Energous Corp 10-Q

Item 1. Financial Statements Energous Corporation CONDENSED BALANCE SHEETS As of March 31, 2022 December 31, 2021 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 42,774,171 $ 49,071,414 Accounts receivable, net 198,924 283,602 Inventory 68,480 – Prepaid expenses and other current assets 431,670 874,886 Total current assets 43,473,245 50,229,902 Property and equipment, net 484,567 510,197 Operating lease right-of-use assets 432,249 618,985 Other assets 11,991 11,991 Total assets $ 44,402,052 $ 51,371,075 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 934,913 $ 1,205,957 Accrued expenses 1,342,782 1,523,317 Accrued severance expense 909,873 975,439 Operating lease liabilities, current portion 438,698 628,307 Deferred revenue 16,091 13,364 Total current liabilities 3,642,357 4,346,384 Operating lease liabilities, long-term portion 27,012 40,413 Total liabilities 3,669,369 4,386,797 Commitments and contingencies Stockholders’ equity: Preferred Stock, $ 0.00001 par value, 10,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued or outstanding. – – Common Stock, $ 0.00001 par value, 200,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively; 77,055,028 and 76,667,205 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively. 771 767 Additional paid-in capital 384,284,669 383,383,550 Accumulated deficit ( 343,552,757 ) ( 336,400,039 ) Total stockholders’ equity 40,732,683 46,984,278 Total liabilities and stockholders’ equity $ 44,402,052 $ 51,371,075 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 March 31, 2022 2021 Revenue $ 215,961 $ 145,065 Costs and expenses: Cost of revenue 203,249 – Research and development 3,527,146 4,591,244 Sales and marketing 1,613,590 1,794,212 General and administrative 2,027,520 2,287,396 Total costs and expenses 7,371,505 8,672,852 Loss from operations ( 7,155,544 ) ( 8,527,787 ) Other income: Interest income 2,826 2,024 Total other income 2,826 2,024 Net loss $ ( 7,152,718 ) $ ( 8,525,763 ) Basic and diluted loss per common share $ ( 0.09 ) $ ( 0.14 ) Weighted average shares outstanding, basic and diluted 76,930,919 61,567,003 The accompanying notes are an integral part of these condensed financial statements. 4 Energous Corporation CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) Common Stock Additional Paid-in Accumulated Total Stockholders' Shares Amount Capital Deficit Equity Balance at January 1, 2022 76,667,205 $ 767 $ 383,383,550 $ ( 336,400,039 ) $ 46,984,278 Stock-based compensation - options – – 10,313 – 10,313 Stock-based compensation - restricted stock units ("RSUs") – – 745,620 – 745,620 Stock-based compensation - employee stock purchase plan ("ESPP") – – 40,973 – 40,973 Issuance of shares for RSUs 387,823 4 ( 4 ) – – Proceeds from contributions to the ESPP – – 104,217 – 104,217 Net loss – – – ( 7,152,718 ) ( 7,152,718 ) Balance at March 31, 2022 77,055,028 771 384,284,669 ( 343,552,757 ) 40,732,683 Common Stock Additional Paid-in Accumulated Total Stockholders' Shares Amount Capital Deficit Equity Balance at January 1, 2021 61,292,412 $ 614 $ 344,024,638 $ ( 294,972,746 ) $ 49,052,506 Stock-based compensation - RSUs – – 2,088,910 – 2,088,910 Stock-based compensation - ESPP – – 57,316 – 57,316 Issuance of shares for RSUs 627,412 6 ( 6 ) – – Proceeds from contributions to the ESPP – – 117,013 – 117,013 Net loss – – – ( 8,525,763 ) ( 8,525,763 ) Balance at March 31, 2021 61,919,824 $ 620 $ 346,287,871 $ ( 303,498,509 ) $ 42,789,982 The accompanying notes are an integral part of these condensed financial statements. 5 Energous Corporation CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 7,152,718 ) $ ( 8,525,763 ) Adjustments to reconcile net loss to: Net cash used in operating activities: Depreciation and amortization 70,119 64,774 Stock based compensation 796,906 2,146,226 Changes in operating lease right-of-use assets 186,736 195,914 Changes in operating assets and liabilities: Accounts receivable 84,678 ( 80,925 ) Inventory ( 68,480 ) – Prepaid expenses and other current assets 443,216 ( 105,491 ) Accounts payable ( 271,044 ) 353,928 Accrued severance expense ( 65,566 ) – Accrued expenses ( 180,535 ) 179,999 Operating lease liabilities ( 203,010 ) ( 210,212 ) Deferred revenue 2,727 5,000 Net cash used in operating activities ( 6,356,971 ) ( 5,976,550 ) Cash flows from investing activities: Purchases of property and equipment ( 44,489 ) ( 111,727 ) Net cash used in investing activities ( 44,489 ) ( 111,727 ) Cash flows from financing activities: Proceeds from contributions to employee stock purchase plan 104,217 117,013 Net cash provided by financing activities 104,217 117,013 Net decrease in cash and cash equivalents ( 6,297,243 ) ( 5,971,264 ) Cash and cash equivalents – beginning 49,071,414 50,729,661 Cash and cash equivalents – ending $ 42,774,171 $ 44,758,397 Supplemental disclosure of non-cash financing activities: Common stock issued for RSUs $ 4 $ 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® wireless power technology, consisting of proprietary semiconductor chipsets, software controls, hardware designs and antennas, that enables radio frequency (“RF”) based charging for electronic devices. The WattUp