AKTS Akoustis Technologies Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2024

or

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

For the transition period from __________ to __________

Commission File Number: 001-38029

AKOUSTIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

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

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

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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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.

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

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

As of November 11, 2024, there were 154,590,918 shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.

AKOUSTIS TECHNOLOGIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Akoustis Technologies, Inc.

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

See accompanying notes to the condensed consolidated financial statements

Akoustis Technologies, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

Akoustis Technologies, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(In thousands)

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

Akoustis Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, except per share data)

(Unaudited)

See accompanying notes to the condensed consolidated financial statements

AKOUSTIS TECHNOLOGIES, INC.

Notes to the Condensed Consolidated Financial Statements
(Unaudited)

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

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

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that relate to our plans, objectives, estimates, and goals. Any and all statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Terms such as “may,” “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 this management’s discussion and analysis of financial condition or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), (iv) our ability to efficiently utilize cash and cash equivalents to support our operations for a given period of time, (v) our ability to engage customers while maintaining ownership of our intellectual property, and (vi) the assumptions underlying or relating to any statement described in (i), (ii), (iii), (iv) or (v) above.

Forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates, and assumptions and are subject to a number of risks and uncertainties and other influences, many of which are beyond our control. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, if we do not arrange financing in the near term or timely appeal recent judgments and awards issued by the Delaware District Court, we will be forced to seek protection by filing a voluntary petition for relief under the bankruptcy code; our limited operating history; our inability to generate revenues or achieve profitability; the impact of conflicts in Ukraine and the Middle East, global pandemics such as COVID-19 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 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’ 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, has resulted in significant expense and a large jury award and related awards in respect of attorney’s fees and pre- and post-judgment interest in favor of Qorvo; the impact of recent departures of executive officers and directors and our inability to attract and retain qualified personnel; the 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 inability to successfully manufacture, market and sell products based on our technologies; 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.

These and other risks and uncertainties, which are described in more detail in Part II, Item 1A. “Risk Factors” of this report and in our Annual Report on Form 10-K, filed with the SEC on October 8, 2024, as amended October 11, 2024 (the “2024 Annual Report”), could cause our actual results to differ materially from those expressed or implied by the forward-looking statements in this report. Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them. Except as may be required by law, we do not undertake any obligation to update the forward-looking statements contained in this report to reflect any new information or future events or circumstances or otherwise.

Overview

Akoustis Technologies, Inc., a Delaware corporation, was incorporated in 2013. The Company is 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 have targeted UHB, sub 7 GHz 5G, Wi-Fi and defense bands. We expect our filter solutions will address problems (such as loss, bandwidth, power handling, and isolation) created by the growing number of frequency bands in the RFFE of mobile devices, infrastructure and premise equipment to support 5G, and Wi-Fi. We have prototyped, sampled and begun commercial shipment of our single-band low loss BAW filter designs for 5G frequency bands and 5 GHz and 6 GHz Wi-Fi bands which are suited to competitive BAW solutions and historically cannot be addressed with low-band, lower power handling surface acoustic wave (“SAW”) technology. Additionally, through our 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 “NY 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 October 31, 2024, our IP portfolio included 97 patents, including a blocking patent that we have licensed from Cornell University. Additionally, as of October 31, 2024, we have 31 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, WiFi CPE OEMs, medical device makers, 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.

Business Environment and Current Trends

Impact of New Export Control Regulations

On October 17, 2023, the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) announced updates to export control regulations, originally issued on October 7, 2022, regarding the sale of certain products and services related to advanced computing items, semiconductor manufacturing equipment, and items that can support end uses related to the development and production of advanced-node integrated circuits and semiconductor manufacturing equipment, among others. The updated rules modify and expand restrictions on the sale of products and the provision of certain services by U.S. persons to some companies and domestic fabs located in certain countries, including China, without prior U.S. governmental authorization.

Semiconductor Shortages and Supply Chain Issues

The global silicon semiconductor industry is experiencing a shortage in supply and difficulties in ability to meet customer demand. This shortage has led to an increase in lead-times of production of semiconductor chips and components. As our business depends in significant part upon manufacturers of products requiring semiconductors, as well as the current and anticipated production of these products, we have sought to manage the impact of supply shortages though carefully maintaining and increasing key inventory levels. In some cases, we have incurred higher costs to secure available inventory, or have extended our purchase commitments or placed non-cancellable orders with suppliers, which introduces inventory risk if our forecasts and assumptions are inaccurate. We believe the global supply chain challenges and their adverse impact on our business and financial results will persist through calendar year 2024. We expect these constrained supply conditions to increase our costs of goods sold and increase uncertainty with respect to the timing of delivery of specific customer orders.

