[PART I](index=6&type=section&id=PART%20I) Overview of Ideal Power Inc.'s business, technology, market strategy, intellectual property, and competitive landscape, along with initial financial and operational details [ITEM 1: BUSINESS](index=6&type=section&id=ITEM%201%3A%20BUSINESS) Ideal Power Inc. develops and commercializes B-TRAN™ solid-state switch technology, funded by equity and grants, targeting EV and renewable energy markets with patented, efficient power solutions [Our Company](index=6&type=section&id=Our%20Company) Ideal Power Inc. focuses on B-TRAN™ solid-state switch technology development, funded by stock sales and grants - Ideal Power Inc. is solely focused on the further development and commercialization of its Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state switch technology[17](index=17&type=chunk) - Operations have been funded primarily through the sale of common stock and warrants, generating **$3.5 million** in grant revenue for bidirectional power switch development to date[18](index=18&type=chunk) **Grant Revenue:** | Year Ended December 31, | Amount | | :---------------------- | :---------- | | 2021 | $576,399 | | 2020 | $428,129 | [COVID-19 Impact](index=6&type=section&id=COVID-19%20Impact) The COVID-19 pandemic has caused some business disruption but no material adverse impact to date, though future risks persist - The COVID-19 pandemic has caused some disruption to the business, particularly in the first and second quarters of 2020, but has not had a material adverse impact on operations to date[20](index=20&type=chunk) - Future risks include potential electrical component shortages, difficulties in securing fabrication capacity, delays in critical development and commercialization activities, and/or incremental costs[20](index=20&type=chunk) [Public Offering](index=6&type=section&id=Public%20Offering) In February 2021, the company raised **$21.2 million** net from a public offering to fund B-TRAN™ commercialization and development - In February 2021, the company issued and sold **1,352,975 shares** of common stock in an underwritten public offering at **$17.00 per share**[21](index=21&type=chunk) - The net proceeds from the Public Offering were **$21.2 million**, intended to fund commercialization and development of B-TRAN™ technology and general corporate purposes[21](index=21&type=chunk) [Test and Evaluation Agreements](index=6&type=section&id=Test%20and%20Evaluation%20Agreements) Ideal Power has secured test and evaluation agreements with major automotive, solar, and EV companies for its B-TRAN™ technology - During the second half of 2021 and first quarter of 2022, Ideal Power announced several test and evaluation agreements with prospective customers[22](index=22&type=chunk) - These customers include a top 10 global automaker, a top 10 global provider of power conversion solutions to the solar industry, a global diverse power management market leader, a commercial electric vehicle (EV) manufacturer, and an EV charging company[22](index=22&type=chunk)[24](index=24&type=chunk) - The purpose is to test and evaluate the B-TRAN™ for use in their applications, with feedback to be incorporated into future commercial products[24](index=24&type=chunk) [Industry Background](index=8&type=section&id=Industry%20Background) The power semiconductor market, crucial for energy conversion, is driven by demand for energy savings and electric vehicles - Power semiconductors are crucial for power conversion in various applications, driven by increasing demand for energy savings and electric vehicles[27](index=27&type=chunk) - The global power semiconductor market is categorized by component (e.g., MOSFETs, IGBTs), material (e.g., silicon, silicon carbide), and end-use (e.g., automotive, renewable energy, telecommunication)[29](index=29&type=chunk)[30](index=30&type=chunk) - Asia Pacific, particularly China, is the leading consumer of power semiconductors, with Europe and North America also being significant markets[32](index=32&type=chunk)[33](index=33&type=chunk) [Our Technology](index=10&type=section&id=Our%20Technology) Ideal Power's B-TRAN™ solid-state switch, developed with DOE grants, offers significant efficiency improvements and reduced component count - Ideal Power's core technology is the Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state power switch, developed with a U.S. Department of Energy grant[36](index=36&type=chunk)[37](index=37&type=chunk) - The B-TRAN™ is designed to replace two pairs of conventional IGBTs and diodes in bidirectional circuits, offering significant improvements in electrical efficiency (**50% or more reduction in power losses**) and reducing component count by **75%**[37](index=37&type=chunk)[38](index=38&type=chunk) - Prototype testing and third-party simulations confirm significant performance and efficiency improvements, validating double-sided B-TRAN™ operation using conventional silicon fabrication[38](index=38&type=chunk)[39](index=39&type=chunk) [Business Strategy and Target Markets](index=12&type=section&id=Business%20Strategy%20and%20Target%20Markets) The company plans strategic partnerships to target electric vehicles, renewable energy, and data centers, aiming for the growing IGBT market - The company plans to engage potential customers and partners through a strategic partnership model after delivering engineering samples of packaged B-TRAN™ devices[44](index=44&type=chunk) - Target markets include electric and hybrid electric vehicles, EV charging, renewable energy and energy storage system power converters, UPS for data centers, industrial motor drives, and solid-state circuit breakers[45](index=45&type=chunk) - The IGBT market was valued at **$6 billion** in 2020 and is projected to reach **$11 billion** by 2026, representing a significant opportunity for B-TRAN™ due to its higher efficiency and inherent bidirectionality[45](index=45&type=chunk) [Intellectual Property](index=12&type=section&id=Intellectual%20Property) Ideal Power protects its B-TRAN™ technology through a robust patent portfolio and trade secrets - Ideal Power protects its intellectual property through patents, trade secrets, and confidentiality procedures[46](index=46&type=chunk) **Patent Portfolio (as of December 31, 2021):** | Category | Count | | :---------------------------------------- | :---- | | U.S. Issued Patents | 38 | | Foreign Issued Patents | 27 | | Pending U.S. and International Applications | 26 | - Patents generally have a **20-year life** from the date of initial filing[46](index=46&type=chunk) [License Agreements](index=12&type=section&id=License%20Agreements) The company holds exclusive, royalty-free licensing agreements for semiconductor power switches, with ongoing variable payments - The company has exclusive royalty-free licensing agreements for semiconductor power switches, expiring in February 2033[47](index=47&type=chunk) - Payments include fixed amounts (paid prior to 2017) and ongoing variable payments of **$10,000** per pending patent filing and **$20,000** per issued patent, up to a maximum of **$100,000 annually**[47](index=47&type=chunk) **Long-Term Liability for Licensing Agreements:** | Date | Amount | | :------------- | :--------- | | Dec 31, 2021 | $917,100 | | Dec 31, 2020 | $552,031 | [Competition](index=12&type=section&id=Competition) Ideal Power competes with established power semiconductor suppliers, offering a unique high-efficiency bidirectional switch - Ideal Power competes with well-established incumbent power semiconductor device suppliers, many of whom have greater financial resources, broader market presence, and longer operating histories[49](index=49&type=chunk)[50](index=50&type=chunk) - Competitors primarily focus on single-sided (uni-directional) power switches like IGBTs and MOSFETs[49](index=49&type=chunk) - The company is not aware of any other true high-efficiency bidirectional design available in the market besides potential products based on its B-TRAN™ technology[50](index=50&type=chunk) [Government Approval and Regulation](index=14&type=section&id=Government%20Approval%20and%20Regulation) No government approval is required for B-TRAN™ licensing or sales, but government support for target markets could be beneficial - Government approval is not required for Ideal Power to license its B-TRAN™ technology or sell B-TRAN™ devices[52](index=52&type=chunk) - Government support for target markets, such as electric vehicles and renewable energy (e.g., **$5 billion** for EV charging infrastructure), could have a material positive impact on the business