What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-15 · 57 added, 117 removed, 54 unchanged (76% of the section changed)

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

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

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

Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “would,” “should,” “could,” “seek,” “intend,” “plan,” “continue,” “estimate,” “anticipate” or other comparable terms.

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expectations for current and potential business relationships;

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

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

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

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

We have developed our 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.

We believe our 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 and public safety 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.

We believe our technology is innovative in its approach, in that we are developing solutions that charge electronic devices with an RF energy zone.

We are developing solutions that deliver wire-free energy for near field charging applications and are also developing at-a-distance charging for distances up to 15 feet and beyond, some of which involve mobility charging.

We have developed our WattUp® wireless power technology, consisting of semiconductor chipsets, software controls, hardware designs and antennas, that enables RF based charging for electronic devices.

The WattUp technology has a broad spectrum of capabilities to enable the next generation of wireless power networks, delivering power and data in a seamless device portfolio.

This includes near field and at-a-distance wireless charging with multiple power levels at various distances.

We believe our WattUp technologies will help facilitate the deployment of the growing IoT applications.

According to the recent report of the International Data Corporation, or the IDC, titled “Worldwide Global DataSphere IoT Device and Data Forecast, 2021–2025,” the IoT market is forecasted to grow to 39.3 billion devices by 2025.

The initial IoT applications that we are targeting are in the area of RF tags and electronic shelf labeling (“ESL”) for the retail, industrial and healthcare markets.

We believe our technology is innovative in its approach, in that we are developing solutions that charge electronic devices using RF.

To-date, we have developed multiple transmitters and receivers, including prototypes as well as partner production designs.

The transmitters vary based on form factor, power specifications and frequencies, while the receivers are designed for applications including Bluetooth tracking tags, IoT sensors, hearing aids, electronic shelf labels, fitness bands, health sensors and devices, smartwatches, smartphones, smartglasses, industrial applications, keyboards, mice, headsets, earbuds, headphones, and more.

We have engagements with companies in the consumer electronics (CE), industrial and medical device markets that are in the both evaluation and product cycle pre-production stages of integrating WattUp-technology into devices being developed for the end-user.

The first end product featuring our technology entered the market in 2019 and we expect additional WattUp enabled products to be announced as we move our business forward.

The first end product

featuring our technology entered the market in 2019 and we expect our one Watt Powerbridge enabled transmitters to begin shipping for commercial IOT applications in the fourth quarter of 2021.

In December 2017, we announced Federal Communications Commission (“FCC”) certification of our first-generation WattUp Mid Field transmitter, which simultaneously powers multiple devices at a distance of up to three feet.

This transmitter underwent rigorous, multi-month testing to verify that it met consumer safety and regulatory requirements.

We believe this was the first certification of a Part 18 FCC-approved non-contact wireless charging transmitter, and that it establishes engineering design precedents that can streamline future regulatory approvals for our technology and for our customers’ end-products that employ our technology.

Our technology solution consists principally of transmitter controller ICs, power amplifier ICs and receiver ICs, as well as novel antenna designs, application prototypes and proprietary software algorithms.

We submitted our first IC design for wafer fabrication in 2013 and since then have developed subsequent generations of transmitter and receiver ICs, antenna designs, and software algorithms.

We have endeavored to optimize our technology by reducing size and cost, while at the same time increasing performance which enables our designs to be integrated into a broad range of devices.

We have developed a “building block” approach that allows us to scale our product implementations by combining multiple transmitter building blocks or multiple receiver building blocks to meet the power, distance, size and cost requirements of customer applications requirements.

Our technology is readily scalable because the same ICs that are used for contact-based charging can be used for distance-based charging solutions.

We have developed two classes of chip solutions, a CMOS-based technology focused on low cost, small footprint and low power (1 watt) and a GaAs/GaN-based technology capable of delivering higher power (greater than 1 watt) with greater efficiency.

