February 27, 2015 and carries a term of five years,
at which time it terminates immediately without further notice or action when all Statements of Work governed by the agreement
terminate or expire. During the term of the agreement, we will collaborate with each other to develop one or more products. Each
of the parties will bear all direct and related costs associated with its development activities. The agreement calls for the
designation of a project manager from each of the parties and the formation of an advisory committee made up of members from each
party to manage escalation of issues unresolved by the project managers. The Joint Development Agreement indicates that we jointly
own in equal, undivided shares title and interest in any joint development works and all Intellectual property rights embodied
in those works other than the Intellectual property rights embodied in either party’s background technology. Background
technology means all information that is owned, controlled, licensed, developed or acquired solely outside the performance of
the Joint Development Agreement.
The Foundry Agreement and Joint Development
Agreement are filed as exhibits to this Report. All references to the Foundry Agreement and Joint Development Agreement herein
are qualified in their entirety by reference to the text thereof filed as an exhibit hereto, which is incorporated herein by reference.
We plan to utilize the STC-MEMS Business
to optimize our BulkONE technology and to consolidate all aspects of wafer manufacturing upon the closing, which is expected to
occur on or about June 26, 2017. This planned consolidation of the Company’s supply chain into the STC-MEMS Business is
expected to shorten time-to-market for its RF products, greatly enhancing the Company’s ability to service customers upon
completion of development and design specifications. We believe shorter time-to-market cycles provide the Company the opportunity
to increase the number of its customer engagements.
Research and Development
Since inception, the Company’s focus
has been on developing an innovative mobile-wireless filter technology with a compelling value proposition to our potential customers
and a significant and noticeable impact to the end user.
Whereas today’s polycrystalline material
(used to manufacture RF resonators and filters) is sputtered on a metal-coated carrier, our BulkONE technology employs high quality,
single crystal resonator films, which are used as the enabler to create high performance BAW RF filters. This single crystal material
is a key differentiator when compared to the incumbent amorphous thin-film technologies because it increases the acoustic velocity
and the electromechanical coupling coefficient in the resonator, which results in higher filter efficiencies and lower power consumption,
leading to simplified RFFEs, longer battery life and reduced tissue heating. Our spend for research and development totaled $709,314
for the transition period ended June 30, 2016 and $1,758,701 and $470,987 for the year ended June 30, 2016 and 2015, respectively.
Our spend for research and development totaled $1,222,194 and $244,635 for the year ended March 31, 2016 and the period May 12,
2014 (inception) through March 31, 2015, respectively. These R&D activities focused on single crystal material development
and resonator demonstration. Current R&D investments include single crystal materials advancement, technology transfer to
our manufacturing partner and resonator development and filter design.
As a result of our efforts, we developed and
recently published an industry leading electromechanical coupling coefficient of 12.5% for our single crystal undoped AIN piezoelectric
resonators as shown in Figure 4. The spacing between resonance and anti-resonance frequencies was 182MHz for our 3.4GHz resonator
device. Our focus is now on improving the quality factor of our device through resonator design and process optimization experiments.
Figure 4- Akoustis’ single crystal
undoped AIN piezoelectric resonator device performance. The plot represents a de-embedded, two-port series-configured BAW resonator
modeled near resonance frequency.
Intellectual Property
We rely on a combination of intellectual property
rights, including patents and trade secrets, along with copyrights, trademarks and contractual obligations and restrictions to
protect our core technology and business.
We currently have 11 patents and 17 pending
patent applications, of which three (3) patents are the subject to a license agreement requiring further negotiation including
three filings for which claims have been allowed in the United States and internationally. The patents relate directly to our single-crystal
bulk acoustic wave (BAW) technology, including materials and device designs, methods of manufacture, integrated circuit designs,
wafer packaging, and point of use (to include mobile applications). We will continue to innovate and expand our patent portfolio,
and when appropriate, we will look to purchase license(s) that grant access to additional intellectual property that enables, enhances
or further expands our technical capabilities and/or product offerings.
H
owever, there is no assurance that any of the pending applications or our future patent
applications will result in patents being issued, or that any patents that may be issued as a result of existing or future applications
will provide meaningful protection or commercial advantage to us.
We believe that it is likely that we will
have competitive advantages from rights granted under our patent applications. Some applications, however, may not result in the
issuance of any patents. In addition, any future patent may be opposed, contested, circumvented or designed around by a third
party or found to be unenforceable or invalidated. Others may develop technologies that are similar or superior to our proprietary
technologies, duplicate our proprietary technologies or design around patents owned or licensed by us.
We generally control access to, and use of,
our confidential information through the use of internal and external controls, including contractual protections with employees,
contractors and customers. We rely in part on the United States and international copyright laws to protect our intellectual property.
All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting
relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection
with the employment or consulting relationship.
Despite our efforts to protect our intellectual
property, unauthorized parties may still copy or otherwise obtain and use our software, technology or other information that we
regard as confidential and proprietary. In addition, we intend to expand our international presence, and effective patent, copyright,
trademark and trade secret protection may not be available or may be limited in foreign countries.
The semiconductor industry is characterized
by vigorous protection and pursuit of intellectual property rights and positions, which has resulted in protracted and expensive
litigation for many companies. Although we have not received any third party claims, we expect that in the future we may receive
communications from various industry participants alleging our infringement of their patents or other intellectual property rights.
Any lawsuits could subject us to significant liability for damages, invalidate our proprietary rights and harm our business and
our ability to compete. Any litigation, regardless of success or merit, could cause us to incur substantial expenses, reduce our
sales and divert the efforts of our technical and management personnel. In the event we receive an adverse result in any litigation,
we could be required to pay substantial damages, seek licenses from third parties, which may not be available on reasonable terms
or at all, cease the sale of products, expend significant resources to develop alternative technology or discontinue the use of
processes requiring the relevant technology.
Akoustis
®
and BulkONE
®
are trademarks of Akoustis, Inc. that were registered with the USPTO on January 24, 2017 and January 10, 2017, respectively.
Competition
The competitive landscape for the Company
is small and is controlled by a handful of RF component suppliers. These companies include, among others, Broadcom (previously
known as Avago Technologies Ltd.), Murata Manufacturing Co., Ltd., Qorvo, Inc., Skyworks Solutions Inc., Taiyo Yuden, and TDK
Epcos. Two of these companies dominate the high band filter market, controlling a significant portion of the customer base and
are increasing capacity to meet the growth demands of the 4G/LTE market.
Upon completion of our product development,
we will compete directly with these companies to secure design slots inside RFFE modules - targeting companies that procure filters
or internally source filters. While many of our competitors have more resources than we have, we believe that our filter designs
will be superior in performance, and we will approach prospective customers as a pure-play filter supplier, offering advantages
in performance over the full frequency range at competitive costs. Our challenge will be to convince the companies that we have
a strong intellectual property position, which we will be able to increase in volume, that we will meet their price targets, and
that we can satisfy reliability requirements.
Employees
We place an emphasis on hiring the best talent
at the right time to enable our core technology and business growth. This includes establishing a competitive compensation and
benefits package, thereby enhancing our ability to recruit experienced personnel and key technologists. We currently have 19 full-time
employees, two part-time employees, plus 13 independent contractors working with the Company, and we will continue to hire specific
and targeted positions to further enable our technology and manufacturing capabilities.
Government Regulations
Our business and products in development are
subject to regulation by various federal and state governmental agencies, including the radio frequency emission regulatory activities
of the Federal Communications Commission (“FCC”), the consumer protection laws of the Federal Trade Commission, the
import/export regulatory activities of the Department of Commerce, the product safety regulatory activities of the Consumer Products
Safety Commission, and the environmental regulatory activities of the Environmental Protection Agency.
The rules and regulations of the FCC limit
the RF used by, and level of power emitting from, electronic equipment. Our RF filters, as a key element enabling consumer electronic
smartphone equipment, are required to comply with these FCC rules, and may require certification, verification or registration
of our RF filters with the FCC. Certification and verification of new equipment requires testing to ensure the equipment’s
compliance with the FCC’s rules. The equipment must be labeled according to the FCC’s rules to show compliance with
these rules. Testing, processing of the FCC’s equipment certificate or FCC registration and labeling may increase development
and production costs and could delay the implementation of our BulkONE acoustic wave resonator technology for our RF filters and
the launch and commercial productions of our filters into the U.S. market. Electronic equipment permitted or authorized to be
used by us through FCC certification or verification procedures must not cause harmful interference to licensed FCC users, and
may be subject to RF interference from licensed FCC users. Selling, leasing or importing non-compliant equipment is considered
a violation of FCC rules and federal law, and violators may be subject to an enforcement action by the FCC. Any failure to comply
with the applicable rules and regulations of the FCC could have an adverse effect on our business, operating results and financial
condition by increasing our compliance costs and/or limiting our sales in the United States.
The semiconductor and electronics industries
also have been subject to increasing environmental regulations. A number of domestic and foreign jurisdictions seek to restrict
the use of various substances, a number of which have been used in our products in development or processes. While we have implemented
a compliance program to ensure our product offering meets these regulations, there may be instances where alternative substances
will not be available or commercially feasible, or may only be available from a single source, or may be significantly more expensive
than their restricted counterparts. Additionally, if we were found to be non-compliant with any such rule or regulation, we could
be subject to fines, penalties and/or restrictions imposed by government agencies that could adversely affect our operating results.
Our cost to maintain compliance with existing environmental regulations is expected to be nominal based on our structure in which
we outsource a majority of our operations to suppliers that are responsible for meeting environmental regulations. We will continue
to monitor our quality program and expand as required to maintain compliance and ability to audit our supply chain.
Noncompliance with applicable regulations
or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of
profits, fines, damages, civil and criminal penalties, or injunctions. An adverse outcome in any such litigation could require
us to pay contractual damages, compensatory damages, punitive damages, attorneys’ fees and costs. These enforcement actions
could harm our business, financial condition and results of operations. If any governmental sanctions are imposed, or if we do
not prevail in any possible civil or criminal litigation, our business, financial condition and results of operations could be
materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s
attention and resources and an increase in professional fees.
Organizational History
We were incorporated as Danlax, Corp., in
Nevada on April 10, 2013. Prior to the Merger and Split-Off (each as defined below), our business was the development and sales
of mobile games.
On April 15, 2015, (i) we changed our name
to Akoustis Technologies, Inc., and (ii) we increased our authorized capital stock from 75,000,000 shares of Common Stock, par
value $0.001 per share, to 300,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of “blank
check” preferred stock, par value $0.001 per share.
On April 23, 2015, we completed a 1.094891-for-1
forward split of our Common Stock in the form of a dividend, with the result that the 11,740,000 shares of Common Stock outstanding
immediately prior to the stock split became 12,854,020 shares of Common Stock outstanding immediately thereafter. All share and
per share numbers in this prospectus relating to our Common Stock have been adjusted to give effect to this stock split, unless
otherwise stated.
On May 22, 2015, our wholly owned subsidiary,
Akoustis Acquisition Corp., a corporation formed in the State of Delaware on May 15, 2015 (“Acquisition Sub”), merged
(the “Merger”) with and into Akoustis, Inc., a corporation incorporated in the State of Delaware on May 12, 2014.
Akoustis, Inc., was the surviving corporation in the Merger and became our wholly-owned subsidiary. All of the outstanding stock
of Akoustis, Inc. was exchanged for shares of our Common Stock.
In connection with the Merger and pursuant
to a Split-Off Agreement, we transferred our pre-Merger assets and liabilities to our pre-Merger majority stockholder, in exchange
for the surrender by him and cancellation of 9,854,019 shares of our Common Stock (the “Split-Off”).
As a result of the Merger and Split-Off, we
discontinued our pre-Merger business and acquired the business of Akoustis, Inc., and we have continued the existing business
operations of Akoustis, Inc., as a publicly-traded company under the name Akoustis Technologies, Inc.
In accordance with “reverse merger”
accounting treatment, our historical financial statements as of period ends, and for periods ended, prior to the Merger have been
replaced with the historical financial statements of Akoustis, Inc. in our SEC filings made subsequent to the Merger.
On May 22, 2015, we also changed our fiscal
year from a fiscal year ending on July 31 of each year to one ending on March 31 of each year, and on August 11, 2016, we changed
our fiscal year to one ending on June 30 of each year, effective immediately.
At a meeting of stockholders on December 15,
2016, our stockholders approved the reincorporation of the Company from the State of Nevada to the State of Delaware, pursuant
to a plan of conversion. We filed Articles of Conversion with the Nevada Secretary of State and a Certificate of Conversion and
a Certificate of Incorporation with the Delaware Secretary of State on December 15, 2016. As a result, we are now a Delaware corporation
governed by Delaware law. In connection with the reincorporation, we reduced our authorized capital stock to 45,000,000 shares
of Common Stock, par value $0.001 per share, and 5,000,000 shares of “blank check” preferred stock, par value $0.001
per share.
Akoustis, Inc.
Akoustis, Inc. was founded in 2014 by experienced
industry leaders and scientists from University of California at Santa Barbara (UCSB) and Cornell University. Our initial funding
was through a $0.5 million series seed funding in 2014, and we received $655,000 in additional investments in convertible notes
and stock by the founders and original angel investors in March 2015. We received a National Science Foundation (“NSF”)
Small Business Innovation Research (“SBIR”) grant that started in January 2015 followed by a second grant award in
April 2015. In addition, we received matching funds from North Carolina Science, Technology & Innovation Department of Commerce.
More recently, we received a third NSF SBIR award in February 2016. The funds from these sources supported the operations of Akoustis,
Inc. and the completion of multiple key Company milestones, including the application for more than ten patents, hiring of key
personnel, the engagement with a foundry prototype facility, initiation of SBIR activities and the engagement of strategic partners
who would consume our RF filters for wireless communications.
The 2015 Offering
Concurrently with the closing of the Merger,
we held a closing of a private placement offering (the “2015 Offering”) in which we sold 3,531,104 shares of our Common
Stock (including shares issued on conversion of convertible notes of Akoustis, Inc., as described below) to accredited investors,
at a purchase price of $1.50 per share (the “2015 Offering Price”). On June 10, 2015, we completed a second and final
closing of the 2015 Offering in which we sold an additional 261,000 shares of Common Stock. In total, we sold an aggregate of
3,792,104 shares of Common Stock in the 2015 Offering for gross proceeds of $5.7 million (before deducting expenses of the offering).
The closing of the 2015 Offering and the closing
of the Merger were conditioned upon each other.
In connection with the 2015 Offering, we paid
Northland Securities, Inc., and Katalyst Securities LLC, each a U.S. registered broker-dealer (the “Placement Agents”),
a cash commission of 10% of the gross proceeds (or 2% in the case of certain existing Akoustis, Inc., investors) raised from investors
in the 2015 Offering. In addition, the Placement Agents received warrants to purchase a number of shares of Common Stock equal
to 10% (or 2% in the case of certain existing Akoustis, Inc., investors) of the number of shares of Common Stock sold in the 2015
Offering, with a term of five (5) years and an exercise price of $1.50 per share (the “2015 Placement Agent Warrants”).
Any sub-agent of the Placement Agents that introduced investors to the 2015 Offering was entitled to share in the cash fees and
warrants attributable to those investors as described above.
As a result of the foregoing, the Placement
Agents and their sub-agents were paid aggregate commissions of $486,976 and were issued 2015 Placement Agent Warrants to purchase
an aggregate of 324,650 shares of our Common Stock. We were also required to reimburse the Placement Agents approximately $77,150
of legal expenses incurred in connection with the 2015 Offering.
A form of the 2015 Placement Agent Warrant
issued to the Placement Agents and their sub-agents is filed as an exhibit to this Report. All descriptions of the 2015 Placement
Agent Warrants herein are qualified in their entirety by reference to the text of such warrant filed as an exhibit hereto and
incorporated herein by reference.
The First 2016 Offering
On March 10, 2016, we held a closing of a
private placement offering (the “March 2016 Offering”) in which we sold 494,125 shares of our Common Stock to accredited
investors at a fixed purchase price of $1.60 per share (the “First 2016 Offering Price”), for aggregate gross proceeds
of $790,600 (before deducting expenses of the March 2016 Offering).
On April 14, 2016, we held a closing of a
private placement offering (the “April 2016 Offering,” and together with the March 2016 Offering, the “First
2016 Offering”) in which we sold 1,741,185 shares of our Common Stock at a fixed purchase price of $1.60 per share (the
“First 2016 Offering Price”), for aggregate gross proceeds of $2.8 million (before deducting expenses of the April
2016 Offering).
In connection with the First 2016 Offering,
we agreed to pay the Placement Agents a cash commission of 8% of the gross proceeds raised from investors first contacted by the
Placement Agents in the First 2016 Offering. In addition, the Placement Agents received warrants to purchase a number of shares
of Common Stock equal to 10% of the number of shares of Common Stock sold in the First 2016 Offering, with a term of five (5)
years and an exercise price of $1.60 per share (the “2016 Placement Agent Warrants”). Any sub-agent of the Placement
Agents that introduced investors to the First 2016 Offering was entitled to share in the cash fees and warrants attributable to
those investors as described above.
As a result of the foregoing, the Placement
Agents and their sub-agents were paid an aggregate commission of $196,752 and were issued 2016 Placement Agent Warrants to purchase
an aggregate of 153,713 shares of Common Stock. We were also required to reimburse the Placement Agents approximately $17,500
of legal expenses incurred in connection with the First 2016 Offering, of which $7,500 was paid by the issuance of 4,690 shares
of Common Stock (valued at the First 2016 Offering Price).
A form of the 2016 Placement Agent Warrant
issued to the Placement Agents and their sub-agents is filed as an exhibit to this Report. All descriptions of the 2016 Placement
Agent Warrants herein are qualified in their entirety by reference to the text of such warrant filed as an exhibit hereto and
incorporated herein by reference.
The 2016-2017 Offering
The Company sold a total of 2,142,000 shares
of its common stock, par value $0.001 per share (the “Common Stock”) in a private placement offering (the “2016-2017
Offering”) at a fixed purchase price of $5.00 per share (the “2016-2017 Offering Price”), with closings in each
of November and December 2016 and January and February 2017. Aggregate gross proceeds were $10.7 million before deducting commissions
and expenses of approximately $854,000. In connection with the 2016-2017 Offering, the Company also issued to the placement agents,
warrants to purchase an aggregate 205,126 shares of Common Stock with a term of five years and an exercise price of $5.00 per share.
In accordance with the terms of the subscription agreements executed by the Company and each of the investors, if the Company issues
additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions, including but not limited to issuances
of awards under Company employee stock incentive programs and certain issuances in connection with credit arrangements, equipment
financings, lease arrangements, or similar transactions) between November 25, 2016 and the date that is 90 days after the date
on which a registration statement registering the resale of the shares issued in the 2016-2017 Offering is declared effective by
the SEC, for a consideration per share less than the 2016-2017 Offering Price (as adjusted for any subsequent stock dividend, stock
split, distribution, recapitalization, reclassification, reorganization, or similar event) (the “Lower Price”), each
investor will be entitled to receive from the Company additional shares of Common Stock in an amount such that, when added to the
number of shares of Common Stock initially purchased by such Investor, will equal the number of shares of Common Stock that such
Investor’s investment in the Offering would have purchased at the Lower Price. We are required to file a registration statement
in accordance with the Registration Rights Agreement entered into with the investors in the 2016-2017 Offering (see “Description
of Securities — Registration Rights” below).
The 2017 Offering
On each of May 2, 2017, May 12, 2017, and
May 24, 2017, the Company held a closing of a private placement offering (the “2017 Offering”) in which it sold an
aggregate of 663,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at
a fixed purchase price of $9.00 per share to accredited investors, for aggregate gross proceeds of $5,967,000, before deducting
commissions of $417,690 and expenses of $2,400. In connection with this closing, the Company agreed to pay a placement agent cash
commissions not to exceed 7% of the gross proceeds raised from investors in the 2017 Offering introduced by the placement agent.
In addition, the Company agreed to issue to the placement agent warrants to purchase a number of shares of Common Stock equal to
7% of the number of shares of Common Stock sold to investors in the 2017 Offering introduced by the placement agent. In
connection with the closing, the Company issued to the placement agent warrants to purchase an aggregate of 46,410 shares of Common
Stock. The warrants have a term of five years and an exercise price of $9.00 per share.
In accordance with the terms of the subscription
agreements executed by the Company and each of the Investors in connection with the 2017 Offering, if the Company issues additional
shares of Common Stock or Common Stock equivalents (subject to customary exceptions, including but not limited to issuances of
awards under Company employee stock incentive programs and certain issuances in connection with credit arrangements, equipment
financings, lease arrangements, or similar transactions), during the period ending on May 1, 2019, for a price per share lower
than the 2017 Offering price, each Investor in the 2017 Offering will be entitled to receive from the Company additional shares
of Common Stock in an amount such that, when added to the number of shares of Common Stock initially purchased by such Investor
and not already sold, will equal the number of shares of Common Stock that such Investor’s investment in the Offering would
have purchased at a ten percent (10%) discount to such lower price.
STC-MEMS Business Acquisition
On March 23, 2017, we entered into the
STC-MEMS Agreements to acquire certain specified assets, including the STC-MEMS Business. The Company also agreed to assume substantially
all of the on-going obligations of the STC-MEMS Business incurred in the ordinary course of business.
Pursuant to the STC-MEMS Agreements, and subject
to the satisfaction or waiver of certain conditions, the Company will purchase the STC-MEMS Business from Sellers for an aggregate
purchase price of $2.75 million, subject to adjustment, payable in cash, at closing. The Company has delivered $10,000 into escrow
as a good faith deposit to be refunded to the Company only under certain limited circumstances, such as Sellers’ failure
to complete the sale or the Company’s termination of the STC-MEMS Agreements due to Sellers’ failure to satisfy a
condition precedent to closing not waived by the Company.
Consummation of the transactions contemplated
by the STC-MEMS Agreements is subject to the satisfaction of certain conditions precedent, including, but not limited to, delivery
to the Company of the financial books and records of the STC-MEMS Business sufficient for the completion of an audit or financial
information as necessary to satisfy any SEC filing requirements in connection with the acquisition, certain third-party consents,
and other customary conditions of closing. The Company has made various representations and warranties and covenants in the STC-MEMS
Agreements that are customary for a company acting as a buyer in its industry except that the Company is required to pay to FRMC
a penalty, as set forth below, if the Company sells the STC-MEMS property within three (3) years after the date of the STC-MEMS
Agreements for an amount in excess of $1.75 million, subject to certain enumerated exceptions. The penalty imposed shall be equivalent
to the amount that the sales price of the property exceeds $1.75 million up to the maximum penalty (“Maximum Penalty”)
defined below:
|
|
Maximum Penalty
|
|
Year 1
|
|
$
|
5,960,000
|
|
Year 2
|
|
$
|
3,973,333
|
|
Year 3
|
|
$
|
1,986,667
|
|
Year 4
|
|
$
|
0
|
|
The STC-MEMS Business currently consists of
a 120,000 square foot commercial wafer-manufacturing facility, including Class 100/Class 1000 cleanroom space, located in Canandaigua,
New York, 57-acres of real estate and improvements associated with the manufacturing facility, 150-mm silicon MEMS wafer fab operations,
including semiconductor manufacturing tools, an existing silicon-based MEMS business with historical annual revenues of approximately
$3.0 million from multiple customers, Trusted Foundry accreditation for MEMS processing, packaging and assembly, a 29-employee
workforce that will be offered employment upon the Closing and two existing tenants with multi-year leases. The Company plans
to utilize the New York facility to internalize all manufacturing for its wafer fab operations.
While the STC-MEMS Agreements contemplates
that a closing of the sale of the STC-MEMS Business will take place on or about June 26, 2017, the conditions precedent to closing
are such that there can be no assurance that the Company will complete its acquisition of the STC-MEMS Business in that time or
at all.
Properties
Our headquarters in Huntersville, NC, is a
4,800 square foot facility that we lease for base rent of $3,800 per month, with a term expiring in April 2018. Although our facilities
are sufficient to meet our current needs, we plan to expand as and when needed.
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 any such matters may arise from time to time that may have an adverse effect on our business, financial
condition, results of operations and prospects.
We are currently not aware of any material
pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such
proceedings that are contemplated by any governmental authority.
DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
Below are the names of, and certain information
about, our current executive officers and directors.
Name
|
|
Age
|
|
Position
|
|
Date Named
to Board
of Directors/as
Executive Officer
|
Arthur E. Geiss
|
|
63
|
|
Co-Chairman of the Board
|
|
May 22, 2015
|
Jerry D. Neal
|
|
72
|
|
Co-Chairman of the Board
|
|
May 22, 2015
|
Jeffrey B. Shealy
|
|
48
|
|
Chief Executive Officer; Director
|
|
May 22, 2015
|
David M. Aichele
|
|
51
|
|
Vice President of Business Development
|
|
May 22, 2015
|
Mark Boomgarden
|
|
49
|
|
Vice President of Operations
|
|
May 22, 2015
|
Cindy C. Payne
|
|
57
|
|
Chief Financial Officer
|
|
May 22, 2015
|
Steven P. DenBaars
|
|
54
|
|
Director
|
|
May 22, 2015
|
Jeffrey K. McMahon
|
|
46
|
|
Director
|
|
May 22, 2015
|
John T. Kurtzweil
|
|
60
|
|
Director
|
|
January 12, 2017
|
Directors are elected to serve until their
successors are elected and qualified. Directors are elected by a plurality of the votes cast at the meeting of stockholders at
which they are elected and hold office until the expiration of the term for which he or she was elected or until a successor has
been elected and qualified.
A majority of the authorized number of directors
constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to
constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting
if all members of the Board of Directors individually or collectively consent in writing to the action.
Executive officers are appointed by the Board
of Directors and serve at its pleasure.
The principal occupation and business experience
during the past five years for our executive officers and directors is as follows:
Arthur E. Geiss
, Co-Chairman of the
Board, founded AEG Consulting, LLC in 2003 and currently serves as Owner and CEO. AEG Consulting offers guidance concerning manufacturing,
operations, and process development to technology companies. Prior to establishing AEG Consulting, Mr. Geiss served as VP Wafer
Fab Operations at RFMD (now Qorvo, Inc.). He was responsible for the start-up and operations of Gallium Arsenide epitaxial-growth
and wafer-fabrication. Previous to RFMD, Mr. Geiss held management positions with Alpha Industries, Inc. (purchased by Skyworks
Solutions, Inc.) and before that at ITT Gallium Arsenide Technology Center (purchased by Cobham plc). At both companies, he was
responsible for process and device development and wafer fabrication operations. Prior to these, Mr. Geiss held a research position
at the Xerox Palo Alto Research Center (now PARC, Inc.). At PARC he investigated the structure of vitreous materials and amorphous
thin-films using Raman spectroscopy. Mr. Geiss has served as a Member of the Executive Committee of the IEEE GaAs IC Symposium
(now CSICS) and as a Member of the Executive Committee of the GaAs Manufacturing Technology Conference (now CS Mantech). He has
numerous patents and publications on electronic devices, processing, and manufacturing. Mr. Geiss earned a B.S. degree at Lafayette
College and M.S. and Ph.D. degrees at Brown University, all in physics. We believe that Mr. Geiss adds value to our Board of Directors
based on his extensive experience with technology companies, his executive leadership and management experience and his research
background.
Jerry D. Neal
, Co-Chairman of the Board,
founded RF Micro Devices Inc. (now, Qorvo, Inc.) in 1991 and served as its Executive Vice President of Marketing and Strategic
Development from January 2002 to May 31, 2012. Dr. Neal served as a Vice President of Marketing of RF Micro Devices Inc., from
May 1991 to January 2000 and its Executive Vice President of Sales, Marketing and Strategic Development from January 2000 to January
2002. Prior to joining RF Micro Devices Inc., he was employed for 10 years with Analog Devices, Inc., including as Marketing Engineer,
Marketing Manager and Business Development Manager. Dr. Neal also founded Moisture Control Systems for the production of his patented
electronic sensor for measurement of soil moisture for research, which was later sold to Hancor, Inc. He has been a Director of
Jazz Semiconductor, Inc. since November 2002. Dr. Neal served as a Director of RF Micro Devices Inc. from February 1992 to July
1993. He also held various positions in Hewlett-Packard. Dr. Neal received his Associate’s Degree in Electrical Engineering
from Gaston Technical Institute and North Carolina State University and his doctor of business management degree from Southern
Wesleyan University. We believe that Mr. Neal adds value to our Board of Directors based on his extensive executive leadership
and management experience and his sales, marketing and product development background.
