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Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-12 · 101 added, 80 removed, 131 unchanged (58% of the section changed)

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Forward-Looking Statements

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires the terms “we,” “us,” “our,” and “Energous” refer to Energous Corporation d/b/a Energous Wireless Power Solutions, a Delaware corporation.

As used in this Quarterly Report on Form 10-Q (this “Report”), unless the context otherwise requires the terms “we,” “us,” “our,” and “Energous” refer to Energous Corporation d/b/a Energous Wireless Power Solutions, a Delaware corporation.

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are intended to be covered by the “safe harbor” created by those sections.

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our ability to protect our intellectual property;

and other risks and uncertainties described in the Risk Factors and in Management’s Discussion and Analysis sections of our most recently filed Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q, including this Quarterly Report on Form 10-Q.

our ability to maintain or improve our financial position, cash flows, and liquidity and our expected financial needs;

We undertake no obligation to publicly update any of our forward-looking statements, whether as a result of new information, future developments or otherwise.

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Actual results could differ from those estimates.

During the three months ended June 30, 2024, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

During the three months ended September 30, 2024, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Results of Operations

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General and administrative expenses include costs for general and corporate functions, including personnel compensation, facility fees, travel, telecommunications, insurance, professional fees, consulting fees, general office expenses, and other overhead.

Three Months Ended June 30, 2024 and 2023

Comparison of Three Months Ended September 30, 2024 and 2023

The following table sets forth selected Condensed Statements of Operations data (in thousands) and such data as a percentage of revenue:

Three months ended June 30,

Three months ended September 30,

Costs and expenses:

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Total other income

During the three months ended June 30, 2024 and 2023, we recorded revenue of $46,000 and $117,000, respectively.

The decrease is due to a decrease in transmitter sales volume.

While recorded revenue declined during the second quarter of 2024, the Company was in receipt of approximately $0.2 million of additional confirmed orders (“backlog”), the majority of which are scheduled to ship in the third quarter of 2024.

During the three months ended September 30, 2024 and 2023, we recorded revenue of $0.2 million and $0.2 million, respectively.

Revenue for the three months ended September 30, 2024 consisted primarily of transmitter sales volume versus the majority of revenue being derived from non-recurring engineering fees and the sale of semiconductor chips during the same period in 2023.

This shift in revenue focus represents the beginning of the Company’s transition from research and development to commercial production of its PowerBridge transmitters.

Costs and Expenses and Loss from Operations.

Costs and expenses are made up of cost of revenue, research and development, sales and marketing, general and administrative and severance expense.

Loss from operations for the three months ended June 30, 2024 and 2023 were $4.7 million and $6.1 million, respectively.

Loss from operations for the three months ended September 30, 2024 and 2023 were $3.6 million and $5.1 million, respectively.

Cost of Revenue:

Three months ended June 30,

Three months ended September 30,

Cost of sales

Percent of total revenue

Cost of revenue was $0.1 million and $0.1 million, respectively, for the three months ended June 30, 2024 and 2023.

There was a slight increase due to the higher cost of transmitters sold.

Cost of revenue was $0.3 million and less than $0.1 million, respectively, for the three months ended September 30, 2024 and 2023.

The increase is primarily due to the cost of transmitters sold, as the initial sales of 2-watt PowerBridge transmitters that were shipped during the third quarter of 2024 were built in-house.

We believe the cost of producing these transmitters will decrease in future quarters, as we utilize a contract manufacturer more often.

During the same period in 2023, revenue generated by transmitter sales represented a small percentage of the total revenue for that period, as the revenue for the three months ended September 30, 2023 consisted mainly of non-recurring engineering fees for which the cost was included in research and development costs.

Research and Development Costs:

Three months ended June 30,

Three months ended September 30,

Research and development

Percent of total revenue

Research and development costs were $2.4 million and $2.9 million, respectively, for the three months ended June 30, 2024 and 2023.

