What changed in this filing

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Item 1. Financial Statements

2021-08-11 compared with 2021-05-17 · 137 added, 79 removed, 326 unchanged (40% of the section changed)

2 unchanged sentences

BALANCE SHEETS

March 31, 2021

June 30, 2021

December 31, 2020

18 unchanged sentences

Preferred Stock, $ 0.00001 par value, 10,000,000 shares authorized

at March 31, 2021 and December 31, 2020;

at June 30, 2021 and December 31, 2020;

no shares issued or

Common Stock, $ 0.00001 par value, 200,000,000 shares authorized

at March 31, 2021 and December 31, 2020, respectively;

and 61,292,412 shares issued and outstanding at March 31, 2021

at June 30, 2021 and December 31, 2020, respectively;

and 61,292,412 shares issued and outstanding at June 30, 2021

and December 31, 2020, respectively.

8 unchanged sentences

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Operating expenses:

24 unchanged sentences

( 303,498,509

Stock-based compensation - restricted

stock units ("RSUs")

Stock-based compensation - performance

share units ("PSUs")

Stock-based compensation - employee

stock purchase plan ("ESPP")

Issuance of shares for RSUs

Issuance of shares for PSUs

Proceeds from contributions to the ESPP

Balance, June 30, 2021 (unaudited)

( 314,514,338

Stockholders'

13 unchanged sentences

( 271,738,396

Stock-based compensation - restricted

stock units ("RSUs")

Stock-based compensation - employee

stock purchase plan ("ESPP")

Issuance of shares for RSUs

Proceeds from contributions to the ESPP

Issuance of shares in an at-the-market ("ATM")

offering, net of $ 236,528 in issuance costs

Balance, June 30, 2020 (unaudited)

( 279,943,062

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

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

20 unchanged sentences

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents - beginning

2 unchanged sentences

Common stock issued for RSUs

Common stock issued for PSUs

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

1 unchanged sentence

Energous Corporation (the “Company”) was incorporated in Delaware on October 30, 2012.

The Company has developed its WattUp® technology, consisting of proprietary semiconductor chipsets, software, hardware designs and antennas, that enables radio frequency (“RF”) based charging for electronic devices, providing wire-free contact and non-contact charging solutions, with the potential to enable charging with mobility.

The Company believes its proprietary WattUp technology can be utilized in consumer electronics such as wearables, hearing aids, earbuds, Bluetooth headsets, Internet of Things (“IoT”) devices, smartphones, tablets, e-book readers, keyboards, mice, remote controls, rechargeable lights, cylindrical batteries, medical devices and other devices with charging requirements that would otherwise require battery replacement or wired power connection.

The Company has developed its WattUp® wireless power technology, consisting of proprietary semiconductor chipsets, software controls, hardware designs and antennas, that enables radio frequency (“RF”) based charging for electronic devices.

The WattUp technology has a broad spectrum of capabilities, including near field wireless charging and at-a-distance wireless charging at various distances.

The Company believes its proprietary WattUp technologies are well suited for many applications, including building and home automation, electronic shelf labels, industrial IoT sensors, surface and implanted medical devices, tracking devices, hearables, wearables, consumer electronics, public safety and military applications.

Potential future applications include smartphones, commercial and industrial robotics, as well as automotive solutions and other devices with charging requirements that would otherwise require battery replacement or a wired power connection.

Note 2 – Liquidity and Management Plans

During the three months ended March 31, 2021 and 2020, the Company recorded revenue of $ 145,065 and $ 61,475 , respectively.

During the three months ended March 31, 2021 and 2020, the Company recorded a net loss of $ 8,525,763 and $ 8,597,736 , respectively.

Net cash used in operating activities was $ 5,976,550 and $ 7,340,111 for the three months ended March 31, 2021 and 2020, respectively.

During the three and six months ended June 30, 2021, the Company recorded revenue of $ 184,960 and $ 330,025 , respectively, and during the three and six months ended June 30, 2020, the Company recorded $ 114,375 and $ 175,850 , respectively.

During the three and six months ended June 30, 2021, the Company recorded net losses of $ 11,015,829 and $ 19,541,592 , respectively, and during the three and six months ended June 30, 2020, the Company recorded net losses of $ 8,204,666 and $ 16,802,402 , respectively.

