What changed in this filing

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Item 1. Financial Statements

2024-11-13 compared with 2024-08-12 · 168 added, 138 removed, 470 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2024

September 30, 2024

December 31, 2023

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Stockholders’ equity:

Preferred Stock, $ 0.00001 par value, 10,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

no shares issued or outstanding as of June 30, 2024 and December 31, 2023.

Common Stock, $ 0.00001 par value, 200,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

6,554,296 and 5,471,121 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.

Preferred Stock, $ 0.00001 par value, 10,000,000 shares authorized as of September 30, 2024 and December 31, 2023;

no shares issued or outstanding as of September 30, 2024 and December 31, 2023.

Common Stock, $ 0.00001 par value, 200,000,000 shares authorized as of September 30, 2024 and December 31, 2023;

7,774,275 and 5,471,121 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.

Additional paid-in capital

8 unchanged sentences

(in thousands, except share and per share amounts)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Costs and expenses:

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Issuance of shares for RSUs

Proceeds (refunds) from contributions to the ESPP

Net refunds due to ESPP participants

Pre-funded warrants exercised

Balance at June 30, 2024 (unaudited)

Balance as of June 30, 2024

Stock-based compensation - RSUs

Stock-based compensation - ESPP

Issuance of shares for RSUs

Proceeds from contributions to the ESPP

Issuance of shares in an ATM placement, net of $ 234 in issuance costs

Balance as of September 30, 2024

Stockholders’

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Stock-based compensation - RSUs

Stock-based compensation - performance share units (“PSUs”)

Stock-based compensation - ESPP

Issuance of shares for RSUs

Proceeds from contributions to the ESPP

Balance as of June 30, 2023

Stock-based compensation - options

Stock-based compensation - RSUs

Stock-based compensation - PSUs

2 unchanged sentences

Proceeds from contributions to the ESPP

Balance at June 30, 2023 (unaudited)

Cash in lieu of fractional shares from reverse stock split

Issuance of shares in an ATM placement, net of $ 94 in issuance costs

Balance as of September 30, 2023

Share and per share amounts have been retroactively adjusted to reflect the impact of a 1-for- 20 reverse stock split effected in August 2023, as discussed in Note 1.

3 unchanged sentences

(in thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

5 unchanged sentences

Change in fair value of warrant liability

Offering costs allocated to warrant liability

Offering costs allocated to warrants

Changes in operating assets and liabilities:

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Net proceeds from a sale of common stock and warrant issuance

Proceeds from contributions to the ESPP, net

Proceeds from contributions to the ESPP

Net cash provided by financing activities

1 unchanged sentence

Cash, cash equivalents and restricted cash - beginning

Cash and cash equivalents - ending

Cash, cash equivalents and restricted cash - ending

Supplemental disclosure of non-cash investing and financing activities:

Decrease in operating lease right-of-use assets and operating lease liabilities from incremental borrowing rate change

Increase in operating lease right-of-use assets and operating lease liabilities from lease modification

The accompanying notes are an integral part of these condensed financial statements.

22 unchanged sentences

Note 2 – Liquidity and Management Plans

During the three and six months ended June 30, 2024, the Company recorded revenue of $ 46,000 and $ 110,000 , respectively.

During the three and six months ended June 30, 2023, the Company recorded revenue of $ 0.1 million and $ 0.2 million, respectively.

During the three and six months ended June 30, 2024, the Company recorded net losses of $ 4.3 million and $ 10.9 million, respectively.

During the three and six months ended June 30, 2023, the Company recorded net losses of $ 4.0 million and $ 10.6 million, respectively.

Net cash used in operating activities was $ 10.8 million and $ 11.7 million for the six months ended June 30, 2024 and 2023, respectively.

However, the Company is currently meeting its liquidity requirements through the proceeds of securities offerings, including the ATM Program (as defined in Note 7 below), which securities offerings generated aggregate net proceeds of $ 6.9 million during 2023 and $ 1.8 million during the six months ended June 30, 2024.

As of June 30, 2024, the Company had cash and cash equivalents of $ 4.9 million.

The Company expects that cash and cash equivalents as of June 30, 2024, together with additional anticipated proceeds from the ATM Program and other financing transactions during 2024, continued cost and expense reductions and collections generated by anticipated revenues, will be sufficient to fund the Company’s operations through August 2025.

During the three and nine months ended September 30, 2024, the Company recorded revenue of $ 0.2 million and $ 0.3 million, respectively.

During the three and nine months ended September 30, 2023, the Company recorded revenue of $ 0.2 million and $ 0.4 million, respectively.

During the three and nine months ended September 30, 2024, the Company recorded net losses of $ 3.4 million and $ 14.3 million, respectively.

During the three and nine months ended September 30, 2023, the Company recorded net losses of $ 4.1 million and $ 14.8 million, respectively.

Net cash used in operating activities was $ 14.9 million and $ 15.9 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the Company had cash and cash equivalents of $ 1.5 million.

The Company is currently meeting its liquidity requirements through the proceeds of securities offerings, including the ATM Program (as defined in Note 7 below), which securities offerings generated aggregate net proceeds of $ 6.9 million during 2023 and $ 2.5 million during the nine months ended September 30, 2024.

Based on current operating levels, the Company will need to raise additional funds in the next 12 months by selling additional equity or incurring debt.

As the Company gains traction in the market with its new technology and continues to invest capital in transitioning and scaling the business from research and development of new technologies to commercial production, there can be no assurance that its available resources and revenue generated from its business operations will be sufficient to sustain its operations.

