Energous Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

watt-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-36379

ENERGOUS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		46-1318953
(State of incorporation)		(I.R.S. Employer Identification No.)

3590 North First Street, Suite 210, San Jose, CA 95134

(Address of principal executive office) (Zip code)

(408) 963-0200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value

WATT

The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☑
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of August 4, 2020, there were 41,630,568 shares of our Common Stock, par value $0.00001 per share, outstanding.

ENERGOUS CORPORATION

FORM 10-Q

FOR THE THREE MONTHS ENDED JUNE 30, 2020

INDEX

PART I - FINANCIAL INFORMATION		3

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

Item 3. Quantitative and Qualitative Disclosure About Market Risk		23

Item 4. Controls and Procedures		23

PART II – OTHER INFORMATION		24

Item 1. Legal Proceedings		24

Item 1A. Risk Factors		24

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities		35

Item 3. Defaults Upon Senior Securities		35

Item 4. Mine Safety Disclosures		35

Item 5. Other Information		35

Item 6. Exhibits		35

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Energous Corporation

BALANCE SHEETS

	As of
	June 30, 2020			December 31, 2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	23,408,940		$	21,684,089
Accounts receivable		105,226			63,144
Prepaid expenses and other current assets		662,958			450,231
Total current assets		24,177,124			22,197,464

Property and equipment, net		408,895			626,524
Operating lease right-of-use assets		1,678,983			2,057,576
Other assets		2,410			2,410
Total assets	$	26,267,412		$	24,883,974
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,340,982		$	1,671,519
Accrued expenses		1,633,637			2,063,097
Operating lease liabilities, current portion		803,760			722,291
Deferred revenue		12,000			12,000
Total current liabilities		3,790,379			4,468,907

Operating lease liabilities, long-term portion		979,660			1,402,193
Total liabilities		4,770,039			5,871,100

Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $0.00001 par value, 10,000,000 shares authorized at June 30, 2020 and December 31, 2019; no shares issued or outstanding		–			–
Common Stock, $0.00001 par value, 50,000,000 shares authorized at June 30, 2020 and December 31, 2019; 41,685,310 and 33,203,806 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively.		417			333
Additional paid-in capital		301,440,018			282,153,201
Accumulated deficit		(279,943,062	)		(263,140,660	)
Total stockholders’ equity		21,497,373			19,012,874
Total liabilities and stockholders’ equity	$	26,267,412		$	24,883,974

The accompanying notes are an integral part of these condensed financial statements.

Energous Corporation

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Revenue	$	114,375		$	47,500		$	175,850		$	114,000
Operating expenses:
Research and development		4,330,433			5,515,017			8,905,736			12,315,695
Sales and marketing		1,438,904			1,143,910			2,886,813			2,743,362
General and administrative		2,470,683			3,335,229			5,123,077			6,097,140
Cost of services revenue		86,995			–			126,539			–
Total operating expenses		8,327,015			9,994,156			17,042,165			21,156,197
Loss from operations		(8,212,640	)		(9,946,656	)		(16,866,315	)		(21,042,197	)
Other income:
Interest income		7,974			142,660			63,913			218,733
Total other income		7,974			142,660			63,913			218,733
Net loss	$	(8,204,666	)	$	(9,803,996	)	$	(16,802,402	)	$	(20,823,464	)
Basic and diluted loss per common share	$	(0.20	)	$	(0.32	)	$	(0.45	)	$	(0.71	)
Weighted average shares outstanding, basic and diluted		40,641,264			30,445,438			37,728,909			29,199,225

The accompanying notes are an integral part of these condensed financial statements.

Energous Corporation

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

	Common Stock				Additional Paid-in			Accumulated			Total Stockholders'
	Shares		Amount		Capital			Deficit			Equity
Balance at January 1, 2020		33,203,806	$	333	$	282,153,201		$	(263,140,660	)	$	19,012,874
Stock-based compensation - restricted stock units ("RSUs")		–		–		2,321,820			–			2,321,820
Stock-based compensation - performance share units ("PSUs")		–		–		(88,348	)		–			(88,348	)
Stock-based compensation - employee stock purchase plan ("ESPP")		–		–		42,827			–			42,827
Issuance of shares for RSUs		396,559		4		(4	)		–			–
Proceeds from contributions to the ESPP		–		–		113,059			–			113,059
Issuance of shares in an at-the-market ("ATM") offering, net of $141,322 in issuance costs		4,351,652		44		5,506,836			–			5,506,880
Net loss		–		–		–			(8,597,736	)		(8,597,736	)
Balance March 31, 2020 (unaudited)		37,952,017		381		290,049,391			(271,738,396	)		18,311,376
Stock-based compensation - restricted stock units ("RSUs")		–		–		2,028,599			–			2,028,599
Stock-based compensation - employee stock purchase plan ("ESPP")		–		–		41,308			–			41,308
Issuance of shares for RSUs		232,995		2		(2	)		–			–
Proceeds from contributions to the ESPP		144,370		1		104,144			–			104,145
Issuance of shares in an at-the-market ("ATM") offering, net of $236,528 in issuance costs		3,355,928		33		9,216,578			–			9,216,611
Net loss		–		–		–			(8,204,666	)		(8,204,666	)
Balance, June 30, 2020 (unaudited)		41,685,310	$	417	$	301,440,018		$	(279,943,062	)	$	21,497,373

	Common Stock					Additional Paid-in			Accumulated			Total Stockholders'
	Shares			Amount		Capital			Deficit			Equity
Balance at January 1, 2019		26,526,303		$	265	$	243,111,741		$	(224,741,571	)	$	18,370,435
Stock-based compensation - restricted stock units ("RSUs")		–			–		3,083,567			–			3,083,567
Stock-based compensation - employee stock purchase plan ("ESPP")		–			–		87,825			–			87,825
Issuance of shares for RSUs		434,522			4		(4	)		–			–
Shares withheld for payroll tax on RSUs		(1,329	)		–		(10,207	)		–			(10,207	)
Shares withheld for payroll tax on performance share units ("PSUs")		(44,481	)		–		(329,159	)		–			(329,159	)
Exercise of stock options		80,201			1		400,102			–			400,103
Proceeds from contributions to the ESPP		–			–		173,167			–			173,167
Issuance of shares and warrant in a private placement, net of $1,680,844 in issuance costs		3,333,333			33		23,319,123			–			23,319,156
Net loss		–			–		–			(11,019,468	)		(11,019,468	)
Balance, March 31, 2019 (unaudited)		30,328,549		$	303	$	269,836,155		$	(235,761,039	)	$	34,075,419
Stock-based compensation - restricted stock units ("RSUs")		–			–		2,675,184			–			2,675,184
Stock-based compensation - employee stock purchase plan ("ESPP")		–			–		122,749			–			122,749
Issuance of shares for RSUs		189,220			2		(2	)		–			–
Proceeds from contributions to the ESPP		85,765			1		145,421			–			145,422
Net loss		–			–		–			(9,803,996	)		(9,803,996	)
Balance, June 30, 2019 (unaudited)		30,603,534		$	306	$	272,779,507		$	(245,565,035	)	$	27,214,778

The accompanying notes are an integral part of these condensed financial statements.

Energous Corporation

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(16,802,402	)	$	(20,823,464	)
Adjustments to reconcile net loss to:
Net cash used in operating activities:
Depreciation and amortization		217,629			476,863
Stock based compensation		4,346,206			5,969,325
Changes in operating lease right-of-use assets		378,593			293,210
Bad debt expense		33,000			–
Changes in operating assets and liabilities:
Accounts receivable		(75,082	)		(2,950	)
Prepaid expenses and other current assets		(212,727	)		94,681
Accounts payable		(330,537	)		(534,124	)
Accrued expenses		(429,460	)		332,767
Operating lease liabilities		(341,064	)		(230,219	)
Net cash used in operating activities		(13,215,844	)		(14,423,911	)
Cash flows from investing activities:
Purchases of property and equipment		–			(172,811	)
Net cash used in investing activities		–			(172,811	)
Cash flows from financing activities:
Net proceeds from the sales of common stock		14,723,491			23,319,156
Proceeds from the exercise of stock options		–			400,103
Proceeds from contributions to employee stock purchase plan		217,204			318,589
Shares repurchased for tax withholdings on vesting of RSUs		–			(10,207	)
Shares repurchased for tax withholdings on vesting of PSUs		–			(329,159	)
Net cash provided by financing activities		14,940,695			23,698,482
Net increase in cash and cash equivalents		1,724,851			9,101,760
Cash and cash equivalents - beginning		21,684,089			20,106,485
Cash and cash equivalents - ending	$	23,408,940		$	29,208,245
Supplemental disclosure of non-cash financing activities:
Common stock issued for RSUs	$	6		$	6

The accompanying notes are an integral part of these condensed financial statements.

Note 1 - Business Organization, Nature of Operations

Energous Corporation (the “Company”) was incorporated in Delaware on October 30, 2012. The Company has developed its WattUp® technology, consisting of proprietary semiconductor chipsets, software, hardware designs and antennas, that enables radio frequency (“RF”) based charging for electronic devices, providing wire-free contact and non-contact charging solutions, with the potential to enable charging with mobility. The Company believes its proprietary WattUp technology can be utilized in consumer electronics such as wearables, hearing aids, earbuds, Bluetooth headsets, Internet of Things (“IoT”) devices, smartphones, tablets, e-book readers, keyboards, mice, remote controls, rechargeable lights, cylindrical batteries, medical devices and other devices with charging requirements that would otherwise require battery replacement or wired power connection.

Note 2 – Liquidity and Management Plans

During the three and six months ended June 30, 2020, the Company recorded revenue of $114,375 and $175,850, respectively, and during the three and six months ended June 30, 2019, the Company recorded revenue of $47,500 and $114,000, respectively. During the three and six months ended June 30, 2020, the Company recorded net losses of $8,204,666 and $16,802,402, respectively, and during the three and six months ended June 30, 2019, the Company recorded net losses of $9,803,996 and $20,823,464, respectively. Net cash used in operating activities was $13,215,844 and $14,423,911 for the six months ended June 30, 2020 and 2019, respectively. The Company is currently meeting its liquidity requirements through the proceeds of securities offerings that raised net proceeds of $23,319,156 in March 2019, $4,557,693 during the fourth quarter 2019, $5,506,880 during the first quarter 2020 and $9,216,611 during the second quarter 2020, along with payments received under product development projects.

As of June 30, 2020, the Company had cash on hand of $23,408,940. The Company expects that cash on hand as of June 30, 2020, together with anticipated revenues and potential financing will be sufficient to fund the Company’s operations into August 2021.

Research and development of new technologies is by its nature unpredictable. Although the Company intends to continue its research and development activities, there can be no assurance that its available resources and revenue generated from its business operations will be sufficient to sustain its operations. Accordingly, the Company expects to pursue additional financing, which could include offerings of equity or debt securities, bank financings, commercial agreements with customers or strategic partners, and other alternatives, depending upon market conditions. There is no assurance that such financing would be available on terms that the Company would find acceptable, or at all.

The market for products using the Company’s technology is broad and evolving, but remains nascent and unproven, so the Company’s success is dependent upon many factors, including customer acceptance of its existing products, technical feasibility of future products, regulatory approvals, competition and global market fluctuations.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The pandemic continues to affect the United States and the world. The Company is monitoring the ongoing effects of COVID-19 (including continued outbreaks) and the related business and travel restrictions and changes to behavior intended to reduce its spread, and COVID-19’s impact on the Company’s operations, financial position, cash flows, inventory, supply chains, global regulatory approvals, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. Due to the continuing developments and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company's operations and liquidity are still uncertain as of the date of this report.

Note 3 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2019 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 13, 2020. The accounting policies used in preparing these unaudited condensed interim financial statements are consistent with those described in the Company’s December 31, 2019 audited financial statements.

Note 3 – Summary of Significant Accounting Policies, continued

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements as well as the reported expenses during the reporting periods.

The Company’s significant estimates and assumptions include the valuation of stock-based compensation instruments, recognition of revenue, the useful lives of long-lived assets, and income tax expense. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" (Topic 606).

In accordance with Topic 606, the Company recognizes revenue using the following five-step approach:

Identify the contract with a customer.

Identify the performance obligations in the contract.

Determine the transaction price of the contract.

Allocate the transaction price to the performance obligations in the contract.

Recognize revenue when the performance obligations are met or delivered.

The Company’s revenue primarily consists of product development projects revenue and royalty revenue from Dialog. The Company also provides contract services for Dialog.

The Company records revenue associated with product development projects that it enters into with certain customers. In general, these product development projects are complex, and the Company does not have certainty about its ability to achieve the project milestones. The achievement of a milestone is dependent on the Company’s performance obligation and requires acceptance by the customer. The Company recognizes this revenue at a point in time based on when the performance obligation is met. The payment associated with achieving the performance obligation is generally commensurate with the Company’s effort or the value of the deliverable and is nonrefundable. The Company records the expenses related to these product development projects in research and development expense, in the periods such expenses were incurred.

The Company records royalty revenue from its manufacturing partner, Dialog, and such royalty revenue is recognized at a point in time based on shipments from Dialog to its customers.

The Company recognizes contract services revenue from Dialog over the period of time that the services are performed. The costs associated with this revenue are recognized as the services are performed and are included in cost of services revenue.

Research and Development

Research and development expenses are charged to operations as incurred. For internally developed patents, all patent application costs are expensed as incurred as research and development expense. Patent application costs, which are generally legal costs, are expensed as research and development costs until such time as the future economic benefits of such patents become more certain. The Company incurred research and development costs of $4,330,433 and $5,515,017 for the three months ended June 30, 2020 and 2019, respectively, and the Company incurred research and development costs of $8,905,736 and $12,315,695 for the six months ended June 30, 2020 and 2019, respectively.

Note 3 – Summary of Significant Accounting Policies, continued

Stock-Based Compensation

The Company accounts for equity instruments issued to employees, board members and contractors in accordance with accounting guidance that requires awards to be recorded at their fair value on the date of grant and are amortized over the vesting period of the award. The Company recognizes compensation costs on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the equity instrument issued.

Under the Company’s Employee Stock Purchase Plan (“ESPP”), employees may purchase a limited number of shares of the Company’s common stock at a 15% discount from the lower of the closing market prices measured on the first and last days of each half-year period. The Company recognizes stock-based compensation expense for the fair value of the purchase options, as measured on the grant date.

Income Taxes

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of June 30, 2020, no liability for unrecognized tax benefits was required to be reported. The guidance also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the three or six months ended June 30, 2020 or 2019. The Company files income tax returns with the United States and California governments.

Net Loss Per Common Share

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method), the vesting of restricted stock units (“RSUs”) and performance stock units (“PSUs”) and the enrollment of employees in the ESPP. The computation of diluted loss per share excludes potentially dilutive securities of 6,945,580 and 7,228,185 for the three months ended June 30, 2020 and 2019, respectively, and 6,945,580 and 7,228,185 for the six months ended June 30, 2020 and 2019, respectively, because their inclusion would be anti-dilutive.

Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Warrant issued to private investors		3,938,802		4,702,354		3,938,802		4,702,354
Options to purchase common stock		550,985		576,293		550,985		576,293
RSUs		1,822,116		1,949,538		1,822,116		1,949,538
PSUs		633,677		–		633,677		–
Total potentially dilutive securities		6,945,580		7,228,185		6,945,580

Price	3.32	EPS	-1
Shares	31	P/E	-2
MCap	102	P/FCF	-5
Net Debt	-23	EBIT	-41
TEV	80	TEV/EBIT	-2
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-03-13
10-Q	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-08-09
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-02-28
10-Q	2018-09-30	Filed 2018-11-09
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-03-16
10-Q	2017-09-30	Filed 2017-11-09
10-Q	2017-06-30	Filed 2017-08-09
10-Q	2017-03-31	Filed 2017-05-10
10-K	2016-12-31	Filed 2017-03-16
10-Q	2016-09-30	Filed 2016-11-09
10-Q	2016-06-30	Filed 2016-08-09
10-Q	2016-03-31	Filed 2016-05-10
10-K	2015-12-31	Filed 2016-03-15
10-Q	2015-09-30	Filed 2015-11-12
10-Q	2015-06-30	Filed 2015-08-13
10-Q	2015-03-31	Filed 2015-05-13
10-K	2014-12-31	Filed 2015-03-30
10-Q	2014-09-30	Filed 2014-11-10
10-Q	2014-06-30	Filed 2014-08-13
10-Q	2014-03-31	Filed 2014-05-14

8-K	2020-08-05	Earnings, Exhibits
8-K	2020-07-24	Amend Bylaw, Shareholder Vote, Exhibits
8-K	2020-05-26
8-K	2020-05-06
8-K	2020-04-21
8-K	2020-02-26
8-K	2019-11-07
8-K	2019-10-11
8-K	2019-08-28
8-K	2019-08-15
8-K	2019-08-08
8-K	2019-05-15
8-K	2019-04-30
8-K	2019-03-28
8-K	2019-03-28
8-K	2019-02-27
8-K	2019-02-27
8-K	2018-10-30
8-K	2018-08-01
8-K	2018-05-16
8-K	2018-05-01
8-K	2018-03-21
8-K	2018-02-15
8-K	2018-01-11
8-K	2018-01-10

EX-3.1	watt-ex31_26.htm
EX-10.5	watt-ex105_93.htm
EX-31.1	watt-ex311_8.htm
EX-31.2	watt-ex312_7.htm
EX-32.1	watt-ex321_6.htm

WATT 10Q Quarterly Report

Energous Earnings 2020-06-30