What changed in this filing

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Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 180 added, 236 removed, 268 unchanged (61% of the section changed)

1 unchanged sentence

Energous Corporation

BALANCE SHEETS

September 30, 2021

CONDENSED BALANCE SHEETS

March 31, 2022

December 31, 2021

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

at September 30, 2021 and December 31, 2020;

at March 31, 2022 and December 31, 2021;

no shares issued or

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

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

at March 31, 2022 and December 31, 2021, respectively;

77,055,028 and 76,667,205 shares issued and outstanding at

September 30, 2021 and December 31, 2020, respectively.

March 31, 2022 and December 31, 2021, respectively.

Additional paid-in capital

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CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Operating expenses:

For the Three Months Ended March 31,

Costs and expenses:

Cost of revenue

Research and development

1 unchanged sentence

General and administrative

Severance expense

Cost of services revenue

Total operating expenses

Total costs and expenses

Loss from operations

10 unchanged sentences

( 336,400,039

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

Balance March 31, 2021 (unaudited)

( 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

Stock-based compensation - stock

Stock-based compensation - options

Stock-based compensation - restricted

stock units ("RSUs")

Stock-based compensation - performance

share units ("PSUs")

Stock-based compensation - employee

2 unchanged sentences

Proceeds from contributions to the ESPP

Balance, September 30, 2021 (unaudited)

Balance at March 31, 2022

( 343,552,757

Energous Corporation

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

Stockholders'

1 unchanged sentence

( 294,972,746

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

Proceeds from contributions to the ESPP

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

offering, net of $ 141,322 in issuance costs

Balance, March 31, 2020 (unaudited)

( 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

Stock-based compensation - restricted

stock units ("RSUs")

Stock-based compensation - employee

stock purchase plan ("ESPP")

Stock-based compensation - RSUs

Stock-based compensation - ESPP

Issuance of shares for RSUs

Proceeds from contributions to the ESPP

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

offering, net of $ 240,060 in issuance costs

Balance, September 30, 2020 (unaudited)

Balance at March 31, 2021

( 303,498,509

2 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

For the Three Months Ended

Cash flows from operating activities:

4 unchanged sentences

Changes in operating lease right-of-use assets

Bad debt expense

Changes in operating assets and liabilities:

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Operating lease liabilities

Deferred revenue

Net cash used in operating activities

3 unchanged sentences

Cash flows from financing activities:

Net proceeds from the sales of common stock

Proceeds from contributions to employee stock purchase plan

4 unchanged sentences

Supplemental disclosure of non-cash financing activities:

At-the-market ("ATM") funds receivable

Common stock issued for RSUs

Common stock issued for PSUs

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

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Note 2 – Liquidity and Management Plans

During the three and nine months ended September 30, 2021, the Company recorded revenue of $ 201,364 and $ 531,389 , respectively, and during the three and nine months ended September 30, 2020, the Company recorded $ 61,500 and $ 237,350 , respectively.

During the three and nine months ended September 30, 2021, the Company recorded net losses of $ 12,464,526 and $ 32,006,118 , respectively, and during the three and nine months ended September 30, 2020, the Company recorded net losses of $ 7,556,837 and $ 24,359,239 , respectively.

Net cash used in operating activities was $ 22,498,803 and $ 19,435,940 for the nine months ended September 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, an at-the-market (“ATM”) offering during October 2021 (see Note 9 – Subsequent Events), proceeds from contributions to the employee stock purchase plan (“ESPP”), along with payments received from customers.

As of September 30, 2021, the Company had cash on hand of $ 28,282,188 .

The Company expects that cash on hand as of September 30, 2021, together with anticipated revenues and with ATM financing during October 2021, will be sufficient to fund the Company’s operations into November 2022.

During the three months ended March 31, 2022 and 2021, the Company recorded revenue of $ 215,961 and $ 145,065 , respectively.

During the three months ended March 31, 2022 and 2021, the Company recorded net losses of $ 7,152,718 and $ 8,525,763 , respectively.

Net cash used in operating activities was $ 6,356,971 and $ 5,976,550 for the three months ended March 31, 2022 and 2021, 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, and $ 27,043,751 during the fourth quarter of 2021, proceeds from contributions to the Company’s employee stock purchase plan (the “ESPP”), along with payments received from customers.

As of March 31, 2022, the Company had cash on hand of $ 42,774,171 .

The Company expects that cash on hand as of March 31, 2022, together with anticipated revenues, will be sufficient to fund the Company’s operations through May 2023.

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

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Accordingly, the Company expects to pursue additional financing, which could include offerings of equity or debt securities, bank financings, commercial agreements with customers or strategic partners, and other alternatives, depending upon market conditions.