technology has a broad spectrum of capabilities, including near field wireless charging and at-a-distance wireless charging at various distances. The Company believes its proprietary WattUp technologies are well suited for many applications, including building and home automation, electronic shelf labels, industrial IoT sensors, surface and implanted medical devices, tracking devices, hearables, wearables, consumer electronics 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. Note 2 – Liquidity and Management Plans During the three months ended March 31, 2022 and 2021, the Company recorded revenue of $ 215,961 and $ 145,065 , respectively. During the three months ended March 31, 2022 and 2021, the Company recorded net losses of $ 7,152,718 and $ 8,525,763 , respectively. Net cash used in operating activities was $ 6,356,971 and $ 5,976,550 for the three months ended March 31, 2022 and 2021, respectively. The Company is currently meeting its liquidity requirements through the proceeds of securities offerings that raised net proceeds of $ 53,556,202 during 2020, and $ 27,043,751 during the fourth quarter of 2021, proceeds from contributions to the Company’s employee stock purchase plan (the “ESPP”), along with payments received from customers. As of March 31, 2022, the Company had cash on hand of $ 42,774,171 . The Company expects that cash on hand as of March 31, 2022, together with anticipated revenues, will be sufficient to fund the Company’s operations through May 2023. Research and development of new technologies is by its nature unpredictable. 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 will be available on terms that the Company would find acceptable, or at all. The market for products using the Company’s technology is broad and evolving, but remains nascent and unproven, so the Company’s success is dependent upon many factors, including customer acceptance of its existing products, technical feasibility of future products, regulatory approvals, the development of complementary technologies, competition and global market fluctuations. 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 (the “SEC”). These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2021 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 23, 2022. The accounting policies used in preparing these unaudited condensed interim financial statements are consistent with those described in the Company’s December 31, 2021 audited financial statements . 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. 7 Note 3 – Summary of Significant Accounting Policies, continued The Company’s significant estimates and assumptions include the valuation of stock-based compensation instruments, recognition of revenue, inventory valuation, the useful lives of long-lived assets, and the valuation allowance on deferred tax assets. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. 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 The Company follows Accounting Standards Codification (“ASC”) 606, "Revenue from Contracts with Customers" (Topic 606). In accordance with Topic 606, the Company recognizes revenue using the following five-step approach: 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 or as the performance obligations are satisfied. The Company’s revenue comes from its single segment of wireless charging system solutions. The wireless charging system revenue consists of revenue from product development projects and production-level systems. During the three months ended March 31, 2022 and 2021, the Company recognized $ 215,961 and $ 145,065 , respectively, in revenue. The Company records revenue associated with product development projects that it enters into with certain customers. 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 the point in time at which the performance obligation is met. The payment associated with achieving the performance obligation is generally commensurate with the Company’s effort or the value of the deliverable and is nonrefundable. The Company records the expenses related to these product development projects in research and development expense, in the periods such expenses were incurred. The Company records revenue associated with the sale of production-level systems at the point in time at which control over the product is transferred to the customer. The Company records the expense related to the sales of these systems as cost of revenue during the period that the product is transferred to the customer. Inventory The Company follows ASC 330, Inventory (“Topic 330”) to account for its inventory, which includes finished goods ready for sale, work in process and raw materials, at the lower of cost or net realizable value. Net realizable value is calculated at the end of each reporting period and adjustment, if needed, is made. Research and Development Research and development expenses are charged to operations as incurred. For internally developed patents, all patent 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 $ 3,527,146 and $ 4,591,244 for the three months ended March 31, 2022 and 2021, 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 amortized over the vesting period of the award. The Company amortizes compensation costs on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the equity instrument issued. Under the ESPP, employees may purchase a limited number of shares of the Company’s common stock at a 15 % discount from the lower of the closing market prices measured on the first and last days of each half-year period. The Company recognizes stock-based compensation expense for the fair value of the purchase options, as measured on the grant date. 