What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-03-24 compared with 2020-03-13 · 110 added, 140 removed, 450 unchanged (36% of the section changed)

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Notes to Financial Statements

REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Energous Corporation

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Energous Corporation

Opinion on the Financial Statements

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 13, 2020 , expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating the overall pr esentation of the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Adoption of New Accounting Standards

As discussed in Note 6 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842), as amended , effective January 1, 2019, using the modified retrospective approach.

Critical Audit Matter

The critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Capital Transactions

Description of the Matter

As discussed in Note 7 to the financial statements, the Company sold shares and raised net proceeds of $53,556,202.

The Company will rely on these proceeds to fund the Company’s operations for the near future.

Based on the significant dollar amount, significant disclosures and use of capital raises to fund its operations, capital transactions is considered to be a critical audit matter.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included the following.

We reviewed terms and provisions of the At Market Issuance Sales Agreement.

We tested the net proceeds raised, shares sold to underlying stock transfer documents and confirmed share amounts to stock transfer agent.

/s/ Marcum llp

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Prepaid expenses and other current assets

Prepaid rent, current

Total current assets

Property and equipment, net

Right-of-use lease asset

Right-of-use lease assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

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no shares issued or

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

December 31, 2019 and December 31, 2018;

33,203,806 and

26,526,303 shares issued and outstanding at December 31, 2019

and December 31, 2018, respectively.

Common Stock, $ 0.00001 par value, 200,000,000 and 50,000,000 shares

authorized at December 31, 2020 and December 31, 2019, respectively;

61,292,412 and 33,203,806 shares issued and outstanding at

December 31, 2020 and December 31, 2019, respectively.

Additional paid-in capital

Accumulated deficit

( 294,972,746

( 263,140,660

Total stockholders’ equity

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General and administrative

Cost of services revenue

Total operating expenses

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Loss on disposal of property and equipment

Total other income

Basic and diluted loss per common share

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Balance, January 1, 2019

( 224,741,571

Stock-based compensation - restricted stock units (“RSUs”)

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Issuance of shares for RSUs

Issuance of shares for PSUs

Shares withheld for payroll tax on RSUs

Shares withheld for payroll tax on PSUs

Shares returned

Exercise of stock options

Cashless exercise of warrants

Shares purchased from contributions to the ESPP

Issuance of shares and warrants in a private placement, net

of $ 1,680,844 in issuance costs

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

of issuance costs of $1,153,715

of $ 339,081 in issuance costs

Balance, December 31, 2019

( 263,140,660

Stock-based compensation - restricted stock units (“RSUs”)

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Issuance of shares for RSUs

Shares withheld for payroll tax on RSUs

Shares withheld for payroll tax on PSUs

Shares returned

Exercise of stock options

Shares purchased from contributions to the ESPP

Issuance of shares and warrants in a private placement, net

of $1,680,844 in issuance costs

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

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Balance, December 31, 2020

( 294,972,746

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

Energous Corporatio n

Energous Corporation

STATEMENTS OF CASH FLOWS

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Loss on disposal of property and equipment

Amortization of prepaid rent from stock issuance

Changes in operating assets and liabilities:

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Net cash used in operating activities

Cash flows from investing activities:

Cash flows used in investing activities:

Purchases of property and equipment

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Net proceeds from the sales of common stock

Net proceeds from an at-the-market ("ATM") offering

Net proceeds from an at-the-market ("ATM") offerings

Proceeds from the exercise of stock options

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Common stock issued for RSUs

Common stock issued for PSUs

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

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Note 2 – Liquidity and Management Plans

During the year ended December 31, 2019, the Company has recorded revenue of $200,143.

During the years ended December 31, 2020 and 2019, the Company has recorded revenue of $ 327,350 and $ 200,143 , respectively.

The Company incurred a net loss of $ 31,832,086 and $ 38,399,089 for the years ended December 31, 2020 and 2019, respectively.

Net cash used in operating activities was $ 24,791,545 and $ 26,621,145 for the years ended December 31, 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 and $4,557,693 during the fourth quarter of 2019, along with payments received under product development projects.

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 $ 4,557,693 during the fourth quarter of 2019, along with payments received under product development projects.

As of December 31, 2020, the Company had cash on hand of $ 50,729,661 .