The decrease of $0.4 million is primarily due to a $0.6 million decrease in employee compensation, consisting of a $0.4 million decrease in payroll costs and a $0.2 million decrease in stock-based compensation, a $0.1 million decrease in software and legal costs and a $0.1 million decrease in miscellaneous office and facility expenses, partially offset by a $0.3 million increase in engineering components and supplies.

Research and development costs were $1.7 million and $2.5 million, respectively, for the three months ended September 30, 2024 and 2023.

The decrease of $0.8 million is primarily due to a $0.3 million decrease in personnel-related expenses, consisting of a $0.2 million decrease in payroll costs and a $0.1 million decrease in stock-based compensation, a $0.2 million decrease in software costs, a $0.1 million decrease in engineering components and circuit boards, and a $0.1 million decrease in miscellaneous office and facility expenses.

Sales and Marketing Costs:

Three months ended June 30,

Three months ended September 30,

Sales and marketing

Percent of total revenue

Sales and marketing costs for the three months ended June 30, 2024 and 2023 were $0.8 million and $1.1 million, respectively.

The decrease of $0.3 million is primarily due to a $0.3 million decrease in payroll costs due to lower headcount within the department and a decrease in bonuses accrued.

Sales and marketing costs for the three months ended September 30, 2024 and 2023 were $0.7 million and $0.8 million, respectively.

The decrease of $0.1 million is primarily due to a $0.1 million decrease in personnel related costs due to reduced headcount.

General and Administrative Expenses:

Three months ended June 30,

Three months ended September 30,

General and administrative

Percent of total revenue

General and administrative costs for the three months ended June 30, 2024 and 2023 were $1.6 million and $2.1 million, respectively.

The decrease of $0.5 million is primarily due to a $0.2 million decrease in stock-based compensation from the former CEO’s departure from the Company, a $0.1 million decrease in insurance premiums, a $0.1 million decrease in consulting and third party fees and a $0.1 million decrease in computer software and support.

General and administrative costs for the three months ended September 30, 2024 and 2023 were $1.0 million and $1.7 million, respectively.

The decrease of $0.7 million is primarily due to a $0.1 million decrease in stock-based compensation from the former

CEO’s departure from the Company, a $0.2 million decrease in consulting and third-party fees, a $0.1 million decrease in insurance premiums, a $0.1 million decrease in accounting and audit fees and a $0.1 million decrease in legal fees.

Severance Expense:

Three months ended June 30,

Three months ended September 30,

Severance expense

Percent of total revenue

Severance expense for the three months ended June 30, 2024 and 2023 was $(0.3) million and $0.1 million, respectively.

The credit during the three months ended June 30, 2024 was a result of the finalization of the negotiated settlement and payroll taxes for the former CEO.

The severance expense for the three months ended June 30, 2023 was related to non-executive employees.

Severance expense for the three months ended September 30, 2024 and 2023 was $0.1 million and $0.3 million, respectively.

The severance expense for the three months ended September 30, 2024 was related to non-executive employees.

The severance expense for the three months ended September 20, 2023 was related to the settlement of the departure by the former Chief Financial Officer.

Other income:

Three months ended June 30,

Three months ended September 30,

Change in fair value of warrant liability

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Total other income

Other income resulting from the change in fair value of the warrant liability was $0.3 million for the three months ended June 30, 2024 and $1.9 million for the three months ended June 30, 2023.

The changes for both periods were due to reduced market value of our common stock.

Interest income for the three months ended June 30, 2024 was $0.1 million as compared to interest income of $0.2 million for the three months ended June 30, 2023.

The decrease was due to a lower average cash balance in our savings account during the three months ended June 30, 2024 compared to the prior year period.

As a result of the above, net loss for the three months ended June 30, 2024 was $4.3 million as compared to $4.0 million for the three months ended June 30, 2023.

Six Months Ended June 30, 2024 and 2023

Other income resulting from the change in fair value of the warrant liability was $0.2 million for the three months ended September 30, 2024 and $0.8 million for the three months ended September 30, 2023.

