Energous(WATT) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Energous Corporation's unaudited condensed financial statements and notes detail financial position, operations, cash flows, and policies Balance Sheets The balance sheets present the company's financial position, showing assets, liabilities, and stockholders' equity at specific dates | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :------------------ | | Cash and cash equivalents | $8,662 | $1,353 | | Total current assets | $10,965 | $2,912 | | Total assets | $12,337 | $3,795 | | LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | Total current liabilities | $2,724 | $4,872 | | Total liabilities | $3,563 | $4,872 | | Total stockholders' equity (deficit) | $8,774 | $(1,077) | | Total liabilities and stockholders' equity (deficit) | $12,337 | $3,795 | Condensed Statements of Operations The condensed statements of operations detail the company's revenues, expenses, and net loss over specific periods | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $975 | $46 | $1,318 | $110 | | Gross profit (loss) | $338 | $(76) | $431 | $(121) | | Loss from operations | $(2,780) | $(4,651) | $(6,391) | $(11,316) | | Net loss | $(2,788) | $(4,258) | $(6,154) | $(10,857) | | Basic and diluted loss per common share | $(0.08) | $(0.65) | $(0.19) | $(1.74) | Condensed Statement of Changes in Stockholders' Equity (Deficit) This statement outlines changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Balance as of January 1, 2025 and June 30, 2025 | (in thousands) | Balance as of January 1, 2025 | Balance as of June 30, 2025 | | :--------------- | :---------------------------- | :-------------------------- | | Common Stock (Shares) | 13,575,907 | 39,260,571 | | Common Stock (Amount) | $1 | $1 | | Additional Paid-in Capital | $399,362 | $415,367 | | Accumulated Deficit | $(400,440) | $(406,594) | | Total Stockholders' Equity (Deficit) | $(1,077) | $8,774 | Balance as of January 1, 2024 and June 30, 2024 | (in thousands) | Balance as of January 1, 2024 | Balance as of June 30, 2024 | | :--------------- | :---------------------------- | :-------------------------- | | Common Stock (Shares) | 5,471,121 | 6,554,296 | | Common Stock (Amount) | $1 | $1 | | Additional Paid-in Capital | $393,539 | $395,906 | | Accumulated Deficit | $(382,042) | $(392,899) | | Total Stockholders' Equity (Deficit) | $11,498 | $3,008 | Condensed Statements of Cash Flows The cash flow statements summarize cash generated and used by operating, investing, and financing activities | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(7,546) | $(10,843) | | Net cash used in investing activities | $(37) | $(58) | | Net cash provided by financing activities | $14,892 | $1,820 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $7,309 | $(9,081) | | Cash, cash equivalents and restricted cash - ending | $8,662 | $4,855 | Notes to the Condensed Financial Statements These notes provide detailed explanations and disclosures for the condensed financial statements, covering business, liquidity, and accounting policies Note 1 - Business Organization, Nature of Operations Energous Corporation develops scalable, over-the-air Wireless Power Network (WPN) technology for IoT devices - Energous Corporation's core business is developing scalable, over-the-air Wireless Power Network (WPN) technology for Internet of Things (IoT) devices, integrating advanced semiconductor chipsets, software controls, hardware designs, and antenna systems[18] - The company holds a patent portfolio exceeding 250 patents, supporting both near-field and at-a-distance wireless charging, and enabling battery-free IoT devices for applications such as RF Tags, IoT Sensors, and Electronic Shelf Labels[19][20] Note 2 – Liquidity and Management Plans The company improved liquidity with revenue growth and financing, alleviating prior going concern doubts for the next 12 months | Financial Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $1,000 | $46 | $1,300 | $110 | | Net Loss | $(2,800) | $(4,300) | $(6,200) | $(10,900) | | Net Cash Used in Operating Activities | N/A | N/A | $(7,500) | $(10,800) | - As of June 30, 2025, the Company had cash and cash equivalents of $8.7 million. The ATM Program generated aggregate net proceeds of $15.8 million during the six months ended June 30, 2025[22] - Based on current operating levels and cost reductions, the Company believes it has sufficient cash and access to capital to fund operations for the next 12 months, alleviating substantial doubt about its ability to continue as a going concern[22][126] Note 3 – Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including revenue