Energous Corporation — FY2023 Form 10-K
Business context and reporting period: This annual report covers the year ended December 31, 2023, with FY2022 comparatives. Energous develops RF-based wireless power network technology for IoT devices, including transmitters, receivers, chipsets, software and antennas. Target applications include asset-tracking and cold-chain tags, electronic shelf labels and IoT sensors. The company remains in an early commercialization and development stage.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $474,184 | $851,321 |
| Cost of revenue | $279,083 | $1,277,565 |
| Gross profit (loss), derived | $195,101 | $(426,244) |
| Total expenses | $22,573,929 | $27,537,646 |
| Operating loss | $(22,099,745) | $(26,686,325) |
| Net loss | $(19,366,763) | $(26,275,260) |
| Net cash used in operations | $(19,248,510) | $(23,636,747) |
| Cash and cash equivalents at year-end | $13,936,050 | $26,287,293 |
Revenue fell approximately 44% year over year, primarily due to lower production-level systems sales volume. Gross margin, calculated from reported revenue and cost of revenue, was approximately 41% in 2023 versus negative 50% in 2022. The smaller operating and net losses reflected lower operating costs; FY2023 net income also benefited from a $2.52 million non-cash gain on the change in fair value of warrant liability and $809,227 of interest income.
At December 31, 2023, current assets were $15.0 million and current liabilities were $4.62 million. Total liabilities were $5.18 million, including $1.26 million of operating lease liabilities; the filing does not report borrowings under conventional debt. Stockholders’ equity declined to $11.50 million from $24.65 million. The accumulated deficit was approximately $382.0 million.
FY2023 financing cash inflows were $7.08 million, primarily from ATM and registered offerings. The company states that year-end cash, expected financing proceeds, cost reductions and anticipated revenue should fund operations through March 2025. It also says it may need further financing, with no assurance it will be available on acceptable terms or at all. A February 2024 registered offering generated approximately $1.8 million in net proceeds.
Material developments, outlook and risks
- Operating expenses declined about $5.0 million year over year. R&D, sales and marketing, and general and administrative expenses all decreased; severance expense was $359,419 versus $798,391.
- The company completed a 1-for-20 reverse stock split in August 2023 to regain Nasdaq’s minimum bid-price compliance. Common shares outstanding were 5,471,121 at year-end; 6,082,686 were reported outstanding as of March 25, 2024.
- Management describes the wireless-power market as nascent and unproven. Commercial success depends on customer adoption, technical execution, regulatory approvals, partnerships and access to capital. No specific revenue or earnings guidance is provided.
- Three customers represented approximately 70% of FY2023 revenue. Customer concentration and the uncertain timing and volume of partner orders create revenue volatility risk.
- The 2023 warrants are liability-classified and remeasured at fair value. The $2.52 million FY2023 gain was non-cash, and future fair-value changes may materially affect reported earnings.
- Regulatory progress includes completion of the PowerBridge approval process in several named markets by year-end 2023; the company reported approvals in over 110 countries as of March 1, 2024. Additional approvals may still be needed for particular products or applications.
- On March 24, 2024, Cesar Johnston ceased serving as CEO but remained a director. Mallorie Burak was appointed interim principal executive officer while the Board searches for a permanent successor.
- Management concluded internal controls over financial reporting were effective at year-end. The auditor issued an unqualified opinion on the financial statements and identified going-concern assessment as a critical audit matter, citing reliance on forecasts and future funding.
Important facts for investors to verify
- Whether Energous can convert demonstrations, development work and regulatory approvals into sustained commercial orders and revenue.
- Whether cash burn, planned cost reductions and financing proceeds support operations through March 2025, and what additional capital may be required.
- Customer concentration, order timing, collections and potential changes in partner inventory or purchasing.
- The dilution and accounting effects of ATM sales, subsequent offerings, warrants and other equity-linked securities.
- The permanent CEO succession, execution of the commercialization strategy, and any material changes in product approvals or technical performance.
- The terms and remaining obligations of leases and the hosted design-software agreement, including quarterly payments of approximately $233,000 through Q2 2024.