watt-10q_20220630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

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

COMMISSION FILE NUMBER 001-36379

ENERGOUS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		46-1318953
(State of incorporation)		(I.R.S. Employer Identification No.)

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

(Address of principal executive office) (Zip code)

(408) 963-0200

(Registrant’s telephone number, including area code)

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value

WATT

The Nasdaq Stock Market

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
Emerging growth company	☐

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

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

As of August 10, 2022, there were 77,482,564 shares of our Common Stock, par value $0.00001 per share, outstanding.

ENERGOUS CORPORATION

FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

INDEX

PART I - FINANCIAL INFORMATION		3

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosure About Market Risk		24

Item 4. Controls and Procedures		24

PART II – OTHER INFORMATION		25

Item 1. Legal Proceedings		25

Item 1A. Risk Factors		25

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities		37

Item 3. Defaults Upon Senior Securities		37

Item 4. Mine Safety Disclosures		37

Item 5. Other Information		37

Item 6. Exhibits		37

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Energous Corporation

CONDENSED BALANCE SHEETS

	As of
	June 30, 2022			December 31, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	35,669,685		$	49,071,414
Accounts receivable, net		210,283			283,602
Inventory		52,153			–
Prepaid expenses and other current assets		1,265,895			874,886
Total current assets		37,198,016			50,229,902

Property and equipment, net		495,395			510,197
Operating lease right-of-use assets		2,318,717			618,985
Other assets		11,991			11,991
Total assets	$	40,024,119		$	51,371,075
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,008,932		$	1,205,957
Accrued expenses		1,472,763			1,523,317
Accrued severance expense		744,820			975,439
Operating lease liabilities, current portion		721,500			628,307
Deferred revenue		21,345			13,364
Total current liabilities		3,969,360			4,346,384

Operating lease liabilities, long-term portion		1,615,527			40,413
Total liabilities		5,584,887			4,386,797

Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $0.00001 par value, 10,000,000 shares authorized at June 30, 2022 and December 31, 2021; no shares issued or outstanding at June 30, 2022 and December 31, 2021.		–			–
Common Stock, $0.00001 par value, 200,000,000 shares authorized at June 30, 2022 and December 31, 2021; 77,464,571 and 76,667,205 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.		775			767
Additional paid-in capital		385,008,963			383,383,550
Accumulated deficit		(350,570,506	)		(336,400,039	)
Total stockholders’ equity		34,439,232			46,984,278
Total liabilities and stockholders’ equity	$	40,024,119		$	51,371,075

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

Energous Corporation

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021
Revenue	$	232,971		$	184,960		$	448,932		$	330,025
Costs and expenses:
Cost of revenue		271,384			–			474,633			–
Research and development		3,209,910			6,103,694			6,737,056			10,694,938
Sales and marketing		1,158,092			2,441,357			2,771,682			4,235,569
General and administrative		2,024,939			2,656,748			4,052,459			4,944,144
Severance expense		633,444			–			633,444			–
Total costs and expenses		7,297,769			11,201,799			14,669,274			19,874,651
Loss from operations		(7,064,798	)		(11,016,839	)		(14,220,342	)		(19,544,626	)
Other income:
Interest income		47,049			1,010			49,875			3,034
Total other income		47,049			1,010			49,875			3,034
Net loss	$	(7,017,749	)	$	(11,015,829	)	$	(14,170,467	)	$	(19,541,592	)
Basic and diluted loss per common share	$	(0.09	)	$	(0.18	)	$	(0.18	)	$	(0.32	)
Weighted average shares outstanding, basic and diluted		77,125,105			62,080,250			77,028,549			61,825,044

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

Energous Corporation

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

	Common Stock				Additional Paid-in			Accumulated			Total Stockholders'
	Shares		Amount		Capital			Deficit			Equity
Balance at January 1, 2022		76,667,205	$	767	$	383,383,550		$	(336,400,039	)	$	46,984,278
Stock-based compensation - options		–		–		10,313			–			10,313
Stock-based compensation - restricted stock units ("RSUs")		–		–		745,620			–			745,620
Stock-based compensation - employee stock purchase plan ("ESPP")		–		–		40,973			–			40,973
Issuance of shares for RSUs		387,823		4		(4	)		–			–
Proceeds from contributions to the ESPP		–		–		104,217			–			104,217
Net loss		–		–		–			(7,152,718	)		(7,152,718	)
Balance at March 31, 2022 (unaudited)		77,055,028		771		384,284,669			(343,552,757	)		40,732,683
Stock-based compensation - options		–		–		21,330			–			21,330
Stock-based compensation - RSUs		–		–		601,029			–			601,029
Stock-based compensation - ESPP		–		–		41,428			–			41,428
Issuance of shares for RSUs		215,746		2		(2	)		–			–
Proceeds from contributions to the ESPP		193,797		2		60,509			–			60,511
Net loss		–		–		–			(7,017,749	)		(7,017,749	)
Balance at June 30, 2022 (unaudited)		77,464,571	$	775	$	385,008,963		$	(350,570,506	)	$	34,439,232

