Ideal Power(IPWR) - 2021 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed financial statements and management's discussion and analysis for the period ended June 30, 2021 Condensed Financial Statements 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 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 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 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] Statements of Stockholders' Equity 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] Notes to Unaudited Financial Statements 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][21] - 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] - 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] - The 2013 Equity Incentive Plan was amended in June 2021, increasing the number of authorized shares for issuance by 500,000[44] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased net losses due to strategic investments in B-TRAN™ commercialization, supported by strong liquidity from a public offering Results of Operations 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] - Sales and marketing expenses were initiated in Q1 2021 following the hiring of a Vice President of Business Development to begin commercialization efforts[66] - 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][66] Liquidity and Capital Resources 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] - 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - No material changes to the company's internal controls over financial reporting occurred during the second quarter of 2021[92] PART II - OTHER INFORMATION This section covers other required disclosures including legal proceedings, risk factors, equity sales, and exhibits Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[97] Defaults Upon Senior Securities This item is not applicable to the company - Not applicable[98] Mine Safety Disclosures This item is not applicable to the company - Not applicable[99] Other Information The company reported no other information for the period - None[100] Exhibits 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]