Energous Corp 10-K

Item 1. Business Overview We have developed our WattUp® wireless power technology, consisting of semiconductor chipsets, software controls, hardware designs and antennas, that enables radio frequency- (“RF”) based charging for electronic devices. The WattUp 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. This includes near field and at-a-distance wireless charging with multiple power levels at various distances. We believe our WattUp technologies will help facilitate the deployment of the growing universe of Internet of Things (“IoT”) applications. According to the International Data Corporation (IDC) August 2022 Market Forecast, the IoT market is forecasted to grow to approximately $1.1 trillion in spending by 2026. The initial IoT applications that we are targeting are in the areas of RF tags, electronic shelf labeling (“ESL”) and IoT sensors for the retail, industrial, healthcare and smart home/office markets. We believe our technology is innovative in its approach, in that we are developing solutions that charge electronic devices using RF. To-date, we have developed multiple transmitters and receivers, including prototypes as well as partner production designs. The transmitters vary based on form factor, power specifications and frequencies, while the receivers are designed to support a myriad of wireless charging applications including Bluetooth tracking tags, IoT sensors, ESLs, beacons, stock management devices, security cameras, handheld devices, smart automation, wearables and hearables. 1 The first end product featuring our technology entered the market in 2019. We started shipping our first at-a-distance WattUp PowerBridge enabled transmitters for commercial IoT applications in the fourth quarter of 2021, and we expect additional WattUp-enabled products to be announced as we move our business forward. Our common stock is quoted on The Nasdaq Capital Market under the symbol “WATT”. We were incorporated in Delaware in 2012. Our corporate headquarters is located at 3590 North First Street, Suite 210, San Jose, CA 95134. Our website can be accessed at www.energous.com. The information contained on, or that may be obtained from our website, is not, and shall not be deemed to be, part of this Report. Our Business Strategy We believe that a large market opportunity lies in wire-free low-power charging at-a-distance, which might develop as the Wi-Fi ecosystem developed. The goal is to ensure interoperability between transmitters and receivers that are based on our technology, regardless of who made them, installed them into finished goods, or marketed them. The implementation of previous ubiquitous solutions, such as Wi-Fi and Bluetooth, illustrates our goal. For example, Wi-Fi routers, regardless of their designer or manufacturer, work with Wi-Fi receivers installed in consumer electronics, regardless of manufacturer. We endeavor to: • Build multiple integrated circuits (“ICs”) to advance our technology; • Develop, license and manufacture a complete transmitter solution to enable wireless power network growth; • Develop reference designs to reduce early adopter risks, enable easier integration at lower costs and foster adoption; • Continue to build additional value by converging networking, power and data to provide smarter vertical solutions in the retail, industrial, healthcare and smart/home office markets through our WattUp PowerBridge products designed for powering next generation IoT. First target applications include RF tags, ESLs and IoT sensors; • Partner with leading technology and systems companies; • Provide game-changing benefits to the consumer in terms of utility and convenience; • Develop and execute on a strategy to gain global regulatory approval for ubiquitous unlimited distance charging; and • Support the AirFuel™ Alliance (AFA), which recently announced that AirFuel RF, the radio frequency-based wireless charging technology from AirFuel Alliance, is now an industry standard, underpinning the compatibility of our WattUp technology across vendors and develop a common user experience at the application level. For our technology to become a ubiquitous solution for charging at-a-distance, we intend to pursue an ecosystem strategy for our technology, engaging not only potential customers for our transmitter, receiver and power amplifier IC’s but also their upstream and downstream value chain partners. We intend to capitalize on our first-to-market advantage and prioritize protection of our intellectual property portfolio, as we believe this strategy will make it less likely that a competing platform will be able to gain a solid foothold in the RF-based wireless charging market and compete with our technology in a meaningful way. To engage with potential customers of the WattUp IC’s, we offer the Evaluation Kits consisting of a transmitter and a receiver along with the enabling software to allow potential strategic partners to test the technology in their labs. The kits form a base “building block” component that is scalable to meet the needs of specific applications. We are developing processes and support capabilities to assist potential customers as they evaluate the technology and develop specific designs to incorporate it. 2 To validate our technology, we originally sought out customers that were smaller, more nimble early adopters with relatively short product cycles , with the aim of ship ping fully integrated WattUp enabled devices to the consumer as quickly as possible. At the same time, we began to engage with larger, top tier customers with the ability to ship WattUp enabled consumer and IoT devices in mass quantities. We are also engaged with companies that have much longer product cycles in multiple vertical markets. Since we are developing a new electronics charging paradigm, we expect many operational details of our strategy to continue to evolve as our technology matures, engineering breakthroughs occur and new partner collaborations are formed. 