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 March 31, 2024
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to _______________
Commission File Number 001-36216
IDEAL POWER INC.
(Exact name of registrant as specified in its charter)
Delaware |
14-1999058 |
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification No.) |
5508 Highway 290 West, Suite 120
Austin, Texas 78735
(Address of principal executive offices)
(Zip Code)
(512) 264-1542
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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, par value $0.001 per share |
IPWR |
The Nasdaq Capital 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 whether 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 issuer is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
As of May 10, 2024, the issuer had 7,684,238 shares of common stock, par value $0.001, outstanding.
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Balance Sheets
(unaudited)
March 31, |
December 31, |
|||||||
2024 |
2023 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 20,235,410 | $ | 8,474,835 | ||||
Accounts receivable, net |
140,000 | 70,000 | ||||||
Inventory |
109,362 | 81,450 | ||||||
Prepayments and other current assets |
271,729 | 482,890 | ||||||
Total current assets |
20,756,501 | 9,109,175 | ||||||
Property and equipment, net |
350,195 | 359,225 | ||||||
Intangible assets, net |
2,601,308 | 2,580,066 | ||||||
Right of use asset |
170,413 | 186,570 | ||||||
Other assets |
12,757 | 13,034 | ||||||
Total assets |
$ | 23,891,174 | $ | 12,248,070 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 382,012 | $ | 405,098 | ||||
Accrued expenses |
504,418 | 455,112 | ||||||
Current portion of lease liability |
72,263 | 70,683 | ||||||
Total current liabilities |
958,693 | 930,893 | ||||||
Long-term lease liability |
113,744 | 132,304 | ||||||
Other long-term liabilities |
1,108,224 | 1,125,173 | ||||||
Total liabilities |
2,180,661 | 2,188,370 | ||||||
Commitments and contingencies (Note 5) |
||||||||
Stockholders’ equity: |
||||||||
Common stock, $0.001 par value; 50,000,000 shares authorized; 7,382,699 shares issued and 7,381,378 shares outstanding at March 31, 2024 and 5,998,018 shares issued and 5,996,697 shares outstanding at December 31, 2023 |
7,383 | 5,998 | ||||||
Additional paid-in capital |
121,235,416 | 107,116,362 | ||||||
Treasury stock, at cost, 1,321 shares at March 31, 2024 and December 31, 2023 |
(13,210 | ) | (13,210 | ) | ||||
Accumulated deficit |
(99,519,076 | ) | (97,049,450 | ) | ||||
Total stockholders’ equity |
21,710,513 | 10,059,700 | ||||||
Total liabilities and stockholders’ equity |
$ | 23,891,174 | $ | 12,248,070 |
The accompanying notes are an integral part of these condensed financial statements.
Statements of Operations
(unaudited)
Three Months Ended |
||||||||
March 31, |
||||||||
2024 |
2023 |
|||||||
Commercial revenue |
$ | 78,739 | $ | — | ||||
Grant revenue |
— | 664 | ||||||
Total revenue |
78,739 | 664 | ||||||
Cost of commercial revenue |
68,498 | — | ||||||
Cost of grant revenue |
— | 664 | ||||||
Total cost of revenue |
68,498 | 664 | ||||||
Gross profit |
10,241 | — | ||||||
Operating expenses: |
||||||||
Research and development |
1,366,893 | 1,440,028 | ||||||
General and administrative |
853,688 | 894,933 | ||||||
Sales and marketing |
316,611 | 304,326 | ||||||
Total operating expenses |
2,537,192 | 2,639,287 | ||||||
Loss from operations |
(2,526,951 | ) | (2,639,287 | ) | ||||
Interest income, net |
57,325 | 111,302 | ||||||
Net loss |
$ | (2,469,626 | ) | $ | (2,527,985 | ) | ||
Net loss per share – basic and diluted |
$ | (0.39 | ) | $ | (0.41 | ) | ||
Weighted average number of shares outstanding – basic and diluted |
6,319,939 | 6,178,508 |
The accompanying notes are an integral part of these condensed financial statements.
