Energous Corporation — Q1 2021 Form 10-Q
Business and period: The quarter ended March 31, 2021. Energous develops WattUp radio-frequency wireless charging technology and remains in an early commercialization stage, with revenue largely from product-development projects. Its commercialization strategy includes a strategic alliance with Dialog Semiconductor.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $145,065 | $61,475 |
| Operating expenses | $8.67 million | $8.72 million |
| Loss from operations | $(8.53) million | $(8.65) million |
| Net loss | $(8.53) million | $(8.60) million |
| Basic and diluted loss per share | $(0.14) | $(0.25) |
| Cash used in operating activities | $5.98 million | $7.34 million |
- Revenue rose about 136% year over year, but remained very small relative to operating costs. Revenue was entirely from product-development projects in Q1 2021; there was no royalty or Dialog contract-services revenue.
- Research and development expense was $4.59 million, sales and marketing $1.79 million, and general and administrative $2.29 million. The filing does not report a meaningful gross margin measure.
- Cash and cash equivalents were $44.76 million at March 31, 2021, down from $50.73 million at year-end 2020. Current assets were $45.66 million and current liabilities $4.03 million.
- Total liabilities were $4.42 million, principally operating lease liabilities; the filing reports no borrowings. Lease liabilities totaled $1.19 million, with $1.22 million of undiscounted future lease payments.
- Stockholders’ equity was $42.79 million. Accumulated deficit was $303.50 million. Stock-based compensation was $2.15 million for the quarter.
Changes versus the prior year
- Operating loss improved by approximately $126,000, while net loss improved by approximately $72,000. Lower interest income largely offset the operating improvement.
- Sales and marketing costs increased $346,000, mainly from higher compensation and customer-demonstration expenses. General and administrative costs declined $365,000, primarily due to lower stock compensation and professional fees. R&D expense was nearly unchanged.
- Operating cash use decreased by approximately $1.36 million. Q1 2020 included $5.51 million of net proceeds from an ATM stock offering; Q1 2021 financing cash inflow was $117,000 from employee stock purchase plan contributions.
- The lower loss per share should be viewed alongside share-count changes: weighted-average shares increased to 61.57 million from 34.82 million. The filing attributes substantial 2020 financing proceeds to securities offerings.
Outlook, risks and unusual items
- Management stated that March 31 cash, together with anticipated revenue, was expected to fund operations into May 2022. The company cautioned that it may need additional financing and that financing may not be available on acceptable terms, or at all.
- The filing describes customer engagements at evaluation and pre-production stages, expects additional WattUp-enabled product announcements and launches in 2021, and notes discussions about products that could reach market in 2022. These are expectations, not guaranteed outcomes.
- COVID-19 had delayed potential customer adoption and at least one product launch; further effects on operations, supply chains, regulatory approvals, customer payments and liquidity remained uncertain.
- Commercialization depends on customer acceptance, technical performance, regulatory approvals, competition and the Dialog relationship. One customer represented approximately 69% of Q1 2021 revenue; one customer represented approximately 64% of quarter-end receivables.
- The company accrued $391,578 under its executive bonus plan for payment in Q2 2021. Management said ordinary-course claims and disputes were not expected to have a material adverse effect. No material pending legal proceedings were reported.
- The filing says the ATM program was completed at the end of 2020 and no securities were sold under it in Q1 2021. However, the MD&A liquidity discussion also refers to funds raised from the ATM offering; investors should reconcile this wording with the stated completion and period-specific cash flows.
- Disclosure controls were assessed as effective as of March 31, 2021, with no material changes in internal control reported. The filing also notes the CEO’s temporary step down for health reasons and the Board’s establishment of an Office of the CEO in April 2021.
Key facts for investors to verify
- Whether customer evaluations and pre-production engagements convert into commercial launches, recurring royalties and material revenue.
- The assumptions underlying the stated operating runway into May 2022, expected spending and any need for new financing.
- Why Q1 revenue and receivables are concentrated in a small number of customers, and the status and economics of the Dialog alliance.
- The potential effect of equity awards and further financing on share-count dilution; weighted-average shares rose materially versus Q1 2020.
- The timing and impact of COVID-related customer, supply-chain and product-launch delays, and the CEO transition.