What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-12 compared with 2024-05-14 · 129 added, 62 removed, 82 unchanged (70% of the section changed)

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Forward-Looking Statements

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires the terms “we,” “us,” “our,” and “Energous” refer to Energous Corporation, a Delaware corporation.

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires the terms “we,” “us,” “our,” and “Energous” refer to Energous Corporation d/b/a Energous Wireless Power Solutions, a Delaware corporation.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are intended to be covered by the “safe harbor” created by those sections.

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We undertake no obligation to publicly update any of our forward-looking statements, whether as a result of new information, future developments or otherwise.

We have developed our wireless power networks technology (“WPNT”), consisting of semiconductor chipsets, software controls, hardware designs and antennas, that enable radio frequency (“RF”) based charging for Internet of Things (“IoT”) devices.

Our WPNT has a broad spectrum of capabilities to enable the next generation of wireless power networks, delivering power and data in a seamless device portfolio.

We have developed scalable, over-the-air wireless power networks (“WPN”) technology, consisting of semiconductor chipsets, software controls, hardware designs and antennas, that enable radio frequency (“RF”) based charging for Internet of Things (“IoT”) devices.

The WPN technology has a broad spectrum of capabilities to enable the next generation of wireless power networks, delivering power and data in a seamless device portfolio, enabling unprecedented levels of visibility, control, and intelligent business automation.

This includes near field and at-a-distance wireless charging with multiple power levels at various distances.

We believe our WPNTs will facilitate the deployment of the growing universe of IoT applications.

According to Statista 2024, the number of IoT connected devices worldwide is forecasted to grow to 29.4 billion units by 2030.

The initial IoT applications we are targeting are RF tags for asset tracking and cold chain applications, electronic shelf labeling (“ESL”), and IoT sensors for retail, industrial, healthcare, and logistics markets.

Our wireless power transmitter and receiver technologies deliver continuous access to wireless power, helping drive a new generation of battery-free devices for asset and inventory tracking and management – from retail sensors, electronic shelf labels, and asset trackers, to air quality monitors, motion detectors, and more.

We believe our technology is innovative in its approach, in that we are developing solutions that charge IoT devices using RF technology.

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Retail and Industrial IoT

The first end product featuring our technology entered the market in 2019.

We started shipping our first at-a-distance wireless PowerBridges for commercial IoT applications in the fourth quarter of 2021, and we expect additional wireless power enabled products to be released as we move our business forward.

The first WPN end product featuring our technology entered the market in 2019.

We started shipping our first at-a-distance wireless PowerBridges for commercial IoT applications and proofs of concept in the fourth quarter of 2021, and we expect additional wireless power enabled products to be released as we move our business forward.

Critical Accounting Policies and Estimates

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Actual results could differ from those estimates.

During the three months ended March 31, 2024, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

During the three months ended June 30, 2024, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Results of Operations

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General and administrative expenses include costs for general and corporate functions, including personnel compensation, facility fees, travel, telecommunications, insurance, professional fees, consulting fees, general office expenses, and other overhead.

Three Months Ended March 31, 2024 and 2023

Three Months Ended June 30, 2024 and 2023

The following table sets forth selected Condensed Statements of Operations data (in thousands) and such data as a percentage of revenue:

Three months ended March 31,

Three months ended June 30,

Costs and expenses:

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Loss from operations

Other (expense) income:

Other income:

Change in fair value of warrant liability

Interest income

Total other income

During the three months ended June 30, 2024 and 2023, we recorded revenue of $46,000 and $117,000, respectively.

The decrease is due to a decrease in transmitter sales volume.

While recorded revenue declined during the second quarter of 2024, the Company was in receipt of approximately $0.2 million of additional confirmed orders (“backlog”), the majority of which are scheduled to ship in the third quarter of 2024.

Costs and Expenses and Loss from Operations.

Costs and expenses are made up of cost of revenue, research and development, sales and marketing, general and administrative and severance expense.

