UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission file number: 001-38029

AKOUSTIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		33-1229046
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

9805 Northcross Center Court, Suite A
Huntersville, NC		28078
(Address of principal executive offices)		(Postal Code)

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

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

Title of Each Class:		Trading Symbol		Name of each exchange on which registered:
Common Stock, $0.001 par value		AKTS		The Nasdaq Stock Market LLC (Nasdaq Capital Market)

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the registrant’s common stock, par value $0.001 per share (“Common Stock”), held by non-affiliates on December 31, 2022 was approximately $148.2 million. For purposes of this computation, shares of Common Stock held by all officers, directors, and any beneficial owners of 10% or more of the outstanding Common Stock were excluded because such persons may be deemed to be affiliates of the registrant. Such determination should not be deemed an admission that such persons are, in fact, affiliates of the registrant.

As of September 01, 2023, there were 72,351,827 shares of Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days after the end of the fiscal year ended June 30, 2023. Portions of such proxy statement are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

Item Number and Caption			Page

Cautionary Note Regarding Forward-Looking Information			ii

PART I			1

	1.	Business	1
	1A.	Risk Factors	12
	1B.	Unresolved Staff Comments	38
	2.	Properties	39
	3.	Legal Proceedings	39
	4.	Mine Safety Disclosures	39

PART II			40

	5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities	40
	6.	[Reserved]	41
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
	7A.	Quantitative and Qualitative Disclosures About Market Risk	46
	8.	Financial Statements and Supplemental Data	F-1
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
	9A.	Controls and Procedures	47
	9B.	Other Information	47
	9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspection	47

PART III			48

	10.	Directors, Executive Officers and Corporate Governance	48
	11.	Executive Compensation	48
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
	13.	Certain Relationships and Related Transactions, and Director Independence	48
	14.	Principal Accountant Fees and Services	48

PART IV			49

	15.	Exhibits and Financial Statement Schedules	49

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K (this “Report”) contains forward-looking statements that relate to our plans, objectives, estimates, and goals. Any and all statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Terms such as “may,” “will,” “might,” “would,” “should,” “could,” “project,” “estimate,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “seek,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of commercially viable radio frequency (“RF”) filters, (ii) projections of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in the management’s discussion and analysis of financial condition or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), (iv) our ability to efficiently utilize cash and cash equivalents to support our operations for a given period of time, (v) our ability to engage customers while maintaining ownership of our intellectual property, and (vi) the assumptions underlying or relating to any statement described in (i), (ii), (iii), (iv) or (v) above.

Forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which are beyond our control. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation,

●

our limited operating history,

	●	our inability to generate revenues or achieve profitability,

	●	the impact of the COVID-19 pandemic, Russian-Ukrainian conflict and other sources of volatility on our operations, financial condition and the worldwide economy, including our ability to access the capital markets,

	●	increases in prices for raw materials, labor, and fuel caused by rising inflation,

	●	our inability to obtain adequate financing and sustain our status as a going concern,

	●	the results of our research and development (“R&D”) activities,

●

our inability to achieve acceptance of our products in the market,

●

general economic conditions, including upturns and downturns in the industry,

●

existing or increased competition,

●

our inability to successfully scale our New York wafer fabrication facility and related operations while maintaining quality control and assurance and avoiding delays in output,

	●	contracting with customers and other parties with greater bargaining power and agreeing to terms and conditions that may adversely affect our business,

	●	the possibility that the anticipated benefits from our business acquisitions (including the acquisitions of RFM Integrated Device, Inc. (“RFMi”) and Grinding and Dicing Services, Inc. (“GDSI”)) will not be realized in full or at all or may take longer to realize than expected,

	●	the possibility that costs or difficulties related to the integration of acquired businesses’ (including RFMi and GDSI’s) operations will be greater than expected and the possibility of disruptions to our business during integration efforts and strain on management time and resources,

●

risks related to doing business in foreign countries, including rising tensions between the United States and China,

●

any cybersecurity breaches or other disruptions compromising our proprietary information and exposing us to liability,

●

our limited number of patents,

	●	failure to obtain, maintain and enforce our intellectual property rights,

	●	claims of infringement, misappropriation or misuse of third-party intellectual property, including the lawsuit filed by Qorvo, Inc. in October 2021, that, regardless of merit, could result in significant expense and negatively impact our business results,

●

our inability to attract and retain qualified personnel,

●

results of any arbitration or litigation that may arise,

●

our reliance on third parties to complete certain processes in connection with the manufacture of our products,

●

product quality and defects,

●

our ability to market and sell our products,

●

our failure to innovate or adapt to new or emerging technologies, including in relation to our competitors,

●

our failure to comply with regulatory requirements,

●

stock volatility and illiquidity,

●

our failure to implement our business plans or strategies,

●

our failure to maintain effective internal control over financial reporting

	●	our failure to obtain or maintain a Trusted Foundry accreditation or our New York fabrication facility, and

	●	shortages in supplies needed to manufacture our products, or needed by our customers to manufacture devices incorporating our products.

A description of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in the section captioned “Risk Factors” and elsewhere in this Report.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. Except as may be required by law, we do not undertake any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.

iii

DEFINITIONS

When used in this Report, the terms, “we,” “Akoustis,” the “Company,” “our,” and “us” refers to Akoustis Technologies, Inc., a Delaware corporation, and its wholly owned consolidated subsidiaries, Akoustis, Inc., also a Delaware corporation, RFM Integrated Device, Inc., a Texas corporation (“RFMi”), and Grinding and Dicing Services, Inc., a California corporation (“GDSI”).

Glossary

The following is a glossary of technical terms used herein:

●

Acoustic wave - a mechanical wave that vibrates in the same direction as its direction of travel.

●

AlN - Aluminum Nitride.

●

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.

●

Band, channel or frequency band - a designated range of radio wave frequencies used to communicate with a mobile device.

●

Bulk acoustic wave (BAW) - an acoustic wave traveling through a material exhibiting elasticity, typically vertical or perpendicular to the surface of a piezoelectric material.

●

Digital baseband - the digital transceiver, which includes the main processor for the communication device.

●

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.

●

Filter - a series of interconnected resonators designed to pass (or select) a desired radio frequency signal and block unwanted signals.

