Quarterly report pursuant to Section 13 or 15(d)

Stock Based Compensation

v3.3.0.814
Stock Based Compensation
9 Months Ended
Sep. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 6 – Stock Based Compensation
 
Equity Incentive Plans
 
2013 Equity Incentive Plan
 
In December 2013 the Company’s board and stockholders approved the “2013 Equity Incentive Plan”, providing for the issuance of equity based instruments covering up to an initial total of 1,042,167 shares of common stock. Effective on March 27, 2014, the aggregate total shares which may be issued under the 2013 Equity Incentive Plan were increased to 2,335,967, as described below.
 
Effective on March 10, 2014, the Company’s board of directors and stockholders approved the First Amendment to the 2013 Equity Incentive Plan which provided for an increase in the aggregate number of shares of common stock that may be issued pursuant to the Plan to equal 18% of the total number of shares of common stock outstanding immediately following the completion of the IPO (assuming for this purpose the issuance of all shares issuable under the Company’s equity plans, the conversion into common stock of all outstanding securities that are convertible by their terms into common stock and the exercise of all options and warrants exercisable for shares of common stock and including shares and warrants issued to the underwriters for such IPO upon exercise of its over-allotment options).
 
As of September 30, 2015, 262,186 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
 
On March 6, 2014, the Company’s board of directors and stockholders approved the 2014 Non-Employee Equity Compensation Plan for the issuance of equity-based instruments covering up to 250,000 shares of common stock to directors and other non-employees.
 
As of September 30, 2015, 146,383 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
 
On April 10, 2015, the Company’s board of directors approved the Energous Corporation 2015 Performance Share Unit Plan (the “Performance Share Plan”), under which 1,310,104 shares of common stock became available for issuance as PSUs to a select group of employees and directors, subject to approval by the stockholders. On May 21, 2015 the Company’s stockholders approved the Performance Share Plan.
 
As of September 30, 2015, 95,859 shares of common stock remain eligible to be issued through equity based instruments under the Performance Share Unit Plan.
 
Employee Stock Purchase Plan
 
On April 10, 2015, the Company’s board of directors approved the ESPP, under which 600,000 shares of common stock have been reserved for purchase by the Company’s employees, subject to approval by the stockholders. On May 21, 2015, the Company’s stockholders approved the ESPP. Employees may designate an amount not less than 1% but not more than 10% of their annual compensation, but for not more than 7,500 shares during an offering period. An offering period shall be six months in duration commencing on or about January 1 and July 1 of each year. The exercise price of the option will be the lesser of 85% of the fair market of the common stock on the first business day of the offering period and 85% of the fair market value of the common stock on the applicable exercise date.
 
As of September 30, 2015, 600,000 shares of common stock remain eligible to be issued through equity based instruments under the ESPP. As of September 30, 2015, eligible employees have contributed $169,811 through payroll withholdings to the ESPP. Initial shares under the ESPP will be delivered in January 2016.
 
Stock Option Award Activity
 
The following is a summary of the Company’s stock option activity during the nine months ended September 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
Weighted
 
Weighted
 
Average
 
 
 
 
 
 
 
 
 
Average
 
Average
 
Remaining
 
 
 
 
 
 
Number of
 
Exercise
 
Grant Date
 
Life In
 
Intrinsic
 
 
 
Options
 
Price
 
Fair Value
 
Years
 
Value
 
Outstanding at January 1, 2015
 
 
1,607,075
 
$
4.41
 
$
2.46
 
 
9.0
 
$
-
 
Granted
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
Exercised
 
 
(10,392)
 
 
2.49
 
 
1.42
 
 
-
 
 
-
 
Forfeited
 
 
(7,832)
 
 
2.49
 
 
1.42
 
 
-
 
 
-
 
Outstanding at September 30, 2015
 
 
1,588,851
 
$
4.43
 
$
2.48
 
 
8.4
 
$
3,924,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at January 1, 2015
 
 
550,298
 
$
4.33
 
$
2.41
 
 
9.1
 
$
-
 
Vested
 
 
290,056
 
 
4.42
 
 
-
 
 
-
 
 
-
 
Exercised
 
 
(10,392)
 
 
2.49
 
 
-
 
 
-
 
 
-
 
Forfeited
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
Exercisable at September 30, 2015
 
 
829,962
 
$
4.38
 
$
2.46
 
 
8.4
 
$
2,064,000
 
 
The following table presents information related to stock options outstanding and exercisable at September 30, 2015:
 
Options Outstanding
 
Options Exercisable
 
 
 