We intend to continue to invest in improving product performance, efficiency, cost-performance, integration and miniaturization as required to reach multiple markets and expand the power-at-a-distance ecosystem, while maintaining a technology lead on potential competitors.

We sell evaluation kits to potential customers of our technology, to allow their respective engineering and product management departments to test and evaluate the technology.

Our customers’ product development, technology integration and product introduction cycles occur over multiple quarters and generally span a period of more than a year to two years and can elapse before first evaluation and final shipment of the customer’s product.

Once our customers begin to sell products to end customers that incorporate our technology, we would expect the commercialization cycle to shorten over time as the technology matures and market acceptance grows.

We maintain the rights to all intellectual property in our technology.

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

As of October 31, 2021, the Energous IP portfolio contained over 200 awarded patents in the United States, which are organized along five (5) critical paths to implementation that we believe a competitor may have to navigate to commercialize WPT technology.

The paths are:

Processing Algorithms, Antenna Designs, Transmitter and Receiver ASICs, Other Software Controls (e.g., Bluetooth â Management and Hardware (e.g., Board Layout).

In addition to the inventions covered by these patents, we have also identified specific inventions that we believe are novel and patentable.

We intend to file for patent protection for the most valuable of these, and for other inventions that we expect to develop.

This is a significant annual expense and we continually monitor the costs and benefits of each patent application and pursue those that we believe are most protective for our business and expand the core value of the Company.

Our seasoned management team has both private and public company experience, as well as relevant industry experience.

In addition, we have identified and hired key engineering resources in the areas of IC development, antenna development, hardware, software and firmware engineering as well as integration and testing, which will allow us to continue to expand our technology and intellectual property and to meet our customers’ support requirements.

In November 2016 we entered into a Strategic Alliance Agreement with Dialog Semiconductor plc (“Dialog”), an industry leader in Bluetooth low energy semiconductors and power management semiconductors.

In conjunction with the Strategic Alliance Agreement, Dialog manufactures and is the exclusive distributor of integrated circuit (“IC”) products that incorporate our designs and provides sales and logistic support to customers on a global basis.

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.

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

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

The transmitters vary based on form factor, power specifications and frequencies, while the receivers support a myriad of wireless charging applications including Bluetooth tracking tags, IoT sensors, ESLs, beacons, stock management devices, security cameras, handheld devices, smart automation, wearables and hearables.

The first end product featuring our technology entered the market in 2019.

We started shipping our first at-a-distance WattUp PowerBridge enabled transmitters for commercial IoT applications in the fourth quarter of 2021, and we expect additional WattUp-enabled products to be announced as we move our business forward.

Impact of COVID-19 on Our Business

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

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

We are monitoring the ongoing effects of COVID-19 (including continued outbreaks) and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on our operations, financial position, cash flows, inventory, supply chains, global regulatory approvals, purchasing trends, customer payments, and the industry in general, in addition to the impact on our employees.

We continue to monitor the ongoing effects of COVID-19 (including continued outbreaks) and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on our operations, financial position, cash flows, inventory, supply chains, global regulatory approvals, purchasing trends, customer payments, and the industry in general, in addition to the impact on our employees.

The COVID-19 pandemic has delayed adoption of our technology by potential customers who have experienced workforce and supply chain disruptions, and who continue to evaluate their future prospects and business models, including partnerships with us.

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

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

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

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

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

Several vaccines have been approved for use since the fourth quarter of 2020, with vaccination rates increasing through early 2021.

Several new variants of COVID-19 have emerged including the “delta” variant, which is now widespread, and are reported by health authorities to be more transmissible than other variants.

Vaccines approved to date have lower efficacy in combating the transmission of some of these new variants, though vaccines appear to protect against severe illness.

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

Further delays in the adoption of our current or future products could result from the ongoing pandemic.

At times, certain of our outsourcing partners, component suppliers and logistical service providers have experienced disruptions, resulting in supply shortages that have affected and may continue to affect our sales.

Similar disruptions could occur in the future.

