Energous Corp 10-K

Item 8. Financial Statements and Supplementary Data. 27 Energous Corporation INDEX TO FINANCIAL STATEMENTS Page(s) Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688 ) 29 Balance Sheets as of December 31, 2022 and 2021 30 Statements of Operations for the years ended December 31, 2022 and 2021 31 Statement of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021 32 Statements of Cash Flows for the years ended December 31, 2022 and 2021 33 Notes to Financial Statements 34 28 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Energous Corporation Opinion on 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. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter 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. We determined that there are no critical audit matters. /s/ Marcum llp Marcum llp We have served as the Company’s auditor since 2013. Melville, NY March 30, 2023 29 Energous Corporation BALANCE SHEETS As of December 31, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 26,287,293 $ 49,071,414 Accounts receivable, net 143,353 283,602 Inventory 105,821 — Prepaid expenses and other current assets 827,551 874,886 Total current assets 27,364,018 50,229,902 Property and equipment, net 429,035 510,197 Operating right-of-use lease assets 1,959,869 618,985 Other assets — 11,991 Total assets $ 29,752,922 $ 51,371,075 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 900,765 $ 1,205,957 Accrued expenses 1,790,414 1,523,317 Accrued severance 416,516 975,439 Operating lease liabilities, current portion 705,894 628,307 Deferred revenue 29,727 13,364 Total current liabilities 3,843,316 4,346,384 Long-term liabilities: Operating lease liabilities, long-term portion 1,264,131 40,413 Total liabilities 5,107,447 4,386,797 Commitments and contingencies Stockholders’ equity: Preferred Stock, $ 0.00001 par value, 10,000,000 shares authorized at December 31, 2022 and December 31, 2021; no shares issued or outstanding — — Common Stock, $ 0.00001 par value, 200,000,000 shares authorized at December 31, 2022 and December 31, 2021; 78,944,954 and 76,667,205 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively. 789 767 Additional paid-in capital 387,319,985 383,383,550 Accumulated deficit ( 362,675,299 ) ( 336,400,039 ) Total stockholders’ equity 24,645,475 46,984,278 Total liabilities and stockholders’ equity $ 29,752,922 $ 51,371,075 The accompanying notes are an integral part of these financial statements. 30 Energous Corporation STATEMENTS OF OPERATIONS For the Year Ended December 31, 2022 2021 Revenue $ 851,321 $ 756,793 Operating expenses: Cost of revenue 1,277,565 — Research and development 12,497,781 20,572,580 Sales and marketing 4,884,959 8,598,343 General and administrative 8,078,950 9,001,483 Severance expense 798,391 4,017,172 Total operating expenses 27,537,646 42,189,578 Loss from operations ( 26,686,325 ) ( 41,432,785 ) Other income: Interest income 411,065 5,492 Total other income 411,065 5,492 Net loss $ ( 26,275,260 ) $ ( 41,427,293 ) Basic and diluted loss per common share $ ( 0.34 ) $ ( 0.64 ) Weighted average shares outstanding, basic and diluted 77,485,729 64,926,524 The accompanying notes are an integral part of these financial statements. 31 Energous Corporation STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY Common Stock Additional Total Shares Amount Paid-in Capital Accumulated Deficit Stockholders’ Equity Balance, January 1, 2021 61,292,412 $ 614 $ 344,024,638 $ ( 294,972,746 ) $ 49,052,506 Stock-based compensation - stock options — — 284,994 — 284,994 Stock-based compensation - restricted stock units (“RSUs”) — — 5,561,698 — 5,561,698 Stock-based compensation - employee stock purchase plan (“ESPP”) — — 252,568 — 252,568 Stock-based compensation - performance share units (“PSUs”) — — 5,831,928 — 5,831,928 Issuance of shares for RSUs 1,431,532 14 ( 14 ) — — Issance of shares for PSUs 1,420,938 14 ( 14 ) — — Shares purchased from contributions to the ESPP 292,890 3 384,123 — 384,126 Issuance of shares in an at-the-market ("ATM") placement, net of $ 868,122 in issuance costs 12,229,433 122 27,043,629 — 27,043,751 Net loss — — — ( 41,427,293 ) ( 41,427,293 ) Balance, December 31, 2021 76,667,205 767 383,383,550 ( 336,400,039 ) 46,984,278 Stock-based compensation - stock options — — 74,771 — 74,771 Stock-based compensation - RSUs — — 2,581,726 — 2,581,726 Stock-based compensation - ESPP — — 124,053 — 124,053 Stock-based compensation - PSUs — — 138,287 — 138,287 Issuance of shares for RSUs 1,022,920 10 ( 10 ) — — Issance of shares for PSUs 135,575 1 ( 1 ) — — Shares purchased from contributions to the ESPP 345,929 3 272,830 — 272,833 Issuance of shares in an ATM placement, net of $ 73,403 in issuance costs 773,325 8 744,779 — 744,787 Net loss — — — ( 26,275,260 ) ( 26,275,260 ) Balance, December 31, 2022 78,944,954 $ 789 $ 387,319,985 $ ( 362,675,299 ) $ 24,645,475 The accompanying notes are an integral part of these financial statements. 