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The unaudited condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the period presented.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for other future periods.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for other future periods.

These interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 28, 2024.

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The Company had restricted cash as collateral for the Company’s corporate credit card program which was discontinued during the second quarter of 2024.

As of June 30, 2024 and December 31, 2023, the carrying value of restricted cash was $ 0 and $ 0.1 million, respectively.

As of September 30, 2024 and December 31, 2023, the carrying value of restricted cash was $ 0 and $ 0.1 million, respectively.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”).

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The carrying amounts of the Company’s financial assets and liabilities, such as cash, cash equivalents, prepaid expenses and other current assets, and accounts payable and accrued expenses, are an approximate of their fair values because of the short maturity of these instruments.

The Company’s warrant liability recognized at fair value on a recurring basis is a level 3 measurement (see Note 10 – Fair Value Measurement).

The Company’s warrant liability recognized at fair value on a recurring basis is a level 3 measurement (see Note 10 – Fair Value Measurements).

Revenue Recognition

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The wireless charging system revenue consists of revenue from product development projects and production-level systems.

During the three and six months ended June 30, 2024, the Company recognized $ 46,000 and $ 110,000 , respectively.

During the three and six months ended June 30, 2023, the Company recognized $ 0.1 million and $ 0.2 million, respectively, in revenue.

During the three and nine months ended September 30, 2024, the Company recognized $ 0.2 million and $ 0.3 million, respectively, in revenue.

During the three and nine months ended September 30, 2023, the Company recognized $ 0.2 million and $ 0.4 million, respectively, in revenue.

The Company records revenue associated with product development projects that it enters into with certain customers.

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Patent application costs, which are generally legal costs, are expensed as research and development costs until such time as the future economic benefits of such patents become more certain.

The Company incurred research and development costs of $ 2.4 million and $ 4.8 million for the three and six months ended June 30, 2024, respectively.

The Company incurred research and development costs of $ 2.9 million and $ 6.0 million for the three and six months ended June 30, 2023, respectively.

The Company incurred research and development costs of $ 1.7 million and $ 6.5 million for the three and nine months ended September 30, 2024, respectively.

The Company incurred research and development costs of $ 2.5 million and $ 8.4 million for the three and nine months ended September 30, 2023, respectively.

Stock-Based Compensation

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A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.

As of June 30, 2024, no liability for unrecognized tax benefits was required to be reported.

As of September 30, 2024, no liability for unrecognized tax benefits was required to be reported.

The guidance from ASC 740, “Income Taxes” also discusses the classification of related interest and penalties on income taxes.

The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense.

No interest or penalties were recorded during the three or six months ended June 30, 2024 and 2023.

No interest or penalties were recorded during the three or nine months ended September 30, 2024 and 2023.

The Company files income tax returns with the United States, California, Texas and Arizona governments.

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Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period.

Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method), the vesting of restricted stock units (“RSUs”) and performance stock units (“PSUs”) and the enrollment of employees in the ESPP.

The computation of diluted loss per share excludes potentially dilutive securities of 2,010,538 and 613,018 , as outlined in the table below, for the three and six months ended June 30, 2024 and 2023, respectively, because their inclusion would be anti-dilutive.

For the three

and six months ended

Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method), the vesting of RSUs and PSUs and the enrollment of employees in the ESPP.

The computation of diluted loss per share excludes potentially dilutive securities of 1,950,212 and 597,020 , as outlined in the table below, for the three and nine months ended September 30, 2024 and 2023, respectively, because their inclusion would be anti-dilutive.

For the three and

nine months ended

September 30,

Warrants issued to investors

1 unchanged sentence

Total potentially dilutive securities

For the three and six months ended June 30, 2024, the table above includes 1,020,409 warrants expiring on February 20, 2029, which have an exercise price of $ 1.84 per share and 412,500 warrants expiring on March 28, 2029, which have an exercise price of $ 1.66 per share.

For the three and six months ended June 30, 2023, the table above includes 83,333 warrants that expired on March 1, 2024, which had an exercise price of $ 200 per share, and 412,500 warrants expiring on March 28, 2029, which have an exercise price of $ 1.66 per share.

For the three and nine months ended September 30, 2024, the table above includes 1,020,409 warrants expiring on February 20, 2029, which have an exercise price of $ 1.84 per share and 412,500 warrants expiring on March 28, 2029, which, as of September 30, 2024, have an exercise price of $ 0.56 per share.

For the three and nine months ended September 30, 2023, the table above includes 83,333 warrants that expired on March 1, 2024, which had an exercise price of $ 200 per share, and 412,500 warrants expiring on March 28, 2029, which, as of September 30, 2024, have an exercise price of $ 0.56 per share.

The Company determines if an arrangement is a lease at the inception of the arrangement.

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See Note 6 – Commitments and Contingencies, Operating Leases for further discussion of the Company’s operating leases.

The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Interim Principal Executive Officer and Chief Financial Officer, reviews financial information on a regular basis for purposes of allocating resources and evaluating financial performance.

The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer and Chief Financial Officer, reviews financial information on a regular basis for purposes of allocating resources and evaluating financial performance.

All long-lived assets are located in the United States and substantially all revenue is attributed to customers based in the United States.

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Adoption of this standard will not likely have a material impact on the Company’s financial statements.