Jeffrey B. Shealy
is our CEO and a
Director. He has over 20 years’ experience in RF/Wireless focused on building businesses around solid-state materials and
electron device innovation. He held the position of Vice President and General Manager at RF Micro Devices, Inc. (now Qorvo) from
2001 until 2014. Mr. Shealy is a Howard Hughes Doctoral Fellow and spent 7 years with Hughes Electronics at Hughes Research Labs
(now HRL Labs) and Hughes Network Systems (now Hughes). He previously founded RF Nitro, a RF Power Amplifier high-tech venture,
which was acquired by RFMD in 2001. Mr. Shealy holds an MBA degree from Wake Forest University, Master of Science and Doctorate
degrees in Electrical and Computer Engineering from University of California at Santa Barbara (UCSB), and a Bachelor’s of
Science degree in Electrical and Computer Engineering from NC State University. We believe that Mr. Shealy adds value to our Board
of Directors based on his intimate knowledge of our business plans and strategies, his experience with high tech startup ventures
and his years of experience in the RF/Wireless industry.
David M. Aichele
is Vice President
of Business Development responsible for leading the sales and marketing efforts of the company. Mr. Aichele joined the company
in May 2015, bringing over 20 years of international sales, business development, and marketing experience with him. Prior to
Akoustis, Mr. Aichele was EVP Sales & Marketing for T1Visions, a high tech software startup company ranking among the 2014
INC 500 fasting growing private companies in the U.S from 2013 to May 2015. Mr. Aichele held Director positions at RFMD (previously
Qorvo) from 2014 to 2013, where he was responsible for the business development and launch of new RF semiconductor products targeting
the cellular market, and senior management positions at Tessera and TE Connectivity, where he led business development and sales
teams. Mr. Aichele holds a BSEE from Ohio University and an MBA from the Leeds School of Business at the University of Colorado.
Mark D. Boomgarden
is Vice President
of Operations and has over 20 years of experience in high-technology companies, including high-volume manufacturing of wafer-based
products, licensing and technology transfer, research and development, mergers and acquisitions, and new-company formation. He
has held key leadership roles in operations, engineering and business development, including both domestic and international companies.
Prior to Akoustis, Mark served as Vice President and General Manager at DigitalOptics Corporation, a wholly owned subsidiary of
Tessera Technologies, Inc. (Nasdaq: TSRA) from 2009-2013. He joined DigitalOptics from Tessera North America, where he served
as General Manager of their wafer-level optics division and as Vice President of their wafer-based camera business for mobile
phones from 2006-2009. Prior to Tessera, Mark worked in various operations and engineering leadership positions with Digital Optics
(a private company) and Alcatel. Mark holds a BSEE from the University of North Carolina at Charlotte (UNCC). He is a past Chairman
of the Electrical and Computer Engineering (ECE) Advisory Board at UNCC, a founding Board Member of the Energy Production and
Infrastructure Center (EPIC), and a current board member of Koyr and CLT Joules. Mark is a veteran of the United States Navy Submarine
Force, U.S. Atlantic Fleet.
Steven P. DenBaars
is a Professor of
Materials and Co-Director of the Solid-State Lighting Center at UC Santa Barbara. Professor DenBaars joined UCSB in 1991 and currently
holds the Mitsubishi Chemical Chair in Solid State Lighting and Displays. He is also a co-founder and current Board member of
two GaN startup companies, Soraa Inc. and Soraa Laser Inc. Dr. DenBaars has been in the LED business for over 25 years starting
with his prior work at Hewlett-Packard Optoelectronics division in 1988 and involvement in more than two LED companies and one
laser diode company. Specific research interests include growth of wide-band gap semiconductors (GaN based), and their application
to Blue LEDs and lasers and energy efficient solid state lighting. This research has led to over 750 scientific publications and
over 160 U.S. patents on electronic materials and devices. He has been awarded a NSF Young Investigator award, Young Scientist
Award of the ISCS, is an IEEE Fellow, IEEE Aron Kressel Award, Visiting Professor at Nanyang Technological University (NTU), Singapore,
and the Institute for Advanced Studies (IAS) HKUST. He was recently elected to the National Academy of Engineering (2012), and
elected Fellow of the National Academy of Inventors (2014). We believe that Professor DenBaars adds value to our Board of Directors
based on his years of experience in the LED industry and his extensive research involving wide-based gap semiconductors and their
application to high power electronic devices.
Jeffrey K. McMahon
has been employed
by North Highland, a global management consulting firm, since 2003. He has held the position of Managing Director since 2014 and
is the current Market Lead for North Highland’s largest market. He has an extensive background in business and information
technology consulting in the financial services, energy, and telecommunications industries. He has 20 years of experience helping
Fortune 100 companies drive revenue, optimize processes, improve customer experience and manage risk. His areas of expertise include
marketing, strategy articulation and realization, strategic execution, business process management and merger integration. Prior
to joining North Highland, Mr. McMahon was a Manager in Accenture’s process practice area. Mr. McMahon received a Bachelor
of Science degree in Civil Engineering from North Carolina State University. We believe that Mr. McMahon adds value to our Board
of Directors based on his extensive experience in business and technology consulting and his marketing and strategization expertise.
Cindy C. Payne
joined us in 2015 as
CFO and Treasurer, bringing over 20 years of experience in financial management. Ms. Payne most recently served as the CFO for
Amerock LLC from 2014-2015, a private equity owned hardware distributor in Mooresville, NC. Prior to joining Amerock, Ms. Payne
held the position of CFO for Tolt Service Group, a private equity owned technology services provider, from 2010 until the company’s
sale in 2014. Her experience prior to Tolt included the role of Director of Financial Planning and Analysis in the Soft Trim Division
of International Automotive Components, a Tier I supplier to the automotive industry and the role of Controller of NewBold Corporation.
NewBold Corporation, located in the Roanoke, Virginia area, offers both manufactured products and technology services to retail
and healthcare markets. Ms. Payne graduated Magna Cum Laude from Western Carolina University with a Bachelor of Science in Business
Administration and is a Certified Public Accountant, licensed in the state of Virginia.
John T. Kurtzweil
joined us in January 2017 as a director, bringing significant senior executive leadership experience, including 19 years as
chief financial officer of publicly traded technology companies and placement of an aggregate of $1.9 billion in equity and
debt instruments. Mr. Kurtzweil, currently an industry consultant, was VP Finance of Cree, Inc., a company that develops,
manufactures, and sells lighting-class light emitting diode, lighting, and semiconductor products for power and radio-frequency
applications, and Chief Financial Officer of Wolfspeed, a Cree Company, positions he held since June 2015 to March 2017. Mr. Kurtzweil
was an independent consultant from October 2014 to June 2015. From June 2012 until September 2014, Mr. Kurtzweil served as
Senior Vice President, Chief Financial Officer and Special Advisor to the CEO of Extreme Networks, Inc., a provider of high-performance,
open networking innovations for enterprises, services providers, and Internet exchanges, and he served as its Chief Accounting
Officer from November 2012 until June 2014. From September 2006 to June 2012, Mr. Kurtzweil served as Executive Vice President,
Finance and as Chief Financial Officer and Treasurer of Cree, Inc. From May 2004 to September 2006, Mr. Kurtzweil was
Senior Vice President and Chief Financial Officer at Cirrus Logic, Inc., a fabless semiconductor company. Mr. Kurtzweil
served as a board member for Meru Networks, Inc. from May 2015 to July 2015 and currently serves as a board member for Axcelis
Technology Inc., a position he has held since May 2015.
We believe that
Mr. Kurtzweil’s
technology industry experience, including several merger and acquisition transactions and, when combined with his treasury experience,
gives him a valuable perspective as a director. Mr. Kurtzweil’s qualifications to serve as a director also include that
he is a certified public accountant and certified management accountant, his financial market experience, training through the
Stanford Directors College, active membership with National Association of Corporate Directors and his qualifications as an audit
committee financial expert.
Director Independence
Our Board has determined that Messrs. Geiss,
DenBaars, McMahon, Kurtzweil, and Neal are independent directors under the applicable standards of The Nasdaq Stock Market. In
reaching this determination, the Board considered Mr. Geiss’ relationship with AEG Consulting, a firm owned and operated
by Mr. Geiss, which provides consulting services to the Company, as discussed below under “Certain Relationships and Related
Person Transactions.” After consideration, the Board determined that this relationship did not impact Mr. Geiss’ ability
to serve as an independent director.
Family Relationships
There are no family relationships among our
directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors or executive officers
has been involved in any of the following events during the past ten years:
|
·
|
any
bankruptcy petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years
prior to that time;
|
|
·
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses);
|
|
·
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his or her involvement in any type of business, securities
or banking activities; or
|
|
·
|
being
found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity
Futures Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.
|
Committees of the Board of Directors
The Board maintains three standing committees:
the Audit Committee; the Compensation Committee and the Nominating Committee. Each committee operates under a written charter
and reports regularly to the Board. A copy of each of these committee charters is available in the “Investors” section
of our website under the heading “Governance Documents” at http://www.akoustis.com and may also be obtained by submitting
the “Contact Us” form at the address set forth above.
Each of the Audit Committee, the Compensation
Committee and the Nominating Committee must be comprised of no fewer than three members, each of whom must satisfy membership
requirements imposed by the applicable committee charter and, where applicable, Nasdaq listing standards and SEC rules and regulations.
Each of the members of the Audit Committee, the Compensation Committee and the Nominating Committee has been determined by the
Board to be independent under applicable Nasdaq listing standards and, in the case of the Audit Committee and the Compensation
Committee, under the independence requirements established by the SEC. A brief description of the responsibilities of each of
these committees and their current membership follows.
|
|
Committee Membership
|
|
Director
|
|
Audit
|
|
|
Compensation
|
|
|
Nominating
|
|
Arthur E. Geiss
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry D. Neal
|
|
|
X
|
|
|
|
X
|
|
|
|
C
|
|
Jeffrey B. Shealy
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen P. DenBaars
|
|
|
|
|
|
|
|
|
|
|
X
|
|
Jeffrey K. McMahon
|
|
|
X
|
|
|
|
C
|
|
|
|
|
|
John T. Kurtzweil
|
|
|
C
|
|
|
|
X
|
|
|
|
X
|
|
C = Committee Chairman
|
|
|
|
|
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|
|
|
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|
|
Audit Committee
The Audit Committee is a separately-designated
standing Audit Committee established in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended,
or the Exchange Act. The Audit Committee operates under a written charter adopted in February 2017. The Audit Committee is appointed
by the Board to assist the Board in its duty to oversee our accounting, financial reporting and internal control functions and
the audit of our financial statements. The Committee’s responsibilities include, among others, direct responsibility for:
(a) appointment, compensation, retention and oversight of our independent registered public accounting firm, which reports
directly to the Audit Committee; (b) establishing policies and procedures for the review and pre-approval by the Committee
of, and approving or pre-approving, all auditing services and permissible non-audit services to be performed by the independent
registered public accounting firm, and any non-audit services to be performed by any other accounting firm; (c) periodically
reviewing major issues regarding accounting principles and financial statement presentations, including any significant changes
in our selection or application of accounting principles; (d) approving the report of the Audit Committee required by SEC
rules to be included in our proxy statement; (e) discussing with management policies with respect to risk assessment and
risk management, including our major financial risk exposures and the steps management has taken to monitor and control such exposures;
and (f) establishing and overseeing procedures for the receipt, retention and treatment of complaints received by Akoustis
regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by employees
of concerns regarding questionable accounting or auditing matters.
The current members of the Audit Committee
are Messrs. Kurtzweil (Chairman), Neal and McMahon, none of whom is an employee of Akoustis and each of whom is independent under
existing Nasdaq listing standards and SEC requirements. The Board has examined the SEC’s definition of “audit committee
financial expert” and determined that Mr. Kurtzweil satisfies this definition.
Compensation Committee
The Compensation Committee operates under
a written charter adopted in February 2017. The Compensation Committee is appointed by the Board to exercise the Board’s
authority concerning compensation of our officers and employees and administration of our stock-based and incentive compensation
plans. In fulfilling its duties, the Compensation Committee has the authority to, among other things: (a) evaluate and set
the compensation of our officers, including our Chief Executive Officer, in accordance with our compensation philosophy; (b) prepare
the Compensation Committee report that SEC rules require to be included in our Annual Report on Form 10-K (or timely filed proxy
statement); (c) evaluate and make recommendations to the Board concerning compensation of directors; (d) periodically
review, and modify if necessary, our philosophy concerning executive compensation and the components of executive compensation;
(e) review and discuss with management our Compensation Discussion and Analysis disclosure and formally recommend to the
Board that it be included in our Annual Report on Form 10-K (or timely filed proxy statement); (f) make the determination
required under SEC rules regarding risks associated with our compensation policies and practices; (g) oversee our compliance
with SEC rules and regulations regarding stockholder approval of certain executive compensation matters, including advisory votes
on executive compensation and the frequency of such votes; (h) retain (or obtain the advice of) and terminate a compensation
consultant, independent legal counsel or other adviser to assist the Committee with the discharge of its duties under the charter,
after taking into consideration factors and criteria required by applicable law; and (i) discharge certain other responsibilities
generally relating to the administration of our incentive and employee benefit plans. The Compensation Committee may condition
its approval of any compensation matter on ratification by the Board if Board action is required by applicable law or otherwise
deemed appropriate. The Compensation Committee regularly consults with members of our executive management team regarding our
executive compensation program.
The Board has the discretion to delegate certain
areas of authority that are reserved to the Board or the Compensation Committee under our equity compensation plans. The Board
has delegated to the Chief Executive Officer, in his capacity as a member of the Board, the authority to grant equity awards:
(a) generally to new or promoted Company employees provided that such employees are not directors or executive officers;
and (b) to Company employees to reward and recognize outstanding engineering performance and other technical achievements.
Pursuant to these delegations, no equity awards may be granted to persons who report directly to the Chief Executive Officer,
are subject to Section 16 under the Exchange Act, or are deemed to be covered employees under Section 162(m) of the
Code. Additionally, these delegations are subject to predetermined limits per individual and in the aggregate, as established
by the Board, and are subject to all terms and conditions of the applicable plan. The Chief Executive Officer is required to report
all grants made under these delegations to the Compensation Committee at its next regularly scheduled meeting following such grants.
The current members of the Compensation Committee
are Messrs. McMahon (Chairman), Neal and Kurtzweil, none of whom is an employee of Akoustis and each of whom is independent
under existing Nasdaq listing standards, SEC requirements and requirements of Section 162(m) of the Code.
Nominating Committee
The
Nominating Committee operates under a written charter adopted in December 2016. The Nominating Committee is appointed by the Board
to: (a) assist the Board in identifying individuals qualified to become Board and committee members and to recommend to the
Board the director nominees; (b) develop and recommend to the Board the policies and guidelines relating to, and generally
overseeing matters of, corporate governance and conflicts of interest; (c) lead the Board in its annual review of the performance
of the Board and its committees; and (d) carry out the duties and responsibilities delegated by the Board relating to any
matters required by the federal securities laws. The current members of the Nominating Committee are
Messrs. Neal
(Chairman),
McMahon and Kurtzweil
, none of whom is an employee of Akoustis
and each of whom is independent under existing Nasdaq listing standards.
Our Board of Directors may designate from
among its members an executive committee and one or more other committees in the future.
Compensation Committee Interlocks and Insider
Participation
No executive officer of the Company has served
as a director or member of the Compensation Committee (or other committee serving an equivalent function) of any other entity,
one of whose executive officers served as director of the Company during the year ended June 30, 2016.
EXECUTIVE COMPENSATION
Summary Compensation Table
In connection with the Merger, on May 22,
2015, we changed our fiscal year from a fiscal year ending on July 31 to a fiscal year ending on March 31. On August 11, 2016,
we changed our fiscal year from a fiscal year ending on March 31 to a fiscal year ending on June 30, effective immediately. Accordingly,
the following table sets forth information concerning the total compensation awarded to, earned by or paid to our named executive
officers during the three-month transition period (“TP”) ended June 30, 2016 and the years ended March 31, 2016 and
2015 (our prior fiscal years). Ivan Krikun, our former Chief Executive Officer prior to the Merger, did not receive any compensation
from the Company in either of the last two completed fiscal years.
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(2)
|
|
|
All Other
Compensation($)(3)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Shealy,
|
|
TP 2016
|
|
|
42,484
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,568
|
|
|
|
52,052
|
|
CEO (1)
|
|
2016
|
|
|
150,000
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
27,309
|
|
|
|
207,309
|
|
|
|
2015
|
|
|
130,602
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,434
|
|
|
|
143,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Boomgarden,
|
|
TP 2016
|
|
|
36,615
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,762
|
|
|
|
45,377
|
|
VP of Operations (1)
|
|
2016
|
|
|
117,692
|
|
|
|
13,600
|
|
|
|
67,450
|
|
|
|
36,334
|
|
|
|
235,076
|
|
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,384
|
|
|
|
14,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cindy Payne,
|
|
TP 2016
|
|
|
39,038
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,564
|
|
|
|
44,602
|
|
Chief Financial Officer (1)
|
|
2016
|
|
|
114,327
|
|
|
|
13,775
|
|
|
|
217,500
|
|
|
|
12,052
|
|
|
|
357,654
|
|
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dave Aichele,
|
|
TP 2016
|
|
|
37,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,149
|
|
|
|
45,292
|
|
VP of Business Development (1)
|
|
2016
|
|
|
121,876
|
|
|
|
13,600
|
|
|
|
165,000
|
|
|
|
23,187
|
|
|
|
323,663
|
|
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Includes
bonus amount earned during the fiscal year ended March 31, 2016. The amounts were paid
in May 2016.
|
|
(2)
|
See
Note 10 to the audited financial statements included in this prospectus for a discussion
of the assumptions made in the valuation of stock awards and option awards.
|
|
(3)
|
Other
compensation is broken down by each executive below:
|
Fiscal Year
|
|
Healthcare, & Life
Insurance ($) (a)
|
|
|
401K
Contribution
($)
(b)
|
|
|
Contractor
Compensation
($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Shealy,
|
|
TP 2016
|
|
|
6,753
|
|
|
|
2,815
|
|
|
|
-
|
|
|
|
9,568
|
|
CEO
|
|
2016
|
|
|
22,232
|
|
|
|
5,077
|
|
|
|
-
|
|
|
|
27,309
|
|
|
|
2015
|
|
|
12,434
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Boomgarden,
|
|
TP 2016
|
|
|
6,753
|
|
|
|
2,009
|
|
|
|
-
|
|
|
|
8,762
|
|
VP of Operations (c)
|
|
2016
|
|
|
18,681
|
|
|
|
4,603
|
|
|
|
13,050
|
|
|
|
36,334
|
|
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
14,384
|
|
|
|
14,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cindy Payne,
|
|
TP 2016
|
|
|
3,451
|
|
|
|
2,113
|
|
|
|
-
|
|
|
|
5,564
|
|
CFO
|
|
2016
|
|
|
7,590
|
|
|
|
4,462
|
|
|
|
-
|
|
|
|
12,052
|
|
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Aichele,
|
|
TP 2016
|
|
|
6,140
|
|
|
|
2,009
|
|
|
|
|
|
|
|
8,149
|
|
VP of Business
|
|
2016
|
|
|
18,584
|
|
|
|
4,603
|
|
|
|
-
|
|
|
|
23,187
|
|
Development
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(a)
|
Healthcare
costs include employer-paid medical, dental, and vision benefits generally available
to all employees. Employer-paid life insurance is included and was less than $100.00
annually per executive for the transition period ended June 30, 2016 and our prior fiscal
years ended March 31, 2016 and 2015.
|
|
(b)
|
Effective
June 1, 2015, we established a 401(k) retirement savings plan, with an employer matching
contribution, for all employees. We have no other plans in place and have never maintained
any other plans that provide for the payment of retirement benefits or benefits that
will be paid primarily following retirement including, but not limited to, tax qualified
deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred
contribution plans and nonqualified deferred contribution plans.
|
|
(c)
|
Mr.
Boomgarden performed services for Akoustis, Inc., under an independent contractor agreement
prior to his employment with the Company.
|
Except as indicated below, we have no contracts,
agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed
above.
Outstanding Equity Awards at Fiscal Year-End
At June 30, 2016, we had two compensation
plans approved by our stockholders: the 2014 Stock Plan and the 2015 Equity Incentive Plan (the “2015 Plan”). The
following table provides information about equity awards granted to our Named Executive Officers that were outstanding as of the
end of Akoustis, Inc.’s last fiscal year ended June 30, 2016.
|
|
Stock Awards
|
|
|
|
Number of shares or units
of
stock that have not vested (#)
|
|
|
Market value of shares
or units
of stock that have not vested ($)
|
|
|
|
|
|
|
|
|
Jeffrey Shealy, CEO (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Mark Boomgarden,
VP of Operations (2)
|
|
|
155,682
|
|
|
|
652,308
|
|
|
|
|
|
|
|
|
|
|
Cindy Payne,
CFO (2)
|
|
|
145,000
|
|
|
|
607,550
|
|
|
|
|
|
|
|
|
|
|
David Aichele,
VP of Business Development (2)
|
|
|
110,000
|
|
|
|
460,900
|
|
|
(1)
|
Mr.
Shealy had no outstanding option or stock awards as of June 30, 2016.
|
|
(2)
|
Reflects
stock options and stock awards valued at the closing ask value of $4.19 as of June 30,
2016.
|
Employment Agreements
On June 15, 2015, we entered into a three-year
employment agreement with our Chief Executive Officer, Jeffrey B. Shealy. After the initial three-year term, the agreement will
be automatically renewed for successive one-year periods unless terminated by either party on at least 30 days’ written
notice prior to the end of the then-current term. Mr. Shealy’s annual base salary was $150,000, subject to increase or decrease
annually as determined by our Board of Directors. Effective July 4, the Board increased Mr. Shealy’s salary to $154,500.
Mr. Shealy is eligible, at the discretion of our Board of Directors, to receive an annual cash bonus of up to 100% of his annual
base salary, which may be based on us achieving certain operational, financial or other milestones (the “Milestones”)
that may be established by our Board of Directors. Mr. Shealy is entitled to receive stock options or other equity incentive awards
under the 2015 Plan as and when determined by the Board, and is entitled to receive perquisites and other fringe benefits that
may be provided to, and is eligible to participate in any other bonus or incentive program established by us for, our executives.
Mr. Shealy and his dependents are also entitled to participate in any of our employee benefit plans subject to the same terms
and conditions applicable to other employees. Mr. Shealy will be entitled to be reimbursed for all reasonable travel, entertainment
and other expenses incurred or paid by him in connection with, or related to, the performance of his duties, responsibilities
or services under his employment agreement, in accordance with policies and procedures, and subject to limitations, adopted by
us from time to time.
In the event that Mr. Shealy is terminated
by us without Cause (as defined in his employment agreement) or he resigns for Good Reason (as defined in his employment agreement)
during the term of his employment, Mr. Shealy would be entitled to (x) an amount equal to his annual base salary then in effect
(payable in accordance with the Company’s normal payroll practices) for a period of 24 months commencing on the effective
date of his termination (the “Severance Period”) (in the case of termination by the executive for Good Reason, reduced
by any cash remuneration paid to him because of any other employment or self-employment during the Severance Period), and (y)
if and to the extent the Milestones are achieved for the annual bonus for the year in which the Severance Period commences (or,
in the absence of Milestones, our Board of Directors has, in its sole discretion, otherwise determined an amount of Mr. Shealy’s
annual bonus for such year), an amount equal to such annual bonus pro-rated for the portion of the performance year completed
before Mr. Shealy’s employment terminated, (z) any unvested stock options, restricted stock or similar incentive equity
instruments will vest immediately. For the duration of the Severance Period, Mr. Shealy will also be eligible to participate in
our benefit plans or programs, provided Mr. Shealy was participating in such plan or program immediately prior to the date of
employment termination, to the extent permitted under the terms of such plan or program (collectively, the “Termination
Benefits”). If Mr. Shealy’s employment is terminated during the term by us for Cause, by Mr. Shealy for any reason
other than Good Reason or due to his death, then he will not be entitled to receive the Termination Benefits, and shall only be
entitled to the compensation and benefits that shall have accrued as of the date of such termination (other than with respect
to certain benefits that may be available to Mr. Shealy as a result of a Permanent Disability (as defined in his employment agreement).
On June 15, 2015, we also entered into an
employment agreement with each of David M. Aichele, our Vice President of Business Development, Mark Boomgarden, our Vice President
of Operations, and Cindy C. Payne, our Chief Financial Officer. Each of these employment agreements has substantially the same
terms as that of Mr. Shealy described above, except as follows:
|
|
Term
|
|
Base
Salary (1)
|
|
|
Eligible Bonus
%
of Base Salary
|
|
|
Severance
Period
|
|
|
|
|
|
|
|
|
|
|
|
David M. Aichele
|
|
2 years
|
|
$
|
136,000
|
|
|
|
50
|
%
|
|
6 months
|
Mark Boomgarden
|
|
2 years
|
|
$
|
136,000
|
|
|
|
50
|
%
|
|
6 months
|
Cindy C. Payne
|
|
2 years
|
|
$
|
145,000
|
|
|
|
50
|
%
|
|
6 months
|
|
(1)
|
Each
named executive’s salary is subject to increase or decrease annually as determined
by our Board of Directors. Effective July 4, 2016, the Board increased the salaries of
Mr. Aichele, Mr. Boomgarden and Ms. Payne to $140,080, $140,080 and $149,350, respectively.
|
On May
12, 2017, the Company delivered notice to Cindy C. Payne, its Chief Financial Officer, David M. Aichele, its Vice President of
Business Development, and Mark Boomgarden, its Vice President of Operations, that their employment agreements with the Company
would not automatically renew pursuant to the terms therein. Accordingly, their employment agreements will expire June 15, 2017.
The decision not to renew the employment agreements is consistent with the employment arrangements offered to new hires of the
Company; it is not a decision to terminate the Company’s employment relationship with these executives, and each executive
will continue in his or her current position unless the executive or the Company otherwise determines to terminate the employment
relationship. These executives are not entitled to any payments or benefits under the employment agreements solely as a result
of the non-renewal.
In addition, in accordance with each such
employment agreement, each of these executives received a restricted stock award under our 2015 Plan for the number of shares
of the Company’s Common Stock shown below. These restricted stock awards are subject to a repurchase option in favor of
the Company that lapses over a four-year period, as follows: the repurchase option on 50% of the shares will lapse at the end
of two years from the date of issuance, and the repurchase option on 25% of the shares will lapse at the end of each of the third
and fourth years from the date of issuance.
|
|
Number of Shares of Restricted
Stock
|
|
David M. Aichele
|
|
|
110,000
|
|
Mark Boomgarden
|
|
|
38,000
|
|
Cindy C. Payne
|
|
|
145,000
|
|
Under the terms of the 2015 Plan, in the event
of a merger or Change in Control (as defined in the 2015 Plan) of the Company, the treatment of each outstanding restricted stock
award will be determined by the Administrator (as defined in the 2015 Plan), including whether each such award will be assumed
or an equivalent option or right substituted by the successor corporation. The Administrator will not be required to treat all
awards similarly in the transaction. In the event that the successor corporation does not assume or substitute for the award,
all restrictions on the restricted stock will lapse.
Restricted Stock Agreements
Akoustis, Inc., entered into, and upon the
Merger the Company assumed, restricted stock purchase agreements with each of Steve DenBaars, Mark Boomgarden and Arthur Geiss
pursuant to which Akoustis, Inc. issued to each of those individuals a number of shares of Akoustis, Inc. Common Stock, which
in the Merger were exchanged for shares of our Common Stock as shown below. The Company has the right to repurchase some or all
of such shares upon termination of the individual’s service with the Company, whether voluntary or involuntary, for 60 months
from the date of termination. 25% of Mr. Geiss’ shares were released from the repurchase option on June 16, 2015, and an
additional 1/48th of the shares shall be released from the repurchase option on the last day of each month thereafter, until all
shares are released from the repurchase option; provided, that such scheduled releases from the repurchase option will immediately
cease as of the termination of service. During the year ended June 30, 2016, the Company amended the original restricted stock
agreements for certain award recipients including Messrs. DenBaars and Boomgarden. According to the amendment, 75% of the shares
as to which the repurchase option had not lapsed as of September 30, 2015, shall be released from the repurchase option on the
third anniversary of the original effective date of the agreement. The remaining 25% of the shares shall be released from the
repurchase option on the fourth anniversary of the original effective date, provided that such scheduled releases from the repurchase
option will immediately cease as of the termination of service.
The number of shares subject to these repurchase
agreements as of May 22, 2017 are:
Steve DenBaars
|
|
|
44,562
|
|
Mark Boomgarden
|
|
|
115,454
|
|
Arthur Geiss
|
|
|
11,647
|
|
Director Compensation
We believe that our director compensation
policy aligns the interest of our non-employee directors with that of our stockholders by compensating each such director with
stock option grants. Each director upon commencement of his or her service receives an option to purchase 40,000 shares of Common
Stock, which vests over four years in equal annual installments, subject to continuation of service as a director. Our policy
also is to reimburse these directors for reasonable out-of-pocket expenses related to their role on our board.