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

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

The market for products using the Company’s technology is broad and evolving, but remains nascent and unproven, so the Company’s success is dependent upon many factors, including customer acceptance of its existing products, technical feasibility of future products, regulatory approvals, the development of complementary technologies, competition and global market fluctuations.

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

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

The Company is 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 COVID-19’s impact on the Company’s 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 its employees.

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

Note 3 – Summary of Significant Accounting Policies

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dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and pursuant to the accounting and disclosure rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”).

Securities and Exchange Commission (the “SEC”).

These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2021 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 23, 2022.

The accounting policies used in preparing these unaudited condensed interim financial statements are consistent with those described in the Company’s December 31, 2021 audited financial statements .

Note 3 – Summary of Significant Accounting Policies, continued

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements as well as the reported expenses during the reporting periods.

The Company’s significant estimates and assumptions include the valuation of stock-based compensation instruments, recognition of revenue, the useful lives of long-lived assets, and income tax expense.

Note 3 – Summary of Significant Accounting Policies, continued

The Company’s significant estimates and assumptions include the valuation of stock-based compensation instruments, recognition of revenue, inventory valuation, the useful lives of long-lived assets, and the valuation allowance on deferred tax assets.

Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.

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Revenue Recognition

The Company follows Accounting Standards Update No.

2014-09, "Revenue from Contracts with Customers" (Topic 606).

The Company follows Accounting Standards Codification (“ASC”) 606, "Revenue from Contracts with Customers" (Topic 606).

In accordance with Topic 606, the Company recognizes revenue using the following five-step approach:

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Allocate the transaction price to the performance obligations in the contract.

Recognize revenue when the performance obligations are met or delivered.

The Company’s revenue primarily consists of product development projects revenue.

The Company also provided contract services for Dialog in 2020.

During the three months and nine months ended September 30, 2021, the Company recognized $ 201,364 and $ 531,389 , respectively, in product development projects revenue, During the three and nine months ended September 30, 2020, the Company recognized $ 61,500 and $ 107,350 , respectively, in product development projects revenue.

During the three and nine months ended September 30, 2021, the Company did no t recognize any contract services revenue.

During the three and nine months ended September 30, 2020, the Company recognized $ 0 and $ 130,000 , respectively, in contract services revenue.

Recognize revenue when or as the performance obligations are satisfied.

The Company’s revenue comes from its single segment of wireless charging system solutions.

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

During the three months ended March 31, 2022 and 2021, the Company recognized $ 215,961 and $ 145,065 , respectively, in revenue.

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

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The achievement of a milestone is dependent on the Company’s performance obligation and requires acceptance by the customer.

The Company recognizes this revenue at a point in time based on when the performance obligation is met.

The Company recognizes this revenue at the point in time at which the performance obligation is met.

The payment associated with achieving the performance obligation is generally commensurate with the Company’s effort or the value of the deliverable and is nonrefundable.

The Company records the expenses related to these product development projects in research and development expense, in the periods such expenses were incurred.

The Company recognized contract services revenue from Dialog in 2020 over the period of time that the services are performed.

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

Note 3 – Summary of Significant Accounting Policies, continued

The Company records revenue associated with the sale of production-level systems at the point in time at which control over the product is transferred to the customer.

The Company records the expense related to the sales of these systems as cost of revenue during the period that the product is transferred to the customer.

The Company follows ASC 330, Inventory (“Topic 330”) to account for its inventory, which includes finished goods ready for sale, work in process and raw materials, at the lower of cost or net realizable value.

Net realizable value is calculated at the end of each reporting period and adjustment, if needed, is made.

Research and Development

Research and development expenses are charged to operations as incurred.

For internally developed patents, all patent application costs are expensed as incurred as research and development expense.

For internally developed patents, all patent costs are expensed as incurred as research and development expense.

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 $ 4,737,159 and $ 4,003,642 for the three months ended September 30, 2021 and 2020, respectively, and the Company incurred research and development costs of $ 15,432,097 and $ 12,909,378 for the nine months ended September 30, 2021 and 2020, respectively.

The Company incurred research and development costs of $ 3,527,146 and $ 4,591,244 for the three months ended March 31, 2022 and 2021, respectively.

Note 3 – Summary of Significant Accounting Policies, continued

Stock-Based Compensation

The Company accounts for equity instruments issued to employees, board members and contractors in accordance with accounting guidance that requires awards to be recorded at their fair value on the date of grant and are amortized over the vesting period of the award.

The Company recognizes compensation costs on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the equity instrument issued.

Under the Company’s Employee Stock Purchase Plan (“ESPP”), employees may purchase a limited number of shares of the Company’s common stock at a 15 % discount from the lower of the closing market prices measured on the first and last days of each half-year period.

The Company amortizes compensation costs on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the equity instrument issued.