Recent Developments

On August 13, 2024, we announced an additional purchase order for $13 million XBAW® filters from our existing Tier-1 customer for use in their Wi-Fi Access Points raising production commitments to greater than $21 million, plus a customer option to increase order quantities.

On September 9, 2024, the District Court issued an Order Granting in Part and Denying in Part Plaintiff’s Motion for Attorneys’ Fees (the “Attorneys’ Fees Order”). The Attorneys’ Fees Order awarded Qorvo approximately $11.7 million in attorneys’ fees (the “Attorneys’ Fees Award”).

On September 10, 2024, the District Court issued an Order on Pre- and Post-Judgment Interest (the “Judgment Interest Order”. The Judgment Interest Order awarded Qorvo approximately $7.3 million (the “Judgment Interest Award” and, collectively with the Damages Award and the Attorneys’ Fees Award, the “Awards”).

On October 11, 2024, the District Court issued an order granting in part and denying in part Qorvo’s motion for permanent injunctive relief, and immediately after entered its Permanent Injunction (the “Injunction Order”). The Injunction Order provides that:

On October 15, 2024, the District Court denied Qorvo’s post-trial motion seeking to amend the jury’s finding that the Company did not violate the North Carolina Unfair and Deceptive Trade Practices Act (the “UDTPA”) and instead award Qorvo treble damages for the Company’s alleged UDTPA violation.

On October 31, 2024, the District Court denied the Company’s post-trial motions seeking to (i) overturn the jury’s damages award for trade secret misappropriation and (ii) obtain a new trial on liability for patent infringement and regarding damages for trade secret misappropriation (or in the alternative, remittitur regarding such damages).

Critical Accounting Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2024 Annual Report.

Results of Operations

Three Months Ended September 30, 2024 and 2023

Revenue

The Company recorded revenue of $9.0 million for the three months ended September 30, 2024 as compared to $7.0 million for the three months ended September 30, 2023. The increase of $2.0 million was primarily due to an increase in fabrication service revenue by $2.4 million or 55.9% offset by a decrease in service revenue of $0.4 million or 15.1%.

Cost of Revenue

Cost of revenue includes direct labor, material, net realizable value (NRV) adjustments, and facility costs primarily associated with manufacturing of filter products and engineering services. The Company recorded cost of revenue of $4.7 million for the three months ended September 30, 2024 as compared to $8.1 million for the three months ended September 30, 2023. The $3.4 million decrease is primarily due to costs associated with RF product revenue which decreased by $3.3 million as well as costs associated with fabrication services revenue which decreased by $0.1 million.

Research and Development Expenses

R&D expenses were $2.7 million for the three months ended September 30, 2024, as compared to $10.3 million for the three months ended September 30, 2023, a decrease of $7.6 million or 74.0%. Personnel costs, including stock-based compensation, were $0.8 million compared to $4.8 million in the prior year period, a decrease of $4.0 million or 82.9%. Facility costs, including depreciation, of $1.7 million primarily associated with the NY Facility were $1.2 million lower than the prior period. Lastly, R&D material costs were $2.1 million lower than the prior period.

General and Administrative Expense

General and administrative (“G&A”) expenses include salaries and wages for executive and administrative staff, stock-based compensation, professional fees, insurance costs and other general costs associated with the administration of our business. G&A expenses for the three months ended September 30, 2024 were $6.9 million, which is a decrease of $3.3 million compared to the $10.2 million for the three months ended September 30, 2023. Year-over-year changes within G&A expenses include a decrease in employee compensation (including stock-based compensation) of $3.0 million and a decrease in legal fees of $1.1 million offset by an increase in other professional services of $1.2 million.

Other (Expense)/Income

Other expense for the three months ended September 30, 2024 was $1.1 million, compared to other income of $1.5 million for the three months ended September 30, 2023. The expense increase of $2.6 million was comprised of a reduction in the gain related to the change in fair value of derivative liabilities of $2.0 million and an increase in interest expense of $0.2 million and an increase in litigation related contingent liability of $0.4 million.

Net Loss

The Company recorded a net loss of $6.4 million for the three months ended September 30, 2024, compared to a net loss of $20.1 million for the three months ended September 30, 2023. The period-over-period reduction in loss of $13.7 million, or 68.1%, was primarily driven by an increase in sales of $2.0 million, a decrease in cost of revenue of $3.4 million, a decrease in G&A expenses of $3.3 million and a decrease in R&D expenses of $7.6 million. These expense decreases were partially offset by a decrease in other income of $2.6 million.