Loss from operations for the three months ended June 30, 2024 and 2023 were $4.7 million and $6.1 million, respectively.

Cost of Revenue:

Three months ended June 30,

Cost of sales

Percent of total revenue

Cost of revenue was $0.1 million and $0.1 million, respectively, for the three months ended June 30, 2024 and 2023.

There was a slight increase due to the higher cost of transmitters sold.

Research and Development Costs:

Three months ended June 30,

Research and development

Percent of total revenue

Research and development costs were $2.4 million and $2.9 million, respectively, for the three months ended June 30, 2024 and 2023.

The decrease of $0.4 million is primarily due to a $0.6 million decrease in employee compensation, consisting of a $0.4 million decrease in payroll costs and a $0.2 million decrease in stock-based compensation, a $0.1 million decrease in software and legal costs and a $0.1 million decrease in miscellaneous office and facility expenses, partially offset by a $0.3 million increase in engineering components and supplies.

Sales and Marketing Costs:

Three months ended June 30,

Sales and marketing

Percent of total revenue

Sales and marketing costs for the three months ended June 30, 2024 and 2023 were $0.8 million and $1.1 million, respectively.

The decrease of $0.3 million is primarily due to a $0.3 million decrease in payroll costs due to lower headcount within the department and a decrease in bonuses accrued.

General and Administrative Expenses:

Three months ended June 30,

General and administrative

Percent of total revenue

General and administrative costs for the three months ended June 30, 2024 and 2023 were $1.6 million and $2.1 million, respectively.

The decrease of $0.5 million is primarily due to a $0.2 million decrease in stock-based compensation from the former CEO’s departure from the Company, a $0.1 million decrease in insurance premiums, a $0.1 million decrease in consulting and third party fees and a $0.1 million decrease in computer software and support.

Severance Expense:

Three months ended June 30,

Severance expense

Percent of total revenue

Severance expense for the three months ended June 30, 2024 and 2023 was $(0.3) million and $0.1 million, respectively.

The credit during the three months ended June 30, 2024 was a result of the finalization of the negotiated settlement and payroll taxes for the former CEO.

The severance expense for the three months ended June 30, 2023 was related to non-executive employees.

Other income:

Three months ended June 30,

Change in fair value of warrant liability

Interest income

Total other income

Other income resulting from the change in fair value of the warrant liability was $0.3 million for the three months ended June 30, 2024 and $1.9 million for the three months ended June 30, 2023.

The changes for both periods were due to reduced market value of our common stock.

Interest income for the three months ended June 30, 2024 was $0.1 million as compared to interest income of $0.2 million for the three months ended June 30, 2023.

The decrease was due to a lower average cash balance in our savings account during the three months ended June 30, 2024 compared to the prior year period.

As a result of the above, net loss for the three months ended June 30, 2024 was $4.3 million as compared to $4.0 million for the three months ended June 30, 2023.

Six Months Ended June 30, 2024 and 2023

The following table sets forth selected Condensed Statements of Operations data (in thousands) and such data as a percentage of revenue:

Six months ended June 30,

Costs and expenses:

Cost of revenue

Research and development

Sales and marketing

General and administrative

Severance expense

Total operating expenses

Loss from operations

Other (expense) income, net:

Offering costs related to warrant liability

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Interest income

Total other (expense) income

During the three months ended March 31, 2024 and 2023, we recorded revenue of $0.1 million and $0.1 million, respectively.

There was a slight decrease due to a decrease in transmitter sales volume.

Total other (expense) income, net

During the six months ended June 30, 2024 and 2023, we recorded revenue of $0.1 million and $0.2 million, respectively.

The decrease is due to a decrease in transmitter sales volume.

While recorded revenue declined during the first six months of 2024, the Company was in receipt of approximately $0.2 million of additional confirmed orders (“backlog”), the majority of which are scheduled to ship in the third quarter of 2024.

