What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-30 compared with 2022-03-23 · 162 added, 141 removed, 465 unchanged (39% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of Energous Corporation (the “Company”) as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying balance sheets of Energous Corporation (the “Company”) as of December 31, 2022 and 2021, the related statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

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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:

Critical audit matters are matters arising from the current period audit of the financial statements that are 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 $27,043,751.

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.

We determined that there are no critical audit matters.

/s/ Marcum llp

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Operating expenses:

Cost of revenue

Research and development

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Severance expense

Cost of services revenue

Total operating expenses

Loss from operations

Other income (expense):

Other income:

Interest income

Loss on disposal of property and equipment

Total other income

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( 294,972,746

Stock-based compensation - stock options

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

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Issuance of shares for RSUs

Issance of shares for PSUs

Shares purchased from contributions to the ESPP

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Stock-based compensation - stock options

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

Stock-based compensation - employee stock purchase plan

Stock-based compensation - performance share units (“PSUs”)

Stock-based compensation - RSUs

Stock-based compensation - ESPP

Stock-based compensation - PSUs

Issuance of shares for RSUs

Issuance of shares for PSUs

Issance of shares for PSUs

Shares purchased from contributions to the ESPP

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

Issuance of shares in an ATM placement, net

of $ 73,403 in issuance costs

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Bad debt expense

Loss on disposal of property and equipment

Changes in operating assets and liabilities:

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Accrued expenses

Accrued severance expense

Accrued severance

Operating lease liabilities

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Net cash used in operating activities

Cash flows used in investing activities:

Cash flows from investing activities:

Purchases of property and equipment

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Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents - beginning

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Supplemental disclosure of non-cash financing activities:

Increase in operating lease right-of-use assets and operating lease liabilities

Common stock issued for RSUs

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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 medial devices, tracking devices, hearables, wearables, consumer electronics and public safety applications.

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.

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Net cash used in operating activities was $ 23,636,747 and $ 28,720,389 for the years ended December 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 employee stock purchase plan (“ESPP”), along with payments received from customers.

The Company is currently meeting its liquidity requirements through the proceeds of securities offerings that raised net proceeds of $ 27,043,751 during 2021 and $ 744,787 during 2022, proceeds from contributions to the employee stock purchase plan (“ESPP”), along with payments received from customers.

As of December 31, 2022, the Company had cash on hand of $ 26,287,293 .

The Company expects that cash on hand as of December 31, 2021, together with anticipated revenues, will be sufficient to fund the Company’s operations into March 2023.

The Company expects that cash on hand as of December 31, 2022, together with proceeds from the underwritten offering conducted during the first quarter of 2023 (See Note 12 – Subsequent Events) and anticipated revenues, will be sufficient to fund the Company’s operations into March 2024.

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

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Securities and Exchange Commission (the “SEC”).

Note 3 – Summary of Significant Accounting Policies, continued

Use of Estimates

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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.

The Company’s significant estimates and assumptions include the valuation of stock-based compensation awards, recognition of revenue, the lower of cost or net realizable value of inventory and valuation of deferred tax assets.

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

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Revenue Recognition

The Company follows Accounting Standards Update No.

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

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

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

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Recognize revenue when the performance obligations are met or delivered.

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

The Company also provided contract services revenue for Dialog in 2020.

During the years ended December 31, 2021 and 2020, the Company recognized $ 756,793 and $ 197,350 in product development projects revenue, respectively.

During the years ended December 31, 2021 and 2020, the Company recognized $ 0 and $ 130,000 in contract services revenue.

The Company’s revenue consists of 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 years ended December 31, 2022 and 2021, the Company recognized $ 851,321 and $ 756,793 in revenue, respectively.

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

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

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

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

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

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

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

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

Revenue Recognition

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.

Note 3 – Summary of Significant Accounting Policies, continued

The Company follows ASC Topic 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

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Total potentially dilutive securities

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

The table above includes 1,666,666 warrants expiring March 1, 2024, with an exercise price of $ 10.00 .

During the year ended December 31, 2022, 1,618,123 warrants with an exercise price of $ 23.00 expired.

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

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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.

Operating lease ROU assets and liabilities are measured and recorded at 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;

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See Note 6 – 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 Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” ASU 2021-04 clarifies accounting for modifications or exchanges of equity-classified warrants.

This standard is effective for annual reporting periods beginning after December 15, 2021.

The Company is currently evaluating the impact the planned adoption of this standard will have 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 does not believe the adoption of this standard will have a material impact on its financial statements.

Management’s Evaluation of Subsequent Events

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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.