●

Group III element nitrides - a dielectric material comprised of group IIIA element, such as boron (B), aluminum (Al) or gallium (Ga), combined with group 5A (or 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.

●

Insertion Loss - the power losses associated with inserting a BAW filter into a circuit.

●

Lossy - resistive losses that result in heat generation.

●

Metrology - techniques used to evaluate materials, devices and circuits.

●

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.

●

Power Amplifier Duplexer (PAD) - an RF module containing a power amplifier and duplex filter components for the RFFE of a smartphone.

●

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.

●

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.

●

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.

●

RF - radio frequency.

●

RF front-end (RFFE) - the circuitries in a mobile device responsible for processing the analog radio signals; located between the device’s antenna and the digital baseband.

●

RF spectrum - a defined range of frequencies.

●

Surface acoustic wave (SAW) - an acoustic sound wave traveling horizontally along the surface of a piezoelectric material.

●

TDD LTE - Time Division Duplex- Long-Term Evolution or a wireless standard which shares the bandwidth between transmit and receive.

●

Tier one - a supplier or OEM with substantial market share.

●

Tier two - a supplier or OEM with an established but not substantial market share.

●

Wafer - a thin slice of semiconductor material used in electronics for the fabrication of integrated circuits.

PART I

ITEM 1. BUSINESS

Overview

Akoustis Technologies, Inc., a Delaware corporation, was incorporated in 2013. The Company is an emerging commercial product company focused on developing, designing, and manufacturing innovative RF filter solutions for the wireless industry, including for products such as smartphones and tablets, network infrastructure equipment, Wi-Fi Customer Premise Equipment (“CPE”), and defense applications. Filters are critical in selecting and rejecting signals, and their performance enables differentiation in the modules defining the RF front-end (“RFFE”). Located between the device’s antenna and its digital backend, the RFFE is the circuitry that performs the analog signal processing and contains components such as amplifiers, filters and switches. We have developed a proprietary microelectromechanical system (“MEMS”) based bulk acoustic wave (“BAW”) technology and a unique manufacturing process flow, called “XBAW ^®”, for our filters produced for use in RFFE modules. Our XBAW^® filters incorporate optimized high purity piezoelectric materials for high power, high frequency and wide bandwidth operation. We are developing RF filters for 5G, Wi-Fi and defense bands using our proprietary resonator device models and product design kits (“PDKs”). As we qualify our RF filter products, we are engaging with target customers to evaluate our filter solutions. Our initial designs target UHB, sub-7 GHz 5G, Wi-Fi and defense bands. We expect our RF filter solutions will address problems (such as loss, bandwidth, power handling, and isolation) created by the growing number of frequency bands in the RFFE of mobile devices, infrastructure and premise equipment to support 5G, and Wi-Fi. We have prototyped, sampled and begun commercial shipment of our single-band low loss BAW filter designs for 5G frequency bands and 5 GHz and 6 GHz Wi-Fi bands which are suited to competitive BAW solutions and historically cannot be addressed with low-band, lower power handling surface acoustic wave (“SAW”) technology. Additionally, through our wholly owned subsidiary, RFMi, of which we acquired majority ownership in October 2021 and full ownership in April 2023, we operate a fabless business whereby we make sales of complementary SAW resonators, RF filters, crystal (“Xtal”) resonators and oscillators, and ceramic products—addressing opportunities in multiple end markets, such as automotive and industrial applications. We also offer back-end semiconductor supply chain services through our wholly owned subsidiary, GDSI, which we acquired in January 2023.

We own and/or have filed applications for patents on the core resonator device technology, manufacturing facility and intellectual property (“IP”) necessary to produce our RF filter chips and operate as a “pure-play” RF filter supplier, providing discrete filter solutions direct to Original Equipment Manufacturers (“OEMs”) and aligning with the front- end module manufacturers that seek to acquire high performance filters to expand their module businesses. We believe this business model is the most direct and efficient means of delivering our solutions to the market.

Technology. Our device technology is based upon bulk-mode acoustic resonance, which we believe is superior to surface-mode resonance for high-band and ultra-high-band (“UHB”) applications that include 4G/LTE, 5G, Wi-Fi, and defense applications. Although some of our target customers utilize or manufacture the RFFE module, they may lack access to critical UHB filter technology that we produce, which is necessary to compete in high frequency applications.

Manufacturing. We currently manufacture Akoustis’ high-performance RF filter circuits, using our first generation XBAW^® wafer process, in our 125,000-square foot wafer-manufacturing facility located in Canandaigua, New York (the “New York Facility”), which we acquired in June 2017. Our SAW-based RF filter products are manufactured by a third party and sold either directly or through a sales distributor.

Intellectual Property. As of August 25, 2023, our IP portfolio included 104 patents, including a blocking patent that we have licensed from Cornell University. Additionally, as of August 25, 2023, we have 108 pending patent applications. These patents cover our XBAW^® RF filter technology from raw materials through the system architectures. Given the significance of the Company’s intellectual property to its business, the Company enforces its intellectual property rights and protects its patent portfolio, which may include filing lawsuits against companies that the Company believes are infringing upon its patents. The Company considers protecting its intellectual property rights to be central to its business model and competitive position in the RF filter industry.

By designing, manufacturing, and marketing our RF filter products to mobile phone OEMs, defense OEMs, network infrastructure OEMs, and Wi-Fi CPE OEMs, we seek to enable broader competition among the front-end module manufacturers.

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

We expect to continue to incur substantial costs for commercialization of our technology on a continuous basis because our business model involves materials and solid-state device technology development and engineering of catalog and custom filter design solutions. To succeed across our combined portfolio of Akoustis, XBAW, and RFMi products, we must convince customers in a wide range of industries including mobile phone OEMs, RFFE module manufacturers, network infrastructure OEMs, Wi-Fi CPE OEMs, medical device makers, automotive and defense customers to use our products in their systems and modules. For example, since there are two dominant BAW filter suppliers in the industry that have high-band technology, and both utilize such technology as a competitive advantage at the module level, we expect customers that lack access to high-band filter technology will be open to engage with our company for XBAW filters.