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 risks and uncertainties in connection with the current macroeconomic environment, including as a result of inflation and rising interest rates, geopolitical factors, including the ongoing conflict between Russia and Ukraine and the responses thereto, supply chain disruptions and the remaining effects of the COVID-19 pandemic. 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. We believe that the COVID-19 pandemic delayed adoption of our technology by potential customers who have experienced workforce and supply chain disruptions, and who continue to evaluate their future prospects and business models, including partnerships with us. Further delays in the adoption of our current or future products could result from the ongoing pandemic and other macroeconomic events. At times, certain of our outsourcing partners, component suppliers and logistical service providers have experienced disruptions, resulting in supply shortages that have affected and may continue to affect our sales. Similar disruptions could occur in the future. Our Technology Our WattUp® technology enables wireless charging ranging from contact-based applications to at-a-distance applications, which charge over the air. An award-winning, RF-based, scalable technology, WattUp transforms the way electronic devices are charged and powered. 3 Figure 1 below shows the current IC product line for Energous: Our small form factor antennas and one transmitter to many receivers capabilities represent significant advantages over RF-beamforming transmitters, which are larger, and higher cost wireless power technology implementations. Our current generation ICs have significantly reduced the size and cost of both transmitter technology and our receiver technology, and products under development are designed to further reduce size and cost. In addition, our ICs are designed for both lower-power and higher-power applications, efficiency and faster synchronization, while working within the constraints of multiple international regulatory environments. In 2022 we continued to leverage the growing ecosystem of investments made by a number of IoT leaders. While participating at the CES 2023, we demonstrated the world’s first smart football in partnership with Catapult. We also demonstrated the world’s first battery-free CO2 sensor in partnership with Sensirion and a full battery-free sensor for lighting application targeting vertical farming in partnership with ams Osram. We also upgraded our IoT Wireless power network connecting Juniper Mist WiFi Access Points to multiple WattUp PowerBridge transmitters at 1W and 5W. We showed charging receiver device interoperability by simultaneously powering RF tags from Wiliot controlled by their Sensing as a Service Cloud Software, ESL tags using e-Peas devices, an IoT Device using Atmosic’s BLE chips, and network edge computing, driven by Syntiant’s Artificial Intelligence voice recognition technology all of which were managed by WattUp Software . 4 Figure 2 below shows the block diagram for our 1W WattUp PowerBridge Transmitter Our Competition Competing methods for charging battery-powered devices include wall plug-in charging, inductive charging, magnetic resonance charging and more. To our knowledge, almost all consumer electronics equipped with a rechargeable battery come bundled with a charging method, such as a power cord. We believe the advantages of our WattUp technology including size, cost, mobility, foreign object detection and portability coupled with the unique capability to charge devices both on contact as well as at-a-distance in a fully compatible ecosystem will foster broad adoption of the technology over time. A variety of wireless charging technologies are on the market or under development today. These competitive technologies fall into the following categories: Inductive Coil Charging. Inductive coil charging uses a magnetic coil to create resonance, which can transmit energy over very short distances. Essentially this is a contact technology whereby the transmitter and receiver need to be closely aligned to charge. Power is delivered as a function of coil size (the larger the coil, the more power), and coils must be directly paired (one receiver coil to one transmitter coil = directly coupled pair). Products utilizing magnetic induction have been available for 10+ years in products such as rechargeable electronic toothbrushes. Magnetic Resonance. Magnetic resonance is similar to magnetic induction, as it uses magnetic coils to transmit energy. This technology uses coils that range in size depending on the power levels being transmitted. It has the ability to transmit power at distances up to ~11 inches (30cm) which can be increased with the use of resonance repeaters It also has more flexibility of placement than magnetic induction. Energy Harvesting. There are multiple companies looking at harvesting energy that may be present in certain environments. The energy harvested may come from a variety of sources, including Solar, Kinetic and Passive RF. Passive RF harvesting refers to using antennas and devices to harvest RF that may already be present in an environment, such as Wi-Fi, mobile phones, cordless phones and other RF emitting devices. Laser. Laser charging technology uses very short wavelengths of light to create a collimated beam that maintains its size over distance, using what is described as distributed resonance to deliver power to an optical receiver. 