32 Energous Corporation STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 26,275,260 ) $ ( 41,427,293 ) Adjustments to reconcile net loss to: Net cash used in operating activities: Depreciation and amortization 246,156 258,249 Stock based compensation 2,918,837 11,931,188 Change in operating lease right-of-use assets 730,452 674,306 Bad debt expense 40,737 10,850 Changes in operating assets and liabilities: Accounts receivable 99,512 ( 218,602 ) Inventory ( 105,821 ) — Prepaid expenses and other current assets 47,335 ( 238,184 ) Other assets 11,991 ( 10,381 ) Accounts payable ( 305,192 ) 109,118 Accrued expenses 267,097 ( 52,970 ) Accrued severance ( 558,923 ) 975,439 Operating lease liabilities ( 770,031 ) ( 733,473 ) Deferred revenue 16,363 1,364 Net cash used in operating activities ( 23,636,747 ) ( 28,720,389 ) Cash flows from investing activities: Purchases of property and equipment ( 164,994 ) ( 365,735 ) Net cash used in investing activities ( 164,994 ) ( 365,735 ) Cash flows from financing activities: Net proceeds from an at-the-market ("ATM") offerings 744,787 27,043,751 Proceeds from contributions to employee stock purchase plan 272,833 384,126 Net cash provided by financing activities 1,017,620 27,427,877 Net decrease in cash and cash equivalents ( 22,784,121 ) ( 1,658,247 ) Cash and cash equivalents - beginning 49,071,414 50,729,661 Cash and cash equivalents - ending $ 26,287,293 $ 49,071,414 Supplemental disclosure of non-cash financing activities: Increase in operating lease right-of-use assets and operating lease liabilities $ 2,071,336 $ — Common stock issued for RSUs $ 10 $ 14 Common stock issued for PSUs $ 1 $ 14 The accompanying notes are an integral part of these financial statements. 33 ENERGOUS CORPORATION Notes to Financial Statements 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 years ended December 31, 2022 and 2021, the Company has recorded revenue of $ 851,321 and $ 756,793 , respectively. The Company incurred a net loss of $ 26,275,260 and $ 41,427,293 for the years ended December 31, 2022 and 2021, respectively. 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 $ 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, 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. Although the Company intends to continue its research and development activities, there can be no assurance that its available resources and revenue generated from its business operations will be sufficient to sustain its operations. Accordingly, the Company expects to pursue additional financing, which could include offerings of equity or debt securities, bank financings, commercial agreements with customers or strategic partners, and other alternatives, depending upon market conditions. There is no assurance that such financing would be available on terms that the Company would find acceptable, or at all. The market for products using the Company’s technology is broad and evolving, but remains nascent and unproven, so the Company’s success is dependent upon many factors, including customer acceptance of its existing products, technical feasibility of future products, regulatory approvals, 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 (“U.S. GAAP”), and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). 34 Note 3 – Summary of Significant Accounting Policies, continued Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements as well as the reported expenses during the reporting periods. The Company’s significant estimates and assumptions include the valuation of stock-based compensation 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. 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”) Topic 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 the 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 of the contract. 5. Recognize revenue when the performance obligations are met or delivered. 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. 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. 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. 35 Note 3 – Summary of Significant Accounting Policies, continued Inventory 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 Research and development expenses are charged to operations as incurred. For internally developed patents, all patent application costs are expensed as incurred as research and development expense. Patent application costs, which are generally legal costs, are expensed as research and development costs until such time as the future economic benefits of such patents become more certain. The Company incurred research and development costs of $ 12,497,781 and $ 20,572,580 for the years ended December 31, 2022 and 2021, respectively. Stock-Based Compensation The Company accounts for equity instruments issued to employees in accordance with accounting guidance that requires awards to be recorded at their fair value on the date of grant and are amortized over the vesting period of the award. The Company recognizes compensation costs on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the equity instrument issued. Under the Company’s Employee Stock Purchase Plan (“ESPP”), employees may purchase a limited number of shares of the Company’s 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 December 31, 2022, no liability for unrecognized tax benefits was required to be reported. The guidance also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the years ended December 31, 2022 and 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 4,132,060 and 5,519,068 for the years ended December 31, 2022 and 2021, respectively, because their inclusion would be antidilutive. 