The table below summarizes all compensation
received by each of the Company’s non-employee directors for services as a director performed during the three-month transition
period ended June 30, 2016 and our prior fiscal year ended March 31, 2016.
Name
|
|
Fiscal Year
|
|
Option awards
($)(1)
|
|
|
All other compensation
($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur E. Geiss (2)
|
|
TP 2016
|
|
|
-
|
|
|
|
4,012
|
|
|
|
4,012
|
|
|
|
2016
|
|
|
27,931
|
|
|
|
9,462
|
|
|
|
37,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry D. Neal
|
|
TP 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2016
|
|
|
27,931
|
|
|
|
-
|
|
|
|
27,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven P. DenBaars
|
|
TP 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2016
|
|
|
27,931
|
|
|
|
-
|
|
|
|
27,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey K. McMahon
|
|
TP 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2016
|
|
|
27,931
|
|
|
|
-
|
|
|
|
27,931
|
|
|
(1)
|
Options
were granted under our 2015 Plan following the Merger to each of our four non-employee
directors to purchase 40,000 shares of our Common Stock, with an exercise price of $1.50
per share, vesting in equal annual installments over four years and exercisable until
May 22, 2025.
|
|
(2)
|
Mr.
Geiss received $4,012 and $9,462 in compensation for consulting services provided by
his consulting firm, AEG Consulting, for the three-month transition period ended June
30, 2016 and the twelve months ended March 31, 2016, respectively.
|
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial ownership is determined in accordance
with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with SEC
rules, shares of our Common Stock that may be acquired upon exercise of stock options or warrants that are currently exercisable
or that become exercisable within 60 days after May 22, 2017 (the “Determination Date”) are deemed beneficially owned
by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership
of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person.
Subject to community property laws, where applicable, the persons or entities named in the tables below have sole voting and investment
power with respect to all shares of our Common Stock indicated as beneficially owned by them.
The following table sets forth information
with respect to the beneficial ownership of our Common Stock as of the Determination Date by (i) each stockholder known by us
to be the beneficial owner of more than 5% of our Common Stock (our only class of voting securities), (ii) each of our directors
and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except
as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares
of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. For shares
subject to repurchase options, as indicated in the notes to the table below, see “Executive Compensation — Employment
Agreements” and “— Restricted Stock Agreements” below for a description of the repurchase option. To our
knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. To our knowledge,
there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation
of which may at a subsequent date result in a change in control of the Company.
|
|
Amount and
nature of
beneficial
ownership
(1)(2)
|
|
|
Percent of
Class
|
|
Jeffrey B. Shealy, Chief Executive Officer, Director
(4)
|
|
|
3,486,586
|
|
|
|
18.3
|
%
|
David M. Aichele, Vice President of Business Development
(5)
|
|
|
136,250
|
|
|
|
*
|
|
Mark Boomgarden, Vice President of Operations
(6)
|
|
|
245,441
|
|
|
|
1.3
|
%
|
Cindy C. Payne, Chief Financial Officer
(7)
|
|
|
184,375
|
|
|
|
1.0
|
%
|
Steven P. DenBaars, Director
(8)(9)
|
|
|
285,858
|
|
|
|
1.5
|
%
|
Arthur E. Geiss, Director, Co-Chairman of the Board
(8)(10)
|
|
|
78,307
|
|
|
|
*
|
|
Jeffrey K. McMahon, Director
(8) (11)
|
|
|
551,888
|
|
|
|
2.9
|
%
|
Jerry D. Neal, Director, Co-Chairman of the Board
(8) (11)
|
|
|
367,000
|
|
|
|
1.9
|
%
|
John T. Kurtzweil, Director
(11)
|
|
|
22,000
|
|
|
|
*
|
|
All directors and executive officers as a group (9 persons)
(12)
|
|
|
|
|
|
|
|
|
Mark Tompkins
|
|
|
|
|
|
|
|
|
App 1, Via Guidino 23
|
|
|
|
|
|
|
|
|
Lugano 6900, Switzerland
|
|
|
2,385,706
|
|
|
|
12.5
|
%
|
*Less than 1%
|
(1)
|
Unless
otherwise indicated in the table, the address for each person named in the table is c/o
Akoustis Technologies, Inc., 9805 Northcross Center Court, Suite H, Huntersville, NC
28078.
|
|
(2)
|
Unless
otherwise indicated in the table, the shares are held directly by the beneficial owner.
|
|
(3)
|
Applicable
percentage ownership is based on 18,403,586 shares of Common Stock outstanding as of
the Determination Date, together with securities exercisable for or convertible into
shares of Common Stock within 60 days after the Determination Date, for each shareholder.
Beneficial ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities.
|
|
(4)
|
Includes
36,000 restricted shares that are subject to a repurchase option.
|
|
(5)
|
Includes
130,000 restricted shares that are subject to a repurchase option.
|
|
(6)
|
Includes
175,480 restricted shares that are subject to a repurchase option.
|
|
(7)
|
Includes
175,000 restricted shares that are subject to a repurchase option.
|
|
(8)
|
Includes
10,000 shares of Common Stock issuable upon exercise of an option that vested in May
2016 and is exercisable until May 22, 2025 and 10,000 shares of Common Stock issuable
upon exercise of an option that is due to vest within 60 days
|
|
(9)
|
Includes
66,562 restricted shares that are subject to a repurchase option.
|
|
(10)
|
Includes
33,647 restricted shares that are subject to a repurchase option.
|
|
(11)
|
Includes
22,000 restricted shares that are subject to a repurchase option.
|
|
(12)
|
Includes
704,891 restricted shares that are subject to a repurchase option.
|
CERTAIN RELATIONSHIPS
AND RELATED PARTY TRANSACTIONS
SEC rules require us to disclose any transaction
or currently proposed transaction in which the Company is a participant and in which any related person has or will have a direct
or indirect material interest involving the lesser of $120,000.00 or one percent (1%) of the average of the Company’s total
assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director,
or holder of 5% or more of the Company’s Common Stock, or an immediate family member of any of those persons. Set forth
below is a description of such related-party transactions that occurred during the transition period.
Certain of our directors and officers participated
in private placements of our Common Stock in the 2015 Offering, the First 2016 Offering, and the 2016-2017 Offering. Specifically:
|
·
|
Our
CEO, Jeffrey Shealy, purchased (i) 134,000 shares of Common Stock for an aggregate purchase
price of $201,000 (of which $200,000 was paid by conversion of a convertible note) in
the 2015 Offering, (ii) 93,750 shares of Common Stock for an aggregate purchase price
of $150,000 in the First 2016 Offering, and (iii) 20,000 shares of Common Stock for an
aggregate purchase price of $100,000 in the 2016-2017 Offering.
|
|
·
|
Steven
P. DenBaars, one of our directors, purchased 17,000 shares of Common Stock for an aggregate
purchase price of $25,500 in the 2015 Offering.
|
|
·
|
Mark
Boomgarden, our Vice President of Operations, purchased (i) 17,000 shares of Common Stock
for an aggregate purchase price of $25,500 in the 2015 Offering, (ii) 6,250 shares of
Common Stock for an aggregate purchase price of $10,000 in the First 2016 Offering, and
(iii) 2,000 shares of Common Stock for an aggregate purchase price of $10,000 in the
2016-2017 Offering.
|
|
·
|
Jeffrey
K. McMahon, one of our directors, purchased (i) 144,000 shares of Common Stock for an
aggregate purchase price of $216,000 (of which $215,000 was paid by conversion of a convertible
note) in the 2015 Offering and (ii) 35,000 shares of Common Stock for an aggregate purchase
price of $56,000 in the First 2016 Offering. In addition, in April 2015, Mr. McMahon
purchased 21 pre-Merger shares of Akoustis, Inc. Common Stock (6,806 post-merger shares
of Common Stock) for an aggregate purchase price of $10,000 (paid by partial conversion
of a convertible note).
|
|
·
|
Jerry
Neal, one of our directors and Co-Chairman of our Board of Directors, purchased 125,000
shares of Common Stock for an aggregate purchase price of $200,000 in the First 2016
Offering and 200,000 shares of Common Stock for an aggregate purchase price of $1,000,000
in the 2016-2017 Offering.
|
|
·
|
Arthur
Geiss, one of our directors and Co-Chairman of our Board of Directors, purchased 10,000
shares of Common Stock for an aggregate purchase price of $16,000 in the First 2016 Offering
and purchased 2,000 shares of Common Stock for an aggregate purchase price of $10,000
in the 2016-2017 Offering.
|
|
·
|
Cindy
Payne, our Chief Financial Officer, purchased 9,375 shares of Common Stock for an aggregate
purchase price of $15,000 in the First 2016 Offering.
|
|
·
|
Dave
Aichele, our VP of Business Development, purchased 6,250 shares of Common Stock for an
aggregate purchase price of $10,000.
|
|
·
|
Rohan
Houlden, our Divisional Vice President of Product Engineering, purchased 20,000 shares
of Common Stock for an aggregate purchase price of $100,000 in the 2016-2017 Offering.
|
In addition, James R. Shealy, brother of
our Chief Executive Officer, purchased 130,000 shares of Common Stock for an aggregate purchase price of $135,000 (of which $130,000
was paid by conversion of a convertible note) in the 2015 Offering, and he also purchased 14,000 shares of Common Stock for an
aggregate purchase price of $70,000 in the 2016-2017 Offering.
Michael J. Shealy, brother of our Chief
Executive Officer, purchased 100,000 shares of Common Stock for an aggregate purchase price of $150,000 in the 2015 Offering and
purchased 20,000 shares of Common Stock for an aggregate purchase price of $100,000 in the 2016-2017 Offering.
Mark Tompkins, who beneficially owned approximately
2,385,706 shares of our Common Stock as of October 20, 2016, participated in the First 2016 Offering, purchasing 250,000 shares
of Common Stock for $400,000.
AEG Consulting, a firm owned and operated
by Arthur Geiss, Co-Chairman of the Board, received $4,050, $4,012, and $9,462 for consulting fees for the three months ended
September 30, 2016, the three-month transition period ended June 30, 2016, and the twelve months ended March 31, 2016, respectively.
Additionally, AEG Consulting received $5,137 and $3,000 for consulting fees for the three months ended March 31, 2017 and 2016,
respectively. The firm received $14,445 and $4,875 for consulting fees for the nine months ended March 31, 2017 and 2016, respectively.
In March 2016, the Company purchased inventory
from Big Red LLC (“Big Red”), a company formed by our CEO, Jeffrey Shealy, Richard Shealy, the brother of the Company’s
CEO, Mark Boomgarden, VP of Operations, and Greenstone, LLC. Specifically, the Company purchased amplifier inventory for $44,000
so that the it could pursue commercialization of such inventory. The Company will use this inventory and related technology to
process and sell amplifiers. Jeffrey Shealy and Mark Boomgarden assigned their interests in “Big Red” to other parties
in March of 2016, including a small minority interest to one of our employees.
In April 2016, the Company entered into a
license agreement with Big Red. The license agreement was executed so that the Company could pursue commercialization of the amplifier
inventory purchased from Big Red in March 2016. The Company will utilize this inventory and related technology to process and
sell the amplifiers. Future revenue from Company sales utilizing the amplifier technology will result in a license fee paid to
Big Red according to the following schedule:
Net Sales
|
|
Royalty Percentage
|
|
$0 - $500,000
|
|
|
5.00
|
%
|
$500,000 - $1,000,000
|
|
|
4.00
|
%
|
$1,000,000 - $2,000,000
|
|
|
3.50
|
%
|
$2,000,000 – $5,000,000
|
|
|
3.00
|
%
|
$5,000,001 and over
|
|
|
2.00
|
%
|
PLAN OF DISTRIBUTION
The selling stockholders may, from time to
time, sell any or all of their shares of our Common Stock on any stock exchange, market or trading facility on which the shares
are traded or in private transactions. If the shares of Common Stock are sold through underwriters, the selling stockholders will
be responsible for underwriting discounts or commissions or agent’s commissions. All selling stockholders who are broker-dealers
are deemed to be underwriters. These sales may be at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale or at negotiated prices. The selling stockholders may use any one or more of the following
methods when selling shares:
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·
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any
national securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale;
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|
·
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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·
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block
trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
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·
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
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·
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transactions
other than on these exchanges or systems or in the over-the-counter market;
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|
·
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through
the writing of options, whether such options are listed on an options exchange or otherwise;
|
|
·
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an
exchange distribution in accordance with the rules of the applicable exchange;
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|
·
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privately
negotiated transactions;
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|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such shares at
a stipulated price per share;
|
|
·
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a
combination of any such methods of sale; and
|
|
·
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any
other method permitted pursuant to applicable law.
|
The selling stockholders may also sell shares
under Rule 144 under the Securities Act, if available, rather than under this prospectus, or they may engage in short sales against
the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares
in connection with these trades.
Broker-dealers engaged by the selling stockholders
may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated.
The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions
involved. Any profits on the resale of shares of Common Stock by a broker-dealer acting as principal might be deemed to be underwriting
discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable
to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under
the Securities Act.
In connection with the sale of the shares
of our Common Stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may
in turn engage in short sales of the shares of Common Stock in the course of hedging in positions they assume. The selling stockholders
may also sell shares of Common Stock short and deliver shares of Common Stock covered by this prospectus to close out short positions
and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of
Common Stock to broker-dealers that in turn may sell such shares.
The selling stockholders may from time to
time pledge or grant a security interest in some or all of the shares of our Common Stock owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of our Common Stock
from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer
the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will
be the selling beneficial owners for purposes of this prospectus and may sell the shares of Common Stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling stockholders to include the pledgees, transferees or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of Common Stock
in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
The selling stockholders and any broker-dealers
or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities
Act in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to, such broker-dealers
or agents and any profit realized on the resale of the shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. At the time a particular offering of the shares of Common Stock is made, a prospectus supplement,
if required, will be distributed, which will set forth the aggregate amount of shares of Common Stock being offered and the terms
of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting
compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the shares of Common Stock may be sold in such states only through registered or licensed
brokers or dealers. In addition, in some states the shares of Common Stock may not be sold unless such shares have been registered
or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. There
can be no assurance that any selling stockholder will sell any or all of the shares of our Common Stock registered pursuant to
the registration statement of which this prospectus forms a part.
Each selling stockholder has informed us that
it does not have any agreement or understanding, directly or indirectly, with any person to distribute our Common Stock. None
of the selling stockholders who are affiliates of broker-dealers, other than the initial purchasers in private transactions, purchased
the shares of Common Stock outside of the ordinary course of business or, at the time of the purchase of the Common Stock, had
any agreements, plans or understandings, directly or indirectly, with any person to distribute the securities.
We are required to pay all fees and expenses
incident to the registration of the shares of Common Stock. Except as provided for indemnification of the selling stockholders,
we are not obligated to pay any of the expenses of any attorney or other advisor engaged by a selling stockholder. We have agreed
to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
If we are notified by any selling stockholder
that any material arrangement has been entered into with a broker-dealer for the sale of shares of Common Stock, we will file
a post-effective amendment to the registration statement. If the selling stockholders use this prospectus for any sale of the
shares of our Common Stock, they will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of our Common Stock and activities of the selling stockholders, which may limit the
timing of purchases and sales of any of the shares of Common Stock by the selling stockholders and any other participating person.
Regulation M may also restrict the ability of any person engaged in the distribution of the shares of Common Stock to engage in
passive market-making activities with respect to the shares of Common Stock. Passive market making involves transactions in which
a market maker acts as both our underwriter and as a purchaser of our Common Stock in the secondary market. All of the foregoing
may affect the marketability of the shares of Common Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
Once sold under the registration statement
of which this prospectus forms a part, the shares of Common Stock will be freely tradable in the hands of persons other than our
affiliates.
Our Common Stock is currently quoted on the
NASDAQ Capital Market, on which we became listed and commenced trading on March 13, 2017. In the last 12 months, the price of
our Common Stock has ranged from less than $5.00 per share to above $5.00 per share.
DESCRIPTION OF SECURITIES
We have authorized capital stock
consisting of 45,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. As of the date of this prospectus,
we had 19,075,050 shares of Common Stock issued and outstanding, and no shares of preferred stock issued and outstanding.
Common Stock
The holders of outstanding shares of Common
Stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and
in such amounts as the board from time to time may determine. Holders of Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders. There is no cumulative voting of the election of directors then standing
for election. The Common Stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation,
dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably
among the holders of the Common Stock after payment of liquidation preferences, if any, on any outstanding payment of other claims
of creditors. Each outstanding share of Common Stock is duly and validly issued, fully paid and non-assessable.
Preferred Stock
Shares of preferred stock may be issued from
time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by our
Board of Directors prior to the issuance of any shares thereof. Preferred stock will have such voting powers, whole or limited,
or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class
or series of preferred stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares
thereof. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding
shares of our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without
a separate vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant
to any preferred stock designation.
While we do not currently have any plans for
the issuance of additional preferred stock, the issuance of such preferred stock could adversely affect the rights of the holders
of Common Stock and, therefore, reduce the value of the Common Stock. It is not possible to state the actual effect of the issuance
of any shares of preferred stock on the rights of holders of the Common Stock until the Board of Directors determines the specific
rights of the holders of the preferred stock; however, these effects may include:
|
·
|
Restricting
dividends on the Common Stock;
|
|
·
|
Diluting
the voting power of the Common Stock;
|
|
·
|
Impairing
the liquidation rights of the Common Stock; or
|
|
·
|
Delaying
or preventing a change in control of the Company without further action by the stockholders.
|
Other than in connection with shares of preferred
stock (as explained above), which preferred stock is not currently designated nor contemplated by us, we do not believe that any
provision of our charter or By-Laws would delay, defer or prevent a change in control.
Warrants
The 2015 Placement Agent Warrants entitled
their holders to purchase 324,650 shares of Common Stock, with a term until June 2020 and an exercise price of $1.50 per share,
and have a “cashless” net exercise option. 2015 Placement Agent Warrants to purchase 317,984 shares of Common Stock
remain outstanding as of May 22, 2017.
The 2016 Placement Agent Warrants entitle
their holders to purchase 153,713 shares of Common Stock, with a term until April 2021 and an exercise price of $1.60 per share,
and have a “cashless” net exercise option. 2016 Placement Agent Warrants to purchase 153,714 shares of Common Stock
remain outstanding as of May 22, 2017.
The 2016-2017 Placement Agent Warrants entitle
their holders to purchase 205,126 shares of Common Stock, with a five-year term expiring in 2021and 2022 and an exercise price
of $5.00 per share, and have a “cashless” net exercise option.
The 2017 Placement Agent Warrants entitle
their holders to purchase 46,410 shares of Common Stock, with a five-year term expiring in May 2022 and an exercise price of $9.00
per share, and have a “cashless” net exercise option.
See “Registration Rights” below
for a description of the registration rights granted to (among others) the holders of the Placement Agent Warrants, which description
is incorporated herein by reference.
Copies of the Placement Agent Warrants are
filed as exhibits to the registration statement of which this prospectus is a part.
Options
Options to purchase an aggregate of 160,000
shares of our Common Stock were granted under our 2015 Equity Incentive Plan following the Merger to four of our non-employee
directors, with an exercise price of $1.50 per share, vesting in equal annual installments over four years and exercisable until
May 22, 2025.
Other Convertible Securities
As of the date hereof, other than the securities
described above, the Company does not have any outstanding convertible securities.
Registration Rights
The 2015 Offering
In connection with the 2015 Offering, we entered
into a Registration Rights Agreement, pursuant to which we agreed to file a registration statement with the SEC (the “2015
Registration Statement”) covering (a) the shares of Common Stock issued in the 2015 Offering, (b) the shares of Common Stock
issuable upon exercise of the 2015 Placement Agent Warrants, (c) any shares of Common Stock issuable to investors in the 2015
Offering pursuant to anti-dilution rights and (d) 1,863,504 additional shares of Common Stock held by two pre-Merger stockholders
(the “2015 Registrable Shares”). The 2015 Registration Statement was declared effective by the SEC on October 20,
2015, and we filed a post-effective amendment to the 2015 Registration Statement concurrently with the filing of the registration
statement of which this prospectus forms a part. The 2015 Registration Statement must be maintained until the earlier of two years
from its effective date or until Rule 144 is available to the holders of all 2015 Registrable Shares without volume limitations.
With respect to (c) above, we registered 1,896,052
shares, which represented a good faith estimate as to the number of shares which may have become issuable upon application of
the price-protected anti-dilution provision applicable to the shares referenced in (a) above (being the number of shares that
would become issuable were we to trigger the application of the anti-dilution provision by issuing Common Stock or Common Stock
equivalents at a price of $1.00 per share). At the time of registration, we could not predict whether such anti-dilution provision
would be triggered or the actual number of shares which would have become issuable were such provision to be triggered. The anti-dilution
rights expired twelve months after the final closing of the 2015 Offering.
If (a) the 2015 Registration Statement ceases
for any reason to remain effective during the period provided by the 2015 Registration Rights Agreement or the holders of 2015
Registrable Shares are otherwise not permitted to utilize the prospectus therein to resell the 2015 Registrable Shares for a period
of more than fifteen consecutive trading days during such period; or (b) the 2015 Registrable Shares are not listed or included
for quotation on OTC Markets, Nasdaq, the New York Stock Exchange or NYSE MKT, or trading of the Common Stock is suspended or
halted for more than three consecutive trading days, the Company may be required to make payments to each holder of 2015 Registrable
Shares as monetary penalties at a rate equal to 1% of the 2015 Offering Price per 30-day period for each share affected during
the period of such failure; provided, however, that in no event will the aggregate of any such penalties exceed 8% of the 2015
Offering Price per share. No liquidated damages shall accrue after the 2015 Registrable Shares may be resold under Rule 144 under
the Securities Act or another exemption from registration under the Securities Act. Stockholders have not been permitted to use
the prospectus in the 2015 Registration Statement since August 2016. However, Rule 144 has generally been available to such stockholders.
Once the post-effective amendment to the 2015 Registration Statement is declared effective by the SEC, stockholders may begin
to use the prospectus included in such post-effective amendment.
The holders of 2015 Registrable Shares and
the stockholders of the Company prior to the Merger (but not holders of the shares issued to the stockholders of Akoustis, Inc.,
in consideration for the Merger) were given “piggyback” registration rights for such 2015 Registrable Shares with
respect to any registration statement filed by us following the effectiveness of the 2015 Registration Statement that would permit
the inclusion of such shares, subject to customary cutback pro rata in an underwritten offering.
We will have paid or will pay all expenses
in connection with any registration obligation provided in the 2015 Registration Rights Agreement, including, without limitation,
all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities
laws, and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its
own sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The First 2016 Offering
In connection with the First 2016 Offering,
we entered into a Registration Rights Agreement, pursuant to which we agreed that promptly, but no later than 90 calendar days
from the final closing of the First 2016 Offering, held April 16, 2016, the Company would file a registration statement with the
SEC (the “2016 Registration Statement”) covering the resale of (a) the shares of Common Stock issued in the First
2016 Offering and (b) any shares of Common Stock issuable to investors in the First 2016 Offering pursuant to the anti-dilution
rights described under “Description of Business—The First 2016 Offering” above (the “2016 Registrable
Shares”).
The 2016 Registration Statement was declared
effective by the SEC on July 22, 2016. With respect to (b) above, we registered 1,341,186 shares, which represented a good faith
estimate as to the number of shares which may have become issuable upon application of the price-protected anti-dilution provision
applicable to the shares referenced in (a) above (being the number of shares that would become issuable were we to trigger the
application of the anti-dilution provision by issuing Common Stock or Common Stock equivalents at a price of $1.00 per share).
At the time of registration, we could not predict whether such anti-dilution provision would be triggered or the actual number
of shares which would have become issuable were such provision to be triggered. The anti-dilution rights expired 90 days after
the 2016 Registration Statement was declared effective by the SEC.
If (a) the 2016 Registration Statement ceases
for any reason to remain effective or the holders of 2016 Registrable Shares are otherwise not permitted to utilize the prospectus
therein to resell the 2016 Registrable Shares for a period of more than fifteen consecutive trading days; or (b) the Registrable
Shares are not listed or included for quotation on OTC Markets, Nasdaq, the New York Stock Exchange or NYSE MKT, or trading of
the Common Stock is suspended or halted for more than three consecutive trading days, the Company may be required make payments
to each holder of 2016 Registrable Shares as monetary penalties at a rate equal to 12% of the First 2016 Offering Price per annum
for each share affected during the period of such failure; provided, however, that in no event will the aggregate of any such
penalties exceed 8% of the First 2016 Offering Price per share. No liquidated damages shall accrue with respect to any 2016 Registrable
Shares after the shares may be resold under Rule 144 under the Securities Act or another exemption from registration under the
Securities Act.
The Company must keep the 2016 Registration
Statement effective until the earlier of (i) two years from the date it was declared effective by the SEC and (ii) the date Rule
144 is available to the holders of 2016 Registrable Shares with respect to all of their 2016 Registrable Shares without volume
or other limitations. The registration statement of which this post-effective amendment forms a part will update the 2016 Registration
Statement and the prospectus included therein.
The holders of 2016 Registrable Shares have
“piggyback” registration rights for such 2016 Registrable Shares with respect to up to two registration statements
filed by the Company following the effectiveness of the 2016 Registration Statement that would permit the inclusion of such shares,
subject to customary cutback pro rata in an underwritten offering.
We will have paid or will pay all expenses
in connection with any registration obligation provided in the 2016 Registration Rights Agreement, including, without limitation,
all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities
laws, and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for
its own sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The 2016-2017 Offering
In connection with the 2016-2017 Offering,
we entered into a Registration Rights Agreement, pursuant to which we have agreed that within 90 calendar days from the final closing
of the 2016-2017 Offering, the Company will file a registration statement with the SEC (the “New Registration Statement”)
covering the resale of (a) the shares of Common Stock issued in the 2016-2017 Offering, (b) any shares of Common Stock issuable
to investors in the 2016-2017 Offering pursuant to the anti-dilution rights described under “Description of Business —The
2016-2017 Offering” above, and (c) the shares of Common Stock issuable pursuant to the Common Stock purchase warrants issued
to the placement agents in the 2016-2017 Offering (the “New Registrable Shares”).
The Company must use its commercially reasonable
efforts to ensure that the New Registration Statement is declared effective within 180 calendar days after filing with the SEC.
If (a) the Company is late in filing the New Registration Statement, (b) the New Registration Statement ceases for any reason
to remain effective or the holders of New Registrable Shares are otherwise not permitted to utilize the prospectus therein to
resell the New Registrable Shares for a period of more than fifteen consecutive trading days; or (c) the New Registrable Shares
are not listed or included for quotation on OTC Markets, Nasdaq, the New York Stock Exchange or NYSE MKT, or trading of the Common
Stock is suspended or halted for more than three consecutive trading days, the Company will make payments to each holder of New
Registrable Shares as monetary penalties at a rate equal to 12% of the 2016-2017 Offering Price per annum for each share affected
during the period of such failure; provided, however, that in no event will the aggregate of any such penalties exceed 8% of the
2016-2017 Offering Price per share. No liquidated damages shall accrue with respect to any New Registrable Shares removed from
the New Registration Statement in response to a comment from the staff of the SEC limiting the number of shares of Common Stock
which may be included in the New Registration Statement (a “Cutback Comment”) or after the shares may be resold under
Rule 144 under the Securities Act or another exemption from registration under the Securities Act.
The Company must keep the New Registration
Statement effective until the earlier of (i) two years from the date it is declared effective by the SEC and (ii) the date Rule
144 is available to the holders of New Registrable Shares with respect to all of their New Registrable Shares without volume or
other limitations.
The holders of New Registrable Shares (including
any shares of Common Stock removed from the New Registration Statement as a result of a Cutback Comment) will have “piggyback”
registration rights for such New Registrable Shares with respect to up to two registration statements filed by the Company following
the effectiveness of the New Registration Statement that would permit the inclusion of such shares, subject to customary cutback
pro rata in an underwritten offering.
We will pay all expenses in connection
with any registration obligation provided in the Registration Rights Agreement, including, without limitation, all registration,
filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities laws, and the fees
and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its own sales commissions,
if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The 2017 Offering
In connection with the 2017 Offering, we
entered into a Registration Rights Agreement, pursuant to which we have agreed that within 90 calendar days from the final closing
of the 2017 Offering, the Company will file a registration statement with the SEC (the “2017 New Registration Statement”)
covering the resale of (a) the shares of Common Stock issued in the 2017 Offering, (b) any shares of Common Stock issuable to the
investor in the 2017 Offering pursuant to the anti-dilution rights described under “Description of Business —2017 Offering”
above, and (c) the shares of Common Stock issuable pursuant to the Common Stock purchase warrants issued to the placement agents
in the 2017 Offering (the “2017 Offering Registrable Shares”).