5 Our Target Markets We categorize our target markets as transmitter markets and receiver markets. Transmitter Target Markets Transmitters are devices that broadcast RF energy that can be accessed by WattUp-enabled receivers in consumer electronics. We believe our transmitter target market can be divided into three distinct applications for our technology: • Stand-alone transmitters that are either sold independently or bundled as part of a pairing with WattUp-enabled receiver devices; • Transmitters that are integrated into third party industrial, medical and enterprise devices; and • Transmitters that could be integrated into Bridge and Wi-Fi routers to form a single device that provides both connectivity and wire-free power for a particular area. We plan to release stand-alone and integrated transmitter technology in three categories: WattUp Near Field Transmitters: Because of its advantages over other forms of contact-based wireless charging, including incorporation into multiple form factors and potential compatibility with future distance transmitters, we expect transmitters using our WattUp Near Field technology to be the first WattUp enabled transmitter products on the market. These contact-based charging solutions are ideally suited for many electronic devices in both consumer and industrial markets such as wearables, IoT devices and other small electronics that require a small form factor receiver and a low-cost charging solution. They are also suitable for larger, more power-hungry devices such as smart watches and tablets. Initially these transmitters will be one-to-one (one transmitter to one receiver), with future versions being single transmitters for multiple receivers. WattUp Far Field Transmitters: Transmitters based on WattUp Far Field technology, which we refer to as the WattUp PowerBridge, are expected to provide low power charging for multiple devices with the capability of extending the range through the deployment of multiple WattUp PowerBridges. We expect that WattUp PowerBridge transmitters will have the ability to broadcast wireless power to WattUp enabled receiving devices for charging. WattUp PowerBridge transmitters may play a significant role in the charging of low power IoT devices– such as ESLs, RF tags, security cameras and IoT sensors. Transmitters Integrated into Third Party Devices: The “building block” core architecture developed for the WattUp technology is suited to a broad range of third party devices in both industrial and consumer markets. The flexibility of the architecture in terms of size, power, distance, and cost affords Energous customers the opportunity to match our technology with specific requirements and limitations typically found with complex integrations. For example, the WattUp transmit technology could be integrated into a WiFi router on the ceiling of a manufacturing floor or hospital ward providing both internet connectivity and wireless power to any devices within range. WattUp PowerBridges: We see the combination of wireless power router and the wireless bridges as a natural integration point and a synergistic application of both technologies. WattUp PowerBridges provide the bridge to Wi-Fi, 5G and other Wide Area network technologies while also providing wireless power to in-range receiver devices. WattUp PowerBridges share a number of technical characteristics with Wi-Fi routers in that: (1) both devices operate in the airwaves in the unlicensed industrial, scientific and medical bands, (2) both devices owe their success to the utility and convenience they bring to the consumer, (3) both devices rely on antennas, and (4) both devices “pair” or provide hand off capabilities which allow for networks to provision large sites. 6 Receiver Target Markets We believe there are many potential uses for our receiver technology, including: • IOT devices including asset trackers, sensors, retail displays, security devices • Smart Home, Medical, Industrial, and other Sensors • ESLs • Logistics and asset tracking tags and sensors • Peripheral devices such as computer mice and keyboards • Remote controls • Rechargeable lights • Gaming consoles and controllers • Hearing aids • Rechargeable batteries • Automotive accessories • Smart textiles • Wearables • Medical devices This list is meant to be illustrative only; we cannot guarantee that we will address any of these markets, and we may decide to address a market that is not on the list. We intend to continue to evaluate our target markets and choose new markets based on factors including (but not limited to) time-to-market, market size and growth, and the strength of our value proposition for a specific application. Our Intellectual Property Our most valuable asset is our intellectual property. This includes U.S. and foreign patents, patent applications and know-how. We have implemented an aggressive intellectual property strategy and are continuing to pursue patent protection for new innovations. As of March 10, 2023, the Energous IP portfolio contained over 200 issued patents organized along five (5) critical paths to implementation that we believe a competitor may have to navigate to commercialize wireless power technology. The paths are: Processing Algorithms, Antenna Designs, Transmitter and Receiver ASICs, Other