if B-TRAN™ is successfully commercialized[52](index=52&type=chunk) [Employees](index=14&type=section&id=Employees) As of February 28, 2022, Ideal Power had **7 full-time employees**, none under collective bargaining - As of February 28, 2022, Ideal Power had **7 full-time employees**, none covered by a collective bargaining agreement[53](index=53&type=chunk) [Available Information](index=14&type=section&id=Available%20Information) SEC filings and corporate governance documents are available on the company's investor relations website - The company makes its SEC filings (10-K, 10-Q, 8-K) and corporate governance documents available free of charge on its investor relations website (ir.idealpower.com) and the SEC website (www.sec.gov)[54](index=54&type=chunk) [ITEM 1A: RISK FACTORS](index=14&type=section&id=ITEM%201A%3A%20RISK%20FACTORS) Ideal Power faces significant risks from its limited operating history, ongoing losses, uncertain B-TRAN™ commercialization, supply chain dependencies, and stock price volatility [Risks Related to the Company](index=16&type=section&id=Risks%20Related%20to%20the%20Company) The company faces risks from its limited operating history, sustained losses, uncertain product development, supply chain issues, and reliance on third-party partners - Ideal Power has a limited operating history, has sustained approximately **$79.9 million** in net losses since inception, and expects to incur future losses, currently generating no product revenue[57](index=57&type=chunk)[58](index=58&type=chunk) - Product development for B-TRAN™ and its driver is inherently uncertain, with risks of unanticipated delays, expenses, and technical problems, and no guarantee of achieving planned milestones or consistent performance with simulations[60](index=60&type=chunk) - The company faces heightened risks in semiconductor fabrication due to two-sided wafer processing, limited fabrication facilities, and ongoing supply chain shortages, which could delay development and increase costs[62](index=62&type=chunk)[63](index=63&type=chunk) - Achieving 'design wins' from potential customers is critical for revenue generation, but is time-consuming, expensive, and not guaranteed, with long product design cycles potentially delaying sales[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - The U.S. government may obtain title to or exercise 'march-in-rights' over inventions developed with grant funds, potentially requiring the company to license its own technology[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - The company relies heavily on third-party resources for semiconductor expertise and manufacturing; the loss or underperformance of these partners could materially affect development and operations[78](index=78&type=chunk) - The COVID-19 pandemic continues to pose risks of delays in development and commercialization activities, supply chain disruptions, and increased costs, with uncertain future impacts on financial results[82](index=82&type=chunk)[84](index=84&type=chunk) - The company may need additional financing to fund operations, which may not be available on commercially reasonable terms, potentially forcing curtailment or cessation of operations[86](index=86&type=chunk) - The ability to utilize net operating loss carryforwards to offset future income may be limited by expiration dates (for pre-2018 losses) and 'ownership change' rules under Sections 382 and 383 of the Internal Revenue Code[94](index=94&type=chunk)[95](index=95&type=chunk) [Risks Related to Owning Our Common Stock](index=27&type=section&id=Risks%20Related%20to%20Owning%20Our%20Common%20Stock) Common stock ownership risks include market volatility, potential dilution from future equity issuances, and no anticipated dividends - The public market for Ideal Power's common stock may be volatile, with its price significantly affected by various factors including operating results, industry trends, competition, and corporate announcements[96](index=96&type=chunk)[101](index=101&type=chunk) - The company is authorized to issue 'blank check' preferred stock, which could dilute the voting rights and liquidation preferences of common stockholders or be used to deter a change in control[100](index=100&type=chunk) - Ideal Power has not paid dividends in the past and has no immediate plans to do so, meaning stockholders will rely solely on stock price appreciation for returns[101](index=101&type=chunk) - Future sales of common stock, including the exercise of warrants and options (**1,392,402 potentially dilutive shares outstanding** as of Feb 28, 2022), could cause dilution and adversely affect the market price[104](index=104&type=chunk) - Raising additional capital through equity, debt, or licensing arrangements may cause further dilution, restrict operations, or require relinquishing rights to technologies[105](index=105&type=chunk) - The company's public float being less than **$75 million** limits its ability to raise capital through primary public offerings on Form S-3 to one-third of its public float in any **12-month period**[106](index=106&type=chunk) [ITEM 1B: UNRESOLVED STAFF COMMENTS](index=32&type=section&id=ITEM%201B%3A%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments from the SEC [ITEM 2: PROPERTIES](index=32&type=section&id=ITEM%202%3A%20PROPERTIES) Ideal Power leases **4,070 square feet** of office and laboratory space in Austin, Texas, under a lease that commenced on June 1, 2021, with a remaining term of **56 months** as of December 31, 2021 - Principal office located at 5508 Highway 290 West, Suite 120, Austin, Texas 78735[3](index=3&type=chunk)[112](index=112&type=chunk) - Leases **4,070 square feet** of office and laboratory space[112](index=112&type=chunk) - The lease commenced on June 1, 2021, with a remaining term of **56 months** as of December 31, 2021[112](index=112&type=chunk) [ITEM 3: LEGAL PROCEEDINGS](index=32&type=section&id=ITEM%203%3A%20LEGAL%20PROCEEDINGS) Ideal Power is not currently involved in any legal proceedings that are expected to have a material adverse impact on its business, financial results, or cash flows - The company is not currently party to any legal proceedings that it believes would reasonably have a material adverse impact on its business, financial results, and cash flows[113](index=113&type=chunk) [ITEM 4: MINE SAFETY DISCLOSURES](index=32&type=section&id=ITEM%204%3A%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Ideal Power Inc [PART II](index=32&type=section&id=PART%20II) Detailed financial information, management's discussion and analysis, market for common equity, and disclosures on internal controls [ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=32&type=section&id=ITEM%205%3A%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Ideal Power's common stock is listed on the Nasdaq Capital Market under the symbol 'IPWR', with **31 shareholders** of record as of March 23, 2022. The company has not paid cash dividends since its inception and does not anticipate doing so in the foreseeable future, opting to reinvest earnings for business expansion. There were no purchases of equity securities by the issuer [Market Information](index=32&type=section&id=Market%20Information) Ideal Power's common stock trades on Nasdaq under 'IPWR', with **31 shareholders** of record as of March 23, 2022 - Ideal Power's common stock is listed on the Nasdaq Capital Market under the symbol 'IPWR'[3](index=3&type=chunk)[115](index=115&type=chunk) - As of March 23, 2022, the company had **31 shareholders** of record[115](index=115&type=chunk) [Dividends](index=33&type=section&id=Dividends) The company has never paid cash dividends and plans to reinvest future earnings for business expansion - The company has not paid any cash dividends on its common stock since inception and does not anticipate paying any in the foreseeable future[116](index=116&type=chunk) - Earnings, if any, will be reinvested to market products and cover operating costs for business expansion[116](index=116&type=chunk) [Purchases of Equity Securities by the Issuer](index=33&type=section&id=Purchases%20of%20Equity%20Securities%20by%20the%20Issuer) The company did not purchase any of its equity securities during the reported period - The company made no purchases of its equity securities during the reported period[118](index=118&type=chunk) [ITEM 6: [RESERVED]](index=33&type=section&id=ITEM%206%3A%20%5BRESERVED%5D) This item is reserved and contains no information [ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=33&type=section&id=ITEM%207%3A%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Ideal