36 Note 3 – Summary of Significant Accounting Policies, continued Net Loss Per Common Share, continued Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. For the Years Ended December 31, 2022 2021 Warrants issued to private investors 1,666,666 3,284,789 Options to purchase common stock 300,262 525,006 RSUs 2,165,132 1,709,273 Total potentially dilutive securities 4,132,060 5,519,068 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. 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. 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 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 6 – Commitments and Contingencies, Operating Leases for further discussion of the Company’s operating leases. Management’s Evaluation of Subsequent Events The Company evaluates events that have occurred after the balance sheet date of December 31, 2022, through the date which the financial statements are issued. Note 4 – Property and Equipment Property and equipment are as follows: As of December 31, 2022 2021 Computer software $ 978,147 $ 916,498 Computer hardware 2,144,364 2,211,490 Furniture and fixtures 488,465 484,186 Leasehold improvements 782,538 782,538 4,393,514 4,394,712 Less – accumulated depreciation ( 3,964,479 ) ( 3,884,515 ) Total property and equipment, net $ 429,035 $ 510,197 The Company currently uses the following expected life terms for depreciating property and equipment: computer software – 1 - 2 years , computer hardware – 3 years, furniture and fixtures – 7 years, leasehold improvements – remaining life of the lease. 37 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. Total depreciation and amortization expense of the Company’s property and equipment was $ 246,156 and $ 258,249 for the years ended December 31, 2022 and 2021, respectively. Note 5 – Accrued Expenses Accrued expenses consist of the following: As of December 31, 2022 2021 Accrued compensation $ 1,306,503 $ 1,217,176 Accrued legal expenses 298,546 178,236 Other accrued expenses 185,365 127,905 Total $ 1,790,414 $ 1,523,317 Note 6 – Commitments and Contingencies Operating Leases San Jose Lease 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 , 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 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 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. As of December 31, 2022, the Company has total operating lease right-of-use assets of $ 1,959,869 , current portion operating lease liabilities of $ 705,894 and long-term portion of operating lease liabilities of $ 1,264,131 . The weighted average remaining lease term is 2.7 years as of December 31, 2022. 38 Note 6 – Commitments and Contingencies, continued Operating Leases, continued Operating Lease Commitments , continued The future minimum lease payments for leased locations are as follows: For the Year Ended December 31, Amount 2023 $ 752,828 2024 733,497 2025 562,408 Total future lease payments 2,048,733 Present value discount (2.9% weighted average) ( 78,708 ) Total operating lease liabilities $ 1,970,025 Hosted Design Solution Agreement 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 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, 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 years ended December 31, 2022 and 2021, the Company recognized a total of $ 1,293,875 and $ 1,433,990 , respectively, in expense under the Bonus Plan. As of December 31, 2022, $ 688,364 of the 2022 amount was not yet paid and is included in accrued expenses. The expense under the Bonus Plan is recorded under operating expenses on the Company’s 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”). 39 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. 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 offer letter, Mr. Johnston will receive an annual base salary of $ 400,000 per year. 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 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. 40 Note 6 – Commitments and Contingencies, continued Executive Employee Agreement – Cesar Johnston, continued 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 t h e Con s o li da t e d Omn i bu s Budge t Reconc ili a ti o n Ac t o f 1985 , a s amende d ( “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. 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 President and Chief Executive Officer (“Employment Agreement”). The Employment Agreement effective as of January 1, 2015 , has an initial term of four years and automatically renews each year after the initial term. The Employment Agreement provides for an annual base salary of $ 365,000 , and Mr. Rizzone is 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 has 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 (“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 restricted stock units 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 will pay-off all amounts owed under a lease agreement relating to a Company Car and Mr. Rizzone will receive the title to the vehicle. All compensation under the Separation Agreement will be subject to applicable withholding. 