Management has reviewed other recently issued accounting pronouncements issued or proposed by the FASB and does not believe any of these accounting pronouncements has had or will have a material impact on the condensed consolidated financial statements.

Note 4 – Inventory

Below is a summary of the Company’s inventory as of June 30, 2024 and December 31, 2023 (in thousands):

Below is a summary of the Company’s inventory as of September 30, 2024 and December 31, 2023 (in thousands):

Balance as of

June 30, 2024

September 30, 2024

December 31, 2023

5 unchanged sentences

Balance as of

June 30, 2024

September 30, 2024

December 31, 2023

10 unchanged sentences

Upon expiration of the original lease on September 30, 2022, the new monthly lease payment starting October 1, 2022 is approximately $ 59,000 , subject to annual escalations up to a maximum monthly lease payment of approximately $ 62,000 .

The Company recorded

lease expense of $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2024, respectively.

The Company recorded lease expense of $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2023, respectively.

Note 6 – Commitments and Contingencies, continued

On July 31, 2024, the Company signed an additional lease amendment where the monthly payments through the remainder of 2024 were reduced to approximately $ 37,000 and the monthly payments from January 2025 through September 2025 were increased to approximately $ 76,000 .

No other changes were made to the existing lease.

As a result of this amendment, the Company revalued its ROU lease asset to $ 0.8 million and its operating lease liability to $ 0.8 million on July 31, 2024.

The Company recorded lease expense of $ 0.2 million and $ 0.6 million for the three and nine months ended September 30, 2024, respectively.

The Company recorded lease expense of $ 0.2 million and $ 0.6 million for the three and nine months ended September 30, 2023, respectively.

Operating Lease Commitments

The Company follows ASC 842, “Leases” (“Topic 842”) and recognizes the required ROU assets and operating lease liabilities on its balance sheet.

The Company anticipates having future total lease payments of $ 0.9 million during the period from the third quarter of 2024 to the third quarter of 2025.

As of June 30, 2024, the Company has total operating lease ROU assets of $ 0.9 million, current portion of operating lease liabilities of $ 0.7 million and long-term portion of operating lease liabilities of $ 0.2 million.

The weighted average remaining lease term is 1.3 years as of June 30, 2024.

A reconciliation of undiscounted cash flows to lease liabilities recognized as of June 30, 2024 is as follows (in thousands):

The Company anticipates having future total lease payments of $ 0.8 million during the period from the fourth quarter of 2024 to the third quarter of 2025.

As of September 30, 2024, the Company has total operating lease ROU assets of $ 0.7 million and current portion of operating lease liabilities of $ 0.8 million.

The weighted average remaining lease term is 1.0 years as of September 30, 2024.

A reconciliation of undiscounted cash flows to lease liabilities recognized as of September 30, 2024 is as follows (in thousands):

For the year ending December 31,

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In June 2024, the Company renewed an electronic design automation software in a hosted environment license agreement through the end of 2025 under which the Company is required to remit quarterly payments of approximately $ 52,000 through the fourth quarter of 2025.

During the three and nine months ended September 30, 2024, the Company recorded expense of approximately $ 52,000 and $ 500,000 , respectively, under this agreement.

Litigations, Claims, and Assessments

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While the outcome of these disputes, claims, liens and litigation matters cannot be predicted with certainty, after consulting with legal counsel, management does not believe that the outcome of these matters will have a material adverse effect on the Company’s combined financial position, results of operations or cash flows.

Note 6 – Commitments and Contingencies, continued

MBO Bonus Plan

On March 15, 2018, the Company’s Board of Directors (“Board”), on the recommendation of the Board’s Compensation Committee (“Compensation Committee”), approved the Energous Corporation MBO Bonus Plan (“Bonus Plan”) for executive officers of the Company.

To be eligible to receive a bonus under the Bonus Plan, an executive officer must be continuously employed throughout the applicable performance period, and in good standing, and achieve the performance objectives selected by the Compensation Committee.

On March 15, 2018, the Company’s Board of Directors (the “Board”), on the recommendation of the Board’s Compensation Committee (the “Compensation Committee”), approved the Energous Corporation MBO Bonus Plan (“Bonus Plan”) for executive officers of the Company.

To be eligible to receive a bonus under the Bonus Plan, an executive officer must be continuously employed throughout the applicable performance period, in good standing, and achieve the performance objectives selected by the Compensation Committee.

Under the Bonus Plan, the Compensation Committee was responsible for selecting the amounts of potential bonuses for executive officers, the performance metrics used to determine whether any such bonuses would be paid and determining whether those performance metrics had been achieved.

The Company did not record any expense under the Bonus Plan during the three or six months ended June 30, 2024.

During the three and six months ended June 30, 2023, the Company recorded $ 0.2 million and $ 0.3 million, respectively, in expense under the Bonus Plan.

The Company did not record any expense under the Bonus Plan during the three or nine months ended September 30, 2024.

During the three and nine months ended September 30, 2023, the Company recorded $ 0.1 million and $ 0.4 million, respectively, in expense under the Bonus Plan.

As of December 31, 2023, the Company had $ 0.5 million in bonuses earned during 2023 that had not yet been paid and was included in accrued expenses.

As of June 30, 2024, the Company had paid all amounts accrued under the Bonus Plan.

On May 30, 2024, the Board, on the recommendation of the Compensation Committee, approved the 2024 Corporate Bonus Plan (“2024 Bonus Plan”), whereby employees’ bonuses will be based upon achievement of performance objectives set by the Compensation Committee and paid annually.

