Company Quick10K Filing
Energous
Price3.32 EPS-1
Shares31 P/E-2
MCap102 P/FCF-5
Net Debt-23 EBIT-41
TEV80 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-13
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-16
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-16
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-03-30
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-13
10-Q 2014-03-31 Filed 2014-05-14
8-K 2020-08-05 Earnings, Exhibits
8-K 2020-07-24 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2020-05-26
8-K 2020-05-06
8-K 2020-04-21
8-K 2020-02-26
8-K 2019-11-07
8-K 2019-10-11
8-K 2019-08-28
8-K 2019-08-15
8-K 2019-08-08
8-K 2019-05-15
8-K 2019-04-30
8-K 2019-03-28
8-K 2019-03-28
8-K 2019-02-27
8-K 2019-02-27
8-K 2018-10-30
8-K 2018-08-01
8-K 2018-05-16
8-K 2018-05-01
8-K 2018-03-21
8-K 2018-02-15
8-K 2018-01-11
8-K 2018-01-10

WATT 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Business Organization, Nature of Operations
Note 2 - Liquidity and Management Plans
Note 3 - Summary of Significant Accounting Policies
Note 4 - Commitments and Contingencies
Note 5 - Stockholders' Equity
Note 6 - Stock - Based Compensation
Note 7 - Related Party Transactions
Note 8 - Customer Concentrations
Note 9 - Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Sales of Unregistered Securities&#59; Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-3.1 watt-ex31_26.htm
EX-10.5 watt-ex105_93.htm
EX-31.1 watt-ex311_8.htm
EX-31.2 watt-ex312_7.htm
EX-32.1 watt-ex321_6.htm

Energous Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
503214-4-22-402014201620182020
Assets, Equity
2.1-1.3-4.7-8.2-11.6-15.02013201520172020
Rev, G Profit, Net Income
4533219-3-152014201620182020
Ops, Inv, Fin

watt-10q_20200630.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

COMMISSION FILE NUMBER 001-36379

ENERGOUS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

46-1318953

(State of incorporation)

 

(I.R.S. Employer Identification No.)

3590 North First Street, Suite 210, San Jose, CA  95134

(Address of principal executive office)        (Zip code)

(408963-0200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.00001 par value

 

WATT

 

The Nasdaq Stock Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes           No 

As of August 4, 2020, there were 41,630,568 shares of our Common Stock, par value $0.00001 per share, outstanding.

 

 

 

 


ENERGOUS CORPORATION

FORM 10-Q

FOR THE THREE MONTHS ENDED JUNE 30, 2020

INDEX

 

PART I - FINANCIAL INFORMATION

 

3

 

 

 

Item 1.  Financial Statements

 

3

 

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

 

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

 

23

 

 

 

Item 4.  Controls and Procedures

 

23

 

 

 

PART II – OTHER INFORMATION

 

24

 

 

 

Item 1.  Legal Proceedings

 

24

 

 

 

Item 1A.  Risk Factors

 

24

 

 

 

Item 2.  Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

35

 

 

 

Item 3.  Defaults Upon Senior Securities

 

35

 

 

 

Item 4.  Mine Safety Disclosures

 

35

 

 

 

Item 5.  Other Information

 

35

 

 

 

Item 6.  Exhibits

 

35

 

 

 

 


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Energous Corporation

BALANCE SHEETS

 

 

 

As of

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,408,940

 

 

$

21,684,089

 

Accounts receivable

 

 

105,226

 

 

 

63,144

 

Prepaid expenses and other current assets

 

 

662,958

 

 

 

450,231

 

Total current assets

 

 

24,177,124

 

 

 

22,197,464

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

408,895

 

 

 

626,524

 

Operating lease right-of-use assets

 

 

1,678,983

 

 

 

2,057,576

 

Other assets

 

 

2,410

 

 

 

2,410

 

Total assets

 

$

26,267,412

 

 

$

24,883,974

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,340,982

 

 

$

1,671,519

 

Accrued expenses

 

 

1,633,637

 

 

 

2,063,097

 

Operating lease liabilities, current portion

 

 

803,760

 

 

 

722,291

 

Deferred revenue

 

 

12,000

 

 

 

12,000

 

Total current liabilities

 

 

3,790,379

 

 

 

4,468,907

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities, long-term portion

 

 

979,660

 

 

 

1,402,193

 

Total liabilities

 

 

4,770,039

 

 

 

5,871,100

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

   at June 30, 2020 and December 31, 2019; no shares issued or

   outstanding

 

 

 

 

 

 

Common Stock, $0.00001 par value, 50,000,000 shares authorized

   at June 30, 2020 and December 31, 2019; 41,685,310 and

   33,203,806 shares issued and outstanding at June 30, 2020

   and December 31, 2019, respectively.

