Energous Corporation — Q1 2019 Form 10-Q
Business context and reporting period. The unaudited filing covers the three months ended March 31, 2019. Energous develops WattUp radio-frequency wireless charging technology and relies primarily on product-development milestones and royalties for revenue. Dialog Semiconductor manufactures and distributes licensed products and is a related-party strategic partner.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $66,500 | $25,000; up $41,500 |
| Research and development | $6.80 million | $8.72 million; down $1.92 million |
| Sales and marketing | $1.60 million | $1.47 million; up $127,056 |
| General and administrative | $2.76 million | $3.28 million; down $518,304 |
| Total operating expenses | $11.16 million | $13.47 million |
| Operating loss | $11.10 million | $13.45 million |
| Net loss | $11.02 million | $13.44 million |
| Basic and diluted loss per share | $0.39 | $0.55 |
| Operating cash used | $7.37 million | $7.73 million |
The filing does not provide a clear gross-profit or gross-margin figure. Revenue remains very small relative to expenses, and the company continues to report losses.
- Cash and cash equivalents were $36.13 million at March 31, 2019, versus $20.11 million at December 31, 2018. Total assets were $38.12 million and stockholders’ equity was $34.08 million.
- Current liabilities were $4.05 million; these included $331,261 of operating lease liabilities. The balance sheet lists no borrowings or other debt.
- Cash increased by $16.02 million in the quarter: operating and investing activities used $7.37 million and $161,249, respectively, while financing activities provided $23.55 million.
Changes, financing, and operating developments
- Net loss narrowed by $2.42 million year over year, primarily as operating expenses fell. Management attributed much of the R&D and G&A reductions to lower stock-based compensation as older awards became fully amortized, as well as reduced patent, regulatory, and professional fees.
- In March 2019, Energous raised $23.32 million net in an offering of 3,333,333 shares and warrants to purchase 1,666,666 shares at $10 per share. Common shares outstanding rose to 30.33 million from 26.53 million at year-end. The offering used part of a shelf registration permitting up to $75 million of securities sales.
- Four customers generated approximately 98% of Q1 revenue. Revenue from Dialog under the strategic alliance was $7,100; the filing does not identify the amounts attributable to each other customer.
- The company adopted lease-accounting guidance on January 1, 2019, recognizing $414,426 of right-of-use assets and $485,747 of lease liabilities at adoption, with no material cumulative equity adjustment. At quarter-end, reported lease liabilities were $331,261.
Outlook, commentary, and risks
Management said cash on hand at March 31, together with anticipated revenue, was expected to fund operations into the second quarter of 2020. It cautioned that revenue may not be sufficient to sustain operations and that additional financing may be needed; future financing may not be available on acceptable terms, or at all.
- Management described pre-production and initial production activity with several consumer-electronics, medical-device, and industrial companies for products intended to reach the market in 2019, and discussions on low-power distance-charging applications. These are forward-looking plans, not guaranteed launches or revenue.
- Key risks include proving commercial feasibility and customer adoption, obtaining regulatory approvals, competition and product performance, dependence on Dialog and other partners, customer concentration, and the need for future capital. The filing notes that meaningful product revenue and profitability have not been established.
- The company reported no pending legal proceedings believed likely to have a material adverse effect and no material off-balance-sheet transactions. Management reported disclosure controls were effective as of March 31, 2019; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether anticipated 2019 product introductions and customer development programs progress to commercial shipments, accepted milestones, and recurring royalty revenue.
- Whether the stated cash runway through Q2 2020 remains achievable as operating cash use continues, and whether additional financing will be required.
- How customer concentration and reliance on Dialog affect revenue growth, commercialization, and the company’s ability to maintain strategic alternatives.
- The potential dilution from the March offering warrants and future equity financing; the warrant exercise price is $10 per share.
- Whether regulatory approvals, technical performance, and customer adoption support the company’s intended charging applications and commercialization plans.