The Company expects that cash on hand as of December 31, 2019, together with anticipated revenues, together with potential new financing activities, including potential sales of stock, will be sufficient to fund the Company’s operations into March 2021.

The Company expects that cash on hand as of December 31, 2020, together with anticipated revenues, will be sufficient to fund the Company’s operations into March 2022.

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

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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.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 3 – Summary of Significant Accounting Policies

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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.

Note 3 – Summary of Significant Accounting Policies, continued

Use of Estimates continued

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 valuation of deferred tax assets.

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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.

During the year ended December 31, 2020, the Company recognized $ 197,350 in product development projects revenue, $ 0 in royalty revenue and $ 130,000 in contract services revenue.

During the year ended December 31, 2019, the Company recognized $ 193,043 in product development projects revenue, $ 7,100 in royalty revenue and $ 0 in contract services revenue.

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

In general, these development projects are complex, and the Company does not have certainty about its ability to achieve the project milestones.

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 revenue based on when the performance obligation is met.

However, the Company does not recognize revenue in excess of an accepted milestone, as there would be uncertainty of payment for work that has not been accepted.

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 projects in research and development expense, in the periods such expenses were incurred.

The Company also records royalty revenue from its manufacturing partner, Dialog, based on shipments from Dialog to its customers.

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.

Note 3 – Summary of Significant Accounting Policies, continued

Research and Development

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The Company incurred research and development costs of $ 17,066,122 and $ 23,228,810 for the years ended December 31, 2020 and 2019, respectively.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 3 – Summary of Significant Accounting Policies, continued

Stock-Based Compensation

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

The Company uses the asset and liability method of accounting for income taxes.

Under this method, deferred tax assets or liabilities are calculated using current tax laws and rates in effect for the year in which the differences are expected to be recovered or paid.

The Company assesses the likelihood that the deferred tax assets will be recovered from future taxable income, and to the extent it is believed that recovery is not likely, establish a valuation allowance.

Based upon available objective evidence, the Company believes it is more likely than not that the net deferred tax assets will not be fully realizable.

Accordingly, the Company has established a valuation allowance for all deferred tax assets for the years ended December 31, 2019 and 2018.

Net Loss Per Common Share

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The computation of diluted loss per share excludes potentially dilutive securities of 5,256,942 and 6,739,639 for the years ended December 31, 2020 and 2019, respectively, because their inclusion would be antidilutive.

Note 3 – Summary of Significant Accounting Policies, continued

Net Loss Per Common Share continued

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.

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Total potentially dilutive securities

ENERGOUS CORPORATION

Notes to Financial Statements

Note 3 – Summary of Significant Accounting Policies, continued

As of January 1, 2019, the Company determines if an arrangement is a lease at the inception of the arrangement.

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Recent Accounting Pronouncements

In July 2019, the FASB issued ASU No.

2019-07, “Codification Updates to SEC Sections.” ASU 2019-07 updates the SEC portion of the FASB’s codification literature to reflect the changes the SEC made to simplify disclosures.

It is effective immediately.

The Company adopted ASU 2019-07 and its adoption had no material impact on its financial statements.

In December 2019, the FASB issued ASU No.

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The Company evaluates events that have occurred after the balance sheet date of December 31, 2020, through the date which the financial statements are issued.

Based upon the review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 4 – Property and Equipment

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computer software – 1 - 2 years , computer hardware – 3 years, furniture and fixtures – 7 years, leasehold improvements – remaining life of the lease.

The Company disposed of $1,205,962 in hardware and software during the year ended December 31, 2019.

The Company disposed of $ 631,608 and $ 1,205,962 in property and equipment during the years ended December 31, 2020 and 2019, respectively.

Total depreciation and amortization expense of the Company’s property and equipment was $ 356,310 and $ 781,228 for the years ended December 31, 2020 and 2019, respectively.

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Operating Leases

On September 10, 2014, the Company entered into a lease agreement with Balzer Family Investments, L.P.

(the “Landlord”) related to space located at Northpointe Business Center, 3590 North First Street, San Jose, California.

The initial term of the lease was 60 months, with initial monthly base rent of $36,720 and the lease was subject to certain annual escalations as defined in the agreement.

