Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We have developed a scalable, over-the-air WPN technology that integrates advanced semiconductor chipsets, software controls, hardware designs, and antenna systems to enable RF-based charging for IoT devices. Our WPN technology provides a comprehensive suite of capabilities designed to power the next generation of wireless energy networks, seamlessly delivering power and data across diverse, battery-free device ecosystems. This innovation enhances operational visibility, control, and intelligent business automation.
Our solutions support both near-field and at-a-distance wireless charging, supplying power at multiple levels across varying distances. By enabling continuous wireless power transmission, our transmitter and receiver technologies facilitate the use of battery-free IoT devices, transforming asset and inventory tracking across multiple industries. Key applications include retail sensors, electronic shelf labels, asset trackers, air quality monitors, motion detectors, and other smart monitoring solutions.
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We believe our technology represents a breakthrough in wireless power delivery, offering a differentiated approach to charging IoT devices via RF technology. To date, we have developed and released multiple transmitter and receiver solutions, including prototypes and partner production designs. Our transmitters vary in form factor, power specifications, and operating frequencies, while our receivers are engineered to support a wide range of wireless charging applications across multiple device categories. including:
Device Type
Application
RF Tags
Cold Chain, Asset Tracking, Medical IoT
IoT Sensors
Cold Chain, Logistics, Asset Tracking
Electronic Shelf Labels
Retail and Industrial IoT
The first WPN-enabled end product featuring our technology entered the market in 2019. In the fourth quarter of 2021, we commenced shipments of our first at-a-distance wireless PowerBridge transmitter systems for commercial IoT applications and proof-of-concept deployments. As we continue to innovate our technology applications, we anticipate the release of additional wireless power-enabled products.
Impact of Current Global Economic Conditions on Our Business
Uncertainty in the global economy presents significant risks to our business. We are subject to continuing exposure relating to the current macroeconomic environment, including inflation and rising interest rates, geopolitical factors, including the ongoing conflict between Russia and Ukraine as well as in the Middle East and the responses thereto and supply chain disruptions. We are closely monitoring the impact of these factors on all aspects of our business, including their impact on our operations, financial position, cash flows, inventory, supply chains, global regulatory approvals, purchasing trends, customer payments, and the industry in general, in addition to the impact on our employees.
Critical Accounting Estimates and Policies
The following discussion and analysis of financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Please see Note 3 to our financial statements for a more complete description of our significant accounting policies.
Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements as well as the reported expenses during the reporting periods.
Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Although we believe that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results could differ from those estimates.
Going Concern. Accounting Standards Codification (“ASC”) 205-40 Presentation of Financial Statements - Going Concern , requires management to assess our ability to continue as a going concern. In accordance with this guidance, we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. We have determined that there was substantial doubt about our ability to continue as a going concern, but it was alleviated based on financing received in 2025, as well as current operating levels and further cost reductions implemented in the first quarter of 2025. We anticipate cash flows generated from operations and our cash and cash equivalents will be sufficient to meet our liquidity needs for at least the next 12 months.
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Determining the extent to which conditions or events raise substantial doubt about our ability to continue as a going concern requires significant judgment and estimation by us. Our significant estimates related to this analysis may include identifying business factors used in the forecasted financial results and liquidity. We believe that the estimated values used in our going concern analysis are based on reasonable assumptions. However, such assumptions are inherently uncertain and actual results could differ materially from those estimates.
Warrants. We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants is estimated using an appropriate valuation model. Such warrant classification is also subject to re-evaluation at each reporting period.
Offering costs associated with warrants classified as liabilities are expensed as incurred and are presented as offering cost related to warrant liability in the statement of operations. Offering costs associated with the sale of warrants classified as equity are charged against proceeds.
Revenue Recognition. We follow ASC 606, “Revenue from Contracts with Customers” (“Topic 606”). In accordance with Topic 606, we recognize revenue using the following five-step approach:
1. Identify the contract with the customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price of the contract.
4. Allocate the transaction price to the performance obligations of the contract.
5. Recognize revenue when or as the performance obligations are satisfied.
Our revenue consists of its single segment of wireless charging system solutions. The wireless charging system revenue consists of revenue from product development projects and production-level systems.