Net cash used in operating activities was $ 12,537,690 and $ 13,215,844 for the six months ended June 30, 2021 and 2020, respectively.

The Company is currently meeting its liquidity requirements through the proceeds of securities offerings that raised net proceeds of $ 53,556,202 during 2020, along with payments received from customers.

As of March 31, 2021, the Company had cash on hand of $ 44,758,397 .

The Company expects that cash on hand as of March 31, 2021, together with anticipated revenues, will be sufficient to fund the Company’s operations into May 2022.

As of June 30, 2021, the Company had cash on hand of $ 38,226,214 .

The Company expects that cash on hand as of June 30, 2021, together with anticipated revenues, will be sufficient to fund the Company’s operations into August 2022.

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

36 unchanged sentences

The Company also provides contract services for Dialog.

During the three months ended March 31, 2021, the Company recognized $ 145,065 in product development projects revenue, $ 0 in royalty revenue and $ 0 in contract services revenue.

During the three months ended March 31, 2020, the Company recognized $ 20,850 in product development projects revenue, $ 0 in royalty revenue and $ 40,625 in contract services revenue.

During the three months ended June 30, 2021, the Company recognized $ 184,960 in product development projects revenue, $ 0 in royalty revenue and $ 0 in contract services revenue.

During the six months ended June 30, 2021, the Company recognized $ 330,025 in product development projects revenue, $ 0 in royalty revenue and $ 0 in contract services revenue.

During the three months ended June 30, 2020, the Company recognized $ 25,000 in product development projects revenue, $ 0 in royalty revenue and $ 89,375 in contract services revenue.

During the six months ended June 30, 2020, the Company recognized $ 45,850 in product development projects revenue, $ 0 in royalty revenue and $ 130,000 in contract services revenue.

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

7 unchanged sentences

The costs associated with this revenue are recognized as the services are performed and are included in cost of services revenue.

Note 3 – Summary of Significant Accounting Policies, continued

Research and Development

2 unchanged sentences

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 $ 4,591,244 and $ 4,575,303 for the three months ended March 31, 2021 and 2020, respectively.

Note 3 – Summary of Significant Accounting Policies, continued

The Company incurred research and development costs of $ 6,103,694 and $ 4,330,433 for the three months ended June 30, 2021 and 2020, respectively, and the Company incurred research and development costs of $ 10,694,938 and $ 8,905,736 for the six months ended June 30, 2021 and 2020, respectively.

Stock-Based Compensation

6 unchanged sentences

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 March 31, 2021, no liability for unrecognized tax benefits was required to be reported.

As of June 30, 2021, no liability for unrecognized tax benefits was required to be reported.

The guidance 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 months ended March 31, 2021 or 2020.

No interest or penalties were recorded during the three or six months ended June 30, 2021 or 2020.

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

3 unchanged sentences

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 7,137,741 and 7,206,004 for the three months ended March 31, 2021 and 2020, respectively, because their inclusion would be anti-dilutive.

The computation of diluted loss per share excludes potentially dilutive securities of 6,323,445 and 6,945,580 for the three months ended June 30, 2021 and 2020, respectively, and 6,323,445 and 6,945,580 for the six months ended June 30, 2021 and 2020, respectively, because their inclusion would be anti-dilutive.

Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

For the Three Months

Ended March 31,

Warrant issued to private investors

Ended June 30,

For the Six Months

Ended June 30,

Warrants issued to private investors

Options to purchase common stock

16 unchanged sentences

The Company adopted this standard, and the adoption did not have a material impact on its financial statements.

In May 2021, the FASB issued ASU No.

2021-04, “ Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” ASU 2021-04 clarifies accounting for modifications or exchanges of equity-classified warrants.

This standard is effective for annual reporting periods beginning after December 15, 2021.

The Company does not believe the adoption of this standard will have a material impact on its financial statements.

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date of March 31, 2021, through the date which the financial statements are available to be issued.

The Company evaluates events that have occurred after the balance sheet date of June 30, 2021, through the date which the financial statements are available to be issued.

Note 4 – Commitments and Contingencies

16 unchanged sentences

The Company’s adoption of the new standard resulted in the recognition of right-of-use assets of $ 414,426 and operating lease liabilities of $ 485,747 , with no material cumulative effect adjustment to equity as of the date of adoption.