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 March 31, 2022, no liability for unrecognized tax benefits was required to be reported. The guidance from ASC 740, Income Taxes, also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the three months ended March 31, 2022 or 2021. 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 5,682,499 and 7,137,741 for the three months ended March 31, 2022 and 2021, respectively, because their inclusion would be anti-dilutive. Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. For the Three Months Ended March 31, 2022 2021 Warrants issued to private investors 3,284,789 3,284,789 Options to purchase common stock 825,006 550,985 RSUs 1,572,704 1,851,254 PSUs – 1,450,713 Total potentially dilutive securities 5,682,499 7,137,741 The table above includes 1,618,123 warrants expiring on October 6, 2022, with an exercise price of $ 23.00 and 1,666,666 warrants expiring on March 1, 2024, with an exercise price of $ 10.00 . Leases The Company determines if an arrangement is a lease at the inception of the arrangement. The Company applies the short-term lease recognition exemption and recognizes lease payments in profit or loss at lease commencement for facility or equipment leases that have a lease term of 12 months or less and do not include a purchase option whose exercise is reasonably certain. Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities. 9 Note 3 – Summary of Significant Accounting Policies, continued ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are measured and recorded at the later of the adoption date, January 1, 2019, or the service commencement date based on the present value of lease payments over the lease term. The Company uses the implicit interest rate when readily determinable; however, most leases do not establish an implicit rate, so the Company uses an estimate of the incremental borrowing rate based on the information available at the time of measurement. Lease expense for lease payments is recognized on a straight-line basis over the lease term. See Note 4 – Commitments and Contingencies, Operating Leases for further discussion of the Company’s operating leases. Recent Accounting Pronouncements In May 2021, the FASB issued ASU No. 2021-04, “ Earnings Per Share (Topic 260), Debt—Modifications and Own Equity (Subtopic 815-40Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Extinguishments (Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” ASU 2021-04 clarifies accounting for modifications or exchanges of equity-classified warrants. This standard is effective for annual reporting periods beginning after December 15, 2021 . The Company adopted this standard, and the adoption did not have a material impact on its financial statements . In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires business entities to disclose certain types of government assistance they receive in the notes to the financial statements. This standard is effective for annual reporting periods beginning after December 15, 2021 . The Company adopted this standard, and the adoption did not have a material impact on its financial statements. Management’s Evaluation of Subsequent Events The Company evaluates events that have occurred after the balance sheet date of March 31, 2022, through the date which the financial statements are available to be issued. Note 4 – Commitments and Contingencies Operating Leases 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 . 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 . 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 . On September 22, 2021, the Company signed a new Costa Mesa lease to lease a new, distinct office space in a different building with the same landlord. Per the lease, the lease commencement date is October 1, 2021 and the expiry date is September 30, 2023. The Company did not have control of the new office space until October 2021, at which time the Company recorded a new right-of-use lease asset of $ 104,563 and operating lease liability of $ 104,563 . The new Costa Mesa lease has an initial monthly lease payment of $ 4,369 starting October 1, 2021 and is subject to an annual escalation up to a maximum monthly lease payment of $ 4,522 . 