Critical Accounting Policies and Estimates

Revenue Recognition

We follow Accounting Standards Update No.

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

We follow Accounting Standards Codification (“ASC”) 606, "Revenue from Contracts with Customers" (Topic 606).

In accordance with Topic 606, we recognize 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.

Our revenue currently consists of product development projects revenue and royalty revenue from Dialog.

We also provided contract services for Dialog in 2020.

Recognize revenue when or as performance obligations are satisfied.

We record revenue associated with product development projects that we enter into with certain customers.

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We record the expenses related to these product development projects in research and development expense, in the periods such expenses were incurred.

We record royalty revenue from our manufacturing partner, Dialog, and such royalty revenue is recognized at a point in time based on shipments from Dialog to its customers.

We recognized contract services revenue from Dialog over a period of time as 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.

We record revenue associated with the sale of production-level systems once control over the product is transferred to the customer.

We record the expense related to the sales of these systems as cost of revenue during the period delivered.

Results of Operations

Operating Expenses

Costs and Expenses

Cost of revenue consists of direct materials, direct labor and overhead for our production-level wireless charging systems.

Research and development expenses include costs associated with our efforts to develop our technology, including personnel compensation, consulting, engineering supplies and components, intellectual property costs, regulatory expense and general office expenses specifically related to the research and development department.

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

Three Months Ended September 30, 2021 and 2020

During the three months ended September 30, 2021 and 2020, we recorded revenue of $201,364 and $61,500, respectively.

Operating Expenses and Loss from Operations.

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

Losses from operations for the three months ended September 30, 2021 and 2020 were $12,465,361 and $7,560,058, respectively.

Research and Development Costs.

Research and development costs were $4,737,159 and $4,003,642, respectively, for the three months ended September 30, 2021 and 2020.

The increase of $733,517 is primarily due to a $317,652 increase in chip design, engineering supplies and components, a $296,335 increase in compensation, consisting of a $284,557 increase in stock-based compensation from the recognition of performance share units (“PSU”) award expense and an $11,778 increase in payroll costs and a $68,824 increase in legal fees associated with patents and intellectual property.

Sales and Marketing Costs.

Sales and marketing costs for the three months ended September 30, 2021 and 2020 were $1,922,128 and $1,500,068, respectively.

The increase of $422,060 is primarily due to a $291,918 increase in compensation, consisting of a $180,196 increase in stock-based compensation from the recognition of performance share units (“PSU”) award expense and a $111,722 increase in payroll costs, a $46,745 increase in marketing and promotional expense and a $23,838 increase in public relations, consulting and third party services.

General and Administrative Expenses.

General and administrative costs for the three months ended September 30, 2021 and 2020 were $1,990,266 and $2,117,848, respectively.

The decrease of $127,582 is primarily due to a $495,425 decrease in compensation, consisting of an $505,950 decrease in stock-based compensation, primarily due to equity awards becoming fully vested during the previous year and from forfeited equity awards, offset by a $10,525 increase in payroll costs, a $180,198 decrease in annual stockholder meeting costs and stock transfer fees as a result of a special shareholder’s meeting being held during the third quarter of 2020, partially offset by a $241,154 increase in recruiting fees, a $208,988 increase in legal and accounting fees, a $57,169 increase in insurance premiums and a $51,348 increase in investor relations, consulting and third party services.

Severance Expense.

Severance expense for the three months ended September 30, 2021 was $4,017,172 from the separation agreement of former President and Chief Executive Officer, Stephen Rizzone, consisting of expected cash payments and estimated payroll taxes of $3,732,178 and stock-based compensation of $284,994 from the extension of the exercise period for his stock options.

In t e r e s t Income .

In t e r e s t income fo r t h e three m on t h s e nd e d September 30, 2021 w a s $835 a s c o m p a r e d t o interest income of $3,221 fo r t h e three m on t h s e nd e d September 30, 2020 .

The decrease of $2,386 is primarily due to lower savings interest rates.

