Energous(WATT) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The company's Q1 2022 financial statements show increased revenue, a reduced net loss, and a decrease in cash and cash equivalents Condensed Balance Sheets The balance sheet as of March 31, 2022, shows a decrease in total assets, liabilities, and stockholders' equity Condensed Balance Sheet Summary | Balance Sheet Item | March 31, 2022 (unaudited, USD) | December 31, 2021 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $42,774,171 | $49,071,414 | | Total current assets | $43,473,245 | $50,229,902 | | Total assets | $44,402,052 | $51,371,075 | | Total current liabilities | $3,642,357 | $4,346,384 | | Total liabilities | $3,669,369 | $4,386,797 | | Total stockholders' equity | $40,732,683 | $46,984,278 | Condensed Statements of Operations Q1 2022 operations show increased revenue, reduced total costs and expenses, and a lower net loss compared to the prior year Q1 Statement of Operations Summary | Metric | Q1 2022 (USD) | Q1 2021 (USD) | | :--- | :--- | :--- | | Revenue | $215,961 | $145,065 | | Total costs and expenses | $7,371,505 | $8,672,852 | | Loss from operations | ($7,155,544) | ($8,527,787) | | Net loss | ($7,152,718) | ($8,525,763) | | Basic and diluted loss per share | ($0.09) | ($0.14) | Condensed Statements of Cash Flows Q1 2022 cash flow statements show increased cash used in operating activities, a net decrease in cash, and an ending balance of $42.77 million Q1 Cash Flow Summary | Cash Flow Activity | Q1 2022 (USD) | Q1 2021 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,356,971) | ($5,976,550) | | Net cash used in investing activities | ($44,489) | ($111,727) | | Net cash provided by financing activities | $104,217 | $117,013 | | Net decrease in cash and cash equivalents | ($6,297,243) | ($5,971,264) | | Cash and cash equivalents – ending | $42,774,171 | $44,758,397 | Notes to Financial Statements Notes to financial statements detail the company's business, liquidity, accounting policies, and significant customer concentration - The company develops WattUp® wireless power technology, consisting of semiconductor chipsets, software, and hardware for RF-based charging of electronic devices[17] - As of March 31, 2022, the company had $42.8 million in cash and believes this, along with anticipated revenues, will be sufficient to fund operations through May 2023[19] - The Strategic Alliance Agreement with Dialog Semiconductor was terminated in September 2021. A wind-down period will continue until September 2024 for certain existing customer relationships[68][96] - In Q1 2022, two customers accounted for approximately 53% of total revenue. As of March 31, 2022, two customers represented 63% of the accounts receivable balance[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial performance, noting increased revenue, reduced net loss due to lower operating expenses, and the need for future financing Results of Operations Q1 2022 results show revenue growth driven by production-level systems and a decrease in operating expenses, primarily from reduced R&D and G&A costs Comparison of Operating Results (Q1 2022 vs Q1 2021) | Line Item | Q1 2022 (USD) | Q1 2021 (USD) | Change (USD) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $215,961 | $145,065 | +$70,896 | Increase in production-level systems revenue | | Cost of Revenue | $203,249 | $0 | +$203,249 | Costs associated with production-level systems sold | | Research & Development | $3,527,146 | $4,591,244 | -$1,064,098 | Decrease in compensation (stock-based and payroll) due to vested awards and lower headcount | | Sales & Marketing | $1,613,590 | $1,794,212 | -$180,622 | Decrease in compensation, partially offset by higher tradeshow costs | | General & Administrative | $2,027,520 | $2,287,396 | -$259,876 | Decrease in compensation and legal fees, partially offset by higher recruiting and investor relations expenses | Liquidity and Capital Resources The company funds operations through securities offerings and customer payments, with $42.8 million cash sufficient through May 2023, but anticipates needing additional long-term financing - The company is meeting liquidity needs through proceeds from securities offerings, including $27,043,751 raised in Q4 2021[114] - Management believes cash on hand as of March 31, 2022, is sufficient to fund operations through May 2023[115] - The company will likely pursue additional financing (equity, debt, or commercial agreements) to sustain long-term operations, but there is no assurance such financing will be available[115][120] Item 3. Quantitative and Qualitative Disclosure About Market Risk The company reports no material change in market risk exposure during Q1 2022, referring to its prior Form 10-K for detailed discussion - There was no material change in the company's market risk exposure during Q1 2022[121] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2022[123] - No material changes to the internal control over financial reporting occurred during the quarter ended March 31, 2022[124] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any pending legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not currently involved in any material legal proceedings[126] Item 1A. Risk Factors The company faces significant risks including financial instability, technological challenges, intellectual property protection issues, regulatory hurdles, and operational dependencies Risks Related to Financial Condition Financial risks include a history of limited revenue, an accumulated deficit of $344 million, the need for additional financing, and the adverse effects of inflation on cost structure - The company has a limited operating history, has generated limited revenues, and had an accumulated deficit of approximately $344 million as of March 31, 2022[128] - Additional financing will likely be needed to achieve long-term business plans, but there is no guarantee it will be available on acceptable terms, if at all[129] - Inflation may adversely affect the business by increasing the overall cost structure, including supply chain and labor costs[130] Risks Related to Technology and Products Technology and product risks involve challenges in commercial feasibility, potential market non-acceptance, COVID-19 related delays, and supply chain disruptions from the Dialog alliance termination - The company may not be able to develop all targeted features or demonstrate the commercial feasibility of its technology at increasing power levels and distances[131][132] - The COVID-19 pandemic has delayed technology adoption by potential customers due to workforce and supply chain disruptions[134] - The termination of the Alliance Agreement with Dialog by its new owner, Renesas Electronics, may result in manufacturing delays, increased costs, or reduced revenues as the company transitions its supply chain[150] Risks Related to Intellectual Property and Regulation Intellectual property and regulatory risks include challenges in protecting IP, potential infringement lawsuits, and the need to obtain and maintain regulatory approvals for RF-based technology - Protecting proprietary rights is difficult and costly, and the company may be unable to defend its patents and other IP against third-party challenges[151] - The company may be subject to patent infringement lawsuits, which could be costly and prevent the sale of its products if it is found to be infringing[156][158] - The company's technology is subject to regulation by the FCC in the U.S. and other agencies globally. Failure to obtain necessary approvals in a timely and cost-efficient manner could materially harm the business[162][163] Other Risks Other risks include high dependency on key personnel, competition for talent, implications of being a 'smaller reporting company', stock price volatility, and no plans for dividends - The company is highly dependent on a small number of key executives and faces intense competition for attracting and retaining high-level engineering talent[164][165] - As a 'smaller reporting company,' reduced disclosure requirements could make the common stock less attractive to some investors[167] - The company has not paid dividends and has no immediate plans to do so, planning instead to reinvest any potential earnings[174] Item 2-5. Other Information The company reports no information for Items 2, 3, and 5, and states Item 4, Mine Safety Disclosures, is not applicable - There were no sales of unregistered securities, defaults upon senior securities, or other information to report for the period[182][183][184] Item 6. Exhibits This section lists exhibits filed with the quarterly report, including CEO and CFO certifications and Inline XBRL documents - The report includes an exhibit index listing required filings, such as officer certifications (31.1, 31.2, 32.1) and XBRL data files (101 series)[185][188]