We record revenue associated with product development projects that we enter into with certain customers. In general, these product development projects are complex, and we do not have certainty about our ability to achieve the project milestones. The achievement of a milestone is dependent on our performance obligation and requires acceptance by the customer. We recognize this revenue at the point in time at which the performance obligation is met. The payment associated with achieving the performance obligation is generally commensurate with our effort or the value of the deliverable and is nonrefundable. Any deferred revenue is recognized upon achievement of the performance obligation or expiration of a support agreement.
Results of Operations
Costs and Expenses
Cost of revenue consists of direct materials, direct labor and overhead for our production-level wireless charging systems. Research and development expenses include costs associated with our efforts to develop our technology, including personnel
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compensation, consulting, engineering supplies and components, intellectual property costs, regulatory expense and general office expenses specifically related to the research and development department. Sales and marketing expenses include costs associated with selling and marketing our technology to our customers, including personnel compensation, public relations, graphic design, tradeshow, engineering supplies utilized by the sales team and general office expenses specifically related to the sale and marketing department. 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.
For the Years Ended December 31, 2024 and 2023
The following table sets forth selected Condensed Statements of Operations data (in thousands) and such data as a percentage of revenue:
For the year ended December 31,
2024
2023
Revenue
$
768
100
%
$
474
100
%
Cost of revenue
756
98
%
279
59
%
Gross profit
12
2
%
195
41
%
Operating expenses:
Research and development
8,275
1,077
%
10,811
2,281
%
Sales and marketing
3,066
399
%
3,852
813
%
General and administrative
5,704
743
%
7,272
1,534
%
Severance expense
1,377
179
%
359
76
%
Total operating expenses
18,422
2,399
%
22,294
4,703
%
Loss from operations
(18,410)
(2,397)
%
(22,099)
(4,662)
%
Other income (expense), net:
Offering costs related to warrant liability
—
—
(592)
(125)
%
Change in fair value of warrant liability
262
34
%
2,515
531
%
Interest income, net
—
—
809
171
%
Loss on extinguishment of short-term debt
(219)
(29)
%
—
—
Other expense
(31)
(4)
%
—
—
Total other income (expense), net
12
2
%
2,732
576
%
Net loss
$
(18,398)
(2,396)
%
$
(19,367)
(4,086)
%
Revenues. During 2024 and 2023, we recorded revenue of $0.8 million and $0.5 million, respectively. The increase in revenue in 2024 is primarily due to an increase in commercial sales of our PowerBridge transmitters, driven primarily by the delivery of transmitters to fulfill an initial order from a Fortune 10 retailer in the fourth quarter of 2024. In contrast, revenue recorded for 2023 was primarily attributable to engineering services, integrated circuit sales, and PowerBridge transmitters for use in proofs of concept.
Cost of Revenue:
For the year ended December 31,
2024
2023
$ Change
% Change
Cost of revenue
$
756
$
279
$
477
171
%
Percent of total revenue
98
%
59
%
Cost of revenue was $0.8 million and $0.3 million, respectively, for 2024 and 2023. The increase is primarily due to the cost of transmitters sold, as the initial sales of 2-watt PowerBridge transmitters that were shipped during 2024 were built in-house. We believe the cost of producing these transmitters will decrease in future quarters, as we utilize a contract manufacturer to build in larger production volumes. During 2023, revenue generated by transmitter sales represented a small percentage of the total revenue for that period, as the revenue for 2023 consisted mainly of non-recurring engineering fees for which the associated cost was included in research and development costs.
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Operating expenses and Loss from Operations. Operating expenses are made up of research and development, sales and marketing, general and administrative, and severance expense. Loss from operations was $18.4 million and $22.1 million, respectively, for 2024 and 2023.