10 Note 4 – Commitments and Contingencies, continued Operating Lease Commitments The Company follows ASC 842, Leases, (“Topic 842”) and recognizes the required right-of-use assets and operating lease liabilities on its balance sheet. The Company anticipates having future total lease payments of $ 470,120 during the period from the second quarter of 2022 to the third quarter of 2023. As of March 31, 2022, the Company has total operating lease right-of-use assets of $ 432,249 , current portion operating lease liabilities of $ 438,698 and long-term portion of operating lease liabilities of $ 27,012 . The weighted average remaining lease term is 0.7 years as of March 31, 2022. A reconciliation of undiscounted cash flows to lease liabilities recognized as of March 31, 2022 is as follows: Amount (unaudited) 2022 $ 429,425 2023 40,695 Total future lease payments 470,120 Present value discount (4% weighted average) ( 4,410 ) Total operating lease liabilities $ 465,710 Hosted Design Software Agreement On June 25, 2015, the Company entered into a three-year agreement to license electronic design automation software in a hosted environment. Pursuant to the agreement, under which services began July 2015, the Company is required to remit quarterly payments. In June 2021, the Company entered into its latest renewal of the agreement for an additional three years , and the Company is required to remit quarterly payments of approximately $ 233,000 through the second quarter of 2024. Litigations, Claims, and Assessments The Company is from time to time involved in various disputes, claims, liens and litigation matters arising in the normal course of business. While the outcome of these disputes, claims, liens and litigation matters cannot be predicted with certainty, after consulting with legal counsel, management does not believe that the outcome of these matters will have a material adverse effect on the Company's combined financial position, results of operations or cash flows. MBO Bonus Plan On March 15, 2018, the Company’s Board of Directors (“Board”), on the recommendation of the Board’s Compensation Committee (“Compensation Committee”), approved the Energous Corporation MBO Bonus Plan (“Bonus Plan”) for executive officers of the Company. To be eligible to receive a bonus under the Bonus Plan, an executive officer must be continuously employed throughout the applicable performance period, and in good standing, and achieve the performance objectives selected by the Compensation Committee. Under the Bonus Plan, the Compensation Committee is responsible for selecting the amounts of potential bonuses for executive officers, the performance metrics used to determine whether any such bonuses will be paid and determining whether those performance metrics have been achieved. During the three months ended March 31, 2022, the Company accrued $ 225,802 in expense under the Bonus Plan, which will be paid during the second quarter of 2022. During the three months ended March 31, 2021, the Company accrued $ 391,578 in expense under the Bonus Plan, which was paid during the second quarter of 2021. The expense under the Bonus Plan is recorded under operating expenses on the Company’s Condensed Statement of Operations within each executive’s department. Severance and Change in Control Agreement On March 15, 2018, the Compensation Committee approved a form of Severance and Change in Control Agreement (“Severance Agreement”) that the Company may enter into with executive officers (each, an “Executive”). 11 Note 4 – Commitments and Contingencies, continued Under the Severance Agreement, if an Executive is terminated in a qualifying change in control termination, the Company agrees to pay the Executive six to 12 months of that Executive’s monthly base salary. If Executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) the Company will pay the full amount of Executive’s premiums under the Company’s health, dental and vision plans, including coverage for the Executive’s eligible dependents, for the six to 12 month period following the Executive’s termination. Executive Employee Agreement – Cesar Johnston On December 9, 2021, the Company announced that Cesar Johnston had been appointed as the Company’s Chief Executive Officer. In connection with Mr. Johnston’s appointment as Chief Executive Officer, the Company and Mr. Johnston executed an offer letter dated as of December 6, 2021. Under the terms of his offer letter, Mr. Johnston will receive an annual base salary of $ 400,000 per year. Beginning in year 2022, he will be eligible to receive a discretionary annual bonus of up to 100 % of his base salary, at the recommendation of the Company’s Compensation Committee, with the approval of the Company’s Board. In add iti on , a s a n i nducemen t to accep t h is appo i n t men t a s Ch i e f Execu ti v e O ffi ce r, M r. J ohn st o n w ill r ece i ve , s ub j ec t to con ti nue d emp l oymen t, ( a ) a s pec i a l one -ti m e si gn - o n bonu s in t h e amoun t o f $ 120 , 000 , payab le in two equa l i n st a ll men ts o f $ 60 , 00 0 eac h o n t h e first pay r o ll da te in 202 2 an d t h e first pay r o ll da te a ft e r Decembe r 6 , 2022 , ( b ) a g r an t o f 150 , 00 0 RSUs to acqu ire s ha r e s o f t h e Company ’s commo n st ock , on e t h ird o f wh i c h w ill ve st o n Decembe r 6 , 202 2 an d t h e r ema i n i n g t w o t h ir d s o f wh i c h w ill ve st in e i gh t equa l i n st a ll men ts o f 12 , 50 0 eac h o n eac h qua rt e rly ann i ve rs a ry t he r ea ft e r an d ( c ) a g r an t o f a n op ti o n to pu r cha se 300,000 s ha r e s o f t h e Company ’s commo n st oc k a t a n exe r c ise p ri c e