What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-10 compared with 2020-05-11 · 68 added, 42 removed, 106 unchanged (51% of the section changed)

Management’s Discussion and Analysis o f Financial Conditi on and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

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expectations for current and potential business relationships;

expectations for revenues, liquidity cash flows and financial performance, the anticipated results of our research and development efforts, the timing for receipt of required regulatory approvals and product launches.

the impact of COVID-19 on our business and our response to it;

and expectations for revenues, liquidity cash flows and financial performance, the anticipated results of our research and development efforts, the timing for receipt of required regulatory approvals and product launches.

Forward-looking statements are neither historical facts nor assurances of future performance.

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timing and receipt of regulatory approvals in the United States and internationally;

the impact of the COVID-19 on our business and our response to it;

our ability to find and maintain development partners;

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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.

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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We are also in discussion with potential customers in the consumer and industrial spaces that are considering our solutions to supply low power distance charging for products that could enter the market in 2021.

When the company was founded in 2012, we recognized the need to design and build an enterprise-class network ma nagement and control software (“NMS”) system that would be integral to supporting our customers’ rapid and cost-effective deployment of our wire-free charging technology.

When the company was founded in 2012, we recognized the need to design and build an enterprise-class network management and control software (“NMS”) system that would be integral to supporting our customers’ rapid and cost-effective deployment of our wire-free charging technology.

Our NMS system is robust and flexible enough to both scale up to control thousands of devices across an enterprise, or scale down to meet the needs of a home or IoT environment.

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We have implemented an aggressive intellectual property strategy and are continuing to pursue patent protection for new innovations.

As of May 6, 2020, we had more than 110 pending patent applications in the U.S.

As of July 30, 2020, we had more than 65 pending patent applications in the U.S.

Additionally, the U.S.

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Impact of COVID-19 on Our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic which continues to spread throughout the United States and the world.

We are monitoring the outbreak of COVID-19 and the related

business and travel restrictions a nd changes to behavior intended to reduce its spread, and its impact on our operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on our employees.

The outbreak of COVID-19 has delayed adoption of our technology by potential customers who temporarily shut down their workforce and supply chain based in China.

In one case, this outbreak delayed the launch of a new product that incorporates our technology.

We have implemented work-from-home policies for our employees.

The effects of the state executive order, local shelter-in-place orders, government-imposed quarantines and our work-from-home policies may negatively impact productivity, disrupt our research and development or other operations, and delay the launch of our customers’ new products that incorporate our technology, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on our operations and liquidity is uncertain as of the date of this report.

While there could ultimately be a material impact on our operations and liquidity, at the time of issuance, the impact could not be determined.

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic.

The pandemic continues to affect the United States and the world.

We are monitoring the ongoing effects of COVID-19 (including

continued outbreaks) and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on our operations, financial position, cash flows, inventory, supply chains, global regulatory approvals, purchasing trends, customer payments, and the industry in general, in addition to the impact on our employees.

The outbreak of COVID-19 has delayed adoption of our technology by potential customers who temporarily shut down their workforce and supply chain based in China, and who continue to evaluate their future prospects and business models, including partnerships with us.

For example, in one case, the outbreak earlier in the spring delayed the launch of a new product that incorporates our technology.

Further delays in this or other products could result from the pandemic.

These changes are due in part to changes in how business is conducted as a result of the pandemic, including state executive orders, local shelter-in-place orders, government-imposed quarantines and work-from-home policies in China, the United States, and elsewhere.

We have implemented work-from-home policies for our employees that will likely be in place until the end of the year.

The effects of state executive orders, local shelter-in-place orders, government-imposed quarantines and our work-from-home policies could negatively impact productivity, disrupt our research and development or other operations, and delay the planned launch of our customers’ new products that incorporate our technology, the magnitude of which will depend, in part, on the length and severity of the continuing restrictions and other limitations on our ability to conduct our business in the ordinary course.

Due to the continuing developments and fluidity of this situation, the magnitude and duration of the pandemic and its impact on our operations and liquidity are still uncertain as of the date of this report.

Critical Accounting Policies and Estimates

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Results of Operations

Three Months Ended March 31, 2020 and 2019

During the three months ended March 31, 2020 and 2019, we recorded revenue of $61,475 and $66,500, respectively.

Three Months Ended June 30, 2020 and 2019

During the three months ended June 30, 2020 and 2019, we recorded revenue of $114,375 and $47,500, respectively.

Operating Expenses and Loss from Operations.

Operating expenses are made up of research and development, sales and marketing, general and administrative expenses and cost of services revenue.

Losses from operations for the three months ended March 31, 2020 and 2019 were $8,653,675 and $11,095,541, respectively.