	Common Stock				Additional Paid-in			Accumulated			Total Stockholders'
	Shares		Amount		Capital			Deficit			Equity
Balance at January 1, 2021		61,292,412	$	614	$	344,024,638		$	(294,972,746	)	$	49,052,506
Stock-based compensation - RSUs		–		–		2,088,910			–			2,088,910
Stock-based compensation - ESPP		–		–		57,316			–			57,316
Issuance of shares for RSUs		627,412		6		(6	)		–			–
Proceeds from contributions to the ESPP		–		–		117,013			–			117,013
Net loss		–		–		–			(8,525,763	)		(8,525,763	)
Balance at March 31, 2021 (unaudited)		61,919,824		620		346,287,871			(303,498,509	)		42,789,982
Stock-based compensation - RSUs		–		–		1,471,826			–			1,471,826
Stock-based compensation - performance share units ("PSUs")		–		–		2,695,847			–			2,695,847
Stock-based compensation - ESPP		–		–		60,651			–			60,651
Issuance of shares for RSUs		298,641		3		(3	)		–			–
Issuance of shares for PSUs		494,608		5		(5	)		–			–
Proceeds from contributions to the ESPP		155,064		2		120,232			–			120,234
Net loss		–		–		–			(11,015,829	)		(11,015,829	)
Balance at June 30, 2021 (unaudited)		62,868,137	$	630	$	350,636,419		$	(314,514,338	)	$	36,122,711

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

Energous Corporation

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(14,170,467	)	$	(19,541,592	)
Adjustments to reconcile net loss to:
Net cash used in operating activities:
Depreciation and amortization		127,311			126,385
Stock based compensation		1,460,693			6,374,550
Changes in operating lease right-of-use assets		371,604			393,936
Bad debt expense		17,500			–
Changes in operating assets and liabilities:
Accounts receivable		55,819			(46,120	)
Inventory		(52,153	)		–
Prepaid expenses and other current assets		(391,009	)		(10,769	)
Accounts payable		(197,025	)		555,702
Accrued severance expense		(230,619	)		–
Accrued expenses		(50,554	)		31,251
Operating lease liabilities		(403,029	)		(422,533	)
Deferred revenue		7,981			1,500
Net cash used in operating activities		(13,453,948	)		(12,537,690	)
Cash flows from investing activities:
Purchases of property and equipment		(112,509	)		(203,004	)
Net cash used in investing activities		(112,509	)		(203,004	)
Cash flows from financing activities:
Proceeds from contributions to employee stock purchase plan		164,728			237,247
Net cash provided by financing activities		164,728			237,247
Net decrease in cash and cash equivalents		(13,401,729	)		(12,503,447	)
Cash and cash equivalents - beginning		49,071,414			50,729,661
Cash and cash equivalents - ending	$	35,669,685		$	38,226,214
Supplemental disclosure of non-cash investing and financing activities:
Increase in operating lease right-of-use assets and operating lease liabilities	$	2,071,336		$	–
Common stock issued for RSUs	$	6		$	9
Common stock issued for PSUs	$	–		$	5

The accompanying notes are an integral part of these condensed 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 three and six months ended June 30, 2022, the Company recorded revenue of $232,971 and $448,932, respectively. During the three and six months ended June 30, 2021, the Company recorded revenue of $184,960 and $330,025, respectively. During the three and six months ended June 30, 2022, the Company recorded net losses of $7,017,749 and $14,170,467, respectively. During the three and six months ended June 30, 2021, the Company recorded net losses of $11,015,829 and $19,541,592, respectively. Net cash used in operating activities was $13,453,948 and $12,537,690 for the six months ended June 30, 2022 and 2021, respectively. The Company is currently meeting its liquidity requirements through the proceeds of securities offerings that raised net proceeds of $53,556,202 during 2020, and $27,043,751 during the fourth quarter of 2021, proceeds from contributions to the Company’s employee stock purchase plan (the “ESPP”), along with payments received from customers.

As of June 30, 2022, the Company had cash on hand of $35,669,685. The Company expects that cash on hand as of June 30, 2022, together with anticipated revenues, will be sufficient to fund the Company’s operations through August 2023.

Research and development of new technologies is by its nature unpredictable. Although the Company intends to continue its research and development activities, there can be no assurance that its available resources and revenue generated from its business operations will be sufficient to sustain its operations. Accordingly, the Company expects to pursue additional financing, which could include offerings of equity or debt securities, bank financings, commercial agreements with customers or strategic partners, and other alternatives, depending upon market conditions. There is no assurance that such financing will be available on terms that the Company would find acceptable, or at all.

The market for products using the Company’s technology is broad and evolving, but remains nascent and unproven, so the Company’s success is dependent upon many factors, including customer acceptance of its existing products, technical feasibility of future products, regulatory approvals, the development of complementary technologies, competition and global market fluctuations.

Note 3 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).

These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2021 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 23, 2022. The accounting policies used in preparing these unaudited condensed interim financial statements are consistent with those described in the Company’s December 31, 2021 audited financial statements.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements as well as the reported expenses during the reporting periods.

Note 3 – Summary of Significant Accounting Policies, continued

The Company’s significant estimates and assumptions include the valuation of stock-based compensation instruments, recognition of revenue, inventory valuation, the useful lives of long-lived assets, and the valuation allowance on deferred tax assets. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results could differ from those estimates.

Cash and Cash Equivalents

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

Revenue Recognition

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

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

Identify the contract with a customer.

Identify the performance obligations in the contract.

Determine the transaction price of the contract.

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

Recognize revenue when or as the performance obligations are satisfied.

The Company’s revenue comes from its single segment of wireless charging system solutions. The wireless charging system revenue consists of revenue from product development projects and production-level systems. During the three and six months ended June 30, 2022, the Company recognized $232,971 and $448,932, respectively, in revenue. During the three and six months ended June 30, 2021, the Company recognized $184,960 and $330,025, respectively, in revenue.

The Company records revenue associated with product development projects that it enters into with certain customers. In general, these product development projects are complex, and the Company does not have certainty about its ability to achieve the project milestones. The achievement of a milestone is dependent on the Company’s performance obligation and requires acceptance by the customer. The Company recognizes this revenue at the point in time at which the performance obligation is met. The payment associated with achieving the performance obligation is generally commensurate with the Company’s effort or the value of the deliverable and is nonrefundable. The Company records the expenses related to these product development projects in research and development expense, in the periods such expenses were incurred.

The Company records revenue associated with the sale of production-level systems at the point in time at which control over the product is transferred to the customer. The Company records the expense related to the sales of these systems as cost of revenue during the period that the product is transferred to the customer.

Inventory

The Company follows ASC 330, Inventory (“Topic 330”) to account for its inventory, which includes finished goods ready for sale, work in process and raw materials, at the lower of cost or net realizable value. Net realizable value is calculated at the end of each reporting period and adjustment, if needed, is made.

Research and Development

Research and development expenses are charged to operations as incurred. For internally developed patents, all patent costs are expensed as incurred as research and development expense. Patent application costs, which are generally legal costs, are expensed as research and development costs until such time as the future economic benefits of such patents become more certain. The Company incurred research and development costs of $3,209,910 and $6,103,694 for the three months ended June 30, 2022 and 2021, respectively. The Company incurred research and development costs of $6,737,056 and $10,694,938 for the six months ended June 30, 2022 and 2021, respectively.

Note 3 – Summary of Significant Accounting Policies, continued

Stock-Based Compensation

The Company accounts for equity instruments issued to employees, board members and contractors in accordance with accounting guidance that requires awards to be recorded at their fair value on the date of grant and amortized over the vesting period of the award. The Company amortizes compensation costs on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the equity instrument issued.

Under the ESPP, employees may purchase a limited number of shares of the Company’s common stock at a 15% discount from the lower of the closing market prices measured on the first and last days of each half-year period. The Company recognizes stock-based compensation expense for the fair value of the purchase options, as measured on the grant date.

Income Taxes

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of June 30, 2022, no liability for unrecognized tax benefits was required to be reported. The guidance from ASC 740, Income Taxes, also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the three and six months ended June 30, 2022 or 2021. The Company files income tax returns with the United States and California governments.