Under the ESPP, employees may purchase a limited number of shares of the Company’s common stock at a 15 % discount from the lower of the closing market prices measured on the first and last days of each half-year period.

The Company recognizes stock-based compensation expense for the fair value of the purchase options, as measured on the grant date.

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

As of September 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.

As of March 31, 2022, no liability for unrecognized tax benefits was required to be reported.

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

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

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

No interest or penalties were recorded during the three months ended March 31, 2022 or 2021.

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

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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 5,843,167 and 5,990,698 for the three months ended September 30, 2021 and 2020, respectively, and 5,843,167 and 5,990,698 for the nine months ended September 30, 2021 and 2020, respectively, because their inclusion would be anti-dilutive.

The computation of diluted loss per share excludes potentially dilutive securities of 5,682,499 and 7,137,741 for the three months ended March 31, 2022 and 2021, 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 September 30,

For the Nine Months

Ended September 30,

Ended March 31,

Warrants issued to private investors

1 unchanged sentence

Total potentially dilutive securities

Note 3 – Summary of Significant Accounting Policies, continued

The table above includes 1,618,123 warrants expiring on October 6, 2022, with an exercise price of $ 23.00 and 1,666,666 warrants expiring on March 1, 2024, with an exercise price of $ 10.00 .

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

1 unchanged sentence

Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities.

Note 3 – Summary of Significant Accounting Policies, continued

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease.

5 unchanged sentences

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes (Topic 740),” Simplifying the Accounting for Income Taxes .

ASU 2019-12 removes certain exceptions under Topic 740 and improves consistent application by clarifying and amending existing guidance.

In May 2021, the FASB issued ASU No.

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

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Extinguishments (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 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.

In November 2021, the FASB issued ASU No.

2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance.

ASU 2021-10 requires business entities to disclose certain types of government assistance they receive in the notes to the financial statements.

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.

The Company adopted this standard, and the adoption did not 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 September 30, 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 March 31, 2022, through the date which the financial statements are available to be issued.

Note 4 – Commitments and Contingencies

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Upon expiration of the original lease on September 30, 2019, the new monthly lease payment starting October 1, 2019 was $ 52,970 and is subject to annual escalations up to a maximum monthly lease payment of $ 64,941 .

Note 4 – Commitments and Contingencies, continued

Operating Leases, continued

3 unchanged sentences

On September 22, 2021, the Company signed a new Costa Mesa lease to lease a new, distinct office space in a different building with the same landlord.

Per the lease, the stated commencement date is October 1, 2021 and concludes September 30, 2023, and the Company did not have control of the new office space until October 2021, at which time the Company recorded a new right-of-use lease asset of $ 104,563 and operating lease liability of $ 104,563 .

The new Costa Mesa lease has a total $ 106,688 in lease payments with an initial monthly lease payment of $ 4,369 starting October 1, 2021 and is subject to an annual escalation up to a maximum monthly lease payment of $ 4,522 .

Per the lease, the lease commencement date is October 1, 2021 and the expiry date is September 30, 2023.

The Company did not have control of the new office space until October 2021, at which time the Company recorded a new right-of-use lease asset of $ 104,563 and operating lease liability of $ 104,563 .

The new Costa Mesa lease has an initial monthly lease payment of $ 4,369 starting October 1, 2021 and is subject to an annual escalation up to a maximum monthly lease payment of $ 4,522 .

Note 4 – Commitments and Contingencies, continued

Operating Lease Commitments

In February 2016, the FASB issued its final standard on lease accounting, ASU No.

2016-02, “Leases (Topic 842),” which superseded Topic 840, “Leases,” which was further modified in ASU No.

2018-10, “Codification Improvements” to clarify the implementation guidance.

The new accounting standard was effective for the Company beginning on January 1, 2019 and required the recognition on the balance sheet of right-of-use assets and lease liabilities.

The Company elected the optional transition method and adopted the new guidance on January 1, 2019 on a modified retrospective basis with no restatement of prior period amounts.

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 $ 779,292 during the period from the fourth quarter of 2021 to the third quarter of 2022.

As of September 30, 2021, the company has total operating lease right-of-use assets of $ 699,202 , current portion operating lease liabilities of $ 765,209 and long-term portion of operating lease liabilities of $ 0 .

The weighted average remaining lease term is 1.0 years as of September 30, 2021.

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

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

The Company anticipates having future total lease payments of $ 470,120 during the period from the second quarter of 2022 to the third quarter of 2023.

As of March 31, 2022, the Company has total operating lease right-of-use assets of $ 432,249 , current portion operating lease liabilities of $ 438,698 and long-term portion of operating lease liabilities of $ 27,012 .

The weighted average remaining lease term is 0.7 years as of March 31, 2022.