To help drive our XBAW filter business, we plan to continue to pursue RF filter design and R&D development agreements and potentially joint ventures with target customers and other strategic partners, although we cannot guarantee we will be successful in these efforts. These types of arrangements may subsidize technology development costs and qualification, filter design costs, and offer complementary technology and market intelligence and other avenues to revenue. However, we intend to retain ownership of our core XBAW technology, intellectual property, designs, and related improvements. Across our combined portfolio of Akoustis, XBAW, and RFMi products, we expect to continue development of catalog designs for multiple customers and to offer such catalog products in multiple sales channels.

Impact of COVID-19 on our Business

The COVID-19 pandemic has significantly impacted business activity across the globe. In particular, COVID-19 contributed to delays we observed in certain suppliers’ shipment of materials necessary for us to manufacture our products and in certain vendors’ ability to deliver equipment for installation at our facilities. Although the effects of COVID-19 and its impact on our supply chain have eased since the peak of the pandemic and related lock-down protocols imposed by local governments, including China, we will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. The effect that any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial results for fiscal year 2024 or beyond is unclear.

Recent Developments

On July 11, 2022, we announced that we had named Kamran Cheema as our new Chief Product Officer.

On August 9, 2022, we announced that we had shipped a second 5G mobile design in a new wafer-level-package to our first foundry customer.

On August 24, 2022, we announced that we had received a development order for two new XBAW® diplexers from a Fortune 100 Internet company.

On September 6, 2022, we announced that Senate Majority Leader Charles E. Schumer toured our New York fabrication facility.

On September 8, 2022, we announced that we entered the gaming market with two design wins in Wi-Fi with two new customers.

On September 14, 2022, we announced that we received a development order for a new XBAW® 5G mobile filter solution for a tier-1 RF module maker.

On September 28, 2022, we announced that we received our fourth design win for a 5G network infrastructure filter.

On October 4, 2022, we announced that we had started sampling two new Wi-Fi 6E and Wi-Fi 7 filter solutions.

On October 6, 2022, we announced that we had become a charter member of the Semiconductor Industry Association.

On October 26, 2022, we announced that we had received three new Wi-Fi 6E design wins for carrier-class applications.

On November 21, 2022, we announced that we had joined the Wi-Fi NOW industry association as an official filter partner.

On December 21, 2022, we announced the completion of qualification of our internally developed wafer-level-packaging (WLP) technology for the 5G mobile, Wi-Fi, timing control, and other markets.

On December 28, 2022, we announced our first design win in 5G mobile from a Tier-1 RF component company customer.

On January 4, 2023, we announced the acquisition of GDSI, a U.S.-based, trusted supplier of semiconductor back-end supply chain services.

On January 18, 2023, we announced that we had received our first high-volume 5G mobile XBAW filter order from a Tier-1 RF component company.

On January 25, 2023, we announced the closing of a public offering of common stock and full exercise of the underwriters’ option to purchase additional shares.

On March 23, 2023, we announced the appointment of Michelle L. Petock, CEO of W Greig & Company to our Board of Directors.

On April 4, 2023, we announced that we received a development order for Wi-Fi 6E/7 from a new RF module maker customer.

On April 11, 2023, we introduced a new C-V2X XBAW^® filter for the automotive market.

On April 26, 2023, we announced a volume purchase order for Wi-Fi 6E filters for a new, advanced, high-speed line of Wi-Fi 6E fixed infrastructure products.

On May 3, 2023, we announced that we had received our first Wi-Fi 7 design win from a leading enterprise-class customer.

On May 24, 2023, we announced that we had received two new Wi-Fi 6E design wins.

On June 1, 2023, we introduced two new advanced BAW RF filters for Wi-Fi 6E and Wi-Fi 7.

One June 5, 2023, we announced that we would be hosting a booth at the IEEE MTT-S International Microwave Symposium.

On June 13, 2023, we launched our new, state-of-the-art XBAW^® foundry services and AI-enabled engineering design services.

On July 20, 2023, we announced that we had shipped two new BAW filters using the XBAW^® foundry process to a 5G mobile and Wi-Fi router RF front-end module customer.

On July 27, 2023, we introduced a new, advanced, single-crystal AlScN on Si wafer XBAW^® technology.

Financing

We have not yet achieved profitability from operations, and so have funded our operations largely with issuances of equity and debt securities, as well as development contracts, RF filter and production orders, government grants, MEMS foundry services (which we exited in 2021) and engineering services. We have historically incurred losses which are primarily the result of material and processing costs associated with developing and commercializing our technology, as well as personnel costs, professional fees (primarily accounting and legal), and other general and administrative (“G&A”) expenses. We expect to continue to incur substantial costs for the commercialization of our technology on a continuous basis because our business model involves materials and solid-state device technology development and engineering of catalog and custom filter design solutions.

The Company expects that its current cash and cash equivalents are sufficient to fund its operations beyond the next twelve months from the date of filing of this Form 10-K. These funds will be used to fund the Company’s operations, including capital expenditures, R&D, commercialization of our technology, development of our patent strategy and expansion of our patent portfolio, as well as to provide working capital and funds for other general corporate purposes. Except for the $48.0 million of Common Stock remaining available to be sold under its ATM Sales Agreement with Oppenheimer & Co. Inc., Craig-Hallum Capital Group LLC, and Roth Capital Partners, LLC, the Company has no commitments or arrangements to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all.

In the future, if the Company is unable to obtain additional financing in a timely fashion and on acceptable terms when such financing is needed, its financial condition and results of operations may be materially adversely affected, and it may not be able to continue operations or execute its stated commercialization plan.

Recent Financing Activity

Equity Offering Program

On May 2, 2022, the Company entered into an ATM Sales Agreement with Oppenheimer & Co. Inc., Craig-Hallum Capital Group LLC, and Roth Capital Partners, LLC pursuant to which the Company may sell from time-to-time shares of its common stock having an aggregate offering price of up to $50,000,000 (the “2022 Equity Offering Program”). On May 25, 2022, the Company announced that it was suspending sales under the 2022 Equity Offering Program. If, in the future, the Company determines to resume sales pursuant to the 2022 Equity Offering Program, it intends to notify investors by the filing of a Current Report on Form 8-K or other filing with the SEC, or other public announcement.