Note 4 – Property and Equipment , continued

The Company disposed of $ 166,192 and $ 130,341 in property and equipment during the years ended December 31, 2022 and 2021, respectively.

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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 .

Note 6 – Commitments and Contingencies, continued

Operating Leases, continued

On May 20, 2022, the Company signed a lease amendment to the existing lease of its office space at its corporate headquarters in San Jose, California, extending the term of the lease for an additional three years .

Upon signing the lease amendment, the Company recorded a new ROU lease asset of $ 2,071,336 and operating lease liability of $ 2,071,336 , using a present value discount rate of 3.0 %.

Upon expiration of the original lease on September 30, 2022, the new monthly lease payment starting October 1, 2022 was $ 58,903 , subject to annual escalations up to a maximum monthly lease payment of $ 62,490 .

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 .

Upon expiration of the original lease on September 30, 2019, the new monthly lease payment starting October 1, 2019 was $ 9,773 , 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 stated commencement date was October 1, 2021 and concludes on September 30, 2023, and the Company did not take control of the new office space until October 2021, at which time the Company recorded a new right-of-use asset of $ 104,563 and operating lease liability of $ 104,563 .

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

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

The new Costa Mesa lease had an initial monthly lease payment of $ 4,369 which started on October 1, 2021, subject to an annual escalation up to a maximum monthly lease payment of $ 4,522 .

Operating Lease Commitments

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

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

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

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

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

The Company’s adoption of the new standard resulted in the recognition of right-of-use assets of $ 414,426 and operating lease liabilities of $ 485,747 , with no material cumulative effect adjustment to equity as of the date of adoption.

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

The Company anticipates having future total lease payments of $ 2,048,733 during the period from the first quarter of 2023 to the third quarter of 2025.

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The weighted average remaining lease term is 2.7 years as of December 31, 2022.

Note 6 – Commitments and Contingencies, continued

Operating Leases, continued

Operating Lease Commitments , continued

The future minimum lease payments for leased locations are as follows:

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Hosted Design Solution 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 the amount of approximately $ 101,000 with the last payment due March 30, 2018.

On December 18, 2015, the agreement was amended to redefine the hardware and software configuration and the quarterly payments increased to approximately $ 198,000 .

In July 2018, the Company renewed the agreement for an additional three years , and the Company is required to remit quarterly payments of approximately $ 218,000 .

In June 2021, the Company renewed the agreement for an additional three years , and the Company is required to remit quarterly payments of approximately $ 233,000 through the second quarter of 2024.

Note 6 – Commitments and Contingencies, continued

In June 2021, the Company entered into an electronic design automation software in a hosted environment license agreement with a term of three years under which the Company is required to remit quarterly payments of approximately $ 233,000 through the second quarter of 2024.

Litigations, Claims, and Assessments

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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.

To be eligible to receive a bonus under the Bonus Plan, an executive officer must be continuously employed throughout the applicable performance period, 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.

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Severance and Change in Control Agreement

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

Note 6 – Commitments and Contingencies , continued

Severance and Change in Control Agreement, continued

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

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.

Note 6 – Commitments and Contingencies, continued

Executive Employee Agreement – Cesar Johnston

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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 of Directors.

Beginning in year 2022, he is 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 of Directors.

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 r e stri c t e d st oc k un its to acqu ire s ha r e s o f t h e Company ’s commo n st ock , on e t h ird o f wh i c h w ill ve st o n Decembe r 6 , 202 2 an d t h e r ema i n i n g t w o t h ir d s o f wh i c h w ill ve st in e i gh t equa l i n st a ll men ts o f 12 , 50 0 eac h o n eac h qua rt e rly ann i ve rs a ry t he r ea ft e r an d ( c ) a g r an t o f a n op ti o n to pu r cha se 300,000 s ha r e s o f t h e Company ’s commo n st oc k a t a n exe r c ise p ri c e equa l to t h e f a ir ma r ke t va l u e o f t h e Company ’s commo n st oc k o n t h e g r an t da t e , ha lf o f wh i c h s ha ll ve st o n Decembe r 31 , 2023 , a qua rt e r o f wh i c h s ha ll ve st o n Decembe r 31 , 202 4 an d t h e r ema i nde r o f wh i c h s ha ll ve st o n Decembe r 31 , 2025 .

Johnston will further be eligible for (a) an additional equity award in the amount of 287,000 performance share units to acquire shares of the Company’s common stock, which will 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 performance share units per calendar year for 2022, 2023 and 2024, respectively, based on outperformance per calendar year, as determined by the Compensation Committee with approval of the Board of Directors.