A reconciliation of undiscounted cash flows to lease liabilities recognized as of March 31, 2022 is as follows:

Total future lease payments

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On June 25, 2015, the Company entered into a three-year agreement to license electronic design automation software in a hosted environment.

Pursuant to the agreement, under which services began July 2015, the Company is required to remit quarterly payments in the amount of approximately $ 101,000 with the last payment due March 30, 2018.

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 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.

Pursuant to the agreement, under which services began July 2015, the Company is required to remit quarterly payments.

In June 2021, the Company entered into its latest renewal of 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

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

Note 4 – Commitments and Contingencies, continued

MBO Bonus Plan

2 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 September 30, 2021, the Company accrued $ 304,377 in expense under the Bonus Plan, which will be paid during the fourth quarter of 2021.

During the three months ended September 30, 2020, the Company accrued $ 189,728 in expense under the Bonus Plan, which was paid during the fourth quarter of 2020.

During the nine months ended September 30, 2021 and 2020, the Company recorded $ 1,087,533 and $ 867,248 , respectively, in expense under the Bonus Plan.

During the three months ended March 31, 2022, the Company accrued $ 225,802 in expense under the Bonus Plan, which will be paid during the second quarter of 2022.

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

The expense under the Bonus Plan is recorded under operating expenses on the Company’s Condensed Statement of Operations within each executive’s department.

Severance and Change in Control Agreement

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

Under the Severance Agreement, if an Executive is terminated in a qualifying termination, the Company agrees to pay the Executive six to 12 months of that Executive’s monthly base salary.

Note 4 – Commitments and Contingencies, continued

Under the Severance Agreement, if an Executive is terminated in a qualifying change in control termination, the Company agrees to pay the Executive six to 12 months of that Executive’s monthly base salary.

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.

Executive Employee Agreement – Cesar Johnston

On December 9, 2021, the Company announced that Cesar Johnston had been appointed as the Company’s Chief Executive Officer.

In connection with Mr.

Johnston’s appointment as Chief Executive Officer, the Company and Mr.

Johnston executed an offer letter dated as of December 6, 2021.

Under the terms of his offer letter, Mr.

Johnston will receive an annual base salary of $ 400,000 per year.

Beginning in year 2022, he will be eligible to receive a discretionary annual bonus of up to 100 % of his base salary, at the recommendation of the Company’s Compensation Committee, with the approval of the Company’s Board.

In add iti on , a s a n i nducemen t to accep t h is appo i n t men t a s Ch i e f Execu ti v e O ffi ce r, M r.

J ohn st o n w ill r ece i ve , s ub j ec t to con ti nue d emp l oymen t, ( a ) a s pec i a l one -ti m e si gn - o n bonu s in t h e amoun t o f $ 120 , 000 , payab le in two equa l i n st a ll men ts o f $ 60 , 00 0 eac h o n t h e first pay r o ll da te in 202 2 an d t h e first pay r o ll da te a ft e r Decembe r 6 , 2022 , ( b ) a g r an t o f 150 , 00 0 RSUs to acqu ire s ha r e s o f t h e Company ’s commo n st ock , on e t h ird o f wh i c h w ill ve st o n Decembe r 6 , 202 2 an d t h e r ema i n i n g t w o t h ir d s o f wh i c h w ill ve st in e i gh t equa l i n st a ll men ts o f 12 , 50 0 eac h o n eac h qua rt e rly ann i ve rs a ry t he r ea ft e r an d ( c ) a g r an t o f a n op ti o n to pu r cha se 300,000 s ha r e s o f t h e Company ’s commo n st oc k a t a n exe r c ise p ri c e equa l to t h e f a ir ma r ke t va l u e o f t h e Company ’s commo n st oc k o n t h e g r an t da t e , ha lf o f wh i c h s ha ll ve st o n Decembe r 31 , 2023 , a qua rt e r o f wh i c h s ha ll ve st o n Decembe r 31 , 202 4 an d t h e r ema i nde r o f wh i c h s ha ll ve st o n Decembe r 31 , 2025 .

Johnston will further be eligible for (a) an additional equity award in the amount of 287,000 PSUs to acquire shares of the Company’s common stock, which vest up to one third per year over a three year period commencing January 1, 2022 and ending December 31, 2024, upon the achievement of performance criteria to be mutually established by Mr.

Johnston and the Compensation Committee, and (b) an additional equity award of up to 25,000 PSUs per calendar year for 2022, 2023 and 2024, respectively, based on outperformance of agreed upon goals per calendar year, as determined by the Compensation Committee with approval of the Board.

As of March 31, 2022, the PSUs have no t yet been granted.

In connec ti o n w ith M r.