 
 
 
 
Weighted Average
 
 
 
 
 
 
 
Outstanding
 
Remaining Life In
 
Exercisable Number of
 
Exercise Price
 
Number of Options
 
Years
 
Options
 
$
1.68
 
 
275,689
 
 
8.2
 
 
137,845
 
 
2.49
 
 
308,530
 
 
8.3
 
 
156,457
 
 
3.63
 
 
51,958
 
 
8.4
 
 
51,958
 
 
4.99
 
 
99,214
 
 
8.5
 
 
49,088
 
 
6.00
 
 
853,460
 
 
8.5
 
 
434,614
 
 
 
 
 
1,588,851
 
 
8.4
 
 
829,962
 
 
As of September 30, 2015, the unamortized value of options was $1,878,887. As of September 30, 2015, the unamortized portion will be expensed over a weighted average period of 2.0 years.
 
Restricted Stock Units (“RSUs”)
 
On August 14, 2014, the compensation committee of the board of directors granted two inducement RSU awards to Cesar Johnston, the Company’s Senior Vice President of Engineering. Under the first award, Mr. Johnston has the right to receive 100,000 shares of the Company’s common stock and this award vests over four years beginning on the first anniversary of his employment start date of July 14, 2014. In addition, Mr. Johnston was granted 20,000 performance based RSU awards. On February 26, 2015, the compensation committee of the board of directors determined that Mr. Johnston had successfully met all conditions provided for in the performance-based RSU award. The RSU’s had an aggregate grant date fair value of $1,356,000 based upon the fair value of the Company’s common stock on the date of grant. The awards granted vest over four years beginning on the first anniversary of the employee’s date of hire. Pursuant to the terms of the awards, the unvested shares terminate upon separation from the Company.
 
On January 2, 2015, the compensation committee of the board of directors granted to various directors, RSUs under which the holders have the right to receive an aggregate of  17,576 shares of the Company’s common stock. The awards granted vest fully on the first anniversary of the grant date. On June 23, 2015, one of the Company’s directors resigned and upon approval by the compensation committee of the board of directors, his RSU award of 4,394 shares became fully vested. Of the total amount of RSUs granted to directors on January 2, 2015, 13,182 remain unvested.
 
On January 22, 2015, the compensation committee of the board of directors granted to various employees and consultants, RSUs under which the holders have the right to receive an aggregate of 54,500 shares of the Company’s common stock. The awards granted were vested on the date of grant.
 
On February 26, 2015, the compensation committee of the board of directors granted to two employees RSUs under which the holders have the right to receive an aggregate of 6,800 shares of the Company’s common stock. The awards granted were vested on the date of grant.
 
On February 26, 2015, the compensation committee of the board of directors granted to Mr. Rizzone, the Company’s Chief Executive Officer, RSUs under which Mr. Rizzone has the right to receive 246,226 shares of the Company’s common stock. The awards granted vest over four years beginning on the first anniversary of the date of grant.
 
On February 26, 2015, the compensation committee of the board of directors granted to a member of the advisory board RSUs under which the holder has the right to receive 5,071 shares. The award vests 12.5% on March 31, 2015 and then an additional 12.5% on each three month anniversary thereafter until fully vested.
 
On May 21, 2015, the compensation committee of the board of directors granted to various employees and consultants inducement RSU awards under which the holders have the right to receive an aggregate of 205,081 shares of the Company’s common stock. The awards granted vest over four years beginning on the first anniversary of the date of hire.
 
On May 21, 2015, the compensation committee of the board of directors granted to Cesar Johnston, the Company’s Senior Vice President of Engineering, RSUs under which Mr. Johnston has the right to receive 1,500 shares of the Company’s common stock. This award was granted under the 2013 Equity Incentive Plan. The award granted vested fully on May 31, 2015.
 
On May 21, 2015, the compensation committee of the board of directors granted to two consultants RSUs under which the holders have the right to receive an aggregate of 7,042 shares of the Company’s common stock. These awards were granted under the 2014 Non-Employee Equity Compensation Plan. The awards granted were fully vested on the date of grant.
 
On May 21, 2015, in connection with patent applications, the compensation committee of the board of directors granted to various employees RSUs under which the holders have the right to receive an aggregate of 6,300 shares of the Company’s common stock. These awards were granted under the 2013 Equity Incentive Plan. Of the awards granted, 2,100 RSUs become fully vested on December 29, 2015, 3,500 become fully vested on December 30, 2015 and 700 become fully vested on December 31, 2015.
 