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. 41 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 In November 2016, the Company and Dialog Semiconductor plc (“Dialog”), a related party (see Note 10—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 (the “Dialog Exclusivity Requirement”). 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. 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. 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. 42 Note 7 – 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 of directors 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 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 the At Market Issuance Sales Agreement, as amended, between the Company, B. Riley Securities, Inc., Roth Capital Partners LLC and Ladenburg Thalmann & Co. Inc. (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. 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 U.S. 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 U.S. GAAP until the actual delivery of shares takes place. There are currently 200,000,000 shares of common stock authorized for issuance. 43 Note 8 – 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 December 31, 2022, 1,294,884 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 December 31, 2022, 670,690 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 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. 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. 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. 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 Company’s 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, 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. 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 which is typically the last market date of the offering period. 44 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. For the year ended December 31, 2022, eligible employees contributed $ 272,833 through payroll deductions to the ESPP and 345,929 shares were deemed delivered for the year ended December 31, 2022. For the year ended December 31, 2021, eligible employees contributed $ 384,126 through payroll deductions to the ESPP and 292,890 shares were deemed delivered for the year ended December 31, 2021. 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: Year Ended December 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 year ended December 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 ( 524,744 ) 5.77 — — Outstanding at December 31, 2022 300,262 $ 1.27 8.9 $ — Exercisable at December 31, 2022 262 $ 2.49 1.0 $ — 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. Restricted Stock Units (“RSUs”) 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 . 45 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 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. The awards, granted under the 2017 Equity Inducement Plan, vest over four years beginning on the anniversary of the grant date. At December 31, 2022, the unamortized value of the RSUs was $ 2,475,986 . The unamortized amount will be expensed over a weighted average period of 1.8 years. A summary of the activity related to RSUs for the year ended December 31, 2022 is presented below: Total Weighted Average Grant Date Fair Value Unvested at January 1, 2022 1,709,273 $ 3.72 RSUs granted 1,937,255 $ 1.21 RSUs forfeited ( 458,476 ) $ 1.98 RSUs vested ( 1,022,920 ) $ 4.16 Unvested at December 31, 2022 2,165,132 $ 1.63 Performance Share Units (“PSUs”) Performance share units (“PSUs”) are grants that vest upon the achievement of certain performance goals. The goals are commonly related to the Company’s revenue and achievement of sales and marketing goals. 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 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, 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. 46 Note 8 – Stock Based Compensation, continued Performance Share Units (“PSUs”), continued At December 31, 2022, the unamortized value of all PSUs was $ 0 . A summary of the activity related to PSUs for the year ended December 31, 2022 is presented below: Total Weighted Average Grant Date Fair Value Unvested at January 1, 2022 — $ — PSUs granted 187,000 $ 1.02 PSUs forfeited ( 51,425 ) $ 1.02 PSUs vested ( 135,575 ) $ 1.02 Unvested at December 31, 2022 — $ — Employee Stock Purchase Plan (“ESPP”) During the years ended December 31, 2022 and 2021, there were two offering periods per year for the ESPP. The first offering period started on January 1 of each year and concluded on June 30 of each year. 