J ohn st on ’s appo i n t men t a s Ch i e f Execu ti v e O ffi ce r, t h e Compan y an d M r.

J ohn st o n add iti ona lly en t e r e d i n to a n amende d and r e st a t e d s eve r anc e an d chang e in con tr o l ag r eemen t, da t e d a s o f Decembe r 6 , 2021 .

I n t h e even t o f a termination t ha t is no t a change-in-control qualifying termination, Mr.

Johnston is entitled to ( a ) a one -ti m e l um p s u m paymen t b y t h e Compan y in a n amoun t equa l to 1 8 mon t h s o f h is mon t h ly ba se s a l a ry p l u s a n amoun t equa l to 100 % o f h is t a r ge t bonu s p l u s, if ag r ee d b y t h e Compen s a ti o n Comm itt ee , a d is c r e ti ona ry bonu s f o r t h e yea r in wh i c h t h e termination occu rs, ( b ) an y ou tst and i n g unve st e d equ ity awa r d s he ld b y M r.

J ohn st o n t ha t wou ld ve st in t h e nex t 1 8 mon t h s o f con ti nu i n g emp l oymen t ( o t he r t ha n an y equ ity awa r d s t ha t ve st upo n s a tisf ac ti o n o f pe rf o r manc e c rit e ri a ) w ill acce l e r a te an d becom e ve st e d an d ( c ) if M r.

J ohn st o n ti me ly e l ec ts con ti nue d cove r ag e unde r COBRA , t h e Compan y o r its s ucce ss o r w ill pa y t h e f u ll amoun t o f M r.

J ohn st on ’s COBR A p r em i um s o n h is beha lf f o r 1 8 mon t h s.

Johnston’s agreement additionally provides that, in the event of a change-in-control qualifying termination, Mr.

Johnston is entitled to (a) a one-time lump sum payment by the Company in an amount equal to 18 months of his monthly base salary plus an amount equal to 150 % of his target bonus plus a prorated bonus for the year in which the termination occurs, (b) any outstanding unvested equity awards held by Mr.

Johnston (including any equity awards that vest upon satisfaction of performance criteria) will accelerate in full and become vested and (c) if Mr.

Johnston timely elects continued coverage under COBRA, the Company or its successor will pay the full amount of Mr.

Johnston’s COBRA premiums on his behalf for 18 months.

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

Note 4 – Commitments and Contingencies, continued

Executive Transition Agreement – Stephen Rizzone

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

Rizzone, the Company’s President and Chief Executive Officer (“Employment Agreement”).

The Employment Agreement effective as of January 1, 2015 , has an initial term of four years and automatically renews each year after the initial term.

The Employment Agreement provides for an annual base salary of $ 365,000 , and Mr.

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, the Company’s former President and Chief Executive Officer (“Employment Agreement”).

The Employment Agreement effective as of January 1, 2015 , had an initial term of four years and automatically renewed each year after the initial term.

The Employment Agreement provided for an annual base salary of $ 365,000 , and Mr.

Rizzone was 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.

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.

Rizzone had 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.

Rizzone entered into an Executive Transition Agreement (the “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.

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 RSUs 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.

Note 4 – Commitments and Contingencies, continued

During the three months ended September 30, 2021, the Company recognized $ 4,017,172 in severance expense associated with the separation agreement, including $ 284,994 in additional stock-based compensation as a result of the extension of the exercise periods on the stock options.

As of September 30, 2021, the Company had unpaid accrued severance expense of $ 1,102,832 .

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

Rizzone would receive the title to the vehicle.

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

As of March 31, 2022, the Company had unpaid accrued severance expense of $ 909,873 which is expected to be paid through August 31, 2023.

Strategic Alliance Agreement

1 unchanged sentence

Pursuant to the terms of the Alliance Agreement, the Company agreed to engage Dialog as the exclusive supplier of the Licensed Products for specified fields of use, subject to certain exceptions (the “Company Exclusivity Requirement”).

Dialog agreed to not distribute, sell or work with any third party to develop any competing products without the Company’s approval (the “Dialog Exclusivity Requirement”).

Dialog agreed to not distribute, sell or work with any third party to develop any competing products without the Company’s approval.

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

Each party will retain all of its intellectual property.

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.

The Company may terminate the Alliance Agreement at any time after the third anniversary of the Agreement upon 180 days’ prior written notice to Dialog, or if Dialog breaches certain exclusivity obligations.

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

The Company may terminate the Alliance Agreement at any time after the third anniversary of the Alliance Agreement upon 180 days’ prior written notice to Dialog, or if Dialog breaches certain exclusivity obligations.

Dialog may terminate the Alliance Agreement if sales of Licensed Products do not meet specified targets.