Liquidity and Capital Resources

Overview

We are experiencing financial and operating challenges. In the absence of additional financing or our timely appeal of the recent judgment and awards relating to the Qorvo Litigation, we will be forced to seek protection by filing a voluntary petition for relief under the Bankruptcy Code.

The Company has incurred losses and negative cash flow from operations since inception. Our operations thus far have been funded primarily with sales of equity and debt securities, as well as contract research and government grants, revenue from customers, foundry services and engineering services. In November 2023, we announced that we had undertaken significant expense reductions and cost-saving measures to reduce our operating cash flow burn. As a result of these cost-savings initiatives, the operating expenditures supporting the future growth of our manufacturing capabilities and expansion of our product offerings have decreased, along with decreases in research and development and headcount costs.

The Company’s short-term and long-term liquidity requirements primarily arise from funding (i) research and development expenses, (ii) general and administrative (“G&A”) expenses including salaries, bonuses, commissions and stock-based compensation, (iii) working capital requirements, (iv) business acquisitions and investments we may make from time to time and a note payable issued in connection with our acquisition of GDSI, and (v) interest and principal payments related to our $44.0 million aggregate principal amount of outstanding convertible notes. Additionally, due to the outcome of the Qorvo Litigation and the judgments against the Company for damages and legal fees, the Company’s liquidity is severely constrained. These matters raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date of this filing

Balance Sheet and Working Capital

The Company had $12.1 million of cash and cash equivalents on hand as of September 30, 2024, which reflects a decrease of $12.3 million compared to $24.4 million as of June 30, 2024. The decrease is primarily due to cash used in operations of $8.1 million, cash used for investing activities of $0.2 million, and cash used for financing activities of $4.1 million. In the absence of additional liquidity, the Company anticipates that its existing cash resources, with a continued focus on cash conservation, is sufficient to fund its operations into the third quarter of fiscal 2025. However, the Company has historically incurred recurring operating losses and will continue to do so until it generates sufficient revenues from operations; as a result, we need to obtain additional capital through the sale of additional equity securities, debt, or otherwise, to fund operations past that date. There is no assurance that the Company’s projections and estimates are accurate. The Company is actively managing and controlling the Company’s cash outflows to mitigate liquidity risks, however these efforts may not be successful.

September 30, 2024 compared to June 30, 2024

As of September 30, 2024, the Company had current assets of $25.7 million, made up primarily of cash on hand of $12.1 million. As of June 30, 2024, current assets were $36.8 million comprised primarily of cash on hand of $24.4 million.

Property, Plant and Equipment was $12.4 million as of September 30, 2024 as compared to a balance of $12.9 million as of June 30, 2024.

Total assets as of September 30, 2024 and June 30, 2024 were $57.4 million and $69.7 million, respectively.

Current liabilities as of September 30, 2024 and June 30, 2024 were $80.1 million and $84.4 million, respectively.

Long-term liabilities totaled $42.5 million as of September 30, 2024, compared to $42.5 million as of June 30, 2024.

Stockholders’ equity was a deficit of $65.2 million as of September 30, 2024, compared to a deficit of $57.1 million as of June 30, 2024, an increase in the deficit of $8.1 million, or 14.2%. This increase in deficit was primarily due to the net loss for the three months ended September 30, 2024 of $6.4 million along with a decrease in additional paid-in-capital (“APIC”) of $1.7 million. The decrease in APIC was primarily due to stock-based compensation.

Cash Flow Analysis

Operating activities used cash of $12.2 million during the three months ended September 30, 2024 and $13.1 million during the comparative period ended September 30, 2023.

Investing activities used cash of $0.2 million for the three months ended September 30, 2024 compared to $4.2 million for the comparative period ended September 30, 2023. Investing activities for the three months ended September 30, 2023 consisted of purchases of property, plant and equipment.

There were no financing activities during the three months ended September 30, 2024 or September 30, 2023.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

We conducted an evaluation under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial officer) of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of such date due to the material weaknesses described below with respect to our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed in our 2024 Annual Report, and based on our evaluation as of September 30, 2024, we identified the following material weaknesses in the Company’s internal controls:

Remediation Plan

IT Access and Change Controls: During the first quarter of fiscal year 2025, controls were designed and implemented to enhance control over financial system access as well as enhanced system change management controls. These controls will be tested for design and operating effectiveness during fiscal year 2025.

Invoice Accrual Review: During the first quarter of fiscal year 2025, controls were designed and implemented to mitigate risks related to the precision of the control with respect to the accrual of invoices in the appropriate accounting period. These controls will be tested for design and operating effectiveness during fiscal year 2025.