recognition, warrant valuation, and fair value measurements - The Company classifies warrants as either equity or liability instruments based on specific terms and accounting guidance (ASC 480 and ASC 815), with liability-classified warrants re-measured at fair value each period and changes recognized in the statements of operations[31][32] - Revenue is recognized using a five-step approach under ASC 606, primarily from product sales (e.g., PowerBridge transmitter systems) and product development projects, with recognition occurring when performance obligations are satisfied[39][40][44] - The fair value hierarchy categorizes inputs into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs). The Company's warrant liability is a Level 3 measurement[35][36][37] Note 4 – Prepaid Expenses and Other Current Assets This note details the components of prepaid expenses and other current assets, showing a slight decrease from December 2024 | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------------ | | Deposit with contract manufacturer | $430 | $323 | | Prepaid insurance | $306 | $163 | | Refund receivable for stock registration fees | $122 | — | | Prepaid and deferred financing costs | — | $372 | | Total | $953 | $983 | Note 5 – Inventory The company's inventory increased due to higher raw materials and the introduction of work-in-process and finished goods | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------------ | | Raw materials | $567 | $498 | | Work-in-process | $45 | — | | Finished goods | $75 | — | | Total | $687 | $498 | Note 6 – Property and Equipment Net property and equipment decreased due to accumulated depreciation and the disposal of fully depreciated assets | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------------ | | Computer software | $936 | $900 | | Computer hardware | $1,643 | $2,412 | | Furniture and fixtures | $206 | $489 | | Leasehold improvements | $417 | $783 | | Less – accumulated depreciation | $(2,896) | $(4,228) | | Total property and equipment, net | $306 | $356 | - The Company disposed of $1.4 million in aggregate of fully depreciated assets during the three and six months ended June 30, 2025[63] Note 7 – Accrued Expenses Accrued expenses slightly decreased due to reductions in legal expenses and interest, offset by other accrued items | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------------ | | Accrued compensation | $733 | $740 | | Accrued legal expenses | $67 | $178 | | Accrued tariffs and value added tax | $62 | — | | Accrued interest | $3 | $90 | | Other accrued expenses | $206 | $127 | | Total | $1,071 | $1,135 | Note 8 – Commitments and Contingencies The company amended its office lease, approved a 2025 bonus plan, and detailed severance agreements - On March 19, 2025, the Company amended its San Jose office lease, relocating to a smaller suite and extending the lease through December 31, 2027. This resulted in an increase of approximately $0.9 million to both ROU asset and operating lease liability[66] Operating Lease Commitments | Operating Lease Commitments (in thousands) | Amount | | :--------------------------------------- | :----- | | Total future lease payments | $1,391 | | Present value discount (8.0% weighted average) | $(132) | | Total operating lease liabilities | $1,259 | - The Company accrued $0.5 million in bonus expense under the 2025 Bonus Plan as of June 30, 2025, to be paid in Q1 2026[73] - The Company recorded $1.2 million in total severance expense pertaining to the former CEO's departure during the six months ended June 30, 2024[75] Note 9 – Short-term Debt The company financed insurance premiums and refinanced a subordinated loan, which was fully repaid in July 2025 - On April 29, 2025, the Company financed approximately $308,000 in business insurance premiums, with an outstanding balance of approximately $241,000 as of June 30, 2025[77] - The Company entered into an amended subordinated business loan agreement with Agile Capital Funding, LLC for a new term loan of $997,000 in November 2024. This loan was fully repaid on July 7, 2025[79][80][115] Note 10 – Capital Stock and Warrants The company engaged in various financing activities, including offerings, an ATM program, and a withdrawn Regulation A offering - The Company issued 412,500 shares of common stock and warrants to purchase up to 412,500 shares (2023 Warrants) in March 2023, generating $2.7 million in net proceeds. The exercise price of the 2023 Warrants was adjusted to $0.28 as of June 30, 2025[82][83] - In February 2024, the Company completed a registered direct offering, selling 570,000 shares of common stock, pre-funded warrants for 450,409 shares, and