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 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. The Company recognized stock-based compensation expense for the plan of $ 124,053 and $ 252,568 for the years ended December 31, 2022 and 2021, respectively. The Company estimated the fair value of the purchase options granted during the years ended December 31, 2022 and 2021 using the Black-Scholes option pricing model. The fair values of the purchase options granted were estimated using the following assumptions: For the Year Ended December 31, 2022 Stock price range $ 0.96 – 1.25 Dividend yield 0 % Expected volatility range 61 – 68 % Risk-free interest rate range 0.06 – 2.52 % Expected life 6 months For the Year Ended December 31, 2021 Stock price range $ 1.80 – 2.78 Dividend yield 0 % Expected volatility range 95 – 143 % Risk-free interest rate range 0.05 – 0.09 % Expected life 6 months 47 Note 8 – Stock Based Compensation, continued Stock-Based Compensation Expense The following tables summarize total stock-based compensation costs recognized for years ended December 31, 2022 and 2021: For the Years Ended December 31, 2022 2021 Options $ 74,771 $ 284,994 RSUs 2,581,726 5,561,698 PSUs 138,287 5,831,928 ESPP 124,053 252,568 Total $ 2,918,837 $ 11,931,188 The total amount of stock-based compensation was reflected within the statements of operations as: For the Years Ended December 31, 2022 2021 Research and development $ 1,134,106 $ 6,582,873 Sales and marketing 448,347 3,099,232 General and administrative 1,083,775 1,964,089 Severance expense 252,609 284,994 Total $ 2,918,837 $ 11,931,188 Note 9 – Income Taxes On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property. The CARES Act has an immaterial impact on the Company’s income taxes. The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires 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. 48 Note 9 – Income Taxes, continued As of December 31, 2022 and 2021, the Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following: December 31, 2022 2021 Deferred tax assets: Research and development tax credits $ 10,526,768 $ 9,475,588 Net operating loss carryovers 76,477,629 67,785,680 Property and equipment 162,698 189,271 Research and development costs 9,829,326 10,923,959 Start-up and organizational costs 9,275 462 Stock-based compensation 283,285 4,659,555 Operating lease liability 551,284 187,132 Other accruals 464,948 670,065 Total gross deferred tax assets 98,305,213 93,891,712 Less: valuation allowance ( 97,756,771 ) ( 93,718,497 ) Total deferred tax assets 548,442 173,215 Deferred tax liabilities: Operating lease right-of-use asset ( 548,442 ) ( 173,215 ) Total deferred tax liabilities ( 548,442 ) ( 173,215 ) Total deferred taxes, net $ — $ — The change in the Company’s valuation allowance is as follows: 2022 2021 January 1, $ 93,718,497 $ 82,929,675 Increase in valuation allowance 4,038,274 10,788,822 December 31, $ 97,756,771 $ 93,718,497 The Company has federal and state net operating loss carryforwards of approximately $ 273,056,000 and $ 274,011,000 , respectively, available to offset future taxable income. The federal and state NOL carryforwards will expire at various dates beginning in 2033 . The Company has federal and state research and development tax credit carryforwards of approximately $ 6,373,000 and $ 5,258,000 , respectively. The federal R&D credit carryforwards will expire beginning in 2032 and state R&D credit carryforwards do not expire. The ultimate realization of the net operating loss is dependent upon future taxable income, if any, of the Company. Although management believes that the Company may have sufficient future taxable income to absorb the net operating loss carryforwards and research and development tax credit carryforwards before the expiration of the carryforward period, there may be circumstances beyond the Company’s control that limit such utilization. Accordingly, management has determined that a full valuation allowance of the deferred tax asset is appropriate at December 31, 2022 and 2021. 49 Note 9 – Income Taxes, continued Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryforwards when the stock ownership of one or more 5% stockholders (stockholders owning 5% or more of the Company’s outstanding capital stock) has increased on a cumulative basis by more than 50 percentage points . Management cannot control the ownership changes occurring as a result of public trading of the Company’s Common Stock. Accordingly, there is a risk of an ownership change beyond the control of the Company that could trigger a limitation of the use of the loss carryforward. The Company completed a Section 382 analysis as of December 31, 2022 and determined that none of its NOLs or R&D credits would be limited. For the Year Ended December 31, 2022 2021 Tax benefit at federal statutory rate ( 21.0 )% ( 21.0 )% State income taxes ( 4.4 ) ( 5.8 ) Permanent differences: Stock-based compensation 12.4 1.8 Executive compensation — 1.6 Research and development tax credits ( 2.4 ) ( 2.7 ) Increase in valuation allowance 15.4 26.1 Effective income tax rate 0.0 % 0.0 % Note 10 – 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 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. As of December 31, 2022, none of the warrants remain outstanding. Dialog presently owns approximately 2.2 % of the Company’s outstanding common shares. 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 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. 50 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 . 51 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.