 

 

417

 

 

 

333

 

Additional paid-in capital

 

 

301,440,018

 

 

 

282,153,201

 

Accumulated deficit

 

 

(279,943,062

)

 

 

(263,140,660

)

Total stockholders’ equity

 

 

21,497,373

 

 

 

19,012,874

 

Total liabilities and stockholders’ equity

 

$

26,267,412

 

 

$

24,883,974

 

 

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

 

3


Energous Corporation

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

114,375

 

 

$

47,500

 

 

$

175,850

 

 

$

114,000

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,330,433

 

 

 

5,515,017

 

 

 

8,905,736

 

 

 

12,315,695

 

Sales and marketing

 

 

1,438,904

 

 

 

1,143,910

 

 

 

2,886,813

 

 

 

2,743,362

 

General and administrative

 

 

2,470,683

 

 

 

3,335,229

 

 

 

5,123,077

 

 

 

6,097,140

 

Cost of services revenue

 

 

86,995

 

 

 

 

 

 

126,539

 

 

 

 

Total operating expenses

 

 

8,327,015

 

 

 

9,994,156

 

 

 

17,042,165

 

 

 

21,156,197

 

Loss from operations

 

 

(8,212,640

)

 

 

(9,946,656

)

 

 

(16,866,315

)

 

 

(21,042,197

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

7,974

 

 

 

142,660

 

 

 

63,913

 

 

 

218,733

 

Total other income

 

 

7,974

 

 

 

142,660

 

 

 

63,913

 

 

 

218,733

 

Net loss

 

$

(8,204,666

)

 

$

(9,803,996

)

 

$

(16,802,402

)

 

$

(20,823,464

)

Basic and diluted loss per common share

 

$

(0.20

)

 

$

(0.32

)

 

$

(0.45

)

 

$

(0.71

)

Weighted average shares outstanding, basic and diluted

 

 

40,641,264

 

 

 

30,445,438

 

 

 

37,728,909

 

 

 

29,199,225

 

 

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

 

4


Energous Corporation

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2020

 

 

33,203,806

 

 

$

333

 

 

$

282,153,201

 

 

$

(263,140,660

)

 

$

19,012,874

 

Stock-based compensation - restricted

   stock units ("RSUs")

 

 

 

 

 

 

 

 

2,321,820

 

 

 

 

 

 

2,321,820

 

Stock-based compensation - performance

   share units ("PSUs")

 

 

 

 

 

 

 

 

(88,348

)

 

 

 

 

 

(88,348

)

Stock-based compensation - employee

   stock purchase plan ("ESPP")

 

 

 

 

 

 

 

 

42,827

 

 

 

 

 

 

42,827

 

Issuance of shares for RSUs

 

 

396,559

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

Proceeds from contributions to the ESPP

 

 

 

 

 

 

 

 

113,059

 

 

 

 

 

 

113,059

 

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

   offering, net of $141,322 in issuance costs

 

 

4,351,652

 

 

 

44

 

 

 

5,506,836

 

 

 

 

 

 

5,506,880

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(8,597,736

)

 

 

(8,597,736

)

Balance March 31, 2020 (unaudited)

 

 

37,952,017

 

 

 

381

 

 

 

290,049,391

 

 

 

(271,738,396

)

 

 

18,311,376

 

Stock-based compensation - restricted

   stock units ("RSUs")

 

 

 

 

 

 

 

 

2,028,599

 

 

 

 

 

 

2,028,599

 

Stock-based compensation - employee

   stock purchase plan ("ESPP")

 

 

 

 

 

 

 

 

41,308

 

 

 

 

 

 

41,308

 

Issuance of shares for RSUs

 

 

232,995

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

Proceeds from contributions to the ESPP

 

 

144,370

 

 

 

1

 

 

 

104,144

 

 

 

 

 

 

104,145

 

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

   offering, net of $236,528 in issuance costs

 

 

3,355,928

 

 

 

33

 

 

 

9,216,578

 

 

 

 

 

 

9,216,611

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(8,204,666

)

 

 

(8,204,666

)

Balance, June 30, 2020 (unaudited)

 

 

41,685,310

 

 

$

417

 

 

$

301,440,018

 