N e t L o ss .

A s a r e s u l t o f t h e a bov e , n e t l o s s fo r t h e three m on t h s e nd e d September 30 , 2021 was $ 12 , 464 , 526 a s c o m p a r e d t o $ 7 , 556 , 837 fo r t h e three m on t h s e nd e d September 30 , 2020 .

Nine Months Ended September 30, 2021 and 2020

During the nine months ended September 30, 2021 and 2020, we recorded revenue of $531,389 and $237,350, respectively.

Operating Expenses and Loss from Operations.

Operating expenses are made up of research and development, sales and marketing, general and administrative expenses, non-recurring severance expense and cost of services revenue.

Losses from operations for the nine months ended September 30, 2021 and 2020 were $32,009,987 and $24,426,373, respectively.

Three Months Ended March 31, 2022 and 2021

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

The increase of $70,896 is primarily due to an increase in production-level systems revenue.

Costs and Expenses and Loss from Operations.

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

Losses from operations for the three months ended March 31, 2022 and 2021 were $7,155,544 and $8,527,787, respectively.

Cost of Revenue.

Cost of revenue was $203,249 and $0, respectively, for the three months ended March 31, 2022 and 2021.

For the three months ended March 31, 2022, cost of revenue is for our production-level systems that are sold to customers.

We did not incur any cost of revenue during the three months ended March 31, 2021.

Research and Development Costs.

Research and development costs were $15,432,097 and $12,909,378, respectively, for the nine months ended September 30, 2021 and 2020.

The increase of $2,522,719 is primarily due to a $1,947,909 increase in compensation, consisting of a $1,818,040 increase in stock-based compensation from the recognition of PSU award expense and $129,869 increase in payroll costs, a $562,460 increase in engineering supplies, components and chip development costs due to project timing, a $98,606 increase in consulting and third-party services expense and a $68,891 increase in regulatory testing, partially offset by a $112,522 decrease in rent expense and a $96,989 decrease in depreciation.

Research and development costs were $3,527,146 and $4,591,244, respectively, for the three months ended March 31, 2022 and 2021.

The decrease of $1,064,098 is primarily due to a $1,110,774 decrease in compensation, consisting of a $796,234 decrease in stock-based compensation, primarily due to equity awards becoming fully vested during the previous year and a lower headcount within the department, a $314,540 decrease in payroll costs due to a lower headcount within the department and a $66,880 decrease in legal fees associated with patents and intellectual property, partially offset by a $77,120 increase in chip design and engineering supplies and components.

Sales and Marketing Costs.

Sales and marketing costs for the nine months ended September 30, 2021 and 2020 were $6,157,697 and $4,386,881, respectively.

The increase of $1,770,816 is primarily due to a $1,424,508 increase in compensation, consisting of an $856,764 increase in stock-based compensation from the recognition of PSU award expense and a $567,743 increase in payroll costs from a higher headcount within the department, a $110,124 increase in legal fees pertaining to marketing and trademarks, a $108,799 increase in marketing and promotional costs, a $91,015 increase in public relations, consulting and third-party services expense and a $58,398 increase in engineering supplies used by the sales and marketing staff for customer demonstrations.

Sales and marketing costs for the three months ended March 31, 2022 and 2021 were $1,613,590 and $1,794,212, respectively.

The decrease of $180,622 is primarily due to a $331,133 decrease in compensation, consisting of a $268,570 decrease in stock-based compensation, primarily due to equity awards becoming fully vested during the previous year and a lower headcount within the department, a $62,563 decrease in payroll costs due to a lower headcount within the department and an $84,544 decrease in public relations, consulting and third party services expenses, partially offset by a $213,873 increase in tradeshow costs and a $30,126 increase in engineering components used by the sales and marketing staff.

General and Administrative Expenses.

General and administrative costs for the nine months ended September 30, 2021 and 2020 were $6,934,410 and $7,240,925, respectively.

