Energous Corporation — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015; interim financial statements are unaudited. Energous is developing WattUp wire-free charging technology and expects ultimately to license it to commercial partners.
Financial results and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $2.075 million | None | $2.500 million | None |
| Operating expenses | $7.683 million | $5.830 million | $21.190 million | $11.346 million |
| Operating loss | $5.608 million | $5.830 million | $18.690 million | $11.346 million |
| Net loss | $5.606 million | $5.848 million | $18.678 million | $36.579 million |
| Loss per share, basic and diluted | $0.43 | $0.62 | $1.45 | $5.08 |
- Q3 revenue was recognized under a product development and licensing agreement with a consumer electronics company, including $2.0 million for achieved milestones. That amount was recorded as a receivable at quarter-end and collected October 21, 2015.
- Q3 operating expenses rose 32% year over year, led by research and development (up $1.06 million) and general and administrative expense (up $0.83 million). Nine-month R&D rose to $13.01 million from $6.18 million, primarily reflecting increased staffing and ASIC development spending.
- Q3 net loss narrowed slightly despite higher operating costs, reflecting revenue. The nine-month net loss was lower than in 2014 primarily because the prior-year period included a $26.27 million derivative-liability fair-value expense, along with convertible-note-related items.
- At September 30, cash and cash equivalents were $15.51 million, down from $31.49 million at December 31, 2014. Total current assets were $18.16 million and current liabilities $2.76 million. The balance sheet showed no debt; stockholders’ equity was $17.31 million.
- Nine-month operating cash use was $15.46 million, versus $8.49 million in 2014; investing cash use was $0.73 million. Financing provided $0.21 million, compared with $25.77 million in 2014, which included IPO and strategic-investor proceeds. The filing gives no gross-profit or operating-margin figure.
- Stock-based compensation was $4.31 million for the first nine months, up from $1.66 million. Potentially dilutive securities excluded from diluted loss per share totaled 4.83 million shares.
Outlook, developments, and risks
- Management expected cash on hand and anticipated customer-project receipts to fund operations into the fourth quarter of 2016. It cautioned that additional financing may be needed; an effective Form S-3 shelf registration permits up to $75 million of debt or equity securities, but there is no assurance financing will be available on acceptable terms.
- Management aimed for initial commercialization in late 2016 or early 2017 and expected to pursue additional development and licensing agreements in late 2015 or early 2016. These are plans, not firm revenue guidance. The company expected continued operating losses while developing its technology.
- The company reported more than 150 pending U.S. patent and provisional applications. In November 2015, after quarter-end, it reported UL testing results of 4 watts at 0–5 feet, 2 watts at 5–10 feet, and 1 watt at 10–15 feet. It also reported beginning to sample a small rectifier ASIC in October 2015.
- Key risks include successfully developing commercially feasible technology, obtaining required regulatory approvals, securing and retaining development partners, market adoption and competition, protecting intellectual property, and raising capital. Management stated that technology development is unpredictable and future revenues sufficient to sustain operations are not assured.
- Future minimum lease payments totaled $2.14 million. The filing reported no pending legal proceedings believed likely to have a material adverse effect and no off-balance-sheet transactions.
Most important facts for investors to verify
- Whether the customer milestones and development agreement progress to licensing, product shipments, and recurring revenue; current reported revenue is project-based.
- Whether cash burn, customer receipts, and other funding support operations beyond management’s stated fourth-quarter 2016 runway, and whether additional financing causes dilution or adds debt.
- Whether WattUp performance, regulatory approval, product integration, and commercialization timing meet management’s expectations.
- The potential effect of equity awards and other securities on dilution; the filing lists 4.83 million potentially dilutive securities excluded from loss-per-share calculations.
- Whether expense growth, particularly R&D and stock-based compensation, translates into demonstrable commercial progress.