The Company anticipates having future total lease payments of $ 1,224,876 during the period from the second quarter of 2021 to the third quarter of 2022.

As of March 31, 2021, the company has total operating lease right-of-use assets of $ 1,097,377 , current portion operating lease liabilities of $ 805,557 and long-term portion of operating lease liabilities of $ 386,424 .

The weighted average remaining lease term is 1.4 years as of March 31, 2021.

A reconciliation of undiscounted cash flows to lease liabilities recognized as of March 31, 2021 is as follows:

The Company anticipates having future total lease payments of $ 1,002,084 during the period from the third quarter of 2021 to the third quarter of 2022.

As of June 30, 2021, the company has total operating lease right-of-use assets of $ 899,355 , current portion operating lease liabilities of $ 785,484 and long-term portion of operating lease liabilities of $ 194,176 .

The weighted average remaining lease term is 1.2 years as of June 30, 2021.

A reconciliation of undiscounted cash flows to lease liabilities recognized as of June 30, 2021 is as follows:

Total future lease payments

5 unchanged sentences

On December 18, 2015, the agreement was amended to redefine the hardware and software configuration and the quarterly payments increased to approximately $ 198,000 .

In July 2018, the Company renewed the agreement for an additional three years , and the Company is required to remit quarterly payments of approximately $ 218,000 .

The current subscription term expires on June 23, 2021.

In July 2018, the Company renewed the agreement for an additional three years , and the Company was required to remit quarterly payments of approximately $ 218,000 .

In June 2021, the Company renewed the agreement for an additional three years, and the Company is required to remit quarterly payments of approximately $ 233,000 through the second quarter of 2024.

Litigations, Claims, and Assessments

6 unchanged sentences

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

During the three months ended March 31, 2021, the Company accrued $ 391,578 in expense under the Bonus Plan, which will be paid during the second quarter of 2021.

During the three months ended March 31, 2020, the Company accrued $ 284,591 in expense, which was paid during the second quarter of 2020.

During the three months ended June 30, 2021, the Company accrued $ 391,578 in expense under the Bonus Plan, which will be paid during the third quarter of 2021.

During the three months ended June 30, 2020, the Company accrued $ 392,929 in expense under the Bonus Plan, which was paid during the third quarter of 2020.

During the six months ended June 30, 2021 and 2020, the Company accrued $ 783,156 and $ 677,520 , respectively, in expense under the Bonus Plan.

Severance and Change in Control Agreement

2 unchanged sentences

If Executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) the Company will pay the full amount of Executive’s premiums under the Company’s health, dental and vision plans, including coverage for the Executive’s eligible dependents, for the six to 12 month period following the Executive’s termination.

Amended Employee Agreement – Stephen Rizzone

Executive Transition Agreement – Stephen Rizzone

On April 3, 2015, the Company entered into an Amended and Restated Executive Employment Agreement with Stephen R.

3 unchanged sentences

Rizzone is eligible to receive quarterly cash bonuses from the MBO Bonus Plan with a total target amount equal to 100 % of his base salary based upon achievement of performance-based objectives established by the Board.

Rizzone is also eligible to receive all customary and usual benefits generally available to senior executives of the Company.

On July 9, 2021, the Company announced that Stephen R.

Rizzone has retired from his position as the Company’s President and Chief Executive Officer and as a member of the Board (see Note 9 – Subsequent Event).

Strategic Alliance Agreement

4 unchanged sentences

Each party will retain all of its intellectual property.

Note 4 – Commitments and Contingencies, continued

Strategic Alliance Agreement continued

The Alliance Agreement has an initial term of seven years and will automatically renew annually thereafter unless terminated by either party upon 180 days’ prior written notice.

17 unchanged sentences

Pursuant to this shelf registration statement, the Company sold shares which raised net proceeds of $ 38,832,711 (net of $ 1,167,289 in issuance costs) during the third and fourth quarters of 2020.

The ATM Program was completed as of the end of 2020 and no further securities were sold during the three months ended March 31, 2021.

The ATM Program was completed as of the end of 2020 and no further securities were sold during the three or six months ended June 30, 2021.

Common Stock Outstanding

6 unchanged sentences

2013 Equity Incentive Plan

Effective on May 26, 2020, the Company’s stockholders approved the amendment and restatement of the 2013 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 1,200,000 shares, bringing to 7,285,967 the total number of shares approved for issuance under that plan.