Convertible Note Offering

On June 9, 2022, the Company issued $44.0 million aggregate principal amount of its 6.0% Convertible Senior Notes due 2027 (the “Notes”) guaranteed by its wholly-owned subsidiary, Akoustis, Inc. The Notes were issued pursuant to an indenture (the “Indenture”), dated June 9, 2022, among the Company, the Guarantor and The Bank of New York Mellon Trust Company, N.A., as trustee. The Notes bear interest at a rate of 6.0% per year until maturity on June 15, 2027, payable semi-annually beginning on December 15, 2022. At the Company’s option, interest may be paid in cash and/or shares of Common Stock. The initial conversion rate for the Notes is 212.3142 shares of Common Stock (subject to adjustment as provided in the Indenture) per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $4.71 per share.

Underwritten Offering of Common Stock

On January 19, 2023, the Company closed a public offering of 12,545,454 shares of Common Stock at a price to the public of $2.75 per share pursuant to an underwriting agreement with B. Riley Securities, Inc., as representative of the several underwriters named therein. The shares of Common Stock issued at closing included 1,636,363 shares issued pursuant to the underwriters’ over-allotment option, which was exercised in full. Gross proceeds totaled $34.5 million before deducting the underwriting discount and offering expenses of approximately $2.5 million, resulting in net proceeds from the offering of approximately $32.0 million. Certain of the Company’s directors and officers participated in the offering by purchasing shares on the same terms and conditions as other investors.

Our XBAW Filter Technology and Business

Current RF acoustic wave filters utilize piezoelectric material physical properties, the resonator device structure and the manufacturing process technology. Existing BAW filters use an “acoustic wave ladder” that is based on a monolithic topology approach using polycrystalline materials.

XBAW technology encompasses cutting-edge polycrystalline, single-crystal and other high purity piezoelectric materials, which are fabricated into bulk-mode, acoustic wave resonators and RF filters. Our innovative 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 and internal manufacturing of our materials, whereby the raw substrate materials utilized in our XBAW process are sourced from a third party. Once our filter designs are simulated and ready to manufacture, we supply the NY Facility raw materials, a mask design file, and a unique process sequence to fabricate our resonators and filters. We hold many issued and pending patents on our XBAW wafer process flow, which is compatible with wafer level packaging (WLP) that allows for low-profile, cost- effective filters to be produced.

Technological Challenges Facing the Mobile Device Industry

Rising consumer demand for always-on wireless broadband connectivity creates an unprecedented need for high performance RFFE modules for mobile devices. Mobile devices such as smartphones, tablets and wearables are quickly becoming the primary means of accessing the Internet and driving the Internet of Things (IoT). Rapid growth in mobile data traffic tests 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 has continued to push the requirements for increased supply of high-performance filters. Furthermore, the introduction of 5G mobile technologies and their associated frequencies has created an even greater need for high-performance, high-frequency filters as the bands being auctioned have primarily been in the 3-6 GHz range, well above the frequencies of current networks.

The new spectrum introduced by 4G/LTE and 5G is driving spectrum licensing at higher frequencies than previous 3G smartphone models. For example, new TDD LTE frequencies allocated for 5G wireless cover frequencies nearly twice as high as those covered in previous generation phones. As a result, the demand for filters represents the single largest opportunity in the RFFE industry, according to a Mobile Experts 2022 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. See “Competition” below.

In addition, 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. Another 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 number or bandwidth of 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.

The RFFE must meet growing data demands while reducing cost and improving battery life. Our solution involves a new approach to RFFE component manufacturing, enabled by XBAW technology. We expect our XBAW technology to produce filters that will reduce the overall system cost and improve performance of the RFFE.

Our XBAW Filter Solutions

Our XBAW filter business is focused on the commercialization of wide bandwidth RF filters operating in the high frequency spectrum known as the sub 8 GHz bands. Using our XBAW technology, we believe these filters enable new power amplifier duplexer (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 two mobile phone OEMs and/or RFFE module suppliers. Longer term, the focus of our XBAW filter business will be to expand our market share by engaging with additional mobile phone OEMs and RFFE module manufacturers. We manufacture our XBAW wafers in our Canandaigua, NY fabrication facility where we continue to focus on the commercialization of our filters using our XBAW technology. We plan to continue develop a series of filter designs to be used in the manufacturing of discrete filters, duplexers or more complex multiplexers targeting the 4G/LTE, 5G, Wi-Fi, automotive and defense frequency bands. We believe our filter designs will create an alternative for, and replace, filters currently manufactured using materials with fundamentally inferior performance. Figure 1 below illustrates characterization plots that represent the high power, high bandwidth and high frequency capability of our high purity piezoelectric materials.

Figure 1-Characteristics of our high purity piezoelectric materials used to fabricate our BAW RF filters.

Single-Band Discrete Designs, Duplexers and Multiplexers

SAW filters are generally desired in modern RFFE because of their 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 preferred for these bands. In the NY Facility, we fabricate BAW resonators, the building block of BAW filters, that offer high frequency, wide bandwidth and high-power performance. We believe the improved efficiency provided by BAW filters will reduce the total cost of RFFE modules, offer efficient use of shared frequency spectrum as well as reduce the battery demand of mobile devices. Additionally, we believe that our XBAW technology 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 XBAW technology.

Figure 2- The potential range of our technology.

Pure-Play Filter Provider Enables New Module Competition

Our XBAW technology allows for a wide range of frequency coverage, and we plan to supply XBAW filters that will support frequency bands from 2 to 20 GHz for 4G/LTE, 5G, Wi-Fi, automotive and defense applications. We have successfully demonstrated resonators that will support the design and fabrication of 4G/LTE filters, Wi-Fi filters and defense filters, with frequencies adjacent to the emerging 5G mobile auctions. We have transitioned our XBAW technology to high volume manufacturing and aim to be a pure-play filter supplier that will address the increasing RF complexity placed on RFFE manufacturers supporting 4G/LTE 5G, and Wi-Fi. Figure 3 illustrates historical and projected growth in RF complexity.

Figure 3- Projected Increase in Filter content in Mobile Phone Front End Modules (FEMs) from 2021 - 2027 (Source: Mobile Experts 2022).