Statements of Cash Flows
(unaudited)
Three Months Ended |
||||||||
March 31, |
||||||||
2024 |
2023 |
|||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (2,469,626 | ) | $ | (2,527,985 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
81,121 | 53,198 | ||||||
Amortization of right of use asset |
16,157 | 15,178 | ||||||
Write-off of fixed assets |
10,217 | — | ||||||
Stock-based compensation |
381,019 | 609,926 | ||||||
Decrease (increase) in operating assets: |
||||||||
Accounts receivable |
(70,000 | ) | (664 | ) | ||||
Inventory |
(27,912 | ) | — | |||||
Prepaid expenses and other assets |
211,438 | 54,710 | ||||||
Increase (decrease) in operating liabilities: |
||||||||
Accounts payable |
(23,086 | ) | (61,693 | ) | ||||
Accrued expenses and other liabilities |
32,357 | 117,099 | ||||||
Lease liability |
(16,980 | ) | (15,492 | ) | ||||
Net cash used in operating activities |
(1,875,295 | ) | (1,755,723 | ) | ||||
Cash flows from investing activities: |
||||||||
Purchase of property and equipment |
(29,611 | ) | (44,995 | ) | ||||
Acquisition of intangible assets |
(73,939 | ) | (24,455 | ) | ||||
Net cash used in investing activities |
(103,550 | ) | (69,450 | ) | ||||
Cash flows from financing activities: |
||||||||
Net proceeds from issuance of common stock and pre-funded warrants |
13,652,663 | — | ||||||
Exercise of options |
86,757 | — | ||||||
Net cash provided by financing activities |
13,739,420 | — | ||||||
Net increase (decrease) in cash and cash equivalents |
11,760,575 | (1,825,173 | ) | |||||
Cash and cash equivalents at beginning of period |
8,474,835 | 16,345,623 | ||||||
Cash and cash equivalents at end of period |
$ | 20,235,410 | $ | 14,520,450 |
The accompanying notes are an integral part of these condensed financial statements.
Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2024 and 2023
(unaudited)
Additional |
Total |
|||||||||||||||||||||||||||
Common Stock |
Paid-In |
Treasury Stock |
Accumulated |
Stockholders’ |
||||||||||||||||||||||||
Shares |
Amount |
Capital |
Shares |
Amount |
Deficit |
Equity |
||||||||||||||||||||||
Balances at December 31, 2022 |
5,926,001 | $ | 5,926 | $ | 105,011,318 | 1,321 | $ | (13,210 | ) | $ | (87,095,430 | ) | $ | 17,908,604 | ||||||||||||||
Vesting of restricted stock units |
6,889 | 7 | (7 | ) | — | — | — | — | ||||||||||||||||||||
Stock-based compensation |
— | — | 609,926 | — | — | — | 609,926 | |||||||||||||||||||||
Net loss for the three months ended March 31, 2023 |
— | — | — | — | — | (2,527,985 | ) | (2,527,985 | ) | |||||||||||||||||||
Balances at March 31, 2023 |
5,932,890 | $ | 5,933 | $ | 105,621,237 | 1,321 | $ | (13,210 | ) | $ | (89,623,415 | ) | $ | 15,990,545 | ||||||||||||||
Balances at December 31, 2023 |
5,998,018 | $ | 5,998 | $ | 107,116,362 | 1,321 | $ | (13,210 | ) | $ | (97,049,450 | ) | $ | 10,059,700 | ||||||||||||||
Issuance of common stock and pre-funded warrants |
1,366,668 | 1,367 | 13,651,296 | — | — | — | 13,652,663 | |||||||||||||||||||||
Exercise of options |
8,334 | 8 | 86,749 | — | — | — | 86,757 | |||||||||||||||||||||
Vesting of restricted stock units |
9,679 | 10 | (10 | ) | — | — | — | — | ||||||||||||||||||||
Stock-based compensation |
— | — | 381,019 | — | — | — | 381,019 | |||||||||||||||||||||
Net loss for the three months ended March 31, 2024 |
— | — | — | — | — | (2,469,626 | ) | (2,469,626 | ) | |||||||||||||||||||
Balances at March 31, 2024 |
7,382,699 | $ | 7,383 | $ | 121,235,416 | 1,321 | $ | (13,210 | ) | $ | (99,519,076 | ) | $ | 21,710,513 |
The accompanying notes are an integral part of these condensed financial statements.