As of March 31, 2021, 930,611 shares of common stock remain eligible to be issued through equity-based instruments under the 2013 Equity Incentive Plan.

Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the 2013 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 1,500,000 shares, bringing to 8,785,967 the total number of shares approved for issuance under that plan.

As of June 30, 2021, 2,414,623 shares of common stock remain eligible to be issued through equity-based instruments under the 2013 Equity Incentive Plan.

2014 Non-Employee Equity Compensation Plan

Effective on May 26, 2020, the Company’s stockholders approved the amendment and restatement of the 2014 Non-employee Equity Compensation Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 800,000 shares, bringing to 1,650,000 the total number of shares approved for issuance under that plan.

Note 6 – Stock-Based Compensation, continued

Equity Incentive Plans, continued

As of March 31, 2021, 873,971 shares of common stock remain eligible to be issued through equity-based instruments under the 2014 Non-Employee Equity Compensation Plan.

As of June 30, 2021, 917,013 shares of common stock remain eligible to be issued through equity-based instruments under the 2014 Non-Employee Equity Compensation Plan.

2015 Performance Share Unit Plan

Effective on May 26, 2020, the Company’s stockholders approved the amendment and restatement of the 2015 Performance Share Unit Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 700,000 shares, bringing to 3,410,104 the total number of shares approved for issuance under that plan.

As of March 31, 2021, 681,238 shares of common stock remain eligible to be issued through equity-based instruments under the 2015 Performance Share Unit Plan.

Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the 2015 Performance Share Unit Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 1,700,000 shares, bringing to 5,110,104 the total number of shares approved for issuance under that plan.

As of June 30, 2021, 2,379,888 shares of common stock remain eligible to be issued through equity-based instruments under the 2015 Performance Share Unit Plan.

2017 Equity Inducement Plan

5 unchanged sentences

or (c) will become an employee of the Company or any subsidiary in connection with a merger or acquisition.

As of March 31, 2021, 143,336 shares of common stock remain available to be issued through equity-based instruments under the 2017 Equity Inducement Plan.

As of June 30, 2021, 138,679 shares of common stock remain available to be issued through equity-based instruments under the 2017 Equity Inducement Plan.

Employee Stock Purchase Plan

1 unchanged sentence

On May 21, 2015, the Company’s stockholders approved the ESPP.

Effective on May 26, 2020, the Company’s stockholders approved the amendment and restatement of the Employee Stock Purchase Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 250,000 shares, bring to 850,000 the total number of shares approved for issuance under that plan.

Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the Employee Stock Purchase Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 700,000 shares, bring to 1,550,000 the total number of shares approved for issuance under that plan.

Under the ESPP, employees may designate an amount not less than 1 % but not more than 10 % of their annual compensation for the purchase of Company shares.

2 unchanged sentences

The exercise price of the option will be 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 March 31, 2021, 140,438 shares of common stock remain eligible to be issued under the ESPP.

Employees contributed $ 117,013 through payroll withholdings as of March 31, 2021 to the ESPP for the current offering period that will end on June 30, 2021 and shares will be deemed delivered on that date.

As of June 30, 2021, 685,374 shares of common stock remain eligible to be issued under the ESPP.

Employees contributed $ 237,247 through payroll withholdings to the ESPP for the offering period ended June 30, 2021 and shares were deemed delivered on that date.

Note 6 – Stock-Based Compensation, continued

Stock Option Activity

The following is a summary of the Company’s stock option activity during the three months ended March 31, 2021:

The following is a summary of the Company’s stock option activity during the six months ended June 30, 2021:

Outstanding at January 1, 2021

Outstanding at March 31, 2021

Outstanding at June 30, 2021

Exercisable at January 1, 2021

Exercisable at March 31, 2021

As of March 31, 2021, the unamortized value of options was $ 0 .

Exercisable at June 30, 2021

As of June 30, 2021, the unamortized value of options was $ 0 .

Restricted Stock Units (“RSUs”)

During the three months ended March 31, 2021, the Compensation Committee granted various employees RSUs covering 941,635 shares of common stock under the 2013 Equity Incentive Plan.

The awards vest over terms ranging from two to three years.

During the three months ended March 31, 2021, the Compensation Committee and the Board of Directors granted various non-employees RSUs covering 125,000 shares of common stock under the 2014 Non-employee Equity Compensation Plan.