The Company Exclusivity Requirement will terminate upon the earlier of January 1, 2021 or the occurrence of certain events relating to the Company’s pre-existing exclusivity obligations.

The Company Exclusivity Requirement renews automatically on an annual basis unless the Company and Dialog agree to terminate the requirement.

The Company Exclusivity Requirement had a termination date of the earlier of January 1, 2021 or the occurrence of certain events relating to the Company’s pre-existing exclusivity obligations.

The Company Exclusivity Requirement renewed automatically on an annual basis unless the Company and Dialog agree to terminate the requirement.

On September 20, 2021, the Company was notified by Dialog, recently acquired by Renesas Electronics Corporation, that it was terminating the Alliance Agreement between the Company and Dialog.

10 unchanged sentences

The Company also raised $ 4,557,693 (net of $ 339,081 in issuance costs) during the fourth quarter of 2019, $ 5,506,880 (net of $ 141,322 in issuance costs) during the first quarter of 2020 and $ 9,216,611 (net of $ 236,528 in issuance costs) during the second quarter of 2020, pursuant to this shelf registration statement.

Note 5 – Stockholders’ Equity, continued

This shelf registration statement has expired and no additional shares will be sold thereunder.

On September 15, 2020, the Company filed a shelf registration statement on Form S-3 with the SEC, which became effective on September 24, 2020, and contains two prospectuses:

a base prospectus, which covers the offering, issuance and sale by the Company of up to $ 75,000,000 of its common stock, preferred stock, debt securities, warrants to purchase our common stock, preferred stock or debt securities, subscription rights to purchase its common stock, preferred stock or debt securities and/or units consisting of some or all of these securities;

and an at-the-market (“ATM”) sales agreement prospectus supplement covering the offering, or the ATM Program, issuance and sale by the Company of up to a maximum aggregate offering price of $ 40,000,000 of its common stock that may be issued and sold under that certain sales agreement.

The $40,000,000 of common stock that may be offered, issued and sold under the sales agreement prospectus is included in the $75,000,000 of the Company’s securities that may be offered, issued and sold by the Company under the base prospectus.

Pursuant to this shelf registration statement, the Company sold shares which raised net proceeds of $ 38,832,711 (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 or nine months ended September 30, 2021.

and an at-the-market sales agreement prospectus supplement covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $ 40,000,000 of its common stock that may be issued and sold under that certain sales agreement (the “ATM Program”).

The $40,000,000 of common stock to be offered, issued and sold under the sales agreement prospectus is included in the $75,000,000 of securities that may be offered, issued and sold by the Company under the base prospectus.

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

On October 4, 2021, the Company filed a prospectus supplement covering the offering, issuance and sale of up to an additional $ 35,000,000 of shares of the Company’s common stock pursuant to the ATM Program.

The Company raised net proceeds of $ 27,043,751 (net of $ 868,122 in issuance costs), during the fourth quarter of 2021 under the ATM Program.

As of March 31, 2022, the Company has $ 7,088,127 remaining on this shelf registration statement.

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

This shelf registration statement allows the Company to sell, from time to time, any combination of debt or equity securities described in the registration statement up to aggregate proceeds of $ 100,000,000 .

Common Stock Outstanding

Our outstanding common shares typically include shares that are deemed delivered under US GAAP.

Shares that are deemed delivered currently include shares that have vested, but have not yet been delivered, under tax-deferred equity awards, as well as shares purchased under our Employee Stock Purchase Program (“ESPP”) where actual transfer of shares normally occurs a few days after the completion of the purchase periods.

Our outstanding shares of common stock typically include shares that are deemed delivered under US GAAP.

Shares that are deemed delivered currently include shares that have vested, but have not yet been delivered, under tax-deferred equity awards, as well as shares purchased under the ESPP where actual transfer of shares normally occurs a few days after the completion of the purchase periods.

There are no voting rights for shares that are deemed delivered under US GAAP until the actual delivery of shares takes place.

On July 24, 2020, the stockholders of the Company approved an increase of the authorized share capital of the Company from 50,000,000 to 200,000,000 shares of common stock.

There are currently 200,000,000 shares of common stock authorized for issuance.

Note 6 – Stock-Based Compensation

2 unchanged sentences

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 September 30, 2021, 2,537,844 shares of common stock remain eligible to be issued through equity-based instruments under the 2013 Equity Incentive Plan.

As of March 31, 2022, 1,362,773 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.

As of September 30, 2021, 879,922 shares of common stock remain eligible to be issued through equity-based instruments under the 2014 Non-Employee Equity Compensation Plan.

As of March 31, 2022, 741,326 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 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 September 30, 2021, 2,513,901 shares of common stock remain eligible to be issued through equity-based instruments under the 2015 Performance Share Unit Plan.