Commercialization of XBAW Filters

The immediate focus of our XBAW filter business is on the commercialization of wide bandwidth RF filters to address the Wi-Fi, Network Infrastructure and Defense bands with innovative single-band designs using our XBAW sub 8 GHz RF filter technology. We are currently developing commercial single-band XBAW filters through the NY Facility. We are focused on developing fixed-band XBAW filters because we believe these designs present the greatest near-term potential for commercialization of our technology, and that once demonstrated, the facility can be more efficiently readied for production compared to alternative technologies.

Our technology development process consists of the following five phases:

Pre-Alpha – Demonstrate basic feasibility/capabilities

Alpha – Develop stable recipe (Process freeze) with limited production development

Beta – Complete technology qualification (Process qualification) in factory to enable product design

Pre-Production – Demonstrate lead product production capabilities, release final design tools

Production – Continual improvement of process and parametric performance

We have completed all phases for our first generation XBAW process technology called XB1. Additionally, we have received and delivered orders for pre-production products based on our XBAW process technology, and as of end fiscal 2023, we have shipped more than 65 million XBAW filters to the 5G mobile, Wi-Fi, 5G infrastructure and defense markets.

Research and Development

Since inception, the Company’s focus has been on developing an innovative wireless filter technology with a compelling value proposition to our potential customers and a significant and noticeable impact to the end user. Compared to legacy polycrystalline material (used to manufacture RF resonators and filters), our patented XBAW technology employs high purity piezoelectric films in our resonators, which are used as the enabler to create high performance BAW RF filters. Our high purity piezoelectric materials are a key differentiator when compared to the incumbent amorphous thin-film technologies because they increase the acoustic velocity, the electromechanical coupling coefficient in the resonator and/or high-power performance. These technology features allow Akoustis to engineer RF filter solutions for a broad spectrum for multiple radio frequencies and thus multiple end markets.

Research and development expense totaled $33.2 million for the year ended June 30, 2023, and $35.7 million for the year ended June 30, 2022. R&D activities focused on high purity piezoelectric materials development and resonator demonstration. Current R&D investments include materials advancement, resonator development, RF filter design, high yield wafer manufacturing and filter packaging.

As a result of our efforts, we have developed and introduced multiple new BAW filters which are currently sampling and in production with multiple customers across multiple markets. Our focus remains on improving the electromechanical coupling and quality factor of our resonator technology and the performance of our fabricated filters through design improvements and process optimization experiments.

Recent Developments in R&D

We concentrated on several products and end markets in fiscal 2023 including 5G mobile, Wi-Fi, CBRS and 5G infrastructure, and the defense market.

In 5G mobile, we have multiple active customer engagements. Our first customer is a tier-2 RF module maker that is designing RF filters using our proprietary and patented XBAW^® process that will utilize our new, advanced wafer-level-packaging. This customer is expected to complete three filters designs utilizing Akoustis PDK and enter pre-production in the first half of calendar 2024. Our second customer is a tier-1 RF component company and has engaged Akoustis to develop two filters for 5G connectivity. Akoustis has shipped multiple designs to this customer over the past year in new, advanced wafer-level-packaging. Our third mobile customer is a tier-1 RF module maker that has engaged Akoustis to develop an XBAW^® filter to address a challenging coexistence band in 5G mobile. We have provided a complete design to this customer for evaluation and expect to continue to work closely with this customer over next 12–18 months. Finally, our fourth mobile customer is a leading tier-1 RF module maker that has engaged Akoustis to develop a new 5G filter utilizing our new, state-of-the-art wafer-level-packaging technology. Akoustis delivered second iteration engineering samples to this customer in the second half of fiscal 2023 and expects to continue to work closely with this customer over the next 12-18 months.

Advancements in our Wi-Fi portfolio continued in fiscal 2023. With the FCC’s decision to increase the available spectrum for Wi-Fi with the ratification of 5.9-7.1 GHz in April 2020, new filters are needed that can operate at high frequency with ultra-wide bandwidth. This has driven investment in the development of both standard and custom XBAW^® filters to address this new market over the past several years. We announced our first two Wi-Fi 6E filters in fiscal 2021, including a 5.5 GHz and 6.5 GHz XBAW^® filter solution with 675 MHz and 1180 MHz of bandwidth. In early fiscal 2022, we entered the Wi-Fi 6E market with our first design win in August of 2021 for a multiple-in-multiple-out (MIMO) gateway product. By the end of the second quarter, we added multiple new Wi-Fi design wins and added two additional Wi-Fi 6E customers and one additional Wi-Fi 6 customer in production, exiting the quarter with five customers in production, up from one at the end of the prior calendar year.

Figure 4 –Wi-Fi 6E and emerging Wi-Fi 7 channel frequency spectrum

In early January 2022, we announced the addition of five additional design wins in Wi-Fi, four in Wi-Fi 6E and one in Wi-Fi 6, bringing the total number of Wi-Fi design wins to thirteen. We added two additional design wins in April 2022, bringing the total number to fifteen, and we received one additional design win in Wi-Fi 6E in the June 2022 quarter. In October 2022, we announced the addition of three new design wins in Wi-Fi 6E bringing total to nineteen. In May 2023, we announced the addition of one design win in Wi-Fi 7 and two additional design wins in Wi-Fi 6 bringing total to twenty-two. We are currently sampling and shipping volume pre-production and production filters with multiple OEMs, ODMs and SoC makers.

In June 2020, we entered into a strategic purchase agreement with a tier 1 enterprise-focused Wi-Fi OEM to create customer Wi-Fi 6E XBAW filters for a MU-MIMO enterprise router product. During fiscal 2021 and 2022, we developed multiple filters for this customer, all of which have been design-locked and successfully completed qualification in the June 2022 quarter. We entered into production with this customer in the first half of fiscal 2023.

In April, 2021, we announced that we had developed two new Wi-Fi 6E XBAW filters, a 5.6 GHz filter and a 6.6 GHz filter. The 5.6 GHz filter module covers the entire UNII 1-4 spectrum and enables an additional 80 MHz and 160 MHz channel in UNII 4, while the 6.6 GHz filter module covers the UNII 5-8 spectrum. Current Wi-Fi 6E configurations allow for the use of six 80 MHz and three 160 MHz channels in the UNII 1-3 spectrum and fourteen 80 MHz and seven 160 MHz channels in the UNII 5-8 spectrum. The XBAW 5.6/6.6 GHz coexistence filter modules allow for the use of seven 80 MHz and three 160 MHz channels in the UNII 1-4 spectrum and twelve 80 MHz and six 160 MHz channels in the UNII 5-8 spectrum. Given that the 6 GHz portion of the Wi-Fi 6E standard has begun to experience utilization relatively recently, this new XBAW coexistence solution allows for an environment of greater capacity in the 5 GHz bands. We received our first order from a tier-1 consumer-focused OEM on the same day we introduced the filters, with the first order for the development of new multi-user, multiple-in-multiple-out mesh routing products for the consumer market. In June 2023, we announced the introduction of next generation 5.6 GHz and 6.6 GHz filters with improved performance in a package greater than 4 times smaller compared to the previous generation of the product.

