Energous Corporation — 2018 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2018; the filing also provides unaudited fourth-quarter results. Energous is developing and licensing WattUp, an RF-based wireless charging technology. Dialog Semiconductor manufactures and exclusively distributes specified products and supports sales and logistics. Commercialization remained early-stage, with limited revenue and pre-production or initial-production work with prospective customers.
Financial results and position
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $514,823 | $1,154,009 |
| Operating expenses | $51.44 million | $50.54 million |
| Loss from operations | $(50.93) million | $(49.39) million |
| Net loss | $(50.84) million | $(49.38) million |
| Basic and diluted loss per share | $(1.99) | $(2.31) |
| Operating cash flow | $(32.53) million | $(34.43) million |
- Revenue fell approximately 55%, primarily reflecting the timing of customer development milestones. One customer accounted for about 92% of 2018 revenue, versus 96% in 2017.
- R&D expense was $32.87 million, down slightly from $33.23 million. Sales and marketing rose to $6.19 million from $5.21 million; general and administrative expense rose to $12.39 million from $12.10 million.
- Fourth-quarter 2018 revenue was $56,050 and net loss was $12.45 million; the comparable 2017 quarter recorded revenue of $29,135 and net loss of $11.24 million.
- Cash and cash equivalents were $20.11 million at year-end, versus $12.80 million in 2017. Financing activities provided $40.70 million in 2018, principally from $38.85 million net proceeds from an at-the-market stock offering.
- Total assets were $22.01 million and current liabilities were $3.64 million. The company reported no long-term liabilities; it had no material debt disclosed. Gross margin is not clearly presented.
- Stock-based compensation was $16.75 million in 2018. The accumulated deficit was $224.74 million.
Changes, outlook and key risks
- Operating expenses increased about 1.8% year over year while revenue declined, and net loss widened about 3.0%. Operating cash use improved by approximately $1.90 million.
- Management estimated year-end cash and anticipated customer-project payments would fund operations into 2020. The filing gives differing estimates: MD&A says into the second quarter of 2020, while the liquidity note says into the first quarter of 2020. It also states that additional financing may be needed.
- After year-end, the company disclosed a firm commitment to raise $23.3 million net from a stock offering, dated February 27, 2019. This is subsequent financing, not cash on hand at December 31, 2018.
- Management described the market as nascent and unproven. Key risks include technical and commercial feasibility, customer adoption, regulatory approvals, competition, reliance on Dialog, customer concentration, and the need for further capital. The filing gives no quantified revenue or profitability guidance.
- The company reported FCC approvals for its technology and international regulatory approvals permitting WattUp products to ship in 111 countries as of year-end. It described 2019 product introductions as prospective, not assured. It announced a 20-watt near-field transmitter in February 2019.
- No pending legal proceeding was identified as expected to materially adversely affect the company. Management concluded internal controls were effective at year-end; the auditor did not provide an internal-control attestation.
Investor verification priorities
- Confirm the February 2019 offering’s closing, net proceeds, share issuance and resulting dilution.
- Reconcile the differing cash-runway estimates and assess actual cash burn against the stated runway.
- Track whether customer programs progress from development and initial production to commercial shipments, and whether revenue concentration declines.
- Verify the status of Dialog distribution, customer licensing, regulatory approvals and WattUp product launches.
- Monitor continued operating losses, stock-based compensation, financing needs and the company’s ability to scale revenue beyond development milestones.