On May 21, 2015, the compensation committee of the board of directors granted to John Gaulding, director and chairman of the board, RSUs under the 2014 Non-Employee Equity Compensation Plan for which Mr. Gaulding has the right to receive 25,000 shares of the Company’s common stock. These shares were issued to Mr. Gaulding in connection with his role as an independent director and chairman of the Board of Directors. The award granted vests fully on January 1, 2016.
 
On May 21, 2015, the compensation committee of the board of directors accelerated the vesting of 13,074 previously issued RSUs, held by certain employees and consultants, to vest on April 30, 2015.
 
On July 1, 2015, the Company appointed Martin Cooper to the Board of Directors with a term expiring at the Company’s 2016 annual stockholders meeting. In connection with Mr. Cooper’s appointment to the Board, Mr. Cooper was issued RSUs under the Company’s 2014 Non-Employee Equity Compensation Plan covering a total of 5,061 shares of Company common stock that will vest in full on January 4, 2016.
 
On July 13, 2015, the Company appointed Brian Sereda Vice President and Chief Financial Officer. As an inducement to join the Company, Mr. Sereda received an inducement restricted stock unit award covering a total of 120,000 shares of common stock. The restricted stock unit award vests in four equal annual installments on July 13 of each of 2016, 2017, 2018 and 2019, subject to Mr. Sereda’s continued employment with the Company through each vesting date.
 
On August 20, 2015, the compensation committee of the board of directors granted to three consultants RSUs under which the holders have the right to receive an aggregate of 8,854 shares of the Company’s common stock (of which 1,416 were granted to Martin Cooper).  These awards were granted under the 2014 Non-Employee Equity Compensation Plan. The awards granted were fully vested on the date of grant.
 
During August 2015, the compensation committee of the board of directors granted to various employees inducement RSU awards under which the holders have the right to receive an aggregate of 74,992 shares of the Company’s common stock. The awards granted vest over four years beginning on the first anniversary of the date of hire.
 
The Company accounts for RSUs granted to consultants using the accounting guidance included in ASC 505-50 “Equity-Based Payments to Non-Employees” (“ASC 505-50”). In accordance with ASC 505-50, the Company estimates the fair value of the unvested portion of the RSU award each reporting period using the closing price of the Company’s common stock.
 
At September 30, 2015, the unamortized value of the RSUs was $9,431,246. The unamortized amount will be expensed over a weighted average period of 3.1 years. A summary of the activity related to RSUs for the nine months ended September 30, 2015 is presented below:
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
Average Grant
 
 
 
Total
 
Date Fair Value
 
Outstanding at January 1, 2015
 
 
733,628
 
$
10.49
 
RSUs granted
 
 
784,003
 
$
8.62
 
RSUs forfeited
 
 
(106,344)
 
$
9.74
 
Shares of common stock issued in exchange for RSUs
 
 
(236,297)
 
$
10.57
 
Outstanding at September 30, 2015
 
 
1,174,990
 
$
9.30
 
 
 
 
 
 
 
 
 
Vested at January 1, 2015
 
 
6,349
 
$
9.94
 
RSUs vested
 
 
231,448
 
$
10.57
 
RSUs forfeited
 
 
-
 
$
-
 
Shares of common stock issued in exchange for RSUs
 
 
(236,297)
 
$
10.57
 
Vested at September 30, 2015
 
 
1,500
 
$
7.94
 
   
Performance Share Units (“PSUs”)
 
Effective on May 21, 2015, the compensation committee of the board of directors granted to Stephan Rizzone PSUs under which Mr. Rizzone had the right to receive up to 639,075 shares of the Company’s common stock. The PSUs shall be earned based on the Company’s market capitalization growth (See Note 4).
 
On May 21, 2015, the compensation committee of the board of directors granted to its independent directors and executives, PSUs under which the holders have the right to receive up to 543,216 shares of the Company’s common stock. The PSUs shall be earned based on the Company’s achievement of market capitalization growth between the effective date of the Employment Agreement and the end of the Initial Employment Period. If the Company’s market capitalization is $100 million or less, no PSUs will be earned. If the Company reaches a market capitalization of $1.1 billion or more, 100% of the PSUs will be earned. For market capitalization between $100 million and $1.1 billion, the percentage of PSUs earned will be determined on a quarterly basis based on straight line interpolation.
 
On July 1, 2015, the Company appointed Martin Cooper to the Board of Directors with a term expiring at the Company’s 2016 annual stockholders meeting. In connection with Mr. Cooper’s appointment, he was granted PSUs under the Company’s 2015 Performance Share Unit Plan for which he is eligible to receive 31,954 shares of the Company’s common stock.
 
The Company determined that the PSUs were equity awards with both market and service conditions. The Company utilized a Monte Carlo simulation to determine the fair value of the market condition, as described above. Grantees of PSUs are required to be employed through December 31, 2018 in order to earn the entire award, if and when vested.
 
The fair value of the grant of PSUs to purchase a total of 1,214,245 shares of common stock was determined to be approximately $3,183,784, and is to be amortized over the service period of May 21, 2015 through December 31, 2018, on a straight-line basis. Amortization was $277,031 and $0 for the three months ended September 30, 2015 and 2014 and was $320,409 and $0 for the nine months ended September 30, 2015 and 2014, respectively.
 
At September 30, 2015, the unamortized value of the PSUs was approximately $2,863,375. The unamortized amount will be expensed over a weighted average period of 3.3 years. A summary of the activity related to PSUs for the nine months ended September 30, 2015 is presented below:
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
Average Grant
 
 
 
Total
 
Date Fair Value
 
Outstanding at January 1, 2015
 
 
-
 
$
-
 
PSUs granted
 
 
1,214,245
 
$
2.62
 
PSUs forfeited
 
 
-
 
$
-
 
Shares of common stock issued in exchange for PSUs
 
 
(1,072)
 
$
2.62
 
Outstanding at September 30, 2015
 
 
1,213,173
 
$
2.62
 
 
 
 
 
 
 
 
 
Vested at January 1, 2015
 
 
-
 
$
-
 
PSUs vested
 
 
1,072
 
$
2.62
 
PSUs forfeited
 
 
-
 
$
-
 
Shares of common stock issued in exchange for PSUs
 
 
(1,072)
 
$
2.62
 
Vested at September 30, 2015
 
 
-
 
$
-
 
 
Employee Stock Purchase Plan (“ESPP”)
 
The initial offering period for the ESPP is July 1, 2015 through December 31, 2015. On July 1, 2015 employees enrolled in the ESPP  agreed to have withheld up to approximately $339,623. If all participants exercised their option under the ESPP, approximately 53,921 shares would be issued in January 2016. Through September 30, 2015, employees have contributed an aggregate of $169,811. The first shares will be issued in January, 2015. As of September 30, 2015, 0 shares have been issued under this plan, with 600,000 shares reserved for future issuance.
 
The weighted-average grant-date fair value of the purchase option for each designated share purchased under this plan was approximately $2.46, which represents the fair value of the option, consisting of three main components: (i) the value of the discount on the enrollment date, (ii) the proportionate value of the call option for 85% of the stock and (iii) the proportionate value of the put option for 15% of the stock. The Company recognized compensation expense for the plan of $29,967 for both the three and nine months ended September 30, 2015.
 
The Company estimated the fair value of options granted during the nine months ended September 30, 2015 using the Black-Scholes option pricing model. The fair values of stock options granted were estimated using the following assumptions:
 
 
 
Options Granted
 
 
 
During the Nine
 
 
 
Months Ended
 
 
 
September 30, 2015
 
Stock price
 
$
7.41
 
Dividend yield
 
 
0
%
Expected volatility
 
 
65
%
Risk-free interest rate
 
 
0.13
%
Expected life
 
 
6 months
 
 
Stock-Based Compensation Expense
 
The following tables summarize total stock-based compensation costs recognized for the three and nine months ended September 30, 2015 and 2014:
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
Stock options
 
$
232,286
 
$
325,634
 
$
724,708
 
$
1,070,939
 
RSUs
 
 
968,385
 
 
381,856
 
 
3,145,520
 
 
389,482
 
IR warrants
 
 
-
 
 
39,410
 
 
85,831
 
 
198,983
 
PSUs
 
 
277,031
 
 
-
 
 
320,409
 
 
-
 
ESPP
 
 
29,967
 
 
-
 
 
29,967
 
 
-
 
Total
 
$
1,507,669
 
$
746,900
 
$
4,306,435
 
$
1,659,404
 
 
The total amount of stock-based compensation was reflected within the statements of operations as:
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
Research and development
 
$
582,320
 
$
329,138
 
$
2,116,631
 
$
568,390
 
General and administrative
 
 
739,842
 
 
165,228
 
 
1,673,427
 
 
657,738
 
Sales and marketing
 
 
185,507
 
 
252,534
 
 
516,377
 
 
433,276
 
Total
 
$
1,507,669
 
$
746,900
 
$
4,306,435
 
$
1,659,404