equa l to t h e f a ir ma r ke t va l u e o f t h e Company ’s commo n st oc k o n t h e g r an t da t e , ha lf o f wh i c h s ha ll ve st o n Decembe r 31 , 2023 , a qua rt e r o f wh i c h s ha ll ve st o n Decembe r 31 , 202 4 an d t h e r ema i nde r o f wh i c h s ha ll ve st o n Decembe r 31 , 2025 . Mr. Johnston will further be eligible for (a) an additional equity award in the amount of 287,000 PSUs to acquire shares of the Company’s common stock, which vest up to one third per year over a three year period commencing January 1, 2022 and ending December 31, 2024, upon the achievement of performance criteria to be mutually established by Mr. Johnston and the Compensation Committee, and (b) an additional equity award of up to 25,000 PSUs per calendar year for 2022, 2023 and 2024, respectively, based on outperformance of agreed upon goals per calendar year, as determined by the Compensation Committee with approval of the Board. As of March 31, 2022, the PSUs have no t yet been granted. In connec ti o n w ith M r. J ohn st on ’s appo i n t men t a s Ch i e f Execu ti v e O ffi ce r, t h e Compan y an d M r. J ohn st o n add iti ona lly en t e r e d i n to a n amende d and r e st a t e d s eve r anc e an d chang e in con tr o l ag r eemen t, da t e d a s o f Decembe r 6 , 2021 . I n t h e even t o f a termination t ha t is no t a change-in-control qualifying termination, Mr. Johnston is entitled to ( a ) a one -ti m e l um p s u m paymen t b y t h e Compan y in a n amoun t equa l to 1 8 mon t h s o f h is mon t h ly ba se s a l a ry p l u s a n amoun t equa l to 100 % o f h is t a r ge t bonu s p l u s, if ag r ee d b y t h e Compen s a ti o n Comm itt ee , a d is c r e ti ona ry bonu s f o r t h e yea r in wh i c h t h e termination occu rs, ( b ) an y ou tst and i n g unve st e d equ ity awa r d s he ld b y M r. J ohn st o n t ha t wou ld ve st in t h e nex t 1 8 mon t h s o f con ti nu i n g emp l oymen t ( o t he r t ha n an y equ ity awa r d s t ha t ve st upo n s a tisf ac ti o n o f pe rf o r manc e c rit e ri a ) w ill acce l e r a te an d becom e ve st e d an d ( c ) if M r. J ohn st o n ti me ly e l ec ts con ti nue d cove r ag e unde r COBRA , t h e Compan y o r its s ucce ss o r w ill pa y t h e f u ll amoun t o f M r. J ohn st on ’s COBR A p r em i um s o n h is beha lf f o r 1 8 mon t h s. Mr. Johnston’s agreement additionally provides that, in the event of a change-in-control qualifying termination, Mr. Johnston is entitled to (a) a one-time lump sum payment by the Company in an amount equal to 18 months of his monthly base salary plus an amount equal to 150 % of his target bonus plus a prorated bonus for the year in which the termination occurs, (b) any outstanding unvested equity awards held by Mr. Johnston (including any equity awards that vest upon satisfaction of performance criteria) will accelerate in full and become vested and (c) if Mr. Johnston timely elects continued coverage under COBRA, the Company or its successor will pay the full amount of Mr. Johnston’s COBRA premiums on his behalf for 18 months. Mr. Johnston is also eligible to receive all customary and usual benefits generally available to senior executives of the Company. 12 Note 4 – Commitments and Contingencies, continued Executive Transition Agreement – Stephen Rizzone On April 3, 2015, the Company entered into an Amended and Restated Executive Employment Agreement with Stephen R. Rizzone, the Company’s former President and Chief Executive Officer (“Employment Agreement”). The Employment Agreement effective as of January 1, 2015 , had an initial term of four years and automatically renewed each year after the initial term. The Employment Agreement provided for an annual base salary of $ 365,000 , and Mr. Rizzone was eligible to receive quarterly cash bonuses from the MBO Bonus Plan with a total target amount equal to 100 % of his base salary based upon achievement of performance-based objectives established by the Board. On July 9, 2021, the Company announced that Stephen R. Rizzone had retired from his position as the Company’s President and Chief Executive Officer and as a member of the Board. In connection with Mr. Rizzone’s retirement, the Company and Mr. Rizzone entered into an Executive Transition Agreement (the “Separation Agreement”), providing for continued employment through August 31, 2021. Upon his termination of employment, the Separation Agreement provides severance payments and benefits to Mr. Rizzone consistent with the terms of his existing employment agreement with the Company, including without limitation: compensation-based payments of $ 1,460,000 in the aggregate, payable under a certain payment scheme as set forth therein, an additional lump sum cash payment of $ 2,000,000 , a pro-rated bonus payment for the two months of employment during the current quarterly bonus period payable at the same time bonus payments are made to other executives of the Company, settlement of deferred vested RSUs and an extension of the exercise periods of all stock options held by Mr. Rizzone until the one year anniversary of his termination date, and additional benefits related to Mr. Rizzone’s medical insurance. In addition, the