Energous Corporation — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; figures are unaudited. Energous develops WattUp, an RF-based wireless-charging technology, and relies on customer development projects and commercial partners. Dialog Semiconductor is its exclusive supplier of related integrated circuits for the general market.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $25,000 | $575,368; down $550,368 |
| Research and development | $8.72 million | $8.35 million |
| Sales and marketing | $1.47 million | $1.60 million |
| General and administrative | $3.28 million | $3.10 million |
| Total operating expenses | $13.47 million | $13.05 million |
| Operating loss | $13.45 million | $12.48 million |
| Net loss | $13.44 million | $12.47 million |
| Loss per share, basic and diluted | $0.55 | $0.61 |
| Cash used in operations | $7.73 million | $10.01 million |
Revenue was milestone-based; management attributed the decrease to a lower-value milestone completed in Q1 2018. One customer accounted for approximately 100% of revenue in both periods and all accounts receivable at March 31, 2018. The filing does not provide a clear gross-margin figure.
Cash and cash equivalents were $44.86 million at March 31, versus $12.80 million at December 31, 2017. The increase primarily reflected $38.85 million in net proceeds from a January ATM equity offering. Financing cash flow was $40.03 million; investing cash use was $0.24 million. Current assets were $45.62 million and current liabilities $4.09 million. No debt is reported on the balance sheet. Accumulated deficit was $187.34 million.
Material changes and other notable items
- Operating loss increased by approximately $0.97 million year over year as expenses rose while revenue fell sharply. Net loss increased by approximately $0.97 million, although loss per share decreased from $0.61 to $0.55, reflecting a higher weighted-average share count.
- R&D expense rose by $0.37 million, principally because of higher compensation and stock-based compensation, partly offset by lower chip-design, manufacturing, and component costs. Stock-based compensation totaled $4.61 million, up from $3.54 million.
- Sales and marketing expense declined by $0.12 million, mainly from lower trade-show costs. G&A increased by $0.18 million, primarily due to higher legal and accounting fees.
- The ATM issuance added 2.22 million shares during the quarter. The company reported 25.42 million shares outstanding at March 31; 7.42 million potentially dilutive securities were excluded from diluted loss per share as anti-dilutive.
- Energous adopted revenue standard Topic 606 on January 1, 2018 using the modified retrospective method and recorded no cumulative-effect adjustment. Adoption of ASU 2016-01 had no material impact.
Outlook, risks, and contingencies
Management said cash on hand, together with anticipated customer-development payments, was expected to fund operations into the second quarter of 2019. This is not assurance of profitability or sufficient funding to complete the business plan. The company may seek further equity, debt, co-development, or other financing; availability and terms are uncertain, and equity financing could dilute shareholders. Management cautioned that meaningful commercial revenue may not materialize and that the company may never become profitable.
The company said it had developed prototypes and was in pre-production with early adopters for contact-based products. It reported FCC certification of its first-generation WattUp Mid Field transmitter in December 2017, described as supporting charging at up to three feet. Commercialization remains subject to product development, customer adoption, manufacturing and partner execution, and additional regulatory approvals, including for future products and applications.
Key risks include the unproven market, technical and commercialization challenges, dependence on Dialog and other partners, customer and revenue concentration, competition, intellectual-property protection and potential infringement claims, regulatory approval, safety or product-liability concerns, and the possibility of needing additional capital. The Dialog alliance includes exclusivity provisions and specified sales and regulatory conditions. Future minimum lease payments were $0.94 million; the filing reported no material change in contractual obligations outside the ordinary course. No pending legal proceeding was identified as expected to have a material adverse effect. Management reported disclosure controls effective at quarter-end and no material change in internal control over financial reporting.
Investor verification priorities
- Confirm whether customer milestones convert into recurring product, licensing, or other commercial revenue, and whether reliance on one customer declines.
- Track cash burn against the stated runway into Q2 2019, funding needs, and any new financing or dilution.
- Verify product launch progress, customer acceptance, manufacturing readiness, and required regulatory approvals beyond the reported Mid Field certification.
- Assess Dialog’s performance under the alliance, including exclusivity terms, commercialization responsibilities, and any applicable sales targets.
- Monitor stock-based compensation and outstanding equity awards, which are significant relative to quarterly revenue.