On March 13, 2019, the Company amended its lease agreement with the Landlord which combined both the first-floor space and the second-floor space for the final three months of the original lease term for the second floor, which expired on September 30, 2019.

Effective July 1, 2019 through September 30, 2019, the new monthly rent payment was $48,372.

On February 26, 2015, the Company entered into a sub-lease agreement for space in its San Jose location on the first floor and was amended on August 25, 2015 to include additional space.

The sub-lease agreement had a term which expired on June 30, 2019.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 6 – Commitments and Contingencies, continued

Operating Leases, continued

San Jose Lease

On July 1, 2019, the Company signed a new lease agreement for the lease of its office space at its corporate headquarters in San Jose, California for an additional three years .

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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 .

On May 31, 2017, the Company renewed a lease agreement for the Company’s space in Costa Mesa, California.

The agreement had a term that expired on September 30, 2019 with initial monthly rent of $9,040 and was subject to certain annual escalations as defined in the agreement.

Note 6 – Commitments and Contingencies, continued

Operating Leases, continued

Costa Mesa Lease

On July 15, 2019, the Company signed a new lease agreement for the lease of office space in Costa Mesa, California for an additional two years .

Upon expiration of the original lease on September 30, 2019, the new monthly lease payment starting October 1, 2019 was $ 9,773 and is subject to an annual escalation up to a maximum monthly lease payment of $ 10,200 .

Operating Lease Commitments

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

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In July 2018, the Company renewed the agreement for an additional three years , and the Company is required to remit quarterly payments of approximately $ 218,000 , with the last payment due in March 2021.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 6 – Commitments and Contingencies, continued

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

ENERGOUS CORPORATION

Notes to Financial Statements

Note 6 – Commitments and Contingencies, continued

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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.

ENERGOUS CORPORATION

Notes to Financial Statements

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

Note 7 – Stockholders’ Equity

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Upon the liquidation, dissolution or winding up of the Company, holders of common stock are entitled to share ratably in all assets of the Company that are legally available for distribution.

Filing of Registration Statement

Pursuant to a shelf registration statement on Form S-3 filed on April 24, 2015, in January 2018, the Company raised $38,846,815 (net of $1,153,715 in underwriter’s discount and issuance costs) from the sale of stock in an “at-the-market” equity offering of its common stock.

On August 9, 2018, the Company filed a shelf registration statement on Form S-3, which became effective on August 17, 2018.

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Pursuant to this registration statement, in March 2019 the Company raised $ 23,319,156 (net of $ 1,680,844 in issuance costs) from an offering of shares of its common stock and warrants to purchase 1,666,666 shares of common stock at an exercise price of $ 10.00 per share.

The Company also raised $4,557,693 (net of $339,081 in issuance costs), pursuant to this shelf registration statement, in an “at-the-market” equity offering during the fourth quarter of 2019.

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.

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 a sales agreement prospectus 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 a 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 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 quarter of 2020.

Note 7 – Stockholders’ Equity continued

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.

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 common shares authorized from 50,000,000 shares to 200,000,000 shares.

In August 2019, an aggregate of 38,666 shares of common stock were returned to the Company and retired in connection with the rescission of restricted stock unit agreements.

Private Placements

On June 28, 2017, the Company and Dialog entered into a securities purchase agreement pursuant to which the Company agreed to sell Dialog 976,139 shares of common stock at a price of $15.3666 per share and a warrant to purchase up to 654,013 shares of common stock that may be exercised only on a cashless basis at a price of $19.9766 per share, and may be exercised at any time between the date that is six months and one day after the closing date of the transaction and the three-year anniversary of the closing date.

The aggregate proceeds from the sale of these shares, which were issued on July 5, 2017, was $14,999,935.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 8 – Stock Based Compensation

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As of December 31, 2020, 2,131,951 shares of common stock remain eligible to be issued through equity-based instruments under the 2015 Performance Share Unit Plan.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 8 – Stock Based Compensation, continued

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2017 Equity Inducement Plan

On December 28, 2017, the Board of Directors approved the 2017 Equity Inducement Plan.

Under the plan, the Board of Directors reserved 600,000 shares for the grant of RSUs.

These grants will be administered by a committee of the Board of Directors or the Board of Directors.

On December 28, 2017, the Board approved the 2017 Equity Inducement Plan.