The changes for both periods were due to a lower market value of our common stock.

Interest income for the three months ended September 30, 2024 was $10,000 as compared to interest income of $179,000 for the three months ended September 30, 2023.

The decrease was due to a lower average cash balance in our savings account during the three months ended September 30, 2024 compared to the prior year period.

As a result of the above, net loss for the three months ended September 30, 2024 was $3.4 million as compared to $4.1 million for the three months ended September 30, 2023.

Comparison of Nine Months Ended September 30, 2024 and 2023

The following table sets forth selected Condensed Statements of Operations data (in thousands) and such data as a percentage of revenue:

Six months ended June 30,

Nine months ended September 30, 2024

Costs and expenses:

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Loss from operations

Other (expense) income, net:

Other (expense) income:

Offering costs related to warrant liability

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Interest income

Total other (expense) income, net

During the six months ended June 30, 2024 and 2023, we recorded revenue of $0.1 million and $0.2 million, respectively.

The decrease is due to a decrease in transmitter sales volume.

While recorded revenue declined during the first six months of 2024, the Company was in receipt of approximately $0.2 million of additional confirmed orders (“backlog”), the majority of which are scheduled to ship in the third quarter of 2024.

Total other (expense) income

During the nine months ended September 30, 2024 and 2023, we recorded revenue of $0.3 million and $0.4 million, respectively.

The decrease is due to a decrease in non-recurring engineering revenue.

Revenue for the nine months ended September 30, 2024 consisted primarily of transmitter sales volume versus the majority of revenue being derived from non-recurring engineering fees and the sale of semiconductor chips during the same period in 2023.

This shift in revenue focus represents the beginning of the Company’s transition from research and development to commercial production of its PowerBridge transmitters.

Costs and Expenses and Loss from Operations.

Costs and expenses are made up of cost of revenue, research and development, sales and marketing, general and administrative and severance expense.

Loss from operations for the six months ended June 30, 2024 and 2023 were $11.3 million and $12.4 million, respectively.

Loss from operations for the nine months ended September 30, 2024 and 2023 were $14.9 million and $17.5 million, respectively.

Cost of Revenue:

Six months ended June 30,

Nine months ended September 30,

Cost of sales

Percent of total revenue

Cost of revenue was $0.2 million and $0.2 million, respectively, for the six months ended June 30, 2024 and 2023.

There was a slight increase due to a higher cost of transmitters sold.

Cost of revenue was $0.5 million and $0.3 million, respectively, for the nine months ended September 30, 2024 and 2023.

The increase is primarily due to the cost of transmitters sold, as the initial sales of 2-watt PowerBridge transmitters that were shipped during the second and third quarter of 2024 were built in-house.

We believe the cost of producing these transmitters will decrease in future quarters, as we utilize a contract manufacturer more often.

During the same period in 2023, revenue generated by transmitter sales represented a small percentage of the total revenue for that period, as the revenue for the nine months ended September 30, 2023 consisted mainly of non-recurring engineering fees for which the cost was included in research and development costs.

Research and Development Costs:

Six months ended June 30,

Nine months ended September 30,

Research and development

Percent of total revenue

Research and development costs were $4.8 million and $6.0 million, respectively, for the six months ended June 30, 2024 and 2023.

The decrease of $1.2 million is primarily due to a $0.9 million decrease in employee compensation, consisting of a $0.7 million decrease in payroll costs and a $0.3 million decrease in stock-based compensation, a $0.1 million decrease in legal fees pertaining to patents, a $0.1 million decrease in test development costs and a $0.1 million decrease in software and support, partially offset by a $0.2 million increase in engineering components and supplies.

Research and development costs were $6.5 million and $8.4 million, respectively, for the nine months ended September 30, 2024 and 2023.

