Energous Corporation (Nasdaq: WATT) — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 24, 2021. This is an annual report, not a standalone fourth-quarter filing. Financial results are compared with fiscal 2019.
Business context and reporting period
Energous is developing and licensing WattUp, a radio-frequency wireless power technology for contact and at-a-distance charging. Dialog Semiconductor manufactures and distributes specified products incorporating the technology under an exclusive strategic alliance. Energous remains at an early commercialization stage: its first enabled end product reached the market in 2019, and revenue in both reported years was very small relative to operating costs.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $327,350 | $200,143 |
| Operating expenses | $32.23 million | $39.01 million |
| Loss from operations | $31.90 million | $38.81 million |
| Net loss | $31.83 million | $38.40 million |
| Basic and diluted loss per share | $0.76 | $1.27 |
| Net cash used in operating activities | $24.79 million | $26.62 million |
| Cash and cash equivalents at year-end | $50.73 million | $21.68 million |
| Total assets | $53.14 million | $24.88 million |
| Total liabilities | $4.09 million | $5.87 million |
Revenue increased 63.6% from a low base, while operating expenses declined 17.4% and net loss narrowed 17.1%. Operating costs substantially exceeded revenue; a conventional gross margin is not meaningful given the company’s development-project and services revenue mix. The filing reports no borrowings; liabilities primarily include operating lease obligations, totaling $1.40 million. Current assets were $51.44 million versus current liabilities of $3.51 million. The company reported no material off-balance-sheet transactions.
2020 revenue comprised $197,350 from product development projects, $130,000 from contract services for Dialog, and no royalties. Three customers accounted for approximately 66% of revenue. Financing provided $53.97 million of cash in 2020, including $53.56 million net proceeds from at-the-market equity sales. Year-end common shares outstanding rose to 61.29 million from 33.20 million a year earlier.
In fourth-quarter 2020, revenue was $90,000 and net loss was $7.47 million, compared with revenue of $45,643 and net loss of $9.39 million in fourth-quarter 2019.
Material changes versus 2019
- Research and development expense fell $6.16 million, mainly due to lower compensation and chip-development costs. General and administrative expense declined $1.21 million, while sales and marketing expense rose $0.46 million.
- Cash increased by $29.05 million, principally reflecting equity financing; operating cash use decreased by $1.83 million.
- Royalty revenue from Dialog fell to zero from $7,100, while contract-services revenue from Dialog began at $130,000.
- Research and development and general and administrative costs benefited in part from lower stock-based compensation. Stock-based compensation totaled $7.90 million, down from $10.65 million.
Outlook, risks, contingencies, and unusual items
- Management said year-end cash, anticipated revenue, and funds raised through the ATM offering were expected to fund operations into March 2022. The company also said it may need additional financing and that availability and terms cannot be assured.
- Management expected additional WattUp-enabled products to be announced and launched in 2021; potential low-power distance-charging products under discussion could reach the market in 2022. These are expectations, not guaranteed outcomes.
- COVID-19 disruptions, including impacts on customers and China-based manufacturing and supply chains, were reported to have delayed potential customer adoption and could further affect development, launches, and operations.
- Key risks include the unproven market for RF wireless charging, product-development and regulatory hurdles, competition, dependence on Dialog for manufacturing and distribution, and the need for continued financing. Renesas announced a planned acquisition of Dialog in February 2021; the filing does not establish the eventual effect on Energous’s alliance.
- Customer and receivable concentration is significant: four customers represented approximately 92% of year-end accounts receivable. The company reported an accumulated deficit of approximately $295 million and fully reserved deferred tax assets.
- No pending legal proceedings were identified as expected to have a material adverse effect. The independent auditor issued an unqualified opinion on the financial statements. Management assessed internal control over financial reporting as effective; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Whether announced or expected product launches occur, and whether they generate meaningful recurring revenue or royalties.
- Cash consumption, financing needs, and the stated runway into March 2022; assess the dilution associated with the 2020 equity issuance.
- Progress and continuity of the Dialog alliance following Renesas’s planned acquisition, including manufacturing, distribution, and royalty arrangements.
- Customer concentration, design wins, production timelines, regulatory approvals, and evidence of end-market adoption.
- Whether COVID-19-related delays, technical challenges, or competitive alternatives affect commercialization plans.