Losses from operations for the three months ended June 30, 2020 and 2019 were $8,212,640 and $9,946,656, respectively.

Research and Development Costs.

Research and development costs were $ 4, 575 , 303 and $ 6,800,678 , respectively, for the three months ende d March 31, 2020 and 2019 .

The decrease of $ 2, 225 , 375 is primarily due to a $1, 653 , 885 decrease in compensation, consisting of a $1,0 9 8, 310 decrease in payroll costs and a $555,575 decrease in stock-based compensation from a lower headcount within the department, a $528,894 decrease in engineering supplies, components and chip development c osts due to project timing, a $90,439 decrease in depreciation and an $80,726 decrease in consulting fees, partially offset by a $249,909 increase in legal fees pertaining to patents and intellectual property.

Research and development costs were $ 4, 330 , 43 3 and $ 5 , 515 , 017 , respectively, for the three months ended June 30 , 2020 and 2019 .

The decrease of $ 1 , 184 , 584 is primarily due to a n $ 867,935 decrease in compensation, consisting of a $ 538,759 decrease in payroll costs and a $ 329,176 decrease in stock-based compensation from a lower headcount within the department, a $121,436 decrease in depreciation and a $102,950 decrease in engineering supplies, components and chip development costs due to project timing.

Sales and Marketing Costs.

Sales and marketing costs for the three months ended March 31, 2020 and 2019 were $1,447,909 and $1,599,452, respectively.

The decrease of $151,543 is primarily due to a $116,526 decrease in compensation, consisting of a $103,936 decrease in payroll costs and a $12,590 decrease in stock-based compensation from a lower headcount within the department, a $123,124 decrease in supplies utilized for customer demonstrations and a $92,081 decrease in tradeshow expenses, partially offset by a $192,258 increase in consulting and third party services.

Sales and marketing costs for the three months ended June 30, 2020 and 2019 were $1,438,904 and $1,143,910, respectively.

The increase of $294,994 is primarily due to a $273,339 increase in compensation, consisting of a $176,949 increase in payroll costs and a $96,390 increase in stock-based compensation from a higher headcount within the department, a $70,013 increase in consulting and third party services, partially offset by an $86,317 decrease in travel, meals and entertainment as a result of COVID-19 restrictions.

General and Administrative Expenses.

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.

General and administrative costs for the three months ended March 31, 2020 and 2019 were $2,652,394 and $2,761,911, respectively.

The decrease of $109,517 is primarily due to a $430,889 decrease in compensation, consisting of a $326,928 decrease in stock-based compensation due to certain equity awards reaching full expense amortization during the previous year and a $103,961 decrease in payroll costs and a $45,456 decrease in recruiting costs, partially offset by a $231,499 increase in accounting and auditing fees, a $75,143 increase in consulting fees and a $58,101 increase in insurance premiums.

General and administrative costs for the three months ended June 30, 2020 and 2019 were $2,470,683 and $3,335,229, respectively.

The decrease of $864,546 is primarily due to a $495,240 decrease in stock-based compensation due to certain equity awards reaching full expense amortization during the previous year and forfeitures of awards from former board members, a $345,519 decrease in legal expense and a $66,799 decrease in travel, meals and entertainment as a result of COVID-19 restrictions, partially offset by a $97,552 increase in insurance premiums.

Cost of Services Revenue.

During the three months ended March 31, 2020 and 2019, we recorded cost of services revenue of $39,544 and $0, respectively.

During the three months ended June 30, 2020 and 2019, we recorded cost of services revenue of $86,995 and $0, respectively.

These costs are related to our contract services performed for Dialog.

In t e r e s t Income .

In t e r e s t income fo r t h e three m on t h s e nd e d March 31, 2020 w a s $55,939 a s c o m p a r e d t o interest income of $76,073 fo r t h e three m on t h s e nd e d March 31, 2019 .

The decrease of $20,134 is due to a lower average cash balance.

In t e r e s t income fo r t h e three m on t h s e nd e d June 30, 2020 w a s $7,974 a s c o m p a r e d t o interest income of $142,660 fo r t h e three m on t h s e nd e d June 30, 2019 .

The decrease of $134,686 is primarily due to lower savings interest rates and a lower average cash balance.

N e t L o ss .

A s a r e s u l t o f t h e a bov e , n e t l o s s fo r t h e three m on t h s e nd e d March 31, 2020 was $8,597,736 a s c o m p a r e d t o $11,019,468 fo r t h e three m on t h s e nd e d March 31, 2019 .

A s a r e s u l t o f t h e a bov e , n e t l o s s fo r t h e three m on t h s e nd e d June 30, 2020 was $8,204,666 a s c o m p a r e d t o $9,803,996 fo r t h e three m on t h s e nd e d June 30, 2019 .