The awards vest over one year .

As of March 31, 2021, t h e un am or ti ze d v a l u e o f t h e R SUs w a s $ 6,355,220 .

During the six months ended June 30, 2021, the Compensation Committee granted various employees RSUs covering 964,885 shares of common stock under the 2013 Equity Incentive Plan.

The awards vest over terms ranging from two to four years.

During the six months ended June 30, 2021, the Compensation Committee and the Board of Directors granted various non-employees RSUs covering 135,000 shares of common stock under the 2014 Non-employee Equity Compensation Plan.

The awards vest over terms ranging from one to four years

During the six months ended June 30, 2021, the Board of Directors granted an employee RSUs covering 7,000 shares of common stock under the 2017 Equity Inducement Plan.

The award vests over a term of four years.

As of June 30, 2021, t h e un am or ti ze d v a l u e o f t h e R SUs w a s $ 4,763,288 .

T h e un am or ti ze d am oun t w il l b e e xp e n s e d ov e r a weighted average p e r i o d o f 1.5 y ea r s .

A summary of the activity related to RSUs for the three months ended March 31, 2021 is presented below:

A summary of the activity related to RSUs for the six months ended June 30, 2021 is presented below:

Outstanding at January 1, 2021

RSUs forfeited

Outstanding at March 31, 2021

Outstanding at June 30, 2021

Note 6 – Stock-Based Compensation, continued

2 unchanged sentences

The goals are commonly related to the Company’s revenue, market capitalization or market share price of the common stock.

During the three months ended March 31, 2021, the Compensation Committee of the Board of Directors granted various employees PSUs covering 1,450,713 shares of common stock under the Company’s 2015 Performance Share Unit Plan.

Amortization for all PSU awards was $ 0 and $( 88,348 ) for the three months ended March 31, 2021 and 2020, respectively.

A summary of the activity related to PSUs for the three months ended March 31, 2021 is presented below:

During the six months ended June 30, 2021, the Compensation Committee of the Board of Directors granted various employees PSUs covering 1,465,713 shares of common stock under the Company’s 2015 Performance Share Unit Plan.

Amortization for all PSU awards was $ 2,695,847 for the three and six months ended June 30, 2021 and $0 and $ ( 88,348 ) for the three and six months ended June 30, 2020, respectively.

As of June 30, 2021, the unamortized value of the PSUs was $ 1,198,389 .

The unamortized amount will be expensed over a weighted average period of 0.5 years.

A summary of the activity related to PSUs for the six months ended June 30, 2021 is presented below:

Average Grant

2 unchanged sentences

PSUs forfeited

Outstanding at March 31, 2021

Outstanding at June 30, 2021

Employee Stock Purchase Plan (“ESPP”)

The current offering period under the ESPP started on January 1, 2021 and will conclude on June 30, 2021.

The most recent offering period under the ESPP started on January 1, 2021 and concluded on June 30, 2021.

During the year ended December 31, 2020, there were two offering periods.

1 unchanged sentence

The second offering period began on July 1, 2020 and concluded on December 31, 2020.

The weighted-average grant-date fair value of the purchase option for each designated share purchased under this plan was approximately $ 0.75 and $ 0.57 for the three months ended March 31, 2021 and 2020, 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 this plan was approximately $ 0.75 and $ 0.57 for the six months ended June 30, 2021 and 2020, 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 plan of $ 57,316 and $ 42,827 for the three months ended March 31, 2021 and 2020, respectively.

The Company estimated the fair value of ESPP purchase options granted during the three months ended March 31, 2021 and 2020 using the Black-Scholes option pricing model.

The Company recognized compensation expense for the plan of $ 60,651 and $ 41,308 for the three months ended June 30, 2021 and 2020, respectively, and the Company recognized compensation expense for the plan of $ 117,967 and $ 84,135 for the six months ended June 30, 2021 and 2020, respectively.

The Company estimated the fair value of ESPP purchase options granted during the six months ended June 30, 2021 and 2020 using the Black-Scholes option pricing model.

