Ideal Power Inc. (NASDAQ:IPWR) Q3 2022 Earnings Conference Call November 14, 2022 4:30 PM ET Company Participants Carolyn Capaccio - LHA Dan Brdar - President & Chief Executive Officer Tim Burns - Chief Financial Officer Conference Call Participants Operator Good day and welcome to the Ideal Power Third Quarter 2022 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Carolyn Capaccio of LHA. Please go ahead. Carolyn Capaccio Thank you, ope ...

Table of Contents 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 September 30, 2022 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 charte ...

Investor Presentation August 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 ...

Ideal Power Inc. (NASDAQ:IPWR) Q2 2022 Earnings Conference Call August 15, 2022 4:30 PM ET Company Participants Carolyn Capaccio - LHA Investor Relations SVP Dan Brdar - CEO President and Director Tim Burns - CFO, Secretary and Treasurer Conference Call Participants David Williams - Benchmark Orin Hirschman - AIGH Investment Partners Don Slowinski - Winslow Asset Group Taylor Fredericks - Arrowhead Peter Sidoti - Sidoti & Company Robert Ainbinder - GoldStreet Operator Welcome to the Ideal Power Second Quart ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I) This part presents the company's unaudited financial statements, management's analysis, and disclosures on controls and procedures [Item 1. Unaudited Condensed Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Financial%20Statements) This section presents the unaudited condensed financial statements, providing a snapshot of the company's financial position and performance [Balance Sheets](index=4&type=section&id=Balance%20Sheets) The company's financial position shows a decrease in total assets, primarily driven by a reduction in cash and cash equivalents - The company's total assets decreased from **$25.88 million** at December 31, 2021, to **$22.81 million** at June 30, 2022, primarily due to a reduction in cash and cash equivalents[10](index=10&type=chunk) Key Balance Sheet Figures | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $20,020,712 | $23,170,149 | | Total current assets | $20,429,823 | $23,447,311 | | Total assets | $22,810,077 | $25,877,480 | | Total current liabilities | $578,476 | $542,871 | | Total liabilities | $1,692,449 | $1,727,555 | | Total stockholders' equity | $21,117,628 | $24,149,925 | [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) The company reported widening net losses for the three and six-month periods due to increased operating expenses - Ideal Power Inc. reported **increased net losses** for both the three and six months ended June 30, 2022, compared to the same periods in 2021, driven by higher operating expenses and decreased other income[12](index=12&type=chunk) Key Statements of Operations Figures | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Grant revenue | $50,978 | $84,705 | $175,986 | $326,766 | | Gross profit | $— | $— | $— | $— | | Total operating expenses | $1,696,172 | $1,276,244 | $3,597,097 | $2,200,388 | | Loss from operations | $(1,696,172) | $(1,276,244) | $(3,597,097) | $(2,200,388) | | Total other income | $6,178 | $89,551 | $2,462 | $89,545 | | Net loss | $(1,689,994) | $(1,186,693) | $(3,594,635) | $(2,110,843) | | Net loss per share – basic and diluted | $(0.27) | $(0.19) | $(0.58) | $(0.37) | [Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows) Net cash used in operations increased significantly, reflecting a higher net loss and changes in working capital - Cash used in operating activities **significantly increased** for the six months ended June 30, 2022, primarily due to a higher net loss and unfavorable changes in working capital, contrasting with the prior year's cash inflows from financing activities[15](index=15&type=chunk) Key Statements of Cash Flows Figures (Six Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net loss | $(3,594,635) | $(2,110,843) | | Net cash used in operating activities | $(3,081,517) | $(1,801,095) | | Net cash used in investing activities | $(67,920) | $(145,019) | | Net cash provided by financing activities | $— | $24,505,835 | | Net increase (decrease) in cash and cash equivalents | $(3,149,437) | $22,559,721 | | Cash and cash equivalents at end of period | $20,020,712 | $25,716,977 | [Statements of Stockholders' Equity](index=7&type=section&id=Statements%20of%20Stockholders'%20Equity) Stockholders' equity declined due to the net loss incurred, partially offset by stock-based compensation - Stockholders' equity decreased from **$24.15 million** at December 31, 2021, to **$21.12 million** at June 30, 2022, primarily due to the net loss incurred during the period, partially offset by stock-based compensation and stock issued for services[17](index=17&type=chunk) - During the six months ended June 30, 2022, the company recognized **$231,765 in stock-based compensation** for the three months ended March 31, 2022, and **$230,473** for the three months ended June 30, 2022, and issued **$100,100 in stock for services**[17](index=17&type=chunk) Key Stockholders' Equity Figures | Metric | December 31, 2021 | June 30, 2022 | | :--- | :--- | :--- | | Common Stock (Amount) | $5,894 | $5,905 | | Additional Paid-In Capital | $104,063,321 | $104,625,648 | | Accumulated Deficit | $(79,906,080) | $(83,500,715) | | Total Stockholders' Equity | $24,149,925 | $21,117,628 | [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Financial%20Statements) The notes detail the company's focus on B-TRAN™ technology, intangible assets, leases, and equity-related transactions - Ideal Power Inc. is focused on the development and commercialization of its **Bidirectional bipolar junction TRANsistor (B-TRAN™)** solid-state switch technology, having financed operations primarily through stock and warrant sales[20](index=20&type=chunk)[21](index=21&type=chunk) - Intangible assets, primarily patents, increased to **$1,189,513** at June 30, 2022, from $1,133,841 at December 31, 2021, with amortization expense of $73,910 for the six months ended June 30, 2022[27](index=27&type=chunk) - The **$91,407 PPP Loan**, including accrued interest, was fully forgiven by the SBA in May 2021, recognized as a non-cash gain in the prior year[29](index=29&type=chunk) - The company entered a new **63-month lease** for office and laboratory space in Austin, Texas, commencing June 1, 2021, with total future minimum payments of $336,454[31](index=31&type=chunk)[33](index=33&type=chunk) - The company has licensing agreements expiring in February 2033, with ongoing variable payments up to a maximum of **$100,000 per year** for five issued patents, resulting in an estimated present value of future payments of $877,778 at June 30, 2022[35](index=35&type=chunk)[36](index=36&type=chunk) - In January 2022, **10,000 unregistered shares** of common stock, valued at $100,100, were issued to a third-party vendor for services[41](index=41&type=chunk) - At June 30, 2022, **394,979 shares** were available for issuance under the 2013 Equity Incentive Plan; during the six months ended June 30, 2022, 41,062 stock options were granted, and **$1,539,738 of unrecognized compensation cost** related to non-vested equity awards remains[42](index=42&type=chunk)[43](index=43&type=chunk)[46](index=46&type=chunk) - As of June 30, 2022, there were **786,420 warrants outstanding** with a weighted average exercise price of $5.19, and 253,828 pre-funded warrants with an exercise price of $0.001[47](index=47&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial results, highlighting increased net losses due to higher operating expenses for B-TRAN™ commercialization - The company is solely focused on the further development and commercialization of its **Bidirectional bipolar junction TRANsistor (B-TRAN™)** solid-state switch technology[56](index=56&type=chunk) - Operations have been funded primarily through the sale of common stock and warrants, with total revenue from inception to June 30, 2022, amounting to **$16.1 million**, mostly from discontinued operations and grant revenue[57](index=57&type=chunk) - The COVID-19 pandemic has not had a material adverse impact on operations to date, but future disruptions, including electrical component shortages, fabrication capacity difficulties, and development delays, remain potential risks[59](index=59&type=chunk) - The company expects to introduce its initial product for commercial sale as early as **late 2022**[61](index=61&type=chunk) - No significant changes to critical accounting estimates or material changes from trends, events, or uncertainties disclosed in the 2021 Annual Report on Form 10-K were reported[83](index=83&type=chunk)[84](index=84&type=chunk) [Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021](index=18&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202022%20to%20the%20three%20months%20ended%20June%2030%2C%202021) Q2 2022 results show a wider net loss driven by higher operating expenses and lower other income compared to Q2 2021 - The increase in Research and Development expenses was primarily due to higher semiconductor fabrication costs (**$115,061**) and wafer and driver component costs (**$95,212**), with almost all fabrication costs self-funded in 2022 compared to partial government funding in 2021[63](index=63&type=chunk) - Other income significantly decreased due to the absence of a **$91,407 gain on forgiveness of long-term debt** recognized in the prior year[66](index=66&type=chunk) - The company expects **higher research and development and sales and marketing expenses**, and flat to modestly lower general and administrative expenses in the remainder of 2022[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) Financial Performance (Three Months Ended June 30) | Metric | 2022 | 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Grant Revenues | $50,978 | $84,705 | -39.8% | | Cost of Grant Revenues | $50,978 | $84,705 | -39.8% | | Research and Development Expenses | $728,383 | $560,693 | +30% | | General and Administrative Expenses | $734,637 | $603,518 | +22% | | Sales and Marketing Expenses | $233,152 | $112,033 | +108% | | Loss from Operations | $(1,696,172) | $(1,276,244) | +33% | | Other Income | $6,178 | $89,551 | -93.1% | | Net Loss | $(1,689,994) | $(1,186,693) | +42% | [Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021](index=20&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202022%20to%20the%20six%20months%20ended%20June%2030%2C%202021) H1 2022 results indicate a significantly larger net loss due to increased R&D, G&A, and S&M expenses year-over-year - The significant increase in Research and Development expenses was primarily due to higher semiconductor fabrication costs (**$365,598**), stock-based compensation, and personnel costs, with almost all fabrication costs self-funded in 2022[71](index=71&type=chunk) - General and Administrative expenses increased due to higher investor relations spending, stock-based compensation, and Board search and placement fees[72](index=72&type=chunk) - Sales and Marketing expenses surged due to increased personnel costs from hiring the first two sales and marketing employees in 2021, along with higher stock-based compensation and travel costs[73](index=73&type=chunk) Financial Performance (Six Months Ended June 30) | Metric | 2022 | 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Grant Revenues | $175,986 | $326,766 | -46.2% | | Cost of Grant Revenues | $175,986 | $326,766 | -46.2% | | Research and Development Expenses | $1,556,930 | $821,573 | +90% | | General and Administrative Expenses | $1,587,586 | $1,204,204 | +32% | | Sales and Marketing Expenses | $452,581 | $174,611 | +159% | | Loss from Operations | $(3,597,097) | $(2,200,388) | +63% | | Other Income | $2,462 | $89,545 | -97.2% | | Net Loss | $(3,594,635) | $(2,110,843) | +70% | [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity for near-term operations but anticipates increased cash burn for B-TRAN™ commercialization - As of June 30, 2022, the company had cash and cash equivalents of **$20.0 million** and net working capital of **$19.9 million**, with no outstanding debt[77](index=77&type=chunk) - Management expects current cash to be **sufficient to fund activities for at least the next twelve months**, but additional funds may be required to fully implement the business strategy[77](index=77&type=chunk) - Net cash used in operating activities for the six months ended June 30, 2022, was **$3.08 million**, an increase from the prior year, and further increases are expected due to accelerated B-TRAN™ development and commercialization[78](index=78&type=chunk)[79](index=79&type=chunk) - Investing activities resulted in **$67,920 in cash outflows** for H1 2022, with an anticipated increase in H2 2022 for equipment acquisition[80](index=80&type=chunk) - There were **no cash inflows or outflows from financing activities** in H1 2022, contrasting with **$24.5 million in inflows** from a public offering and option exercises in H1 2021[81](index=81&type=chunk) - The **$21.2 million net proceeds** from the February 2021 public offering are being utilized to fund commercialization and development of B-TRAN™ technology and for general corporate and working capital purposes[82](index=82&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Ideal Power Inc is not required to provide these disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a **smaller reporting company**[85](index=85&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes in internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2022[87](index=87&type=chunk) - There have been **no material changes** in internal controls over financial reporting during the quarter ended June 30, 2022[88](index=88&type=chunk) - The report highlights that control systems provide only **reasonable, not absolute, assurance** due to inherent limitations such as resource constraints, human error, circumvention by individual acts or collusion, and management override[89](index=89&type=chunk) [PART II - OTHER INFORMATION](index=24&type=section&id=PART%20II) This part covers other required disclosures, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) Ideal Power Inc is not currently involved in any legal proceedings - The company is **not currently party to any legal proceedings**[92](index=92&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) There are no material changes to the risk factors previously disclosed in the company's Annual Report - **No material changes** from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[93](index=93&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds for this period - **No unregistered sales** of equity securities and use of proceeds were reported[94](index=94&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to Ideal Power Inc for the reporting period - This item is **not applicable**[95](index=95&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Ideal Power Inc for the reporting period - This item is **not applicable**[96](index=96&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item for the reporting period - **No other information** was reported[97](index=97&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including various certifications and Inline XBRL documents - The exhibits include certifications from the Principal Executive Officer (31.1) and Principal Financial Officer (31.2) pursuant to the Exchange Act, a certification pursuant to 18 U.S.C. 1350 (32.1), and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 10.LAB, 101.PRE, 104)[99](index=99&type=chunk) [SIGNATURES](index=26&type=section&id=SIGNATURES) This section contains the official signatures of the company's executive officers, dated August 15, 2022 - The report was signed on **August 15, 2022**, by R. Daniel Brdar, Chief Executive Officer, and Timothy W. Burns, Chief Financial Officer, on behalf of Ideal Power Inc[102](index=102&type=chunk)

Investor Presentation May 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 are ...

Ideal Power Inc. (NASDAQ:IPWR) Q1 2022 Earnings Conference Call May 16, 2022 4:30 PM ET Company Participants Carolyn Capaccio – Investor Relations-LHA Dan Brdar – President and Chief Executive Officer Tim Burns – Chief Financial Officer Conference Call Participants David Williams – Benchmark Orin Hirschman – AIGH Investment Partners Don Slowinski – Winslow Asset Group Operator Good day and welcome to the Ideal Power, First Quarter 2022 Results Conference Call. Today’s conference is being recorded. At this ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the period [Item 1. Unaudited Condensed Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Financial%20Statements) Q1 2022 saw a weakened financial position with decreased assets and equity, increased liabilities, and a higher net loss from increased operating expenses and reduced grant revenue [Balance Sheets](index=4&type=section&id=Balance%20Sheets%20at%20March%2031%2C%202022%20and%20December%2031%2C%202021) The balance sheet reflects a decrease in cash, total assets, and stockholders' equity, alongside an increase in total liabilities from December 2021 to March 2022 Balance Sheet Summary (March 31, 2022 vs. December 31, 2021) | Metric | March 31, 2022 | December 31, 2021 | Change | | :-------------------------- | :--------------- | :---------------- | :----- | | Cash and cash equivalents | $21,725,410 | $23,170,149 | $(1,444,739) | | Total current assets | $22,108,453 | $23,447,311 | $(1,338,858) | | Total assets | $24,507,763 | $25,877,480 | $(1,369,717) | | Total current liabilities | $756,083 | $542,871 | $213,212 | | Total liabilities | $1,930,614 | $1,727,555 | $203,059 | | Total stockholders' equity | $22,577,149 | $24,149,925 | $(1,572,776) | [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations%20for%20the%20three%20months%20ended%20March%2031%2C%202022%20and%202021) The statements of operations show a significant increase in net loss for Q1 2022, driven by higher operating expenses and reduced grant revenue Statements of Operations Summary (Three Months Ended March 31) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Grant revenue | $125,008 | $242,061 | (48.36)% | | Cost of grant revenue | $125,008 | $242,061 | (48.36)% | | Gross profit | $— | $— | — | | Research and development | $828,547 | $260,880 | 217.59% | | General and administrative | $852,949 | $600,686 | 42.00% | | Sales and marketing | $219,429 | $62,578 | 250.65% | | Total operating expenses | $1,900,925 | $924,144 | 105.70% | | Loss from operations | $(1,900,925) | $(924,144) | 105.70% | | Net loss | $(1,904,641) | $(924,150) | 106.09% | | Net loss per share (basic and diluted) | $(0.31) | $(0.17) | 82.35% | - **Net loss increased by 106% year-over-year**, primarily due to a **105.7% increase in total operating expenses** and a **48.36% decrease in grant revenue**[13](index=13&type=chunk) [Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202022%20and%202021) Cash flow analysis reveals increased cash usage in operating activities and a cessation of financing cash inflows in Q1 2022 compared to the prior year Statements of Cash Flows Summary (Three Months Ended March 31) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(1,417,123) | $(843,337) | | Net cash used in investing activities | $(27,616) | $(30,737) | | Net cash provided by financing activities | $— | $24,505,835 | | Net increase (decrease) in cash and cash equivalents | $(1,444,739) | $23,631,761 | | Cash and cash equivalents at end of period | $21,725,410 | $26,789,017 | - **Net cash used in operating activities increased by 68.04% year-over-year**[16](index=16&type=chunk) - Financing activities provided **no cash in Q1 2022**, a significant decrease from **$24.51 million in Q1 2021**[16](index=16&type=chunk) [Statements of Stockholders' Equity](index=7&type=section&id=Statements%20of%20Stockholders%27%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202022%20and%202021) Stockholders' equity decreased due to the net loss, partially offset by stock-based compensation and stock issued for services Stockholders' Equity Summary (March 31, 2022 vs. December 31, 2021) | Metric | December 31, 2021 | March 31, 2022 | | :-------------------------- | :---------------- | :--------------- | | Common Stock (Shares) | 5,893,767 | 5,905,118 | | Common Stock (Amount) | $5,894 | $5,905 | | Additional Paid-In Capital | $104,063,321 | $104,395,175 | | Accumulated Deficit | $(79,906,080) | $(81,810,721) | | Total Stockholders' Equity | $24,149,925 | $22,577,149 | - **Total stockholders' equity decreased by $1.57 million**, primarily due to the **net loss of $(1,904,641)** for the period, partially offset by stock-based compensation and stock issued for services[19](index=19&type=chunk) [Notes to Unaudited Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Financial%20Statements) Notes detail B-TRAN™ technology, accounting policies, intangible assets, lease obligations, commitments, and equity activities including offerings and incentive plans [Note 1 – Organization and Description of Business](index=8&type=section&id=Note%201%20%E2%80%93%20Organization%20and%20Description%20of%20Business) This note describes the company's focus on B-TRAN™ technology and its reliance on common stock and warrants for funding operations - The company is focused on the development and commercialization of its **Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state switch technology**[22](index=22&type=chunk) - Operations have been financed primarily through the sale of common stock and warrants, with future operations dependent on obtaining adequate funding through various sources[23](index=23&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=8&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the preparation of unaudited financial statements, treatment of pre-funded warrants, and exclusion of common share equivalents from diluted net loss per share - Unaudited financial statements are prepared in accordance with SEC Form 10-Q rules, with certain GAAP disclosures condensed or omitted[24](index=24&type=chunk) - Pre-funded warrants to purchase **253,828 shares of common stock** are included in the computation of basic net loss per share for both periods[26](index=26&type=chunk) - No common share equivalents are included in diluted net loss per share due to their anti-dilutive effect in periods with a net loss[27](index=27&type=chunk) [Note 3 – Intangible Assets](index=9&type=section&id=Note%203%20%E2%80%93%20Intangible%20Assets) This note details changes in patents and other intangible assets, including amortization expenses and capitalized patent costs Intangible Assets, Net | Metric | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :--------------- | :---------------- | | Patents | $1,150,426 | $1,133,841 | | Other intangible assets | $1,391,479 | $1,391,479 | | Accumulated amortization – patents | $(171,142) | $(158,516) | | Accumulated amortization – other intangible assets | $(335,340) | $(311,154) | | **Total intangible assets, net** | **$2,035,423** | **$2,055,650** | - Amortization expense increased to **$36,812 for Q1 2022** from **$23,698 for Q1 2021**[29](index=29&type=chunk) - The company capitalized **$317,923** for costs related to patents not yet awarded at March 31, 2022[30](index=30&type=chunk) [Note 4 – Lease](index=9&type=section&id=Note%204%20%E2%80%93%20Lease) This note describes the new office and laboratory lease, including future minimum lease payments and remaining lease term - The company entered a new **63-month lease** for **4,070 square feet** of office and laboratory space in Austin, Texas, commencing June 1, 2021[32](index=32&type=chunk) Future Minimum Lease Payments | For the Year Ended December 31, | Amount | | :------------------------------ | :----- | | 2022 (remaining) | $57,659 | | 2023 | $78,517 | | 2024 | $80,552 | | 2025 | $82,587 | | 2026 | $56,132 | | **Total lease payments** | **$355,447** | - The remaining lease term was **53 months** at March 31, 2022, with an estimated incremental borrowing rate of **6% per annum**[33](index=33&type=chunk)[34](index=34&type=chunk) [Note 5 – Commitments and Contingencies](index=11&type=section&id=Note%205%20%E2%80%93%20Commitments%20and%20Contingencies) This note covers exclusive license agreements, estimated future payments, absence of legal proceedings, and the uncertain impact of the COVID-19 pandemic - The company has an exclusive royalty-free license agreement expiring in February 2033, with ongoing variable payments of **$20,000 per issued patent annually**, up to a maximum of **$100,000 per year** (all five associated patents are issued)[36](index=36&type=chunk) - The estimated present value of future payments under the licensing agreements was **$922,439** at March 31, 2022[37](index=37&type=chunk) - The company is not currently a party to any legal proceedings[38](index=38&type=chunk) - The COVID-19 pandemic has not had a material adverse impact on operations to date, but its future impact remains uncertain, with potential risks to capital raising and operating results[40](index=40&type=chunk) [Note 6 — Common Stock](index=11&type=section&id=Note%206%20%E2%80%94%20Common%20Stock) This note details the 2021 public offering, use of proceeds, and issuance of unregistered shares for vendor services in 2022 - In February 2021, the company completed a public offering, issuing **1,352,975 shares of common stock at $17.00 per share**, generating net proceeds of **$21.2 million**[41](index=41&type=chunk) - Proceeds from the public offering are intended to fund commercialization and development of B-TRAN™ technology and general corporate purposes[41](index=41&type=chunk) - In January 2022, **10,000 unregistered shares of common stock**, valued at **$100,100**, were issued to a third-party vendor as compensation for services[42](index=42&type=chunk) [Note 7 — Equity Incentive Plan](index=13&type=section&id=Note%207%20%E2%80%94%20Equity%20Incentive%20Plan) This note outlines available shares under the incentive plan, stock option activity, and unrecognized compensation costs - At March 31, 2022, **412,945 shares of common stock** were available for issuance under the 2013 Equity Incentive Plan[44](index=44&type=chunk) Stock Option Activity (Three Months Ended March 31, 2022) | Metric | Stock Options | Weighted Average Exercise Price | | :-------------------------- | :------------ | :------------------------------ | | Outstanding at Dec 31, 2021 | 492,886 | $7.35 | | Granted | 23,096 | $11.11 | | Exercised | (3,750) | $5.36 | | Forfeited | (16,250) | $9.33 | | Outstanding at Mar 31, 2022 | 495,982 | $7.48 | | Exercisable at Mar 31, 2022 | 386,828 | $6.46 | - A modification to stock option grants for a former Chairman extended the post-termination exercise period from 12 months to 5 years, resulting in **$49,327 of expense in Q1 2022**[46](index=46&type=chunk) - Unrecognized compensation cost related to non-vested equity awards was **$1,650,209** at March 31, 2022, expected to be recognized over a weighted average period of **1.3 years**[47](index=47&type=chunk) [Note 8 — Warrants](index=13&type=section&id=Note%208%20%E2%80%94%20Warrants) This note provides details on outstanding warrants, including pre-funded warrants, their exercise prices, and exercisability - At March 31, 2022, the company had **786,420 warrants outstanding** with a weighted average exercise price of **$5.19 per share**[48](index=48&type=chunk) - Additionally, **253,828 pre-funded warrants** were outstanding with an exercise price of **$0.001 per share** and no expiration date[48](index=48&type=chunk) - All warrants were exercisable at March 31, 2022, subject to beneficial ownership limitations[49](index=49&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses financial performance, increased net loss from B-TRAN™ development and reduced grant revenue, COVID-19 impact, and liquidity [Overview](index=17&type=section&id=Overview) This overview reiterates the company's focus on B-TRAN™ technology, funding sources, grant revenue, and expected product introduction - Ideal Power Inc. is solely focused on the development and commercialization of its **B-TRAN™ solid-state switch technology**[56](index=56&type=chunk) - Operations have been funded primarily through the sale of common stock and warrants[57](index=57&type=chunk) - Grant revenue for Q1 2022 was **$125,008**, a decrease from **$242,061 in Q1 2021**[57](index=57&type=chunk) - The company expects to introduce its initial product for commercial sale in **late 2022**[61](index=61&type=chunk) [COVID-19 Impact](index=17&type=section&id=COVID-19%20Impact) This section assesses the COVID-19 pandemic's impact on operations, potential supply chain disruptions, and future risks - The COVID-19 pandemic has not had a material adverse impact on operations to date, but future developments remain highly uncertain[59](index=59&type=chunk) - Potential future disruptions include electrical component shortages, difficulties in securing fabrication capacity, and delays in development and commercialization activities[59](index=59&type=chunk) - A significant disruption in the semiconductor supply chain, due to COVID-19 and increased demand, may materially and adversely impact the company in the future[59](index=59&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) This section analyzes changes in grant revenues, operating expenses, and the resulting increase in loss from operations and net loss Key Operating Expenses and Revenue Changes (Three Months Ended March 31) | Expense Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change ($) | YoY Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------- | :------------- | | Grant Revenues | $125,008 | $242,061 | $(117,053) | (48.36)% | | Cost of Grant Revenues | $125,008 | $242,061 | $(117,053) | (48.36)% | | Research and Development | $828,547 | $260,880 | $567,667 | 217.59% | | General and Administrative | $852,949 | $600,686 | $252,263 | 42.00% | | Sales and Marketing | $219,429 | $62,578 | $156,851 | 250.65% | | Loss from Operations | $(1,900,925) | $(924,144) | $(976,781) | 105.70% | | Net Loss | $(1,904,641) | $(924,150) | $(980,491) | 106.09% | - Research and development expenses increased by **218%** due to higher self-funded semiconductor fabrication costs, personnel costs, and stock-based compensation[63](index=63&type=chunk) - Sales and marketing expenses increased by **251%** due to the hiring of the first sales and marketing employees and commercialization efforts[65](index=65&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) This section details cash and working capital, future funding needs, and changes in cash flows from operating and financing activities - At March 31, 2022, cash and cash equivalents totaled **$21.7 million**, with net working capital of **$21.4 million** and no outstanding debt[70](index=70&type=chunk) - Management expects current cash to fund activities for at least the next twelve months, but additional funds may be required to fully implement the plan of operation[70](index=70&type=chunk) - Net cash used in operating activities increased to **$1,417,123 in Q1 2022** from **$843,337 in Q1 2021**, and is expected to increase further throughout 2022[71](index=71&type=chunk)[72](index=72&type=chunk) - Financing activities provided **no cash in Q1 2022**, compared to **$24.51 million in Q1 2021** from a public offering and option/warrant exercises[73](index=73&type=chunk) [Critical Accounting Estimates](index=20&type=section&id=Critical%20Accounting%20Estimates) This section confirms no significant changes to critical accounting estimates from the prior annual report - There have been no significant changes to the critical accounting estimates disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[75](index=75&type=chunk) [Trends, Events and Uncertainties](index=20&type=section&id=Trends%2C%20Events%20and%20Uncertainties) This section confirms no material changes to trends, events, or uncertainties from the prior annual report - There are no material changes from trends, events, or uncertainties disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[76](index=76&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Ideal Power Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is not required to provide quantitative and qualitative disclosures about market risk as it is a smaller reporting company[77](index=77&type=chunk) [Item 4. Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management found disclosure controls effective, with no material changes to internal controls, acknowledging inherent system limitations [Evaluation of Disclosure Controls and Procedures](index=21&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2022 - The company's disclosure controls and procedures were evaluated and concluded to be effective as of March 31, 2022[78](index=78&type=chunk) [Changes in Internal Control over Financial Reporting](index=21&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports no material changes in internal controls over financial reporting during the quarter - There have been no material changes in internal controls over financial reporting during the quarter ended March 31, 2022[79](index=79&type=chunk) [Limitations on the Effectiveness of Controls](index=21&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) This section highlights that control systems provide reasonable, not absolute, assurance due to inherent limitations - Control systems provide only reasonable, not absolute, assurance due to inherent limitations such as resource constraints, faulty judgments, errors, circumvention, and management override[80](index=80&type=chunk) [PART II – OTHER INFORMATION](index=22&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers non-financial disclosures, including the absence of current legal proceedings, no material changes to risk factors, details on unregistered equity sales, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings, though it may be subject to litigation in the ordinary course of business - The company is not currently a party to any legal proceedings[83](index=83&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) This section states there are no material changes to the risk factors disclosed in the prior annual report - There are no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[84](index=84&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the issuance of unregistered common stock to a vendor for services in January 2022 under a private placement exemption - In January 2022, **10,000 unregistered shares of common stock**, valued at **$100,100**, were issued to a third-party vendor as compensation for services performed[85](index=85&type=chunk) - The shares were issued in a private placement pursuant to Section 4(a)(2) of the Securities Act[85](index=85&type=chunk) [Item 3. Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - This item is not applicable[86](index=86&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[87](index=87&type=chunk) [Item 5. Other Information](index=22&type=section&id=Item%205.%20Other%20Information) This section confirms no other information to report under this item - No other information to report[88](index=88&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include certifications (31.1, 31.2, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 10.LAB, 101.PRE, 104)[90](index=90&type=chunk) [SIGNATURES](index=24&type=section&id=SIGNATURES) This section contains the signatures of the Chief Executive Officer and Chief Financial Officer, dated May 16, 2022 - The report was signed on May 16, 2022, by R. Daniel Brdar (Chief Executive Officer) and Timothy W. Burns (Chief Financial Officer)[93](index=93&type=chunk)

[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 ...