Company agreed to pay-off all amounts owed under a lease agreement relating to a Company Car and that Mr. Rizzone would receive the title to the vehicle. All compensation under the Separation Agreement has been or will be subject to applicable withholding. As of March 31, 2022, the Company had unpaid accrued severance expense of $ 909,873 which is expected to be paid through August 31, 2023. Strategic Alliance Agreement In November 2016, the Company and Dialog Semiconductor plc (“Dialog”), a related party (see Note 7—Related Party Transactions), entered into a Strategic Alliance Agreement (“Alliance Agreement”) for the manufacture, distribution and commercialization of products incorporating the Company’s wire-free charging technology (“Licensed Products”). Pursuant to the terms of the Alliance Agreement, the Company agreed to engage Dialog as the exclusive supplier of the Licensed Products for specified fields of use, subject to certain exceptions (the “Company Exclusivity Requirement”). Dialog agreed to not distribute, sell or work with any third party to develop any competing products without the Company’s approval. In addition, both parties agreed on a revenue sharing arrangement and will collaborate on the commercialization of Licensed Products based on a mutually-agreed upon plan. Each party will retain all of its intellectual property. The Alliance Agreement has an initial term of seven years , with automatic renewal annually thereafter unless terminated by either party upon 180 days’ prior written notice. The Company may terminate the Alliance Agreement at any time after the third anniversary of the Alliance Agreement upon 180 days’ prior written notice to Dialog, or if Dialog breaches certain exclusivity obligations. Dialog may terminate the Alliance Agreement if sales of Licensed Products do not meet specified targets. The Company Exclusivity Requirement had a termination date of the earlier of January 1, 2021 or the occurrence of certain events relating to the Company’s pre-existing exclusivity obligations. The Company Exclusivity Requirement renewed automatically on an annual basis unless the Company and Dialog agree to terminate the requirement. On September 20, 2021, the Company was notified by Dialog, recently acquired by Renesas Electronics Corporation, that it was terminating the Alliance Agreement between the Company and Dialog. 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. 13 Note 5 – Stockholders’ Equity Authorized Capital The holders of the Company’s common stock are entitled to one vote per share. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board out of legally available funds. 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. Financing On August 9, 2018, the Company filed a shelf registration statement on Form S-3 with the SEC, which became effective on August 17, 2018. This shelf registration statement allows the Company to sell, from time to time, any combination of debt or equity securities described in the registration statement up to aggregate proceeds of $ 75,000,000 . 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) 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. This shelf registration statement has expired and no additional shares will be sold thereunder. On September 15, 2020, the Company filed a shelf registration statement on Form S-3 with the SEC, which became effective on September 24, 2020, and contains two prospectuses: a base prospectus, which covers the offering, issuance and sale by the Company of up to $ 75,000,000 of its common stock, preferred stock, debt securities, warrants to purchase our common stock, preferred stock or debt securities, subscription rights to purchase its common stock, preferred stock or debt securities and/or units consisting of some or all of these securities; and an at-the-market sales agreement prospectus supplement covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $ 40,000,000 of its common stock that may be issued and sold under that certain sales agreement (the “ATM Program”). The $40,000,000 of common stock to be offered, issued and sold under the sales agreement prospectus is included in the $75,000,000 of securities that may be offered, issued and sold by the Company under the base prospectus. Pursuant to this shelf registration statement, the Company sold shares which raised net proceeds of $ 38,832,711 (net of $ 1,167,289 in issuance costs) during the third and fourth quarters of 2020 under the ATM Program. On October 4, 2021, the Company filed a prospectus supplement covering the offering, issuance and sale of up to an additional $ 35,000,000 of shares of the Company’s common stock pursuant to the ATM Program. The Company raised net proceeds of $ 27,043,751 (net of $ 868,122 in issuance costs), during the fourth quarter of 2021 under the ATM Program. As of March 31, 2022, the Company has $ 7,088,127 remaining on this shelf registration statement. On November 15, 2021, the Company filed a shelf registration statement on Form S-3 with the SEC, which became effective on December 16, 2021. This shelf registration statement allows the Company to sell, from time to time, any combination of debt or equity securities described in the registration statement up to aggregate proceeds of $ 100,000,000 . Common Stock Outstanding Our outstanding shares of common stock typically include shares that are deemed delivered under US GAAP. Shares that are deemed delivered currently include shares that have vested, but have not yet been delivered, under tax-deferred equity awards, as well as shares purchased under the ESPP where actual transfer of shares normally occurs a few days after the completion of the purchase periods. There are no voting rights for shares that are deemed delivered under US GAAP until the actual delivery of shares takes place. There are currently 200,000,000 shares of common stock authorized for issuance. 