Energous Corporation (Nasdaq: WATT) — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Energous develops RF-based wireless power technology for IoT devices, including asset-tracking tags, sensors and electronic shelf labels. The interim financial statements are unaudited.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $64,000 | $97,000 |
| Cost of revenue | $109,000 | $139,000 |
| Operating loss | $6.665 million | $6.294 million |
| Net loss | $6.599 million | $6.653 million |
| Net cash used in operations | $5.073 million | $5.364 million |
- Revenue fell about 34%, primarily because of lower transmitter sales volume. Cost of revenue exceeded revenue in both periods; the resulting gross loss was $45,000 versus $42,000. Operating costs were many times revenue.
- Research and development was $2.349 million, down 24%; sales and marketing was $873,000, down 28%; general and administrative expense was $1.835 million, down 6%. These reductions were more than offset at the operating-loss level by $1.563 million of severance expense.
- Cash and cash equivalents were $10.655 million at March 31, down from $13.876 million at December 31, 2023. Including restricted cash, cash totaled $10.715 million. Q1 cash declined by $3.221 million.
- Financing provided $1.853 million, principally from a February registered offering that generated approximately $1.8 million net. There is no borrowings balance reported; liabilities include operating leases of $1.053 million and a $702,000 warrant liability.
- Current assets were $11.681 million and current liabilities $5.567 million. Stockholders’ equity fell to $7.156 million from $11.498 million.
Changes, unusual items and outlook
- Former CEO Cesar Johnston departed effective March 24, 2024. The company recorded $1.563 million of related severance expense, including accelerated equity-award compensation; $1.4 million remained accrued at quarter-end.
- The company reduced R&D, sales and marketing, and G&A expenses versus Q1 2023. Net loss improved slightly, despite a higher operating loss, partly because Q1 2023 included $592,000 of warrant-related offering costs. Q1 2024 also included an $82,000 warrant fair-value expense, while interest income declined to $148,000 from $233,000.
- Management expects March 31 cash, anticipated additional ATM proceeds, continued cost reductions and anticipated revenue collections to fund operations through May 2025. The MD&A separately states that available resources are expected to cover at least the next 12 months. These expectations depend on financing, cost actions and revenue; no specific revenue or earnings guidance is provided.
- The company says the market for its technology remains nascent and unproven. It expects to pursue additional financing and cautions that financing may not be available on acceptable terms or at all. If financing or other plans fall short, further cost reductions or changes to plans may be needed.
- Customer concentration is significant: four customers generated approximately 87% of Q1 2024 revenue, and two customers represented approximately 92% of accounts receivable at quarter-end.
- The February offering included 570,000 common shares, 450,409 pre-funded warrants and warrants for 1,020,409 shares. Common shares outstanding were 6,085,766 at March 31 and 6,538,240 as of May 10, 2024. Total warrants outstanding at March 31 were 1,883,318.
- Management reported effective disclosure controls as of March 31 and no material changes in internal control over financial reporting. The filing reports no material changes to the risk factors in the 2023 Form 10-K and no pending legal proceedings believed to have a material adverse effect.
Important facts for investors to verify
- Whether cash burn, expected ATM proceeds and additional financing support the stated runway through May 2025.
- Whether customer adoption and sales can grow beyond the very low revenue base and concentrated customer mix.
- The potential dilution and cash proceeds associated with outstanding warrants, pre-funded warrants and future equity issuance.
- How the CEO transition, severance payments and further cost reductions affect operating capacity and spending.
- Whether technical development, customer implementations, regulatory approvals and market acceptance progress as anticipated.