Net Loss Per Common Share

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method), the vesting of restricted stock units (“RSUs”) and performance stock units (“PSUs”) and the enrollment of employees in the ESPP. The computation of diluted loss per share excludes potentially dilutive securities of 6,212,707 and 6,323,445 for the three months ended June 30, 2022 and 2021, respectively, and 6,212,707 and 6,323,445 for the six months ended June 30, 2022 and 2021, respectively because their inclusion would be anti-dilutive.

Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Warrants issued to private investors		3,284,789		3,284,789		3,284,789		3,284,789
Options to purchase common stock		825,006		550,985		825,006		550,985
RSUs		2,102,912		1,530,216		2,102,912		1,530,216
PSUs		–		957,455		–		957,455
Total potentially dilutive securities		6,212,707		6,323,445		6,212,707		6,323,445

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

Leases

The Company determines if an arrangement is a lease at the inception of the arrangement. The Company applies the short-term lease recognition exemption and recognizes lease payments in profit or loss at lease commencement for facility or equipment leases that have a lease term of 12 months or less and do not include a purchase option whose exercise is reasonably certain. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities.

Note 3 – Summary of Significant Accounting Policies, continued

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are measured and recorded at the later of the adoption date, January 1, 2019, or the service commencement date based on the present value of lease payments over the lease term. The Company uses the implicit interest rate when readily determinable; however, most leases do not establish an implicit rate, so the Company uses an estimate of the incremental borrowing rate based on the information available at the time of measurement. Lease expense for lease payments is recognized on a straight-line basis over the lease term. See Note 4 – Commitments and Contingencies, Operating Leases for further discussion of the Company’s operating leases.

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date of June 30, 2022, through the date which the financial statements are available to be issued.

Note 4 – 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 new lease amendment, the Company recorded a new right-of-use 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 will be $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.

On September 22, 2021, the Company signed a new Costa Mesa lease to lease a new, distinct office space in a different building with the same landlord. Per the lease, the lease commencement date is October 1, 2021 and the expiry date is September 30, 2023. The Company did not have control of the new office space until October 2021, at which time the Company recorded a new right-of-use lease asset of $104,563 and operating lease liability of $104,563. The new Costa Mesa lease has an initial monthly lease payment of $4,369 starting October 1, 2021 and is subject to an annual escalation up to a maximum monthly lease payment of $4,522.

Note 4 – Commitments and Contingencies, continued

Operating Lease Commitments

The Company follows ASC 842, Leases, (“Topic 842”) and recognizes the required right-of-use assets and operating lease liabilities on its balance sheet. The Company anticipates having future total lease payments of $2,446,936 during the period from the third quarter of 2022 to the third quarter of 2025. As of June 30, 2022, the Company has total operating lease right-of-use assets of $2,318,717, current portion of operating lease liabilities of $721,500 and long-term portion of operating lease liabilities of $1,615,527. The weighted average remaining lease term is 3.2 years as of June 30, 2022.

A reconciliation of undiscounted cash flows to lease liabilities recognized as of June 30, 2022 is as follows:

	Amount
	(unaudited)
2022	$	398,203
2023		752,828
2024		733,497
2025		562,408
Total future lease payments		2,446,936
Present value discount (2.9% weighted average)		(109,909	)
Total operating lease liabilities	$	2,337,027

Hosted Design Software Agreement

On June 25, 2015, the Company entered into a three-year agreement to license electronic design automation software in a hosted environment. Pursuant to the agreement, under which services began in July 2015, the Company is required to remit quarterly payments. In June 2021, the Company entered into its latest renewal of the agreement for an additional three years, and the Company is required to remit quarterly payments of approximately $233,000 through the second quarter of 2024.

Litigations, Claims, and Assessments

The Company is from time to time involved in various disputes, claims, liens and litigation matters arising in the normal course of business. While the outcome of these disputes, claims, liens and litigation matters cannot be predicted with certainty, after consulting with legal counsel, management does not believe that the outcome of these matters will have a material adverse effect on the Company's combined financial position, results of operations or cash flows.

MBO Bonus Plan

On March 15, 2018, the Company’s Board of Directors (“Board”), on the recommendation of the Board’s Compensation Committee (“Compensation Committee”), approved the Energous Corporation MBO Bonus Plan (“Bonus Plan”) for executive officers of the Company. To be eligible to receive a bonus under the Bonus Plan, an executive officer must be continuously employed throughout the applicable performance period, and in good standing, and achieve the performance objectives selected by the Compensation Committee.