Under the plan, the Board reserved 600,000 shares for the grant of RSUs.

These grants will be administered by the Board or a committee of the Board.

These awards will be granted to individuals who (a) are being hired as an Employee by the Company or any Subsidiary and such Award is a material inducement to such person being hired;

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Employee Stock Purchase Plan

In April 2015, the Company’s board of directors approved the ESPP, under which 600,000 shares of common stock have been reserved for purchase by the Company’s employees, subject to approval by the stockholders.

In April 2015, the Company’s Board approved the ESPP, under which 600,000 shares of common stock have been reserved for purchase by the Company’s employees, subject to approval by the stockholders.

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

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

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No options were granted during the years ended December 31, 2020 and 2019.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 8 – Stock Based Compensation, continued

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During the year ended December 31, 2020, the Compensation Committee of the Board (“Compensation Committee”) granted various employees RSUs under which the holders have the right to receive an aggregate 674,656 shares of common stock.

The majority of these awards, granted under the 2013 Equity Incentive Plan, vest over terms ranging from one to four years.

The majority of these awards, granted under the 2013 Equity Incentive Plan, vest over terms ranging from two to four years .

During the year ended December 31, 2020, the Compensation Committee granted various directors and consultants RSUs under which the holders have the right to receive an aggregate 142,953 shares of common stock.

These awards were granted under the 2014 Non-Employee Equity Compensation Plan.

The awards granted vest over terms from one to four years.

The awards granted vest over terms from one to three years .

During the year ended December 31, 2020, the Compensation Committee granted employees RSUs under which the holders have the right to receive 187,500 shares of common stock.

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Outstanding at December 31, 2020

ENERGOUS CORPORATION

Notes to Financial Statements

Note 8 – Stock Based Compensation, continued

Performance Share Units (“PSUs”)

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

The PSUs originally issued during 2015 to certain board members and senior management were earned based on the Company’s achievement of market capitalization growth between the effective date of the grant agreement and December 31, 2018.

If the Company’s market capitalization was $100 million or less, no PSUs were earned.

If the Company reached a market capitalization of $1.1 billion or more, 100% of the PSUs would have been earned.

For market capitalization between $100 million and $1.1 billion, the percentage of PSUs earned was determined on a quarterly basis based on straight line interpolation.

The Company determined that the PSUs were equity awards with both market and service conditions.

Grantees of PSUs were required to be employed through December 31, 2018 in order to earn the entire award, if and when vested.

The fair value of these grants of PSUs to purchase a total of 1,342,061 shares of common stock (including 1,278,153 PSUs granted under the 2015 Performance Share Unit Plan and 63,908 granted as an inducement) was determined to be approximately $3,218,000, and was amortized over the service period of May 21, 2015 through December 31, 2018, on a straight-line basis.

During the year ended December 31, 2020, the Compensation Committee granted various employees PSUs under which the holders have the right to receive an aggregate 267,677 shares of common stock.

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The awards granted vest upon achievement of Company-wide revenue goals.

Amortization for all PSU awards was $88,348 and $819,816 for the years ended December 31, 2019 and 2018, respectively.

ENERGOUS CORPORATION

Notes to Financial Statements

Compensation expense amortization for all PSU awards was $( 88,348 ) and $ 88,348 for the years ended December 31, 2020 and 2019, respectively.

Note 8 – Stock Based Compensation, continued

Performance Share Units (“PSUs”), continued

At December 31, 2019, the unamortized value of all PSUs was $806,172 and will be expensed over a weighted average period of 1.0 years.

At December 31, 2020, the unamortized value of all PSUs was $ 0 .

A summary of the activity related to PSUs for the year ended December 31, 2020 is presented below:

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The Company recognized stock-based compensation expense for the plan of $ 329,461 and $ 368,021 for the years ended December 31, 2020 and 2019, respectively.

ENERGOUS CORPORATION

Notes to Financial Statements

Note 8 – Stock Based Compensation, continued

Employee Stock Purchase Plan (“ESPP”), continued

The Company estimated the fair value of the purchase options granted during the years ended December 31, 2020 and 2019 using the Black-Scholes option pricing model.

