Equity Method Investments

9 Months Ended

Jan. 27, 2018

Equity Method Investments

Equity Method Investments

5. Equity Method Investments

In December of 2017, the Company and Softbank formed a joint venture, HAPSMobile.  HAPSMobile is a Japanese corporation that is 5% owned by the Company and 95% owned by SoftBank and is governed by a Joint Venture Agreement (the “JVA”).  The Company purchased its 5% stake in HAPSMobile for 210,000,000 yen ($1,860,000) effective as of December 27, 2017.  Under the JVA, the Company committed to make additional capital contributions of 150,000,000 yen (approximately $1,400,000) and 209,500,000 yen (approximately $1,900,000) in or around April 2018 and January 2019, respectively, to maintain its 5% ownership stake. Additionally under the JVA, the Company may purchase additional shares of HAPSMobile, at the same per share price for the purchase of its original 5% stake, to increase its ownership percentage of HAPSMobile up to 19% prior to the first flight test of the prototype aircraft produced under a design and development agreement between HAPSMobile and the Company.

As the Company has the ability to exercise significant influence over the operating and financial policies of HAPSMobile, the Company’s investment will be accounted as an equity method investment. For the three months ended January 27, 2018, the Company recorded 5% of the net loss of HAPSMobile, or $418,000, in “Equity method investment activity, net of tax” in the consolidated statement of operations.  At January 27, 2018, the carrying value of the investment in HAPSMobile was $1,503,000 and was recorded in “Other assets, long-term.”