The Company must use its commercially reasonable
efforts to ensure that the 2017 New Registration Statement is declared effective within 180 calendar days after filing with the
SEC. If (a) the Company is late in filing the 2017 New Registration Statement, (b) the 2017 New Registration Statement ceases
for any reason to remain effective or the holders of New Registrable Shares are otherwise not permitted to utilize the prospectus
therein to resell the 2017 Offering Registrable Shares for a period of more than fifteen consecutive trading days; or (c) the
2017 Offering Registrable Shares are not listed or included for quotation on OTC Markets, Nasdaq, the New York Stock Exchange
or NYSE MKT, or trading of the Common Stock is suspended or halted for more than three consecutive trading days, the Company will
make payments to each holder of 2017 Offering Registrable Shares as monetary penalties at a rate equal to 12% of the 2017 Offering
Price per annum for each share affected during the period of such failure; provided, however, that in no event will the aggregate
of any such penalties exceed 8% of the 2017 Offering Price per share. No liquidated damages shall accrue with respect to any 2017
Offering Registrable Shares removed from the 2017 New Registration Statement in response to a comment from the staff of the SEC
limiting the number of shares of Common Stock which may be included in the 2017 New Registration Statement (a “2017 Cutback
Comment”) or after the shares may be resold under Rule 144 under the Securities Act or another exemption from registration
under the Securities Act.
The Company must keep the 2017 New Registration
Statement effective until the earlier of (i) two years from the date it is declared effective by the SEC and (ii) the date Rule
144 is available to the holders of 2017 New Registrable Shares with respect to all of their 2017 New Registrable Shares without
volume or other limitations.
The holders of 2017 New Registrable Shares
(including any shares of Common Stock removed from the New Registration Statement as a result of a Cutback Comment) will have
“piggyback” registration rights for such 2017 New Registrable Shares with respect to up to two registration statements
filed by the Company following the effectiveness of the 2017 New Registration Statement that would permit the inclusion of such
shares, subject to customary cutback pro rata in an underwritten offering.
We will pay all expenses
in connection with any registration obligation provided in the Registration Rights Agreement, including, without limitation, all
registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities laws,
and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its own
sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The Registration Rights Agreements referred
to above are filed as exhibits to the registration statement of which this prospectus is a part.
Lock-up Agreements and Other Restrictions
In connection with the Merger, each of
our executive officers and directors, and each of the stockholders of Akoustis, Inc., who received shares of our Common Stock
in the Merger (each a “Restricted Holder”, and, collectively, the “Restricted Holders”), holding at the
time of the Merger an aggregate 5,734,006 shares of our Common Stock, entered into agreements (the “Lock-Up Agreements”),
whereby they were restricted for a period of 24 months after the Merger, or until May 22, 2017, from certain sales or dispositions
of our Common Stock held by them immediately after the Merger (the “Lock-Up”). The Lock-Up excludes shares of Common
Stock purchased by the Restricted Holders in the 2015 Offering, other than our Chief Executive Officer, and shares purchased in
the open market in compliance with applicable securities laws.
In addition, each Restricted Holder agreed
in the Lock-Up Agreement that it will not, for a period of 24 months following the Merger, or until May 22, 2017, directly or
indirectly, effect or agree to effect any short sale (as defined in Rule 200 under Regulation SHO of the Exchange Act), whether
or not against the box, establish any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act)
with respect to the Common Stock, borrow or pre-borrow any shares of Common Stock, or grant any other right (including, without
limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to
or derives any significant part of its value from the Common Stock or otherwise seek to hedge its position in the Common Stock.
Transfer Agent
The transfer agent for our Common Stock is
Globex Transfer, LLC. The transfer agent’s address is 780 Deltona Blvd., Suite 202, Deltona, FL 32725 and its telephone
number is 813-344-4490.
Anti-Takeover Effects of Provisions of
Our Certificate of Incorporation and By-Laws and Delaware State Law
The provisions of the General Corporation
Law of the State of Delaware, or DGCL, and our Certificate of Incorporation and By-Laws could have the effect of discouraging
others from attempting an unsolicited offer to acquire our company. Such provisions may also have the effect of preventing changes
in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders
may otherwise deem to be in their best interests.
Authorized but unissued shares.
The
authorized but unissued shares of our Common Stock and our preferred stock are available for future issuance without any further
vote or action by our stockholders. These additional shares may be utilized for a variety of corporate purposes, including future
public or private offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized
but unissued shares of our Common Stock and our preferred stock could render more difficult or discourage an attempt to obtain
control over us by means of a proxy contest, tender offer, merger or otherwise.
Special meeting of stockholders and advance
notice requirements for stockholder proposals.
Our By-Laws require that special meetings of stockholders be called only
by a majority of our board of directors, by the chairman of the board, the Chief Executive Officer, the President, or the Secretary.
In addition, our By-Laws provide that candidates for director may be nominated and other business brought before an annual meeting
only by the board of directors or by a stockholder who gives written notice to us not less than 90 days, nor more than 120 days,
prior to the one year anniversary of the date of the annual meeting of the previous year. These provisions may have the effect
of deterring unsolicited offers to acquire our company or delaying stockholder actions, even if they are favored by the holders
of a majority of our outstanding voting securities.
Business combinations
. The DGCL generally
prohibits a corporation from engaging in any business combination with any interested stockholder for a three-year period following
the time that the stockholder became an interested stockholder, unless:
|
•
|
prior
to such time, our board of directors approved either the business combination or the
transaction which resulted in the stockholder becoming an interested stockholder;
|
|
•
|
upon
consummation of the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of our voting stock outstanding
at the time the transaction commenced, excluding certain shares; or
|
|
•
|
at
or subsequent to that time, the business combination is approved by our board of directors
and by the affirmative vote of holders of at least 66
2
⁄
3
%
of the outstanding voting stock that is not owned by the interested stockholder.
|
Generally, a “business combination”
includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject
to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and
associates, owns, or within the previous three years owned, 15% or more of our voting stock.
Under certain circumstances, this provision
could make it more difficult for a person who would be an “interested stockholder” to effect various business combinations
with a corporation for a three-year period. However, this provision generally does not apply to a corporation that does not have
a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders. Accordingly,
this provision does not currently apply to us.
LEGAL MATTERS
The validity of the Common Stock offered hereby
will be passed upon for us by LKP Global Law, LLP, 1901 Avenue of the Stars, Suite 480, Los Angeles, CA 90067. LKP is counsel
to us and receives legal fees in accordance with an executed retainer agreement.
EXPERTS
The consolidated financial statements of Akoustis
Technologies, Inc. as of June 30, 2016 and 2015, and March 31, 2016 and 2015 and for the three months ended June 30, 2016, the
years ended June 30, 2016 and 2015, and the year ended March 31, 2016 and the period from May 12, 2014 (inception) through March
31, 2015, included in this prospectus and the registration statement of which this prospectus forms a part, have been audited
by Marcum LLP, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory
paragraph relating to substantial doubt about the ability of Akoustis Technologies, Inc. to continue as a going concern as described
in Note 2 to the consolidated financial statements) appearing elsewhere herein, and are included in reliance on such report given
upon such firm’s authority as an expert in auditing and accounting.
WHERE YOU CAN FIND MORE
INFORMATION
We file annual reports, quarterly reports,
current reports and other information with the SEC. You may read or obtain a copy of these reports at our website address, www.akoustis.com,
or at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information
on the operation of the public reference room and their copy charges by calling the SEC at 1-800-SEC-0330. The SEC maintains a
website that contains registration statements, reports, proxy information statements and other information regarding registrants
that file electronically with the SEC. The address of the website is http://www.sec.gov.
We have filed with the SEC a Registration
Statement on Form S-1 under the Securities Act to register the shares offered by this prospectus. The term “registration
statement” means the original registration statement and any and all amendments thereto, including the schedules and exhibits
to the original registration statement or any amendment. This prospectus is part of that registration statement. This prospectus
does not contain all of the information set forth in the registration statement or the exhibits to the registration statement.
For further information with respect to us and the shares being offered pursuant to this prospectus, you should refer to the registration
statement and its exhibits. Statements contained in this prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and you should refer to the copy of that contract or other documents filed as an exhibit
to the registration statement. You may read or obtain a copy of the registration statement at the SEC’s public reference
facilities and Internet sites referred to above.
The information found on, or otherwise accessible
through, any website referenced in this prospectus is not incorporated into, and does not form a part of, this prospectus.
INDEX TO FINANCIAL STATEMENTS
|
Page
|
Unaudited Condensed Consolidated Financial
Statements of Akoustis Technologies, Inc.
|
|
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2017 (unaudited) and June 30, 2016
|
F-2
|
|
|
Condensed
Consolidated Statements of Operations for the three and nine months ended March 31, 2017 and 2016 (unaudited)
|
F-3
|
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended March 31, 2017 (unaudited)
|
F-4
|
|
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended March 31, 2017 and 2016 (unaudited)
|
F-5
|
|
|
Notes
to the Condensed Consolidated Financial Statements (unaudited)
|
F-6
|
|
|
Audited
Consolidated Financial Statements of Akoustis Technologies, Inc.
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-16
|
|
|
Consolidated
Balance Sheets as of June 30, 2016, June 30, 2015, March 31, 2016 and March 31, 2016
|
F-17
|
|
|
Consolidated
Statements of Operations for the three months ended June 30, 2016, the years ended June 30, 2016 and 2015, the year ended
March 31, 2016 and for the period from May 12, 2014 (inception) through March 31, 2015
|
F-18
|
|
|
Consolidated
Statement of Changes in Stockholders’ Equity for the period from May 12, 2014 (inception) through June 30, 2016
|
F-19
|
|
|
Consolidated
Statements of Cash Flows for the three months ended June 30, 2016, the years ended June 30, 2016 and 2015, the year ended
March 31, 2016 and for the period from May 12, 2014 (inception) through March 31, 2015
|
F-20
|
|
|
Notes
to the Consolidated Financial Statements
|
F-21
|
PART I - FINANCIAL INFORMATION
ITEM 1.
|
FINANCIAL STATEMENTS
.
|
Akoustis Technologies,
Inc.
Condensed Consolidated Balance Sheets
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,425,699
|
|
|
$
|
4,155,444
|
|
Inventory
|
|
|
49,534
|
|
|
|
43,544
|
|
Prepaid expenses
|
|
|
125,714
|
|
|
|
54,818
|
|
Deposits
|
|
|
688,651
|
|
|
|
-
|
|
Total current assets
|
|
|
10,289,598
|
|
|
|
4,253,806
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
688,162
|
|
|
|
206,985
|
|
|
|
|
|
|
|
|
|
|
Intangibles, net
|
|
|
117,854
|
|
|
|
71,233
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
10,715
|
|
|
|
10,715
|
|
Total Assets
|
|
$
|
11,106,329
|
|
|
$
|
4,542,739
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
1,271,794
|
|
|
$
|
543,646
|
|
Deferred revenue
|
|
|
30,500
|
|
|
|
-
|
|
Total current liabilities
|
|
|
1,302,294
|
|
|
|
543,646
|
|
|
|
|
|
|
|
|
|
|
Long-term Liabilities:
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
1,322,729
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,302,294
|
|
|
|
1,866,375
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.001: 5,000,000 shares
authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001 par value; 45,000,000 shares authorized;
18,105,349 and 15,375,981 shares issued and outstanding at March 31, 2017 and June 30, 2016, respectively
|
|
|
18,105
|
|
|
|
15,376
|
|
Additional paid in capital
|
|
|
23,993,581
|
|
|
|
9,335,801
|
|
Accumulated deficit
|
|
|
(14,207,651
|
)
|
|
|
(6,674,813
|
)
|
Total Stockholders’
Equity
|
|
|
9,804,035
|
|
|
|
2,676,364
|
|
Total Liabilities
and Stockholders’ Equity
|
|
$
|
11,106,329
|
|
|
$
|
4,542,739
|
|
See accompanying notes to the condensed
consolidated financial statements
Akoustis Technologies,
Inc.
Condensed Consolidated Statements
of Operations
|
|
For
the Three Months
Ended
March
31, 2017
|
|
|
For
the Three Months
Ended
March
31, 2016
|
|
|
For
the Nine Months
Ended
March
31, 2017
|
|
|
For
the Nine Months
Ended
March
31, 2016
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Contract
research and government grants
|
|
$
|
294,464
|
|
|
$
|
234,334
|
|
|
$
|
453,532
|
|
|
$
|
234,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
14,500
|
|
|
|
-
|
|
|
|
14,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
308,964
|
|
|
|
234,334
|
|
|
|
468,032
|
|
|
|
234,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
1,162,138
|
|
|
|
375,779
|
|
|
|
2,590,698
|
|
|
|
1,049,391
|
|
General
and administrative expenses
|
|
|
1,203,641
|
|
|
|
480,757
|
|
|
|
4,533,652
|
|
|
|
1,966,561
|
|
Total
operating expenses
|
|
|
2,365,779
|
|
|
|
856,536
|
|
|
|
7,124,350
|
|
|
|
3,015,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(2,056,815
|
)
|
|
|
(622,202
|
)
|
|
|
(6,656,318
|
)
|
|
|
(2,781,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
-
|
|
|
|
500
|
|
|
|
-
|
|
|
|
500
|
|
Interest income
|
|
|
671
|
|
|
|
305
|
|
|
|
970
|
|
|
|
1,153
|
|
Change
in fair value of derivative liabilities
|
|
|
(8,028
|
)
|
|
|
(127,994
|
)
|
|
|
(877,490
|
)
|
|
|
(108,565
|
)
|
Total
other income (expense)
|
|
|
(7,357
|
)
|
|
|
(127,189
|
)
|
|
|
(876,520
|
)
|
|
|
(106,912
|
)
|
Net
loss
|
|
$
|
(2,064,172
|
)
|
|
$
|
(749,391
|
)
|
|
$
|
(7,532,838
|
)
|
|
$
|
(2,888,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$
|
(0.12
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding -basic and diluted
|
|
|
17,691,114
|
|
|
|
13,161,247
|
|
|
|
16,419,225
|
|
|
|
12,854,810
|
|
See accompanying
notes to the condensed consolidated financial statements
Akoustis
Technologies, Inc.
Condensed Consolidated
Statement of Changes in Stockholders’ Equity
For the Nine Months
Ended March 31, 2017
(unaudited)
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid In Capital
|
|
|
Deficit
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 1, 2016
|
|
|
15,375,981
|
|
|
$
|
15,376
|
|
|
$
|
9,335,801
|
|
|
$
|
(6,674,813
|
)
|
|
$
|
2,676,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash, net of issuance costs
|
|
|
2,141,993
|
|
|
|
2,142
|
|
|
|
9,838,885
|
|
|
|
-
|
|
|
|
9,841,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued to underwriter
|
|
|
-
|
|
|
|
-
|
|
|
|
(715,081
|
)
|
|
|
-
|
|
|
|
(715,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
553,000
|
|
|
|
553
|
|
|
|
3,181,465
|
|
|
|
-
|
|
|
|
3,182,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for exercise of warrants
|
|
|
34,375
|
|
|
|
34
|
|
|
|
54,966
|
|
|
|
-
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted shares
|
|
|
-
|
|
|
|
-
|
|
|
|
97,326
|
|
|
|
-
|
|
|
|
97,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of warrants from liability to equity classification
|
|
|
-
|
|
|
|
-
|
|
|
|
2,200,219
|
|
|
|
-
|
|
|
|
2,200,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the nine months ended March 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,532,838
|
)
|
|
|
(7,532,838
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2017
|
|
|
18,105,349
|
|
|
$
|
18,105
|
|
|
$
|
23,993,581
|
|
|
$
|
(14,207,651
|
)
|
|
$
|
9,804,035
|
|
See accompanying notes to the condensed
consolidated financial statements
Akoustis Technologies,
Inc.
Condensed Consolidated Statements
of Cash Flows
|
|
For the Nine Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,532,838
|
)
|
|
$
|
(2,888,530
|
)
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
61,374
|
|
|
|
23,403
|
|
Amortization of intangibles
|
|
|
5,063
|
|
|
|
2,212
|
|
Share-based compensation
|
|
|
2,952,850
|
|
|
|
441,190
|
|
Change in fair value of derivative liabilities
|
|
|
877,490
|
|
|
|
108,565
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
(5,990
|
)
|
|
|
(43,544
|
)
|
Prepaid expenses
|
|
|
(70,896
|
)
|
|
|
351
|
|
Cash paid for deposits
|
|
|
(688,651
|
)
|
|
|
-
|
|
Other assets
|
|
|
-
|
|
|
|
-
|
|
Accounts payable and accrued expenses
|
|
|
339,561
|
|
|
|
143,731
|
|
Deferred revenue
|
|
|
30,500
|
|
|
|
-
|
|
Net Cash Used In Operating Activities
|
|
|
(4,031,537
|
)
|
|
|
(2,212,622
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash paid for machinery and equipment
|
|
|
(542,551
|
)
|
|
|
(124,672
|
)
|
Cash paid for intangibles
|
|
|
(51,684
|
)
|
|
|
(31,784
|
)
|
Net Cash Used In Investing Activities
|
|
|
(594,235
|
)
|
|
|
(156,456
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
9,841,027
|
|
|
|
769,687
|
|
Proceeds from the exercise of warrants
|
|
|
55,000
|
|
|
|
-
|
|
Net Cash Provided By Financing Activities
|
|
|
9,896,027
|
|
|
|
769,687
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
5,270,255
|
|
|
|
(1,599,391
|
)
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Period
|
|
|
4,155,444
|
|
|
|
4,329,496
|
|
|
|
|
|
|
|
|
|
|
Cash - End of Period
|
|
$
|
9,425,699
|
|
|
$
|
2,730,105
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash Paid During the Period for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation payable
|
|
$
|
485,916
|
|
|
$
|
101,045
|
|
Warrants issued for stock issuance costs
|
|
$
|
715,081
|
|
|
$
|
-
|
|
Reclassification of derivative liability to additional paid
in capital
|
|
$
|
2,200,219
|
|
|
$
|
-
|
|
See accompanying notes to the condensed
consolidated financial statements
AKOUSTIS TECHNOLOGIES,
INC.
Notes to the Condensed Consolidated
Financial Statements
(Unaudited
)
March 31, 2017
Note 1. Organization
Akoustis Technologies, Inc. (formerly
known as Danlax, Corp.) (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on April 10, 2013. Effective
December 15, 2016, the Company changed its state of incorporation from the State of Nevada to the State of Delaware. Through its
subsidiary, Akoustis, Inc. (a Delaware corporation), the Company operates in the telecommunications and fiber optics sector and
is based in Huntersville, North Carolina. The mission of the Company is to commercialize and manufacture its patented BulkONE
®
acoustic wave technology to address the critical frequency-selectivity requirements in today’s mobile smartphones - improving
the efficiency and signal quality of mobile wireless devices and enabling the Internet of Things.
On August 11, 2016, the Company changed
its fiscal year from the period beginning on April 1 and ending on March 31 to the period beginning on July 1 and ending on June
30 of each year, effective immediately.
On March 10, 2017, the Company announced
that its common stock was approved for listing on the NASDAQ Capital Market, effective March 13, 2017 under the symbol AKTS.
On March 23, 2017, the Company entered
into a Definitive Asset Purchase Agreement and a Definitive Real Property Purchase Agreement (together, the “Agreements”) with
The Research Foundation for the State University of New York (RF-SUNY) and Fuller Road Management Corporation (FRMC), an affiliate
of RF-SUNY, to acquire for an aggregate purchase price of $2.75 million, certain specified assets, including STC-MEMS, a semiconductor
wafer-manufacturing operation and microelectromechanical systems (MEMS) business with associated wafer-manufacturing tools and
28 employees, as well as the real estate and improvements associated with the facility located in Canandaigua, New York, which
is used in the operation of STC-MEMS. Subject to satisfaction of certain conditions precedent, the Agreements contemplate that
closing of the transactions is expected to occur approximately 90 days from the date of execution of the definitive agreement,
which is on or about June 26,
2017.
The 2016-2017 Offering
The Company sold a total of 2,141,993
shares of its common stock, par value $0.001 per share (the “Common Stock”) in a private placement offering (the “2016-2017 Offering”)
at a fixed purchase price of $5.00 per share (the “2016-2017 Offering Price”), with closings in each of November and December
2016 and January and February 2017. Aggregate gross proceeds were $10.7 million before deducting commissions and expenses of approximately
$854,000. In connection with the 2016-2017 Offering, the Company also issued to the placement agents, warrants to purchase an
aggregate 205,126 shares of Common Stock with a term of five years and an exercise price of $5.00 per share. In accordance with
the terms of the subscription agreements executed by the Company and each of the investors, if the Company issues additional shares
of Common Stock or Common Stock equivalents (subject to customary exceptions, including but not limited to issuances of awards
under Company employee stock incentive programs and certain issuances in connection with credit arrangements, equipment financings,
lease arrangements, or similar transactions) between November 25, 2016 and the date that is 90 days after the date on which a
registration statement registering the resale of the shares issued in the 2016-2017 Offering is declared effective by the Securities
and Exchange Commission (the “SEC”), for a consideration per share less than the 2016-2017 Offering Price (as adjusted for any
subsequent stock dividend, stock split, distribution, recapitalization, reclassification, reorganization, or similar event) (the
“Lower Price”), each investor will be entitled to receive from the Company additional shares of Common Stock in an amount such
that, when added to the number of shares of Common Stock initially purchased by such Investor, will equal the number of shares
of Common Stock that such Investor’s investment in the Offering would have purchased at the Lower Price.
Note 2. Liquidity and Management
Plans
The accompanying condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As of March 31, 2017, the Company had working capital of $9.0 million and an
accumulated deficit of $14.2 million. Since inception, the Company has recorded approximately $876,000 of revenue from contract
research and government grants. As of March 31, 2017, the Company had cash and cash equivalents of $9.4 million which the Company
believes is sufficient to fund its current operations through June 2018. The Company had $10 million of cash and cash equivalents
on hand as of May 12, 2017 to fund its business. The Company cannot yet estimate the amount of capital expenditures to be incurred
in connection with the operations of the Acquired Business (as defined in Note 9) upon closing of the transactions discussed more
fully in Note 9 as it is continuing to conduct due diligence on the operations and available financial information associated
with the acquisition. Consummation of the transactions is conditioned, in part, on delivery to the Company of the financial books
and records of the Acquired Business sufficient for the completion of an audit or financial information as necessary to satisfy
any SEC filing requirements related to the acquisition.
There is no assurance that the Company’s
projections and estimates are accurate. The Company’s primary sources of operating funds since inception have been private equity,
note financings and grants. The Company needs to raise additional capital to accomplish its business plan objectives and will
continue its efforts to secure additional funds through issuance of debt or equity instruments and/or receipts of grants as appropriate.
Management believes that it will be successful in obtaining additional financing based on its history of raising funds; however,
the amount of funds raised, if any, may not be sufficient to enable the Company to attain profitable operations. To the extent
that the Company is unsuccessful in obtaining additional financing, the Company may need to curtail or cease its operations and
implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations.
There can be no assurance that such a plan will be successful.
Note 3. Summary of significant accounting
policies
Basis of presentation
The Company’s 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 SEC.
The unaudited condensed consolidated
financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion
of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods
presented. The Company assumes that the users of the interim financial information herein have read or have access to the audited
financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation
may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained
in the Company’s Transition Report on Form 10-K for the three months and year ended June 30, 2016, filed on October 31, 2016,
(the “2016 Annual Report”) has been omitted from this 10-Q. The results of operations for the interim periods presented herein
are not necessarily indicative of results for the entire fiscal year ending June 30, 2017 or any other period.
Principles of Consolidation
The accompanying condensed consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiary, Akoustis, Inc. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Significant Accounting Policies
and Estimates
The Company’s significant accounting
policies are disclosed in Note 3-Summary of Significant Accounting Policies in the 2016 Annual Report. Since the date of the 2016
Annual Report, there have been no material changes to the Company’s significant accounting policies, except for the change in
accounting policy related to the presentation of contract research and government grants as discussed below. The preparation of
the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes to the condensed
consolidated financial statements. These estimates and assumptions include valuing equity securities and derivative financial
instruments issued in financing transactions, deferred taxes and related valuation allowances, and the fair values of long lived
assets. Actual results could differ from the estimates.
Change in Accounting Policy for Revenue Recognition
Effective October 1, 2016, the Company
changed its accounting policy for the recognition of grant revenue. The Company believes this change in accounting policy is preferable
due to the fact that grant revenue is viewed as an ongoing function of its intended operations. This change in accounting policy
also enhances the comparability of the Company’s financial statements with many of its industry peers. The adoption of this accounting
policy change has been applied retrospectively to all prior periods presented in this Quarterly Report on Form 10-Q and has had
no impact on net loss per share.
Contract Research and Government
Grants
The Company may generate revenue from
product sales, license agreements, collaborative research and development arrangements, and government grants. To date the Company’s
principal source of revenue consists of government research grants. The Company recognizes nonrefundable grant revenue when it
is received and reports this revenue as “Contract research and government grants” on the condensed consolidated statements of
operations. Contracts executed and monies received prior to the recognition of revenue are recorded as deferred revenue.
Engineering Review Services Revenue
The Company records Engineering Review Services
revenue (“ERS”) which is for providing one time design and development services whereby the Company’s R&D personnel deliver
simulations/models and demonstration units (low volume) for evaluation by the customers. The Company recognizes revenue when there
is persuasive evidence of an arrangement, the service has been provided to the customer, the amount of fees to be paid by the
customer is fixed or determinable, and the collection of fees is reasonably assured. Total ERS revenue to date is approximately
$14,500.
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, 2017 and 2016 presented in these condensed consolidated financial statements, the
weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.
The Company had the following common
stock equivalents at March 31, 2017 and 2016:
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Options
|
|
|
160,000
|
|
|
|
160,000
|
|
Warrants
|
|
|
642,448
|
|
|
|
324,650
|
|
Totals
|
|
|
802,448
|
|
|
|
484,650
|
|
Shares Outstanding
Shares outstanding include shares of
restricted stock with respect to which restrictions have not lapsed. Restricted stock included in reportable shares outstanding
was 2,144,055 shares and 1,353,055 shares as of March 31, 2017 and 2016, respectively. Shares of restricted stock are included
in the calculation of weighted average shares outstanding.
Reclassification
Certain prior period amounts have been
reclassified to conform to current period presentation. The reclassifications did not have an impact on net loss as previously
reported
.
Recently Issued Accounting Pronouncements
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. Property and equipment
Property and equipment consisted of
the following:
|
|
Estimated
Useful Life
|
|
March 31,
2017
|
|
|
June 30,
2016
|
|
Research and development equipment
|
|
3 – 10 years
|
|
$
|
768,923
|
|
|
$
|
226,372
|
|
Computer equipment
|
|
5 years
|
|
|
16,783
|
|
|
|
16,783
|
|
Furniture and fixtures
|
|
5 – 10 years
|
|
|
3,725
|
|
|
|
3,725
|
|
Leasehold improvements
|
|
*
|
|
|
3,240
|
|
|
|
3,240
|
|
|
|
|
|
|
792,671
|
|
|
|
250,120
|
|
Less: Accumulated depreciation
|
|
|
|
|
(104,509
|
)
|
|
|
(43,135
|
)
|
Total
|
|
|
|
$
|
688,162
|
|
|
$
|
206,985
|
|
(*) 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 $35,540 and $10,417 for the three months ended March 31, 2017 and 2016, respectively.
The Company recorded depreciation expense
of $61,374 and $23,403 for the nine months ended March 31, 2017 and 2016, respectively.
As of March 31, 2017, research and development
fixed assets totaling $39,116 were not placed in service and therefore not depreciated during the period.
Note 5. Intangible assets
The Company’s
intangible assets consisted of the following:
|
|
Estimated
useful life
|
|
March 31, 2017
|
|
|
June 30, 2016
|
|
Patents
|
|
15 years
|
|
$
|
126,246
|
|
|
$
|
74,562
|
|
Less: Accumulated amortization
|
|
|
|
|
(9,952
|
)
|
|
|
(4,889
|
)
|
Subtotal
|
|
|
|
|
116,294
|
|
|
|
69,673
|
|
Trademarks
|
|
—
|
|
|
1,560
|
|
|
|
1,560
|
|
Intangible assets, net
|
|
|
|
$
|
117,854
|
|
|
$
|
71,233
|
|
The Company
recorded amortization expense of $1,951 and $800 for the three months ended March 31, 2017 and 2016, respectively.
The Company
recorded amortization expense of $5,063 and $2,212 for the nine months ended March 31, 2017 and 2016 respectively.