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Stock price range

14.48 – 22.34

Dividend yield

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Expected life

Note 8 – Stock Based Compensation, continued

Stock-Based Compensation Expense

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General and administrative

ENERGOUS CORPORATION

Notes to Financial Statements

Note 9 – Income Taxes

In December 2017, the SEC issued Staff Accounting Bulletin No.

118 (“SAB 118”), which provides guidance on accounting for the income tax effects of the TCJA.

SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting relating to the TCJA under Accounting Standards Codification Topic 740, “Income Taxes” (“ASC 740”).

In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for TCJA-related income tax effects is incomplete, but the company is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements.

If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.

The Company completed its analysis of the TCJA’s income tax effects.

In accordance with SAB 118, the TCJA-related income tax effects that the Company initially reported as provisional estimates were refined as additional analysis was performed.

There was no material impact to the Company’s financial statements recorded when its analysis was completed in the 2018 fourth quarter.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law.

The CARES Act includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property.

The CARES Act has an immaterial impact on the Company’s income taxes.

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”).

ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and establishes for all entities a minimum threshold for financial statement recognition of the benefit of tax positions and requires certain expanded disclosures.

The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income.

Deferred income taxes represent the tax effects of differences between the financial reporting and tax bases of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.

The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

As of December 31, 2020, the Company has recorded a full valuation allowance.

Note 9 – Income Taxes, continued

As of December 31, 2020 and 2019, the Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:

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Increase in valuation allowance

ENERGOUS CORPORATION

Notes to Financial Statements

Note 9 – Income Taxes , continued

The Company has federal and state net operating loss carryforwards of approximately $ 205,474,000 and $ 206,403,000 , respectively, available to offset future taxable income.

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Accordingly, management has determined that a full valuation allowance of the deferred tax asset is appropriate at December 31, 2020 and 2019.

Note 9 – Income Taxes, continued

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryforwards when the stock ownership of one or more 5% stockholders (stockholders owning 5% or more of the Company’s outstanding capital stock) has increased on a cumulative basis by more than 50 percentage points.

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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 6 – 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 (See Note 7 – Stockholders’ Equity, Private Placements ).

As of December 31, 2019, a total of 654,013 of the warrants remain outstanding.

Dialog presently owns approximately 5.2% of the Company’s outstanding common shares and could potentially own 7.1% of the Company’s outstanding common shares if it exercised all of its warrants for common shares.

For the years ended December 31, 2019 and 2018, the Company paid $0 and $79,550, respectively, to Dialog for chip development costs incurred, which is recorded under research and development expense.

Pursuant to the Strategic Alliance Agreement in Note 6 – Commitments and Contingencies, we recorded $7,100 and $5,773 in revenue for the years ended December 31, 2019 and 2018, respectively.

ENERGOUS CORPORATION

Notes to Financial Statements

As of December 31, 2020, none of the warrants remain outstanding.

Dialog presently owns approximately 2.8 % of the Company’s outstanding common shares.

The Company recorded $ 0 and $ 7,100 in royalty revenue for the years ended December 31, 2020 and 2019, respectively, pursuant to the Strategic Alliance Agreement.

Additionally, the Company recorded $ 130,000 and $ 0 in contract services revenue during the years ended December 31, 2020 and 2019, respectively.

The Company also recorded related expenses of $ 126,539 and $ 0 in cost of services revenue during the years ended December 31, 2020 and 2019, respectively.

Note 11 – Unaudited Quarterly Financial Information

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Note 12 – Customer Concentration

Four customers accounted for approximately 52% of the Company’s revenue for the year ended December 31, 2019 and one customer accounted for approximately 92% of the Company’s revenue for the year ended December 31, 2018.

Three customers accounted for approximately 66 % of the Company’s revenue for the year ended December 31, 2020 and four customers accounted for approximately 52 % of the Company’s revenue for the year ended December 31, 2019.

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

Four customers accounted for nearly 100 % of the Company’s accounts receivable balance as of December 31, 2019.

Three customers accounted for approximately 86% of the Company’s accounts receivable balance as of December 31, 2018.

Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure.

Note 13 – Subsequent Event

On February 8, 2021, Renesas Electronics Corporation announced the planned acquisition of Dialog Semiconductor Corporation.

The Company has a strategic agreement with Dialog (see Note 6 – Commitments and Contingencies, Strategic Alliance Agreement ).

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data