Research and Development Costs:
For the year ended December 31,
2024
2023
$ Change
% Change
Research and development
$
8,275
$
10,811
$
(2,536)
(23)
%
Percent of total revenue
1,077
%
2,281
%
Research and development costs for 2024 and 2023 were $8.3 million and $10.8 million, respectively. The decrease of $2.5 million is primarily due to a $1.7 million decrease in employee compensation, consisting primarily of a $1.3 million decrease in personnel-related expenses and a $0.4 million decrease in stock-based compensation, a $0.2 million decrease in legal fees pertaining to patents, a $0.2 million decrease in software and maintenance costs, a $0.1 million decrease in test development costs, a $0.1 million decrease in consulting and third-party expenses and a $0.1 million decrease in travel and miscellaneous office expenses.
Sales and Marketing Costs:
For the year ended December 31,
2024
2023
$ Change
% Change
Sales and marketing
$
3,066
$
3,852
$
(786)
(20)
%
Percent of total revenue
399
%
813
%
Sales and marketing costs for 2024 and 2023 were $3.1 million and $3.9 million, respectively. The decrease of $0.8 million is primarily due to a $0.8 million decrease in employee compensation, consisting of a $0.7 million decrease in personnel-related expenses due to a lower headcount within the department and a $0.1 million decrease in stock-based compensation, 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, third-party and public relations fees.
General and Administrative Costs:
For the year ended December 31,
2024
2023
$ Change
% Change
General and administrative
$
5,704
$
7,272
$
(1,568)
(22)
%
Percent of total revenue
743
%
1,534
%
General and administrative costs for 2024 and 2023 were $5.7 million and $7.3 million, respectively. The decrease of $1.6 million is primarily due to a $0.5 million decrease in stock-based compensation, a $0.5 million decrease in consulting and third-party service fees, a $0.4 million decrease in insurance premiums, a $0.2 million decrease in accounting and auditing fees, a $0.1 million decrease in legal fees, a $0.1 million decrease in computer software and support, a $0.1 million decrease in annual meeting costs and a $0.1 million decrease in travel and miscellaneous office expenses, partially offset by a $0.3 million increase in stock registration expense and a $0.1 million increase in public relations and investor relations expenses.
Severance Expense:
For the year ended December 31,
2024
2023
$ Change
% Change
Severance expense
$
1,377
$
359
$
1,018
284
%
Percent of total revenue
179
%
76
%
Severance expense for 2024 and 2023 was $1.4 million and $0.4 million, respectively. The increase of $1.0 million is primarily due to the departure of the former CEO during 2024 for which $1.2 million in severance expense was recorded, partially offset by $0.3 million in severance expense recorded during 2023 due to the departure of the former CFO.
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Other income (expense), net:
For the year ended December 31,
2024
2023
$ Change
% Change
Offering costs related to warrant liability
$
—
$
(592)
$
592
100
%
Change in fair value of warrant liability
262
2,515
(2,253)
(90)
%
Interest income, net
—
809
(809)
(100)
%
Loss on extinguishment of short-term debt
(219)
—
(219)
(100)
%
Other expense
(31)
—
(31)
(100)
%
Total other income (expense), net
$
12
$
2,732
$
(2,720)
(100)
%
Offering costs related to warrant liability were $0.6 million during 2023. We did not incur such cost during 2024.
Other income resulting from the change in fair value of the warrant liability was $0.3 million during 2024 and $2.5 million during 2023. The changes for both periods were due to a lower market value of our common stock.
Net interest income for 2024 was $0, as $0.2 million in interest income from our money market account, offset $0.2 million in interest expense from a short-term loan. Interest income of $0.8 million during 2023 was from interest earned from our money market account.
Loss on extinguishment of short-term debt was $0.2 million during 2024. We did not incur such cost during 2023.
Net Loss. As a result of the factors described above, net loss for 2024 was $18.4 million, compared to $19.4 million for 2023.