The following table outlines estimated
future annual amortization expense for the next five years and thereafter:
March 31,
|
|
|
|
|
2018
|
|
$
|
8,212
|
|
2019
|
|
|
8,212
|
|
2020
|
|
|
8,212
|
|
2021
|
|
|
8,212
|
|
2022
|
|
|
8,212
|
|
Thereafter
|
|
|
75,234
|
|
|
|
$
|
116,294
|
|
Note 6. Accounts payable and accrued expenses
Accounts payable and accrued expenses
consisted of the following at March 31, 2017 and June 30, 2016:
|
|
March 31, 2017
|
|
|
June 30, 2016
|
|
Accounts payable
|
|
$
|
146,217
|
|
|
$
|
73,400
|
|
Accrued salaries and benefits
|
|
|
107,071
|
|
|
|
21,376
|
|
Accrued bonuses
|
|
|
334,228
|
|
|
|
126,575
|
|
Accrued stock-based compensation
|
|
|
567,669
|
|
|
|
179,079
|
|
Other accrued expenses
|
|
|
116,609
|
|
|
|
143,216
|
|
Totals
|
|
$
|
1,271,794
|
|
|
$
|
543,646
|
|
Note 7. Derivative Liabilities
Upon closing of the private placements
on May 22, 2015 and June 9, 2015, the Company issued 298,551 and 26,099 warrants, respectively, to purchase the same number of
shares of common stock with an exercise price of $1.50 and a five-year term to the placement agent. Upon closing of a private
placement in April 2016, the Company issued 153,713 warrants to purchase the same number of shares of common stock with an exercise
price of $1.60 and a five-year term to the placement agent. The Company identified certain put features embedded in the warrants
that potentially could result in a net cash settlement, requiring the Company to classify the warrants as a derivative liability.
During the nine months ended March 31,
2017, the Company amended the existing warrant agreements to eliminate the derivative feature. Upon execution of the revised agreements,
a total of 471,697 warrants with a fair value of $2,200,219 were reclassified from liability to equity.
Level 3 Financial Liabilities – Derivative warrant
liabilities
Financial assets and liabilities measured
at fair value on a recurring basis are summarized below and disclosed on the condensed consolidated balance sheet as of March
31, 2017:
|
|
Carrying
|
|
|
Fair Value Measurement Using
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities
|
|
$
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Financial assets and liabilities measured
at fair value on a recurring basis are summarized below and disclosed on the condensed consolidated balance sheet as of June 30,
2016:
|
|
Carrying
|
|
|
Fair Value Measurement Using
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities
|
|
$
|
1,322,729
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,322,729
|
|
|
$
|
1,322,729
|
|
The table below provides a summary of
the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended March 31, 2017:
|
|
Fair Value
Measurement
Using Level 3
Inputs
|
|
|
|
Total
|
|
Balance, July 1, 2016
|
|
$
|
1,322,729
|
|
Change in fair value of derivative warrant liabilities
|
|
|
877,490
|
|
Reclassification of Derivative liability to Additional Paid in Capital
|
|
|
(2,200,219
|
)
|
Balance, March 31, 2017
|
|
$
|
-
|
|
The fair value of the derivative feature
of the warrants on the issuance dates, at the balance sheet date and on the date of reclassification to equity were calculated
using a binomial option model valued with the following weighted average assumptions:
|
|
January 19, 2017
|
|
|
June 30, 2016
|
|
Risk free interest rate
|
|
|
1.75
|
%
|
|
|
1.01
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected volatility
|
|
|
69
|
%
|
|
|
39
|
%
|
Remaining term (years)
|
|
|
3.14 – 4.04
|
|
|
|
3.89-4.79
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate: The Company
uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.
Dividend yield: The Company uses a 0%
expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near
future.
Volatility: The Company calculates the
expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period
consistent with the warrant’s expected term.
Remaining term: The Company’s remaining
term is based on the remaining contractual maturity of the warrants.
During the nine months ended March 31,
2017 and 2016, the Company marked the derivative feature of the warrants to fair value and recorded a loss of $877,490 and $108,565,
respectively, relating to the change in fair value.
Note 8. Stockholders’ Equity
The Company recorded stock-based compensation
expense for the shares issued to consultants that have vested, which is a component of general and administrative expenses in
the Condensed Consolidated Statement of Operations as follows:
|
|
|
|
|
Stock Based Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
Month of Original Grant
|
|
Shares
Issued
|
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
December 2015
|
|
|
230,000
|
|
|
$
|
945,189
|
|
|
$
|
136,603
|
|
March 2016
|
|
|
60,000
|
|
|
|
261,214
|
|
|
|
12,133
|
|
August 2016
|
|
|
40,000
|
|
|
|
147,600
|
|
|
|
-
|
|
January 2017
|
|
|
50,000
|
|
|
|
114,329
|
|
|
|
-
|
|
|
|
|
380,000
|
|
|
$
|
1,468,332
|
|
|
$
|
148,736
|
|
As of March 31, 2017 and June 30, 2016,
the Company had 18,105,349 and 15,375,981 common shares issued and outstanding, respectively.
Stock incentive plan
The following is a summary of the option
activity:
|
|
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Outstanding – June 30, 2016
|
|
|
160,000
|
|
|
$
|
1.50
|
|
Exercisable – June 30, 2016
|
|
|
40,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Forfeited/Cancelled
|
|
|
—
|
|
|
|
—
|
|
Outstanding – March 31, 2017
|
|
|
160,000
|
|
|
$
|
1.50
|
|
Exercisable – March 31, 2017
|
|
|
40,000
|
|
|
$
|
1.50
|
|
As of March 31, 2017, the total intrinsic
value of options outstanding and exercisable was $1,814,400 and $453,600, respectively. As of March 31, 2017, the Company has
$59,764 in
unrecognized stock-based compensation expense attributable to the outstanding
options, which will be amortized over a period of 2.14 years.
For the three months ended March 31,
2017 and 2016, the Company recorded $6,888 and $6,964, respectively, in stock-based compensation related to stock options, which
is reflected in the condensed consolidated statements of operations.
For the nine months ended March 31,
2017 and 2016, the Company recorded $20,968 and $21,044, respectively, in stock-based compensation related to stock options, which
is reflected in the condensed consolidated statements of operations.
Issuance of restricted shares
– employees and consultants
Restricted stock awards are considered
outstanding at the time of execution by the Company and the recipient of a restricted stock agreement, as the stock award holders
are entitled to dividend and voting rights. As of March 31, 2017, the number of shares granted for which the restrictions have
not lapsed was 1,641,764 shares.
The Company recognizes the compensation
expense for all share-based compensation granted based on the grant date fair value. The grant date fair value of the award is
recorded as share–based compensation expense over the respective restriction period. Any portion of the grant awarded to consultants
and other service providers as to which the repurchase option has not lapsed is accrued on the Balance Sheet as a component of
accounts payable and accrued expenses. As of March 31, 2017 and June 30, 2016, the accrued stock-based compensation was $567,669
and $179,079, respectively. The Company has the right to repurchase some or all of such shares in certain circumstances upon termination
of the recipient’s service with the Company, for up to 60 months from the date of termination (“repurchase option”). The shares
as to which the repurchase option has not lapsed are subject to forfeiture upon termination of consulting and employment agreements.
In September 2015, the Company amended
the original restricted stock agreement for certain award recipients. Pursuant to the amendment, 75% of the shares as to which
the repurchase option had not lapsed as of September 30, 2015 will be released from the repurchase option on the third anniversary
of the original effective date of the agreement. The remaining 25% of the shares will be released from the repurchase option on
the fourth anniversary of the original effective date.
The following is a summary of restricted shares:
Grant Date
|
|
Shares
Issued
|
|
|
Fair
Value
|
|
|
Shares
Vested
|
|
June 2014
|
|
|
307,876
|
|
|
$
|
2,103,429
|
|
|
|
96,211
|
|
July 2014
|
|
|
32,408
|
|
|
|
2,090
|
|
|
|
9,452
|
|
August 2014
|
|
|
81,020
|
|
|
|
534,950
|
|
|
|
31,056
|
|
September 2014
|
|
|
129,633
|
|
|
|
513,400
|
|
|
|
32,408
|
|
March 2015
|
|
|
72,918
|
|
|
|
691,565
|
|
|
|
13,164
|
|
June 2015
|
|
|
293,000
|
|
|
|
439,500
|
|
|
|
-
|
|
November 2015
|
|
|
36,200
|
|
|
|
54,300
|
|
|
|
-
|
|
December 2015
|
|
|
300,000
|
|
|
|
1,393,000
|
|
|
|
230,000
|
|
January 2016
|
|
|
40,000
|
|
|
|
68,000
|
|
|
|
-
|
|
March 2016
|
|
|
60,000
|
|
|
|
333,000
|
|
|
|
60,000
|
|
June 2016
|
|
|
118,000
|
|
|
|
577,771
|
|
|
|
-
|
|
August 2016
|
|
|
351,000
|
|
|
|
1,570,472
|
|
|
|
40,000
|
|
January 2017
|
|
|
192,000
|
|
|
|
1,472,302
|
|
|
|
-
|
|
February 2017
|
|
|
110,000
|
|
|
|
697,500
|
|
|
|
-
|
|
March 2017
|
|
|
20,000
|
|
|
|
135,000
|
|
|
|
-
|
|
|
|
|
2,144,055
|
|
|
$
|
10,586,279
|
|
|
|
512,291
|
|
In relation to the above restricted
stock agreements for the three months ended March 31, 2017 and 2016, the Company recorded stock-based compensation expense for
the shares that have vested of $698,103 and $235,030, respectively.
In relation to the above restricted
stock agreements for the nine months ended March 31, 2017 and 2016, the Company recorded stock-based compensation expense for
the shares that have vested of $2,931,885 and $393,040, respectively.
As of March 31, 2017, the Company had
$6,766,031 in unrecognized stock-based compensation expense related to the unvested shares.
Note 9. Commitments
Operating leases
The Company leases office space in Huntersville,
NC pursuant to a three-year lease agreement. The operating lease provides for annual real estate tax and cost of living increases
and contains predetermined increases in the rentals payable during the term of the lease. The aggregate rent expense is recognized
on a straight-line basis over the lease term. The total lease rental expense was $42,716 and $41,364 for the nine months ended
March 31, 2017 and 2016, respectively.
Total future minimum payments required
under the operating lease are as follows.
Twelve Months Ending March 31,
|
|
|
|
|
2018
|
|
$
|
48,260
|
|
2019
|
|
|
4,031
|
|
|
|
$
|
52,291
|
|
Definitive Purchase Agreements
On March 23,
2017, the Company entered into a Definitive Asset Purchase Agreement (the “AP Agreement”) and a Definitive Real Property Purchase
Agreement (“RP Agreement”) (collectively, the “Agreements”) with The Research Foundation for the State University of New York
(“RF-SUNY”) and Fuller Road Management Corporation (“FRMC”), an affiliate of RF-SUNY (collectively, “Sellers”), respectively,
to acquire certain specified assets, including STC-MEMS, a semiconductor wafer-manufacturing operation and microelectromechanical
systems (MEMS) business with associated wafer-manufacturing tools, as well as the real estate and improvements associated with
the facility located in Canandaigua, New York, which is used in the operation of STC-MEMS (the assets and real estate and improvements
referred to together herein as the “Acquired Business”). The Company also agreed to assume substantially all of the on-going obligations
of the Acquired Business incurred in the ordinary course of business.
Pursuant to
the Agreements, and subject to the satisfaction or waiver of certain conditions, the Company will purchase the Acquired Business
from Sellers for an aggregate purchase price of $2.75 million (subject to adjustment as provided in the AP Agreement), payable
in cash, at closing. The Company has delivered $10,000 into escrow as a good faith deposit to be refunded to the Company only
under certain limited circumstances, such as Sellers’ failure to complete the sale or the Company’s termination of the Agreements
due to Sellers’ failure to satisfy a condition precedent to closing not waived by the Company.
Consummation of the transactions contemplated
by the Agreements is subject to the satisfaction of certain conditions precedent, including, but not limited to, delivery
to the Company of the financial books and records of the Acquired Business sufficient for the completion of an audit
or financial information as necessary to satisfy any SEC filing requirements in connection with the acquisition, certain third-party
consents, and other customary conditions of closing. The Company has made various representations and warranties and
covenants in the Agreements that are customary for a company acting as a buyer in its industry except that the Company is required
to pay to FRMC a penalty, as set forth below, if the Company sells the property subject to the RP Agreement within three (3) years
after the date of the RP Agreement for an amount in excess of $1,750,000, subject to certain enumerated exceptions. The penalty
imposed shall be equivalent to the amount that the sales price of the property exceeds $1,750,000 up to the maximum penalty (“Maximum
Penalty”) defined below:
|
|
Maximum Penalty
|
|
Year 1
|
|
$
|
5,960,000
|
|
Year 2
|
|
$
|
3,973,333
|
|
Year 3
|
|
$
|
1,986,667
|
|
Year 4
|
|
$
|
0
|
|
While the Agreements
contemplate that a closing of the sale of the Acquired Business (the “Closing”) will take place on or about June 26, 2017, or
up to 14 additional days in the Company’s discretion if certain required consents have not been obtained, the conditions precedent
to closing are such that there can be no assurance that the Company will complete its acquisition of the Acquired Business in
that time or at all.
The Acquired Business
currently consists of a 120,000 square foot commercial wafer-manufacturing facility, including Class 100/Class 1000 cleanroom
space, located in Canandaigua, New York, 57-acres of real estate and improvements associated with the manufacturing facility,
150-mm silicon MEMS wafer fab operations, including semiconductor manufacturing tools, an existing silicon-based MEMS business
with historical annual revenues of approximately $3.0 million from multiple customers, and a 28 employee workforce that the Company
generally expects will be offered employment upon the Closing and two existing tenants with multi-year leases. The Acquired Business
also holds Trusted Foundry accreditation for MEMS processing, packaging and assembly. The Trusted Foundry Program, managed by
the Department of Defense, was initiated in 2004 to ensure mission-critical national defense systems have access to leading-edge
integrated circuits (ICs) from secure, domestic sources.
Note 10. Related Party Transactions
Consulting Services
AEG Consulting, a firm owned by one
of the Company’s Co-Chairmen, received $5,137 and $3,000 for consulting fees for the three months ended March 31, 2017 and 2016,
respectively. The firm received $14,445 and $4,875 for consulting fees for the nine months ended March 31, 2017 and 2016, respectively.
The Company’s CEO and Vice President
of Engineering participated in the closing of the 2016-2017 Offering that occurred on November 25, 2016 where they each purchased
20,000 shares of Common Stock at a price of $5.00 per share. The Company’s Vice-President of Operations also purchased 5,000 shares
of Common Stock in the closing at an aggregate purchase price of $25,000. The brother of the CEO purchased 14,000 shares of Common
Stock in the closing at an aggregate purchase price of $70,000.
The Company’s second Co-Chairman participated
in the closing of the 2016-2017 Offering that occurred on December 27, 2016 where he purchased 2,000 shares of Common Stock at
a price of $5.00 per share for an aggregate purchase price of $10,000. A second brother of the CEO purchased 20,000 shares of
Common Stock in the closing at an aggregate purchase price of $100,000.
Note 11. Subsequent Events
In April 2017, 59,506 placement agent
warrants issued in connection with the 2015 private placement offering, each having a term of five years and an exercise price
of $1.50, were exercised. Also in April 2017, 17,188 placement agent warrants issued in connection with the first 2016 private
placement offering, each having a term of five years and an exercise price of $1.60, were exercised.
During April, the Company granted a
restricted stock award of 70,000 shares of Common Stock to a non-executive employee. The award vests at 25% on each of the first
four anniversaries of the award.
Also during April 2017, the Company
issued a restricted stock award of 40,000 shares to a second non-executive employee. The award vests 50% on the second anniversary
of the grant date and 25% on the each of the third and fourth anniversaries.
On May 2, 2017, the Company held a closing
of a new private placement offering (the “2017 Offering”) in which it sold 111,100 shares of Common Stock at a purchase price
of $9.00 per share, for aggregate gross proceeds of $999,900, before deducting commissions of $70,000. In connection with this
closing, the Company agreed to pay a placement agent cash commissions not to exceed 7% of the gross proceeds raised from investors
first contacted by the placement agent in the 2017 Offering. In addition, the Company agreed to issue to the placement agent warrants
to purchase a number of shares of Common Stock equal to 7% of the number of shares of Common Stock sold to investors first contacted
by the placement agent in the 2017 Offering as additional commissions. As a result of the foregoing, the Company issued to the
placement agent warrants to purchase an aggregate of 7,777 shares of Common Stock. The warrants have a term of five years and
an exercise price of $9.00 per share. These commissions were accrued pursuant to the terms of a placement agent agreement entered
into in connection with the 2016-2017 Offering, which, as amended, provided for compensation to the placement agent upon subsequent
investments made by an original participating stockholder in the 2016-2017 Offering.
Also, in May, the Company held a closing of the 2017 Offering in which it sold 63,000 shares of Common
Stock at a purchase price of $9.00 per share, for aggregate gross proceeds of $567,000, before deducting commissions of $40,000.
In connection with this closing, the Company issued to a placement agent warrants to purchase an aggregate of 4,410 shares of
Common Stock. The warrants have a term of five years and an exercise price of $9.00 per share.
Additionally, in May, the Company held a closing of the 2017
Offering in which it sold 488,900 shares of Common Stock at a purchase price of $9.00 per share, for aggregate gross proceeds of
$4,400,100 before deducting commissions of $308,000. In connection with this closing, the Company issued to a placement agent warrants
to purchase an aggregate of 34,223 shares of Common Stock. The warrants have a term of five years and an exercise price of $9.00
per share.
Report of Independent Registered Public Accounting Firm
To
the Board of Directors and Shareholders
of
Akoustis Technologies, Inc.
We
have audited the accompanying consolidated balance sheets of Akoustis
Technologies, Inc. (the “Company”) as of June 30, 2016 and 2015, and March 31,
2016 and 2015, and the related consolidated statements of operations and cash
flows for the three months ended June 30, 2016, the years ended June 30, 2016
and 2015, the year ended March 31, 2016 and the period from May 12, 2014
(inception) through March 31, 2015, and the consolidated statement of changes in
stockholders’ equity for the period from May 12, 2014 (inception) through June
30, 2016. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Akoustis Technologies,
Inc., as of June 30, 2016 and 2015, and March 31, 2016 and 2015, and the
consolidated results of its operations and its cash flows for the three months
ended June 30, 2016, the years ended June 30, 2016 and 2015, the year ended
March 31, 2016 and the period from May 12, 2014 (inception) through March 31,
2015 in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has not generated any revenue,
and has incurred losses since inception. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s
plans regarding these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Marcum
llp
Marcum
llp
New York,
NY
October 31, 2016
Akoustis Technologies,
Inc.
Consolidated Balance Sheets
|
|
June 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,155,444
|
|
|
$
|
4,329,496
|
|
|
$
|
2,730,105
|
|
|
$
|
687,739
|
|
Inventory
|
|
|
43,544
|
|
|
|
-
|
|
|
|
43,544
|
|
|
|
30,521
|
|
Prepaid expenses
|
|
|
54,818
|
|
|
|
59,812
|
|
|
|
59,461
|
|
|
|
19,000
|
|
Total current assets
|
|
|
4,253,806
|
|
|
|
4,389,308
|
|
|
|
2,833,110
|
|
|
|
737,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
206,985
|
|
|
|
81,641
|
|
|
|
182,910
|
|
|
|
65,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles, net
|
|
|
71,233
|
|
|
|
31,077
|
|
|
|
60,649
|
|
|
|
26,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
10,715
|
|
|
|
10,715
|
|
|
|
10,715
|
|
|
|
2,715
|
|
Total Assets
|
|
$
|
4,542,739
|
|
|
$
|
4,512,741
|
|
|
$
|
3,087,384
|
|
|
$
|
832,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
543,646
|
|
|
$
|
122,514
|
|
|
$
|
367,290
|
|
|
$
|
58,439
|
|
Convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
655,000
|
|
Total current
liabilities
|
|
|
543,646
|
|
|
|
122,514
|
|
|
|
367,290
|
|
|
|
713,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
|
1,322,729
|
|
|
|
205,144
|
|
|
|
313,709
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,866,375
|
|
|
|
327,658
|
|
|
|
680,999
|
|
|
|
713,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.001: 10,000,000 shares
authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001 par value; 300,000,000 shares
authorized; 15,375,981, 12,469,084, 13,615,440 and 5,493,200 shares issued and outstanding at June 30, 2016, June 30, 2015,
March 31, 2016 and March 31, 2015, respectively
|
|
|
15,376
|
|
|
|
12,469
|
|
|
|
13,615
|
|
|
|
5,493
|
|
Additional paid in capital
|
|
|
9,335,801
|
|
|
|
5,441,260
|
|
|
|
6,549,946
|
|
|
|
559,870
|
|
Accumulated deficit
|
|
|
(6,674,813
|
)
|
|
|
(1,268,646
|
)
|
|
|
(4,157,176
|
)
|
|
|
(446,349
|
)
|
Total Stockholders’
Equity
|
|
|
2,676,364
|
|
|
|
4,185,083
|
|
|
|
2,406,385
|
|
|
|
119,014
|
|
Total Liabilities
and Stockholders’ Equity
|
|
$
|
4,542,739
|
|
|
$
|
4,512,741
|
|
|
$
|
3,087,384
|
|
|
$
|
832,453
|
|
See accompanying notes to the consolidated
financial statements
Akoustis Technologies,
Inc.
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period from
|
|
|
|
For the Three Months
Ended
|
|
|
For the Year
Ended
|
|
|
For the Year
Ended
|
|
|
For the Year
Ended
|
|
|
May 12, 2014
(Inception) through
|
|
|
|
June 30, 2016
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
709,314
|
|
|
|
1,758,701
|
|
|
|
470,987
|
|
|
|
1,222,194
|
|
|
|
244,635
|
|
General and administrative expenses
|
|
|
968,734
|
|
|
|
2,935,299
|
|
|
|
920,031
|
|
|
|
2,647,800
|
|
|
|
339,214
|
|
Total operating
expenses
|
|
|
1,678,048
|
|
|
|
4,694,000
|
|
|
|
1,391,018
|
|
|
|
3,869,994
|
|
|
|
583,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,678,048
|
)
|
|
|
(4,694,000
|
)
|
|
|
(1,391,018
|
)
|
|
|
(3,869,994
|
)
|
|
|
(583,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
20,500
|
|
|
|
254,834
|
|
|
|
167,499
|
|
|
|
264,333
|
|
|
|
137,500
|
|
Other income
|
|
|
-
|
|
|
|
500
|
|
|
|
-
|
|
|
|
500
|
|
|
|
-
|
|
Interest income
|
|
|
186
|
|
|
|
1,339
|
|
|
|
175
|
|
|
|
1,328
|
|
|
|
-
|
|
Change in fair value of derivative
liabilities
|
|
|
(860,275
|
)
|
|
|
(968,840
|
)
|
|
|
1,571
|
|
|
|
(106,994
|
)
|
|
|
-
|
|
Total other
income (expense)
|
|
|
(839,589
|
)
|
|
|
(712,167
|
)
|
|
|
169,245
|
|
|
|
159,167
|
|
|
|
137,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,517,637
|
)
|
|
$
|
(5,406,167
|
)
|
|
$
|
(1,221,773
|
)
|
|
$
|
(3,710,827
|
)
|
|
$
|
(446,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
per common share - basic and diluted
|
|
$
|
(0.17
|
)
|
|
$
|
(0.40
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding-basic and diluted
|
|
|
15,111,088
|
|
|
|
13,349,482
|
|
|
|
6,240,780
|
|
|
|
11,702,313
|
|
|
|
5,493,200
|
|
See accompanying notes to the consolidated
financial statements
Akoustis Technologies,
Inc.
Consolidated Statement of Changes
in Stockholders’ Equity
For the Period from May 12, 2014 (Inception) through June 30, 2016
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid In Capital
|
|
|
Deficit
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance May 12, 2014 (Inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to founders
|
|
|
3,017,203
|
|
|
|
3,016
|
|
|
|
(3,015
|
)
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
|
134,504
|
|
|
|
135
|
|
|
|
34,865
|
|
|
|
-
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares issued for cash
|
|
|
1,717,635
|
|
|
|
1,718
|
|
|
|
528,282
|
|
|
|
-
|
|
|
|
530,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
623,858
|
|
|
|
624
|
|
|
|
(262
|
)
|
|
|
-
|
|
|
|
362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period May 12, 2014 (Inception) to March 31, 2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(446,349
|
)
|
|
|
(446,349
|
)
|
Balance, March 31, 2015
|
|
|
5,493,200
|
|
|
|
5,493
|
|
|
|
559,870
|
|
|
|
(446,349
|
)
|
|
|
119,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash, net of issuance costs
|
|
|
3,362,104
|
|
|
|
3,362
|
|
|
|
4,238,265
|
|
|
|
-
|
|
|
|
4,241,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued to underwriter
|
|
|
-
|
|
|
|
-
|
|
|
|
(206,715
|
)
|
|
|
-
|
|
|
|
(206,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of notes
|
|
|
436,806
|
|
|
|
437
|
|
|
|
654,563
|
|
|
|
-
|
|
|
|
655,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapitalization
|
|
|
3,000,005
|
|
|
|
3,000
|
|
|
|
(3,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
176,969
|
|
|
|
177
|
|
|
|
198,277
|
|
|
|
-
|
|
|
|
198,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period April 1, 2015 to June 30, 2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(822,297
|
)
|
|
|
(822,297
|
)
|
Balance, June 30, 2015
|
|
|
12,469,084
|
|
|
|
12,469
|
|
|
|
5,441,260
|
|
|
|
(1,268,646
|
)
|
|
|
4,185,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash, net of issuance costs
|
|
|
494,125
|
|
|
|
494
|
|
|
|
769,193
|
|
|
|
-
|
|
|
|
769,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
652,231
|
|
|
|
652
|
|
|
|
339,493
|
|
|
|
-
|
|
|
|
340,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period July 1, 2015 to March 31, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,888,530
|
)
|
|
|
(2,888,530
|
)
|
Balance, March 31, 2016
|
|
|
13,615,440
|
|
|
|
13,615
|
|
|
|
6,549,946
|
|
|
|
(4,157,176
|
)
|
|
|
2,406,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash, net of issuance costs
|
|
|
1,745,875
|
|
|
|
1,746
|
|
|
|
2,561,150
|
|
|
|
-
|
|
|
|
2,562,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued to underwriter
|
|
|
-
|
|
|
|
-
|
|
|
|
(165,719
|
)
|
|
|
-
|
|
|
|
(165,719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
8,000
|
|
|
|
8
|
|
|
|
363,457
|
|
|
|
-
|
|
|
|
363,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock from exercise of warrants
|
|
|
6,666
|
|
|
|
7
|
|
|
|
9,993
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of warrant derivatives from liability to equity classification
|
|
|
-
|
|
|
|
-
|
|
|
|
16,974
|
|
|
|
-
|
|
|
|
16,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended June 30, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,517,637
|
)
|
|
|
(2,517,637
|
)
|
Balance, June 30, 2016
|
|
|
15,375,981
|
|
|
$
|
15,376
|
|
|
$
|
9,335,801
|
|
|
$
|
(6,674,813
|
)
|
|
$
|
2,676,364
|
|
See accompanying notes to the consolidated
financial statements
Akoustis Technologies,
Inc.