Employees must be continuously employed throughout the applicable performance period and achieve the performance objectives.

Note 6 – Commitments and Contingencies, continued

As of September 30, 2024, the Company had paid all amounts accrued under the Bonus Plan.

On May 30, 2024, the Board, on the recommendation of the Compensation Committee, approved the 2024 Corporate Bonus Plan (the “2024 Bonus Plan”), whereby employees’ bonuses will be based upon achievement of performance objectives set by the Compensation Committee and paid annually.

Employees must be continuously employed throughout the applicable performance period and payment date and achieve the performance objectives.

Under the 2024 Bonus Plan, the Compensation Committee is responsible for selecting the amounts of potential bonuses for executive officers and vice presidents, the performance metrics used to determine whether any such bonuses will be paid and determining whether those performance metrics have been achieved.

As of June 30, 2024, the Company did not record any expense under the 2024 Bonus Plan.

As of September 30, 2024, the Company recorded approximately $ 0.1 million under the 2024 Bonus Plan.

Severance and Change in Control Agreement

On March 15, 2018, the Compensation Committee approved a form of Severance and Change in Control Agreement that the Company may enter into with executive officers.

On May 30, 2024, the Compensation Committee approved a new form of Severance Agreement that the Company may enter into with executive officers and vice presidents (each, an “Executive”).

On May 30, 2024, the Compensation Committee approved a new form of Severance Agreement and Change in Control Agreement (“Severance Agreement”) that the Company may enter into with executive officers and vice presidents (each, an “Executive”).

Under the Severance Agreement, if an Executive party thereto is terminated without cause or in a qualifying change in control termination, the Company agrees to pay the Executive three to twelve months of that Executive’s monthly base salary and 25 % to 100 % of the Executive’s target bonus, and to accelerate the vesting of 25 % to 100 % of the Executive’s unvested equity awards.

If an Executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) the Company will pay the full amount of the Executive’s premiums under the Company’s health, dental and vision plans, including coverage for the Executive’s eligible dependents, for the three -to- twelve-month period, as applicable, following the Executive’s termination.

Note 6 – Commitments and Contingencies, continued

Executive Transition – Cesar Johnston

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The Company recorded $ 1.2 million in total severance expense pertaining to Mr.

Johnston’s departure during the three months ended March 31, 2024, including $ 0.1 million in stock-based compensation as a result of accelerated vesting of RSUs and options (see Note 8 – Stock-Based Compensation for additional details).

The Company reversed $ 0.3 million in accrued severance during the three months ended June 30, 2024, as a result of the finalization of the negotiated settlement and payroll taxes.

The Company, therefore, recorded expense of $ 1.2 million in total severance expense pertaining to Mr.

Johnston’s departure during the six months ended June 30, 2024.

As of June 30, 2024, the Company had accrued unpaid severance expense related to COBRA reimbursements of approximately $ 46,000 pertaining to the Johnston Severance Agreement, which is due to be paid through September 2025.

Johnston’s departure during the nine months ended September 30, 2024, including $ 0.1 million in stock-based compensation as a result of accelerated vesting of RSUs and options (see Note 8 – Stock-Based Compensation for additional details).

As of September 30, 2024, the Company had accrued unpaid severance expense related to COBRA reimbursements of approximately $ 37,000 pertaining to the Johnston Severance Agreement, which is due to be paid through September 2025.

Johnston received approximately $ 8,000 in Director's fees for the period of March 28, 2024 through June 12, 2024, during which he did not serve as President and Chief Executive Officer but continued to serve as a member of the Board.

Executive Transition – William Mannina

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Mannina and the Company, Mr.

Mannina received payments and benefits including cash severance payments equivalent to nine months of his then-current salary of $ 265,825 and premium payments for continued healthcare coverage for nine months following his resignation effective date.

Mannina received payments and benefits including cash severance payments equivalent to nine months of his then-current salary of approximately $ 266,000 and premium payments for continued healthcare coverage for nine months following his resignation effective date.

Mannina’s restricted stock units continued to vest through August 16, 2023.

As of June 30, 2024, the Company had no accrued unpaid severance expense pertaining to Mr.

As of September 30, 2024, the Company had no accrued unpaid severance expense pertaining to Mr.

Mannina’s agreement.

Note 6 – Commitments and Contingencies, continued

Strategic Alliance Agreement

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In addition, both parties agreed on a revenue sharing arrangement and to collaborate on the commercialization of Licensed Products based on a mutually-agreed upon plan.

Each party will retain all of its intellectual property.

Each party will retain all of its intellectual property rights.

The Alliance Agreement had an initial term of seven years , with automatic renewal annually thereafter unless terminated by either party upon 180 days’ prior written notice.

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On September 20, 2021, the Company was notified by Dialog, which had been recently acquired by Renesas Electronics Corporation (“Renesas”), that it was terminating the Alliance Agreement between the Company and Dialog.

There is a wind down period included in the Alliance Agreement which will conclude in September 2024.

During the wind down period, the Alliance Agreement’s terms will continue to apply to the Company’s products that are covered by certain existing customer relationships, except that the parties’ respective exclusivity rights have terminated.

There is a wind down period included in the Alliance Agreement which concluded in September 2024.

During the wind down period, the Alliance Agreement’s terms applied to the Company’s products that are covered by certain existing customer relationships, except that the parties’ respective exclusivity rights have terminated.