J ohn st o n received , 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 r e stri c t e d st oc k un its 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 vested 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 .

Also pursuant to the terms of his offer letter, Mr.

Johnston is eligible for (a) an additional equity award in the amount of 287,000 PSUs to acquire shares of the Company’s common stock, to vest at various amounts to be agreed upon by the Board 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 each of 2022, 2023 and 2024, based on outperformance of agreed upon goals per calendar year, as determined by the Compensation Committee with approval of the Board.

On July 20, 2022, the Board approved, by unanimous written consent, the grant to Mr.

Johnston of up to 287,000 PSUs pursuant to the terms of Mr.

Johnston’s offer letter.

The 287,000 PSUs that have been approved shall vest as follows:

(a) up to 187,000 PSU shares shall vest on December 31, 2022, subject to Mr.

Johnston’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by Mr.

Johnston of certain performance metrics previously determined by the Compensation Committee and approved by the Board, and (b) up to an additional 50,000 PSU shares shall vest on each of December 31, 2023 and December 31, 2024, subject to Mr.

Johnston’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by Mr.

Johnston of certain performance metrics to be recommended by the Compensation Committee and approved by the Board at a subsequent date.

As of December 31, 2022, the Company accrued $ 360,000 in bonus expense for Mr.

Johnston’s annual discretionary bonus and recorded $ 120,000 in bonus expense for Mr.

Johnston’s one-time sign-on bonus.

As of December 31, 2022, only 187,000 PSUs have approved performance criteria.

As of December 31, 2022, 135,575 PSU shares were earned and deemed delivered on that date.

As of December 31, 2022, the Board has not approved any additional equity awards based on outperformance of agreed upon goals.

As of December 31, 2022, the Board has not approved the goals for the additional 50,000 PSU shares for vesting on each of December 31, 2023 and 2024;

therefore, these PSUs have not been considered granted.

Note 6 – Commitments and Contingencies, continued

Executive Employee Agreement – Cesar Johnston, continued

In connec ti o n w ith M r.

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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.

The Johnston A&R CIC Agreement additionally provides that, in the event of a change-in-control qualifying termination, 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.

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

Note 6 – Commitments and Contingencies, continued

Executive Transition Agreement – Stephen Rizzone

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

During the year ended December 31, 2021, the Company recognized $ 4,017,172 in severance expense associated with the separation agreement, including $ 284,994 in additional stock-based compensation as a result of the extension of the exercise periods on the stock options.

As of December 31, 2021, the Company had unpaid accrued severance expense of $ 975,439 .

During the year ended December 31, 2021, the Company recorded $ 4,017,172 in severance expense associated with the separation agreement, including $ 284,994 in additional stock-based compensation as a result of the extension of the exercise periods on the stock options.

As of December 31, 2022, the Company had unpaid accrued severance expense of $ 411,607 which is expected to be paid by August 2023.

Note 6 – Commitments and Contingencies, continued

Executive Transition Agreement – Neeraj Sahejpal

On April 29, 2022, the Company announced the departure of Neeraj Sahejpal, former Senior Vice President of Marketing and Business Development, effective April 30, 2022.

Pursuant to the terms of Mr.

Sahejpal’s severance and change of control agreement with the Company, Mr.

Sahejpal received payments and benefits including compensation equal to 12 months of Mr.

Sahejpal’s then-current salary of $ 261,250 , 12 months of maximum potential bonus of $ 261,250 , and 12 months of COBRA reimbursements.

In addition, all RSUs held by Mr.

Sahejpal that were due to vest in the 12 months after his departure, totaling RSUs covering 85,943 shares, were accelerated.

The Company recorded $ 798,391 in total severance expense pertaining to Mr.

Sahejpal’s departure for the year ended December 31, 2022, including $ 252,609 in stock-based compensation as a result of accelerated vesting of RSUs.

As of December 31, 2022, the Company had unpaid accrued severance expense of $ 4,909 pertaining to Mr.

Sahejpal’s agreement which is expected to be paid through April 30, 2023.

Strategic Alliance Agreement

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Each party will retain all of its intellectual property.

The Alliance Agreement has an initial term of seven years and will automatically renew annually thereafter unless terminated by either party upon 180 days’ prior written notice.

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

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

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

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

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.

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.

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

Dialog could terminate the Alliance Agreement if sales of Licensed Products did 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, then recently acquired by Renesas Electronics Corporation, that it was terminating the Alliance Agreement.

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

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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.

Note 7 – Stockholders’ Equity, continued

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

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.

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

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.

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 the At Market Issuance Sales Agreement, as amended, between the Company, B.