Software Controls (e.g., Bluetooth â Management and Hardware (e.g., Board Layout). Further, we have additional pending patent applications in the U.S. and abroad. We intend to file for patent protection for the most valuable of our inventions, as well as for other new inventions that we expect to develop. This is a significant annual expense and we continually monitor the costs and benefits of each patent application and issued patent to ensure we pursue those that we believe are most protective for our business and expand our core value. So long as we make the business decision to continue paying maintenance and/or annuity fees, our issued patents have terms that would not expire earlier than 2030. Government Regulation Our wire-free charging technology involves the transmission of power using RF energy, which is subject to regulation by the FCC, international regulators and may be subject to regulation by other federal, state, local and international agencies. Our technology has been tested against U.S. and international safety requirements which has consistently demonstrated that our technology is safe. We continue to work with regulatory bodies to establish processes, standards and spectrum allocation to ensure devices incorporating WattUp technology can secure required domestic and international approvals. As part of the regulatory approval process, devices incorporating the WattUp technology must obtain approvals under FCC Part 15 and/or FCC Part 18 in the U.S., depending on the specific application. Energous has received Part 15 and Part 18 FCC approvals for WattUp enabled products and has received regulatory approvals from many international agencies. 7 Current FCC Approvals for WattUp Technology FCC ID Description Grant Date 2ADNG-MLA1599 Digital Transmission System Bluetooth Accessory 2.4GHz 12/30/2014 2ADNG-MT100 Close Coupled 5.8 GHz Charger Pad 05/24/2016 2ADNG-NF130 RF Wireless Charger and Receiver 5.8 GHz 05/02/2017 2ADNG-NF130 Digital Transmission System for Bluetooth 2.4 GHz 05/02/2017 2ADNG-MS300 Wireless Charger 913 MHz 12/26/2017 2ADNG-MS300 Digital Transmission System for Bluetooth 2.4 GHz 12/26/2017 2ADNG-MS300A WPT Client Device 913 MHz 01/05/2018 2ADNG-MS300A Digital Transmission System WPT Client Device with BLE 2.4 GHz 01/05/2018 2ADNG-NF230 RF Wireless Charger 918 MHz 04/09/2018 2ADNG-NF230 Digital Transmission System for Bluetooth 2.4 GHz 04/09/2018 2ADNG-NF330 RF Wireless Charger 918MHz 07/29/2019 2ADNG-NF330 Digital Transmission System for Bluetooth 2.4 GHz 07/29/2019 2ADNG-MS550 RF Wireless Charger 918MHz 04/21/2020 2ADNG-MS550 Digital Transmission System for Bluetooth 2.4 GHz 04/21/2020 2ADNG-MS550 RF Wireless Charger 918MHz 09/30/2020 2ADNG-MS550 Digital Transmission System for Bluetooth 2.4 GHz 09/30/2020 2ADNG-VN15 RF Wireless Charger 918MHz 10/19/2021 2ADNG-VN15 Digital Transmission System for Bluetooth 2.4 GHz 10/19/2021 2ADNG-VN1810 RF Wireless Charger 918MHz 11/30/2021 2ADNG-VN1810 Digital Transmission System for Bluetooth 2.4 GHz 11/30/2021 2ADNG-VN25 RF Wireless Charger 918MHz 01/14/2022 2ADNG-VN25 Digital Transmission System for Bluetooth 2.4 GHz 01/14/2022 2ADNG-VN55 RF Wireless Charger 918MHz 06/02/2022 2ADNG-VN55 Digital Transmission System for Bluetooth/Zigbee 2.4 GHz 06/02/2022 2ADNG-VN1820 RF Wireless Charger 918MHz 08/10/2022 2ADNG-VN1820 Digital Transmission System for Bluetooth 2.4 GHz 08/10/2022 As of December 31, 2022, we announced completion of the regulatory process for our WattUp PowerBridge wireless charging technology in US, Canada, Europe,India, China, UK, Korea, Australia and New Zealand, for unlimited distance wireless charging. As of March 20, 2023, products integrating WattUp® technology had received international regulatory approvals over 110 countries. Manufacturing As a fabless semiconductor company in the research and development stage, we foresee our manufacturing strategy to follow an outsourced manufacturing process. We are engaged with contract manufacturing partners in the United States and internationally. Human Capital As of March 20, 2023, we had 43 full-time employees, 33 of whom are Engineers. None of these employees are covered by a collective bargaining agreement, and we believe our relationship with our employees is good. We also employ consultants, including technical advisors, on an as-needed basis for their technical expertise. Consultants and technical advisors provide us with expertise in electrical engineering, software development, market research and accounting. We are committed to maintaining a workplace free from discrimination and harassment on the basis of color, race, gender, age, disability, sexual orientation, religion, expression, or any other status protected by applicable law. Our management and employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. 8 Seasonality The industrial markets in which we are involved have minimal seasonal impact. The consumer markets for the commercial products that we anticipate our technology can be used in, including the markets in which we currently have proof of concept deployments, vary in their seasonal impact. Overall, we do not foresee a material seasonal impact to our revenue at this time. Available Information We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934, as amended, or Exchange Act. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov. Copies of each of our filings with the SEC can also be viewed and downloaded free of charge at our website, https://ir.energous.com/, after the reports and amendments are electronically filed with or furnished to the SEC.