Notes to Financial Statements
(unaudited)
Note 1 – Organization and Description of Business
Ideal Power Inc. (the “Company”) was incorporated in Texas in May 2007 under the name Ideal Power Converters, Inc. The Company changed its name to Ideal Power Inc. and re-incorporated in Delaware in July 2013. With headquarters in Austin, Texas, the Company is focused on the further development and commercialization of its Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state switch technology.
Since its inception, the Company has financed its research and development efforts and operations primarily through the sale of common stock. The Company’s continued operations are dependent upon, among other things, its ability to obtain adequate sources of funding through future revenues, follow-on stock offerings, issuances of warrants, debt financing, co-development agreements, government grants, sale or licensing of developed intellectual property or other alternatives.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The balance sheet at December 31, 2023 has been derived from the Company’s audited financial statements included in its Annual Report on Form 10-K filed with the SEC on April 1, 2024.
In the opinion of management, these financial statements reflect all normal recurring, and other adjustments, necessary for a fair presentation. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.
Net Loss Per Share
In accordance with Accounting Standards Codification 260, shares issuable for little or no cash consideration are considered outstanding common shares and included in the computation of basic net loss per share. As such, for the three months ended March 31, 2024 and 2023, the Company included pre-funded warrants to purchase shares of common stock in its computation of net loss per share. The pre-funded warrants were issued in March 2024 and November 2019 with an exercise price of $0.001. See Note 8.
In periods with a net loss, no common share equivalents are included in the computation of diluted net loss per share because their effect would be anti-dilutive. At March 31, 2024 and 2023, potentially dilutive shares outstanding amounted to 1,630,595 and 1,630,695 shares, respectively, and exclude pre-funded warrants to purchase shares of common stock.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standard, if adopted, would have a material impact on the Company’s financial statements.
Note 3 – Intangible Assets
Intangible assets, net consisted of the following:
March 31, |
December 31, |
|||||||
2024 |
2023 |
|||||||
(unaudited) |
||||||||
Patents |
$ | 1,601,638 | $ | 1,530,257 | ||||
Trademarks |
18,352 | 15,794 | ||||||
Other intangible assets |
1,843,036 | 1,843,036 | ||||||
3,463,026 | 3,389,087 | |||||||
Accumulated amortization - patents |
(290,881 | ) | (272,872 | ) | ||||
Accumulated amortization - other intangible assets |
(570,837 | ) | (536,149 | ) | ||||
$ | 2,601,308 | $ | 2,580,066 |
At March 31, 2024 and December 31, 2023, the Company had capitalized $430,287 and $460,890, respectively, for costs related to patents that have not been awarded. Cost related to patents that have not yet been awarded are not amortized until patent issuance.
Amortization expense amounted to $52,697 and $38,226 for the three months ended March 31, 2024 and 2023, respectively. Amortization expense for the succeeding five years and thereafter is $160,934 (remaining nine months of 2024), $214,579 (2025-2028) and $1,133,419 (thereafter).
Note 4 – Lease
In March 2021, the Company entered into a lease agreement for 4,070 square feet of office and laboratory space located in Austin, Texas. The commencement of the lease occurred on June 1, 2021 and the initial term of the lease was 63 months. The actual base rent in the first year of the lease was $56,471 and was net of $18,824 in abated rent over the first three months of the lease term. The annual base rent in the second year of the lease is $77,330 and increases by $2,035 in each succeeding year of the lease. In addition, the Company is required to pay its proportionate share of operating costs for the building under this triple net lease. The lease contains a 5-year fair market renewal option. It does not contain a termination option. The Company recognized a right of use asset of $339,882 and a corresponding lease liability for this lease upon lease commencement.
For purposes of calculating the right of use asset and lease liability included in the Company’s financial statements, the Company estimated its incremental borrowing rate at 6% per annum.
Future minimum payments under the lease are as follows:
For the Year Ended December 31, |
||||
2024 (remaining) |
$ | 60,711 | ||
2025 |
82,587 | |||
2026 |
56,132 | |||
Total lease payments |
199,430 | |||
Less: imputed interest |
(13,423 | ) | ||
Total lease liability |
186,007 | |||
Less: current portion of lease liability |
(72,263 | ) | ||
Long-term lease liability |
$ | 113,744 |
At March 31, 2024, the remaining lease term was 29 months.
For the three months ended March 31, 2024 and 2023, operating cash flows for lease payments totaled $19,841 and $19,333, respectively. For the three months ended March 31, 2024 and 2023, operating lease cost, recognized on a straight-line basis, totaled $19,018 and $19,018, respectively.
Note 5 – Commitments and Contingencies
License Agreements
In 2015, the Company entered into a licensing agreement which expires in February 2033. Per the agreement, the Company has an exclusive royalty-free license, included in intangible assets, associated with semiconductor power switches which enhances its intellectual property portfolio. The Company pays $100,000 annually under this agreement.
In 2023, the Company amended a 2021 license agreement which expires in February 2034. Per the agreement, the Company has an exclusive royalty-free license, included in intangible assets, associated with semiconductor drive circuitry which enhances its intellectual property portfolio. The Company pays $50,000 annually under this agreement.
At March 31, 2024 and December 31, 2023, the other long-term liability for the estimated present value of future payments under the licensing agreements was $1,108,224 and $1,125,173, respectively. The Company is accruing interest for future payments related to these agreements.
Legal Proceedings
The Company may be subject to litigation from time to time in the ordinary course of business. The Company is not currently party to any legal proceedings.
Indemnification Obligations
The employment agreements of Company executives include an indemnification provision whereby the Company shall indemnify and defend, at the Company’s expense, its executives so long as an executive’s actions were taken in good faith and in furtherance of the Company’s business and within the scope of the executive’s duties and authority.
Note 6 — Common Stock
In March 2024, the Company issued and sold 1,366,668 shares of its common stock at a price of $7.50 per share and 633,332 pre-funded warrants to purchase shares of common stock at a price of $7.499 per pre-funded warrant in an underwritten public offering (the “March 2024 Offering”). The pre-funded warrants have an exercise price of $0.001 per share. The underwriter has a 30-day option to purchase up to an additional 300,000 shares of common stock at the offering price, less the underwriting discounts and commissions. The net proceeds to the Company from the March 2024 Offering were $13.7 million as of March 31, 2024.
Note 7 — Equity Incentive Plan
In May 2013, the Company adopted the 2013 Equity Incentive Plan (as amended and restated, the “Plan”) and reserved shares of common stock for issuance under the Plan, which was last amended in June 2023. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. At March 31, 2024, 453,839 shares of common stock were available for issuance under the Plan.
A summary of the Company’s stock option activity and related information is as follows:
Weighted |
||||||||||||
Weighted |
Average |
|||||||||||
Average |
Remaining |
|||||||||||
Stock |
Exercise |
Life |
||||||||||
Options |
Price |
(in years) |
||||||||||
Outstanding at December 31, 2023 |
525,948 | $ | 7.69 | 6.6 | ||||||||
Exercised |
(8,334 | ) | $ | 10.41 | ||||||||
Outstanding at March 31, 2024 |
517,614 | $ | 7.65 | 5.4 | ||||||||
Exercisable at March 31, 2024 |
479,285 | $ | 7.34 | 5.2 |
A summary of the Company’s restricted stock unit (RSU) and performance stock unit (PSU) activity is as follows:
RSUs |
PSUs |
|||||||
Outstanding at December 31, 2023 |
171,530 | 114,000 | ||||||
Granted |
50,710 | — | ||||||
Vested |
(9,679 | ) | — | |||||
Outstanding at March 31, 2022 |
212,561 | 114,000 |
During the three months ended March 31, 2024, the Company granted 38,710 RSUs to Board members and 12,000 RSUs to employees under the Plan. The estimated fair value of these equity grants was $397,803, $82,362 of which was recognized during the three months ended March 31, 2024.
At March 31, 2024, there was $1,885,023 of unrecognized compensation cost related to non-vested equity awards granted under the Plan. That cost is expected to be recognized over a weighted average period of 0.9 years.
Note 8 — Warrants
At March 31, 2024 and December 31, 2023, the Company had 786,420 warrants outstanding with a weighted average exercise price of $5.19 per share. At March 31, 2024 and December 31, 2023, the Company had 887,160 and 253,828 pre-funded warrants outstanding, respectively, with an exercise price of $0.001 per share. The weighted average remaining life, excluding the pre-funded warrants with no expiration date, of the outstanding warrants is 0.9 years.
At March 31, 2024, all warrants were exercisable, although the warrants held by certain of the Company’s warrant holders may be exercised only to the extent that the total number of shares of common stock then beneficially owned by such warrant holder does not exceed 4.99% (or, at the investor’s election, 9.99%) of the outstanding shares of the Company’s common stock.
Note 9 — Subsequent Events
Public Offering
In April 2024 and in connection with the March 2024 Offering, the underwriter exercised its 30-day option to purchase an additional 300,000 shares of the Company’s common stock at the offering price of $7.50 per share, less underwriting discounts and commissions. The estimated net proceeds to the Company from the March 2024 Offering, including the underwriter’s exercise of its option to purchase additional shares, are $15.7 million.
Amended Lease
In April 2024, the Company entered into a first amendment and relocation agreement (the “Amended Lease”) with our landlord. Under the Amended Lease, the Company will relocate to another, larger suite in the same office building. The Amended Lease is for 5,775 square feet of office and laboratory space and, upon occupancy, will replace the 4,070 square feet of office and laboratory space currently leased by the Company. The term of the Amended Lease will expire sixty-two (62) months from the earliest to occur of July 1, 2024 or the Company’s occupancy of all or any part of the new suite. The annual base rent for the first year of the Amended Lease is $118,388 and the annual base rent increases approximately 2.75% each year during the lease term. As with the current lease, the Company is required to pay its proportionate share of operating costs for the building under this triple net lease.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS REPORT
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements include, but are not limited to, statements regarding our future financial performance, business condition and results of operations, future business plans and pursuing additional government funding. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this report. In particular, these include statements relating to future actions, prospective products, applications, customers, technologies, future performance or results of anticipated products, expenses, and financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
● |
our history of losses; |
● |
our ability to generate revenue; |
● |
our limited operating history; |
● |
the size and growth of markets for our technology; |
● |
regulatory developments that may affect our business; |
● |
our ability to successfully develop new products and the expected performance of those products; |
● |
the performance of third-party consultants and service providers whom we have and will continue to rely on to assist us in development and commercialization of our B-TRAN™ and related packaging and drive circuitry; |
● |
the rate and degree of market acceptance for our B-TRAN™ and current and future B-TRAN™ products; |
● |
the time required for third parties to redesign, test and certify their products incorporating our B-TRAN™; |
● |
our ability to successfully commercialize our B-TRAN™ technology; |
● |
our ability to secure strategic partnerships with semiconductor fabricators and others related to our B-TRAN™ technology; |
● |
our ability to obtain, maintain, defend and enforce intellectual property rights protecting our technology; |
● |
the success of our efforts to manage cash spending, particularly prior to the commercialization of our B-TRAN™ technology at scale; |
● |
general economic conditions and events, including inflation, and the impact they may have on us and our potential partners and licensees; |
● |
our dependence on the global supply chain and impacts of supply chain disruptions; |
● |
our ability to obtain adequate financing in the future, if and when we need it; |
● |
the impact of global health pandemics on our business, financial condition and results of operations; |
● |
our success at managing the risks involved in the foregoing items; and |
● |
other factors discussed in this report. |
The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report, except as required by applicable law. You should not place undue reliance on these forward-looking statements.
Unless otherwise stated or the context otherwise requires, the terms “Ideal Power,” “we,” “us,” “our” and the “Company” refer to Ideal Power Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited 2023 financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. In addition to historical information, the discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.
Overview
Ideal Power Inc. is located in Austin, Texas. We are solely focused on the further development and commercialization of our Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state switch technology.
To date, operations have been funded primarily through the sale of common stock and we have generated $3.7 million in grant revenue for bidirectional power switch development. Grant revenue was $0 and $664 in the three months ended March 31, 2024 and 2023, respectively. We may pursue additional research and development grants, if and when available, to further develop and/or improve our technology.
We are in the process of commercializing our B-TRAN™ technology and launched our first two commercial products, the SymCool™ Power Module and SymCool™ IQ Intelligent Power Module, in 2023. We generated $78,739 in commercial revenue in the three months ended March 31, 2024.
Product Launches
In early 2023, we launched our first commercial product, the SymCool™ Power Module. This multi-die B-TRAN™ module is designed to meet the very low conduction loss needs of the solid-state circuit breaker market. We commenced shipment of SymCool™ Power Modules to fulfill customer orders in the first quarter of 2024.
In late 2023, we launched our second commercial product, the SymCool™ IQ Intelligent Power Module (IPM). The SymCool™ IQ IPM builds on the bidirectional B-TRAN™ multi-die packaging design of our SymCool™ Power Module and adds an integrated intelligent driver optimized for bidirectional operation. This product targets several markets including renewable energy, energy storage, EV charging and other industrial applications. We expect initial sales of this product as early as late 2024.
Development Agreement
During the fourth quarter of 2022, we announced, and began Phase 1 of, a product development agreement with Stellantis, a top 10 global automaker, for a custom B-TRAN™ power module for use in the automaker’s EV drivetrain inverters in its next generation EV platform. In Phase 1 of the program, we provided packaged B-TRAN™ devices, test kits and technical data to Stellantis for their evaluation. During the third quarter of 2023, we secured, and began Phase 2 of, this program. In Phase 2 of the program, we collaborated with Stellantis and the program partners, including both the program’s packaging company and the organization building the initial drivetrain inverter, to supply B-TRAN™ devices for integration into the custom power module and inverter designs. Also, as part of Phase 2, we provided Stellantis a comprehensive test plan for the testing required to achieve certification to automotive standards for B-TRAN™. The test plan was subsequently approved as submitted. In the first quarter of 2024, we successfully completed Phase 2 of the program. We recorded the remaining revenue under Phase 2 of this program in the first quarter of 2024. We are currently finalizing the scope of work for the next phase of the program with Stellantis.
Distribution Agreement
In March 2024, we announced a global distribution agreement with Richardson Electronics, Ltd. (RELL). RELL is the first distributor for our products. We commenced shipments of our products to RELL to fulfill end customer orders late in the first quarter of 2024.
Test and Evaluation Agreements
Since the middle of 2021, we announced several test and evaluation agreements with prospective customers, including, but not limited to, a second top 10 global automaker, a top 10 global provider of power conversion solutions to the solar industry, two global diverse power management market leaders, a tier 1 automotive supplier and a global power conversion supplier. These companies, along with other current and future participants in our test and evaluation program, intend to test and evaluate the B-TRAN™ for use in their applications. We expect to incorporate the feedback from these customers into our future commercial products. We began B-TRAN™ customer shipments to program participants in mid-2023.
March 2024 Offering
In March 2024, we issued and sold 1,366,668 shares of our common stock at a price of $7.50 per share and 633,332 pre-funded warrants to purchase shares of our common stock at a price of $7.499 per pre-funded warrant in an underwritten public offering. The pre-funded warrants have an exercise price of $0.001 per share. The underwriter had a 30-day option to purchase up to an additional 300,000 shares of our common stock at the offering price, less the underwriting discounts and commissions. In April 2024, the underwriter exercised this option in full. The estimated net proceeds to us from the March 2024 Offering are $15.7 million, inclusive of the underwriter’s exercise of its option to purchase additional shares in full. We intend to use the net proceeds from the March 2024 Offering to fund further commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes.
Results of Operations
Comparison of the three months ended March 31, 2024 to the three months ended March 31, 2023
Commercial Revenue. Commercial revenue was $78,739 for the three months ended March 31, 2024, compared to $0 in the three months ended March 31, 2023, as we completed Phase 2 of our development agreement with Stellantis and began to fulfill customer orders for our products.
Grant Revenue. Grant revenue was immaterial for the three months ended March 31, 2024 and 2023. We expect to pursue additional government funding that may result in additional grant revenues in the future.
Cost of Commercial Revenue. Cost of commercial revenue was $68,498 for the three months ended March 31, 2024, compared to $0 in the three months ended March 31, 2023, as we completed Phase 2 of our development agreement with Stellantis and began to fulfill customer orders for our products.
Cost of Grant Revenue. Cost of grant revenue was immaterial for the three months ended March 31, 2024 and 2023. Cost of grant revenue was equal to the associated grant revenue resulting in no gross profit. We expect no gross profit from other grants that we are pursuing or may pursue in 2024.
Research and Development Expenses. Research and development expenses decreased by $73,135, or 5%, to $1,366,893 in the three months ended March 31, 2024 from $1,440,028 in the three months ended March 31, 2023. The decrease was due to lower stock-based compensation expense of $168,612, partly offset by higher personnel costs of $78,863 and other B-TRAN™ development spending of $16,614. We expect higher research and development expenses in the remainder of 2024 as compared to 2023 as we continue development of our B-TRAN™ technology.
General and Administrative Expenses. General and administrative expenses decreased by $41,245, or 5%, to $853,688 in the three months ended March 31, 2024 from $894,933 in the three months ended March 31, 2023. The decrease was due to lower stock-based compensation expense of $65,390 and other general and administrative spending of $6,757, partly offset by higher investor relations spending of $30,902. We expect slightly higher general and administrative expenses, exclusive of stock-based compensation, in the remainder of 2024 as compared to 2023.
Sales and Marketing Expenses. Sales and marketing expenses increased by $12,285, or 4%, to $316,611 in the three months ended March 31, 2024 from $304,326 in the three months ended March 31, 2023. The increase was due to higher personnel costs of $55,274 and other spending of $761, partly offset by lower search and placement fees of $43,750. We expect higher sales and marketing expenses in the remainder of 2024 as compared to 2023 as we further commercialize our B-TRAN™ technology.
Loss from Operations. Our loss from operations for the three months ended March 31, 2024 was $2,526,951, or 4% lower, as compared to the $2,639,287 loss from operations for the three months ended March 31, 2023, for the reasons discussed above.
Interest Income, Net. Net interest income was $57,325 for the three months ended March 31, 2024 compared to $111,302 for the three months ended March 31, 2023 as a result of the impact of a declining cash balance on the interest earned from our money market account.
Net Loss. Our net loss for the three months ended March 31, 2024 was $2,469,626, or 2% lower, as compared to a net loss of $2,527,985 for the three months ended March 31, 2023, for the reasons discussed above.
Liquidity and Capital Resources
We currently generate commercial revenue only. We have incurred losses since inception. We have funded our operations to date primarily through the sale of common stock and pre-funded warrants.
At March 31, 2024, we had cash and cash equivalents of $20.2 million. Our net working capital at March 31, 2024 was also $19.8 million. We had no outstanding debt at March 31, 2024.
We believe that our cash and cash equivalents on hand will be sufficient to meet our ongoing liquidity needs for at least the next twelve months from the date of filing this Quarterly Report on Form 10-Q; however, we may require additional funds in the future to fully implement our plan of operation and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all. Although we believe we have adequate sources of liquidity over the long term, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets could each impact our business and liquidity.
Operating activities in the three months ended March 31, 2024 resulted in cash outflows of $1,875,295 which were due to the net loss for the period of $2,469,626, partly offset by stock-based compensation of $381,019, favorable balance sheet timing of $105,817 and other non-cash items of $107,495.
Operating activities in the three months ended March 31, 2023 resulted in cash outflows of $1,755,723, which were due to the net loss for the period of $2,527,985, partly offset by stock-based compensation of $609,926, favorable balance sheet timing of $93,960 and other non-cash items of $68,376.
We expect an increase in cash outflows from operating activities in the remainder of 2024 as we further develop and commercialize our B-TRAN™ technology.
Investing activities in the three months ended March 31, 2024 and 2023 resulted in cash outflows of $103,550 and $69,450, respectively, for the acquisition of intangible assets and fixed assets.
Financing activities in the three months ended March 31, 2024 resulted in cash inflows of $13,652,663 from the March 2024 Offering, as discussed above, and $86,757 from the exercise of stock options.
Critical Accounting Estimates
There have been no significant changes during the three months ended March 31, 2024 to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Trends, Events and Uncertainties
There are no material changes from trends, events or uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of its Chief Executive Officer (principal executive officer) and its Chief Financial Officer (principal financial and accounting officer) of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2024 and has concluded that, as of March 31, 2024, the Company’s disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There have been no material changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are being met. Further, the design of any system of controls must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
We may be subject to litigation from time to time in the ordinary course of business. We are not currently party to any legal proceedings.
There are no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
Exhibit |
Document |
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4.1 |
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31.1* |
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31.2* |
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32.1** |
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101.INS* |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH* |
Inline XBRL Taxonomy Extension Schema Document |
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101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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10.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). |
* |
Filed herewith |
** |
Furnished herewith |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: May 15, 2024 |
IDEAL POWER INC. |
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By: |
/s/ R. Daniel Brdar |
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R. Daniel Brdar |
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Chief Executive Officer |
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By: |
/s/ Timothy W. Burns |
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Timothy W. Burns |
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Chief Financial Officer |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, R. Daniel Brdar, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Ideal Power Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 15, 2024 |
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/s/ R. Daniel Brdar |
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R. Daniel Brdar |
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Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy W. Burns, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Ideal Power Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 15, 2024 |
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/s/ Timothy W. Burns |
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Timothy W. Burns |
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Chief Financial Officer (Principal Financial and |
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Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the periodic report of Ideal Power Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2024 as filed with the Securities and Exchange Commission (the “Report”), we, R. Daniel Brdar, Chief Executive Officer (Principal Executive Officer) and Timothy W. Burns, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: May 15, 2024 |
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/s/ R. Daniel Brdar |
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R. Daniel Brdar |
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Chief Executive Officer (Principal Executive Officer) |
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/s/ Timothy W. Burns |
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Timothy W. Burns |
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Chief Financial Officer (Principal Financial and |
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Accounting Officer) |