Liquidity and Capital Resources
During 2024 and 2023, we recorded revenue of $0.8 million and $0.5 million, respectively. We incurred a net loss of $18.4 million and $19.4 million for 2024 and 2023, respectively. Net cash used in operating activities was $17.6 million and $19.2 million for 2024 and 2023, respectively. As of December 31, 2024, we had cash on hand of $1.4 million. We are currently meeting our liquidity requirements through the proceeds of securities offerings in at-the-market (ATM) offerings that raised net proceeds of $3.2 million during 2024 and $13.4 million during 2025 through February 25, 2025, as well as through a short-term loan on which we have a payable balance due of approximately $0.8 million as of December 31, 2024. As of February 25, 2025, the Company had $11.7 million in cash on hand.
Based on current operating levels and further cost reduction efforts implemented in the first quarter of 2025, we believe we have sufficient cash on hand to fund the next 12 months of operations.
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 financing, 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. 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 “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. The pre-funded warrants were
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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.
ATM Offering Program
On June 21, 2024, we entered into the At the Market Offering Agreement with H.C. Wainwright & Co., LLC, as sales agent, pursuant to which we could issue and sell of up to $3.45 million in shares of our common stock (the “ATM Program”). During the three months and year ended December 31, 2024, we sold 5,634,585 shares and 6,851,753 shares, respectively, of our common stock under the Current ATM Program for net proceeds of approximately $2.4 million and $3.1 million, respectively (net of commissions and other related offering expenses of approximately $0.1 million and $0.3 million, respectively).
After December 31, 2024, we settled sales of an additional 16,584,405 shares of our common stock for net proceeds of approximately $13.4 million (net of $0.7 million in commissions and issuance costs) under the ATM Program. These sales settled between January 2, 2025 and February 12, 2025.
On February 13, 2025, we filed a prospectus supplement covering the offering, issuance and sale of an additional $80.0 million in shares of our common stock under the ATM Program. Between February 21, 2025 and February 26, 2025, the Company settled sales of 252,040 shares of common stock for net proceeds of approximately $38,000 under the ATM Program pursuant to the prospectus supplement filed on February 13, 2025.
Agile Subordinated Loan Agreement
Effective October 1, 2024, we entered into a subordinated business loan agreement (the “Original Loan Agreement”) with Agile Capital Funding, LLC and Agile Lending, LLC (collectively, the “Lender”), which provided for an initial term loan of $525,000, with the ability to receive additional term loans of up to $1.6 million, subject to certain conditions (such loans, the “Term Loan”). Principal and interest on the initial term loan in the aggregate amount of $756,000 was to be repaid in weekly payments of $27,000 commencing on October 14, 2024, and fully repaid on or before the maturity date of April 21, 2025. The Term Loan would be expressly subordinated to our obligations on certain senior indebtedness as provided in the Original Loan Agreement. Effective only upon the occurrence and continuance of an event of default under the Loan Agreement, we would grant the Lender a security interest in certain collateral, excluding intellectual property, of Energous Corporation as set forth in the Original Loan Agreement.
Effective November 5, 2024, we entered into an amended subordinated business loan agreement with the Lender (the “Amended Loan Agreement”) to refinance the Term Loan. The Amended Loan Agreement provides for a new term loan of $997,000, with the ability to receive additional term loans of up to $1.6 million, subject to certain conditions (such new loans, the “New Term Loan”). Principal and interest on the initial new term loan in the aggregate amount of $1,415,740 is to be repaid in weekly payments of approximately $39,000 and fully repaid on or before the maturity date of July 17, 2025. The proceeds of the New Term Loan were allocated to cover the administrative fee of $48,000 and to repay in full the Term Loan as described above, which had a carrying amount of $429,000 and settlement value of $648,000 on November 5, 2024, and the remaining proceeds will be utilized for working capital. The New Term Loan will be expressly subordinated to our obligations on certain senior indebtedness of the Company as provided in the Amended Loan Agreement. The Amended Loan Agreement replaces the Original Loan Agreement and otherwise contains substantially the same terms as the Original Loan Agreement.