Note 6 – Stock-Based Compensation, continued

As of March 31, 2022, 2,411,013 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 September 30, 2021, 111,679 shares of common stock remain available to be issued through equity-based instruments under the 2017 Equity Inducement Plan.

As of March 31, 2022, 130,426 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 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.

Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the ESPP 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 September 30, 2021, 685,374 shares of common stock remain eligible to be issued under the ESPP.

Employees contributed $ 124,801 through payroll withholdings to the ESPP as of September 30, 2021 for the current offering period that will end on December 31, 2021 and shares will be deemed delivered on that date.

As of March 31, 2022, 547,548 shares of common stock remain eligible to be issued under the ESPP.

Employees contributed $ 104,217 through payroll withholdings to the ESPP as of March 31, 2022 for the current offering period that will end on June 30, 2022 and shares will be 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 nine months ended September 30, 2021:

During the three months ended March 31, 2022, the Board granted our Chief Executive Officer 300,000 stock options under the 2013 Equity Incentive Plan at an exercise price of $ 1.27 per share with half of the options vesting on the second anniversary of the vesting start date and a quarter of the options vesting on each of the two following anniversaries .

The Company estimated the fair value of stock options granted during the three months ended March 31, 2022 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, 2022

Dividend yield

Expected volatility

Risk-free interest rate

Expected life

The following is a summary of the Company’s stock option activity during the three months ended March 31, 2022:

Outstanding at January 1, 2022

Outstanding at September 30, 2021

Outstanding at March 31, 2022

Exercisable at January 1, 2022

Exercisable at September 30, 2021

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

Exercisable at March 31, 2022

As of March 31, 2022, the unamortized fair value of options was $ 298,147 .

The unamortized amount will be expensed over a weighted average period of 3.2 years.

Restricted Stock Units (“RSUs”)

During the nine months ended September 30, 2021, the Compensation Committee granted various employees RSUs covering 979,385 shares of common stock under the 2013 Equity Incentive Plan.

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

Note 6 – Stock-Based Compensation, continued

During the nine months ended September 30, 2021, the Compensation Committee and the Board of Directors granted various non-employees RSUs covering 172,091 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 nine months ended September 30, 2021, the Board of Directors granted an employee RSUs covering 34,000 shares of common stock under the 2017 Equity Inducement Plan.

During the three months ended March 31, 2022, the Board granted various employees RSUs covering 152,500 shares of common stock under the 2013 Equity Incentive Plan.

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

During the three months ended March 31, 2022, the Compensation Committee and the Board granted various non-employees RSUs covering 131,096 shares of common stock under the 2014 Non-employee Equity Compensation Plan.

The awards vest on the one year anniversary of the grant date.

During the three months ended March 31, 2022, the Board granted an employee RSUs covering 10,000 shares of common stock under the 2017 Equity Inducement Plan.

The award vests over a term of four years .

As of September 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 $ 3,237,533 .

Note 6 – Stock-Based Compensation, continued

As of March 31, 2022, t h e un am or ti ze d fair v a l u e o f t h e R SUs w a s $ 3,155,703 .

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 1.7 y ea r s .

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

A summary of the activity related to RSUs for the three months ended March 31, 2022 is presented below:

Outstanding at January 1, 2022

RSUs forfeited

Outstanding at September 30, 2021

Performance Share Units (“PSUs”)

Performance share units (“PSUs”) are grants that vest upon the achievement of certain performance goals.

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

During the nine months ended September 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 $ 843,741 and $ 3,539,588 for the three and nine months ended September 30, 2021, respectively, and $ 0 and $( 88,348 ) for the three and nine months ended September 30, 2020, respectively.

As of September 30, 2021, the unamortized value of the PSUs was $ 733,189 .

The unamortized amount will be expensed over a weighted average period of 0.3 years.

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

Average Grant

Date Fair Value

Outstanding at January 1, 2021

PSUs forfeited

Outstanding at September 30, 2021

Outstanding at March 31, 2022

Employee Stock Purchase Plan (“ESPP”)

The current offering period under the ESPP started on July 1, 2021 and will conclude on December 31, 2021.

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

The current offering period under the ESPP started on January 1, 2022 and will conclude on June 30, 2022.

During the year ended December 31, 2021, there were two offering periods.

The first offering period began January 1, 2020 and concluded on June 30, 2020.

The first offering period began on January 1, 2021 and concluded on June 30, 2021.

The second offering period began on July 1, 2021 and concluded on December 31, 2021.

Note 6 – Stock-Based Compensation, continued

The weighted-average grant-date fair value of the purchase option for each designated share purchased under this plan was approximately $ 1.05 and $ 1.11 for the nine months ended September 30, 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 $ 0.40 and $ 0.75 for the three months ended March 31, 2022 and 2021, 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 $ 76,814 and $ 96,056 for the three months ended September 30, 2021 and 2020, respectively, and the Company recognized compensation expense for the plan of $ 194,781 and $ 180,191 for the nine months ended September 30, 2021 and 2020, respectively.