warrants for 1,020,409 shares (2024 Warrants), yielding approximately $1.8 million in net proceeds[84] - The At-the-Market (ATM) Program generated net proceeds of approximately $2.0 million during the three months ended June 30, 2025, and $15.8 million during the six months ended June 30, 2025. As of June 30, 2025, approximately $77.2 million in shares remained available under the ATM Program[88][160] - The Company withdrew its Regulation A Offering on March 11, 2025, resulting in a one-time write-off of $0.7 million in expenses related to the abandoned financing transaction[90] Common Stock Reserved for Future Issuance | Common Stock Reserved for Future Issuance | June 30, 2025 | June 30, 2024 | | :---------------------------------------- | :------------ | :------------ | | RSUs outstanding | 340,820 | 577,629 | | Warrants outstanding | 1,432,909 | 1,432,909 | | Shares available for issuance under the 2024 Equity Incentive Plan | 2,345,081 | 233,570 | | Total | 4,118,810 | 2,394,886 | Note 11 – Stock-Based Compensation Stock-based compensation activities include equity plans, RSU grants, and the termination of the ESPP, with decreased expense in 2025 - The 2024 Equity Incentive Plan was approved by stockholders, replacing prior equity plans, and had 2,345,081 shares of common stock available for issuance as of June 30, 2025[95][96] - As of June 30, 2025, 340,820 RSUs were outstanding, with an unamortized fair value of $0.3 million to be expensed over a weighted average period of 2.8 years[100] - The Employee Stock Purchase Plan (ESPP) was terminated on January 21, 2025, with no transactions recorded under it in 2025[102] Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $10 | $52 | $19 | $159 | | Sales and marketing | $61 | $70 | $123 | $150 | | General and administrative | $26 | $21 | $49 | $108 | | Severance expense | — | — | $16 | $130 | | Cost of revenue | — | — | $1 | — | | Total | $97 | $143 | $208 | $547 | Note 12 – Warrant Liability The company's 2023 Warrants are classified as a liability due to variable exercise price adjustments, with fair value decreasing to $0.1 million - The 2023 Warrants, issued in March 2023, are classified as a liability due to their variable exercise price adjustments, which do not meet the criteria for equity treatment under ASC 815-40[106][108][109] - As of June 30, 2025, the fair value of the 2023 Warrant liability was $0.1 million, reflecting a decrease of $0.3 million during the six months ended June 30, 2025[109][113] Note 13 – Fair Value Measurements The company measures its warrant liability at fair value using Level 3 inputs and a Monte Carlo simulation model | (in thousands) | Balance as of June 30, 2025 | Balance as of December 31, 2024 | | :--------------- | :-------------------------- | :------------------------------ | | Cash equivalents (Level 1) | $8,662 | $1,353 | | Warrant liability (Level 3) | $91 | $358 | - The Company uses a Monte Carlo simulation model with Level 3 inputs (share price, exercise price, term, volatility, risk-free rate, dividend yield) to estimate the fair value of the 2023 Warrant liability[111][112] - The fair value of the 2023 Warrant liability decreased by $0.3 million during the six months ended June 30, 2025, from $358,000 to $91,000[112][113] Note 14 – Customer Concentrations The company has significant customer concentration, with two customers accounting for a large portion of revenue and receivables - Two customers accounted for approximately 94% of the Company's revenue for the three months ended June 30, 2025, and 88% for the six months ended June 30, 2025[114] - Two customers accounted for approximately 89% of the Company's accounts receivable balance as of June 30, 2025[114] Note 15 – Subsequent Events Subsequent to June 30, 2025, the company settled additional ATM sales and fully repaid its short-term debt - From July 1, 2025, to July 28, 2025, the Company settled sales of 4,400,169 shares of common stock for net proceeds of approximately $1.7 million under the ATM Program[115] - On July 7, 2025, the Company made an early payoff of its short-term debt with Agile Capital Funding, LLC and Agile Lending, LLC, with no further obligations under the loan agreement[115] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, highlighting revenue growth, reduced losses, improved liquidity, and accounting policies Forward-Looking Statements This section contains cautionary statements regarding forward-looking information, emphasizing inherent uncertainties and risks - The report contains forward-looking statements based on current beliefs and assumptions, which are subject to inherent uncertainties, risks, and changes in