Consolidated Statements of Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period from
|
|
|
|
For the Three Months
Ended
|
|
|
For the Year
Ended
|
|
|
For the Year
Ended
|
|
|
For the Year
Ended
|
|
|
May 12, 2014
(Inception) through
|
|
|
|
June 30, 2016
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,517,637
|
)
|
|
$
|
(5,406,167
|
)
|
|
$
|
(1,221,773
|
)
|
|
$
|
(3,710,827
|
)
|
|
$
|
(446,349
|
)
|
Adjustments to reconcile net loss to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
11,425
|
|
|
|
34,828
|
|
|
|
8,090
|
|
|
|
26,035
|
|
|
|
5,675
|
|
Amortization of intangibles
|
|
|
1,131
|
|
|
|
3,339
|
|
|
|
1,550
|
|
|
|
2,714
|
|
|
|
1,044
|
|
Share-based compensation
|
|
|
435,642
|
|
|
|
849,625
|
|
|
|
231,909
|
|
|
|
639,644
|
|
|
|
6,219
|
|
Change in fair value of derivative liabilities
|
|
|
860,275
|
|
|
|
968,840
|
|
|
|
(1,571
|
)
|
|
|
106,994
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
-
|
|
|
|
(43,544
|
)
|
|
|
|
|
|
|
(13,023
|
)
|
|
|
(30,521
|
)
|
Prepaid expenses
|
|
|
4,643
|
|
|
|
4,994
|
|
|
|
(59,812
|
)
|
|
|
(40,461
|
)
|
|
|
(19,000
|
)
|
Other assets
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,715
|
)
|
|
|
(8,000
|
)
|
|
|
(2,715
|
)
|
Accounts payable and accrued
expenses
|
|
|
104,179
|
|
|
|
275,116
|
|
|
|
70,278
|
|
|
|
207,806
|
|
|
|
52,582
|
|
Net Cash Used
In Operating Activities
|
|
|
(1,100,342
|
)
|
|
|
(3,312,969
|
)
|
|
|
(980,044
|
)
|
|
|
(2,789,118
|
)
|
|
|
(433,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for machinery and equipment
|
|
|
(35,500
|
)
|
|
|
(160,172
|
)
|
|
|
(80,275
|
)
|
|
|
(143,433
|
)
|
|
|
(71,187
|
)
|
Cash paid for intangibles
|
|
|
(11,715
|
)
|
|
|
(43,495
|
)
|
|
|
(31,452
|
)
|
|
|
(36,397
|
)
|
|
|
(28,010
|
)
|
Net Cash Used
In Investing Activities
|
|
|
(47,215
|
)
|
|
|
(203,667
|
)
|
|
|
(111,727
|
)
|
|
|
(179,830
|
)
|
|
|
(99,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from promissory note
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
Repayment of promissory note
|
|
|
-
|
|
|
|
-
|
|
|
|
(30,000
|
)
|
|
|
-
|
|
|
|
(30,000
|
)
|
Proceeds from issuance of common stock
|
|
|
2,562,896
|
|
|
|
3,332,584
|
|
|
|
4,276,627
|
|
|
|
5,011,314
|
|
|
|
35,001
|
|
Proceeds from issuance of preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
530,000
|
|
Proceeds from the exercise of warrants
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds received from convertible
note
|
|
|
-
|
|
|
|
-
|
|
|
|
655,000
|
|
|
|
-
|
|
|
|
655,000
|
|
Net Cash Provided
By Financing Activities
|
|
|
2,572,896
|
|
|
|
3,342,584
|
|
|
|
4,931,627
|
|
|
|
5,011,314
|
|
|
|
1,220,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (decrease) in Cash
|
|
|
1,425,339
|
|
|
|
(174,052
|
)
|
|
|
3,839,856
|
|
|
|
2,042,366
|
|
|
|
687,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Period
|
|
|
2,730,105
|
|
|
|
4,329,496
|
|
|
|
489,640
|
|
|
|
687,739
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash - End of Period
|
|
$
|
4,155,444
|
|
|
$
|
4,155,444
|
|
|
$
|
4,329,496
|
|
|
$
|
2,730,105
|
|
|
$
|
687,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Paid During the Period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
984
|
|
|
$
|
-
|
|
|
$
|
984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation payable
|
|
$
|
72,177
|
|
|
$
|
146,016
|
|
|
$
|
33,063
|
|
|
$
|
101,045
|
|
|
$
|
5,857
|
|
Warrants issued for stock issuance
costs
|
|
$
|
165,719
|
|
|
$
|
165,719
|
|
|
$
|
206,715
|
|
|
$
|
206,715
|
|
|
$
|
-
|
|
Conversion of convertible notes
into common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
655,000
|
|
|
$
|
655,000
|
|
|
$
|
-
|
|
Reclassification of derivative
liability to additional paid in capital
|
|
$
|
16,974
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
See accompanying notes to the consolidated
financial statements
AKOUSTIS TECHNOLOGIES,
INC.
Notes to the Consolidated Financial
Statements
June 30, 2016
Note 1. Organization
Akoustis Technologies, Inc. (formerly
known as Danlax, Corp.) (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on April 10, 2013. The Company
operates in the telecommunications and fiber optics sector and is based in Huntersville, North Carolina. The mission
of the Company is to commercialize and manufacture its patent-pending BulkOne™ acoustic wave technology to address the critical
frequency-selectivity requirements in today’s mobile smartphones – improving the efficiency and signal quality of mobile wireless
devices and enabling The Internet of Things.
The Merger
On May 22, 2015, Akoustis Acquisition
Corp., the Company’s wholly owned subsidiary, a corporation formed in the State of Delaware on May 15, 2015 (“Acquisition Sub”)
merged (the “Merger”) with and into Akoustis, Inc., a corporation incorporated in the State of Delaware on May 12, 2014. Akoustis,
Inc., was the surviving corporation in the Merger and became a wholly owned subsidiary of the Company. All of the outstanding
stock of Akoustis, Inc., was converted into shares of the Company’s Common Stock, as described in more detail below.
At the closing of the Merger, each of
the 11,671 shares of Common Stock and the 5,300 shares of preferred stock of Akoustis, Inc. issued and outstanding immediately
prior to the closing of the Merger was exchanged for 324.082 shares of the Company’s Common Stock. As a result, an aggregate of
5,500,006 shares of the Company’s Common Stock were issued to the holders of Akoustis Inc. stock.
In connection with the Merger and pursuant
to a Split-Off Agreement, the Company transferred all pre-Merger assets and liabilities to the Company’s pre-Merger majority stockholder,
in exchange for the surrender by him and cancellation of 9,854,019 shares of the Company’s Common Stock, resulting in 3,000,005
shares of the Company’s Common Stock outstanding at the time of the Merger. These cancelled shares will resume the status of authorized
but unissued shares of the Company’s Common Stock.
As a result of the Merger and Split-Off,
the Company discontinued its pre-Merger business and acquired the business of Akoustis, Inc., and will continue the existing business
operations of Akoustis, Inc.
The Merger was accounted for as a “reverse
merger,” and Akoustis, Inc., was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities
and the historical operations that will be reflected in the financial statements prior to the Merger will be those of Akoustis,
Inc. and will be recorded at the historical cost basis, and the consolidated financial statements after completion of the Merger
will include the assets and liabilities of Akoustis, Inc., historical operations of the Company, and operations of the Company
and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of the Company’s Common Stock
pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger. The Merger is
intended to be treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended. All historical
share amounts of the accounting acquirer were retrospectively recast to reflect the share exchange.
Also on May 22, 2015, the Company changed
its fiscal year from a fiscal year ending on July 31 of each year to one ending on March 31 of each year. On August 11, 2016,
the Board of Directors adopted a resolution to change the fiscal year end from March 31 to June 30.
Since inception through June 30, 2016,
the Company has not generated any revenue from operations and has accumulated losses of $6,674,813.
The Financing
On May 22, 2015, concurrently with the
closing of the Merger, and as a condition to the Merger, the Company held a closing on a private placement offering (the “2015
Offering”) in which the Company sold 3,101,104 shares of its Common Stock, at a purchase price of $1.50 per share. On June 10,
2015, the Company completed a second and final closing of the private placement offering in which the Company sold an additional
261,000 shares of Common Stock. In total, the Company sold an aggregate of 3,362,104 shares of Common Stock. The aggregate gross
proceeds from the 2015 Offering was $5,043,206 (before deducting placement agent fees and offering expenses of $801,579).
As a result of the foregoing, the Placement
Agents and their sub-agents were paid aggregate commissions of $486,976 and were issued 2015 Placement Agent Warrants to purchase
an aggregate of 324,650 shares of our Common Stock. We were also required to reimburse the Placement Agents approximately $77,150
of legal expenses incurred in connection with the 2015 Offering.
During April and May 2015, $655,000
principal amount of convertible notes of Akoustis, Inc., were converted into 436,806 shares of Common Stock of the Company on
the same terms as the other investors in the 2015 Offering at a conversion price of $1.50 per share.
On August 6, 2015, the Company filed
with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-1 for the public offering by selling
stockholders of up to 7,876,310 shares of its Common Stock (which includes outstanding shares of Common Stock, shares underlying
warrants and shares that may become issuable pursuant to an anti-dilution provision applicable to certain of the outstanding shares)
pursuant to registration rights granted in connection with the 2015 Offering. The SEC declared the Form S-1 effective on October
20, 2015.
The 2016 Offering
On March 10, 2016, the Company held
a closing of a private placement offering (the “March 2016 Offering”) in which it sold 494,125 shares of Common Stock at a fixed
purchase price of $1.60 per share (the “2016 Offering Price”), for aggregate gross proceeds of $790,600 (before deducting legal
expenses of $20,913 for the March 2016 Offering).
On April 14, 2016, the Company held
closings of a private placement offering (the “April 2016 Offering”) in which the Company sold 1,741,185 shares of Common Stock
at a fixed purchase price of $1.60 per share (the “2016 Offering Price”), for aggregate gross proceeds of $2,785,896 (before deducting
expenses of $223,000 for legal services and agent commissions of the April 2016 Offering).
Investors in the shares were given anti-dilution
protection with respect to the shares of Common Stock sold in the April 2016 Offering such that if, during the period from the
closing of the April 2016 Offering until 90 days after the date on which the registration statement that the Company is required
to file under a Registration Rights Agreement with the investors is declared effective by the SEC, the Company shall issue
additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions, including but not limited to issuances
of awards under the Company’s 2015 Equity Incentive Plan and certain issuances of securities in connection with credit arrangements,
equipment financings, lease arrangements or similar transactions) for a consideration per share less than the 2016 Offering Price
(as adjusted for any subsequent stock dividend, stock split, distribution, recapitalization, reclassification, reorganization
or similar event) (the “Lower Price”), each such investor will be entitled to receive from the Company additional shares of Common
Stock in an amount such that, when added to the number of shares of Common Stock initially purchased by such investor, will equal
the number of shares of Common Stock that such investor’s Offering subscription amount would have purchased at the Lower Price.
As of mid-October 2016, the anti-dilution rights expired.
In connection with the April 2016 Offering,
the Company agreed to pay the Placement Agents a cash commission of 8% of the gross proceeds raised from investors first contacted
by the Placement Agents in the 2016 Offering. In addition, the Placement Agents received warrants to purchase a number of shares
of Common Stock equal to 10% of the number of shares of Common Stock sold in the April 2016 Offering, with a term of five (5)
years and an exercise price of $1.60 per share (the “2016 Placement Agent Warrants”). Any sub-agent of the Placement Agents that
introduced investors to the 2016 April Offering was entitled to share in the cash fees and warrants attributable to those investors
as described above.
As a result of the foregoing, the Placement
Agents and their sub-agents were paid an aggregate commission of $196,752 and were issued 2016 Placement Agent Warrants to purchase
an aggregate of 153,713 shares of Common Stock. The Company was also required to reimburse the Placement Agents approximately
$17,500 of legal expenses incurred in connection with the 2016 Offering, of which $7,500 was paid by the issuance of 4,690 shares
of Common Stock (valued at the 2016 Offering Price).
Note 2. Going Concern and Management Plans
The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. As of June 30, 2016, the Company had working capital of $3,710,160 and an accumulated deficit
of $6,674,813. The Company has not generated any revenues from operations and incurred net losses since inception. As
of June 30, 2016, the Company had cash and cash equivalents of $4,155,444. The Company estimates that the $2.8 million of cash
and cash equivalents as of October 25, 2016, and the future receipts from National Science Foundation/Small Business Innovation
Research (“NSF/SBIR”) grants already awarded will be sufficient to fund its operations through March 31, 2017. In order to fund
operations past that date, the Company
will need to raise additional capital, through the
sale of additional equity securities, through additional grants, or otherwise, to support future operations.
There is no
assurance that the Company’s projections and estimates are accurate. Although the Company is actively managing and controlling
the Company’s cash outflows to mitigate these risks, these matters raise substantial doubt about the Company’s ability to
continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability
and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable
to continue as a going concern.
The Company’s primary sources of operating
funds since inception have been equity and note financings and grants. The Company intends to raise additional capital through
private debt and equity investors in order to accomplish its business plan objectives and is continuing its efforts to secure
additional funds through debt or equity instruments and grants. Management believes that it will be successful in obtaining additional
financing based on its history of raising funds; however, no assurance can be provided that the Company will be able to do so.
There is no assurance that any funds it raises will be sufficient to enable the Company to attain profitable operations or continue
as a going concern. To the extent that the Company is unsuccessful, the Company may need to curtail or cease its operations and
implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations.
There can be no assurance that such a plan will be successful.
Note 3. Summary of significant accounting policies
Basis of presentation
The Company’s consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of Consolidation
The
accompanying 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.
Use of estimates and assumptions
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts
of revenues and expenses during the reporting period(s).
Critical accounting estimates are estimates
for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly
uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or
operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements
were:
|
(1)
|
Fair value of long–lived assets:
Fair value is generally determined using the asset’s
expected future discounted cash flows or market value, if readily determinable. If long–lived assets are determined to be
recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book
values of the long–lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers
the following to be some examples of important indicators that may trigger an impairment review: (i) significant under–performance
or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the
manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes
in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive
pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes.
The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence
of such events.
|
|
(2)
|
Valuation allowance for deferred tax assets:
Management assumes that the realization
of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax
purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential
tax benefits of the net loss carry–forwards are offset by a full valuation allowance. Management made this assumption based
on (a) the Company has incurred a loss, (b) general economic conditions, and (c) other factors.
|
|
(3)
|
Estimates and assumptions used in valuation of equity instruments:
Management estimates
expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method
used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar
instruments.
|
|
(4)
|
Estimates and assumptions used in valuation of derivative liability
:
Management utilizes a binomial option pricing model to estimate the fair value of derivative liabilities. The model
includes subjective assumptions that can materially affect the fair value estimates.
|
These significant accounting estimates
or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions,
and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on various
assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with an original maturity of three months or less when purchased to be cash equivalents. As of June 30, 2016,
June 30, 2015, March 31, 2016 and March 31, 2015, the Company had cash and cash equivalents of $4,155,444, $4,329,496, $2,730,105
and $687,739, respectively. Financial instruments that potentially subject the Company to concentrations of credit risk consist
primarily of cash deposits. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation
(“FDIC”). At times, the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance
limits.
Inventory
Inventory is stated at lower of cost
or market using the first-in, first-out (FIFO) valuation method. Inventory was comprised of the following at June 30, 2016, June
30, 2015, March 31, 2016 and March 31, 2015:
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
Finished goods held for resale
|
|
$
|
43,544
|
|
|
$
|
-
|
|
|
$
|
43,544
|
|
|
$
|
-
|
|
Raw materials
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,521
|
|
|
|
$
|
43,544
|
|
|
$
|
-
|
|
|
$
|
43,544
|
|
|
$
|
30,521
|
|
Property and equipment, net
Property and equipment are stated at
cost less accumulated depreciation. Depreciation is calculated using the straight–line method on the various asset classes over
their estimated useful lives, which range from three to ten years. Expenditures for major renewals and betterments that
extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs, which do not
extend the economic useful life of the related assets, are charged to operations as incurred.
Intangible assets, net
Intangible assets consist of patents
and trademarks. Applicable long–lived assets are amortized or depreciated over the shorter of their estimated useful lives, the
estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates
of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s
judgment. Patents are amortized on the straight-line method over their useful lives of 15 years.
Impairment of Long-Lived Assets
The Company assesses the recoverability
of its long-lived assets, including property and equipment, when there are indications that the assets might be impaired. When
evaluating assets for potential impairment, the Company compares the carrying value of the asset to its estimated undiscounted
future cash flows. If an asset’s carrying value exceeds such estimated undiscounted cash flows, the Company records an impairment
charge for the difference between the carrying amount of the asset and its fair value.
Based on its assessments, the Company
did not record any impairment charges for the three months ended June 30, 2016, the years ended June 30, 2016, June 30, 2015 and
March 31, 2016 and the period May 12, 2014 (Inception) through March 31, 2015.
Fair Value of Financial Instruments
The carrying amounts of cash and cash
equivalents, accounts payable, accrued expenses, and convertible notes payable approximate fair value due to the short-term nature
of these instruments.
The Company measures the fair value
of financial assets and liabilities based on the guidance of ASC 820, “Fair Value Measurements and Disclosures,” which defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also
establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
Fair value measurements are categorized
using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad
levels:
Level 1 - Quoted prices are available
in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions
for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Pricing inputs are other than
quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date,
and include those financial instruments that are valued using models or other valuation methodologies.
Level 3 - Pricing inputs include significant
inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies
that result in management’s best estimate of fair value.
Derivative Liability
The Company evaluates its convertible
debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts
qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB
Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is
marked-to-market each balance sheet date and recorded as either an asset or a liability. The change in fair value is recorded
in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative
instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair
value is reclassified to equity.
In circumstances where the embedded
conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments
in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a
single, compound derivative instrument.
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting
period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to
liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified
in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected
within 12 months of the balance sheet date.
The Company adopted Section 815-40-15
of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature)
is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating
the instrument’s contingent exercise and settlement provisions.
The Company utilizes a binomial option
pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance
sheet date. The Company records the change in the fair value of the derivative as other income or expense in the consolidated
statements of operations.
Grant income
During the three months ended June 30,
2016, the Company received grant funds of $20,500. During the years ended June 30, 2016, June 30, 2015, March 31, 2016 and the
period from May 12, 2014 (inception) through March 31, 2015, the Company received grant funds of $254,834, $167,499, $264,333
and $137,500, respectively. The Company recognizes nonrefundable grant revenue when it is received and reports this revenue as
“Grant income” on the consolidated statements of operations.
Research and Development
Research and development expenses are
charged to operations as incurred.
Advertising and marketing costs
The Company expenses advertising and
marketing costs as incurred. These amounts were immaterial for the three months June 30, 2016, the years ended June 30, 2016,
June 30, 2015, March 31, 2016 and the period from May 12, 2014 (inception) through March 31, 2015.
Equity–based compensation
The Company recognizes compensation
expense for all equity–based payments in accordance with ASC 718 “
Compensation – Stock Compensation
“. Under fair value
recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation
cost only for those shares expected to vest over the requisite service period of the award.
Restricted stock awards are granted
at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite
service periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal
to the fair market value of a share of Company stock on the grant date.
The fair value of an option award is
estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires
the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected
stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and
the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected
option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free
rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends
on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture
rate is estimated based on management’s best estimate.
Determining the appropriate fair value
model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described
above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates,
which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company
uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company
is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s
actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different
from what the Company has recorded in the current period.
The Company accounts for share–based
payments granted to non–employees in accordance with ASC 505-40, “
Equity Based Payments to Non–Employees
”. The Company
determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value
of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is
used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which
a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s
performance is complete. The fair value of the equity instruments is re-measured each reporting period over the requisite service
period.
Income taxes
The Company applies the elements of
ASC 740–10 “
Income Taxes
” regarding accounting for uncertainty in income taxes. This clarifies the accounting for uncertainty
in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial
statements if that position is more likely than not of being sustained by the taxing authority. As of March 31, 2016, no liability
for unrecognized tax benefits was required to be reported. The Company does not expect that the amount of unrecognized tax benefits
will significantly increase or decrease within the next twelve months. The Company’s policy is to recognize interest and penalties
related to tax matters in the income tax provision on the Statement of Operations. There was no interest and penalties for the
periods ended June 30, 2016, June 30, 2015, March 31, 2016 and March 31, 2015.
Deferred taxes are computed based on
the tax liability or benefit in future years of the reversal of temporary differences in the recognition of income or deduction
of expenses between financial and tax reporting purposes. The net difference, if any, between the provision for taxes and taxes
currently payable is reflected in the balance sheet as deferred taxes. Deferred tax assets and/or liabilities, if any, are classified
as current and non–current based on the classification of the related asset or liability for financial reporting purposes, or
based on the expected reversal date for deferred taxes that are not related to an asset or liability. Valuation allowances are
recorded to reduce deferred tax assets to that amount which is more likely than not to be realized.
Loss Per Share
Basic net loss per common share is computed
by dividing net loss attributable to Common Stockholders by the weighted-average number of common shares outstanding during the
period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during
the period, adjusted for the dilutive effect of Common Stock equivalents. In periods when losses are reported, which is the case
for the three months ended June 30, 2016, the years ended June 30, 2016, June 30, 2015 and March 31, 2016 and the period May 12,
2014 (Inception) through March 31, 2015 presented in these consolidated financial statements, the weighted-average number of common
shares outstanding excludes Common Stock equivalents because their inclusion would be anti-dilutive.
The Company had the following Common
Stock equivalents at June 30, 2016, June 30, 2015, March 31, 2016 and 2015:
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Options
|
|
|
160,000
|
|
|
|
160,000
|
|
|
|
160,000
|
|
|
|
—
|
|
Warrants
|
|
|
471,697
|
|
|
|
324,650
|
|
|
|
324,650
|
|
|
|
—
|
|
Totals
|
|
|
631,697
|
|
|
|
484,650
|
|
|
|
484,650
|
|
|
|
—
|
|
Shares outstanding
Shares outstanding include shares of
restricted stock with respect to which restrictions have not lapsed. Restricted stock included in reportable shares outstanding
was 1,361,055, 546,886, 1,353,055 shares and 623,855 shares as of June 30, 2016, June 30, 2015, March 31, 2016 and March 31, 2015,
respectively. Shares of restricted stock are included in the calculation of weighted average shares outstanding.
Reclassification
Certain prior period amounts have been
reclassified to conform to current period presentation. The reclassifications did not have an impact on net loss as previously
reported
.
Recent Accounting Pronouncements
In August 2014,
the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, “
Presentation of Financial Statements-Going
Concern”.
The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is
substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting
period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s
ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting
Standards Update is the final version of Proposed Accounting Standards Update 2013-300—Presentation of Financial Statements (Topic
205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this
Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
The Company is currently evaluating the effects of ASU 2014-15 on the consolidated financial statements.
In July 2015,
the FASB issued the FASB Accounting Standards Update No. 2015-11 “
Inventory (Topic 330)
:
Simplifying the Measurement
of Inventory” (“ASU 2015-11”).
The amendments in this Update do not apply to inventory that is measured using last-in,
first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is
measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this Update
at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of
business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for
inventory measured using LIFO or the retail inventory method.
For public business entities, the amendments in this
Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.
The Company is currently evaluating the effects of ASU 2015-11 on the consolidated financial statements.
In November
2015, the FASB issued Accounting Standards Update ASU No. 2015-17, “
Balance Sheet Classification of Deferred Taxes”,
which
will require entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet.
The ASU simplifies the current guidance, which requires entities to separately present deferred tax assets and deferred tax liabilities
as current and noncurrent in a classified balance sheet. The ASU may be applied either prospectively or retrospectively. The amendments
in this ASU are effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual
periods. Earlier application is permitted as of the beginning of an interim or annual period. The Company is currently evaluating
the effects of ASU 2015-17 on the consolidated financial statements.
In January 2016, the FASB issued ASU
No. 2016-01, “
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities”
. The update addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments.
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years. Early adoption is permitted only for certain portions of the ASU related
to financial liabilities. The Company is currently evaluating the impact of the provisions of this new standard on the consolidated
financial statements.
In February 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “
Leases
” (topic 842). The FASB issued
this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods
beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted.
The Company is currently evaluating the impact of the new standard.
In April 2016, the FASB issued ASU No.
2016-09, “
Compensation – Stock Compensation”
(topic 718). The FASB issued this update to improve the accounting for employee
share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of
the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification
of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective
for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the
update is permitted. The Company is currently evaluating the impact of the new standard.
In August 2016, the FASB issued Accounting
Standards Update 2016-15 (ASU 2016-15), “
Classification of Certain Cash Receipts and Cash Payments”
.
This update provides guidance on how to record eight specific cash flow issues. This update is effective for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and a retrospective transition
method to each period should be presented. The Company is currently evaluating the effect of this update on its consolidated financial
statements.
Subsequent events
The Company
has evaluated events that occurred subsequent to June 30, 2016 and through the date the consolidated financial statements were
issued.
Note 4. Property and equipment
Property and
equipment consisted of the following:
|
|
Estimated
Useful Life
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Research and development equipment
|
|
3 – 10 years
|
|
$
|
226,372
|
|
|
$
|
70,091
|
|
|
$
|
192,672
|
|
|
$
|
66,095
|
|
Computer equipment
|
|
5 years
|
|
|
16,783
|
|
|
|
12,892
|
|
|
|
14,983
|
|
|
|
4,367
|
|
Furniture and fixtures
|
|
5 – 10 years
|
|
|
3,725
|
|
|
|
3,725
|
|
|
|
3,725
|
|
|
|
725
|
|
Leasehold improvements
|
|
*
|
|
|
3,240
|
|
|
|
3,240
|
|
|
|
3,240
|
|
|
|
—
|
|
|
|
|
|
|
250,120
|
|
|
|
89,948
|
|
|
|
214,620
|
|
|
|
71,187
|
|
Less: Accumulated depreciation
|
|
|
|
|
(43,135
|
)
|
|
|
(8,307
|
)
|
|
|
(31,710
|
)
|
|
|
(5,675
|
)
|
Total
|
|
|
|
$
|
206,985
|
|
|
$
|
81,641
|
|
|
$
|
182,910
|
|
|
$
|
65,512
|
|
(*) Amortized on a straight-line basis over the term of the
lease or the estimated useful lives, whichever period is shorter.
The Company recorded depreciation expense
of $11,425 for three months ended June 30, 2016. The Company recorded depreciation expense of $34,828, $8,090, $26,035 and $5,675
for the years ended June 30, 2016, June 30, 2015 and March 31, 2016 and the period May 12, 2014 (Inception) through March 31,
2015, respectively.
Note 5. Intangible assets
The Company’s
intangible assets consisted of the following:
|
|
Estimated
useful life
|
|
June 30, 2016
|
|
|
June 30,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Patents
|
|
15 years
|
|
$
|
74,562
|
|
|
$
|
31,067
|
|
|
$
|
62,847
|
|
|
$
|
26,450
|
|
Less: Accumulated amortization
|
|
|
|
|
(4,889
|
)
|
|
|
(1,550
|
)
|
|
|
(3,758
|
)
|
|
|
(1,044
|
)
|
Subtotal
|
|
|
|
|
69,673
|
|
|
|
29,517
|
|
|
|
59,089
|
|
|
|
25,406
|
|
Trademarks
|
|
—
|
|
|
1,560
|
|
|
|
1,560
|
|
|
|
1,560
|
|
|
|
1,560
|
|
Intangible assets, net
|
|
|
|
$
|
71,233
|
|
|
$
|
31,077
|
|
|
$
|
60,649
|
|
|
$
|
26,966
|
|
The Company
recorded amortization expense of $1,131 for three months ended June 30, 2016. The Company recorded amortization expense of $3,339,
$1,550, $2,714 and $1,044, for the years ended June 30, 2016, June 30, 2015 and March 31, 2016 and the period May 12, 2014 (Inception)
through March 31, 2015, respectively.
The following table outlines estimated
future annual amortization expense for the next five years and thereafter:
June 30,
|
|
|
|
|
2017
|
|
$
|
4,921
|
|
2018
|
|
|
4,921
|
|
2019
|
|
|
4,921
|
|
2020
|
|
|
4,921
|
|
2021
|
|
|
4,921
|
|
Thereafter
|
|
|
45,068
|
|
|
|
$
|
69,673
|
|
Note 6. Accounts payable and accrued expenses
Accounts payable and accrued expenses
consisted of the following at June 30, 2016, June 30, 2015, March 31, 2016 and March 31, 2015:
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Accounts payable
|
|
$
|
73,400
|
|
|
$
|
20,454
|
|
|
$
|
49,011
|
|
|
$
|
157
|
|
Accrued salaries and benefits
|
|
|
21,376
|
|
|
|
44,365
|
|
|
|
43,323
|
|
|
|
-
|
|
Accrued bonuses
|
|
|
126,575
|
|
|
|
-
|
|
|
|
93,141
|
|
|
|
-
|
|
Accrued stock-based compensation
|
|
|
179,079
|
|
|
|
33,063
|
|
|
|
106,902
|
|
|
|
5,857
|
|
Other accrued expenses
|
|
|
143,216
|
|
|
|
24,632
|
|
|
|
74,913
|
|
|
|
52,425
|
|
Totals
|
|
$
|
543,646
|
|
|
$
|
122,514
|
|
|
$
|
367,290
|
|
|
$
|
58,439
|
|
Note 7. Convertible notes payable
During March 2015, Akoustis, Inc. received
$655,000 in proceeds from six investors upon execution of convertible notes. On April 9, 2015, one note holder converted $10,000
of his outstanding convertible note to 6,806 shares of Common Stock of the Company. On May 22, 2015, the remaining $645,000 of
the notes were converted to 430,000 shares of Common Stock of the Company.
Note 8. Derivative Liabilities
Upon closing of the private placement
transactions on May 22, 2015 and June 9, 2015, the Company issued 298,551 and 26,099 warrants, respectively, to purchase Common
Stock with an exercise price of $1.50 and a five-year term to the placement agent. Upon closing of the April 2016 Offering, the
Company issued 153,713 warrants to purchase Common Stock with an exercise price of $1.60 and a five-year term to the placement
agent shares of Common Stock. The Company identified certain put features embedded in the warrants that potentially could result
in a net cash settlement, requiring the Company to classify the warrants as a derivative liability.