Costs and Expenses and Loss from Operations.

Costs and expenses are made up of cost of revenue, research and development, sales and marketing, general and administrative and severance expense.

Loss from operations for the three months ended March 31, 2024 and 2023 were $6.7 million and $6.3 million, respectively.

Loss from operations for the six months ended June 30, 2024 and 2023 were $11.3 million and $12.4 million, respectively.

Cost of Revenue:

Three months ended March 31,

Six months ended June 30,

Cost of sales

Percent of total revenue

Cost of revenue was $0.1 million and $0.1 million, respectively, for the three months ended March 31, 2024 and 2023.

There was a slight decrease due to a lower cost of transmitters sold.

Cost of revenue was $0.2 million and $0.2 million, respectively, for the six months ended June 30, 2024 and 2023.

There was a slight increase due to a higher cost of transmitters sold.

Research and Development Costs:

Three months ended March 31,

Six months ended June 30,

Research and development

Percent of total revenue

Research and development costs were $2.3 million and $3.1 million, respectively, for the three months ended March 31, 2024 and 2023.

The decrease of $0.7 million is primarily due to a $0.3 million decrease in employee compensation, consisting of a $0.2 million decrease in payroll costs and a $0.1 million decrease in stock-based compensation, a $0.1 million decrease in engineering components and supplies, a $0.1 million decrease in legal fees pertaining to patents, a $0.1 million decrease in test development costs and a $0.1 million decrease in miscellaneous office and facility expenses.

Research and development costs were $4.8 million and $6.0 million, respectively, for the six months ended June 30, 2024 and 2023.

The decrease of $1.2 million is primarily due to a $0.9 million decrease in employee compensation, consisting of a $0.7 million decrease in payroll costs and a $0.3 million decrease in stock-based compensation, a $0.1 million decrease in legal fees pertaining to patents, a $0.1 million decrease in test development costs and a $0.1 million decrease in software and support, partially offset by a $0.2 million increase in engineering components and supplies.

Sales and Marketing Costs:

Three months ended March 31,

Six months ended June 30,

Sales and marketing

Percent of total revenue

Sales and marketing costs for the three months ended March 31, 2024 and 2023 were $0.9 million and $1.2 million, respectively.

The decrease of $0.3 million is primarily due to a $0.2 million decrease in payroll costs, a $0.1 million decrease in stock-based compensation and a $0.1 million decrease in marketing, tradeshow and public relations costs, partially offset by a $0.1 million increase in consulting expenses.

Sales and marketing costs for the six months ended June 30, 2024 and 2023 were $1.7 million and $2.3 million, respectively.

The decrease of $0.6 million is primarily due to a $0.5 million decrease in payroll costs due to a lower headcount within the department and a decrease in bonuses accrued, a $0.1 million decrease in tradeshow expense and a $0.1 million decrease in software, travel and miscellaneous office expenses, partially offset by a $0.2 million increase in consulting fees.

General and Administrative Expenses:

Three months ended March 31,

Six months ended June 30,

General and administrative

Percent of total revenue

General and administrative costs for the three months ended March 31, 2024 and 2023 were $1.8 million and $2.0 million, respectively.

The decrease of $0.1 million is primarily due to a $0.1 million decrease in stock-based compensation, a $0.1 million decrease in legal fees and a $0.1 million decrease in miscellaneous travel, facilities and office expenses, partially offset by a $0.1 million increase in franchise tax.

General and administrative costs for the six months ended June 30, 2024 and 2023 were $3.4 million and $4.1 million, respectively.

The decrease of $0.6 million is primarily due to a $0.3 million decrease in stock-based compensation, a $0.2 million decrease in insurance premiums, a $0.1 million decrease in consulting and third-party service fees, a $0.1 million decrease in legal fees and a $0.1 million decrease in computer software and support, partially offset by a $0.1 million increase in public relations and annual meeting costs.