Six Months Ended June 30, 2020 and 2019

During the six months ended June 30, 2020 and 2019, we recorded revenue of $175,850 and $114,000, respectively.

Operating Expenses and Loss from Operations.

Operating expenses are made up of research and development, sales and marketing, general and administrative expenses and cost of services revenue.

Losses from operations for the six months ended June 30, 2020 and 2019 were $16,866,315 and $21,042,197, respectively.

Research and Development Costs.

Research and development costs were $8,905,736 and $12,315,695, respectively, for the six months ended June 30, 2020 and 2019.

The decrease of $3,409,959 is primarily due to a $2,521,821 decrease in compensation, consisting of a $1,637,070 decrease in payroll costs and an $884,751 decrease in stock-based compensation from a lower headcount within the department, a $631,844 decrease in engineering supplies, components and chip development costs due to project timing, a $211,874 decrease in depreciation, a $125,324 decrease in consulting fees and an $84,468 decrease in regulatory testing fees, partially offset by a $212,714 increase in legal fees pertaining to patents and intellectual property.

Sales and Marketing Costs.

Sales and marketing costs for the six months ended June 30, 2020 and 2019 were $2,886,813 and $2,743,362, respectively.

The increase of $143,451 is primarily due to a $156,813 increase in compensation, consisting of a $73,013 increase in payroll costs and an $83,800 increase in stock-based compensation from a higher headcount within the department and a $262,271 increase in consulting and third party services, partially offset by a $101,265 decrease in tradeshow expenses, a $91,665 decrease in supplies utilized for customer demonstrations and an $86,317 decrease in travel, meals and entertainment as a result of COVID-19 restrictions.

General and Administrative Expenses.

General and administrative costs for the six months ended June 30, 2020 and 2019 were $5,123,077 and $6,097,140, respectively.

The decrease of $974,063 is primarily due to a $926,955 decrease in compensation, consisting of a $822,168 decrease in stock-based compensation due to

certain equity awards reaching full expense amortization during the previous year and a $ 104 , 786 decrease in payroll costs , a $327,138 decrease in legal costs, a $74,650 decrease in travel, meals and entertainment as a result of COVID-19 restrictions and a $51,399 decrease in general office expenses, partially offset by a $206,116 increase in accounting and auditing fees, a $155,653 increase in insurance premiums and a $112,570 increase in consulting expense.

Cost of Services Revenue.

During the six months ended June 30, 2020 and 2019, we recorded cost of services revenue of $126,539 and $0, respectively.

These costs are related to our contract services performed for Dialog.

In t e r e s t Income .

In t e r e s t income fo r t h e six m on t h s e nd e d June 30, 2020 w a s $63,913 a s c o m p a r e d t o interest income of $218,733 fo r t h e six m on t h s e nd e d June 30, 2019 .

The decrease of $154,820 is primarily due to lower savings interest rates and a lower average cash balance.

N e t L o ss .

A s a r e s u l t o f t h e a bov e , n e t l o s s fo r t h e six m on t h s e nd e d June 30, 2020 was $16,802,402 a s c o m p a r e d t o $20,823,464 fo r t h e six m on t h s e nd e d June 30, 2019 .

L i q u i d it y a n d Cap it a l R e s o ur ces

During the three months ended March 31, 2020 and 2019, we recorded revenue of $61,475 and $66,500, respectively.

We incurred net losses of $8,597,736 and $11,019,468 for the three months ended March 31, 2020 and 2019, respectively.

Net cash used in operating activities was $7,340,111 and $7,369,177 for the three months ended March 31, 2020 and 2019, respectively.

We are currently meeting our liquidity requirements through the proceeds from securities offerings that raised net proceeds of $23,319,156 in March 2019, $4,557,693 during the fourth quarter 2019 and $5,506,880 during the first quarter 2020, along with payments received under product development projects.

We believe our current cash on hand, together with anticipated revenues and potential financing, will be sufficient to fund our operations into May 2021.

During the six months ended June 30, 2020 and 2019, we recorded revenue of $175,850 and $114,000, respectively.

We incurred net losses of $16,802,402 and $20,823,464 for the six months ended June 30, 2020 and 2019, respectively.

Net cash used in operating activities was $13,215,844 and $14,423,911 for the six months ended June 30, 2020 and 2019, respectively.

We are currently meeting our liquidity requirements through the proceeds from securities offerings that raised net proceeds of $23,319,156 in March 2019, $4,557,693 during the fourth quarter 2019, $5,506,880 during the first quarter 2020 and $9,216,611 during the second quarter 2020, along with payments received under product development projects.

We believe our current cash on hand, together with anticipated revenues and potential financing, will be sufficient to fund our operations into August 2021.