Level 3 Financial Liabilities – Derivative warrant
liabilities
Financial assets and liabilities measured
at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of June 30, 2016:
|
|
Carrying
|
|
|
Fair Value Measurement Using
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities
|
|
$
|
1,322,729
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,322,729
|
|
|
$
|
1,322,729
|
|
Financial assets and liabilities measured
at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of June 30, 2015:
|
|
Carrying
|
|
|
Fair Value Measurement Using
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities
|
|
$
|
205,144
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
205,144
|
|
|
$
|
205,144
|
|
Financial assets and liabilities measured
at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of March 31, 2016:
|
|
Carrying
|
|
|
Fair Value Measurement Using
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities
|
|
$
|
313,709
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
313,709
|
|
|
$
|
313,709
|
|
The table below provides a summary of
the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) during the period April 1, 2015 ended June 30, 2016:
|
|
Fair Value
Measurement
Using Level 3
Inputs
|
|
|
|
Total
|
|
Balance, April 1, 2015
|
|
$
|
—
|
|
Issuance of derivative warrant liabilities
|
|
|
206,715
|
|
Change in fair value of derivative warrants
|
|
|
(1,571
|
)
|
Balance, June 30, 2015
|
|
|
205,144
|
|
Change in fair value of derivative warrants
|
|
|
108,565
|
|
Balance, March 31, 2016
|
|
|
313,709
|
|
Issuance of derivative warrants
|
|
|
165,719
|
|
Transfer from liability to equity classification due to exercise
|
|
|
(16,974
|
)
|
Change in fair value of derivative warrant liabilities
|
|
|
860,275
|
|
Balance, June 30, 2016
|
|
$
|
1,322,729
|
|
The fair value of the derivative feature
of the warrants on the issuance dates and at the balance sheet date were calculated using a binomial option model valued with
the following weighted average assumptions:
|
|
May 22,
2015
|
|
|
June 9,
2015
|
|
|
June 30,
2015
|
|
|
March 31,
2016
|
|
|
April 14,
2016
|
|
|
June 30,
2016
|
|
Risk free interest rate
|
|
|
1.57
|
%
|
|
|
1.74
|
%
|
|
|
1.63
|
%
|
|
|
1.04
|
%
|
|
|
1.08
|
%
|
|
|
1.01
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected volatility
|
|
|
47
|
%
|
|
|
47
|
%
|
|
|
47
|
%
|
|
|
41
|
%
|
|
|
44
|
%
|
|
|
39
|
%
|
Remaining term (years)
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
4.89 – 4.94
|
|
|
|
4.15 – 4.19
|
|
|
|
5.0
|
|
|
|
3.89 – 4.79
|
|
Risk-free interest rate: The Company
uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.
Dividend yield: The Company uses a 0%
expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near
future.
Volatility: The Company calculates the
expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period
consistent with the warrants’ expected term.
Remaining term: The Company’s remaining term is based on
the remaining contractual maturity of the warrants.
During the three months ended June 30,
2016, the Company marked the derivative feature of the warrants to fair value and recorded a loss of $860,275, relating to the
change in fair value.
During the years ended June 30, 2016,
June 30, 2015 and March 31, 2016, the Company marked the derivative feature of the warrants to fair value and recorded a gain
(loss) of $(968,840), $1,571 and $(106,994), respectively, relating to the change in fair value.
Note 9. Concentrations
For the three months ended June 30,
2016, four vendors represented 32%, 16%, 15% and 13% of the Company’s purchases.
For the year ended June 30, 2016, two
vendors represented 28% and 14% of the Company’s purchases. For the year ended June 30, 2015, two vendors represented 31% and
19% of the Company’s purchases. For the year ended March 31, 2016, one vendor represented 10% of the Company’s purchases. For
the period May 12, 2014 (Inception) through March 31, 2015, three vendors represented 46%, 17% and 10% of the Company’s purchases.
Note 10. Stockholders’ Equity
On April 15, 2015, the Company authorized
the execution and filing of Amended and Restated Articles of Incorporation with the Nevada Secretary of State, which among other
things, authorized the increase in the number of authorized shares of capital stock from 75,000,000 shares of Common Stock to
310,000,000 total shares consisting of (a) 300,000,000 shares of par value $0.001 Common Stock and (b) 10,000,000 of $0.001 par
value "blank check" preferred stock. As of June 30, 2016, June 30, 2015, March 31, 2016 and March 31, 2015, there were no shares
of preferred stock issued and outstanding.
As a result of the Merger, an aggregate
of 5,500,006 shares of the Company’s Common Stock were issued to the holders of Akoustis Inc. stock.
In connection with the Split-Off Agreement,
the Company transferred all pre-Merger assets and liabilities to the Company’s pre-Merger majority stockholder, in exchange for
the surrender by him and cancellation of 9,854,019 shares of the Company’s Common Stock. These cancelled shares resumed the status
of authorized but unissued shares of the Company’s Common Stock. The remaining shareholders of the Company owned 3,000,005 shares
of Common Stock shown as a recapitalization on the Consolidated Statement of Stockholders’ Equity.
On May 22, 2015, the Company issued
100,000 shares of Common Stock for professional services provided. These shares were expensed in the Consolidated Statement of
Operations for the grant date fair value of $150,000.
During December 2015, 230,000 restricted
shares were granted to two consultants pursuant to a one-year investor relations agreement with a fair value of $963,700 at June
30, 2016. The restricted shares will vest over the life of the consulting agreement. As of June 30, 2016, the Company had $757,492
in unrecognized stock-based compensation expense related to the unvested shares.
In March 2016, the above consulting
agreements originally executed in December 2015 were amended so that the consultants would receive shares of Common Stock over
the remaining term of the agreement in lieu of the monthly cash retainer. Pursuant to the amended agreement, the Company
granted 60,000 restricted shares to the two consultants with a fair value of $251,400 at June 30, 2016. The restricted shares
will vest over the remaining life of the consulting agreement. As of June 30, 2016, the Company had $179,614, in unrecognized
stock based compensation expense related to the unvested shares.
In relation to the above consulting
agreements for the three months ended June 30, 2016, the years ended June 30, 2016, June 30, 2015, March 31, 2016 and the period
May 12, 2014 (Inception) through June 30, 2015 the Company recorded stock–based compensation expense for the shares that have
vested, which is a component of general and administrative expenses in the Consolidated Statement of Operations as follows:
|
|
|
|
|
Stock Based Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Period
from
|
|
|
|
|
|
|
For the
Three
Months
Ended
|
|
|
For the
Year
Ended
|
|
|
For the
Year
Ended
|
|
|
For the
Year
Ended
|
|
|
May 12,
2014
(Inception)
through
|
|
|
|
Shares
Issued
|
|
|
June 30,
2016
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2015
|
|
|
230,000
|
|
|
$
|
206,208
|
|
|
$
|
342,811
|
|
|
$
|
-
|
|
|
$
|
136,603
|
|
|
$
|
-
|
|
March 2016
|
|
|
60,000
|
|
|
|
59,653
|
|
|
|
71,786
|
|
|
|
-
|
|
|
|
12,133
|
|
|
|
-
|
|
|
|
|
290,000
|
|
|
$
|
265,861
|
|
|
$
|
414,597
|
|
|
$
|
-
|
|
|
$
|
148,736
|
|
|
$
|
-
|
|
As further discussed in Note 1, the
Company issued 3,362,104 shares of Common Stock in connection with the private placement in May and June 2015.
As discussed in Note 1, on March 10,
2016, the Company held a closing of a private placement offering (the “March 2016 Offering”) in which it sold 494,125 shares of
Common Stock at a fixed purchase price of $1.60 per share (the “2016 Offering Price”), for aggregate gross proceeds of $790,600
(before deducting legal expenses of the March 2016 Offering).
As discussed in Note 1, on April 14,
2016, the Company held closings of a private placement offering (the “April 2016 Offering”) in which the Company sold 1,741,185
shares of Common Stock at a fixed purchase price of $1.60 per share (the “2016 Offering Price”), for aggregate gross proceeds
of $2,785,896 (before deducting expenses for legal services and agent commissions of the April 2016 Offering).
As of June 30, 2016, June 30, 2015,
March 31, 2016 and 2015, the Company had 15,375,981, 12,469,084, 13,615,440 and 5,493,200 common shares issued and outstanding,
respectively.
Stock incentive plan
2014 Stock Plan
On June 14, 2014, the Board of Directors
of Akoustis Inc. adopted, and on the same date its stockholders approved, the 2014 Stock Plan which reserved a total of 1,950
shares of Common Stock of Akoustis, Inc. for issuance. The 2014 Stock Plan authorized the grant to participants of incentive stock
options, nonstatutory stock options, and restricted stock awards. Shares issued under the 2014 Plan and later forfeited to the
Company due to the failure to vest or repurchased by the Company at the original purchase price paid to the Company for such shares,
were available for future awards.
Vesting of all shares under the 2014
Stock Plan was determined by the plan administrator on a grant-by-grant basis. The typical vesting schedule provided that 25%
of the shares subject to the award would vest on the first year anniversary of the date of grant, and 1/48
th
of the
total number of shares awarded would vest on a monthly basis thereafter.
From June 14, 2014 to May 22, 2015,
the date of the Merger, Akoustis Inc. issued restricted stock awards representing an aggregate of 1,925 shares of common stock
of Akoustis Inc. to employees and contractors under the 2014 Stock Plan. On May 22, 2015, each of the 1,925 shares of common stock
issued under the 2014 Stock Plan was exchanged for 324.082 shares of the Company’s Common Stock with the same vesting schedule
applicable to the exchanged shares. Although as of May 22, 2015 there were 8,102 shares available for issuance under the 2014
Stock Plan (each of the 25 common shares remaining converted into 324.082 remaining shares of the Company), the Company no longer
intends to grant awards under the 2014 Stock Plan.
2015 Equity Compensation Plan
On May 22, 2015, the Board of Directors
adopted, and on the same date the stockholders approved, the 2015 Plan, which reserves a total of 1,200,000 shares of Common Stock
for issuance under the 2015 Plan. The 2015 Plan authorizes the grant to participants of nonqualified stock options, incentive
stock options, restricted stock awards, restricted stock units, performance grants. The Company agreed not to grant awards under
the 2015 Plan for more than 600,000 shares of Common Stock during the first year following the closing of the Merger. If an incentive
award granted under the 2015 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to the
Company in connection with an incentive award, the shares subject to such award and the surrendered shares will become available
for further awards under the 2015 Plan.
In addition, the number of shares of
our Common Stock subject to the 2015 Plan, any number of shares subject to any numerical limit in the 2015 Plan, and the number
of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding Common Stock
by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger,
consolidation, liquidation, business combination or exchange of shares or similar transaction.
Options granted under the Plan vest
as determined by the Company’s board of directors and expire over varying terms, but not more than seven years from the date of
grant. In the case of an Incentive Stock Option that is granted to a 10% shareholder on the date of grant, such Option shall not
be exercisable after the expiration of five years from the date of grant. The 160,000 options were issued to four non-employee
directors in May 2015.
The fair values
of the Company’s options were estimated at the dates of grant using a Black-Scholes option pricing model with the following weighted
average assumptions:
Expected term (years)
|
|
|
6.25
|
|
Risk-free interest rate
|
|
|
1.29
|
%
|
Volatility
|
|
|
47
|
%
|
Dividend yield
|
|
|
0
|
%
|
Expected term:
The Company’s expected term is based on the period the options are expected to remain outstanding. The Company estimated this
amount utilizing the “Simplified Method” in that the Company does not have sufficient historical experience to provide a reasonable
basis to estimate an expected term.
Risk-free interest
rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.
Volatility:
The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer
group stock price for a period consistent with the options’ expected term.
Dividend yield:
The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring
dividends in the near future.
The following is a summary of the option
activity:
|
|
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Outstanding – April 1, 2015
|
|
|
—
|
|
|
$
|
—
|
|
Exercisable –April 1, 2015
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
160,000
|
|
|
|
1.50
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Forfeited/Cancelled
|
|
|
—
|
|
|
|
—
|
|
Outstanding – June 30, 2015
|
|
|
160,000
|
|
|
$
|
1.50
|
|
Exercisable – June 30, 2015
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Forfeited/Cancelled
|
|
|
—
|
|
|
|
—
|
|
Outstanding – March 31, 2016
|
|
|
160,000
|
|
|
$
|
1.50
|
|
Exercisable – March 31, 2016
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Forfeited/Cancelled
|
|
|
—
|
|
|
|
—
|
|
Outstanding – June 30, 2016
|
|
|
160,000
|
|
|
$
|
1.50
|
|
Exercisable – June 30, 2016 (1)
|
|
|
40,000
|
|
|
$
|
1.50
|
|
As of June 30, 2016, the total intrinsic
value of options outstanding and exercisable was $430,400 and $107,600, respectively. As of June 30, 2016, the Company has $80,732
in
unrecognized stock based compensation expense attributable to the outstanding options
which will be amortized over a period of 2.89 years.
For the three months ended June 30,
2016, the Company recorded $6,964 in stock-based compensation related to stock options which is reflected in the consolidated
statements of operations.
For the years ended June 30, 2016, June
30, 2015, March 31, 2016 and the period May 12, 2014 (Inception) through March 31, 2015, the Company recorded $28,008, $2,984,
$24,028 and $0, respectively, in stock-based compensation related to stock options which is reflected in the consolidated statements
of operations.
Issuance of restricted shares
– employees and consultants
Restricted stock awards are considered
outstanding at the time of execution by the Company and the recipient of a restricted stock agreement, as the stock award holders
are entitled to dividend and voting rights. As of June 30, 2016, the number of shares granted for which the restrictions have
not lapsed was 463,841 shares.
Restricted shares are valued using the
share price on the date of most recent equity raise or the value of the services performed, whichever is more readily determinable.
The grant date fair value of the award is recorded as share–based compensation expense over the respective restriction period.
Any portion of the grant awarded to consultants as to which the repurchase option has not lapsed is accrued on the Balance Sheet
as a component of accounts payable and accrued expenses. As of June 30, 2016, June 30, 2015, March 31, 2016 and 2015, the accrued
stock-based compensation was $179,079, $33,063, $106,902 and $5,857, respectively. The Company has the right to repurchase some
or all of such shares upon termination of the individual’s service with the Company, whether voluntary or involuntary, for 60
months from the date of termination (“repurchase option”). The shares as to which the repurchase option has not lapsed are subject
to forfeiture upon termination of consulting and employment agreements.
In September 2015, the Company amended
the original restricted stock agreement for certain award recipients. According to the amendment, 75% of the shares as to which
the repurchase option had not lapsed as of September 30, 2015, shall be released from the repurchase option on the third anniversary
of the original effective date of the agreement. The remaining 25% of the shares shall be released from the repurchase option
on the fourth anniversary of the original effective date.
The following is a summary of restricted shares:
Grant Date
|
|
Shares
Issued
|
|
|
Fair
Value
|
|
|
Shares
Vested
|
|
June 2014
|
|
|
307,876
|
|
|
$
|
604,385
|
|
|
|
96,211
|
|
July 2014
|
|
|
32,408
|
|
|
|
1,469
|
|
|
|
9,452
|
|
August 2014
|
|
|
81,020
|
|
|
|
207,257
|
|
|
|
33,083
|
|
September 2014
|
|
|
129,633
|
|
|
|
260,514
|
|
|
|
32,408
|
|
March 2015
|
|
|
72,918
|
|
|
|
259,288
|
|
|
|
8,608
|
|
June 2015
|
|
|
293,000
|
|
|
|
439,500
|
|
|
|
-
|
|
November 2015
|
|
|
36,200
|
|
|
|
54,300
|
|
|
|
-
|
|
December 2015
|
|
|
300,000
|
|
|
|
1,068,700
|
|
|
|
-
|
|
January 2016
|
|
|
40,000
|
|
|
|
68,000
|
|
|
|
-
|
|
March 2016
|
|
|
60,000
|
|
|
|
251,400
|
|
|
|
-
|
|
June 2016
|
|
|
8,000
|
|
|
|
33,600
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,361,055
|
|
|
$
|
3,248,413
|
|
|
|
179,762
|
|
In relation to the above restricted
stock agreements for the three months ended June 30, 2016, the years ended June 30, 2016, June 30, 2015, March 31, 2016 and the
period May 12, 2014 (Inception) through June 30, 2015, the Company recorded stock–based compensation expense for the shares that
have vested, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the
Period
from
|
|
For the
Three
Months
Ended
|
|
|
For the
Year
Ended
|
|
|
For the
Year
Ended
|
|
|
For the
Year
Ended
|
|
|
May 12,
2014
(Inception)
through
|
|
June 30,
2016
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
428,678
|
|
|
$
|
821,617
|
|
|
$
|
78,925
|
|
|
$
|
465,616
|
|
|
$
|
6,219
|
|
As of June 30, 2016, the Company had
$2,347,898, in unrecognized stock based compensation expense related to the unvested shares.
Note 11. Commitments
Employment agreements
On June 15, 2015, the Company entered
into a three-year employment agreement with the Chief Executive Officer (“CEO”). After the initial three-year term, the agreement
will be automatically renewed for successive one-year periods unless terminated by either party on at least 30 days’ written notice
prior to the end of the then-current term. The CEO’s annual base salary is $150,000 and is subject to increase or decrease on
each anniversary as determined by the Board of Directors. The CEO is eligible, at the discretion of our Board of Directors, to
receive an annual cash bonus of up to 100% of the annual base salary, which may be based on the Company achieving certain operational,
financial or other milestones (the “Milestones”) that may be established by the Board of Directors. The CEO is entitled to receive
stock options or other equity incentive awards under the 2015 Plan as and when determined by the Board, and is entitled to receive
perquisites and other fringe benefits that may be provided to, and is eligible to participate in any other bonus or incentive
program established by the Company, for the executives. The CEO and his dependents are also entitled to participate in any of
the employee benefit plans subject to the same terms and conditions applicable to other employees. The CEO will be entitled to
be reimbursed for all reasonable travel, entertainment and other expenses incurred or paid by him in connection with, or related
to, the performance of his duties, responsibilities or services under his employment agreement, in accordance with policies and
procedures, and subject to limitations, adopted by us from time to time. In the event that the CEO is terminated by the Company
without Cause (as defined in his employment agreement) or he resigns for Good Reason (as defined in his employment agreement)
during the term of his employment, the CEO would be entitled to (x) an amount equal to his annual base salary then in effect (payable
in accordance with the Company’s normal payroll practices) for a period of 24 months commencing on the effective date of his termination
(the “Severance Period”) (in the case of termination by the executive for Good Reason, reduced by any cash remuneration paid to
him because of any other employment or self-employment during the Severance Period), and (y) if and to the extent the Milestones
are achieved for the annual bonus for the year in which the Severance Period commences (or, in the absence of Milestones, the
Board of Directors has, in its sole discretion, otherwise determined an amount of the CEO’s annual bonus for such year), an amount
equal to such annual bonus pro-rated for the portion of the performance year completed before the CEO employment terminated, (z)
any unvested stock options, restricted stock or similar incentive equity instruments will vest immediately. For the duration of
the Severance Period, the CEO will also be eligible to participate in our benefit plans or programs, provided the CEO was participating
in such plan or program immediately prior to the date of employment termination, to the extent permitted under the terms of such
plan or program (collectively, the “Termination Benefits”). If the CEO’s employment is terminated during the term by the Company
for Cause, by the CEO for any reason other than Good Reason or due to his death, then he will not be entitled to receive the Termination
Benefits, and shall only be entitled to the compensation and benefits which shall have accrued as of the date of such termination
(other than with respect to certain benefits that may be available to the CEO as a result of a Permanent Disability (as defined
in his employment agreement).
On June 15, 2015, the Company also entered
into employment agreements with each of the Vice President of Business Development, the Vice President of Operations, and the
Chief Financial Officer. Each of these employment agreements has substantially the same terms as that of the CEO described above,
except as follows:
|
|
Term
|
|
Base Salary
|
|
|
Eligible Bonus
% of
Base
Salary
|
|
|
Severance
Period
|
Vice President of Business Development
|
|
2 years
|
|
$
|
136,000
|
|
|
|
50
|
%
|
|
6 months
|
Vice President of Operations
|
|
2 years
|
|
$
|
136,000
|
|
|
|
50
|
%
|
|
6 months
|
Chief Financial Officer
|
|
2 years
|
|
$
|
145,000
|
|
|
|
50
|
%
|
|
6 months
|
In addition, in accordance with each
such employment agreement, each of these executives received a restricted stock award under the 2015 Plan for the number of shares
of the Company’s common stock shown below. These restricted stock awards are subject to a repurchase option in favor of the Company
that lapses over a four-year period, as follows: the repurchase option on 50% of the shares will lapse at the end of two years
from date of issuance, and the repurchase option on 25% of the shares will lapse at the end of each of the third and fourth years
from date of issuance.
|
|
Number of Shares
of
Restricted
Stock
|
|
|
Grant Date Fair
Value
|
|
Vice President of Business Development
|
|
|
110,000
|
|
|
$
|
165,000
|
|
Vice President of Operations
|
|
|
38,000
|
|
|
$
|
57,000
|
|
Chief Financial Officer
|
|
|
145,000
|
|
|
$
|
217,500
|
|
Operating leases
In July 2014, Akoustis, Inc. entered
into a 24–month lease agreement for office space located in Cornelius, North Carolina, terminating on June 30, 2016. Under the
agreement, total annual rent is $24,000 with the option to renew the lease for two additional one year terms.
In April 2015, Akoustis, Inc. entered
into a new lease agreement for office space in Huntersville, NC. The lease is for a three-year term with monthly base rent
payments of approx. $3,800 and requires a deposit of $10,000. At the time of the execution of the new lease, the original lease
for the existing office space had 14 months remaining on the existing two-year agreement. Akoustis, Inc. negotiated with the landlord
to pay $16,000 for an eight-month termination fee, which includes rent through May 15, 2015.
The operating leases provide for annual
real estate tax and cost of living increases and contain predetermined increases in the rentals payable during the term of the
lease. The aggregate rent expense is recognized on a straight-line basis over the lease term. The total lease rental expense was
$13,822 for the three months ended June 30, 2016.
The total lease rental expense was $55,186,
$42,808, $66,556 and $19,613 for the years ended June 30, 2016, June 30, 2015, March 31, 2016 and the period May 12, 2014 (Inception)
through March 31, 2015, respectively.
Total future minimum payments required
under the new operating lease are as follows.
Year Ending June 30,
|
|
|
|
2017
|
|
$
|
47,203
|
|
2018
|
|
|
40,314
|
|
|
|
$
|
87,517
|
|
Note 12. Related Party Transactions
Offering and convertible notes
Akoustis, Inc. was founded on May 12,
2014. In June 2014, the founders and angel investors contributed $530,000 in a series-seed equity financing.
In March 2015, the Company executed
a stock purchase agreement for $35,000 with an investor to offset legal and audit expenses related to the Merger and private placement
offering. In April 2015, one of the convertible noteholders converted $10,000 of his convertible note into shares of Akoustis,
Inc. Common Stock in order to enable the Company to qualify for additional matching funds from NSF. As a result, the net note
investment remaining was $645,000, which, in accordance with the terms of the convertible notes, converted into Common Stock of
the Company on the same terms as the other investors in the Company’s private placement offering referred to below, at a conversion
price of $1.50 per share.
Of the $530,000 raised by Akoustis,
Inc., in June 2014, the CEO was the largest investor at $175,000. The CEO also purchased $200,000 principal amount of Akoustis,
Inc., convertible notes in March 2015 and in addition, he participated in the 2015 Offering, purchasing 134,000 shares of Common
Stock for an aggregate purchase price of $201,000 (of which $200,000 was paid by conversion of the convertible note). He also
participated in the 2016 Offering, purchasing 93,750 shares of Common Stock for an aggregate purchase price of $150,000.
Furthermore, a firm owned by the CEO
(Raytech, LLC) loaned Akoustis, Inc., $30,000 to assist in purchase of test and measurement equipment required to evaluate the
performance of the technology demonstrators. The loan was a 12-month simple interest note and was repaid in full in March 2015.
A Director since May 22, 2015 participated
in the $530,000 equity financing of Akoustis, Inc., in June 2014 by investing $50,000 and participated in the 2015 Offering, purchasing
17,000 shares of Common Stock for an aggregate purchase price of $25,500.
The Vice President of Operations since
May 18, 2015, received payments for consulting services of $27,426 for Akoustis, Inc. under an independent contractor agreement
from May 14, 2014 to May 18, 2015 when he became an employee of the Company. In addition, the Vice President of Operations since
May 18, 2015, participated in the 2015 Offering, purchasing 17,000 shares of Common Stock for an aggregate purchase price of $25,500
and participated in the 2016 Offering, purchasing 6,250 shares of Common Stock for an aggregate purchase price of $10,000.
A Director since May 22, 2015, participated
in the $530,000 financing of Akoustis, Inc., in June 2014 by investing $100,000. He also purchased $225,000 principal amount of
Akoustis, Inc., convertible notes in March 2015. and at Akoustis, Inc.’s request and to qualify Akoustis, Inc. for an NSF matching
award in April 2015, he also purchased 21 shares of Akoustis, Inc.’s Common Stock pre-Merger (6,806 shares of our Common Stock
post-Merger) for an aggregate purchase price of $10,000 paid by partial conversion of the convertible note. In addition, the Director
participated in the 2015 Offering, purchasing 144,000 shares of Common Stock for an aggregate purchase price of $216,000 (of which
$215,000 was paid by conversion of the convertible note) and he also participated in the 2016 Offering, purchasing 35,000 shares
of Common Stock for $56,000.
The brother of the CEO participated
in the $530,000 equity financing of Akoustis, Inc., in June 2014 by investing $80,000. The CEO’s brother also purchased $130,000
principal amount of Akoustis, Inc., convertible notes in March 2015 and participated in the 2015 Offering, purchasing 90,000 shares
of Common Stock for an aggregate purchase price of $135,000 (of which $130,000 was paid by conversion of the convertible note).
He also participated in the 2015 Offering, purchasing 100,000 shares of Common Stock for an aggregate purchase price of $150,000.
A stockholder, who beneficially owns
approximately 15.4% of the Common Stock as of June 27, 2016, participated in the 2015 Offering, purchasing 135,000 shares of Common
Stock for an aggregate purchase price of $202,500 and participated in the 2016 Offering purchasing 250,000 shares of Common Stock
for $400,000. The stockholder is also a party to the Registration Rights Agreement with respect to all of his shares.
A Director since May 22, 2015 and Co-Chairman
since May 11, 2016 participated in the 2016 Offering, purchasing 125,000 shares of Common Stock for an aggregate purchase price
of $200,000.
A Director since May 22, 2015 and Co-Chairman
since May 11, 2016 participated in the 2016 Offering, purchasing 10,000 shares of Common Stock for an aggregate purchase price
of $16,000.
Furthermore,
AEG Consulting, a firm owned by a Co-Chairman received $4,013, $10,238, $7,700, $9,463 and $3,462 for consulting fees for the
three months ended June 30, 2016, for the years ended June 30, 2016, June 30, 2015 and March 31, 2016, and the period May 12,
2014 (Inception) through March 31, 2015, respectively.
The Chief Financial Officer since June
15, 2015, and VP of Business Development since May 6, 2015 participated in the 2016 Offering. The CFO purchased 9,375 of Common
Stock for an aggregate purchase price of $15,000 while the VP of Business Development purchased 6,250 shares of Common Stock for
an aggregate purchase price of $10,000.
Inventory Purchase
In March 2016, the Company purchased
inventory from Big Red LLC (“Big Red”), a company formed by the CEO, the brother of the Company’s CEO, the VP of Operations and
one additional party. The transaction for $43,544 was executed so the Company could pursue commercialization of the amplifier
inventory purchased. The Company will utilize this inventory and related technology to process and sell the amplifiers. The CEO
and VP of Operations assigned their interests in Big Red to other parties in March of 2016.
License Agreement
In April 2016, the Company entered into
a license agreement with Big Red. The license agreement was executed so that the Company could pursue commercialization of amplifier
inventory purchased from Big Red in March 2016. The Company will utilize this inventory and related technology to process and
sell the amplifiers. Future revenue from sales utilizing the amplifier technology will result in a license fee paid to Big Red
according to the following schedule:
Net Sales
|
|
Royalty Percentage
|
|
$0 - $500,000
|
|
|
5.00
|
%
|
$500,000 - $1,000,000
|
|
|
4.00
|
%
|
$1,000,000 - $2,000,000
|
|
|
3.50
|
%
|
$2,000,000 – $5,000,000
|
|
|
3.00
|
%
|
$5,000,001 and over
|
|
|
2.00
|
%
|
Note 13. Income Taxes
The Company had no income tax expense
due to operating losses incurred for the three months ended June 30, 2016 and the years ended June 30, 2016 and March 31, 2016
and the period from May 14, 2014 (Inception) through March 31, 2015.