14 Note 6 – Stock-Based Compensation Equity Incentive Plans 2013 Equity Incentive Plan Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the 2013 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 1,500,000 shares, bringing to 8,785,967 the total number of shares approved for issuance under that plan. As of March 31, 2022, 1,362,773 shares of common stock remain eligible to be issued through equity-based instruments under the 2013 Equity Incentive Plan. 2014 Non-Employee Equity Compensation Plan Effective on May 26, 2020, the Company’s stockholders approved the amendment and restatement of the 2014 Non-employee Equity Compensation Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 800,000 shares, bringing to 1,650,000 the total number of shares approved for issuance under that plan. As of March 31, 2022, 741,326 shares of common stock remain eligible to be issued through equity-based instruments under the 2014 Non-Employee Equity Compensation Plan. 2015 Performance Share Unit Plan Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the 2015 Performance Share Unit Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 1,700,000 shares, bringing to 5,110,104 the total number of shares approved for issuance under that plan. As of March 31, 2022, 2,411,013 shares of common stock remain eligible to be issued through equity-based instruments under the 2015 Performance Share Unit Plan. 2017 Equity Inducement Plan 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; (b) are being rehired as an employee following a bona fide period of interruption of employment with the Company or any subsidiary; or (c) will become an employee of the Company or any subsidiary in connection with a merger or acquisition. As of March 31, 2022, 130,426 shares of common stock remain available to be issued through equity-based instruments under the 2017 Equity Inducement Plan. Employee Stock Purchase Plan 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 the approval by the stockholders. On May 21, 2015, the Company’s stockholders approved the ESPP. Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the ESPP to increase the number of shares reserved for issuance through equity-based instruments thereunder by 700,000 shares, bring to 1,550,000 the total number of shares approved for issuance under that plan. Under the ESPP, employees may designate an amount not less than 1 % but not more than 10 % of their annual compensation for the purchase of Company shares. No more than 7,500 shares may be purchased by an employee under the ESPP during an offering period. An offering period shall be six months in duration commencing on or about January 1 and July 1 of each year. The exercise price of the option will be the lesser of 85 % of the fair market of the common stock on the first business day of the offering period and 85 % of the fair market value of the common stock on the applicable exercise date. As of March 31, 2022, 547,548 shares of common stock remain eligible to be issued under the ESPP. Employees contributed $ 104,217 through payroll withholdings to the ESPP as of March 31, 2022 for the current offering period that will end on June 30, 2022 and shares will be deemed delivered on that date. 15 Note 6 – Stock-Based Compensation, continued Stock Option Activity During the three months ended March 31, 2022, the Board granted our Chief Executive Officer 300,000 stock options under the 2013 Equity Incentive Plan at an exercise price of $ 1.27 per share with half of the options vesting on the second anniversary of the vesting start date and a quarter of the options vesting on each of the two following anniversaries . The Company estimated the fair value of stock options granted during the three months ended March 31, 2022 using the Black-Scholes option pricing model. The fair values of stock options granted were estimated using the following assumptions: Three Months Ended March 31, 2022 Stock price $ 1.27 Dividend yield 0 % Expected volatility 108 % Risk-free interest rate 1.92 % Expected life 5.6 years The following is a summary of the Company’s stock option activity during the three months ended March 31, 2022: Number of Options Weighted Average Exercise Price Weighted Average Remaining Life In Years Intrinsic Value Outstanding at January 1, 2022 525,006 $ 5.77 0.7 $ – Granted 300,000 1.27 – – Exercised – – – – Forfeited – – – – Outstanding at March 31, 2022 825,006 $ 4.13 3.8 $ – Exercisable at January 1, 2022 525,006 $ 5.77 0.7 $ – Vested – – – – Exercised – – – – Forfeited – – – – Exercisable at March 31, 2022 525,006 $ 5.77 0.4 $ – As of March 31, 2022, the unamortized fair value of options was $ 298,147 . The unamortized amount will be expensed over a weighted average period of 3.2 years. Restricted Stock Units (“RSUs”) During the three months ended March 31, 2022, the Board granted various employees RSUs covering 152,500 shares of common stock under the 2013 Equity Incentive Plan. The awards vest over terms ranging from three to four years . During the three months ended March 31, 2022, the Compensation Committee and the Board granted various non-employees RSUs covering 131,096 shares of common stock under the 2014 Non-employee Equity Compensation Plan. The awards vest on the one year anniversary of the grant date. During the three months ended March 31, 2022, the Board granted an employee RSUs covering 10,000 shares of common stock under the 2017 Equity Inducement Plan. The award vests over a term of four years . 16 Note 6 – Stock-Based Compensation, continued As of March 31, 2022, t h e un am or ti ze d fair v a l u e o f t h e R SUs w a s $ 3,155,703 . T h e un am or ti ze d am oun t w il l b e e xp e n s e d ov e r a weighted average p e r i o d o f 1.7 y ea r s . A summary of the activity related to RSUs for the three months ended March 31, 2022 is presented below: Total Weighted Average Grant Date Fair Value Outstanding at January 1, 2022 1,709,273 $ 3.72 RSUs granted 293,596 1.29 RSUs forfeited ( 42,342 ) 2.45 RSUs vested ( 387,823 ) 5.97 Outstanding at March 31, 2022 1,572,704 $ 2.75 Employee Stock Purchase Plan (“ESPP”) The current offering period under the ESPP started on January 1, 2022 and will conclude on June 30, 2022. During the year ended December 31, 2021, there were two offering periods. The first offering period began on January 1, 2021 and concluded on June 30, 2021. The second offering period began on July 1, 2021 and concluded on December 31, 2021. The weighted-average grant-date fair value of the purchase option for each designated share purchased under this plan was approximately $ 0.40 and $ 0.75 for the three months ended March 31, 2022 and 2021, respectively, which represents the fair value of the option, consisting of three main components: (i) the value of the discount on the enrollment date, (ii) the proportionate value of the call option for 85 % of the stock and (iii) the proportionate value of the put option for 15 % of the stock. The Company recognized compensation expense for the ESPP of $ 40,973 and $ 57,316 for the three months ended March 31, 2022 and 2021, respectively. The Company estimated the fair value of ESPP purchase options granted during the three months ended March 31, 2022 and 2021 using the Black-Scholes option pricing model. The fair values of ESPP purchase options granted were estimated using the following assumptions: Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Stock price $ 1.25 $ 1.80 Dividend yield 0 % 0 % Expected volatility 61 % 95 % Risk-free interest rate 0.19 % 0.09 % Expected life 6 months 6 months Stock-Based Compensation Expense The following tables summarize total stock-based compensation costs recognized for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 Stock options $ 10,313 $ – RSUs 745,620 2,088,910 ESPP 40,973 57,316 Total $ 796,906 $ 2,146,226 17 Note 6 – Stock-Based Compensation, continued The total amount of stock-based compensation was reflected within the statements of operations as: Three Months Ended March 31, 2022 2021 Research and development $ 353,043 $ 1,149,277 Sales and marketing 180,377 448,947 General and administrative 263,486 548,002 Total $ 796,906 $ 2,146,226 Note 7 – Related Party Transactions In November 2016, the Company and Dialog entered into the Alliance Agreement for the manufacture, distribution and commercialization of products incorporating the Company’s wire-free charging technology (See Note 4 – Commitments and Contingencies, Strategic Alliance Agreement ). On November 7, 2016 and June 28, 2017, the Company and Dialog entered into securities purchase agreements under which Dialog acquired a total of 1,739,691 shares and received warrants to purchase up to 1,417,565 shares. As of March 31, 2022, none of the warrants remain outstanding. As of March 31, 2022, Dialog owns approximately 2.3 % of the Company’s outstanding common shares. The Company did not record any revenue or expense related to Dialog during the three months ended March 31, 2022 and 2021. On September 20, 2021, the Company was notified by Dialog, recently acquired by Renesas Electronics Corporation, that it was terminating the Alliance Agreement between the Company and Dialog. Note 8 – Customer Concentrations Two customers accounted for approximately 53 % of the Company’s revenue for the three months ended March 31, 2022, and one customer accounted for approximately 69 % of the Company’s revenue for the three months ended March 31, 2021. Two customers accounted for approximately 63 % of the accounts receivable balance as of March 31, 2022. Four customers accounted for approximately 68 % of the accounts receivable balance as of December 31, 2021. 18