Under the Bonus Plan, the Compensation Committee is responsible for selecting the amounts of potential bonuses for executive officers, the performance metrics used to determine whether any such bonuses will be paid and determining whether those performance metrics have been achieved.

During the three months ended June 30, 2022, the Company accrued $275,990 in expense under the Bonus Plan, which will be paid during the third quarter of 2022. During the three months ended June 30, 2021, the Company accrued $391,578 in expense under the Bonus Plan, which was paid during the third quarter of 2021. During the six months ended June 30, 2022 and 2021, the Company accrued $501,792 and $783,156 in expense under the Bonus Plan, respectively. The expense under the Bonus Plan is recorded under operating expenses on the Company’s Condensed Statement of Operations within each executive’s department.

Note 4 – Commitments and Contingencies, continued

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”).

Under the Severance Agreement, if an Executive is terminated in a qualifying change in control termination, the Company agrees to pay the Executive six to 12 months of that Executive’s monthly base salary. If Executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) the Company will pay the full amount of Executive’s premiums under the Company’s health, dental and vision plans, including coverage for the Executive’s eligible dependents, for the six to 12 month period following the Executive’s termination.

Executive Employee Agreement – Cesar Johnston

On December 9, 2021, the Company announced that Cesar Johnston had been appointed as the Company’s Chief Executive Officer. In connection with Mr. Johnston’s appointment as Chief Executive Officer, the Company and Mr. Johnston executed an offer letter dated as of December 6, 2021.

Under the terms of his offer letter, Mr. Johnston will receive an annual base salary of $400,000 per year. Beginning in year 2022, he will be eligible to receive a discretionary annual bonus of up to 100% of his base salary, at the recommendation of the Company’s Compensation Committee, with the approval of the Company’s Board. In addition, as an inducement to accept his appointment as Chief Executive Officer, Mr. Johnston will receive, subject to continued employment, (a) a special one-time sign-on bonus in the amount of $120,000, payable in two equal installments of $60,000 each on the first payroll date in 2022 and the first payroll date after December 6, 2022, (b) a grant of 150,000 RSUs to acquire shares of the Company’s common stock, one third of which will vest on December 6, 2022 and the remaining two thirds of which will vest in eight equal installments of 12,500 each on each quarterly anniversary thereafter and (c) a grant of an option to purchase 300,000 shares of the Company’s common stock at an exercise price equal to the fair market value of the Company’s common stock on the grant date, half of which shall vest on December 31, 2023, a quarter of which shall vest on December 31, 2024 and the remainder of which shall vest on December 31, 2025.

Mr. Johnston will further be eligible for (a) an additional equity award in the amount of 287,000 PSUs to acquire shares of the Company’s common stock, which vest up to one third per year over a three year period commencing January 1, 2022 and ending December 31, 2024, upon the achievement of performance criteria to be mutually established by Mr. Johnston and the Compensation Committee, and (b) an additional equity award of up to 25,000 PSUs per calendar year for 2022, 2023 and 2024, respectively, based on outperformance of agreed upon goals per calendar year, as determined by the Compensation Committee with approval of the Board. As of June 30, 2022, the PSUs had not yet been granted. On July 20, 2022, the Compensation Committee approved by unanimous written consent, the PSU grants to Mr. Johnston pursuant to the terms of Mr. Johnston’s offer letter and subject to the outperformance of certain performance metrics as determined by the Compensation Committee.

In connection with Mr. Johnston’s appointment as Chief Executive Officer, the Company and Mr. Johnston additionally entered into an amended and restated severance and change in control agreement, dated as of December 6, 2021. In the event of a termination that is not 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 100% of his target bonus plus, if agreed by the Compensation Committee, a discretionary bonus for the year in which the termination occurs, (b) any outstanding unvested equity awards held by Mr. Johnston that would vest in the next 18 months of continuing employment (other than any equity awards that vest upon satisfaction of performance criteria) will accelerate 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.

Note 4 – Commitments and Contingencies, continued

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 former President and Chief Executive Officer (“Employment Agreement”).

The Employment Agreement effective as of January 1, 2015, had an initial term of four years and automatically renewed each year after the initial term. The Employment Agreement provided for an annual base salary of $365,000, and Mr. Rizzone was eligible to receive quarterly cash bonuses from the MBO Bonus Plan with a total target amount equal to 100% of his base salary based upon achievement of performance-based objectives established by the Board.

On July 9, 2021, the Company announced that Stephen R. Rizzone had retired from his position as the Company’s President and Chief Executive Officer and a