Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

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Commitments and Contingencies
6 Months Ended
Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and contingencies

Note 12. Commitments and Contingencies

 

Leases

 

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

 

The components of lease expense were as follows:

 

    Three
Months Ended
December 31,
2021
    Three
Months Ended
December 31,
2020
   

Six

Months Ended
December 31,
2021

   

Six

Months Ended
December 31,
2020

 
Operating Lease Expense   $ 82     $ 75     $ 157     $ 150  

 

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

 

    Classification on the
Condensed Consolidated
Balance Sheet
  December 31,
2021
    June 30,
2021
 
Assets                    
Operating lease assets   Other non-current assets   $ 389     $ 471  
                     
Liabilities                    
Other current liabilities   Current liabilities     291       270  
Operating lease liabilities   Other non-current liabilities     94       202  
                     
Weighted Average Remaining Lease Term:                    
Operating leases         1.25       1.76  
                     
Weighted Average Discount Rate:                    
Operating leases         11.9 %     12.5 %

 

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

 

For the year ending June 30,      
2022   $ 176  
2023     231  
2024     7  
2025    
 
Thereafter    
 
Total lease payments (undiscounted cash flows)     414  
         
Less imputed interest     (29 )
Total   $ 385  

 

Ontario County Industrial Development Authority Agreement

 

On February 27, 2018, the Company entered into a Lease and Project Agreement (the “Lease and Project Agreement”) and a Company Lease Agreement (the “Company Lease Agreement” and together with the Lease and Project Agreement, the “Agreements”), each dated as of February 1, 2018, with the Ontario County Industrial Development Agency, a public benefit corporation of the State of New York (the “OCIDA”). Pursuant to the Agreements, the Company leases for $1.00 annually to the OCIDA an approximately 9.995 acre parcel of land in Canandaigua, New York, together with the improvements thereon (including the Company’s New York fabrication facility), and transfer title to certain related equipment and personal property to the OCIDA (collectively, the “Facility”). The OCIDA leases the Facility back to the Company for annual rent payments specified in the Lease and Project Agreement for the Company’s primary use as research and development, manufacturing, warehouse and professional office space in its business, and to be subleased, in part, by the Company to various existing tenants. The Company estimates substantial tax savings during the term of the Agreements, which expire on December 31, 2028. In addition, subject to the terms of the Lease and Project Agreement, certain purchases and leases of eligible items will be exempt from the imposition of sales and use taxes. Subject to the terms of the Lease and Project Agreement, the OCIDA has also granted to the Company an exemption from certain mortgage recording taxes for one or more mortgages securing an aggregate principal amount not to exceed $12.0 million, or such greater amount as approved by the OCIDA in its sole and absolute discretion. The benefits provided to the Company pursuant to the terms of the Lease and Project Agreement are subject to claw back over the life of the Agreements upon certain recapture events, including certain events of default.

 

Litigation, Claims and Assessments

 

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