We have had several significant advancements in our CBRS and 5G mobile infrastructure business during fiscal 2022 and 2023. In the June quarter of fiscal 2022, we entered production with three CBRS infrastructure OEM’s, our first production ramps in mobile infrastructure. Also in that quarter, we finished the first phase development of our new 3.8 GHz filter for the US market. In late calendar 2020, the FCC auctioned frequencies between 3.7 GHz and 3.98 GHz for 5G mobile use in the United States. Carriers are currently building networks that operate between 3.7 GHz and 3.98 GHz; we are running second iteration of our filters to address these bands and expect to begin sampling our new 3.8 GHz filter to OEMs in late calendar 2023 for use in small cell base stations.

In the defense market, we built on our early successes in phased array radar and drone filters with the award of a Defense Advanced Research Projects Agency (DARPA) contract to advance XBAW technology in October of 2020, and the award of a second DARPA contract in April 2022 to advance the Company’s XBAW technology to 18 GHz. The first program, a Direct-to-Phase-2 (DP2) program, is to facilitate MEMS development, produce novel piezoelectric materials and device designs for both commercial and defense markets. One of the major outcomes from the DP2 program is to develop a piezo MEMS (PDK) for the Company’s proprietary and patented XBAW process which is expected to support customer engagements that leverage the PDK to create devices and circuits, including RF filters, using the XBAW process. Under the second program, the Company intends to develop a novel mode overtone approach to circumvent trade-offs inherent in traditional BAW frequency scaling approaches.

Akoustis currently has 17 commercial XBAW filters in its production and greater than 18 XBAW filters in development. Current product catalog filters include a 5.6 GHz Wi-Fi filter, a 5.2 GHz Wi-Fi filter, a 5.5 GHz Wi-Fi-6E filter, a 6.5 GHz Wi-Fi 6E filter, three small cell 5G network infrastructure filters including two Band n77 filters and one Band n79 filter, a 3.8 GHz filter for defense phased-array radar applications, and a 3.6 GHz filter for the CBRS 5G infrastructure market. New developments include standard catalog and custom filters for the sub-7 GHz bands targeting 5G mobile device, network infrastructure, Wi-Fi CPE, automotive and defense markets.

Our RFMi Technology and Business

RFMi is focused on supplying SAW and Xtal based frequency components to automotive, industrial IoT, medical, telecom, consumer, and other markets. The team designs, develops and markets under RFMi-branded SAW band pass filters, notch filters, diplexers, duplexers, resonators and delay lines, as well as Xtal resonators, temperature sensing Xtal resonators, temperature compensated crystal oscillators (“TCXO"), voltage controlled temperature compensated crystal oscillators (“VCTCXO”), crystal oscillators (“XO"), voltage controlled crystal oscillators (“VCXO”), oven controlled crystal oscillators (“OCXO”) and Xtal filters, etc.

Technological Challenges Facing Customers for RFMi-branded Solutions

While wireless spectrum expands to above 3GHz where Akoustis XBAW products are focused, the spectrum under 3GHz is also becoming more and more crowded. Customers are losing “guard bands” next to their operating spectrum to competing applications and operators, and “co-existence” has become necessary for functionality for wireless electronics. LTE applications increasingly need to co-exist with Industrial, Scientific, and Medical (“ISM”) band applications, satellite signals are interfered by terrestrial signals, industrial wireless control signals are saturated by communication signals, even medical wireless signals can be interrupted by other RF power outputs. The more traditional filtering technologies, like L-C (inductor – capacitor) and ceramic filters, may not have a Q factor high enough to supply steep roll-off from passband to rejection band. On the other hand, the demand for available data has also exploded, due to the increasing speed of data transmission and digital communication, which requires faster and more accurate piezo-ceramic resonators.

Our RFMi-branded Solutions for the RFMi Customers

RFMi is addressing jamming and high data rate problems by focusing on frequency components and supplying diverse and flexible SAW and Xtal products. In its operation spectrum (about 30MHz to 3GHz), SAW technology offers one of the highest Q factors. RFMi provides custom and standard SAW band pass filters to allow a signal spectrum to pass while rejecting the other signals, as well as a SAW diplexer with one input and two output, SAW duplexers that transmit and receive simultaneously for Frequency Division Duplex (“FDD”) applications, and SAW resonators for high frequency transmitters, as well as custom delay lines. For Xtal products, instead of only supplying standard Xtal resonators at a few frequencies, RFMi provides a family of Xtal products and supports custom designs to accommodate a wider temperature range than standard products, stable frequency, and low jitter and phase noise.

Our GDSI Services and Business

GDSI supplies advanced back-end wafer processing and supply chain services to over 250 customers across multiple industries including automotive, IoT, defense, medical, optical and communications. Its services process multiple materials including silicon, silicon carbide, silicon germanium, fused silica, quartz, alumina, ceramics, MEMS, optical filers and components, gallium nitride and PZT.

Service Challenges Facing Customers of GDSI-branded Solutions

Semiconductor manufacturers in North America typically use overseas assembly and test (“OSAT”) partners for die preparation, which can take multiple weeks for service and delivery of a finished product. GDSI is an ideal partner for complex die preparation for North American customers as it can offer same day service, in addition to advanced prototyping and production capacity for customers with low lead times. Additionally, GDSI has ISO, ITAR and Trusted Foundry Supplier (CAT 1A rank) accreditations, allowing it to service defense companies in the United States that often cannot outsource production to overseas partners.