The decrease of $1.9 million is primarily due to a $1.2 million decrease in employee compensation, consisting primarily of a $0.9 million decrease in personnel-related expenses and a $0.4 million decrease in stock-based compensation, a $0.4 million decrease in software and maintenance costs, a $0.1 million decrease in test development costs, a $0.1 million decrease in consulting and third-party expenses and a $0.1 million decrease in travel and miscellaneous office expenses, partially offset by a $0.1 million increase in engineering components and circuit boards.

Sales and Marketing Costs:

Six months ended June 30,

Nine months ended September 30,

Sales and marketing

Percent of total revenue

Sales and marketing costs for the six months ended June 30, 2024 and 2023 were $1.7 million and $2.3 million, respectively.

The decrease of $0.6 million is primarily due to a $0.5 million decrease in payroll costs due to a lower headcount within the department and a decrease in bonuses accrued, a $0.1 million decrease in tradeshow expense and a $0.1 million decrease in software, travel and miscellaneous office expenses, partially offset by a $0.2 million increase in consulting fees.

Sales and marketing costs for the nine months ended September 30, 2024 and 2023 were $2.4 million and $3.1 million, respectively.

The decrease of $0.7 million is primarily due to a $0.7 million decrease in employee compensation, consisting of a $0.6 million decrease in personnel related expenses due to a lower headcount within the department and a $0.1 million decrease in stock-based compensation, a $0.1 million decrease in tradeshow expense and a $0.1 million decrease in software, travel and miscellaneous office expenses, partially offset by a $0.3 million increase in consulting fees.

General and Administrative Expenses:

Six months ended June 30,

Nine months ended September 30,

General and administrative

Percent of total revenue

General and administrative costs for the six months ended June 30, 2024 and 2023 were $3.4 million and $4.1 million, respectively.

The decrease of $0.6 million is primarily due to a $0.3 million decrease in stock-based compensation, a $0.2 million decrease in insurance premiums, a $0.1 million decrease in consulting and third-party service fees, a $0.1 million decrease in legal fees and a $0.1 million decrease in computer software and support, partially offset by a $0.1 million increase in public relations and annual meeting costs.

General and administrative costs for the nine months ended September 30, 2024 and 2023 were $4.4 million and $5.8 million, respectively.

The decrease of $1.3 million is primarily due to a $0.4 million decrease in stock-based compensation, a $0.3 million decrease in insurance premiums, a $0.3 million decrease in consulting and third-party service fees, a $0.2 million decrease in legal fees, a $0.1 million decrease in computer software and support and a $0.1 million decrease in travel and miscellaneous office expenses, partially offset by a $0.2 million increase in public relations and annual meeting costs.

Severance Expense:

Six months ended June 30,

Nine months ended September 30,

Severance expense

Percent of total revenue

Severance expense for the six months ended June 30, 2024 and 2023 was $1.3 million and $0.1 million, respectively.

The increase of $1.2 million is primarily due to the departure of the former CEO during 2024 for which $1.2 million in severance expense was recorded.

Severance expense for the nine months ended September 30, 2024 and 2023 was $1.4 million and $0.4 million, respectively.

The increase of $1.0 million is primarily due to the departure of the former CEO during 2024 for which $1.2 million in severance expense was recorded, partially offset by $0.3 million in severance expense recorded during 2023 due to the departure of the former CFO.

Other (expense) income, net:

Six months ended June 30,

Nine months ended September 30,

Offering costs related to warrant liability

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Total other (expense) income, net

Offering costs related to warrant liability were $0.6 million for the six months ended June 30, 2023.

We did not incur such cost during the six months ended June 30, 2024.

Other income resulting from the change in fair value of the warrant liability was $0.3 million for the six months ended June 30, 2024 and $1.9 million for the six months ended June 30, 2023.

The changes for both periods were due to reduced market value of our common stock

Interest income for the six months ended June 30, 2024 was $0.2 million as compared to interest income of $0.5 million for the six months ended June 30, 2023.

The decrease was due to a lower average cash balance in our savings account during the six months ended June 30, 2024 compared to the prior year period.

