Energous Corporation — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Energous develops WattUp RF-based wireless charging technology, including chipsets, software, hardware and antennas. Its business remains primarily in research and development and partner product development; the filing describes the market as nascent and unproven.
Financial results and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $61,500 | $40,500 | $237,350 | $154,500 |
| Operating expenses | $7.62 million | $8.34 million | $24.66 million | $29.50 million |
| Operating loss | $7.56 million | $8.30 million | $24.43 million | $29.34 million |
| Net loss | $7.56 million | $8.18 million | $24.36 million | $29.01 million |
| Loss per share, basic and diluted | $0.18 | $0.27 | $0.62 | $0.98 |
| Cash used in operating activities | Not presented for quarter | Not presented for quarter | $19.44 million | $20.97 million |
Margins: The filing does not present a clear gross-margin measure. Nine-month cost of services revenue was $126,539; it related to contract services for Dialog. Revenue remains very small relative to operating expenses.
Liquidity at September 30, 2020: Cash and cash equivalents were $17.30 million, plus $3.17 million of ATM proceeds receivable. Current assets were $21.28 million and current liabilities $3.31 million (approximately 6.4x current-asset coverage). Total liabilities were $4.07 million, primarily operating lease liabilities; no interest-bearing debt is reported. Total lease liabilities were $1.61 million.
Cash flows and financing: Nine-month investing cash outflow was $7,302; financing provided $15.06 million, principally from common-stock sales. Cash declined $4.38 million from year-end 2019 to $17.30 million. The company reported 43.06 million shares outstanding at quarter-end, up from 33.20 million at December 31, 2019.
Changes versus comparable periods
- Revenue increased 52% in Q3 and 54% for the first nine months, but remained limited in absolute terms.
- Q3 net loss narrowed by $627,390; nine-month net loss narrowed by $4.65 million. Lower R&D and G&A costs drove much of the improvement, partly offset by higher sales and marketing expense.
- Nine-month operating cash use decreased by $1.53 million year over year. Financing proceeds were lower than in the prior-year period, while share count rose substantially due mainly to ATM sales.
- Interest income fell to $3,221 in Q3 and $67,134 for the nine months, which the company attributed to lower rates and a lower average cash balance.
Outlook, commentary and risks
- Management expected September 30 cash, anticipated revenue and ATM financing to fund operations into November 2021. It also said additional financing would likely be pursued; availability and acceptable terms are not assured.
- After quarter-end, Energous received $3.17 million of ATM proceeds on October 2 and a further $4.21 million in net ATM proceeds through November 4, 2020, from 1,605,810 shares.
- The company reported that COVID-19 delayed potential customer adoption and a product launch, and could disrupt operations, supply chains, regulatory approvals and customer purchasing. The effects and duration remained uncertain.
- Commercialization depends on technical development, regulatory approvals, customer acceptance, partner execution and competition. The company relies on Dialog for manufacture and distribution under a strategic alliance; no royalty revenue from Dialog was recorded in Q3.
- Customer concentration is material: four customers represented approximately 81% of Q3 revenue and three represented 78% of nine-month revenue. The company had an accumulated deficit of approximately $287.5 million and had never generated meaningful product revenue.
- Management reported effective disclosure controls as of September 30, 2020, with no material quarter-specific change in internal control over financial reporting. No pending legal proceeding was identified as likely to have a material adverse effect.
Important facts for investors to verify
- Whether partner products launch and generate recurring commercial revenue, royalties or meaningful customer demand.
- Whether the stated cash runway through November 2021 remains achievable after operating cash use, expected revenue and subsequent ATM proceeds.
- The amount and potential dilution of further financing, given the substantial increase in shares outstanding and likely need for additional capital.
- Progress on customer programs, regulatory approvals and COVID-19-related delays, as well as dependence on Dialog and concentrated customers.
- Whether the filing’s revenue and cost-of-services disclosures support any useful gross-margin analysis; a clear gross-margin figure is not provided.