Our GDSI-branded Solutions for GDSI Customers

GDSI offers wafer-thinning services for wafers up to 300 millimeters, die grinding, ultra-thin wafer grinding at greater than 50um, bonded wafers, and bumped wafers. The services offer tight tolerances for TTV and final thickness accuracy, 3DICs/TSV with via reveal or grinding into interposer, DBG for ultra-thin die or increased die strength. GDSI also offers wafer polishing services for wafers up to 200 millimeters using a chemical mechanical polish with a mirror finish with a Ra<10A, increased die strength, reduced warpage and which removes sub-surface damage. The division also offers a stealth dicing process for wafers up to 300 millimeters, which is a completely dry process with frontside and backside processing capability for wafers with a thickness range of 75um to 800um. Additionally, GDSI can offer coring services, device pick-and-place and automated inspection services.

Raw Materials

Within its internal manufacturing operation for XBAW filters, Akoustis sources raw materials, process gases, metals and other miscellaneous supplies to fabricate its BAW RF filter circuits. Materials range from substrates (used to deposit key piezoelectric materials) to standard dielectric-based laminates (used for packaging of the RF filter circuits). The Company sources at least two types of substrate materials for its BAW process and we have more than one supplier for one material and a single source for the other. Multiple process gases are used for material synthesis, process etching and wafer treatment. While there is more than one supplier for most process gases, the purity levels of such gases may change by source. Hence, either purification or process requalification may be required when purchasing from a second source is required. Akoustis sources various high purity metals for electrode formation and interconnect layers for its RF circuits. Such metals are available in various purity levels and are available from more than one supplier. Other process handling hardware common to the semiconductor industry is available in abundance from multiple suppliers. Consistent with other semiconductor manufacturers, the Company may have to work with all its suppliers to ensure adequate supply of raw materials, process gases and metals as the Company ramps from R&D into high volume manufacturing.

RFMi Supply Chain

RFMi mainly relies on its contract manufacturer, Tai-Saw Technology Co., Ltd. (“TST”) to source raw materials, such as different chemicals and gases for front and back-end manufacturing, quartz, lithium tantalate and certain bonded wafers, metal targets, Xtal blanks, semiconductor IC’s, aluminum bonding wires and flip chip gold stub bump supplies, packages and lids. Most raw materials have dual or multi-sources. However, certain materials, e.g., high temperature co-fired ceramic (“HTCC”) ceramic packages, bonded wafers and automotive grade TCXO/VCTCXO IC’s are single-sourced as there is no alternative supplier or the alternative supplier does not guarantee automotive grade materials. Many of RFMi’s customers are automotive and require a Production Part Approval Process (“PPAP”), where using an alternative source may require re-PPAP and take efforts and time. RFMi intends to diversity its supply chain, however, it takes time and resources. Certain raw material, like HTCC ceramic packages, may not have a second source for the foreseeable future.

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.

In the United States and internationally, as of August 25, 2023, our IP portfolio included 104 patents, including one blocking patent that we have licensed from Cornell University. Additionally, we have 108 active and pending patent applications. These patents cover our XBAW RF filter technology from the substrate level through the system application layer. Where possible, we leverage both federal and state level R&D grants to support development and commercialization of our technology. Our owned patents expire between 2034 and 2040. We intend to 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.

We believe that Akoustis has 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 and intellectual property assignment 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.

Competition

The RF filter market is controlled by a relatively small number of RF component suppliers. These companies include, among others, Broadcom Corporation, Murata Manufacturing Co., Ltd.(“Murata”), Qorvo, Inc., Skyworks Solutions Inc., Taiyo Yuden Co. Ltd., and Qualcomm Incorporated. Broadcom Corporation and Qorvo, Inc. dominate the high band BAW filter market, controlling a significant portion of the customer base and are increasing capacity to meet the growing RF filter demand of the 4G/5G cellular market.

We compete directly with these companies to secure design slots inside RFFE module 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 approach prospective customers as a pure-play filter supplier, offering advantages in performance over the full frequency range at competitive costs. Our challenges include convincing our customers that we have a strong intellectual property position, we will be able to deliver in volume, we will meet their price targets, and we can satisfy quality, reliability and other requirements. For a list of other competitive factors, see “Item 1A. Risk Factors - We are still developing many of our products, and they may not be accepted in the market.”

The Xtal market is more mature and there are many players, including Epson, KDS Daishinku, Kyocera, Murata and NDK from Japan and TXC from Taiwan. Our RFMi products are largely focused on niche markets such as Industrial IoT and professional audio, which may reduce competition with these large, high volume competitors. In addition, our RFMi products primarily consist of TCXO, VCTCXO and VCXO, instead of low cost Xtal. However, we may still compete with market participants with more resources and purchasing power than us.

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. As of June 30, 2023, we had a total of 222 full-time employees. We will continue to hire specific and targeted positions to further enable our technology and manufacturing capabilities as and when appropriate.

Government Regulations

Our business and products in development are or may become subject to regulation by various federal and state governmental agencies, including the radio frequency emission regulatory activities of the Federal Communications Commission (the “FCC”), the consumer protection laws of the Federal Trade Commission (the “FTC”), the import/export regulatory activities of the Department of Commerce, international traffic in arms regulations (ITAR) administered by the Department of State, the product safety regulatory activities of the Consumer Products Safety Commission, and the environmental regulatory activities of the Environmental Protection Agency (the “EPA”).

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 XBAW 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.

Like our XBAW products, RFMi’s SAW and Xtal products are frequency components and are subject to similar FCC rules. For instance, many of RFMi’s customers operate in ISM (Industrial, Scientific, and Medical) band, MICS (Medical Implant Communication System), WMTS (Wireless Medical Telemetry Service) and other bands regulated by FCC, in which transmission power level is restricted and products have to pass the FCC, and in certain cases FDA certification to be allowed in the market. Even though RFMi’s components do not need to be certified by FCC and/or FDA, our customers modules and systems which incorporate RFMi components may need to be certified. Any failure of RFMi’s customers to be certified would affect RFMi’s sales.

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. 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.

Recent Legislation

On August 9, 2022, President Biden signed into law the CHIPS and Science Act of 2022, which appropriates funds to support the construction of semiconductor plants in the United States and advancement of United States semiconductor research and development. The Company is seeking to expand its domestic manufacturing footprint including both semiconductors and advanced packaging at our NY campus under the DoC Chips for America program. We are currently awaiting feedback on our pre-application from the DoC and we expect to file a final application by the end of the calendar year.