As a result of the above, net loss for the six months ended June 30, 2024 was $10.9 million as compared to $10.6 million for the six months ended June 30, 2023.

Offering costs related to warrant liability were $0.6 million for the nine months ended September 30, 2023.

We did not incur such cost during the nine months ended September 30, 2024.

Other income resulting from the change in fair value of the warrant liability was $0.4 million for the nine months ended September 30, 2024 and $2.7 million for the nine months ended September 30, 2023.

The changes for both periods were due to a lower market value of our common stock

Interest income for the nine months ended September 30, 2024 was $0.2 million as compared to interest income of $0.6 million for the nine months ended September 30, 2023.

The decrease was due to a lower average cash balance in our savings account during the nine months ended September 30, 2024 compared to the prior year period.

As a result of the above, net loss for the nine months ended September 30, 2024 was $14.3 million as compared to $14.8 million for the nine months ended September 30, 2023.

Liquidity and Capital Resources

During the six months ended June 30, 2024 and 2023, we recorded revenue of $110,000 and $214,000, respectively.

We incurred net losses of $10.9 million and $10.6 million for the six months ended June 30, 2024 and 2023, 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.

We are currently meeting our liquidity requirements through the proceeds of securities offerings that raised net proceeds of $6.9 million during 2023 and $1.8 million during the first quarter of 2024.

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

We believe our current cash on hand, 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 at least the next twelve months.

During the nine months ended September 30, 2024 and 2023, we recorded revenue of $0.3 million and $0.4 million, respectively.

We incurred net losses of $14.3 million and $14.8 million for the nine months ended September 30, 2024 and 2023, 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.

We are currently meeting our liquidity requirements through the proceeds of securities offerings that raised net proceeds of $2.5 million during 2024.

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

As we gain traction in the market with our new technology and continue 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 our available resources and revenue generated from our business operations will be sufficient to sustain our operations.

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2024 ATM Offering Program

On June 21, 2024, the Company entered into the At the Market Offering Agreement, dated June 21, 2024, with H.C.

Wainwright & Co., LLC as sales agent, pursuant to which the Company may issue and sell of up to $3.5 million in shares of the Company’s common stock (the “ATM Program”).

No sales were made under the ATM Program in the six months ended June 30, 2024.

After June 30, 2024, the Company received gross proceeds of $0.2 million from the sale of an aggregate of 240,112 shares of common stock under the ATM Program during the period from July 1, 2024 through August 9, 2024.

Operating Activities - During the six months ended June 30, 2024, cash flows used in operating activities were $10.8 million, consisting of a net loss of $10.9 million, less adjustments to reconcile net loss to net cash used in operating activities aggregating $0.4 million (principally stock-based compensation of $0.5 million, depreciation and amortization of $0.1 million, offset by a change in fair value of warrant liability of $0.3 million), a $0.3 million decrease in accrued expenses, a $0.1 million increase in inventory and a $0.1 million decrease in accounts payable, partially offset by a $0.1 million decrease in prepaid expenses and other current assets.

During the six months ended June 30, 2023, cash flows used in operating activities were $11.7 million, consisting of a net loss of $10.6 million, plus adjustments to reconcile net loss to net cash used in operating activities aggregating $0.1 million (principally stock-based compensation of $1.0 million, issuance costs allocated to warrant liability of $0.6 million, inventory net realizable adjustment of $0.1 million and depreciation and amortization expense of $0.1 million, partially offset by a decrease in fair value of the warrant liability of $1.9 million), a $0.4 million increase in prepaid expenses and other current assets, a $0.4 million decrease in operating lease liabilities, a $0.3 million decrease in accrued expenses, a $0.2 million increase in inventory and a $0.2 million decrease in accrued severance, partially offset by a $0.2 million increase in accounts payable.

Investing Activities - During the six months ended June 30, 2024 and 2023, cash flows used in investing activities were $0.1 million and $0.1 million, respectively.

During the six months ended June 30, 2024, a small amount of testing and computer equipment was purchased.