circumstances that could cause actual results to differ materially[116] - Key factors influencing actual results include the ability to develop and commercialize technology, timing of customer implementations, regulatory approvals, market acceptance, competition, intellectual property protection, and maintaining financial position and liquidity[116] Overview Energous Corporation specializes in scalable, over-the-air Wireless Power Network (WPN) technology for IoT devices, leveraging over 250 patents - Energous Corporation develops scalable, over-the-air Wireless Power Network (WPN) technology that integrates advanced semiconductor chipsets, software controls, hardware designs, and antenna systems for RF-based charging of IoT devices[117] - The Company's solutions, backed by over 250 patents, support both near-field and at-a-distance wireless charging, enabling battery-free IoT devices for applications like RF Tags, IoT Sensors, and Electronic Shelf Labels[118][119] Nasdaq Market Compliance The company received a Nasdaq notification for minimum bid price non-compliance and plans a reverse stock split to regain compliance - Energous Corporation received a notification from Nasdaq regarding non-compliance with the $1.00 minimum bid price rule (Nasdaq Marketplace Rule 5550(a)(2))[121] - The Company was granted an extension until August 25, 2025, to regain compliance, with the intention to cure the deficiency by effecting a reverse stock split if necessary[121][123] - Stockholders approved a proposal for an amendment to effect a reverse stock split at a ratio between 1-for-5 and 1-for-50, at the Board's discretion[122] Critical Accounting Policies and Estimates Management discusses critical accounting policies, emphasizing estimates for stock-based compensation, revenue, inventory, and warrant liabilities - The preparation of financial statements requires management to make significant estimates and assumptions, which can be subjective and complex, affecting reported asset and liability amounts and expenses[124][125] - Substantial doubt about the Company's ability to continue as a going concern was alleviated by financing received in 2025 and cost reductions, with anticipated cash flows sufficient for the next 12 months[126] - The Company accounts for warrants as equity or liability instruments based on specific terms, with liability-classified warrants re-measured at fair value, and recognizes revenue using the five-step approach under ASC 606[128][129][130][133] Results of Operations The company experienced substantial revenue growth and reduced net losses due to increased sales and significant operating expense reductions Comparison of Three Months Ended June 30, 2025 and 2024 Revenue surged by 2,020% to $1.0 million, and net loss decreased by 35% due to expense reductions | (in thousands) | 2025 | 2024 | $ Change | % Change | | :--------------- | :--- | :--- | :------- | :------- | | Revenue | $975 | $46 | $929 | 2,020 % | | Cost of revenue | $637 | $122 | $515 | 422 % | | Gross profit (loss) | $338 | $(76) | $414 | 545 % | | Total operating expenses | $3,118 | $4,575 | $(1,457) | (32)% | | Loss from operations | $(2,780) | $(4,651) | $1,871 | 40 % | | Net loss | $(2,788) | $(4,258) | $1,470 | 35 % | - Revenue increased by 2,020% year-over-year, primarily due to the expansion of commercial applications with multinational enterprise retailers deploying WPN technology[135] - Research and development costs decreased by $1.2 million (52%) due to reductions in engineering components, circuit boards, software, and payroll costs[139] - General and administrative costs decreased by $0.4 million (25%) due to lower legal fees and annual meeting-related expenses, partially offset by increased payroll costs from bonus plan milestones[141] Comparison of Six Months Ended June 30, 2025 and 2024 Revenue grew by 1,098% to $1.3 million, and net loss decreased by 43% due to expense reductions and lower severance costs | (in thousands) | 2025 | 2024 | $ Change | % Change | | :--------------- | :--- | :--- | :------- | :------- | | Revenue | $1,318 | $110 | $1,208 | 1,098 % | | Cost of revenue | $887 | $231 | $656 | 284 % | | Gross profit (loss) | $431 | $(121) | $552 | 456 % | | Total operating expenses | $6,822 | $11,195 | $(4,373) | (39)% | | Loss from operations | $(6,391) | $(11,316) | $4,925 | 44 % | | Net loss | $(6,154) | $(10,857) | $4,703 | 43 % | - Revenue increased by 1,098% year-over-year, primarily due to the expansion of commercial applications with multinational enterprise retailers deploying WPN technology[148] - Research and development costs decreased by $2.2 million (49%) due to lower headcount, reduced