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

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2020

Dividend yield

4 unchanged sentences

Stock-Based Compensation Expense

The following tables summarize total stock-based compensation costs recognized for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

The following tables summarize total stock-based compensation costs recognized for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June,

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

Three Months Ended September 30,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

4 unchanged sentences

On November 7, 2016 and June 28, 2017, the Company and Dialog entered into securities purchase agreements under which Dialog acquired a total of 1,739,691 shares and received warrants to purchase up to 1,417,565 shares.

As of March 31, 2021, none of the warrants remain outstanding.

As of March 31, 2021, Dialog owns approximately 2.8 % of the Company’s outstanding common shares.

The Company recorded $ 0 and $ 0 for the three months ended March 31, 2021 and 2020, respectively, in royalty revenue.

Additionally, the Company recorded $0 and $ 40,625 in contract services revenue performed by Dialog during the three months ended March 31, 2021 and 2020.

The Company recorded $ 0 and $ 39,544 in cost of services revenue associated with contract services performed for Dialog during the three months ended March 31, 2021 and 2020, respectively.

As of June 30, 2021, none of the warrants remain outstanding.

As of June 30, 2021, Dialog owns approximately 2.8 % of the Company’s outstanding common shares.

The Company recorded $ 0 and $ 0 for the three months ended June 30, 2021 and 2020, respectively, and $ 0 and $ 0 in for the six months ended June 30, 2021 and 2020, respectively, in royalty revenue.

Additionally, the Company recorded $ 0 and $ 89,375 in contract services revenue performed by Dialog during the three months ended June 30, 2021 and 2020, respectively, and the Company recorded $ 0 and $ 130,000 in contract services revenue performed by Dialog during the six months ended June 30, 2021 and 2020, respectively.

The Company recorded $ 0 and $ 86,995 in cost of services revenue associated with contract services performed for Dialog during the three months ended June 30, 2021 and 2020, respectively, and the Company recorded $ 0 and $ 126,539 in cost of services revenue associated with contract services performed for Dialog during the six months ended June 30, 2021 and 2020, respectively.

Additionally, the Company incurred $ 183,000 and $ 0 in chip development expense from Dialog, during the three months ended June 30, 2021 and 2020, respectively, and the Company incurred $ 183,000 and $ 0 in chip development expense from Dialog during the six months ended June 30, 2021 and 2020, respectively.

Note 8 – Customer Concentrations

One customer accounted for approximately 69 % of the Company’s revenue for the three months ended March 31, 2021, and two customers accounted for approximately 82 % of the Company’s revenue for the three months ended March 31, 2020.

One customer accounted for approximately 64 % of the accounts receivable balance as of March 31, 2021.

Three customers accounted for approximately 64 % of the Company’s revenue for the three months ended June 30, 2021, and two customers accounted for approximately 96 % of the Company’s revenue for the three months ended June 30, 2020.

Four customers accounted for approximately 72 % of the Company’s revenue for the six months ended June 30, 2021, and two customers accounted for approximately 85 % of the Company’s revenue for the six months ended June 30, 2020.

Three customers accounted for approximately 62 % of the accounts receivable balance as of June 30, 2021.

Four customers accounted for approximately 92 % of the accounts receivable balance as of December 31, 2020.

Note 9 – Subsequent Event

On July 9, 2021, the Company announced that Stephen R.

Rizzone has retired from his position as the Company’s President and Chief Executive Officer and as a member of the Board.

In connection with Mr.

Rizzone’s retirement, the Company and Mr.

Rizzone entered into an Executive Transition Agreement (“Separation Agreement”), providing for continued employment through August 31, 2021.

Upon his termination of employment, the Separation Agreement provides severance payments and benefits to Mr.

Rizzone consistent with the terms of his existing employment agreement with the Company, including without limitation:

compensation-based payments of $ 1,460,000 in the aggregate, payable under a certain payment scheme as set forth therein, an additional lump sum cash payment of $ 2,000,000 , a pro-rated bonus payment for the two months of employment during the current quarterly bonus period payable at the same time bonus payments are made to other executives of the Company, settlement of deferred vested restricted stock units and an extension of the exercise periods of all stock options held by Mr.

Rizzone until the one year anniversary of his termination date, and additional benefits related to Mr.

Rizzone’s medical insurance.

In addition, the Company will pay-off all amounts owed under a lease agreement relating to a Company Car and Mr.

Rizzone will receive the title to the vehicle.

All compensation under the Separation Agreement will be subject to applicable withholding.

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