The provision for/(benefit from) income
tax differs from the amount computed by applying the statutory federal income tax rate to income before the provision for/(benefit
from) income taxes. The sources and tax effects of the differences are as follows:
|
|
Three Months
Ended
June
30,
2016
|
|
|
For the
Year Ended
June
30,
2016
|
|
|
For the
Year Ended
June
30,
2015
|
|
|
For the
Year Ended
March
31,
2016
|
|
|
For the
Period May
12,
2014
(Inception)
Through
March 31,
2015
|
|
Income taxes at Federal statutory rate
|
|
|
(34.00
|
)%
|
|
|
(34.00
|
)%
|
|
|
(34.00
|
)%
|
|
|
(34.00
|
)%
|
|
|
(34.00
|
)%
|
State income taxes, net of Federal income tax benefit
|
|
|
(2.63
|
)%
|
|
|
(2.60
|
)%
|
|
|
(2.64
|
)%
|
|
|
(2.54
|
)%
|
|
|
(3.96
|
)%
|
Permanent differences
|
|
|
0.06
|
%
|
|
|
0.22
|
%
|
|
|
4.10
|
%
|
|
|
1.06
|
%
|
|
|
0.00
|
%
|
Change in Valuation Allowance
|
|
|
36.57
|
%
|
|
|
36.09
|
%
|
|
|
32.54
|
%
|
|
|
35.32
|
%
|
|
|
37.96
|
%
|
State tax rate change
|
|
|
0.00
|
%
|
|
|
0.29
|
%
|
|
|
0.00
|
%
|
|
|
0.16
|
%
|
|
|
0.00
|
%
|
Income Tax Provision
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
The tax effects of temporary differences
that give rise to the Company’s deferred tax assets and liabilities are as follows:
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
Net Operating Loss Carryforwards
|
|
$
|
1,711,488
|
|
|
$
|
368,961
|
|
|
$
|
1,264,686
|
|
|
$
|
159,721
|
|
Share-based compensation
|
|
|
396,264
|
|
|
|
69,524
|
|
|
|
236,645
|
|
|
|
–
|
|
Change in derivative liability
|
|
|
315,205
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Other
|
|
|
(22,365
|
)
|
|
|
9,713
|
|
|
|
(21,324
|
)
|
|
|
9,713
|
|
|
|
|
2,400,592
|
|
|
|
448,198
|
|
|
|
1,480,007
|
|
|
|
169,434
|
|
Valuation Allowance
|
|
|
(2,400,592
|
)
|
|
|
(448,198
|
)
|
|
|
(1,480,007
|
)
|
|
|
(169,434
|
)
|
Net Deferred Tax Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
–
|
|
|
$
|
–
|
|
At June 30, 2016, the Company had approximately
$4,671,000 of federal and state net operating loss carryovers that may be available to offset future taxable income.
The net operating loss carry overs,
if not utilized, will expire in stages beginning 2035.
Based on a history of cumulative losses
at the Company and the results of operations for the years ended June 30, 2016 and March 31, 2016, the Company determined that
it is more likely than not it will not realize benefits from the deferred tax assets. The Company will not record income tax benefits
in the financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable
income to realize the deferred income tax assets. As a result of the analysis, the Company determined that a full valuation allowance
against the deferred tax assets is required. The net change in the valuation allowance during the year ended June 30, 2016 was
an increase of approximately $1,952,000.
Due to the merger on May 22, 2015, Akoustis
Technologies Inc.'s previous net operating losses may be significantly limited. The Company has not performed a detailed analysis
to determine whether an ownership change under IRC Section 382 or similar rules has occurred. The effect of an ownership change
would be the imposition of annual limitation on the use of NOL carryforwards attributable to periods before the change. Any limitation
may result in expiration of a portion of the NOL before utilization. The Company recognizes interest and penalties related to
uncertain tax positions in selling, general and administrative expenses. The Company has not identified any uncertain tax positions
requiring a reserve as of June 30, 2016.
14. Transition Period
Comparative Data
|
|
Three months
ended
|
|
|
Three months
ended
|
|
|
|
June 30, 2016
(Audited)
|
|
|
June 30, 2015
(Unaudited)
|
|
|
|
|
|
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
709,314
|
|
|
$
|
228,125
|
|
General and administrative
|
|
|
968,734
|
|
|
|
625,917
|
|
|
|
|
1,678,048
|
|
|
|
854,042
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
20,500
|
|
|
|
29,999
|
|
Interest income
|
|
|
186
|
|
|
|
175
|
|
Change in fair value of warrant derivative liability
|
|
|
(860,275
|
)
|
|
|
1,571
|
|
Total other income (expenses)
|
|
|
(839,589
|
)
|
|
|
31,745
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(2,517,637
|
)
|
|
$
|
(822,297
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.17
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding – basic and diluted
|
|
|
15,111,088
|
|
|
|
7,823,683
|
|
|
|
|
|
|
|
|
|
|
Cash flow Data:
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(1,100,342
|
)
|
|
$
|
(576,492
|
)
|
Net cash used in investing activities
|
|
|
(47,215
|
)
|
|
|
(23,378
|
)
|
Net cash provided by financing activities
|
|
|
2,572,896
|
|
|
|
4,241,627
|
|
Net increase in cash for the period
|
|
$
|
1,425,339
|
|
|
$
|
3,641,757
|
|
Note 15. Subsequent Events
Issuance of Restricted Stock
Restricted Stock Awards were executed
by two non-executive employees in the amounts of (1) 8,000 common shares on August 9, 2016 and (2) 20,000 common shares on July
6, 2016. Both Restricted Stock Awards are subject to a repurchase option in favor of the Company that lapses over a four-year
period, as follows: the repurchase option on 50% of the shares will lapse at the end of two years from the date of issuance, and
the repurchase option on 25% of the shares will lapse at the end of each of the third and fourth years from the date of issuance.
The shares were issued to the following groups of individuals:
On August 11, 2016 the Board of Directors
approved the issuance of 40,000 common shares to consultants. The shares have a grant date fair value of $147,600 and vest immediately.
On August 11, 2016, the Board of Directors
approved the issuance of the following Restricted Stock Awards for a total of 383,000 common shares. These restricted stock awards
are subject to a repurchase option in favor of the Company that lapses over a four-year period, as follows: the repurchase option
on 50% of the shares will lapse at the end of two years from the date of issuance, and the repurchase option on 25% of the shares
will lapse at the end of each of the third and fourth years from the date of issuance. The shares were issued to the following
groups of individuals:
|
a)
|
Four Board Members, including two Co-Chairmen, received 22,000 common shares each
|
|
b)
|
Nine non-executive employees received 172,000 common shares
|
|
c)
|
CEO received 36,000 common shares
|
|
d)
|
CFO received grant for 30,000 common shares
|
|
e)
|
Vice President of Business Development and Vice President of Operations received 20,000 common
shares each
|
|
f)
|
One contractor received 10,000 common shares, and
|
|
g)
|
One contractor who is a related party received 7,000 common shares
|
AKOUSTIS TECHNOLOGIES, INC.
3,397,536 Shares of Common Stock
PROSPECTUS
May 25, 2017
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance
and Distribution.
Set forth below is an estimate (except
for registration fees, which are actual) of the approximate amount of the fees and expenses payable by us in connection with the
issuance and distribution of the shares of our Common Stock. The selling stockholders will not be responsible for any of the expenses
of this offering.
EXPENSE
|
|
AMOUNT
|
|
|
|
|
|
|
SEC registration fee
|
|
$
|
4,009
|
|
Accounting fees and expenses
|
|
$
|
15,000
|
|
Legal fees and expenses
|
|
$
|
50,000
|
|
Miscellaneous
|
|
$
|
5,000
|
|
Total
|
|
$
|
74,009
|
|
Item 14. Indemnification of Directors
and Officers.
Section 102(b)(7) of the DGCL allows a
corporation to provide in its certificate of incorporation that a director of the corporation will not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except where the director
breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized
the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal
benefit. The Company’s certificate of incorporation provides for this limitation of liability.
Section 145 of the DGCL, or Section 145,
provides that a Delaware corporation may indemnify any person who was, is or is threatened to be made, party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent
of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided
such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s
best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct
was illegal. A Delaware corporation may indemnify any persons who were or are a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and
reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted
in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests,
provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged
to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably
incurred.
Section 145 further authorizes a corporation
to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such capacity, or arising out of his or her status as such,
whether or not the corporation would otherwise have the power to indemnify him under Section 145.
The Company’s Certificate of Incorporation
provides that the liability of directors for monetary damages shall be eliminated to the fullest extent under applicable law.
The Company’s By-Laws state that the Company shall indemnify every present or former director, officer, employee, or agent
of the Company or person who is or was serving at the Company’s request as a director, officer, member, manager, partner,
trustee, fiduciary, employee or agent of another corporation, limited liability company, partnership, joint venture, trust, employee
benefit plan or other enterprise (each an “Indemnitee”).
The Company’s By-Laws provide that
the Company shall indemnify an Indemnitee against all judgments, fines, amounts paid in settlement and reasonable expenses actually
and reasonably incurred by the Indemnitee in connection with any proceeding in which he was, or is threatened to be made, a party
by reason of his serving or having served, if it is determined that the Indemnitee (a) acted in good faith, (b) reasonably believed
that such action was in, or not opposed to, the Company’s best interests and (c) in the case of any criminal proceeding,
had no reasonable cause to believe that his conduct was unlawful; provided, however, that the Company shall not be obligated to
indemnify an Indemnitee that was threatened to be made a party but does not become a party unless the incurring of such expenses
was authorized by or under the authority of the Board of Directors, and the Company shall not be obligated to indemnify against
any amount paid in settlement unless the Board of Directors has consented to such settlement. In any action brought by or in the
right of the Company to procure a judgment in its favor, no indemnification shall be made in respect of any proceeding if a final
adjudication establishes that the Indemnitee is liable to the Company, unless the court determines that such person is fairly
and reasonably entitled to indemnity. The Company may indemnify an Indemnitee who has served, or prepared to serve, as a witness
in, but is not a party to, any action, suit, or proceeding. The termination of any proceeding by judgment, order, settlement or
conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did not meet
the requirements set forth in clauses (a) through (c) above.
Expenses incurred by any present or former
director or officer of the Company in defending any civil, criminal, administrative, or investigative action, suit, or proceeding,
shall be paid by the Company in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking
in writing by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled
to indemnification. Expenses and costs incurred by other Indemnitees may be paid by the Company in advance of the final disposition
of such action, suit, or proceeding upon a similar undertaking.
Other than discussed above, neither the
Company’s By-Laws nor its Certificate of Incorporation includes any specific indemnification provisions for the Company’s
officers or directors against liability under the Securities Act. The Company has also purchased insurance providing for indemnification
of its directors and officers. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered
Securities.
All share and per share stock numbers
in this section relating to the Common Stock of the Company (Akoustis Technologies, Inc.) are after giving effect to the 1.094891-for-one
forward split of our Common Stock on April 23, 2015.
On May 22, 2015, we issued options for
an aggregate of 160,000 shares of our Common Stock to our four non-employee directors under the 2015 Plan. These issuances were
exempt from registration pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering.
The 2015 Offering and the First 2016
Offering
The information regarding the 2015 Offering
and the 2015 Placement Agent Warrants set forth in “Description of Business — The 2015 Offering” is incorporated
herein by reference. The information regarding the First 2016 Offering and the 2016 Placement Agent Warrants set forth in “Description
of Business — The First 2016 Offering” is incorporated herein by reference. The 2015 Offering and the First 2016 Offering
were each exempt from registration in reliance upon Section 4(a)(2) of the Securities Act and/or Rule 506 (b) of Regulation D
promulgated thereunder as transactions not involving a public offering.
The 2016-2017 Offering
The information regarding the 2016-2017
Offering and the 2016-2017 Placement Agent Warrants set forth in “Description of Business — The 2016/2017 Offering”
is incorporated herein by reference. The 2016-2017 Offering was exempt from registration in reliance upon Section 4(a)(2) of the
Securities Act and/or Rule 506 (b) of Regulation D promulgated thereunder as transactions not involving a public offering.
The 2017 Offering
The information regarding the 2017 Offering
and the 2017 Placement Agent Warrant set forth in “Description of Business — The 2017 Offering” is incorporated
herein by reference. The 2017 Offering was exempt from registration in reliance upon Section 4(a)(2) of the Securities Act and/or
Rule 506 (b) of Regulation D promulgated thereunder as transactions not involving a public offering.
Shares Issued in Connection with the
Merger
On May 22, 2015, pursuant to the terms
of the Merger Agreement, all of the shares of stock of Akoustis, Inc., were exchanged for 5,500,006 restricted shares of our Common
Stock. This transaction was exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering.
None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions
involved.
Restricted Share Awards under the 2015
Plan
Since the Merger, we have issued 487,000
shares of our Common Stock to our directors and executive officers, 356,200 shares of our Common Stock to several employees, and
25,000 shares of our Common Stock to independent contractors under the 2015 Plan. Each of these issuances was exempt from registration
under Section 4(a)(2) of the Securities Act, in reliance upon the exemption provided by Regulation D promulgated by the SEC thereunder,
and/or in reliance on a “no sale” theory. These issuances constituted transactions by an issuer not involving any
public offering, were made only to persons with access to information about the Company and, with respect to certain issuances
made to employees, as bonuses in exchange for no consideration. None of the securities were sold through an underwriter and, accordingly,
there were no underwriting discounts or commissions involved.
Restricted Share Awards under the 2016
Plan
On December 15, 2016, our stockholders
approved the 2016 Stock Incentive Plan (the “2016 Plan”), which reserves 3,000,000 shares of our Common Stock, plus
any shares subject to outstanding awards granted under the 2015 Plan that are forfeited, for issuance under the 2016 Plan. Accordingly,
we will no longer grant awards under the 2014 Plan or the 2015 Plan, although awards that are outstanding under such plans will
continue in accordance with their terms. Since December 15, 2016, we have issued 302,000 restricted shares under the 2016 Plan.
Each of these issuances was exempt from registration under Section 4(a)(2) of the Securities Act, in reliance upon the exemption
provided by Regulation D promulgated by the SEC thereunder, and/or in reliance on a “no sale” theory.
Shares Issued to Consultants
On December 9, 2015, pursuant to the terms
of an Independent Consulting Agreement between the Company, The Del Mar Consulting Group, Inc. (“Del Mar”) and Alex
Partners, LLC (“Alex Partners”), we issued 138,000 restricted shares of our Common Stock to Del Mar and 92,000 restricted
shares of Common Stock to Alex Partners. In March 2016, the above consulting agreements originally executed in December 2015 were
amended so that the consultants would receive shares of Common Stock over the remaining term of the agreement in lieu of the monthly
cash retainer. Pursuant to the amended agreement, the Company granted an aggregate of 60,000 restricted shares to the two consultants
with a fair value of $126,600 at March 31, 2016.
In August 2016, pursuant to the terms
of a consulting agreement between the Company and Integra Consulting Group, LLC (“Integra”), we issued 40,000 shares
of our Common Stock to Integra in partial consideration for consulting services provided by Integra to the Company.
In January, 2017, pursuant to the terms
of a Second Independent Consulting Agreement between the Company and Del Mar, we issued 30,000 restricted shares of our Common
Stock to Del Mar in partial consideration for consulting services provided by Del Mar to the Company.
In January, 2017, pursuant to the terms
of a Second Independent Consulting Agreement between the Company and Alex Partners, we issued 20,000 restricted shares of Common
Stock to Alex Partners in partial consideration for consulting services provided by Alex Partners to the Company.
These issuances were exempt from registration
pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering and were only made after the consultants
made certain representations and warranties to the Company and had an opportunity to ask questions of our officers. None of the
securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
Sales of Unregistered Securities of
Akoustis, Inc., prior to the Merger
Share and per share stock numbers relating
to stock of Akoustis, Inc. issued prior to the Merger on May 22, 2015 have not been adjusted to reflect the Merger, in which each
share of Akoustis, Inc. stock outstanding at the time of the Merger was automatically converted into 324.082 shares of our Common
Stock.
Common Stock.
On May 12, 2014, Akoustis, Inc., issued
8,050 shares of its common stock to its founders, Jeffrey Shealy, and Lora Shealy, for $1 and an in-kind assignment of certain
assets to Akoustis, Inc.
Between June 2014 and May 15, 2015, Akoustis,
Inc. issued 1,925 shares of its common stock to several independent contractors, including Steven DenBaars, Mark Boomgarden and
Arthur Geiss, pursuant to Akoustis, Inc.’s 2014 Stock Plan in consideration of business and consulting services.
In March 2015, Akoustis, Inc. sold to
an accredited investor 1,675 shares of its common stock at a price of $35,000.
In April 2015, Akoustis, Inc. sold to
an accredited investor 21 shares of its common stock at a price of $10,000, paid by partial conversion of a convertible note.
Series Seed Preferred Stock.
On June 16, 2014, Akoustis, Inc. sold
5,300 shares of its Series Seed Preferred Stock, at a purchase price of $100 per share, to its directors and private investors,
each of whom qualified as an accredited investor pursuant to Regulation D under the Securities Act. The aggregate proceeds from
the sale of Series Seed Preferred Stock were $530,000.
Convertible Notes.
During March 2015, Akoustis, Inc. issued
and sold convertible promissory notes (the “Notes”) to four investors, including its Chief Executive Officer, in the
aggregate principal amount of $655,000, with a maturity date of December 31, 2015. The Notes carried no interest if paid on the
Maturity Date. $10,000 principal amount of the Notes was converted into 21 shares of Akoustis, Inc., common stock as described
above. Pursuant to the mandatory conversion provision of the Notes, the remaining aggregate of $645,000 principal amount of the
Notes was automatically converted into shares of the Company’s Common Stock by their terms upon closing of the 2015 Offering
and Merger, at a conversion price per share equal to the 2015 Offering Price of $1.50 per share.
Each of these issuances by Akoustis, Inc.,
was exempt from registration under Section 4(a)(2) of the Securities Act, and/or in reliance upon the exemption provided by Regulation
D promulgated by the SEC thereunder, as transactions by an issuer not involving any public offering. None of these securities
were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
Item 16. Exhibits and Financial Statement
Schedules.
The exhibits listed in the accompanying
Exhibit Index are filed as a part of this post-effective amendment on Form S-1.
Item 17. Undertakings.
|
(a)
|
The
undersigned registrant hereby undertakes:
|
1. To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
i. To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
ii. To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective registration statement;
iii. To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
2. That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
|
(b)
|
Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other than the payment by the registrant of expenses
incurred and paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
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(c)
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Each prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such
date of first use.
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SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Huntersville, State of North Carolina, on May 25, 2017.
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AKOUSTIS TECHNOLOGIES, INC.
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By:
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/s/ Jeffrey B. Shealy
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Name:
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Jeffrey B. Shealy
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Title:
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President and Chief Executive Officer (Principal Executive Officer)
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KNOW ALL PERSONS BY THESE PRESENTS, that
each person whose signature appears below hereby constitutes and appoints Jeffrey B. Shealy, or either of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution, for such person and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments or supplements to this registration statement and to file
the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact
and agents or either one of them full power and authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents, or any of them, or his or her substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the following persons and in the capacities set forth below on May
25, 2017.
/s/Jeffrey B. Shealy
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/s/ Cindy C. Payne
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Jeffrey B. Shealy
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Cindy C. Payne
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President, Chief Executive Officer, and Director (Principal Executive
Officer)
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Chief Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
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/s/ Arthur E. Geiss
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/s/ Jerry D. Neal
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Arthur E. Geiss
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Jerry D. Neal
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Co-Chairman of the Board
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Co-Chairman of the Board
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/s/ Steven P. Denbaars
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/s/ Jeffrey K. McMahon
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Steven P. Denbaars
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Jeffrey K. McMahon
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Director
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Director
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/s/ John T. Kurtzweil
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John T. Kurtzweil
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Director
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EXHIBIT INDEX
Exhibit
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Number
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Description
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2.1
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Agreement and Plan of Merger and Reorganization,
dated as of May 22, 2015, by and among the Registrant, Acquisition Sub and Akoustis, Inc.
(incorporated by reference from
Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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2.2
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Plan of Conversion, dated December 15, 2016
(incorporated
by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 16, 2016)
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2.3
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Definitive Asset Purchase Agreement, dated March 23, 2017, by
and between The Research Foundation for the State University of New York and the Registrant
(incorporated by reference
to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 24, 2017)
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2.4
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Definitive Real Property Purchase Agreement, dated March 23,
2017, by and between Fuller Road Management Corporation and the Registrant
(incorporated by reference to Exhibit 2.2 to
the Registrant’s Current Report on Form 8-K filed with the SEC on March 24, 2017)
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3.1
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Certificate of Incorporation of the Registrant, as filed with
the Delaware Secretary of State on December 15, 2016
(incorporated by reference from Exhibit 3.1 to the Registrant’s
Current Report on Form 8-K filed with the SEC on December 16, 2016)
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3.2
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By-Laws of the Registrant, dated as of December 15, 2016
(incorporated by reference from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December
16, 2016)
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3.3
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Certificate of Conversion of the Registrant, as filed with the
Delaware Secretary of State on December 15, 2016
(incorporated by reference from Exhibit 3.3 to the Registrant’s
Current Report on Form 8-K filed with the SEC on December 16, 2016)
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3.4
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Articles of Conversion of the Registrant, as filed with the
Nevada Secretary of State on December 15, 2016
(incorporated by reference from Exhibit 3.4 to the Registrant’s Current
Report on Form 8-K filed with the SEC on December 16, 2016)
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3.5
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Certificate of Merger of Acquisition Sub with and into Akoustis,
Inc., filed May 22, 2015
(incorporated by reference from Exhibit 3.3 to the Registrant’s Current Report on Form 8-K
filed with the SEC on May 29, 2015)
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5.1*
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Legal opinion of LKP Global Law, LLP
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10.1
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Split-Off Agreement, dated as of May 22, 2015, by and among
the Registrant, Danlax Enterprise Corp. and Ivan Krikun
(incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.2
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General Release Agreement, dated as of May 22, 2015, by and
among the Registrant, Danlax Enterprise Corp. and Ivan Krikun
(incorporated by reference to Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.3
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Indemnification Shares Escrow Agreement, dated as of May 22,
2015, by and among the Registrant, Jeffrey B. Shealy, and CKR Law LLP, as Escrow Agent
(incorporated by reference to Exhibit
10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.4
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Form of Lock-Up and No Short Selling Agreement between the Registrant
and the officers, directors and shareholders party thereto
(incorporated by reference to Exhibit 10.4 to the Registrant’s
Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.5
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Form of 2015 Subscription Agreement between the Registrant and
the investors party thereto
(incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form
8-K filed with the SEC on May 29, 2015)
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10.6
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Form of 2015 Placement Agent Warrant for Common Stock of the
Registrant in connection with the Registrant’s 2015 private placement offering
(incorporated by reference to Exhibit
10.8 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.7
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Form of 2015 Registration Rights Agreement
(incorporated
by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.8†
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Akoustis Technologies, Inc. 2015 Equity Incentive Plan
(incorporated
by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.9†
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Form of Stock Option Agreement under the 2015 Equity Incentive
Plan
(incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on Form 8-K filed with the SEC
on May 29, 2015)
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10.10†
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Akoustis, Inc. 2014 Stock Plan
(incorporated by reference
to Exhibit 10.10 to the Registrant’s Transition Report on Form 10-K filed with the SEC on October 31, 2016)
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10.11†
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Form of Restricted Stock Purchase Agreement under the 2014 Stock
Plan between the Registrant (as assignee of Akoustis, Inc.) and each of Steve DenBaars, Mark Boomgarden and Arthur Geiss
(incorporated by reference to Exhibit 10.12 to the Registrant’s Current Report on Form 8-K filed with the SEC on May
29, 2015)
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10.12
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Joint Development Agreement, dated February 27, 2015, between
Akoustis, Inc. and Global Communication Semiconductors, LLC
(incorporated by reference to Exhibit 10.13 to the Registrant’s
Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.13
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Foundry Agreement, dated February 27, 2015, between Akoustis,
Inc. and Global Communication Semiconductors, LLC
(incorporated by reference to Exhibit 10.14 to the Registrant’s
Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.14†
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Employment Agreement between the Registrant and Jeffrey Shealy
dated as of June 15, 2015
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed with the SEC on June 19, 2015)
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10.15†
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Employment Agreement between the Registrant and David M. Aichele
dated as of June 15, 2015
(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
filed with the SEC on June 19, 2015)
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10.16†
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Employment Agreement between the Registrant and Mark Boomgarden
dated as of June 15, 2015
(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K
filed with the SEC on June 19, 2015)
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10.17†
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Employment Agreement between the Registrant and Cindy C. Payne
dated as of June 15, 2015
(incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K
filed with the SEC on June 19, 2015)
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10.18†
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Form of Restricted Stock Agreement between the Registrant and
each of Mark Boomgarden, Dave Aichele and Cindy Payne
(incorporated by reference to Exhibit 10.17 to the Registrant’s
Annual Report on Form 10-K filed with the SEC on June 29, 2016)
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10.19†
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Form of Amendment to Restricted Stock Purchase Agreement between
the Registrant and each of Steve DenBaars and Mark Boomgarden
(incorporated by reference to Exhibit 10.18 to the Registrant’s
Annual Report on Form 10-K filed with the SEC on June 29, 2016)
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10.20
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Form of 2016 Subscription Agreement between the Registrant and
the investors party thereto
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed with the SEC on April 20, 2016)
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10.21
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Form of 2016 Placement Agent Warrant for Common Stock of the
Registrant in connection with the Registrant’s 2016 private placement offering
(incorporated by reference to Exhibit
10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 20, 2016)
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10.22
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Form of 2016 Registration Rights Agreement
(incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 11, 2016)
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10.23
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Registration Rights Agreement for the 2016-2017 Offering
(incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 25, 2016)
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10.24†
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Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 16, 2016)
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10.25†
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Form of Restricted Stock Award Agreement under the 2016 Equity
Incentive Plan
(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017)
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10.26
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Amendment No. 1 to Registration Rights Agreement by and among the Company and the investors in the 2016-2017 Offering (
incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 28, 2016
)
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10.27
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Form of Placement Agent Warrant in connection with the 2016-2017 Offering (
incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 28, 2016
)
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10.28†
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Form of Subscription Agreement by and among the Company and the investors in the 2016-2017 Offering (
incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017
)
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10.29†
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Form of Amended Subscription Agreement by and among the Company and the investors in the 2016-2017 Offering (
incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017
)
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10.30
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Placement Agent Agreement, dated December 8, 2016, between the Registrant and Katalyst Securities LLC in connection with the 2016-2017 Offering (
incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017
)
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10.31
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Placement Agent Agreement, dated December 12, 2016, between the Registrant and Drexel Hamilton, LLC in connection with the 2016-2017 Offering (
incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017
)
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10.32
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Placement Agent Agreement, dated December 19, 2016, between the Registrant and Northland Securities, Inc. in connection with the 2016-2017 Offering (i
ncorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017
)
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10.33
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Placement Agent Agreement, dated December 14, 2016, between the Registrant and Joseph Gunnar & Co, LLC in connection with the 2016-2017 Offering (
incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017
)
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10.34
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Form of Amended and Restated Placement Agent Warrant for Common Stock of the Company in connection with the Company’s 2015 private placement offering and 2016 private placement offering (
incorporated by reference to Exhibit 10.12 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016, filed with the SEC on February 14, 2017
)
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10.35*
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Form of Subscription Agreement by and among the Company and the investor in the 2017 Offering
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10.36*
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Form of Amended Subscription Agreement by and among the Company and the Investors in the 2017 Offering
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10.37*
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Form of Registration Rights Agreement by and among the Company and the investor in the 2017 Offering
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10.38*
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Form of Placement Agent Warrant in connection with the 2017 Offering
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10.39*
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Amendment to Placement Agent Agreement, Form of, between the Company and Drexel Hamilton LLC in connection with the 2017 Offering
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10.40*
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Amendment to Placement Agent Agreement, dated May 8, 2017, between the Company and Katalyst Securities LLC in connection with the 2017 Offering
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21.1
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Subsidiaries of the Registrant
(incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on June 29, 2016)
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23.1*
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Consent of Independent Registered Accounting Firm
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23.2*
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Consent of LKP Global Law, LLP (included in Exhibit 5.1)
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24.1*
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Power of Attorney (included on Signature Page)
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101§
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Interactive Data Files of Financial Statements and Notes
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101.ins§
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Instant Document
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101.sch§
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XBRL Taxonomy Schema Document
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101.cal§
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XBRL Taxonomy Calculation Linkbase Document
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101.def§
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XBRL Taxonomy Definition Linkbase Document
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101.lab§
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XBRL Taxonomy Label Linkbase Document
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101.pre§
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XBRL Taxonomy Presentation Linkbase Document
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* Filed herewith
† Management contract or compensatory plan or arrangement
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