Note 7 – Capital Stock and Warrants

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The $ 40 million of common stock to be offered, issued and sold under the Prior ATM Program was included in the $ 75 million of securities that may be offered, issued and sold by the Company under the base prospectus.

Pursuant to this shelf registration statement, the Company sold shares which raised net proceeds of $ 38.8 million (net of $ 1.2 million in issuance costs) during the third and fourth quarters of 2020 under the Prior ATM Program.

Note 7 – Capital Stock and Warrants, continued

The Company sold shares which raised net proceeds of $ 38.8 million (net of $ 1.2 million in issuance costs) during the third and fourth quarters of 2020 under the Prior ATM Program.

On October 4, 2021, the Company filed a prospectus supplement covering the offering, issuance and sale of up to an additional $ 35 million of shares of the Company’s common stock pursuant to the Prior ATM Program.

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During the first quarter of 2023, the Company raised $ 3.6 million (net of $ 0.2 million in issuance costs) under the Prior ATM Program.

As of June 30, 2024, there is no amount remaining in the Prior Shelf due to its expiration on September 24, 2023.

As of September 30, 2024, there is no amount remaining in the Prior Shelf due to its expiration on September 24, 2023.

On November 15, 2021, the Company filed a shelf registration statement on Form S-3 with the SEC, which became effective on December 16, 2021.

This shelf registration statement allows the Company to sell, from time to time, any combination of debt or equity securities described in the registration statement up to aggregate proceeds of $ 100 million.

Pursuant to this registration statement, on March 28, 2023, the Company completed an underwritten offering pursuant to which it issued and sold an aggregate of (i) 412,500 shares of its common stock (the “Shares”) and (ii) warrants to purchase up to 412,500 shares of its common stock (the “2023 Warrants”), for net proceeds of $ 2.7 million, after deducting underwriting discounts, commission and expenses payable by the Company.

Pursuant to this registration statement, on March 28, 2023, the Company completed an underwritten offering pursuant to which it issued and sold an aggregate of (i) 412,500 shares of its common stock and (ii) warrants to purchase up to 412,500 shares of its common stock (the “2023 Warrants”), for net proceeds of $ 2.7 million, after deducting underwriting discounts, commission and expenses payable by the Company.

The 2023 Warrants were immediately exercisable upon issuance and have a term of six years and an exercise price of $ 8.00 .

The Company allocated the proceeds received first to the 2023 Warrants based on the fair value of the 2023 Warrants as determined at initial measurement, with the remaining proceeds allocated to the Shares (see Note 9 – Warrant Liability and Note 10 – Fair Value Measurements).

Pursuant to the terms of the 2023 Warrants, the exercise price was adjusted to $ 1.66 during 2023.

Pursuant to the terms of the 2023 Warrants, the exercise price was adjusted to $ 1.66 during 2023 and was further adjusted to $ 0.56 as of September 30, 2024.

On February 15, 2024, the Company entered into a securities purchase agreement with an institutional investor, providing for the issuance and sale by the Company in a registered direct offering (the “Offering”), of (i) 570,000 shares of the Company’s common stock, (ii) pre-funded warrants to purchase up to 450,409 shares of common stock (referred to individually as a “Pre-Funded Warrant” and collectively as the “Pre-Funded Warrants”), and (iii) warrants to purchase an aggregate of 1,020,409 shares of common stock (referred to individually as a “Warrant” and collectively as the “2024 Warrants”).

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The Company received net proceeds of approximately $ 1.8 million (net of $ 0.2 million in issuance costs).

Note 7 – Capital Stock and Warrants, continued

On June 21, 2024, the Company filed a prospectus supplement covering the offering, issuance and sale of up to $ 3.4 million in shares of the Company’s common stock pursuant to the At the Market Offering Agreement, dated June 21, 2024, between the Company and H.C.

Wainwright & Co., LLC (the “Current ATM Program”, and together with the Prior ATM program, the “ATM Program”).

As of June 30, 2024, no transactions under this prospective supplement have been made.

In addition, on June 20, 2024, the Company provided notice of termination of the Prior ATM Program that the Company had entered into with Roth Capital Partners, LLC, as sales agent.

The Company entered into the Current ATM Program discussed above to replace the Prior ATM Program.

Note 7 – Capital Stock and Warrants, continued

During both the three and nine months ended September 30, 2024, the Company sold 1,217,168 shares of its common stock under the Current ATM Program for proceeds of approximately $ 0.7 million (net of commissions and other related offering expenses of approximately $ 0.2 million).

As of September 30, 2024, the Company has approximately $ 2.5 million remaining on the Current ATM Program for potential future sales.

Common Stock Outstanding

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The Company has reserved the following shares of common stock for future issuance:

June 30, 2024

September 30, 2024

December 31, 2023

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On March 28, 2024, the Board increased the number of shares of common stock reserved and available for issuance under the 2017 Equity Inducement Plan by 121,510 shares.

As of June 30, 2024, 133,612 shares of common stock remain available to be issued through equity-based instruments under the 2017 Equity Inducement Plan.

As of September 30, 2024, 62,802 shares of common stock remain available to be issued through outstanding RSUs under the 2017 Equity Inducement Plan.

No new equity award grants are to be issued from the 2017 Equity Inducement Plan.

Note 8 – Stock-Based Compensation, continued

2024 Equity Incentive Plan

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All existing outstanding awards remain outstanding under the Prior Equity Plans, and an additional 456,000 shares of common stock were approved for issuance under the 2024 Plan.

As of June 30, 2024, 233,570 shares of common stock remain available for issuance under the 2024 Plan.

Note 8 – Stock-Based Compensation, continued

As of September 30, 2024, 284,758 shares of common stock remain available for issuance under the 2024 Plan.

Employee Stock Purchase Plan

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The exercise price of options purchased under the ESPP is the lesser of 85 % of the fair market of the common stock on the first business day of the offering period and 85 % of the fair market value of the common stock on the applicable exercise date.

As of June 30, 2024, 17,166 shares of common stock remain eligible to be issued under the ESPP.

Employees contributed approximately $ 55,000 through payroll withholdings to the ESPP as of June 30, 2024 for the current offering period which ended on June 30, 2024.

Approximately $ 52,000 was due to be refunded to employees due to share purchase limits for an offering period.

The remaining $ 3,000 was used to purchase 3,750 shares with shares deemed delivered on June 30, 2024.

As of September 30, 2024, 17,166 shares of common stock remain eligible to be issued under the ESPP.

Employees contributed approximately $ 5,000 through payroll withholdings to the ESPP as of September 30, 2024 for the current offering period which concludes on December 31, 2024.

Stock Option Activity

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Consequently, 3,750 options became vested and another 3,750 options were forfeited.

This resulted in stock-based compensation expense of approximately $ 0 and $ 53,000 during the three and six months ended June 30, 2024, respectively.

As of June 30, 2024, all stock options granted to the former Chief Executive Officer were forfeited.

No stock options were granted during the three and six months ended June 30, 2023 and 2024.

The following is a summary of the Company’s stock option activity during the six months ended June 30, 2024:

This resulted in stock-based compensation expense of approximately $ 0 and $ 53,000 during the three and nine months ended September 30, 2024, respectively.

As of September 30, 2024, all stock options granted to the former Chief Executive Officer were forfeited.

No stock options were granted during the three and nine months ended September 30, 2023 and 2024.

Note 8 – Stock-Based Compensation, continued

The following is a summary of the Company’s stock option activity during the nine months ended September 30, 2024:

Outstanding as of January 1, 2024

Outstanding as of June 30, 2024

Outstanding as of September 30, 2024

Exercisable as of January 1, 2024

Exercisable as of June 30, 2024

As of June 30, 2024, the unamortized fair value of stock options was $ 0 .

Note 8 – Stock-Based Compensation, continued

Exercisable as of September 30, 2024

As of September 30, 2024, the unamortized fair value of stock options was $ 0 .

Restricted Stock Units (“RSUs”)

During the six months ended June 30, 2024, the Board granted its Interim Principal Executive officer and Chief Financial Officer 77,000 RSUs.

During the nine months ended September 30, 2024, the Board granted its Interim Principal Executive officer and Chief Financial Officer 77,000 RSUs.

Each RSU represents the contingent right to one share of common stock of the Company.

The RSU awards vest over four years .

During the six months ended June 30, 2024, the Compensation Committee granted directors an aggregate of 6,000 RSUs for service on the board of directors.

During the nine months ended September 30, 2024, the Compensation Committee granted directors an aggregate of 6,000 RSUs for service on the Board.

These RSU awards vest on the one-year anniversary of the grant date.

During the six months ended June 30, 2024, the Board granted employees an aggregate of 468,000 RSUs, which vest over four years .

During the nine months ended September 30, 2024, the Board granted employees an aggregate of 468,000 RSUs, which vest over four years .

Under the former Chief Executive Officer’s Severance Agreement, unvested RSUs vesting within 18 months of termination were accelerated and vested on March 26, 2024.

Consequently, 3,017 RSUs vested resulting in stock-based compensation expense of approximately $ 0 and $ 77,000 during the three and six months ended June 30, 2024, respectively.

As of June 30, 2024, the unamortized fair value of the RSUs was $ 1.1 million.

Consequently, 3,017 RSUs vested resulting in stock-based compensation expense of approximately $ 0 and $ 77,000 during the three and nine months ended September 30, 2024, respectively.

As of September 30, 2024, the unamortized fair value of the RSUs was $ 0.9 million.

The unamortized amount will be expensed over a weighted average period of 2.8 years.

A summary of the activity related to RSUs for the six months ended June 30, 2024 is presented below:

A summary of the activity related to RSUs for the nine months ended September 30, 2024 is presented below:

Outstanding at January 1, 2024

RSUs forfeited

Outstanding at June 30, 2024

Outstanding at September 30, 2024

Performance Stock Units (“PSUs”)

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The goals are commonly related to the Company’s revenue and achievement of sales and marketing goals.

On July 20, 2022, the Board granted the Company’s former Chief Executive Officer, Cesar Johnston, up to 14,350 PSUs under the Company’s 2015 Performance Share Unit Plan pursuant to the terms of Mr.

Johnston’s offer letter with the Company (See Note 6 – Commitments and Contingencies).

The up to 14,350 PSUs that had been approved were to vest as follows:

(a) up to 9,350 PSU shares would vest on December 31, 2022, subject to Mr.

Johnston’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by Mr.

Johnston of certain performance metrics previously determined by the Compensation Committee and approved by the Board, and (b) up to an additional 2,500 PSU shares would vest on each of December 31, 2023 and December 31, 2024, subject to Mr.

Johnston’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by Mr.

Johnston of certain performance metrics to be recommended by the Compensation Committee and approved by the Board at a subsequent date.

There was no PSU activity for the three or six months ended June 30, 2024 and 2023.

The 2,500 PSU shares that were reserved for grant during 2024 per Mr.

Johnston’s offer letter with the Company, as well as the 1,250 shares reserved for potential outperformance by Mr.

Johnston of 2024 goals were returned to the 2015 Performance Share Unit Plan for future issuance.

Note 8 – Stock-Based Compensation, continued

On July 20, 2022, the Board granted the Company’s former Chief Executive Officer 14,350 PSUs under the Company’s 2015 Performance Share Unit Plan pursuant to the terms of the former executive’s offer letter with the Company (See Note 6 – Commitments and Contingencies).

The 14,350 PSUs that had been approved were to vest as follows:

(a) up to 9,350 PSU shares would vest on December 31, 2022, subject to the former executive’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by the former executive of certain performance metrics previously determined by the Compensation Committee and approved by the Board, and (b) up to an additional 2,500 PSU shares would vest on each of December 31, 2023 and December 31, 2024, subject to continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, of certain performance metrics.

There was no PSU activity for the three or nine months ended September 30, 2024 and 2023.

The 2,500 PSU shares that were reserved for grant during 2024 per the former executive’s offer letter with the Company, as well as the 1,250 shares reserved for potential outperformance by the former executive of 2024 goals were returned to the 2015 Performance Share Unit Plan for future issuance upon the former executive’s termination of service with the Company.

Employee Stock Purchase Plan

The current offering period under the ESPP began on July 1, 2024 and will conclude on December 31, 2024.

The recently completely offering period under the ESPP started on January 1, 2024 and concluded on June 30, 2024.

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The second offering period began on July 1, 2023 and concluded on December 31, 2023.

The weighted average grant-date fair value of the purchase option for each designated share purchased under the ESPP was approximately $ 0.85 per share and $ 8.00 per share for the six months ended June 30, 2024 and 2023, respectively, which represents the fair value of the option, consisting of three main components:

The weighted average grant-date fair value of the purchase option for each designated share purchased under the ESPP was approximately $ 0.63 per share and $ 4.05 per share for the nine months ended September 30, 2024 and 2023, respectively, which represents the fair value of the option, consisting of three main components:

(i) the value of the discount on the enrollment date, (ii) the proportionate value of the call option for 85 % of the stock and (iii) the proportionate value of the put option for 15 % of the stock.

The Company recognized compensation expense for the ESPP of approximately $( 16,000 ) and $ 3,000 for the three and six months ended June 30, 2024.

The credit balance during the three months ended June 30, 2024 is primarily due to share purchase limitations recognized during the quarter resulting in the reversal of part of the previous quarter’s compensation expense.

The Company recognized compensation expense for the ESPP of approximately $ 16,000 and $ 41,000 for the three and six months ended June 30, 2023, respectively.

The Company estimated the fair value of ESPP purchase options granted during the six months ended June 30, 2024 and 2023 using the Black-Scholes option pricing model.

The Company recognized compensation expense for the ESPP of approximately $ 1,000 and $ 4,000 for the three and nine months ended September 30, 2024, respectively.

The Company recognized compensation expense for the ESPP of approximately $ 1,000 and $ 42,000 for the three and nine months ended September 30, 2023, respectively.

The Company estimated the fair value of ESPP purchase options granted during the nine months ended September 30, 2024 and 2023 using the Black-Scholes option pricing model.

The fair values of ESPP purchase options granted were estimated using the following assumptions:

Six Months Ended June 30,

Nine Months Ended September 30,

$ 1.09 - 1.83

$ 4.80 - 16.72

Dividend yield

1 unchanged sentence

Risk-free interest rate

5.26 %- 5.37 %

4.42 %- 5.47 %

Expected life

1 unchanged sentence

The total amount of stock-based compensation was reflected within the statements of operations as (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

7 unchanged sentences

Each 2023 Warrant was initially exercisable for one share of the Company’s common stock at a price of $ 8.00 per share.

As of June 30, 2024, the exercise price was adjusted to $ 1.66 per share (subject to further adjustment in certain circumstances, including in the event of stock dividends and splits;

As of September 30, 2024, the exercise price was adjusted to $ 0.56 per share (subject to further adjustment in certain circumstances, including in the event of stock dividends and splits;

recapitalizations;

9 unchanged sentences

As such, the 2023 Warrants were initially measured at fair value and recorded as a liability in the amount of $ 3.1 million.

As of June 30, 2024, all 2023 Warrants were outstanding.

As of June 30, 2024, the fair value of the warrant liability was $ 0.4 million.

The Company recorded a change in fair value of the warrant liability of $ 0.3 million for both the three and six months ended June 30, 2024.

The Company recorded a change in fair value of the warrant liability of $ 1.9 million for both the three and six months ended June 30, 2023.

As of September 30, 2024, all 2023 Warrants were outstanding.

As of September 30, 2024, the fair value of the warrant liability was $ 0.2 million.

The Company recorded a change in fair value of the warrant liability of $ 0.2 million and $ 0.4 million for the three and nine months ended September 30, 2024, respectively.

The Company recorded a change in fair value of the warrant liability of $ 0.8 million and $ 2.7 million for the three and nine months ended September 30, 2023, respectively.