Power funds B-TRAN™ development through equity and grants, facing R&D uncertainties and future financing needs, with a reduced net loss in 2021 and increased cash from a public offering [Overview](index=33&type=section&id=Overview) Ideal Power focuses on B-TRAN™ solid-state switch technology, funded by stock sales and grants - Ideal Power is solely focused on the further development and commercialization of its B-TRAN™ solid-state switch technology[120](index=120&type=chunk) - Operations have been funded primarily through the sale of common stock and warrants, generating **$3.5 million** in grant revenue to date[121](index=121&type=chunk) [Trends, Events and Uncertainties](index=33&type=section&id=Trends%2C%20Events%20and%20Uncertainties) R&D success is unpredictable, COVID-19 impacts are uncertain, and the company raised **$21.2 million** from a public offering in 2021 - Research and development of new technologies is unpredictable, with no assurance of success, adoption, or profitability, and no committed source of financing[122](index=122&type=chunk) - The COVID-19 pandemic continues to create uncertainty regarding its future impact on financial performance, ability to raise additional capital, and operating results, despite not having a material adverse impact to date[123](index=123&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - In February 2021, the company received net proceeds of **$21.2 million** from its Public Offering[127](index=127&type=chunk) - In August 2020, the company closed an Early Warrant Exercise Transaction, raising net proceeds of **$2.5 million**[128](index=128&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) Key accounting estimates include stock-based compensation, intangible asset amortization, long-lived asset impairment, and income tax valuation allowances - Stock-based compensation is estimated using the Black-Scholes option valuation model, with assumptions for grant price, risk-free interest rate, expected lives, expected volatility, and zero expected dividend yield[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Intangible assets (patents and other) are recorded at cost, with legal and filing fees capitalized, and amortized over the shorter of legal life (**20 years**) or estimated economic life[133](index=133&type=chunk) - Long-lived assets are reviewed for impairment annually, with impairments of **$528** and **$20,660** recorded in 2021 and 2020, respectively[134](index=134&type=chunk) - Income taxes are accounted for using an asset and liability approach, with a full valuation allowance established for deferred tax assets due to the unlikelihood of realizing tax benefits[135](index=135&type=chunk)[136](index=136&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Grant revenues increased in 2021, while R&D and sales expenses rose, leading to a reduced net loss primarily due to non-operating gains **Grant Revenues:** | Year Ended December 31, | Amount | Change YoY | | :---------------------- | :-------- | :--------- | | 2021 | $576,399 | +$148,270 | | 2020 | $428,129 | | - Cost of grant revenues increased by **$148,270** to **$576,399** in 2021, resulting in no gross profit, and is expected to continue with no gross profit under current subcontracts[139](index=139&type=chunk) **Research and Development Expenses:** | Year Ended December 31, | Amount | Change YoY | | :---------------------- | :---------- | :--------- | | 2021 | $1,927,743 | +$206,850 | | 2020 | $1,720,893 | | - The increase in R&D expenses was primarily due to higher contract labor for device and driver development, expansion of internal test capabilities, and personnel costs, partly offset by lower stock-based compensation[140](index=140&type=chunk) **General and Administrative Expenses:** | Year Ended December 31, | Amount | Change YoY | | :---------------------- | :---------- | :--------- | | 2021 | $2,408,425 | +$101,336 | | 2020 | $2,307,089 | | **Sales and Marketing Expenses:** | Year Ended December 31, | Amount | Change YoY | | :---------------------- | :------- | :--------- | | 2021 | $512,807 | +$472,807 | | 2020 | $40,000 | | **Net Loss:** | Year Ended December 31, | Amount | Change YoY | | :---------------------- | :------------ | :--------- | | 2021 | $(4,770,269) | +$3,023,628| | 2020 | $(7,793,897) | | - The decrease in net loss was primarily due to a **$91,407** gain on forgiveness of the PPP Loan in 2021 and the absence of a **$3,720,866** non-cash warrant inducement expense incurred in 2020[144](index=144&type=chunk)[145](index=145&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Ideal Power funds operations through equity sales, with cash and equivalents significantly increasing in 2021, providing liquidity for the next **12 months** - The company currently generates only grant revenue and has funded operations through the sale of common stock and warrants[146](index=146&type=chunk) **Cash and Cash Equivalents:** | Date | Amount | | :------------- | :---------- | | Dec 31, 2021 | $23,170,149 | | Dec 31, 2020 | $3,157,256 | - The company believes its cash and cash equivalents on hand will be sufficient to meet ongoing liquidity needs for at least the next **12 months**, but additional future financing may be necessary[147](index=147&type=chunk) **Net Cash Used in Operating Activities:** | Year Ended December 31, | Amount | | :---------------------- | :------------ | | 2021 | $(4,280,864) | | 2020 | $(3,019,032) | **Net Cash Provided by Financing Activities:** | Year Ended December 31, | Amount | | :---------------------- | :----------- | | 2021 | $24,530,692 | | 2020 | $3,185,766 | - Financing activities in 2021 included **$21.2 million** from the Public Offering and **$3.3 million** from the exercise of warrants and stock options[153](index=153&type=chunk) [PPP Loan](index=41&type=section&id=PPP%20Loan) The company received a **$91,407** PPP Loan in May 2020, which was fully forgiven by the SBA in May 2021 - In May 2020, Ideal Power received a **$91,407** PPP Loan, primarily used for payroll costs[154](index=154&type=chunk) - The PPP Loan, including accrued interest, was approved for forgiveness by the SBA in May 2021[154](index=154&type=chunk) [Early Warrant Exercise Transaction](index=41&type=section&id=Early%20Warrant%20Exercise%20Transaction) An August 2020 early warrant exercise transaction raised **$2.5 million** and resulted in a **$3.7 million** non-cash inducement expense - In August 2020, the company closed an Early Warrant Exercise Transaction, raising net proceeds of **$2.5 million**[155](index=155&type=chunk) - This transaction involved the exercise of **1,176,137 Original Warrants** and the issuance of **705,688 new Series C warrants**, resulting in a **$3.7 million** non-cash warrant inducement expense[156](index=156&type=chunk) [Public Offering_2](index=41&type=section&id=Public%20Offering_2) In February 2021, a public offering of **1,352,975 shares** generated **$21.2 million** in net proceeds for B-TRAN™ development and corporate purposes - In February 2021, the company issued and sold **1,352,975 shares** of common stock at **$17.00 per share**[157](index=157&type=chunk) - The net proceeds to the company from the Public Offering were **$21.2 million**, intended for B-TRAN™ technology commercialization and development, and general corporate purposes[157](index=157&type=chunk) [Contractual Obligations and Commitments](index=41&type=section&id=Contractual%20Obligations%20and%20Commitments) The company has a **63-month** lease for office and lab space and a long-term liability for licensing agreements - The company entered into a **63-month** lease for **4,070 square feet** of office and laboratory space in Austin, Texas, commencing June 1, 2021[158](index=158&type=chunk) **Future Minimum Lease Payments:** | For the Year Ended December 31, | Amount | | :------------------------------ | :------- | | 2022 | $76,482 | | 2023 | $78,517 | | 2024 | $80,552 | | 2025 | $82,587 | | 2026 | $56,132 | | **Total Lease Payments** | **$374,270** | - The long-term liability for licensing agreements was **$917,100** at December 31, 2021, reflecting annual payments of **$100,000** for five issued patents[161](index=161&type=chunk) [ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=42&type=section&id=ITEM%207A%3A%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Ideal Power is not required to provide quantitative and qualitative disclosures about market risk [ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=42&type=section&id=ITEM%208%3A%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents Ideal Power's audited financial statements for 2021 and 2020, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes. The financial statements received unqualified opinions from independent auditors. Key financial highlights include a significant increase in cash and equity due to a public offering, a reduced net loss in 2021, and detailed breakdowns of assets, liabilities, and accounting policies [Report of Independent Registered Public Accounting Firm (BPM LLP)](index=43&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20(BPM%20LLP)) BPM LLP issued an unqualified opinion on the 2021 financial statements, highlighting intangible asset valuation as a critical audit matter - BPM LLP issued an unqualified opinion on Ideal Power Inc.'s financial statements for the year ended December 31, 2021, stating they present fairly the financial position and cash flows in conformity with GAAP[165](index=165&type=chunk) - A critical audit matter identified was the carrying value of intangible assets, due to significant management judgment in developing assumptions of future economic benefit in impairment analysis[170](index=170&type=chunk)[171](index=171&type=chunk) [Report of Independent Registered Public Accounting Firm (Gumbiner Savett Inc.)](index=46&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20(Gumbiner%20Savett%20Inc.)) Gumbiner Savett Inc. issued an unqualified opinion on the 2020 financial statements, affirming fair presentation in conformity with GAAP - Gumbiner Savett Inc. issued an unqualified opinion on Ideal Power Inc.'s financial statements for the year ended December 31, 2020, stating they present fairly the financial position and cash flows in conformity with GAAP[175](index=175&type=chunk) [Balance Sheets](index=47&type=section&id=Balance%20Sheets) The balance sheets show significant increases in cash, total assets, and stockholders' equity from 2020 to 2021 **Balance Sheet Highlights (as of December 31):** | Metric | 2021 | 2020 | | :------------------------ | :------------ | :------------ | | Cash and cash equivalents | $23,170,149 | $3,157,256 | | Total current assets | $23,447,311 | $3,446,426 | | Total assets | $25,877,480 | $5,132,173 | | Total current liabilities | $542,871 | $659,526 | | Total liabilities | $1,727,555 | $1,302,964 | | Total stockholders' equity| $24,149,925 | $3,829,209 | [Statements of Operations](index=48&type=section&id=Statements%20of%20Operations) The statements of operations reflect increased grant revenue, higher operating expenses, and a reduced net loss in 2021 **Statements of Operations Highlights (Year Ended December 31):** | Metric | 2021 | 2020 | | :-------------------------- | :------------ | :------------ | | Grant revenue | $576,399 | $428,129 | | Gross profit | $0 | $0 | | Total operating expenses | $4,848,975 | $4,067,982 | | Loss from operations | $(4,848,975) | $(4,067,982) | | Other income (expenses) | $78,706 | $(3,725,915) | | Net loss | $(4,770,269) | $(7,793,897) | | Net loss per share (basic & diluted) | $(0.80) | $(2.20) | | Weighted average shares outstanding | 5,937,520 | 3,539,217 | [Statement of Stockholders' Equity](index=49&type=section&id=Statement%20of%20Stockholders%27%20Equity) Stockholders' equity significantly increased in 2021, primarily due to proceeds from a public offering and warrant/option exercises **Total Stockholders' Equity (as of December 31):** | Date | Amount | | :------------- | :---------- | | 2021 | $24,149,925 | | 2020 | $3,829,209 | - The increase in stockholders' equity in 2021 was primarily driven by **$21.2 million** from the issuance of common stock in a public offering and **$3.3 million** from the exercise of options and warrants[186](index=186&type=chunk) [Statements of Cash Flows](index=50&type=section&id=Statements%20of%20Cash%20Flows) Cash flows show increased operating cash usage, minimal investing activities, and substantial cash provided by financing in 2021 **Cash Flow Highlights (Year Ended December 31):** | Metric | 2021 | 2020 | | :------------------------------ | :------------ | :------------ | | Net cash used in operating activities | $(4,280,864) | $(3,019,032) | | Net cash used in investing activities | $(236,935) | $(67,160) | | Net cash provided by financing activities | $24,530,692 | $3,185,766 | | Net increase in cash and cash equivalents | $20,012,893 | $99,574 | | Cash and cash equivalents at end of year | $23,170,149 | $3,157,256 | - The significant increase in cash from financing activities in 2021 was primarily due to **$21.2 million** from the public offering and **$3.3 million** from the exercise of options and warrants[153](index=153&type=chunk)[189](index=189&type=chunk) [Note 1 — Organization and Description of Business](index=51&type=section&id=Note%201%20%E2%80%94%20Organization%20and%20Description%20of%20Business) Ideal Power Inc. focuses on B-TRAN™ technology development, with continued operations dependent on securing future funding sources - Ideal Power Inc. is focused on the development and commercialization of its Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state switch technology[192](index=192&type=chunk) - The company's continued operations are dependent upon obtaining adequate sources of funding through future revenues, stock offerings, debt financing, co-development agreements, or government grants[193](index=193&type=chunk) [Note 2 — Summary of Significant Accounting Policies](index=51&type=section&id=Note%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to GAAP, with key policies covering grant revenue, R&D costs, deferred taxes, and potentially dilutive shares - Financial statements are prepared in conformity with GAAP, requiring management estimates and assumptions[194](index=194&type=chunk) - Grant revenue is recognized on a cost reimbursement basis, with **$576,399** and **$428,129** recognized in 2021 and 2020, respectively[208](index=208&type=chunk)[209](index=209&type=chunk) - Research and development costs are expensed as incurred, including engineering personnel, wafer fabrication, and testing[210](index=210&type=chunk) - A full valuation allowance has been established for deferred tax assets due to the unlikelihood of realizing tax benefits[211](index=211&type=chunk)[212](index=212&type=chunk) - Potentially dilutive shares outstanding amounted to **1,379,306** in 2021 and **1,541,518** in 2020, excluding pre-funded warrants and excess warrant shares[215](index=215&type=chunk) [Note 3 — Property and Equipment](index=57&type=section&id=Note%203%20%E2%80%94%20Property%20and%20Equipment) Property and equipment, net, increased in 2021, with details on machinery, leasehold improvements, and depreciation expenses **Property and Equipment, Net (as of December 31):** | Category | 2021 | 2020 | | :------------------------ | :---------- | :---------- | | Machinery and equipment | $93,811 | $89,559 | | Building leasehold improvements | $10,245 | $25,090 | | Furniture, fixtures, software and IT equipment | $62,884 | $45,517 | | Accumulated depreciation and amortization | $(110,782) | $(123,041) | | **Total** | **$56,158** | **$37,125** | **Depreciation Expenses:** | Year Ended December 31, | Amount | | :---------------------- | :------- | | 2021 | $25,234 | | 2020 | $24,117 | [Note 4 — Intangible Assets](index=57&type=section&id=Note%204%20%E2%80%94%20Intangible%20Assets) Intangible assets, primarily patents, increased in 2021, with associated amortization expenses detailed **Intangible Assets, Net (as of December 31):** | Category | 2021 | 2020 | | :------------------------ | :------------ | :------------ | | Patents | $1,133,841 | $941,701 | | Other intangible assets | $1,391,479 | $964,542 | | Accumulated amortization | $(469,670) | $(337,340) | | **Total** | **$2,055,650**| **$1,568,903**| **Amortization Expense:** | Year Ended December 31, | Amount | | :---------------------- | :------- | | 2021 | $132,330 | | 2020 | $98,035 | - The company capitalized **$306,640** for costs related to patents not yet awarded in 2021 and wrote off **$528** in previously capitalized patent costs[221](index=221&type=chunk) [Note 5 — Accrued Expenses](index=58&type=section&id=Note%205%20%E2%80%94%20Accrued%20Expenses) Accrued expenses increased in 2021, driven by higher compensation, licensing fees, and semiconductor fabrication costs **Accrued Expenses (as of December 31):** | Category | 2021 | 2020 | | :-------------------------------- | :--------- | :--------- | | Accrued professional fees | $44,000 | $32,500 | | Accrued compensation | $191,556 | $147,756 | | Accrued licensing fees | $60,000 | $50,000 | | Accrued Board fees | $45,000 | $30,000 | | Accrued taxes | $0 | $75,200 | | Accrued semiconductor fabrication costs | $92,600 | $0 | | Other | $53,831 | $6,551 | | **Total** | **$475,487** | **$353,507** | [Note 6 – Loans](index=58&type=section&id=Note%206%20%E2%80%93%20Loans) The **$91,407** PPP Loan received in May 2020 was fully forgiven by the SBA in May 2021 - In May 2020, Ideal Power received a **$91,407** PPP Loan, which was primarily used for payroll costs[154](index=154&type=chunk)[224](index=224&type=chunk) - The PPP Loan, including accrued interest, was fully forgiven by the SBA in May 2021, resulting in a non-cash gain on forgiveness[154](index=154&type=chunk)[224](index=224&type=chunk) [Note 7 — Lease](index=58&type=section&id=Note%207%20%E2%80%94%20Lease) The company commenced a new **63-month** lease for **4,070 square feet** of office and laboratory space in June 2021, recognizing a right-of-use asset and lease liability - The company entered into a new **63-month** lease for **4,070 square feet** of office and laboratory space in Austin, Texas, commencing June 1, 2021[226](index=226&type=chunk) - A right-of-use asset of **$339,882** and a corresponding lease liability were recognized upon lease commencement[226](index=226&type=chunk) **Future Minimum Lease Payments:** | For the Year Ended December 31, | Amount | | :------------------------------ | :------- | | 2022 | $76,482 | | 2023 | $78,517 | | 2024 | $80,552 | | 2025 | $82,587 | | 2026 | $56,132 | | **Total Lease Payments** | **$374,270** | [Note 8 — Commitments and Contingencies](index=60&type=section&id=Note%208%20%E2%80%94%20Commitments%20and%20Contingencies) Commitments include licensing agreements with annual payments and ongoing uncertainties related to the COVID-19 pandemic - Licensing agreements, expiring in February 2033, involve annual variable payments up to **$100,000** for five issued patents, resulting in a long-term liability of **$917,100** at December 31, 2021[230](index=230&type=chunk)[231](index=231&type=chunk) - The company is not currently party to any legal proceedings that it believes would reasonably have a material adverse impact on its business[232](index=232&type=chunk) - The COVID-19 pandemic continues to spread, posing uncertain risks to the company's financial performance and operations[234](index=234&type=chunk) [Note 9 — Equity](index=60&type=section&id=Note%209%20%E2%80%94%20Equity) A February 2021 public offering generated **$21.2 million** in net proceeds for B-TRAN™ development and corporate purposes - In February 2021, the company issued **1,352,975 shares** of common stock at **$17.00 per share** in a public offering, generating **$21.2 million** in net proceeds[236](index=236&type=chunk)[237](index=237&type=chunk) - The net proceeds are intended to fund commercialization and development of B-TRAN™ technology and general corporate purposes[237](index=237&type=chunk) - The company issued unregistered common stock to third-party vendors for services: **10,000 shares** (**$139,300**) in October 2021, **4,000 shares** (**$68,680**) in February 2021, and **26,316 shares** (**$50,000**) in April 2020[238](index=238&type=chunk) [Note 10 — Equity Incentive Plan](index=62&type=section&id=Note%2010%20%E2%80%94%20Equity%20Incentive%20Plan) The 2013 Equity Incentive Plan was amended in June 2021, increasing authorized shares and extending its termination date - The 2013 Equity Incentive Plan was last amended in June 2021, increasing authorized shares by **500,000** and extending the termination date to June 2031[239](index=239&type=chunk) - As of December 31, 2021, **419,791 shares** of common stock were available for issuance under the Plan[239](index=239&type=chunk) **Equity Grants and Recognized Expense:** | Year | Grants (Stock Options/Restricted Units) | Estimated Fair Value | Recognized Expense | | :--- | :-------------------------------------- | :------------------- | :----------------- | | 2021 | 231,821 | $2,078,872 | $327,414 | | 2020 | 226,691 | $758,214 | $754,369 | - As of December 31, 2021, there was **$1,758,931** of unrecognized compensation cost related to non-vested share-based compensation, expected to be recognized over a weighted average period of **1.4 years**[247](index=247&type=chunk) [Note 11 — Warrants](index=63&type=section&id=Note%2011%20%E2%80%94%20Warrants) Warrant activity in 2020 included an early exercise transaction that raised **$2.5 million** and resulted in a **$3.7 million** inducement expense - The Early Warrant Exercise Transaction in August 2020 raised **$2.5 million** in net proceeds and resulted in the issuance of **705,688 new Series C warrants**[248](index=248&type=chunk)[249](index=249&type=chunk) - A **$3.7 million** non-cash warrant inducement expense was recognized in connection with the Early Warrant Exercise Transaction[249](index=249&type=chunk) **Warrant Activity (Outstanding at December 31):** | Metric | Warrants (2021) | Warrants (2020) | Pre-Funded Warrants (2021) | Pre-Funded Warrants (2020) | | :---------------------- | :-------------- | :-------------- | :------------------------- | :------------------------- | | Outstanding at Jan 1 | 1,149,868 | 2,463,063 | 320,201 | 868,443 | | Issued | 0 | 705,688 | 0 | 0 | | Exercised | (363,448) | (589,941) | (66,373) | (548,242) | | Held in abeyance | 0 | (803,300) | 0 | 0 | | Expired | 0 | (625,642) | 0 | 0 | | **Outstanding at Dec 31** | **786,420** | **1,149,868** | **253,828** | **320,201** | - The estimated aggregate pre-tax intrinsic value of outstanding warrants was **$8.5 million** at December 31, 2021[252](index=252&type=chunk) [Note 12 — Income Taxes](index=64&type=section&id=Note%2012%20%E2%80%94%20Income%20Taxes) The company has approximately **$62 million** in federal NOL carryforwards, with a full valuation allowance against deferred tax assets - As of December 31, 2021, the company has federal net operating loss (NOL) carryforwards of approximately **$62 million**[253](index=253&type=chunk) - Pre-2018 federal NOLs expire from 2031 through 2038, while federal NOLs for 2018 and thereafter do not expire[253](index=253&type=chunk) - A full valuation allowance has been established to reduce net deferred tax assets to zero at December 31, 2021 and 2020, due to the unlikelihood of realizing tax benefits[255](index=255&type=chunk)[256](index=256&type=chunk) **Reconciliation of Statutory to Effective Tax Rate (Year Ended December 31):** | Metric | 2021 | 2020 | | :-------------------------- | :---- | :---- | | Statutory federal income tax rate | (21)% | (21)% | | Warrant inducement | — | 10 | | Valuation allowance | 21 | 11 | | **Effective tax rate** | **— %** | **— %** | [ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=66&type=section&id=ITEM%209%3A%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) This item is not applicable to Ideal Power Inc [ITEM 9A: CONTROLS AND PROCEDURES](index=67&type=section&id=ITEM%209A%3A%20CONTROLS%20AND%20PROCEDURES) Ideal Power's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021. Management also assessed and determined that internal control over financial reporting was effective as of the same date, based on the COSO framework. No material changes in internal control over financial reporting were identified during the fourth quarter of 2021 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2021[262](index=262&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[263](index=263&type=chunk) - No changes in internal control over financial reporting were identified during the three months ended December 31, 2021, that materially affected or are reasonably likely to materially affect internal control over financial reporting[265](index=265&type=chunk) [ITEM 9B: OTHER INFORMATION](index=67&type=section&id=ITEM%209B%3A%20OTHER%20INFORMATION) This item is not applicable to Ideal Power Inc [ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.](index=69&type=section&id=ITEM%209C%3A%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS.) There are no disclosures regarding foreign jurisdictions that prevent inspections [PART III](index=69&type=section&id=PART%20III) Information on directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and principal accountant fees [ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=69&type=section&id=ITEM%2010%3A%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information for this item is incorporated by reference from the company's definitive proxy statement relating to the 2022 annual meeting of stockholders [ITEM 11: EXECUTIVE COMPENSATION](index=69&type=section&id=ITEM%2011%3A%20EXECUTIVE%20COMPENSATION) Information for this item is incorporated by reference from the company's definitive proxy statement relating to the 2022 annual meeting of stockholders [ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS](index=69&type=section&id=ITEM%2012%3A%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20SHAREHOLDER%20MATTERS) Information for this item is incorporated by reference from the company's definitive proxy statement relating to the 2022 annual meeting of stockholders [ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=69&type=section&id=ITEM%2013%3A%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information for this item is incorporated by reference from the company's definitive proxy statement relating to the 2022 annual meeting of stockholders [ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=69&type=section&id=ITEM%2014%3A%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information for this item is incorporated by reference from the company's definitive proxy statement relating to the 2022 annual meeting of stockholders [PART IV](index=69&type=section&id=PART%20IV) Listing of exhibits, financial statement schedules, and Form 10-K summary disclosure [ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES](index=69&type=section&id=ITEM%2015%3A%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements and supplementary data included in the report, along with a comprehensive index of exhibits. All financial statement schedules have been omitted as they are not required or are included elsewhere in the financial statements [Documents Filed with Report](index=69&type=section&id=Documents%20Filed%20with%20Report) The report includes audited financial statements for 2021 and 2020, along with independent auditor reports - The report includes audited financial statements: Balance Sheets, Statements of Operations, Statement of Stockholders' Equity, and Statements of Cash Flows for the years ended December 31, 2021 and 2020[275](index=275&type=chunk) - Reports of Independent Registered Public Accounting Firms (BPM LLP and Gumbiner Savett Inc.) are also filed[275](index=275&type=chunk) [Schedules](index=69&type=section&id=Schedules) All financial statement schedules are omitted as they are not required or are presented within the financial statements - All financial statement schedules have been omitted because they are not required, not applicable, or the information is included in the consolidated financial statements or related notes[276](index=276&type=chunk) [Exhibits](index=69&type=section&id=Exhibits) The exhibit index details various documents filed with the Annual Report on Form 10-K, including corporate and governance documents - The exhibit index lists various documents filed as part of the Annual Report on Form 10-K, including organizational documents, stock and warrant forms, equity incentive plans, employment agreements, and certifications[280](index=280&type=chunk) [ITEM 16: FORM 10-K SUMMARY](index=74&type=section&id=ITEM%2016%3A%20FORM%2010-K%20SUMMARY) This item indicates that no Form 10-K summary is provided

Ideal Power Inc. (NASDAQ:IPWR) Q4 2021 Earnings Conference Call March 17, 2022 5:00 PM ET Company Representatives Dan Brdar - President, Chief Executive Officer Tim Burns - Chief Financial Officer Carolyn Capaccio - LHA Conference Call Participants David Williams - Benchmark Taylor Fredericks - Arrowhead Securities Group Operator Good day! And welcome to the Ideal Power, Fourth Quarter 2021 Results Conference Call. Today’s conference is being recorded. At this time, I’d now like to turn the conference over ...

Investor Presentation March 2022 Safe Harbor All statements in this presentation that are not based on historical fact are "forward looking statements." While management has based any forward looking statements included in this presentation on its current expectations, the information on which such expectations were based may change. These forward looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which a ...

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section details the company's financial statements, management's analysis, market risk disclosures, and internal controls [Condensed Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Financial%20Statements) The company's financial position significantly strengthened by September 30, 2021, driven by a public offering that increased cash to $24.5 million, while net loss improved by 50% to $3.3 million due to non-recurring expenses in the prior year [Balance Sheets](index=4&type=section&id=Balance%20Sheets) The balance sheet reflects a substantial increase in assets and equity, primarily driven by a significant cash infusion from financing activities - Total assets increased dramatically to **$27.3 million** as of September 30, 2021, from **$5.1 million** at December 31, 2020, primarily driven by a surge in cash and cash equivalents from **$3.2 million to $24.5 million**, resulting from financing activities during the period[11](index=11&type=chunk) - Total stockholders' equity saw a substantial increase to **$25.3 million** from **$3.8 million**, mainly due to the issuance of common stock and additional paid-in capital from a public offering and warrant exercises[11](index=11&type=chunk) Balance Sheet Summary (in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $24,488 | $3,157 | | Total current assets | $24,850 | $3,446 | | Total assets | $27,285 | $5,132 | | **Liabilities & Equity** | | | | Total current liabilities | $741 | $660 | | Total liabilities | $1,983 | $1,303 | | Total stockholders' equity | $25,302 | $3,829 | | **Total Liabilities & Equity** | **$27,285** | **$5,132** | [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) The statements of operations show zero gross profit from grant revenue, with a reduced net loss for the nine months ended September 30, 2021, due to non-recurring prior-year expenses - All revenue for the reported periods was grant revenue, which was fully offset by the cost of grant revenue, resulting in **zero gross profit**[13](index=13&type=chunk) - The net loss for the nine months ended September 30, 2021, was **$3.35 million**, a significant improvement from the **$6.66 million** loss in the same period of 2020, primarily attributable to a **$3.72 million** warrant inducement expense recorded in 2020 that did not recur in 2021, and a **$91,407** gain on forgiveness of long-term debt in 2021[13](index=13&type=chunk) Statements of Operations Summary (in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Grant Revenue | $121 | $148 | $448 | $154 | | Gross Profit | $0 | $0 | $0 | $0 | | Total Operating Expenses | $1,234 | $1,173 | $3,434 | $2,935 | | Loss from Operations | $(1,234) | $(1,173) | $(3,434) | $(2,935) | | Net Loss | $(1,239) | $(4,895) | $(3,350) | $(6,658) | | Net Loss Per Share | $(0.20) | $(1.28) | $(0.57) | $(2.04) | [Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows) Cash flows indicate increased operating cash usage, significantly offset by substantial cash provided from financing activities, primarily a public offering - Net cash used in operating activities was **$3.0 million** for the first nine months of 2021, compared to **$2.3 million** in the same period of 2020[16](index=16&type=chunk) - Financing activities provided a significant cash inflow of **$24.5 million** in the first nine months of 2021, primarily from **$21.2 million** in net proceeds from a common stock issuance and **$3.3 million** from the exercise of options and warrants, a substantial increase from the **$3.1 million** provided by financing activities in the prior-year period[16](index=16&type=chunk) Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(2,993) | $(2,304) | | Net Cash Used in Investing Activities | $(183) | $(48) | | Net Cash Provided by Financing Activities | $24,506 | $3,063 | | **Net Increase in Cash** | **$21,330** | **$712** | [Notes to Unaudited Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Financial%20Statements) Key notes detail the company's focus on B-TRAN™ technology, the forgiveness of a PPP loan, and proceeds from a February 2021 public offering - The company is solely focused on the development and commercialization of its B-TRAN™ solid state switch technology and has financed its operations primarily through the sale of common stock and warrants[21](index=21&type=chunk)[22](index=22&type=chunk) - In May 2021, the Small Business Administration (SBA) approved