As of December 31, 2024, we had a short-term loan payable balance of approximately $0.8 million. We recorded interest expense of approximately $0.2 million related to the Original Loan Agreement and the Amended Loan Agreement. We recorded a loss on the extinguishment of debt of approximately $0.2 million related to the Original Loan Agreement. The payment multiplier on the current loan is 1.42. An administrative fee of $25,000 was paid on the Original Loan agreement and an administrative fee of $48,000 was paid on the Amended Loan Agreement.
Regulation A Offering
On October 11, 2024, we filed a Regulation A Offering Statement on Form 1-A with an offering of a maximum of 5,000,000 Units (the “Regulation A Offering”), with each Unit consisting of one share of Series A Convertible Preferred Stock (initially
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convertible into two shares of common stock) and three common stock purchase warrants, two to each purchase one share of common stock at an exercise price of $1.50 per share and one to purchase one share of common stock at $2.00 per share, for an aggregate of 5,000,000 shares of Series A Convertible Preferred Stock (and 10,000,000 shares of common stock underlying the shares of Series A Convertible Preferred Stock) and warrants to purchase up to an aggregate of 10,000,000 shares of common stock at an exercise price of $1.50 per share and 5,000,000 shares of common stock at an exercise price of $2.00 per share, at an offering price of $1.50 per Unit, for a maximum offering amount of $7,500,000. The Regulation A Offering Statement was qualified by the SEC on November 22, 2024. As of December 31, 2024, no closings have occurred on the Regulation A Offering. Our prepaid expense and other current assets balance as of December 31, 2024 includes $0.3 million in prepaid expenses related to the Regulation A Offering.
Cash Flows
During 2024, cash flows used in operating activities were $17.6 million, consisting of a net loss of $18.4 million, less adjustments to reconcile net loss to net cash used in operating activities aggregating $1.1 million (principally stock-based compensation of $0.8 million, depreciation and amortization expense of $0.2 million, loss on extinguishment of short-term debt of $0.2 million, issuance of common stock to consultant of $0.1 million and accrued interest of $0.1 million, partially offset by change in fair value of warrant liability of $0.3 million), a $0.5 million decrease in operating lease liabilities, a $0.2 million decrease in accrued expenses, a $0.1 million decrease in accrued severance expense and a $0.1 million increase in inventory, partially offset by $0.7 million decrease in operating lease right-of-use assets. During 2023, cash flows used in operating activities were $19.3 million, consisting of a net loss of $19.4 million, less adjustments to reconcile net loss to net cash used in operating activities aggregating $0.1 million (principally stock-based compensation of $1.7 million, issuance costs allocated to warrant liability of $0.6 million, depreciation and amortization expense of $0.2 million and inventory net realizable adjustment of $0.2 million, partially offset by a decrease in fair value of the warrant liability of $2.5 million), a $0.7 million decrease in operating lease liabilities, a $0.5 million decrease in accrued expenses, a $0.5 million increase in inventory and a $0.3 million decrease in accrued severance, partially offset by a $1.0 million increase in accounts payable, a $0.7 decrease in operating lease right-of-use assets, a $0.3 million increase in prepaid expenses and other current assets and a $0.1 million decrease in accounts receivable.
During 2024 and 2023, cash flows used in investing activities were $0.1 million and $0.2 million, respectively. The cash used in 2024 and 2023 was for the purchases of testing and computer equipment.
During 2024, cash flows provided by financing activities were $5.1 million, which primarily consisted of $3.2 million in net proceeds from the sale of shares of our common stock under the ATM Program, $1.8 million in net proceeds from a registered direct offering that included the sale of common stock, pre-funded warrants and warrants and net borrowings of $0.8 million from a short-term loan, partially offset by $0.3 million in repayments of financed insurance and $0.3 million in repayments of a short-term loan. During 2023, cash flows provided by financing activities were $7.1 million, which consisted of $4.2 million in net proceeds from the sale of shares of our common stock under our prior at-the-market offering program, $2.7 million in net proceeds from the issuance and sale of common stock and warrants, $0.1 million in proceeds from a direct sale of common stock to the former Chief Executive Officer and $0.1 million in proceeds from the ESPP.