Energous Corporation — Q1 2016 Form 10-Q
Business context and reporting period. This quarterly report covers the three months ended March 31, 2016. Energous is developing WattUp, an RF-based wireless charging system, and expects to monetize it through silicon sales and technology licensing. The company reported limited development-project revenue and remains focused on product development and commercialization.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | $136,364 | $200,000; down about 32% |
| Research and development | $7,674,093 | $4,275,565; up about 79% |
| Sales and marketing | $807,067 | $1,043,894; down about 23% |
| General and administrative | $2,455,612 | $1,812,141; up about 36% |
| Total operating expenses | $10,936,772 | $7,131,600 |
| Operating loss | $10,800,408 | $6,931,600 |
| Net loss | $10,796,542 | $6,925,279 |
| Basic and diluted loss per share | $0.66 | $0.54 |
| Net cash used in operating activities | $6,325,595 | $4,784,068 |
- Cash and cash equivalents were $23.71 million at March 31, 2016, down from $29.87 million at December 31, 2015. Cash fell by $6.16 million during the quarter.
- Current assets were $24.46 million and current liabilities were $5.65 million. Total assets were $26.37 million. The balance sheet presents no debt balance.
- Stockholders’ equity was $20.72 million, compared with $29.27 million at year-end 2015; accumulated deficit was $89.50 million.
- Investing activities used $120,370; financing activities provided $284,067, primarily from employee stock-plan contributions and option exercises. No gross margin is presented in the supplied filing text.
Material changes and operating developments
- Operating expenses rose by $3.81 million year over year, while revenue declined by $63,636. The larger R&D spend reflected increased chip-development costs, engineering headcount, patent and legal costs, design-tool software, and rent allocation.
- G&A increased mainly from compensation and stock-based compensation, including higher headcount and a full quarter of the CEO’s RSU agreement. Sales and marketing fell largely due to lower compensation after the Chief Commercial Officer’s departure and reduced travel.
- The company received a $500,000 payment on March 31 under the second phase of a development and licensing agreement; it recognized $136,364 as revenue and recorded the remainder as deferred revenue.
- Management described a January 2016 miniature transmitter and small-form-factor receiver, and said evaluation kits began going to potential licensees in February. It reported a March development agreement with Pegatron and an April 2016 joint development and licensing agreement with a specialty battery company.
Outlook, risks, and contingencies
- Management expected cash on hand plus anticipated revenue to fund operations into the second quarter of 2017. It also cautioned that additional financing may be needed depending on the timing of meaningful commercial revenue; no assurance was given that financing would be available on acceptable terms.
- Management’s commercialization expectations included potential nearfield products shipping in late 2016 or early 2017 and future royalties if partner products incorporating WattUp reach consumers. These are forward-looking expectations, not assured outcomes.
- Key risks include technology development and feature delivery, regulatory approvals, partner retention, market acceptance, competition, intellectual-property protection, and the ability to raise capital. The company stated that its WattUp technology had been independently validated by UL in October 2015; it also reported more than 250 pending patent and provisional applications.
- Operating lease commitments totaled $1.87 million in future minimum payments. The filing reported no material pending legal proceeding, no off-balance-sheet transactions, and no material changes in contractual obligations outside the ordinary course.
- Disclosure controls were assessed as effective as of March 31, 2016, with no material change in internal control over financial reporting reported for the quarter.
Important facts for investors to verify
- Whether development milestones with the consumer-electronics customer and other partners are achieved, accepted, and converted into recurring licensing or product revenue.
- Whether the stated cash runway through Q2 2017 remains supportable as operating cash use continues and commercial revenue remains limited.
- The progress, timing, and regulatory status of WattUp products, including the expected nearfield commercialization timetable.
- The potential dilution from equity compensation and future financing; shares outstanding were 16,488,977 at March 31, 2016, and 16,554,966 as of May 5, 2016.