Changes in Internal Control over Financial Reporting

Other than the mitigating controls referenced above, during the quarter ended September 30, 2024, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may have an adverse effect on our business, financial condition or results of operations and prospects.

Except for the matters described under “Litigation, Claims and Assessments” in “Note 13. – Commitments and Contingencies” of the condensed consolidated financial statements in this Item 1 of Part I of this Quarterly Report on Form 10-Q, which description is incorporated in “Item 1. Legal Proceedings” by reference, we are currently not aware of any material pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

ITEM 1A. RISK FACTORS.

In addition to the risk factors set forth below and the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. Except as disclosed below, there have been no material changes to the risk factors described in Part I, Item 1A, “Risk Factors,” included in our 2024 Annual Report.

We have a history of operating losses and will need to raise significant additional capital to continue our business and operations. Additionally, the Qorvo Litigation resulted in a verdict against the Company, awarding Qorvo approximately $38.6 million in damages, and the District Court has since awarded Qorvo approximately $11.7 million in attorneys’ fees and approximately $7.3 million in pre- and post-judgment interest, which has severely constrained our liquidity. Unless we arrange financing in the near term, or timely appeal the verdict and fee awards, we will be forced to seek protection by filing a voluntary petition for relief under the Bankruptcy Code, which would have a material adverse effect on our business and could cause you to lose all of your investment.

We are experiencing financial and operating challenges. As of September 30, 2024, we had $12.1 million of cash and cash equivalents compared to $79.7 million of current liabilities, resulting in negative working capital. Current liabilities include a litigation related contingent liability in respect of an adverse judgment against the Company in the Qorvo Litigation awarding Qorvo approximately $38.6 million in damages and subsequently issued orders awarding Qorvo approximately $11.7 million in attorneys’ fees and approximately $7.4 million in pre- and post-judgment interest. On October 31, 2024, the District Court denied the Company Post-Trial Motions. The verdict in the Qorvo Litigation together with the related awards and the denial of the Company Post-Trial Motions have created significant uncertainty regarding the Company’s financial condition and prospects. The Company is continuing to evaluate the impact of the verdict and the related awards on its business, results of operations, and financial condition; however, unless the Company arranges financing or timely appeals the District Court’s judgment and awards, which may require the Company’s posting an undertaking (such as an appeal bond), the Company will be required to seek protection under applicable bankruptcy laws, resulting in our stockholders losing some or all of their investment.

We have been subject to claims of infringement, misappropriation or misuse of third party intellectual property that have resulted in significant expense and severe disruption to our business, and we may become subject to similar claims in the future.

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

As described under “Litigation, Claims and Assessments” in “Note 13 – Commitments and Contingencies” of the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, the Qorvo Litigation has resulted in a verdict against the Company awarding Qorvo a substantial amount of damages and the District Court has subsequently awarded Qorvo attorneys’ fees and pre- and post-judgment interest, which has several constrained our liquidity and will likely cause us to file for protection under the Bankruptcy Code. The District Court has also granted a permanent injunction, which places certain restrictions on the Company’s ability to sell products found by the jury to infringe the two asserted Qorvo patents and also grants certain inspection and audit rights to Qorvo to ensure compliance with the injunction. The District Court also denied the Company’s post-trial motions seeking to (i) overturn the jury’s damages award for trade secret misappropriation and (ii) obtain a new trial on liability for patent infringement and regarding damages for trade secret misappropriation (or in the alternative, remittitur regarding such damages). Additionally, as described under Note 14, the Company has filed a complaint against Qorvo in the U.S. District Court for the Eastern District of Texas alleging infringement by Qorvo of certain Company patents.

The litigation described above has been prolonged and costly and resulted in significant expenses, diversion of management and technical personnel attention and disruptions and delays in the Company’s business and product development, and other collateral consequences, all of which has had a material adverse effect on its business, financial condition, and results of operations. Any out-of-court settlement of the above matters or other actions may also have an adverse effect on the Company’s business, financial condition and results of operations, including, but not limited to, substantial expenses, the payment of royalties, licensing or other fees payable to third parties, or restrictions on its ability to develop, manufacture, and sell its products.

From time to time, the Company may become involved in other lawsuits, investigations, and claims that arise in the ordinary course of business. The Company believes it has meritorious defenses against such other pending claims and intends to vigorously pursue them. While it is not possible to predict or determine the outcomes of any such other pending actions, the Company believes the amount of liability, if any, with respect to such other pending actions, would not materially affect its financial position, results of operations, or cash flows.

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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Unregistered Sales of Equity Securities

The Company did not sell any unregistered securities during the period covered by this report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

The exhibits in the Exhibit Index below are filed or furnished, as applicable, as part of this report.

EXHIBIT INDEX

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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