Energous Corporation (Nasdaq: WATT) — Q1 2023 10-Q
Reporting period: Three months ended March 31, 2023. Energous develops WattUp RF-based wireless charging technology for electronic devices, targeting applications including electronic shelf labels, IoT sensors, wearables and tracking devices. The interim financial statements are unaudited.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparator |
|---|---|---|
| Revenue | $96,676 | $215,961 |
| Gross loss | $42,137 | Gross profit $12,712 |
| Gross margin | -43.6% | 5.9% |
| Operating loss | $6.29 million | $7.16 million |
| Net loss | $6.65 million | $7.15 million |
| Basic and diluted loss per share | $0.08 | $0.09 |
| Operating cash use | $5.36 million | $6.36 million |
Revenue declined 55% year over year, primarily from lower production-level system sales. Operating expenses fell to $6.25 million from $7.17 million, led by lower R&D and sales and marketing costs. Interest income rose to $233,222 from $2,826. Q1 2023 net loss includes $591,670 of offering costs related to liability-classified warrants.
At March 31, cash and cash equivalents were $26.34 million, current assets were $27.16 million, and current liabilities were $6.84 million. Total liabilities were $7.93 million, including $3.14 million in warrant liability and $1.79 million in operating lease liabilities. The filing reports no borrowings. Stockholders’ equity was $21.39 million. Cash increased by $52,667 during the quarter, as $5.42 million of financing cash inflows nearly offset operating cash use.
Changes, financing and dilution
- Compared with Q1 2022, operating loss improved by $861,485 and net loss by $500,211, while revenue fell by $119,285 and gross margin moved from positive to negative.
- The company raised funds through an ATM offering and a March underwritten offering. The latter issued 8.25 million common shares and warrants to purchase another 8.25 million shares at $0.40 each, immediately exercisable and expiring in 2029. The warrants are accounted for as a liability; their March 31 fair value was $3.135 million.
- Shares issued and outstanding rose from 78.94 million at December 31, 2022 to 91.03 million at March 31, 2023. The reported weighted-average share count for Q1 was 81.41 million.
- Two customers represented approximately 84% of Q1 revenue and 80% of quarter-end receivables, indicating substantial customer concentration.
Outlook, risks and contingencies
Management expects March 31 cash, together with anticipated revenue, to fund operations through May 2024. It also expects to pursue additional financing; availability and acceptable terms are not assured. The filing provides no revenue or earnings guidance.
- The company has limited revenue, continuing operating losses, and an accumulated deficit of approximately $369.3 million. Management says the market for its technology remains nascent and unproven; commercialization depends on customer adoption, technical development, regulatory approvals, competition and access to capital.
- Nasdaq notified Energous in January 2023 that its share price had been below the $1 minimum for 30 consecutive trading days. The disclosed compliance period ran through July 19, 2023; continued listing was not assured.
- Dialog/Renesas had terminated the strategic alliance agreement. A wind-down period continues through September 2024 for covered existing customer relationships, but the parties’ exclusivity rights have ended.
- Operating lease commitments were $1.86 million in undiscounted future payments. The company also disclosed quarterly payments of approximately $233,000 under a hosted design-software agreement through Q2 2024.
- Management reported disclosure controls were effective as of March 31, 2023 and no material change in internal control over financial reporting during the quarter. The company reported no pending legal proceedings believed likely to have a material adverse effect.
Important facts for investors to verify
- Whether cash burn, customer receipts and any additional financing support the stated runway through May 2024.
- Whether WattUp products achieve commercial adoption and revenue growth, given low revenue and customer concentration.
- The potential dilution from the 8.25 million warrants and other equity awards, and future earnings volatility from warrant fair-value remeasurement.
- Nasdaq listing compliance status after the July 19, 2023 deadline.
- The impact of the ended Dialog/Renesas alliance and the remaining wind-down period on customer arrangements and commercialization.