Note 10 – Fair Value Measurements

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

Balance as of June 30, 2024

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

Balance as of September 30, 2024

Cash equivalents

9 unchanged sentences

The key inputs into the Monte Carlo simulation model for the 2023 Warrants are as follows:

As of September 30,

As of June 30,

As of March 31,

As of September 30,

As of June 30,

4 unchanged sentences

Dividend yield

The change in the fair value of the 2023 Warrant liability was determined to be $ 0.3 million during the six months ended June 30, 2024.

The change in fair value of the 2023 Warrant liability was determined to be $ 1.9 million during the six months ended June 30, 2023 (see Note 9 – Warrant Liability).

For the six months ended June 30,

(in thousands):

The change in the fair value of the 2023 Warrant liability was $ 0.4 million during the nine months ended September 30, 2024.

The change in fair value of the 2023 Warrant liability was $ 2.7 million during the nine months ended September 30, 2023 (see Note 9 – Warrant Liability).

For the nine months ended September 30,

Beginning value

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Note 11 – Customer Concentrations

Two customers accounted for approximately 87 % of the Company’s revenue for the three months ended June 30, 2024, and three customers accounted for approximately 78 % of the Company’s revenue for the six months ended June 30, 2024.

Two customers accounted for approximately 68 % of the Company’s revenue for the three months ended June 30, 2023, and three customers accounted for approximately 75 % of the Company’s revenue for the six months ended June 30, 2023.

Two customers accounted for approximately 91 % of the Company’s accounts receivable balance as of June 30, 2024, and two customers accounted for approximately 88 % of the Company’s accounts receivable balance as of December 31, 2023.

Two customers accounted for approximately 85 % of the Company’s revenue for the three months ended September 30, 2024, and two customers accounted for approximately 74 % of the Company’s revenue for the nine months ended September 30, 2024.

Three customers accounted for approximately 75 % of the Company’s revenue for the three months ended September 30, 2023, and three customers accounted for approximately 67 % of the Company’s revenue for the nine months ended September 30, 2023.

Two customers accounted for approximately 89 % of the Company’s accounts receivable balance as of September 30, 2024, and two customers accounted for approximately 88 % of the Company’s accounts receivable balance as of December 31, 2023.

Note 12 – Subsequent Event

Pursuant to the prospectus supplement filed on June 21, 2024 (See Note 7 – Capital Stock and Warrants, Financing ), the Company raised $ 0.2 million from total sales of 240,112 shares of the Company’s common stock under the ATM Program during the period from July 1, 2024 through August 9, 2024.

For the period October 1, 2024 through November 12, 2024, the Company sold 1,069,169 shares through its Current ATM, representing $ 0.6 million in net proceeds.

Agile Subordinated Loan Agreement

Effective October 1, 2024, the Company entered into a subordinated business loan agreement (the “Original Loan Agreement”) with Agile Capital Funding, LLC and Agile Lending, LLC (collectively, the “Lender”), which provided for an initial term loan of $ 525,000 , with the ability to receive additional term loans of up to $ 1.6 million, subject to certain conditions (such loans, the “Term Loan”).

Principal and interest on the initial term loan in the aggregate amount of $ 756,000 was to be repaid in weekly payments of $ 27,000 commencing on October 14, 2024 and fully repaid on or before the maturity date of April 21, 2025.

The Term Loan would be expressly subordinated to the Company's obligations on certain senior indebtedness of the Company as provided in the Original Loan Agreement.

Effective only upon the occurrence and continuance of an event of default under the Loan Agreement, the Company would grant the Lender a security interest in certain collateral, excluding intellectual property, of the Company as set forth in the Original Loan Agreement.

Effective November 5, 2024, the Company entered into an amended subordinated business loan agreement with the Lender (the “Amended Loan Agreement”) to refinance the Term Loan.

The Amended Loan Agreement provides for a new term loan of $ 997,000 , with the ability to receive additional term loans of up to $ 1.6 million, subject to certain conditions (such new loans, the “New Term Loan”).

Principal and interest on the initial new term loan in the aggregate amount of $ 1,415,740 is to be repaid in weekly payments of approximately $ 39,000 and fully repaid on or before the maturity date of July 17, 2025 .

The proceeds of the New Term Loan were used to repay in full the Term Loan described above, which had a balance of $ 648,000 on November 5, 2024, and the remaining proceeds will be used for working capital.

The New Term Loan will be expressly subordinated to the Company's obligations on certain senior indebtedness of the Company as provided in the Amended Loan Agreement.

The Amended Loan Agreement replaces the Original Loan Agreement and otherwise contains substantially the same terms as the Original Loan Agreement.

Regulation A Offering

On October 11, 2024, the Company filed a Regulation A Offering Statement on Form 1-A with an offering of a maximum of 5,000,000 Units (the “Regulation A Offering”), with each Unit consisting of one share of Series A Convertible Preferred Stock and three common stock purchase warrants, two to each purchase one share of common stock at an exercise price of $ 1.50 per share and one to purchase one share of common stock at $ 2.00 per share, for an aggregate of 5,000,000 shares of Series A Convertible Preferred Stock (and 10,000,000 shares of common stock underlying the shares of Series A Convertible Preferred Stock) and warrants to purchase up to an aggregate of 10,000,000 shares of common stock at an exercise price of $ 1.50 per share and 5,000,000 shares of common stock at an exercise price of $ 2.00 per share, at an offering price of $ 1.50 per Unit, for a maximum offering amount of $ 7,500,000 .

The Regulation A Offering is subject to qualification by the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements