Energous Corporation — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017. Energous is developing WattUp, a radio-frequency wireless charging technology, and generates revenue primarily from customer development projects and milestones. Dialog Semiconductor is its strategic manufacturing and distribution partner and exclusive supplier in specified markets, subject to the alliance terms.
Financial results and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $0.30 million | $0.18 million | $0.87 million | $0.32 million |
| Operating expenses | $13.22 million | $10.47 million | $26.27 million | $21.41 million |
| Operating loss | $(12.92) million | $(10.29) million | $(25.40) million | $(21.09) million |
| Net loss | $(12.92) million | $(10.28) million | $(25.39) million | $(21.08) million |
| Basic and diluted loss per share | $(0.63) | $(0.62) | $(1.23) | $(1.27) |
| Operating cash used | Not separately stated by quarter | $(18.96) million | $(15.95) million |
- Cash and cash equivalents were $13.08 million at June 30, 2017, down from $31.26 million at December 31, 2016. Total current assets were $14.23 million and current liabilities $4.05 million.
- Total assets were $16.32 million; stockholders’ equity was $12.26 million. The filing reports no debt balance. Gross margin is not presented.
- Management estimated cash, the Dialog investment completed in July, and anticipated project revenue would fund operations into the third quarter of 2018. This estimate depends on future funding and revenue assumptions.
Changes versus prior comparable periods
- Revenue rose 65% in Q2 and 175% for the first half, primarily from development milestones. Revenue remains small relative to operating costs.
- First-half net loss increased by $4.31 million year over year, while operating cash use increased by approximately $3.01 million.
- First-half operating expenses increased about $4.87 million. Management cited higher headcount and compensation, including increased stock-based compensation, partly offset by lower chip-design, manufacturing, component, and engineering-software costs.
- First-half stock-based compensation was $7.90 million versus $3.55 million a year earlier. The company reported 20.86 million common shares outstanding at June 30, up from 20.37 million at year-end; 7.53 million potential common shares were excluded from diluted loss per share as anti-dilutive.
Outlook, risks, and notable items
- In July 2017, Energous issued Dialog 976,139 shares for aggregate proceeds of approximately $15.0 million and a warrant for up to 654,013 shares. This occurred after quarter-end and is not included in June 30 cash.
- Management expected product shipments to consumers to begin in the second half of 2017 following evaluation by potential licensees; the filing does not provide a firm launch date, revenue target, or assurance of adoption.
- The company stated that it may need additional financing if meaningful commercial revenue is delayed. Financing could involve equity, debt, or co-development arrangements; there is no assurance financing will be available on acceptable terms.
- Key risks include technical and commercial feasibility, customer adoption and implementation timing, FCC approvals for transmitting power at a distance, development-partner availability, intellectual-property protection, competition, and continued access to capital. The company also noted that it cannot assure profitability or sufficient future revenue.
- The company reported no material pending legal proceedings, no off-balance-sheet transactions, and no material changes to market-risk exposure or internal controls. It reported no material changes outside the ordinary course to specified contractual obligations.
Investor verification points
- Check whether subsequent product launches, customer milestones, and commercial revenues occurred, and whether milestone revenue is recurring or project-specific.
- Compare actual cash burn and financing needs with management’s projected runway into Q3 2018, including the impact of the July Dialog proceeds.
- Review dilution from outstanding warrants, options, RSUs, PSUs, and future equity awards; verify the terms and potential share count of the July Dialog warrant.
- Track required regulatory approvals and the status of the Dialog alliance, including exclusivity conditions and sales targets.
- Confirm reported revenue values against the financial statements: the statements show first-half 2016 revenue of $318,182; one liquidity-note passage contains a conflicting $318,812 figure.