Severance Expense:

Three months ended March 31,

Six months ended June 30,

Severance expense

Percent of total revenue

Severance expense for the three months ended March 31, 2024 was $1.6 million which was mostly attributed to the departure of our former President and Chief Executive Officer, Cesar Johnston.

We did not incur any such costs for the three months ended March 31, 2023.

Other (expense) income:

Three months ended March 31,

Severance expense for the six months ended June 30, 2024 and 2023 was $1.3 million and $0.1 million, respectively.

The increase of $1.2 million is primarily due to the departure of the former CEO during 2024 for which $1.2 million in severance expense was recorded.

Other (expense) income, net:

Six months ended June 30,

Offering costs related to warrant liability

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Interest income

Total other (expense) income

Offering costs related to warrant liability were $0.6 million for the three months ended March 31, 2023.

We did not incur any such costs for the three months ended March 31, 2024.

Other expense resulting from the change in fair value of the warrant liability was $0.1 million for the three months ended March 31, 2024.

We did not incur any such expense for the three months ended March 31, 2023.

Interest income for the three months ended March 31, 2024 was $0.1 million as compared to interest income of $0.2 for the three months ended March 31, 2023.

The decrease was due to a lower average cash balance in our savings account during the three months ended March 31, 2024 compared to the prior year period.

As a result of the above, net loss for the three months ended March 31, 2024 was $6.6 million as compared to $6.7 million for the three months ended March 31, 2023.

Total other (expense) income, net

Offering costs related to warrant liability were $0.6 million for the six months ended June 30, 2023.

We did not incur such cost during the six months ended June 30, 2024.

Other income resulting from the change in fair value of the warrant liability was $0.3 million for the six months ended June 30, 2024 and $1.9 million for the six months ended June 30, 2023.

The changes for both periods were due to reduced market value of our common stock

Interest income for the six months ended June 30, 2024 was $0.2 million as compared to interest income of $0.5 million for the six months ended June 30, 2023.

The decrease was due to a lower average cash balance in our savings account during the six months ended June 30, 2024 compared to the prior year period.

As a result of the above, net loss for the six months ended June 30, 2024 was $10.9 million as compared to $10.6 million for the six months ended June 30, 2023.

Liquidity and Capital Resources

During the three months ended March 31, 2024 and 2023, we recorded revenue of $0.1 million and $0.1 million, respectively.

We incurred net losses of $6.6 million and $6.7 for the three months ended March 31, 2024 and 2023, respectively.

Net cash used in operating activities was $5.1 million and $5.4 million for the three months ended March 31, 2024 and 2023, respectively.

We are currently meeting our liquidity requirements through the proceeds of securities offerings that raised net proceeds of $27.0 million during 2021, $0.7 million during 2022, $5.4 million during 2023 and $1.8 million during the first quarter of 2024.

We believe our current cash on hand, together with proceeds from additional future equity financing, implementation of cost and expense reductions and anticipated revenues, will be sufficient to fund our operations through at least the next twelve months.

Although we intend to continue our research and development activities and transition to commercial production, there can be no assurance that our available resources will be sufficient to enable us to generate revenues sufficient to sustain operations.

Accordingly, we will likely pursue additional financing, which could include offerings of equity or debt securities, bank financings, commercial agreements with customers or strategic partners, and other alternatives, depending upon market conditions.

During the six months ended June 30, 2024 and 2023, we recorded revenue of $110,000 and $214,000, respectively.

We incurred net losses of $10.9 million and $10.6 million for the six months ended June 30, 2024 and 2023, respectively.

Net cash used in operating activities was $10.8 million and $11.7 million for the six months ended June 30, 2024 and 2023, respectively.

We are currently meeting our liquidity requirements through the proceeds of securities offerings that raised net proceeds of $6.9 million during 2023 and $1.8 million during the first quarter of 2024.

As of June 30, 2024, the Company had cash and cash equivalents of $4.9 million.

