Energous(WATT) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed financial statements for the three months ended March 31, 2024, detailing changes in assets, liabilities, equity, and cash flows Condensed Balance Sheets Total assets decreased to $13.1 million from $16.7 million due to lower cash, with liabilities increasing to $5.9 million from accrued severance Condensed Balance Sheet Data (in thousands) | Account | March 31, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,655 | $13,876 | | Total current assets | $11,681 | $15,007 | | Total assets | $13,092 | $16,676 | | Liabilities & Equity | | | | Accrued severance expense | $1,469 | $134 | | Total current liabilities | $5,567 | $4,621 | | Total liabilities | $5,936 | $5,178 | | Total stockholders' equity | $7,156 | $11,498 | | Total liabilities and stockholders' equity | $13,092 | $16,676 | Condensed Statements of Operations For Q1 2024, revenue was $64,000, with a $6.7 million operating loss and $6.6 million net loss, impacted by $1.6 million severance Condensed Statement of Operations Data (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $64 | $97 | | Total costs and expenses | $6,729 | $6,391 | | Severance expense | $1,563 | $0 | | Loss from operations | $(6,665) | $(6,294) | | Net loss | $(6,599) | $(6,653) | | Basic and diluted loss per common share | $(1.11) | $(1.63) | Condensed Statements of Cash Flows Net cash used in operating activities was $5.1 million, while financing activities provided $1.9 million, leading to a net decrease in cash of $3.2 million Condensed Statement of Cash Flows Data (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,073) | $(5,364) | | Net cash used in investing activities | $(1) | $0 | | Net cash provided by financing activities | $1,853 | $5,417 | | Net decrease in cash, cash equivalents and restricted cash | $(3,221) | $53 | | Cash, cash equivalents and restricted cash - ending | $10,715 | $26,340 | Note 1 - Business Organization, Nature of Operations The company develops wireless power networks technology for IoT devices, and a 1-for-20 reverse stock split was retroactively applied in August 2023 - The company develops wireless power networks technology (WPNT) using RF-based charging for IoT devices in markets such as retail, industrial, and medical[21][22] - A 1-for-20 reverse stock split was effected on August 16, 2023 All share and per-share data have been retroactively adjusted[24][25] Note 2 – Liquidity and Management Plans The company, with $10.7 million cash as of March 31, 2024, relies on securities offerings to fund operations and expects to pursue additional financing - As of March 31, 2024, the company had $10.7 million in cash and cash equivalents, which is expected to fund operations through May 2025[27] - The company has a history of net losses and relies on securities offerings for liquidity, having raised $1.8 million in Q1 2024[26] - Management expects to pursue additional financing through equity or debt offerings, bank financings, or strategic partnerships to sustain operations[28] Note 6 – Commitments and Contingencies The company recorded $1.5 million severance for its CEO, has $1.1 million in lease commitments, and is winding down its Dialog alliance - Following the departure of CEO Cesar Johnston in March 2024, the company recorded $1.5 million in severance expense, including accelerated stock-based compensation[69] - The company has total future lease payments of $1.1 million for its San Jose headquarters, with the lease term ending in Q3 2025[60][61] - The Strategic Alliance Agreement with Dialog (acquired by Renesas) is in a wind-down period that will conclude in September 2024, terminating the parties' exclusivity rights[75] Note 7 – Capital Stock and Warrants In February 2024, the company raised $1.8 million from a registered direct offering, detailing common stock reserved for future issuance - In February 2024, the company raised approximately $1.8 million in net proceeds from a registered direct offering of common stock, pre-funded warrants, and warrants[80] Common Stock Reserved for Future Issuance | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Stock options outstanding | 11,250 | 15,000 | | RSUs outstanding | 102,179 | 71,734 | | Warrants outstanding | 1,883,318 | 495,833 | | Total Reserved | 2,401,248 | 905,278 | Note 8 – Stock-Based Compensation Total stock-based compensation was $404,000 in Q1 2024, with $130,000 for CEO severance due to accelerated vesting Stock-Based Compensation Expense (in thousands) | Department | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Research and development | $107 | $209 | | Sales and marketing | $80 | $105 | | General and administrative | $87 | $208 | | Severance expense | $130 | $0 | | Total | $404 | $522 | - Accelerated vesting for the former CEO resulted in stock-based compensation expense of approximately $53,000 for options and $77,000 for RSUs during the quarter[93][98] Note 12 – Customer Concentrations Significant customer concentration exists, with 87% of Q1 2024 revenue from four customers and 92% of accounts receivable from two - For Q1 2024, four customers accounted for 87% of revenue[117] - As of March 31, 2024, two customers accounted for 92% of the accounts receivable balance[117] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, noting flat revenue, increased operating loss from severance, and reliance on financing Results of Operations Q1 2024 revenue was $0.1 million, with operating loss increasing to $6.7 million due to $1.6 million severance, despite R&D and S&M cost cuts - Revenue was $0.1 million for Q1 2024, a slight decrease from Q1 2023 due to lower transmitter sales volume[125] - Research and development costs decreased by $0.7 million (24%) YoY, primarily due to reduced employee compensation, engineering supplies, and legal fees[128] - Sales and marketing costs decreased by $0.3 million (28%) YoY, driven by lower payroll, stock-based compensation, and marketing/tradeshow costs[129] - A severance expense of $1.6 million was recorded in Q1 2024, mostly attributed to the departure of the former President and CEO[131] Liquidity and Capital Resources The company relies on securities offerings for liquidity, raising $1.8 million in Q1 2024, and anticipates additional capital for R&D and commercialization - The company is meeting liquidity requirements through securities offerings, raising net proceeds of $1.8 million in Q1 2024[136] - Management believes current cash, along with proceeds from future financing and cost reductions, will fund operations for at least the next twelve months[137] - In February 2024, the company raised approximately $1.8 million in net proceeds from a registered direct offering of common stock and warrants[141] Cash Flow Summary (in millions) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(5.1) | $(5.4) | | Net Cash Provided by Financing Activities | $1.9 | $5.4 | Quantitative and Qualitative Disclosure About Market Risk The company is not required to provide this information as it qualifies as a smaller reporting company - The company is not required to provide this information as it qualifies as a smaller reporting company[146] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2024[148] - There were no changes in internal control over financial reporting during Q1 2024 that have materially affected, or are reasonably likely to materially affect, internal controls[149] PART II – OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[151] Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year 2023 - No material changes have occurred to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2023[152] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[153] Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[155] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents and required certifications