Enovix (ENVX) - 2022 Q4 - Annual Report

Part I Business Overview Enovix is a development-stage company focused on advanced Li-ion batteries with a silicon anode, expecting first commercial revenue from Fab-1 in Q2 2022 - Enovix is a development-stage company with no product revenue to date, having incurred a net loss of $125.9 million in fiscal year 2021 and an accumulated deficit of $333.2 million as of January 2, 2022[18] - The company's core technology is an advanced Li-ion battery with a proprietary 3D cell architecture that enables a 100% active silicon anode, which it estimates delivers 24%-133% greater energy density than current industry-standard batteries[15][25] - Enovix's first production factory, Fab-1, is operational in Fremont, California, with the first commercial revenue forecasted for the second quarter of 2022[17][76] - The company has secured design wins across its target markets, including a smartwatch industry leader, a Land Mobile Radio (LMR) market leader, a Tier-1 laptop manufacturer, and two AR/VR market leaders[43][45][46][47] - As of January 2, 2022, Enovix's intellectual property portfolio includes 39 issued U.S. patents and 63 issued foreign patents, with patents beginning to expire in 2028[85] - The company employed 215 full-time employees and one part-time employee as of January 2, 2022, primarily based at its headquarters in Fremont, CA[105] Risk Factors The company faces significant manufacturing, operational, and financial risks, including complex production, capital needs for expansion, and intense market competition - The company relies on a new, complex, and not yet fully scaled manufacturing process, which presents significant risks in operational performance, cost, and achieving production volume[114][115] - The current manufacturing facility in Fremont (Fab-1) will not be sufficient to meet expected customer demand, and the company's success depends on locating and bringing an additional facility online[118][119] - Enovix is an early-stage company with a history of financial losses, including a net loss of $125.9 million in FY 2021, and expects to incur significant expenses and continuing losses for the foreseeable future[146][147] - The battery market is highly competitive, with risks from large incumbents (Panasonic, Samsung SDI, LG), other emerging companies, and potential state-sponsored competition from overseas that could compete on price[154][155][159] - The business is capital-intensive and may require additional funding to acquire and build out its next manufacturing facility (Fab-2), which may not be available on acceptable terms[184][185] - In the past, material weaknesses in internal control over financial reporting were identified. While remediated, failure to maintain effective controls in the future could adversely affect financial reporting and stock price[12][170][172] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[273] Properties Enovix's primary corporate, engineering, and manufacturing facilities are leased in Fremont, California, totaling approximately 68,500 square feet - The company's principal facilities are leased in Fremont, California, totaling approximately 68,500 square feet for its headquarters, R&D, and manufacturing, with a lease expiration of August 31, 2030[274] Legal Proceedings Legal proceedings include two dismissed shareholder complaints and a pending wage and hour class action lawsuit - Two shareholder complaints (Costello and Boxhorn) filed in 2021 against RSVAC related to the Business Combination were voluntarily dismissed[520][521] - In January 2022, a putative wage and hour class action lawsuit (Sopheap Prak et al. v. Enovix Corporation et al.) was filed against the company, alleging violations of the California Labor Code[522] Mine Safety Disclosures This item is not applicable to the company - Not applicable[276] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Enovix common stock trades on Nasdaq under "ENVX", with no dividends paid, and the company repurchased unvested shares in Q4 2021 - The company's common stock is listed on the Nasdaq Stock Market LLC under the symbol "ENVX"[279] - No dividends have been declared or paid, and none are anticipated in the foreseeable future[280] Issuer Purchases of Equity Securities (Q4 2021) | Fiscal Month | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | November 1 - November 28, 2021 | 14,871 | $0.06 | | November 29 - January 2, 2022 | 196,037 | $0.06 | | Total | 210,908 | $0.06 | Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $125.9 million in FY2021 due to increased R&D and SG&A, but holds $385.3 million in cash, deemed sufficient for future operations Consolidated Operating Results Comparison (in thousands) | | Fiscal Year 2021 | Fiscal Year 2020 | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $1,967 | $3,375 | $(1,408) | (42%) | | Research and development | $37,850 | $14,442 | $23,408 | 162% | | Selling, general and administrative | $29,705 | $5,713 | $23,992 | 420% | | Loss from operations | $(69,522) | $(23,530) | $(45,992) | 195% | | Total other expense, net | $(56,352) | $(16,120) | $(40,232) | 250% | | Net loss | $(125,874) | $(39,650) | $(86,224) | 217% | - The company's revenue funnel, representing the potential annual value of engaged customer projects, increased to $1.5 billion in Q4 2021[298] - As of January 2, 2022, the company had cash and cash equivalents of $385.3 million and working capital of $377.5 million, primarily from the net proceeds of the Business Combination[336] Non-GAAP Adjusted EBITDA Reconciliation (in thousands) | | Fiscal Year 2021 | Fiscal Year 2020 | | :--- | :--- | :--- | | Net loss | $(125,874) | $(39,650) | | Interest expense, net | 187 | 107 | | Depreciation and amortization | 1,515 | 579 | | EBITDA | $(124,172) | $(38,964) | | Stock-based compensation | 10,711 | 666 | | Change in fair value of warrants | 56,141 | 13,789 | | Other adjustments | 60 | 2,272 | | Adjusted EBITDA | $(57,260) | $(22,239) | Summary of Cash Flows (in thousands) | | Fiscal Year 2021 | Fiscal Year 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(51,306) | $(20,050) | | Net cash used in investing activities | $(43,584) | $(26,953) | | Net cash provided by financing activities | $451,090 | $65,920 | Quantitative and Qualitative Disclosures About Market Risk The company reports minimal exposure to market risks, with interest rate, foreign currency, and inflation risks deemed not material - Interest Rate Risk: The company's primary market risk exposure is interest rate sensitivity on its $385.3 million in cash and cash equivalents. An immediate 100 basis point change in interest rates would not have a material effect[373][374] - Foreign Currency and Inflation Risk: There was no material foreign currency or inflation risk for fiscal years 2021 and 2020 as activities were primarily conducted in the U.S. and transacted in U.S. dollars[375][377] Financial Statements and Supplementary Data Audited financial statements show a significant increase in cash and assets due to the business combination, alongside a net loss of $125.9 million in FY2021 Consolidated Balance Sheet Data (in thousands) | | Jan 2, 2022 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $385,293 | $29,143 | | Total current assets | $398,121 | $33,044 | | Property and equipment, net | $76,613 | $31,290 | | Total assets | $482,565 | $64,964 | | Total current liabilities | $20,636 | $10,868 | | Warrant liability | $124,260 | $15,995 | | Total liabilities | $156,448 | $28,748 | | Total stockholders' equity | $326,117 | $36,216 | Consolidated Statement of Operations Data (in thousands) | | Fiscal Year 2021 | Fiscal Year 2020 | | :--- | :--- | :--- | | Total operating expenses | $69,522 | $23,530 | | Loss from operations | $(69,522) | $(23,530) | | Total other expense, net | $(56,352) | $(16,120) | | Net loss | $(125,874) | $(39,650) | | Net loss per share | $(1.07) | $(0.49) | - The Business Combination in July 2021 was accounted for as a reverse recapitalization, with Legacy Enovix as the accounting acquirer. The transaction provided net cash proceeds of approximately $373.7 million[409][412][491] - As of January 2, 2022, the company had federal and state net operating loss carryforwards of $227.2 million and $226.3 million, respectively. A full valuation allowance has been recorded against these deferred tax assets[595][598] - In December 2021, the company called its Public Warrants for redemption. By January 7, 2022, a total of 11,304,351 Public Warrants were exercised, generating gross proceeds of $130.0 million ($82.5 million in FY21, $47.5 million in FY22)[557][559][608] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company replaced its auditor Marcum LLP with Deloitte & Touche LLP after the business combination, reporting no disagreements on accounting matters - On July 14, 2021, following the Business Combination, Marcum LLP was replaced by Deloitte & Touche LLP as the company's independent registered public accounting firm[610] - There were no disagreements with Marcum on any matter of accounting principles, financial statement disclosure, or auditing scope during their engagement[612][614] Controls and Procedures Management concluded disclosure controls were effective, and previously identified material weaknesses in internal controls were remediated as of January 2, 2022 - Management concluded that disclosure controls and procedures were effective as of January 2, 2022[616] - The company is excluding management's report on internal control over financial reporting, as permitted for the first annual report following the Business Combination[619] - Two previously identified material weaknesses in internal control over financial reporting were remediated as of January 2, 2022. Remediation actions included hiring a new CFO and Controller and establishing more robust review processes[622][623] Part III Items 10-14 Information for Items 10 through 14 is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[628][629][630][631][632] Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, with financial statement schedules omitted as not applicable - This section provides a list of all financial statements and exhibits filed as part of the Annual Report on Form 10-K[634] Form 10-K Summary The company reports that there is no Form 10-K summary - None[645]