Good day and welcome to Energous Corporation First Quarter 2020 Financial Results Conference Call. All participants will be in listen only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mike Bishop, Energous Investor Relations. Please go ahead.

Thank you, Jason, and welcome, everyone. Before we begin, I would like to remind participants that during today's call the company will make forward-looking statements. These statements whether in prepared remarks or during the Q&A session are subject to inherent risks and uncertainties that are detailed in the company's filings with the Securities and Exchange Commission. Except as otherwise required by federal securities laws, Energous disclaims any obligation or undertaking to publicly release updates or revisions to the forward-looking statements contained herein or elsewhere to reflect changes in expectations with regard to those events, conditions and circumstances. Also, please note that during this call Energous will be discussing non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release, which is posted on the company's website. Now, I would like to turn the call over to Steve Rizzone, CEO of Energous. Please go ahead, Steve.

Thanks, Mike. And welcome to the Energous first quarter 2020 conference call. Clearly these are challenging times for everyone. It is our sincere hope that all of you in attendance today along with your families remain safe and secure from the virus. In today's call, I will cover our recent certification and the WattUp PowerHub developer kit announcement and provide an operational overview of the business, including the impact of the global pandemic on Energous. Brian Sereda, our CFO who is joining us today will provide a financial update, following which we will open the call to questions. I would like to begin with comments on the announcements two weeks ago regarding FCC certification of a completely new groundbreaking WattUp Mid Field Transmitter technology. Since the company's inception, the overwhelming differentiator of the Energous technology has been its ability to support both contact-based charging, as well as charging at a distance. We chose to focus on contact-based charging first, because we believe that it represented the fastest path to both achieving globally the regulatory certifications required to successfully launch a completely new technology and since the contacts-based charging paradigm was already established, it would be easier to foster the customer partnerships necessary to integrate the technology into consumer and industrial applications. We took this path with the clear understanding that in order to develop a true WattUp based wireless power 2.0 ecosystem, both contact and distinct charging capabilities were required. While Energous entered the wireless charging market focusing on contact-based application, the ultimate goal for the company has always been charging at a distance. This is why we are excited by the recent certification from the FCC, and today's WattUp PowerHub developer kit announcement that extends from it. Both are important as they demonstrate significant advancements in our core technology,…

Thanks, Steve. Before I begin, I'd like to remind everyone that at close of market today we issued a press release announcing our financial results for the first fiscal quarter of 2020 ended March 31st. In the first quarter we recognized $61,000 in revenue compared to $47,000 in the prior quarter, and $67,000 in the same quarter last year. Q1 of this year included engineering services perform for Dialog and the accompanying cost of this service is shown as a separate line in our P&L in OpEx. The cost associated with this are internal engineering costs moved out of R&D operating expense, and tied to a project involving the development of new technologies and is expected to wrap up at the end of June. Echoing Steve's earlier discussion, the introduction of PowerHub offers existing and potential partners the first product offering path in contacted distance charging. Although this current pandemic limits our ability to turn customer activities into a forecast, we can share that we are encouraged by the expanded opportunities this announcement has brought and is expected to bring as our funnel of new and current customers moving through design and phases continues to develop. As our visibility improves and macro conditions stabilize, only then we will be in a position to offer more tangible outlook for the balance of 2020. On the expense side, total GAAP spend, including the services cost I just mentioned for the first quarter totaled $8.7 million. Approximately $0.8 million lower than $9.5 million of total expense in the prior quarter, and approximately $2.5 million lower than the same period last year. The improvement in expenses is tied to lower headcount costs including stock compensation and lower overall engineering costs, reflecting a maturing technology portfolio and its impact on reducing ship take up and…

Thanks, Brian. Operator, we will now take questions

[Operator Instructions]. Our first question comes from Suji Desilva from ROTH Capital. Please go ahead.

Hello, Steve, and hello, Brian. Congratulations on the execution in a challenging environment certainly, and the accomplishment. Just a housekeeping question, Brian. For the service revenue cost, is that something we should consider something that cost of goods sold against revenue that impacts that gross margin number, is that below the line? And I wasn’t unclear whether that cost is going to continue and grow, or whether it's kind of a one-time cost?

Yes, last question -- your last part first. It's a one-time cost. That project will conclude in June. It was a unique project, working together with Dialog which is considered a related party. We don't control the intellectual property. So the presentation is shown on the income statement reflects that. So it's not an ongoing cost, or it is certainly not a third-party cost, it's simply just moved cost out of R&D and segregated. So, again, second quarter, we should conclude that project in probably the -- in the last monthly event.

And then going on to -- moving on to the products, now that you’re kind of breaking out kind of at-a-distance, kind of contact, and then kind of close I guess. I'd like to know maybe Stephen, if these three products require a separate regulatory body kind of processes or whether they covered together in single efforts across countries, that kind of color would help as a starting point?

So I just want to be clear, when we talk about the announcements today, we're talking about the WattUp PowerHub developer kit, which is a subset of the FCC certification. So, it's the same technology. So, it is one essential product, if you will. We have contact and we have the short distance technology and then we have the longer distance beamforming technology. Any product that emerges from these developments will have to go through its own regulatory certification process in order to be -- I should say before it can be sold to the public. So, every product has to go through a certification process. These are three separate though global regulatory efforts, the idea -- sorry go ahead.

No, that was what I was looking for. And anything to add that would be great.

We -- as we said that -- go ahead.

Okay. So I guess, given that they are separate, and I just wanted to understand the significance of the new product I guess, the one that no longer needs beamforming for the short distance. In terms of costs and form factors, Stephen, what are the -- kind of now the benefits for the customers they can perhaps go to market faster or better?

Well, as I said, we've learned a lot in talking with customers over the last couple of years. We also understand the global regulatory environment very, very well, exceedingly well, and it's a very conservative environment. And so based on these two factors, we made the determination that the best path for essentially launching at-a-distance technology would be in a smaller transmitter, less expensive, much easier and simpler to integrate. And also certainly as a faster path on a global regulatory track than a much more complex device. The strategy also plays well with our key market efforts so that we're currently focused on with our contact-based product. As you know, with these markets, we're targeting hearables and wearables and smart glasses. And one of the key elements is that, those devices initially shipping with contact-based transmitters will also be compatible with the distance charge that we expect to come to market next year. So that's a very important consideration. And as I said, the customer interest has proven to be very, very strong. And largely because it's less expensive, it's a lot easier. There's a whole plethora of devices that can use the technology and it just represents the fastest way to really bring distance charging to fruition.

It sounds like you have a clear path for the customers to integrate the technology seamlessly. And then maybe lastly on the hearing aid market, I've heard from several other peer companies there that, that could be a challenging market because of obviously the COVID issues for the elderly. I'm wondering if there's a geographic sort of element to it with your customer NewSound and whether you have confidence in that market ramping or whether there could perhaps be a headwind there? That'll be helpful since it seems like one of the first markets coming out of the gate for you guys.

Well, again, we really can't speak to how this is all going to play out. We have very limited visibility. Our engagements continue to move forward and the hearing aid and PSAP markets do represent a significant opportunity for us. But these companies are just starting to get back to work now and we'll have to see how this all plays out. Our visibility is really limited to 30, 60 days out right now.

The next question comes from Jon Hickman from Ladenburg. Please go ahead.

I was wondering if you could opine a little bit about what future cash needs may be to get through this period and into next year when revenue starts to ramp for you?

Yes, hi, Jon. This is -- as I highlighted in my script, the -- our expenses -- we have great visibility into our expenses I believe. And we're expecting the trend below last year. So I think given the success we've had in the ATM, we want the best for shareholders and stakeholders alike and our goal is continue to squeeze operation -- operational execution so that we don't have to continually dip our toe into the market. So I think right now we are -- our cash needs have been met. And we'll continue to take the most prudent course of action when it comes to having to raise additional capital.

Okay. Steve, can you talk a little bit about what's going on regulatory wise in the Asian markets?

Certainly. So we were very pleased with the Japanese certification. The Japanese regulatory agency is highly regarded and well-known as a very, very thorough agency. And so overcoming that hurdle really kind of sets the tone for the follow on approvals. We believe that there are three approvals or certifications that we require now in order to complete the full global regulatory capability or certification process. And those three are Korea, China and India. Unfortunately, when this pandemic broke, those agencies were some of the first to close down. And the visibility that we have now is very limited. We understand that they are starting to open up and reengage in China, less so in India -- excuse me in Korea, and not so in India as we understand. Our regulatory team continues to believe that we have paths to certification in all three jurisdictions. The thing we can't answer now is just how soon these agencies will be back operating at full speed, how soon they'll work through whatever backlog was created as part of the pandemic; and of course, ultimately, how soon we can complete the certification process? I'm sure there's going to be a delay, an impact. We have no ideas to the magnitude yet. But as I said, we remain optimistic that the issue is a question of when and not if. And that once these agencies get back and operational, we will fully engage again.

At this point, I will turn the call back to Mr. Rizzone for closing remarks.

Thank you, everyone for attending today's call. We sincerely hope that you, along with all of our stakeholders and partners, remain safe as we work our way through this pandemic together. Also, thanks to our employees whose safety and well-being will continue to be our top priority and who have shown such tremendous commitment and dedication throughout the past -- through few months. Finally -- and let me say -- and I believe I speak for everyone on the Energous team, we fully expect to emerge from the pandemic in a position of strength as we continue to execute on our top priorities of increasing the numbers of customers shipping WattUp enabled products to consumers, steadily increasing revenues, completing global regulatory certification, as well as launching the first charging-at-a-distance transmitters as quickly as possible. We will look forward to report progress on all four of these goals at the next conference call. Thank you and good bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.