The decrease of $306,515 is primarily due to a $562,873 decrease in compensation, consisting of a $687,657 decrease in stock-based compensation, primarily due to equity awards becoming fully vested during the previous year and from forfeited equity awards, offset by a $124,784 increase in payroll costs, a $152,107 decrease in accounting and audit fees, an $80,334 decrease in board stipends, an $80,192 decrease in annual meeting costs, partially offset by a $241,184 increase in recruiting expense, $190,038 increase in insurance premiums and $161,384 increase in general corporate legal fees.

Severance Expense.

Severance expense for the nine months ended September 30, 2021 was $4,017,172 from the separation agreement of former President and Chief Executive Officer, Stephen Rizzone, consisting of expected cash payments and estimated payroll taxes of $3,732,178 and stock-based compensation of $284,994 from the extension of the exercise period for his stock options.

General and administrative costs for the three months ended March 31, 2022 and 2021 were $2,027,520 and $2,287,396, respectively.

The decrease of $259,876 is primarily due to a $441,302 decrease in compensation, consisting of a $284,516 decrease in stock-based compensation from forfeited equity awards and a lower headcount within the department, a $156,786 decrease in payroll costs due to a lower headcount within the department and an $87,781 decrease in legal and accounting fees, partially offset by a $109,994 increase in recruiting expense, a $61,717 increase in investor relations, consulting and third party services expenses, a $57,169 increase in insurance premiums and a $47,698 increase in annual stockholder meeting costs and stockholder transfer fees.

In t e r e s t Income .

In t e r e s t income fo r t h e nine m on t h s e nd e d September 30, 2021 w a s $3,869 a s c o m p a r e d t o interest income of $67,134 fo r t h e nine m on t h s e nd e d September 30, 2020 .

The decrease of $63,265 is primarily due to lower savings interest rates.

In t e r e s t income fo r t h e three m on t h s e nd e d March 31, 2022 w a s $2,826 a s c o m p a r e d t o interest income of $2,024 fo r t h e three m on t h s e nd e d March 31, 2021 .

The increase of $802 is primarily due to higher savings interest rates.

N e t L o ss .

A s a r e s u l t o f t h e a bov e , n e t l o s s fo r t h e nine m on t h s e nd e d September 30, 2021 was $32,006,118 a s c o m p a r e d t o $24,359,239 fo r t h e nine m on t h s e nd e d September 30, 2020 .

A s a r e s u l t o f t h e a bov e , n e t l o s s fo r t h e three m on t h s e nd e d March 31, 2022 was $7,152,718 a s c o m p a r e d t o $8,525,763 fo r t h e three m on t h s e nd e d March 31, 2021 .

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

During the nine months ended September 30, 2021 and 2020, we recorded revenue of $531,389 and $237,350, respectively.

We incurred net losses of $32,006,118 and $24,359,239 for the nine months ended September 30, 2021 and 2020, 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.

We are currently meeting our liquidity requirements through the proceeds from securities offerings that raised net proceeds of $53,556,202 during 2020, an at-the-market (“ATM”) offering during October 2021, proceeds from contributions to the employee stock purchase plan (“ESPP”), along with payments received from customers.

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.

We believe our cash on hand as of September 30, 2021, together with anticipated revenues and with ATM financing during October 2021, will be sufficient to fund our operations into November 2022.

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

We incurred net losses of $7,152,718 and $8,525,763 for the three months ended March 31, 2022 and 2021, 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.

We are currently meeting our 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 ESPP and payments received from customers.

We believe our cash on hand as of March 31, 2022, together with anticipated revenues, will be sufficient to fund our operations through May 2023.

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

Accordingly, we may 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 we would find acceptable, or at all.

During the nine months ended September 30, 2021, cash flows used in operating activities were $22,498,803, consisting of a net loss of $32,006,118, less non-cash expenses aggregating $9,391,389 (principally stock-based compensation of $8,591,089, decrease in amortization of operating lease right-of-use assets of $594,089 and depreciation and amortization expense of $195,361) and a $1,102,832 increase in accrued severance expense, partially offset by a $636,984 decrease in operating lease liabilities, a $174,606 decrease in accounts payable, a $111,683 increase in accounts receivable and a $72,074 increase in prepaid expenses and other current assets.

During the nine months ended September 30, 2020, cash flows used in operating activities were $19,435,940, consisting of a net loss of $24,359,239, less non-cash expenses aggregating $7,209,398 (principally stock-based compensation of $6,318,948, amortization of operating lease right-of-use assets of $570,460 and depreciation and amortization expense of $286,990), an $818,306 decrease in accrued expenses, a $626,053 decrease in accounts payable, $514,167 decrease in operating lease liabilities and a $331,367 increase in prepaid expenses and other current assets.

During the nine months ended September 30, 2021 and 2020, cash flows used in investing activities were $310,718 and $7,302, respectively.

The cash used in investing activities for the nine months ended September 30, 2021 consisted of the new website, as well as the purchases of new testing equipment and engineering software.

The cash used in investing activities for the nine months ended September 30, 2020 consisted of the purchase of new lab equipment.

During the nine months ended September 30, 2021, cash flows provided by financing activities were $362,048, which consisted of entirely of proceeds from contributions to the ESPP.

During the nine months ended September 30, 2020, cash flows provided by financing activities were $15,062,387, which consisted of $14,723,491 in net proceeds from the sale of shares of our common stock to the public in an ATM offering and $338,896 in proceeds from contributions to the ESPP.

Accordingly, we will likely 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 will be available on terms that we would find acceptable, or at all.

During the three months ended March 31, 2022, cash flows used in operating activities were $6,356,971, consisting of a net loss of $7,152,718, less non-cash expenses aggregating $1,053,761 (principally stock-based compensation of $796,906, decrease in amortization of operating lease right-of-use assets of $186,736 and depreciation and amortization expense of $70,119), a $271,044 de crease in accounts payable, a $203,010 decrease in operating lease liabilities and a $180,535 decrease in accrued expenses, partially offset by a $443,216 decrease in prepaid expenses and other current assets.

During the three months ended March 31, 2021, cash flows used in operating activities were $5,976,550, consisting of a net loss of $8,525,763, less non-cash expenses aggregating $2,406,914 (principally stock-based compensation of $2,146,226, decrease in amortization of operating lease right-of-use assets of $195,914 and depreciation and amortization expense of $64,774), a $210,212 decrease in operating lease liabilities, a $105,491 increase in prepaid expenses and other current assets and an $80,925 increase in accounts receivable, partially offset by a $353,928 increase in accounts payable and a $179,999 increase in accrued expenses.

During the three months ended March 31, 2022 and 2021, cash flows used in investing activities were $44,489 and $111,727, respectively.

The cash used in investing activities for the three months ended March 31, 2022 consisted of the purchase of new engineering software licenses.

The cash used in investing activities for the three months ended March 31, 2021 consisted of the purchase of new testing equipment and engineering software.

During the three months ended March 31, 2022, cash flows provided by financing activities were $104,217, which consisted of entirely of proceeds from contributions to the ESPP.

During the three months ended March 31, 2021, cash flows provided by financing activities were $117,013, which consisted entirely of proceeds from contributions to the ESPP.

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

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Quantitative and Qualitative Disclosure About Market Risk

There has been no material change in our exposure to market risk during the three months ended September 30, 2021.

Please refer to "Quantitative and Qualitative Disclosures about Market Risk" contained in Part II, Item 7A of our Form 10-K for the year ended December 31, 2020 for a discussion of our exposure to market risk.

There has been no material change in our exposure to market risk during the three months ended March 31, 2022.

See "Quantitative and Qualitative Disclosures about Market Risk" in Part II, Item 7A of our Form 10-K for the year ended December 31, 2021 for a discussion of our exposure to market risk.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis