Ideal Power(IPWR) - 2021 Q3 - Quarterly Report

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