ITEM 1A. RISK FACTORS

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.

Risk Factors Summary

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 may not generate sufficient revenues to achieve profitability.

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

	●	We are subject to a number of restrictive covenants relating to our indebtedness, which may restrict our business and financing activities.

	●	Our business, results of operation and financial condition have been, and could in the future be, adversely affected by a pandemic, epidemic or other public health emergency.

	●	The industry and the markets in which the Company operates are highly competitive and subject to rapid technological change.

	●	We are still developing many of our products, and they may not be accepted in the market.

	●	Winning business in the semiconductor industry is subject to a lengthy process that often requires us to incur significant expense, from which we may ultimately generate no revenue.

	●	We face risks associated with the operation of our manufacturing facility.

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

	●	The average selling prices of semiconductor products in our markets have often decreased rapidly and may do so in the future.

	●	Problems in scaling our manufacturing operations or poor manufacturing yields could have a material adverse effect on our business.

	●	Industry overcapacity could cause us to underutilize our manufacturing facilities and have a material adverse effect on our financial performance.

	●	We 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 contract with a number of large service providers and product companies that have considerable bargaining power, which may require us to agree to terms and conditions that could have an adverse effect on our business or ability to recognize revenues.

	●	We may be subject to risks related to doing business in, and having counterparties based in, foreign countries.

	●	Economic regulation in China could adversely impact our business and results of operations.

	●	We depend on a few large customers for a substantial portion of our revenue.

	●	Global shortages in manufacturing capacities could negatively affect our operations and negatively impact our results of operations.

	●	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.

	●	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.

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.

	●	We have a limited number of patent applications, which may not result in issued patents or patents that fully protect our intellectual property.

	●	We are and may in the future be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.

	●	We need to protect our trademark rights and disclosure of our trade secrets to prevent competitors from taking advantage of our goodwill.

	●	Development of certain technologies with our customers or manufacturers may result in restrictions on jointly-developed intellectual property.

	●	We are and 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.

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.

	●	Servicing our debt requires a significant amount of cash or Common Stock, and we may not have sufficient cash flow from our business or have the ability to issue the necessary number of shares of Common Stock to pay our substantial debt.

Risks Related to Regulatory Requirements

	●	Government regulation may adversely affect our business.

	●	We may incur substantial expenses in connection with regulatory requirements, and any regulatory compliance failure could cause our business to suffer.

	●	There could be an adverse change or increase in the laws and/or regulations governing our business.

Investment Risks

	●	Our common stock has been thinly traded and its share price in the public markets has experienced, and may in the future experience, extreme volatility.

	●	Stockholders may experience dilution of their ownership interests because of the future issuance of additional shares of our stock or other securities.

General Risk Factors

	●	Security breaches and other disruptions could compromise our proprietary information and expose us to liability, which would cause our business and reputation to suffer.

	●	Litigation or legal proceedings, including product liability claims, could expose us to significant liabilities, occupy a significant amount of our management’s time and attention and damage our reputation.

	●	There could be an adverse change or increase in the laws and/or regulations governing our business.

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 emerging commercial company that began meaningful commercial operations in 2019 by selling advanced single-crystal BAW filter products for RFFEs for use in the mobile wireless device industry. Historically, we have primarily focused on R&D of high efficiency acoustic wave resonator technology utilizing single-crystal piezoelectric materials, and have not become profitable from operations.

Since our expectations of potential customers and future demand for our products are based on only limited experience, it is difficult for our management and our investors to accurately forecast and evaluate our future prospects and our revenues. Our proposed progression of our operations is therefore subject to all of the risks inherent in light of the expenses, difficulties, complications and delays frequently encountered in connection with the growth of any new business and the development of a product, as well as those risks that are specific to our business in particular. The risks include, but are not limited to, our reliance on third parties to complete some processes for the manufacturing and packaging of our products, 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 sufficient revenues to achieve profitability.

We have incurred operating losses since our inception and expect to continue to have negative cash flow from operations. We have only generated minimal revenues from shipment of product while our primary sources of funds have been R&D grants, MEMS foundry services (which we exited in 2021), issuances of our equity, and debt. Our future profitability will depend on our ability to create a sustainable business model and generate sufficient 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 R&D 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 the use of 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 sufficient 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.

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

In October 2021, we acquired a majority ownership position in RFM Integrated Device, Inc. (“RFMi”) and, on April 29, 2022, exercised the right to acquire the remaining 49%. In January 2023, we acquired all of the outstanding capital stock of Grinding and Dicing Services, Inc. (“GDSI”). The consideration for the acquisitions has included cash, common stock, a secured promissory note, as well as a possible earn-out payment with respect to RFMi that may be paid in cash or common stock based on its future trading price. We may in the future make additional acquisitions of, or investments in, companies that we believe have products or capabilities that are a strategic or commercial fit with our current business or otherwise offer opportunities for our company. In connection with these acquisitions or investments, we may:

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

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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.

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

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

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

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diversion of management’s attention from its 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 stockholder litigation challenging the acquisition, which could result in significant costs of defense, indemnification and liability,

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

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

Acquisitions may also have unanticipated tax, legal, regulatory and accounting ramifications, including recording goodwill and non-amortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges and incurring amortization expenses related to certain intangible assets.

If our goodwill and intangible assets on our consolidated balance sheet arising from the RFMi and GDSI acquisitions become impaired, it would require us to record a material charge to earnings in accordance with generally accepted accounting principles.

As a result of our acquisitions of RFMi and GDSI, we recorded approximately $14.6 million of goodwill and $17.7 million of intangible assets which are currently shown as assets on our consolidated balance sheet at June 30, 2023. Generally Accepted Accounting Principles (“GAAP”) require us to test our goodwill and intangible assets for impairment on an annual basis, or more frequently if indicators for potential impairment exist. The testing required by GAAP involves estimates and judgments by management. Although we believe our assumptions and estimates are reasonable and appropriate, any changes in key assumptions, including a failure to meet business plans or other unanticipated events and circumstances, may affect the accuracy or validity of such estimates. If in the future we determine that an impairment exists, we may be required to record a material charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets is

SEC Form 10-K filed by Akoustis Technologies Inc.