the full forgiveness of the company's **$91,407** Paycheck Protection Program (PPP) loan, including accrued interest, which was recognized as a gain in the financial statements[32](index=32&type=chunk) - In February 2021, the company raised net proceeds of **$21.2 million** through an underwritten public offering of 1,352,975 shares of common stock at **$17.00 per share**[45](index=45&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the increased loss from operations to higher R&D and sales & marketing expenses, while liquidity significantly improved due to a $21.2 million public offering [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Operational results show increased R&D and sales & marketing expenses, leading to a higher loss from operations, though net loss decreased due to non-recurring items - For Q3 2021 vs Q3 2020, R&D expenses increased by **22%** due to higher contract labor for device development, and sales and marketing expenses rose significantly from **$20 thousand to $128,248** due to the hiring of a VP of Business Development and efforts to commercialize B-TRAN™ technology[68](index=68&type=chunk)[70](index=70&type=chunk) - For the nine months ended Sep 30, 2021 vs 2020, R&D expenses increased by **23% ($264,512)** and sales & marketing expenses increased from **$20 thousand to $302,859**, leading to a **17%** increase in the loss from operations[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - The net loss for the nine months ended Sep 30, 2021, decreased by **50%** compared to the prior year period, primarily due to a non-recurring **$3.7 million** warrant inducement expense in 2020 and a **$91,407** gain on PPP loan forgiveness in 2021[81](index=81&type=chunk)[82](index=82&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity significantly improved with a strong cash position and no outstanding debt, primarily due to proceeds from a public offering and PPP loan forgiveness - As of September 30, 2021, the company had a strong liquidity position with **$24.5 million** in cash and cash equivalents and **$24.1 million** in net working capital, with **no outstanding debt**[83](index=83&type=chunk) - The company's cash position was primarily bolstered by **$24.5 million** in net cash provided by financing activities in the first nine months of 2021, which included **$21.2 million** from a public offering and **$3.3 million** from the exercise of warrants and stock options[87](index=87&type=chunk)[91](index=91&type=chunk) - In May 2021, the SBA approved the forgiveness of the company's **$91,407** PPP loan, which was obtained in May 2020[88](index=88&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is a smaller reporting company and is not required to provide this information - As a smaller reporting company, Ideal Power Inc. is not required to provide quantitative and qualitative disclosures about market risk[96](index=96&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2021, with no material changes in internal controls over financial reporting during the quarter - The company's management, including the CEO and CFO, concluded that disclosure controls and procedures were **effective** as of September 30, 2021[97](index=97&type=chunk) - No material changes in internal controls over financial reporting occurred during the quarter ended September 30, 2021[98](index=98&type=chunk) [PART II OTHER INFORMATION](index=27&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits filed with the report [Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings - The company is not currently involved in any legal proceedings[102](index=102&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2020 Annual Report on Form 10-K[103](index=103&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None reported for the period[104](index=104&type=chunk) [Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, along with Inline XBRL documents[109](index=109&type=chunk)

Financial Data and Key Metrics Changes - In Q3 2021, the company recorded $121,000 in grant revenue, with operating expenses remaining flat at $1.2 million compared to Q3 2020 [44][46] - Net loss for Q3 2021 was $1.2 million, a decrease from $4.9 million in Q3 2020, which included a one-time non-cash warrant inducement expense of $3.7 million [48] - Cash used in operating and investing activities was $1.2 million, up from $0.8 million in Q3 2020, with cash and cash equivalents totaling $24.5 million as of September 30, 2021 [49][50] Business Line Data and Key Metrics Changes - The company is focused on the commercialization of its B-TRAN semiconductor technology, with significant progress made towards a commercial launch in the second half of 2022 [6][11] - The company has engaged with multiple global companies for testing and evaluation of B-TRAN, including a top 10 global automaker and a top 10 solar power conversion provider [8][11] Market Data and Key Metrics Changes - The overall circuit breaker market is projected to grow at a compound annual growth rate of over 6% to approximately $26 billion by 2027, with B-TRAN positioned in a segment worth about $10 billion [19][54] - The company anticipates that the actual size of the circuit breaker market may be underestimated, particularly with the growth in electric vehicle applications [57] Company Strategy and Development Direction - The company aims to leverage its B-TRAN technology to address the growing demand for efficient power management solutions in various sectors, including electric vehicles, renewable energy, and solid-state circuit breakers [11][41] - The strategy includes ongoing collaborations with the U.S. Navy and the Department of Energy to develop B-TRAN enabled circuit breakers for military and utility applications [25][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growing interest in government-funded R&D and commercial partnerships for solid-state circuit breakers, indicating a favorable environment for B-TRAN technology [17][18] - The company plans to continue engaging with prospective customers and expects to provide updates on customer feedback and program developments [37][39] Other Important Information - The company has 65 issued B-TRAN patents and is in the process of qualifying a second semiconductor fabrication partner to mitigate supply chain risks [36][33] - The passing of the Chairman of the Board, Mr. David Eisenhaure, was acknowledged, highlighting his contributions to the company's strategic direction [42][43] Q&A Session Summary Question: Clarification on Total Addressable Markets - The total circuit breaker market is $26 billion, with about 40% applicable to B-TRAN, estimated at $10 billion [54][55] Question: Additional Use Cases for B-TRAN - B-TRAN has potential applications beyond circuit breakers, particularly in electric vehicles and charging stations, which may not be fully captured in current market studies [56][57] Question: Timing for Third-Party Lab Selection - The selection of a third-party lab is expected to be completed by the end of the current quarter, with results anticipated in Q1 [58][61] Question: Revenue Post-Sampling Program - The company expects to earn revenue from custom modules and additional R&D funds from grants after the sampling program [68] Question: Progress with Companies Sampling B-TRAN - Several companies are ready to proceed with sampling, with discussions ongoing for cross-selling B-TRAN into multiple product lines [70][71]

IDEAL POWER Investor Presentation Safe Harbor All statements in this presentation that are not based on historical fact are "forward looking statements." While management has based any forward looking statements included in this presentation on its current expectations, the information on which such expectations were based may change. These forward looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed financial statements and management's discussion and analysis for the period ended June 30, 2021 [Condensed Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Financial%20Statements) The condensed financial statements reflect a strengthened cash position from a public offering, despite widening net losses due to increased R&D and sales investments [Balance Sheets](index=4&type=section&id=Balance%20Sheets) The balance sheets show a substantial increase in cash and total assets, primarily driven by a public stock offering Balance Sheet Summary (Unaudited) | Balance Sheet Items | June 30, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $25,716,977 | $3,157,256 | | Total current assets | $25,985,183 | $3,446,426 | | Total assets | $28,438,696 | $5,132,173 | | **Liabilities & Equity** | | | | Total current liabilities | $742,571 | $659,526 | | Total liabilities | $1,992,171 | $1,302,964 | | Total stockholders' equity | $26,446,525 | $3,829,209 | [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) The statements of operations indicate widening net losses for both three and six-month periods, despite increased grant revenue Statements of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2021 (USD) | Three Months Ended June 30, 2020 (USD) | Six Months Ended June 30, 2021 (USD) | Six Months Ended June 30, 2020 (USD) | | :--- | :--- | :--- | :--- | :--- | | Grant Revenue | $84,705 | $6,515 | $326,766 | $6,515 | | Total Operating Expenses | $1,276,244 | $832,203 | $2,200,388 | $1,762,637 | | Loss from Operations | $(1,276,244) | $(832,203) | $(2,200,388) | $(1,762,637) | | Net Loss | $(1,186,693) | $(833,258) | $(2,110,843) | $(1,763,759) | | Net Loss Per Share | $(0.19) | $(0.28) | $(0.37) | $(0.59) | [Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows) Cash flows show a significant net increase in cash, primarily from financing activities, offsetting operating and investing outflows Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2021 (USD) | 2020 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,801,095) | $(1,497,357) | | Net cash used in investing activities | $(145,019) | $(33,966) | | Net cash provided by financing activities | $24,505,835 | $267,223 | | **Net increase (decrease) in cash** | **$22,559,721** | **$(1,264,100)** | - The significant increase in cash was driven by **$21.2 million** in net proceeds from the issuance of common stock and **$3.3 million** from the exercise of options and warrants[15](index=15&type=chunk) [Statements of Stockholders' Equity](index=7&type=section&id=Statements%20of%20Stockholders'%20Equity) Stockholders' equity significantly increased due to a public offering and option exercises, despite a net loss - Total stockholders' equity increased from **$3.8 million** at the end of 2020 to **$26.4 million** at June 30, 2021. This was primarily due to a public offering that raised **$21.2 million** and the exercise of options and warrants generating **$3.3 million**, offset by a net loss of **$2.1 million** for the six-month period[17](index=17&type=chunk) [Notes to Unaudited Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Financial%20Statements) These notes provide essential details on the company's B-TRAN™ technology focus, financing activities, and specific financial events - The company is solely focused on the development and commercialization of its B-TRAN™ solid state switch technology and has historically financed operations through the sale of common stock and warrants[20](index=20&type=chunk)[21](index=21&type=chunk) - In May 2021, the Small Business Administration (SBA) approved the full forgiveness of the company's **$91,407** Paycheck Protection Program (PPP) loan, which was recorded as a gain[28](index=28&type=chunk) - In February 2021, the company completed an underwritten public offering, selling **1,352,975 shares** of common stock at **$17.00 per share**, resulting in net proceeds of **$21.2 million**[42](index=42&type=chunk) - The 2013 Equity Incentive Plan was amended in June 2021, increasing the number of authorized shares for issuance by **500,000**[44](index=44&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses increased net losses due to strategic investments in B-TRAN™ commercialization, supported by strong liquidity from a public offering [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Operating results show increased grant revenues but also higher R&D and new sales and marketing expenses, leading to a larger operating loss Comparison of Operating Results (Q2 2021 vs Q2 2020) | Metric | Q2 2021 (USD) | Q2 2020 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Grant Revenues | $84,705 | $6,515 | +1200% | | Research & Development | $560,693 | $316,325 | +77% | | General & Administrative | $603,518 | $515,878 | +17% | | Sales & Marketing | $112,033 | $0 | N/A | | Loss from Operations | $(1,276,244) | $(832,203) | +53% | - The **77% increase** in Q2 R&D expenses was driven by higher contract labor for driver development, costs for qualifying a second semiconductor fabricator, and other B-TRAN™ development spending[64](index=64&type=chunk) - Sales and marketing expenses were initiated in Q1 2021 following the hiring of a Vice President of Business Development to begin commercialization efforts[66](index=66&type=chunk) - Management expects both R&D and sales & marketing expenses to be higher in the remaining quarters of 2021 as the company accelerates development and engages with prospective customers[64](index=64&type=chunk)[66](index=66&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity significantly improved with substantial cash from a public offering, providing resources for future development - As of June 30, 2021, the company had a strong liquidity position with **$25.7 million** in cash and cash equivalents, **$25.2 million** in net working capital, and no outstanding debt[78](index=78&type=chunk) - Financing activities in the first six months of 2021 provided **$24.5 million** in cash, primarily from the **$21.2 million** net proceeds of the February 2021 public offering and **$3.3 million** from the exercise of warrants and stock options[82](index=82&type=chunk) - The company expects cash outflows from operating activities to increase for the remainder of 2021 to support the accelerated development and commercialization of its B-TRAN™ technology[79](index=79&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Ideal Power is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[88](index=88&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's management, including the CEO and CFO, conducted an evaluation of disclosure controls and procedures and concluded that they were effective as of June 30, 2021. There were no material changes in internal controls over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period, June 30, 2021[91](index=91&type=chunk) - No material changes to the company's internal controls over financial reporting occurred during the second quarter of 2021[92](index=92&type=chunk) [PART II - OTHER INFORMATION](index=26&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers other required disclosures including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently a party to any legal proceedings - The company is not currently involved in any legal proceedings[95](index=95&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes from the risk factors disclosed in the 2020 Annual Report on Form 10-K are reported[96](index=96&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[97](index=97&type=chunk) [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - Not applicable[98](index=98&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[99](index=99&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - None[100](index=100&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, which include the Amended & Restated 2013 Equity Incentive Plan, officer certifications as required by the Sarbanes-Oxley Act, and XBRL data files - Key exhibits filed include the Amended & Restated 2013 Equity Incentive Plan and certifications from the Principal Executive Officer and Principal Financial Officer[101](index=101&type=chunk)

Ideal Power Inc. (NASDAQ:IPWR) Q2 2021 Results Conference Call August 12, 2021 4:30 PM ET Company Participants Carolyn Capaccio - Investor Relations Daniel Brdar - President and Chief Executive Officer Timothy Burns - Chief Financial Officer Conference Call Participants Shawn Severson - Water Tower Research David Williams - The Benchmark Company Don Slowinski - Winslow Asset Group Operator Good day, ladies and gentlemen and welcome to the Ideal Power Second Quarter 2021 Results Conference Call. Today’s conf ...

IDEAL POWER Investor Presentation Safe Harbor All statements in this presentation that are not based on historical fact are "forward looking statements." While management has based any forward looking statements included in this presentation on its current expectations, the information on which such expectations were based may change. These forward looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Delaware 14-1999058 IDEAL POWER INC. (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 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 (Exact name of registrant as specified in its charter) ...