We believe our current cash on hand, together with additional anticipated proceeds from the ATM Program and other financing transactions during 2024, continued cost and expense reductions and collections generated by anticipated revenues, will be sufficient to fund the Company’s operations through at least the next twelve months.

As we gain traction in the market with our new technology and continue to invest capital in transitioning and scaling the business from research and development of new technologies to commercial production, there can be no assurance that our available resources and revenue generated from our business operations will be sufficient to sustain our operations.

Accordingly, we expect to pursue additional financing, which could include offerings of equity or debt securities, bank financings, commercial agreements with customers or strategic partners, and other alternatives, depending upon market conditions.

There is no assurance that such financing will be available on terms that we would find acceptable, or at all.

Research and development of new technologies is, by its nature, unpredictable.

Although we intend to continue our research and undertake development activities, there can be no assurance that our available resources will be sufficient to enable us to generate revenues sufficient to sustain operations.

Furthermore, since we have no committed source of financing, there can be no assurance that we will be able to raise capital as and when we need it to continue our operations.

If we are unsuccessful in implementing this plan, we will be required to make further cost and expense reductions or modifications to our on-going and strategic plans.

February 2024 Equity Offering

On February 15, 2024, we entered into a securities purchase agreement with an institutional investor, providing for the issuance and sale by us, in a registered direct offering (the “Offering”), of (i) 570,000 shares of our common stock, (ii) pre-funded warrants to purchase up to 450,409 shares of common stock, and (iii) warrants to purchase up to an aggregate of 1,020,409 shares of common stock.

On February 15, 2024, we entered into a securities purchase agreement with an institutional investor, providing for the issuance and sale by us, in a registered direct offering (the “February 2024 Offering”), of (i) 570,000 shares of our common stock, (ii) pre-funded warrants to purchase up to 450,409 shares of common stock, and (iii) warrants to purchase up to an aggregate of 1,020,409 shares of common stock.

Each share of common stock and pre-funded warrant was offered and sold together with an accompanying warrant at a combined price of $1.96 per share of common stock or pre-funded warrant, as applicable.

Each pre-funded warrant and other warrants are exercisable at any time on or after the date of issuance to purchase one share of common stock at a price of either $0.001 per share, in the case of the pre-funded warrants, or $1.84 per share, in the case of the other warrants.

The pre-funded warrants expire when they are exercised in full, and the other warrants expire five years from the date of issuance.

We received net proceeds of approximately $1.8 million from the Offering, after deducting placement agent fees and estimated offering expenses.

Operating Activities - During the three months ended March 31, 2024, cash flows used in operating activities were $5.1 million, consisting of a net loss of $6.6 million, less adjustments to reconcile net loss to net cash used in operating activities aggregating $0.6 million (principally stock-based compensation of $0.4 million and change in fair value of warrant liability of $0.1 million), a $0.3 million decrease in accounts payable, a $0.2 million increase in inventory and a $0.1 million decrease in accrued expenses, partially offset by a $1.3 million increase in accrued severance expense, a $0.2 decrease in prepaid expenses and other current assets and a $0.1 decrease in accounts receivable.

During the three months ended March 31, 2023, cash flows used in operating activities were $5.4 million, consisting of a net loss of $6.7 million, less adjustments to reconcile net loss to net cash used in operating activities aggregating $1.3 million (principally issuance costs allocated to warrant liability of $0.6 million, stock-based compensation of $0.5 million and an inventory net realizable adjustment of $0.1 million), a $0.4 million decrease in accrued expenses and a $0.2 million decrease in accrued severance expense, partially offset by a $0.5 million increase in accounts payable and a $0.2 million decrease in prepaid expenses and other current assets.

Investing Activities - During the three months ended March 31, 2024 and 2023, cash flows used in investing activities were not material.

During the three months ended March 31, 2024, a small amount of testing equipment was purchased.