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

The Company recognized compensation expense for the ESPP of $ 40,973 and $ 57,316 for the three months ended March 31, 2022 and 2021, respectively.

The Company estimated the fair value of ESPP purchase options granted during the three months ended March 31, 2022 and 2021 using the Black-Scholes option pricing model.

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

Nine Months Ended

September 30, 2021

Nine Months Ended

September 30, 2020

$1.80 - $2.78

$1.77 - $2.96

Three Months Ended

March 31, 2022

Three Months Ended

March 31, 2021

Dividend yield

1 unchanged sentence

Risk-free interest rate

0.05% - 0.09%

0.17% - 1.57%

Expected life

Stock-Based Compensation Expense

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

Three Months Ended September 30,

Nine Months Ended September,

The following tables summarize total stock-based compensation costs recognized for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Stock options

Note 6 – Stock-Based Compensation, continued

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Research and development

1 unchanged sentence

General and administrative

Severance expense

Note 7 – Related Party Transactions

In November 2016, the Company and Dialog entered into an alliance agreement for the manufacture, distribution and commercialization of products incorporating the Company’s wire-free charging technology (See Note 4 – Commitments and Contingencies, Strategic Alliance Agreement ).

In November 2016, the Company and Dialog entered into the Alliance Agreement for the manufacture, distribution and commercialization of products incorporating the Company’s wire-free charging technology (See Note 4 – Commitments and Contingencies, Strategic Alliance Agreement ).

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 September 30, 2021, none of the warrants remain outstanding.

As of September 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 September 30, 2021 and 2020, respectively, and $ 0 and $ 0 in for the nine months ended September 30, 2021 and 2020, respectively, in royalty revenue.

Additionally, the Company recorded $ 0 and $ 0 in contract services revenue performed for Dialog during the three months ended September 30, 2021 and 2020, respectively, and the Company recorded $ 0 and $ 130,000 in contract services revenue performed for Dialog during the nine months ended September 30, 2021 and 2020, respectively.

The Company recorded $ 0 and $ 0 in cost of services revenue associated with contract services performed for Dialog during the three months ended September 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 nine months ended September 30, 2021 and 2020, respectively.

Additionally, the Company incurred $ 225,000 and $ 0 in chip development expense from Dialog, during the three months ended September 30, 2021 and 2020, respectively, and the Company incurred $ 408,000 and $ 0 in chip development expense from Dialog during the nine months ended September 30, 2021 and 2020, respectively.

On September 20, 2021, the Company was notified by Dialog, recently acquired by Renesas Electronics Corporation, that it was terminating the strategic alliance agreement between the Company and Dialog.

As of March 31, 2022, none of the warrants remain outstanding.

As of March 31, 2022, Dialog owns approximately 2.3 % of the Company’s outstanding common shares.

The Company did not record any revenue or expense related to Dialog during the three months ended March 31, 2022 and 2021.

On September 20, 2021, the Company was notified by Dialog, recently acquired by Renesas Electronics Corporation, that it was terminating the Alliance Agreement between the Company and Dialog.

Note 8 – Customer Concentrations

Two customers accounted for approximately 61 % of the Company’s revenue for the three months ended September 30, 2021, and four customers accounted for approximately 81 % of the Company’s revenue for the three months ended September 30, 2020.

Four customers accounted for approximately 62 % of the Company’s revenue for the nine months ended September 30, 2021, and three customers accounted for approximately 78 % of the Company’s revenue for the nine months ended September 30, 2020.

Two customers accounted for approximately 70 % of the accounts receivable balance as of September 30, 2021.

Two customers accounted for approximately 53 % of the Company’s revenue for the three months ended March 31, 2022, and one customer accounted for approximately 69 % of the Company’s revenue for the three months ended March 31, 2021.

Two customers accounted for approximately 63 % of the accounts receivable balance as of March 31, 2022.

Four customers accounted for approximately 68 % of the accounts receivable balance as of December 31, 2021.

Note 9 – Subsequent Events

On October 4, 2021, the Company filed with the Securities and Exchange Commission (“SEC”) a prospectus supplement covering the issuance and sale of shares of the Company’s common stock having an aggregate offering price up to $ 35,000,000 pursuant to the Company’s at-the-market offering program (the “ATM”).

As of October 31, 2021, the Company has sold 12,229,433 shares for gross proceeds of $ 27,911,873 under the ATM, and a net of $ 27,060,301 after approximately $ 851,572 in broker commissions and issuance costs.

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