Although we intend to continue our research and development activities, there can be no assurance that our available resources will be sufficient to enable us to generate revenues sufficient to sustain operations.

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There is no assurance that such financing would be available on terms that we would find acceptable, or at all.

During the three months ended March 31, 2020, cash flows used in operating activities were $7,340,111, consisting of a net loss of $8,597,736, less non-cash expenses aggregating $2,619,443 (principally stock-based compensation of $2,276,299, amortization of operating lease right-of-use assets of $188,445 and depreciation and amortization expense of $121,699), a $633,268 decrease in accounts payable, a $628,052 decrease in accrued expenses and a $169,681 decrease in operating lease liabilities, partially offset by a $98,212 decrease in prepaid expenses and other current assets.

Dur ing the three months ended March 31, 2019, cash flows used in operating activities were $7,369,177, consisting of a net loss of $11,019,468, less non-cash expenses aggregating $3,534,053 (principally stock-based compensation of $3,171,392 and depreciation and amortization expense of $235,368), a $147,413 decrease in prepaid expenses and other current assets and an $80,170 increase in accrued expenses.

During the three months ended March 31, 2020 and 2019, cash flows used in investing activities were $0 and $161,249, respectively.

The cash used in investing activities for the three months ended March 31, 2019 primarily consisted of leasehold improvements related to the construction of a regulatory testing chamber within our office space.

During the three months ended March 31, 2020, cash flows provided by financing activities were $5,619,939, which consisted of $5,506,880 in net proceeds from the sale of shares of our common stock to the public in an ATM offering and $113,059 in proceeds from contributions to the ESPP.

During the three months ended March 31, 2019, cash flows provided by financing activities were $23,553,060, which consisted of $23,319,156 in net proceeds from a private offering of shares and warrants pursuant to a shelf registration, $400,103 in proceeds from the exercises of stock options and $173,167 in proceeds from contributions to the ESPP, partially offset by $339,366 in shares withheld for the payment of payroll taxes for the delivery of RSUs and PSUs.

During the six months ended June 30, 2020, cash flows used in operating activities were $13,215,844, consisting of a net loss of $16,802,402, less non-cash expenses aggregating $4,975,428 (principally stock-based compensation of $4,346,206, amortization of operating lease right-of-use assets of $378,593 and depreciation and amortization expense of $217,629), a $429,460 decrease in accrued expenses, a $341,064 decrease in operating lease liabilities, a $330,537 decrease in accounts payable, a $212,727 increase in prepaid expenses and other current assets and a $75,082 increase in accounts receivable.

During the six months ended June 30, 2019, cash flows used in operating activities were $14,423,911, consisting of a net loss of $20,823,464, less non-cash expenses aggregating $6,739,398 (principally stock-based compensation of $5,969,325 and depreciation and amortization expense of $476,863), a $534,124 decrease in accounts payable, partially offset by a $332,767 increase in accrued expenses.

During the six months ended June 30, 2020 and 2019, cash flows used in investing activities were $0 and $172,811, respectively.

The cash used in investing activities for the six months ended June 30, 2019 primarily consisted of leasehold improvements related to the construction of a regulatory testing chamber within our office space.

During the six months ended June 30, 2020, cash flows provided by financing activities were $14,940,695, which consisted of $14,723,491 in net proceeds from the sale of shares of our common stock to the public in an ATM offering and $217,204 in proceeds from contributions to the ESPP.

During the six months ended June 30, 2019, cash flows provided by financing activities were $23,698,482, which consisted of $23,319,156 in net proceeds from a private offering of shares and warrants pursuant to a shelf registration, $400,103 in proceeds from the exercise of stock options and $318,589 in proceeds from contributions to the ESPP, partially offset by $339,366 in shares withheld for the payment of payroll taxes for the delivery of RSUs and PSUs.

Research and development of new technologies is, by its nature, unpredictable.

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Off Balance Sheet Transactions

As of March 31, 2020, we did not have any off-balance sheet transactions.

As of June 30, 2020, we did not have any off-balance sheet transactions.

Material Changes in Specified Contractual Obligations

A table of our specified contractual obligations was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operation of our most recent Annual Report on Form 10-K.

There were no material changes outside the ordinary course of our business in the specified contractual obligations during the three months ended March 31, 2020.

There were no material changes outside the ordinary course of our business in the specified contractual obligations during the three months ended June 30, 2020.

Quantitative and Qualitative Disclosure About Market Risk

There has been no material change in our exposure to market risk during the three months ended March 31, 2020.

There has been no material change in our exposure to market risk during the three months ended June 30, 2020.

Please refer to "Quantitative and Qualitative Disclosures about Market Risk" contained in Part II, Item 7A of our Form 10-K for the year ended December 31, 2019 for a discussion of our exposure to market risk.

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