Equity Method Investments

3 Months Ended

Jul. 28, 2018

Equity Method Investments

Equity Method Investments

6. Equity Method Investments

In December 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 and 150,000,000 yen ($1,407,000) on April 17, 2018.  Under the JVA, the Company committed to make an additional capital contribution of 209,500,000 yen (approximately $1,900,000) in or around January 2019 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 is accounted for as an equity method investment. For the three months ended July 28, 2018, the Company recorded 5% of the net loss of HAPSMobile, or $602,000, in “Equity method investment activity, net of tax” in the unaudited consolidated statement of operations.  At July 28, 2018, the carrying value of the investment in HAPSMobile was $1,388,000 and was recorded in “Other assets.”