engineering components, and decreased stock-based compensation[151] - General and administrative costs decreased by $1.5 million (41%) due to lower legal fees, annual meeting expenses, consulting, and insurance premiums, partially offset by increased payroll costs from bonus plan milestones[153] - Severance expense decreased by $0.9 million (69%) due to lower non-executive employee separations in 2025 compared to the former CEO's departure in 2024[154] ATM Offering Program The ATM program generated significant capital, with $15.8 million in net proceeds during the first six months of 2025 - During the three months ended June 30, 2025, the Company sold 6,793,371 shares under the ATM Program for net proceeds of approximately $2.0 million[160] - For the six months ended June 30, 2025, the ATM Program generated net proceeds of approximately $15.8 million from the sale of 25,496,676 shares[160] - As of June 30, 2025, approximately $77.2 million in shares of common stock remained available for issuance under the ATM Program[160] - From July 1, 2025, through July 28, 2025, the Company settled additional sales of 4,400,469 shares for net proceeds of approximately $1.7 million[161] Agile Subordinated Loan Agreement The company refinanced a subordinated loan for $997,000 in November 2024, which was fully repaid in July 2025 - The Company entered into an amended subordinated business loan agreement with Agile Capital Funding, LLC in November 2024, providing a new term loan of $997,000[163] - The New Term Loan, with an aggregate repayment amount of $1,415,740, was fully repaid on July 7, 2025, prior to its maturity date[163] Liquidity and Capital Resources Liquidity improved significantly with $8.7 million in cash, primarily from ATM proceeds, sufficient for the next 12 months - As of June 30, 2025, the Company had cash and cash equivalents of $8.7 million[164] - Net cash used in operating activities was $7.5 million for the six months ended June 30, 2025, compared to $10.8 million for the same period in 2024[164] - The ATM Program provided $15.8 million in net proceeds during the six months ended June 30, 2025, significantly contributing to liquidity[164] - The Company believes it has sufficient cash and access to capital to fund operations for the next 12 months, but may pursue additional financing (equity, debt, commercial agreements) to sustain operations as it scales its technology[166][167] Cash Flows Net cash used in operating activities decreased, while financing activities provided $14.9 million, improving the cash position - Net cash used in operating activities was $7.5 million for the six months ended June 30, 2025, a decrease from $10.8 million in the prior year, primarily due to reduced net loss and changes in working capital[168][169] - Net cash used in investing activities was $37,000 for the six months ended June 30, 2025, consistent with minimal purchases of property and equipment[170] - Net cash provided by financing activities was $14.9 million for the six months ended June 30, 2025, mainly from $15.8 million in net proceeds from the ATM Program, partially offset by loan repayments[171] Item 3. Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, Energous Corporation is not required to provide market risk disclosures - The Company is exempt from providing quantitative and qualitative disclosure about market risk as it qualifies as a smaller reporting company[172] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025. There were no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, ensuring timely and accurate reporting of material information[173][174] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[175] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect - The Company is not currently party to any pending legal proceedings that are believed to have a material adverse effect on its combined financial position, results of operations, or cash flows[177] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have occurred to the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[178] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - None[179] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - None[180] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[181] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[182] Item 6. Exhibits This section lists all exhibits filed, furnished, or incorporated by reference as part of this Quarterly Report on Form 10-Q - The exhibits include the Second Amended and Restated Certificate of Incorporation, Bylaws, Amended and Restated 2024 Equity Incentive Plan, certifications (Rule 13a-14(a), 18 U.S.C Section 1350), and Inline XBRL documents[183]