During the six months ended June 30, 2023, a small amount of testing equipment was purchased.

Financing Activities - During the six months ended June 30, 2024, cash flows provided by financing activities were $1.8 million, which primarily consisted of $1.8 million in net proceeds from a registered direct offering that included the sale of common stock, pre-funded warrants and warrants.

During the six months ended June 30, 2023, cash flows provided by financing activities were $5.4 million, which consisted of $2.7 million in net proceeds from the issuance and sale of common stock and warrants, $2.7 million in net proceeds from the sale of shares of our common stock in an at-the-market (“ATM”) offering and $0.1 million in proceeds from the ESPP.

We are in receipt of approximately $0.2 million of additional confirmed orders (“backlog”), the majority of which are scheduled to ship in the third quarter of 2024.

On June 21, 2024, we entered into the At the Market Offering Agreement with H.C.

Wainwright & Co., LLC, as sales agent, pursuant to which we may issue and sell of up to $3.45 million in shares of the Company’s common stock (the “ATM Program”).

During both the three and nine months ended September 30, 2024, we sold 1,217,168 shares of common stock under the ATM Program, respectively, for net proceeds of approximately $0.7 million (net of $0.2 million in commissions and issuance costs).

As of September 30, 2024, the Company had remaining capacity to issue up to approximately $2.5 million of common stock under the ATM Program.

Agile Subordinated Loan Agreement

Effective October 1, 2024, we 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 our obligations on certain senior indebtedness as provided in the Original Loan Agreement.

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

Effective November 5, 2024, we 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 our 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, we 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.

Operating Activities - During the nine months ended September 30, 2024, cash flows used in operating activities were $14.9 million, consisting of a net loss of $14.3 million, less adjustments to reconcile net loss to net cash used in operating activities aggregating $0.4 million (principally stock-based compensation of $0.7 million and depreciation and amortization of $0.1 million, partially offset by a change in fair value of warrant liability of $0.4 million), a $0.3 million decrease in accounts payable, a $0.3 million decrease in accrued expenses, a $0.3 million increase in inventory and a $0.1 decrease in accrued severance.

During the nine months ended September 30, 2023, cash flows used in operating activities were $15.9 million, consisting of a net loss of $14.8 million, plus adjustments to reconcile net loss to net cash used in operating activities aggregating $0.4 million (principally stock-based compensation of $1.4 million, issuance costs allocated to warrant liability of $0.6 million, inventory net realizable adjustment of $0.2 million and depreciation and amortization expense of $0.1 million, partially offset by a decrease in fair value of the warrant liability of $2.7 million), a $0.3 million increase in inventory, a $0.2 million decrease in accrued severance expense, a $0.1 million decrease in accounts payable, a $0.1 decrease in accrued expenses and a $0.1 million increase in prepaid expenses and other current assets.

Investing Activities - During the nine months ended September 30, 2024 and 2023, cash flows used in investing activities were $0.1 million and $0.1 million, respectively.

During each of the nine months ended September 30, 2024 and 2023, a small amount of testing and computer equipment was purchased.

Financing Activities - During the nine months ended September 30, 2024, cash flows provided by financing activities were $2.5 million, which primarily consisted of $1.8 million in net proceeds from a registered direct offering that included the sale of common stock, pre-funded warrants and warrants and $0.8 million in net proceeds from the sale of shares of our common stock under the ATM Program.

During the nine months ended September 30, 2023, cash flows provided by financing activities were $6.3 million, which consisted of $3.6 million in net proceeds from the sale of shares of our common stock under the Prior ATM Program, $2.7 million in net proceeds from the issuance and sale of common stock and warrants and $0.1 million in proceeds from the ESPP.

We are in receipt of approximately $0.2 million of additional confirmed orders (“backlog”), the majority of which are scheduled to ship in the fourth quarter of 2024.

Quantitative and Qualitative Disclosure About Market Risk

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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 2. Management’s Discussion and Analysis