 

$

(279,943,062

)

 

$

21,497,373

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2019

 

 

26,526,303

 

 

$

265

 

 

$

243,111,741

 

 

$

(224,741,571

)

 

$

18,370,435

 

Stock-based compensation - restricted

   stock units ("RSUs")

 

 

 

 

 

 

 

 

3,083,567

 

 

 

 

 

 

3,083,567

 

Stock-based compensation - employee

   stock purchase plan ("ESPP")

 

 

 

 

 

 

 

 

87,825

 

 

 

 

 

 

87,825

 

Issuance of shares for RSUs

 

 

434,522

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

Shares withheld for payroll tax on RSUs

 

 

(1,329

)

 

 

 

 

 

(10,207

)

 

 

 

 

 

(10,207

)

Shares withheld for payroll tax on performance share units ("PSUs")

 

 

(44,481

)

 

 

 

 

 

(329,159

)

 

 

 

 

 

(329,159

)

Exercise of stock options

 

 

80,201

 

 

 

1

 

 

 

400,102

 

 

 

 

 

 

400,103

 

Proceeds from contributions to the ESPP

 

 

 

 

 

 

 

 

173,167

 

 

 

 

 

 

173,167

 

Issuance of shares and warrant in a private

   placement, net of $1,680,844 in issuance costs

 

 

3,333,333

 

 

 

33

 

 

 

23,319,123

 

 

 

 

 

 

23,319,156

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,019,468

)

 

 

(11,019,468

)

Balance, March 31, 2019 (unaudited)

 

 

30,328,549

 

 

$

303

 

 

$

269,836,155

 

 

$

(235,761,039

)

 

$

34,075,419

 

Stock-based compensation - restricted

   stock units ("RSUs")

 

 

 

 

 

 

 

 

2,675,184

 

 

 

 

 

 

2,675,184

 

Stock-based compensation - employee

   stock purchase plan ("ESPP")

 

 

 

 

 

 

 

 

122,749

 

 

 

 

 

 

122,749

 

Issuance of shares for RSUs

 

 

189,220

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

Proceeds from contributions to the ESPP

 

 

85,765

 

 

 

1

 

 

 

145,421

 

 

 

 

 

 

145,422

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(9,803,996

)

 

 

(9,803,996

)

Balance, June 30, 2019 (unaudited)

 

 

30,603,534

 

 

$

306

 

 

$

272,779,507

 

 

$

(245,565,035

)

 

$

27,214,778

 

 

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

5


Energous Corporation

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(16,802,402

)

 

$

(20,823,464

)

Adjustments to reconcile net loss to:

 

 

 

 

 

 

 

 

Net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

217,629

 

 

 

476,863

 

Stock based compensation

 

 

4,346,206

 

 

 

5,969,325

 

Changes in operating lease right-of-use assets

 

 

378,593

 

 

 

293,210

 

Bad debt expense

 

 

33,000

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(75,082

)

 

 

(2,950

)

Prepaid expenses and other current assets

 

 

(212,727

)

 

 

94,681

 

Accounts payable

 

 

(330,537

)

 

 

(534,124

)

Accrued expenses

 

 

(429,460

)

 

 

332,767

 

Operating lease liabilities

 

 

(341,064

)

 

 

(230,219

)

Net cash used in operating activities

 

 

(13,215,844

)

 

 

(14,423,911

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(172,811

)

Net cash used in investing activities

 

 

 

 

 

(172,811

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

     Net proceeds from the sales of common stock

 

 

14,723,491

 

 

 

23,319,156

 

Proceeds from the exercise of stock options

 

 

 

 

 

400,103

 

Proceeds from contributions to employee stock purchase plan

 

 

217,204

 

 

 

318,589

 

Shares repurchased for tax withholdings on vesting of RSUs

 

 

 

 

 

(10,207

)

Shares repurchased for tax withholdings on vesting of PSUs

 

 

 

 

 

(329,159

)

Net cash provided by financing activities

 

 

14,940,695

 

 

 

23,698,482

 

Net increase in cash and cash equivalents

 

 

1,724,851

 

 

 

9,101,760

 

Cash and cash equivalents - beginning

 

 

21,684,089

 

 

 

20,106,485

 

Cash and cash equivalents - ending

 

$

23,408,940

 

 

$

29,208,245

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Common stock issued for RSUs

 

$

6

 

 

$

6

 

 

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

6


Note 1 - Business Organization, Nature of Operations

Energous Corporation (the “Company”) was incorporated in Delaware on October 30, 2012. The Company has developed its WattUp® technology, consisting of proprietary semiconductor chipsets, software, hardware designs and antennas, that enables radio frequency (“RF”) based charging for electronic devices, providing wire-free contact and non-contact charging solutions, with the potential to enable charging with mobility. The Company believes its proprietary WattUp technology can be utilized in consumer electronics such as wearables, hearing aids, earbuds, Bluetooth headsets, Internet of Things (“IoT”) devices, smartphones, tablets, e-book readers, keyboards, mice, remote controls, rechargeable lights, cylindrical batteries, medical devices and other devices with charging requirements that would otherwise require battery replacement or wired power connection.

Note 2 – Liquidity and Management Plans

During the three and six months ended June 30, 2020, the Company recorded revenue of $114,375 and $175,850, respectively, and during the three and six months ended June 30, 2019, the Company recorded revenue of $47,500 and $114,000, respectively. During the three and six months ended June 30, 2020, the Company recorded net losses of $8,204,666 and $16,802,402, respectively, and during the three and six months ended June 30, 2019, the Company recorded net losses of $9,803,996 and $20,823,464, respectively. Net cash used in operating activities was $13,215,844 and $14,423,911 for the six months ended June 30, 2020 and 2019, respectively. The Company is currently meeting its liquidity requirements through the proceeds of securities offerings that raised net proceeds of $23,319,156 in March 2019, $4,557,693 during the fourth quarter 2019, $5,506,880 during the first quarter 2020 and $9,216,611 during the second quarter 2020, along with payments received under product development projects.

As of June 30, 2020, the Company had cash on hand of $23,408,940. The Company expects that cash on hand as of June 30, 2020, together with anticipated revenues and potential financing will be sufficient to fund the Company’s operations into August 2021.

Research and development of new technologies is by its nature unpredictable. Although the Company intends to continue its research and development activities, there can be no assurance that its available resources and revenue generated from its business operations will be sufficient to sustain its operations. 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.

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, 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

Basis of Presentation

The accompanying financial statements are presented in U.S. 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”).

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, 2019 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 13, 2020.  The accounting policies used in preparing these unaudited condensed interim financial statements are consistent with those described in the Company’s December 31, 2019 audited financial statements.

7


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. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" (Topic 606).

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

 

 

1.

Identify the contract with a customer.

 

2.

Identify the performance obligations in the contract.

 

3.

Determine the transaction price of the contract.

 

4.

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

 

5.

Recognize revenue when the performance obligations are met or delivered.

The Company’s revenue primarily consists of product development projects revenue and royalty revenue from Dialog. The Company also provides contract services for Dialog.  

The Company records revenue associated with product development projects that it enters into with certain customers. In general, these product development projects are complex, and the Company does not have certainty about its ability to achieve the project milestones. 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 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 records royalty revenue from its manufacturing partner, Dialog, and such royalty revenue is recognized at a point in time based on shipments from Dialog to its customers.

The Company recognizes contract services revenue from Dialog over the period of time that the services are performed. The costs associated with this revenue are recognized as the services are performed and are included in cost of services revenue.

 

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. 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 $4,330,433 and $5,515,017 for the three months ended June 30, 2020 and 2019, respectively, and the Company incurred research and development costs of $8,905,736 and $12,315,695 for the six months ended June 30, 2020 and 2019, respectively.

 

8


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

 

 

Income Taxes

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. 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 June 30, 2020, no liability for unrecognized tax benefits was required to be reported. The guidance also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the three or six months ended June 30, 2020 or 2019. The Company files income tax returns with the United States and California governments.

 

Net Loss Per Common Share

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. 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 6,945,580 and 7,228,185 for the three months ended June 30, 2020 and 2019, respectively, and 6,945,580 and 7,228,185 for the six months ended June 30, 2020 and 2019, 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 June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Warrant issued to private investors

 

 

3,938,802

 

 

 

4,702,354

 

 

 

3,938,802

 

 

 

4,702,354

 

Options to purchase common stock

 

 

550,985

 

 

 

576,293

 

 

 

550,985

 

 

 

576,293

 

RSUs

 

 

1,822,116

 

 

 

1,949,538

 

 

 

1,822,116

 

 

 

1,949,538

 

PSUs

 

 

633,677

 

 

 

 

 

 

633,677

 

 

 

 

Total potentially dilutive securities

 

 

6,945,580

 

 

 

7,228,185

 

 

 

6,945,580