Energous Corporation — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; filed May 10, 2017. Energous develops WattUp, a radio-frequency wireless charging technology, including chips, antennas, software, transmitters and receivers. Dialog Semiconductor is the planned exclusive supplier of related integrated circuits for the general market under a strategic alliance.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Revenue | $575,368 | $136,364; up approximately 322%, primarily from development milestones |
| Research and development | $8.35 million | $7.67 million |
| Sales and marketing | $1.60 million | $0.81 million |
| General and administrative | $3.10 million | $2.46 million |
| Total operating expenses | $13.05 million | $10.94 million |
| Loss from operations | $(12.48) million | $(10.80) million |
| Net loss | $(12.47) million | $(10.80) million |
| Basic and diluted loss per share | $(0.61) | $(0.66) |
| Net cash used in operating activities | $(10.01) million | $(6.33) million |
- At March 31, cash and cash equivalents were $21.45 million, versus $31.26 million at December 31, 2016. Total assets were $24.55 million and stockholders’ equity was $19.89 million.
- Current assets were $22.43 million and current liabilities were $4.66 million, implying working capital of approximately $17.76 million and a current ratio of about 4.8. No debt is shown on the balance sheet.
- Investing activities used $76,968; financing activities provided $272,864. Cash decreased by $9.81 million during the quarter.
- The filing does not provide a clear gross margin or a separate cost-of-revenue figure. Revenue is primarily from customer product-development arrangements, including milestone and engineering payments.
Changes, outlook and risks
- Revenue increased year over year but remained small relative to operating costs. Net loss widened about 16%, while operating cash use increased about 58%.
- Management attributed higher R&D costs largely to compensation and stock-based compensation, depreciation and patent costs, partly offset by lower chip-design, manufacturing and component costs. Sales and marketing growth reflected higher compensation and trade-show costs; G&A growth was primarily compensation-related.
- Stock-based compensation was $3.54 million, compared with $1.95 million a year earlier. The company reported 7.36 million potentially dilutive securities excluded from diluted loss per share as anti-dilutive.
- Management expected March 31 cash, together with anticipated revenue, to fund operations through the second quarter of 2018. It also said additional financing may be needed depending on the timing of meaningful commercial revenue; financing availability and acceptable terms are not assured. Prior private placements in 2016 raised net proceeds of approximately $34.79 million.
- The company reported that evaluation kits were being tested by potential licensees and expected products to begin shipping to consumers in the second half of 2017. This is an expectation, not a guarantee. Its consumer-electronics development agreement is milestone-based, and adoption into customer products is uncertain.
- Key risks include developing commercially feasible technology, obtaining regulatory approvals—particularly FCC approval for transmitting power at a distance—customer adoption and implementation timing, maintaining development partners, competition and intellectual-property protection. WattUp’s stated far-field target is up to a 15-foot radius; commercial performance and approvals remain uncertain.
- Future minimum lease payments were $1.33 million in total. The company reported no material off-balance-sheet transactions, no material changes to contractual obligations, and no pending legal proceedings believed likely to have a material adverse effect. Disclosure controls were deemed effective; no material change in internal control was reported.
Important facts for investors to verify
- Whether anticipated customer milestones, development payments and prospective product launches materialize, and how concentrated revenue is among development customers.
- FCC and other regulatory approval status, as well as evidence that WattUp can meet performance, cost and product-integration requirements at commercial scale.
- Cash burn versus the stated runway through Q2 2018, and the potential timing, availability and dilution or other terms of any additional financing.
- Dialog alliance exclusivity, commercialization progress and any applicable sales targets or conditions.
- Potential dilution from outstanding warrants, options, RSUs and PSUs, including the significant unamortized RSU compensation disclosed in the filing.