Riley Securities, Inc., Roth Capital Partners LLC and Ladenburg Thalmann & Co.

(the “ATM Program”).

The $40,000,000 of common stock to be offered, issued and sold under the ATM Program 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 2021 under the ATM Program.

During 2022, the Company raised an additional $ 744,787 (net of $ 73,403 in issuance costs).

As of December 31, 2022, the Company has $ 6,269,937 of common stock registered for sale under the ATM Program.

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.

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Common Stock Outstanding

Our outstanding common shares typically include shares that are deemed delivered under U.S.

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

Our outstanding shares of common stock typically include shares that are deemed delivered under U.S.

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 U.S.

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.

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

Note 8 – Stock Based Compensation

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As of December 31, 2022, 2,275,438 shares of common stock remain eligible to be issued through equity-based instruments under the 2015 Performance Share Unit Plan.

Note 8 – Stock Based Compensation, continued

Equity Incentive Plans, continued

2017 Equity Inducement Plan

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

On December 28, 2017, the Board approved the 2017 Equity Inducement Plan (“2017 Plan”).

Under the 2017 Plan, the Board reserved 600,000 shares for the grant of RSUs.

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or (c) will become an employee of the Company or any subsidiary in connection with a merger or acquisition.

As of December 31, 2021, 133,551 shares of common stock remain available to be issued through equity-based instruments under the 2017 Equity Inducement Plan.

On July 20, 2022, the Board increased the number of shares of common stock reserved and available for issuance under the 2017 Plan by 2,000,000 shares to a total of 2,600,000 shares approved.

As of December 31, 2022, 1,566,170 shares of common stock remain available to be issued through equity-based instruments under the 2017 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 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 Employee Stock Purchase Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 700,000 shares, bringing to 1,550,000 the total number of shares approved for issuance under that plan.

Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the ESPP to increase the number of shares reserved for issuance through equity-based instruments thereunder by 700,000 shares, bringing 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.

Note 8 – Stock Based Compensation, continued

Equity Incentive Plans, continued

Employee Stock Purchase Plan , continued

As of December 31, 2022, 201,619 shares of common stock remain eligible to be issued under the ESPP.

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Stock Option Award Activity

During the year ended December 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 next two anniversaries of the vesting start date.

No options were granted during the years ended December 31, 2022 and 2021.

The Company estimated the fair value of stock options granted during 2022 using the Black-Scholes option pricing model.

The fair values of stock options granted during 2022 were estimated using the following assumptions:

December 31, 2022

Dividend yield

Expected volatility

Risk-free interest rate

Expected life

The following is a summary of the Company’s stock option activity during the year ended December 31, 2022:

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As of December 31, 2022, the unamortized value of options was $ 233,689 .

The unamortized amount will be expensed over a weighted average period of 2.6 years.

The aggregate intrinsic value of options exercised was $ 0 for the years ended December 31, 2022 and 2021.

No options were granted during the years ended December 31, 2021 and 2020.

Note 8 – Stock Based Compensation, continued

Restricted Stock Units (“RSUs”)

During the year ended December 31, 2021, the Compensation Committee of the Board (“Compensation Committee”) granted various employees RSUs under which the holders have the right to receive an aggregate 1,849,985 shares of common stock.

During the year ended December 31, 2022, the Compensation Committee granted various employees RSUs under which the holders have the right to receive an aggregate of 1,038,700 shares of common stock.

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

Note 8 – Stock Based Compensation, continued

Restricted Stock Units (“RSUs”), continued

During the year ended December 31, 2022, the Compensation Committee granted various directors and consultants RSUs under which the holders have the right to receive an aggregate 290,055 shares of common stock.

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

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

The awards granted vest over terms from one year to two years .

During the year ended December 31, 2022, the Compensation Committee granted employees RSUs under which the holders have the right to receive 608,500 shares of common stock.

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Date Fair Value

Outstanding at January 1, 2021

Unvested at January 1, 2022

RSUs forfeited

Outstanding at December 31, 2021

Unvested at December 31, 2022

Performance Share Units (“PSUs”)

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

During the year ended December 31, 2021, the Compensation Committee granted various employees PSUs under which the holders have the right to receive an aggregate 1,465,713 shares of common stock.

These awards were granted under the 2015 Performance Share Unit Plan.

Compensation expense amortization for all PSU awards was $ 5,831,928 and $( 88,348 ) for the years ended December 31, 2021 and 2020, respectively.

On July 20, 2022, the Board granted the Company’s Chief Executive Officer, Cesar Johnston, up to 287,000 PSUs under the Company’s 2015 Performance Share Unit Plan pursuant to the terms of Mr.

