8-K: Akoustis Technologies Files for Chapter 11, Pursues Strategic Asset Sale

Akoustis Technologies has filed for Chapter 11 bankruptcy to facilitate a strategic sale of its business and assets, aiming to ensure continued operations and a sale free of prior legal encumbrances.

Summary

• Akoustis Technologies, a manufacturer of RF filters, has initiated voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware.
• The company is seeking to sell its assets through a court-supervised process, aiming to maximize value for stakeholders.
• This action follows a legal case with Qorvo, Inc., which resulted in a judgment against Akoustis for approximately $58 million.
• Akoustis has entered into a stalking horse asset purchase agreement with Gordon Brothers for an initial purchase price of $10 million for substantially all of the company's tool and tool-related equipment, machinery, IT equipment, and other assets.
• The purchase price may be reduced to $7 million if the closing occurs more than 52 days after the bankruptcy filing, plus a percentage of proceeds from any subsequent sale of the assets by Gordon Brothers.
• The sale process will be subject to court approval and may involve competing bids.
• Akoustis intends to continue operating its business during the Chapter 11 process, with first-day motions filed to ensure uninterrupted operations, including employee wages and vendor payments.
• The company has engaged Raymond James & Associates, Inc. to advise on strategic options, including the asset sale.

Sentiment

Score: 3

Explanation: The document indicates significant financial distress and a forced sale of assets, which is a negative development. While the company is trying to maintain operations, the overall outlook is not positive for current equity holders.

Positives

• The company has secured a stalking horse bid, providing a baseline for the asset sale.
• Akoustis is taking steps to ensure continued operations during the bankruptcy process.
• The company is aiming to sell its assets free and clear of prior legal encumbrances.
• The court-supervised sale process may attract higher bids, potentially increasing value for stakeholders.
• The company has sufficient liquidity to continue operating in the ordinary course of business during the court-supervised sale process.

Negatives

• The Chapter 11 filing was triggered by a $58 million judgment against the company.
• The company's convertible notes and secured promissory note are now immediately due and payable.
• Trading in the company's securities is highly speculative and poses substantial risks.
• The company does not expect common stockholders to receive any payment or distribution in the bankruptcy proceedings.
• The initial purchase price for assets may be reduced if the sale is delayed.

Risks

• Trading in the company's securities is highly speculative and may not reflect any actual recovery for holders.
• There is uncertainty regarding the outcome and timing of the Chapter 11 cases and the asset sale.
• The company's relationships with vendors, regulatory authorities, employees, and other third parties could be negatively impacted.
• There is a risk of possible proceedings brought by third parties in connection with the bankruptcy or sale.
• Court approval of the asset sale is not guaranteed, and other conditions may not be met.
• The timing and amount of any distributions to stakeholders are uncertain.
• The company's ability to meet financial obligations and maintain critical contracts during the bankruptcy is at risk.

Future Outlook

The company plans to pursue a sale of its business or assets under Chapter 11, aiming to continue operations and maximize value for stakeholders. The company is seeking to execute an organized sale process with sufficient time to obtain going concern qualified bids.

Management Comments

• Kamran Cheema, Chief Executive Officer of Akoustis, stated that the Chapter 11 filing is a strategic step to provide flexibility and allow the company to continue operations while the sale process continues.
• He emphasized the priority of ensuring a seamless process for customers, partners, and employees.
• He also stated the company intends to leverage the court-supervised sale process to reaffirm that the business being sold is free and clear of any Qorvo infringement.

Industry Context

This announcement reflects the challenges faced by technology companies in the competitive RF filter market, particularly when dealing with intellectual property disputes and financial pressures. The move to sell assets through bankruptcy is a strategic response to these challenges, aiming to preserve value and ensure the continuation of the business under new ownership.

Comparison to Industry Standards

• The use of a stalking horse bid is a common practice in bankruptcy sales, providing a floor for the bidding process and encouraging other potential buyers.
• The initial purchase price of $10 million for the assets is relatively low, reflecting the company's financial distress and the potential for competing bids to increase the final sale price.
• The reduction of the purchase price to $7 million if the closing is delayed is a standard clause to incentivize a timely sale.
• The inclusion of a percentage of proceeds from subsequent sales by Gordon Brothers is a way to share potential upside with the sellers.
• The company's focus on continuing operations during the bankruptcy process is consistent with the goal of maximizing value for stakeholders and ensuring a smooth transition for customers and employees.
• The legal issues with Qorvo are a significant factor in the bankruptcy filing, highlighting the importance of intellectual property in the technology sector.

Legal Proceedings

• The company has filed for Chapter 11 bankruptcy.
• The company is subject to a $58 million judgment in favor of Qorvo, Inc.

Stakeholder Impact

• Shareholders are unlikely to receive any payment or distribution on their securities.
• Employees will continue to receive wages and benefits during the bankruptcy process.
• Customers will experience a seamless transition as the company continues to operate.
• Vendors will continue to be paid for critical services.
• Creditors will be subject to the bankruptcy process and may not receive full payment.

Next Steps

• The company will seek court approval for the asset sale and bidding procedures.
• The company will solicit competing bids for its assets.
• The company will continue to operate its business during the Chapter 11 process.
• The company will work to complete the sale process as quickly as possible.

Key Dates

Keywords

Chapter 11, bankruptcy, asset sale, stalking horse, RF filters, BAW, Gordon Brothers, Qorvo, strategic sale, restructuring