Energous Corporation — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 10, 2021. Energous develops WattUp RF-based wireless charging technology. Revenue remained limited and primarily came from product-development projects; no royalty revenue was recorded in the first half.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $185,000 | $114,000 | $330,000 | $176,000 |
| Operating expenses | $11.20 million | $8.33 million | $19.87 million | $17.04 million |
| Operating loss | $11.02 million | $8.21 million | $19.54 million | $16.87 million |
| Net loss | $11.02 million | $8.20 million | $19.54 million | $16.80 million |
| Loss per share, basic and diluted | $0.18 | $0.20 | $0.32 | $0.45 |
| Operating cash used | Not stated separately | Not stated separately | $12.54 million | $13.22 million |
Q2 revenue rose about 62% year over year and first-half revenue about 88%, but from a low base. Net loss widened about 34% in Q2 and 16% for the first half. Research and development and sales and marketing costs increased; management attributed much of the increase to compensation and PSU stock-based compensation. First-half stock-based compensation was $6.37 million. Lower weighted-average share counts’ comparative impact is not applicable; despite higher net loss, reported loss per share was lower than in 2020.
At June 30, cash and cash equivalents were $38.23 million, down from $50.73 million at December 31, 2020. Current assets were $39.00 million and current liabilities $4.06 million. Total liabilities were $4.25 million, including $0.98 million of operating lease liabilities; the filing reports no borrowings or other debt. No gross margin figure is presented; reported cost of services revenue was zero in 2021 periods. The company had an accumulated deficit of $314.51 million.
Cash used in investing activities was reported as $203,004 in the cash-flow statement; MD&A gives $203,044. Financing cash flow was $237,247, consisting of ESPP proceeds; no public share offering proceeds were received in the first half of 2021.
Liquidity, outlook, and risks
Management said cash on hand, together with anticipated revenue, was expected to fund operations into August 2022. It also stated that additional financing may be needed and may not be available on acceptable terms, or at all. The company’s business remains dependent on uncertain customer adoption and commercialization of its technology.
Management described customer evaluations and pre-production engagements across consumer electronics, industrial, military, and medical markets, and expected additional WattUp-enabled products to be announced or launched in 2021. Potential customer products could take more than a year to two years to move through development and introduction; the filing gives no quantified revenue guidance. COVID-19-related workforce and supply-chain disruptions had delayed potential customer adoption and product launches, with further effects uncertain.
Material risks include limited commercial revenue and continuing losses; technology development, market acceptance, regulatory approval, and competitive risks; dependence on Dialog for manufacturing and distribution; and potential financing needs. Revenue was concentrated: four customers accounted for about 72% of first-half revenue, and three customers for about 62% of receivables at quarter-end.
After quarter-end, CEO Stephen Rizzone retired effective July 2021 and left the board. His transition agreement provides for $1.46 million in compensation-based payments, a $2.00 million lump-sum payment, a prorated bonus, equity-related provisions, medical benefits, and payoff of a company-car lease. The filing also identifies the CFO’s July 2021 resignation in its personnel risk discussion and refers to acting executive officers, making leadership continuity a notable issue.
The company reported no material pending legal proceedings, no off-balance-sheet transactions, and effective disclosure controls as of June 30, 2021. Management said ordinary-course disputes were not expected to have a material adverse effect.
Important facts for investors to verify
- Whether the stated cash runway into August 2022 remains achievable after operating cash burn and the CEO transition costs.
- Actual customer product launches, adoption, and conversion of development work into recurring product or royalty revenue.
- Availability and terms of any additional financing, and potential dilution or debt-related restrictions.
- Dialog’s continued ability and commitment to manufacture, distribute, and commercialize licensed products.
- Leadership succession following the CEO retirement and CFO resignation, and the final costs and timing of the separation agreement.
- The cash-flow statement versus MD&A discrepancy in investing cash outflow ($203,004 versus $203,044).