No assets were purchased during the three months ended March 31, 2023.

Financing Activities - During the three months ended March 31, 2024, cash flows provided by financing activities were $1.9 million, which primarily consisted of $1.8 million in net proceeds from a registered direct offering that included the sale of common stock, pre-funded warrants and warrants.

During the three months ended March 31, 2023, cash flows provided by financing activities were $5.4 million, which consisted of $2.7 million in net proceeds from the issuance and sale of common stock and warrants, $2.7 million in net proceeds from the sale of shares of our common stock in an at-the-market (“ATM”) offering and $0.1 million in proceeds from the ESPP.

The pre-funded warrants were exercised at a price of $0.001 per share during April 2024.

The other warrants to purchase 1,020,409 shares of common stock are still outstanding and have an exercise price of $1.84 per share.

These warrants expire five years from the date of issuance.

We received net proceeds of approximately $1.8 million from the February 2024 Offering, after deducting placement agent fees and estimated offering expenses.

2024 ATM Offering Program

On June 21, 2024, the Company entered into the At the Market Offering Agreement, dated June 21, 2024, with H.C.

Wainwright & Co., LLC as sales agent, pursuant to which the Company may issue and sell of up to $3.5 million in shares of the Company’s common stock (the “ATM Program”).

No sales were made under the ATM Program in the six months ended June 30, 2024.

After June 30, 2024, the Company received gross proceeds of $0.2 million from the sale of an aggregate of 240,112 shares of common stock under the ATM Program during the period from July 1, 2024 through August 9, 2024.

Operating Activities - During the six months ended June 30, 2024, cash flows used in operating activities were $10.8 million, consisting of a net loss of $10.9 million, less adjustments to reconcile net loss to net cash used in operating activities aggregating $0.4 million (principally stock-based compensation of $0.5 million, depreciation and amortization of $0.1 million, offset by a change in fair value of warrant liability of $0.3 million), a $0.3 million decrease in accrued expenses, a $0.1 million increase in inventory and a $0.1 million decrease in accounts payable, partially offset by a $0.1 million decrease in prepaid expenses and other current assets.

During the six months ended June 30, 2023, cash flows used in operating activities were $11.7 million, consisting of a net loss of $10.6 million, plus adjustments to reconcile net loss to net cash used in operating activities aggregating $0.1 million (principally stock-based compensation of $1.0 million, issuance costs allocated to warrant liability of $0.6 million, inventory net realizable adjustment of $0.1 million and depreciation and amortization expense of $0.1 million, partially offset by a decrease in fair value of the warrant liability of $1.9 million), a $0.4 million increase in prepaid expenses and other current assets, a $0.4 million decrease in operating lease liabilities, a $0.3 million decrease in accrued expenses, a $0.2 million increase in inventory and a $0.2 million decrease in accrued severance, partially offset by a $0.2 million increase in accounts payable.

Investing Activities - During the six months ended June 30, 2024 and 2023, cash flows used in investing activities were $0.1 million and $0.1 million, respectively.

During the six months ended June 30, 2024, a small amount of testing and computer equipment was purchased.

During the six months ended June 30, 2023, a small amount of testing equipment was purchased.

Financing Activities - During the six months ended June 30, 2024, cash flows provided by financing activities were $1.8 million, which primarily consisted of $1.8 million in net proceeds from a registered direct offering that included the sale of common stock, pre-funded warrants and warrants.

During the six months ended June 30, 2023, cash flows provided by financing activities were $5.4 million, which consisted of $2.7 million in net proceeds from the issuance and sale of common stock and warrants, $2.7 million in net proceeds from the sale of shares of our common stock in an at-the-market (“ATM”) offering and $0.1 million in proceeds from the ESPP.

We are in receipt of approximately $0.2 million of additional confirmed orders (“backlog”), the majority of which are scheduled to ship in the third quarter of 2024.

Quantitative and Qualitative Disclosure About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis