Stock Based Compensation | Note 8 – Stock Based Compensation Equity Incentive Plans 2013 Equity Incentive Plan In December 2013, the Company’s board of directors and stockholders approved the Company’s 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 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). Effective March 27, 2014, the aggregate total shares which may be issued under the 2013 Equity Incentive Plan were increased to 2,335,967. Effective on May 19, 2016, 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 2,150,000 shares, bringing the total number of approved shares to 4,485,967 under the 2013 Equity Incentive Plan. As of December 31, 2017, 829,515 shares of common stock remain eligible to be issued through equity-based instruments under the 2013 Equity Incentive Plan. 2014 Non-Employee On March 6, 2014, the Company’s board of directors and stockholders approved the 2014 Non-Employee non-employees. Effective on May 19, 2016, the Company’s stockholders approved the amendment and restatement of the 2014 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 350,000 shares, bringing the total number of approved shares to 600,000 under the 2014 Non-Employee As of December 31, 2017, 292,655 shares of common stock remain eligible to be issued through equity-based instruments under the 2014 Non-Employee 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 December 31, 2017, 31,951 shares of common stock remain eligible to be issued through equity based instruments under the Performance Share Unit Plan. 2017 Equity Inducement Plan On December 28, 2017, the Board of Directors approved the 2017 Equity Inducement Plan. Under the plan, the Board of Directors reserved 600,000 shares for the grant of RSUs. These grants will be administered by a committee of the Board of Directors or the Board of Directors acting as a Committee. 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. 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 December 31, 2017, 405,921 shares of common stock remain eligible to be issued through equity based instruments under the ESPP. For the year ended December 31, 2017, eligible employees contributed $869,066 through payroll deductions to the ESPP and 64,542 shares were deemed delivered for the year ended December 31, 2017. For the year ended December 31, 2016, eligible employees contributed $727,784 through payroll deductions to the ESPP and 85,356 shares were deemed delivered for the year ended December 31, 2016. Stock Option Award Activity The following is a summary of the Company’s stock option activity during the year ended December 31, 2017: Number of Weighted Weighted Intrinsic Outstanding at January 1, 2017 1,309,444 $ 4.55 7.1 $ 16,107,929 Granted — — — — Exercised (272,205 ) 3.60 — — Forfeited — — — — Outstanding at December 31, 2017 1,037,239 $ 4.80 6.4 $ 15,198,044 Exercisable at December 31, 2017 1,037,239 $ 4.80 6.4 $ 15,198,044 As of December 31, 2017, the unamortized value of options was $0. The aggregate intrinsic value of options exercised was $2,864,845, $984,144 and $92,728 for the years ended December 31, 2017, 2016 and 2015, respectively. No options were granted during the years ended December 31, 2017, 2016 and 2015. Restricted Stock Units (“RSUs”) During the first quarter of 2017, the compensation committee of the board of directors (“Compensation Committee”) granted various directors RSUs under which the holders have the right to receive an aggregate of 48,844 shares of common stock. These awards were granted under the 2014 Non-Employee During the first quarter of 2017, the Compensation Committee granted employees RSU awards under which the holders have the right to receive an aggregate of 246,000 shares of common stock. The awards vest over four years beginning on the anniversary of the employee hire dates. During the first quarter of 2017, the Compensation Committee granted various employees RSU awards under the 2013 Equity Incentive Plan under which the holders have the right to receive an aggregate of 351,080 shares of common stock. The awards vest over terms from two to four years. During the second quarter of 2017, the Compensation Committee granted various consultants RSUs under which the holders have the right to receive an aggregate of 8,400 shares of common stock. These awards were granted under the 2014 Non-Employee During the second quarter of 2017, the Compensation Committee granted employees RSU awards under which the holders have the right to receive an aggregate of 120,000 shares of common stock. A majority of the awards vest over four years beginning on the anniversary of the employee hire dates. During the second quarter of 2017, the Compensation Committee granted employees RSU awards under the 2013 Equity Incentive Plan under which the holders have the right to receive an aggregate of 308,059 shares of common stock. The awards vest over terms from two to four years. During the third quarter of 2017, the Compensation Committee granted employees RSU awards under the 2013 Equity Incentive Plan under which the holders have the right to receive an aggregate of 117,514 shares of common stock. The awards vest over terms from two to four years. During the fourth quarter of 2017, the Compensation Committee granted employees RSU awards under the 2013 Equity Incentive Plan under which the holders have the right to receive an aggregate of 53,188 shares of common stock. A majority of the awards vest over a four year term. The Company accounts for RSUs granted to consultants using the accounting guidance included in ASC 505-50 Non-Employees” 505-50”). 505-50, At December 31, 2017, the unamortized value of the RSUs was $24,701,605. The unamortized amount will be expensed over a weighted average period of 2.7 years. A summary of the activity related to RSUs for the year ended December 31, 2017 is presented below: Total Weighted Outstanding at January 1, 2017 2,052,223 $ 11.58 RSUs granted 1,253,085 $ 15.81 RSUs forfeited (249,928 ) $ 12.63 RSUs vested (781,055 ) $ 11.53 Outstanding at December 31, 2017 2,274,325 $ 13.75 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 market capitalization or market share price of the common stock. The PSUs originally issued during 2015 to certain board members and senior management 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. 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 below. Grantees of PSUs are required to be employed through December 31, 2018 in order to earn the entire award, if and when vested. No PSUs were granted during the year ended December 31, 2017. Performance Share Market capitalization $ 106,600,000 Dividend yield 0 % Expected volatility 75 % Risk-free interest rate 1.04 % The fair value of the grants of PSUs to purchase a total of 1,342,061 shares of common stock (including 1,278,153 PSUs granted under the 2015 Performance Share Unit Plan and 63,908 granted as an inducement) was determined to be approximately $3,218,000, and is amortized over the service period of May 21, 2015 through December 31, 2018, on a straight-line basis. On October 24, 2016, the compensation committee of the board of directors granted Mr. Rizzone a PSU award under the 2013 Equity Incentive Plan under which Mr. Rizzone has the right to receive 150,000 shares of the Company’s common stock. The shares of this award vest upon the Company’s stock price meeting specific targets. For the PSU award grant issued to Mr. Rizzone, a Monte Carlo simulation was used to determine the fair value at each of the five target prices of the Company’s common stock, using a market capitalization of $298,857,000, dividend yield of 0%, expected volatility of 75% and a risk-free interest rate of 0.66%. The fair value of the PSUs granted to Mr. Rizzone under the 2013 Equity Incentive Plan was determined to be $2,332,000, and is amortized over the estimated service period from October 24, 2016 through October 30, 2017. Amortization for all PSU awards was $1,661,650 and $2,285,683 for the years ended December 31, 2017 and 2016, respectively. At December 31, 2017, the unamortized value of all PSUs was approximately $819,910. The unamortized amount will be expensed over a weighted average period of 1.0 years. A summary of the activity related to PSUs for the year ended December 31, 2017 is presented below: Total Weighted Outstanding at January 1, 2017 1,153,617 $ 3.66 PSUs granted — $ — PSUs forfeited (111,960 ) $ 2.62 PSUs vested (90,000 ) $ 13.82 Outstanding at December 31, 2017 951,657 $ 2.65 Deferred Stock Units (“DSUs”) On January 4, 2016, the compensation committee of the board of directors granted to John Gaulding, director and chairman of the board, DSUs under the 2014 Non-Employee At December 31, 2017, the unamortized value of the DSUs was $0. A summary of the activity related to DSUs for the year ended December 31, 2017 is presented below: Total Weighted Outstanding at January 1, 2017 14,953 $ 8.36 DSUs granted — $ — DSUs forfeited — $ — DSUs vested (14,953 ) $ 8.36 Outstanding at December 31, 2017 — $ — Employee Stock Purchase Plan (“ESPP”) During the year ended December 31, 2017, there were two offering periods for the ESPP. The first offering period started on January 1, 2017 and concluded on June 30, 2017. The second offering period started on July 1, 2017 and concluded on December 31, 2017. During the year ended December 31, 2016, there were also two offering periods for the ESPP. The first offering period started on January 1, 2016 and concluded on June 30, 2016. The second offering period started on July 1, 2016 and concluded on December 31, 2016. During the year ended December 31, 2015, there was one initial offering period for the ESPP which started on July 1, 2015 and concluded on December 31, 2015. The weighted-average grant-date fair value of the purchase option for each designated share purchased under this plan was approximately $5.42, $5.20 and $2.46 during the years ended December 31, 2017, 2016 and 2015, respectively, which represents the fair value of the option, consisting of three main components: (i) the value of the discount on the enrollment date, (ii) the proportionate value of the call option for 85% of the stock and (iii) the proportionate value of the put option for 15% of the stock. The Company recognized compensation expense for the plan of $331,913, $318,735 and $113,217 for the years ended December 31, 2017, 2016 and 2015, respectively. The Company estimated the fair value of the purchase options granted during the years ended December 31, 2017, 2016 and 2015 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 Stock price range $ 16.08 -17.59 Dividend yield 0 % Expected volatility range 56 – 66 % Risk-free interest rate range 0.62 – 1.11 % Expected life 6 months For the Year Ended Stock price range $ 8.36 – 12.16 Dividend yield 0 % Expected volatility range 56 – 100 % Risk-free interest rate range 0.37 – 0.49 % Expected life 6 months For the Year Ended 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 years ended December 31, 2017, 2016 and 2015: For the Years Ended December 31, 2017 2016 2015 Stock options $ 764,723 $ 1,045,081 $ 1,037,399 RSUs 13,043,171 5,735,032 4,225,728 PSUs 1,661,650 2,285,683 489,239 DSUs 1,362 123,644 — ESPP 331,913 318,735 113,217 IR warrants — — 85,831 Total $ 15,802,819 $ 9,508,175 $ 5,951,414 The total amount of stock-based compensation was reflected within the statements of operations as: For the Years Ended December 31, 2017 2016 2015 Research and development $ 8,522,798 $ 4,226,304 $ 2,816,707 Sales and marketing 1,113,120 328,760 729,329 General and administrative 6,166,901 4,953,111 2,405,378 Total $ 15,802,819 $ 9,508,175 $ 5,951,414 |