Johnston’s offer letter with the Company (See Note 4 – Commitments and Contingencies).

The up to 287,000 PSUs that have been approved shall vest as follows:

(a) up to 187,000 PSU shares shall vest on December 31, 2022, subject to Mr.

Johnston’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by Mr.

Johnston of certain performance metrics to be recommended by the Compensation Committee and approved by the Board at a subsequent date.

As of December 31, 2022, only 187,000 PSUs have approved performance criteria.

As of December 31, 2022, 135,575 PSUs have been achieved and vested and were deemed delivered on that date.

As of December 31,2022, the performance criteria for the additional 100,000 PSUs have not been approved by the Board.

Note 8 – Stock Based Compensation, continued

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Date Fair Value

Outstanding at January 1, 2021

Unvested at January 1, 2022

PSUs forfeited

Outstanding at December 31, 2021

Unvested at December 31, 2022

Employee Stock Purchase Plan (“ESPP”)

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The second offering period started on July 1 of each year and concluded on December 31 of each year.

The weighted-average grant-date fair value of the purchase option for each designated share purchased under this plan was approximately $ 1.10 and $ 1.18 during the years ended December 31, 2021 and 2020, respectively, which represents the fair value of the option, consisting of three main components:

The weighted-average grant-date fair value of the purchase option for each designated share purchased under the ESPP was approximately $ 0.37 and $ 1.10 during the years ended December 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.

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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.

As of December 31, 2021 and 2020, deferred tax assets consisted principally of net operating loss and tax credit carryforwards, research and development costs and stock-based compensation, and such deferred tax assets were fully reserved.

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, 2021, the Company has recorded a full valuation allowance.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period.

Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance as of December 31, 2022.

Note 9 – Income Taxes, continued

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Executive compensation

True-up of state deferred taxes

Change in effective tax rate

Research and development tax credit, federal

Research and development tax credit, state

Increase in valuation allowance, federal

Increase in valuation allowance, state

Research and development tax credits

Increase in valuation allowance

Effective income tax rate

Note 10 – Related Party Transactions

In November 2016, the Company and Dialog entered into an alliance agreement for the manufacture, distribution and commercialization of products incorporating the Company’s wire-free charging technology (See Note 6 – Commitments and Contingencies, Strategic Alliance Agreement ).

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

1 unchanged sentence

Dialog presently owns approximately 2.2 % of the Company’s outstanding common shares.

The Company recorded $ 0 in royalty revenue for the each of the years ended December 31, 2021 and 2020, pursuant to the Strategic Alliance Agreement.

Additionally, the Company recorded $ 0 and $ 130,000 in contract services revenue during the years ended December 31, 2021 and 2020, respectively.

The Company also recorded related expenses of $ 0 and $ 126,539 in cost of services revenue during the years ended December 31, 2021 and 2020, respectively.

Additionally, the Company incurred $ 408,000 and $ 0 in chip development expense from Dialog during the years ended December 31, 2021 and 2020, respectively.

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

The Company incurred $ 0 and $ 408,000 in chip development expense from Dialog during the years ended December 31, 2022 and 2021, respectively.

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

Note 11 – Customer Concentration

Three customers accounted for approximately 42 % of the Company’s revenue for the year ended December 31, 2021 and three customers accounted for approximately 66 % of the Company’s revenue for the year ended December 31, 2020.

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

One customer accounted for approximately 50 % of the Company’s revenue for the year ended December 31, 2022 and three customers accounted for approximately 42 % of the Company’s revenue for the year ended December 31, 2021.

One customer accounted for approximately 87 % of the Company’s accounts receivable balance as of December 31, 2022.

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

Note 12 – Subsequent Events

During the period from January 1, 2023 through March 1, 2023, the Company raised net proceeds of $ 2,674,683 (net of $ 68,651 in issuance costs) under its ATM Program.

As of March 1, 2023, the Company had $ 3,526,605 remaining on the ATM Program.

On February 28, 2023, the Company committed to purchase products that will be produced by a contract manufacturer during the second and third quarters of 2023.

The total amount of the committed orders is $ 510,000 , and the products produced by the contract manufacturer will be held for future sales.

On March 24, 2023, the Company completed an underwritten offering of its securities (the “Offering”) pursuant to which it sold an aggregate of (i) 8,250,000 shares of its common stock and (ii) warrants to purchase up to 8,250,000 shares of common stock, for aggregate proceeds of approximately $ 2,689,000 , net of commissions and professional fees of approximately $ 611,000 .

The warrants issued in the Offering were immediately exercisable and have a term of six years and a per share exercise price of $ 0.40 .

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