Ideal Power Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 12, 2023. Ideal Power is developing and commercializing its B-TRAN solid-state switch technology.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / prior period |
|---|---|---|
| Grant revenue | $664 | $125,008 |
| Gross profit | $0 | $0 |
| Research and development | $1.44 million | $828,547 |
| General and administrative | $894,933 | $852,949 |
| Sales and marketing | $304,326 | $219,429 |
| Operating loss | $2.64 million | $1.90 million |
| Net loss | $2.53 million | $1.90 million |
| Net loss per share, basic and diluted | $0.41 | $0.31 |
| Net cash used in operating activities | $1.76 million | $1.42 million |
Cash and cash equivalents were $14.52 million at March 31, down from $16.35 million at December 31, 2022. Total assets were $17.52 million and stockholders’ equity was $15.99 million. The company reported no outstanding debt. Current liabilities were $501,306; management reported net working capital of approximately $14.5 million. There was no gross margin because grant revenue was matched by grant costs.
Material changes
- Revenue declined by about 99% year over year, reflecting lower grant activity; the 2022 quarter included revenue from both NAVSEA and a Department of Energy subcontract.
- Operating expenses rose 39% to $2.64 million. R&D increased 74%, mainly from higher stock-based compensation, semiconductor fabrication and personnel costs.
- Net loss increased 33%. Net interest income of $111,302 in 2023, versus net interest expense of $3,716 in 2022, partly offset the higher operating loss.
- Operating cash outflow increased from $1.42 million to $1.76 million. Stock-based compensation was $609,926, compared with $231,765 a year earlier.
Outlook, risks and other notable items
- The company launched its first commercial product, the SymCool Power Module, in January 2023 and expected fabrication and initial sales later in 2023. It also expected to launch a second product in the second half of 2023.
- A development program with a top-10 global automaker is in Phase 1. The company expects modest 2023 revenue under the agreement; production-ready modules are targeted for 2025, contingent on program progress and securing later phases.
- Management expects higher R&D and cash outflows during the remainder of 2023, with higher sales and marketing costs; G&A excluding stock-based compensation was expected to remain relatively flat versus 2022.
- Management said available cash should fund ongoing liquidity needs for at least 12 months from filing, but additional funding may be required to fully implement its plans. Operations have been funded primarily through stock sales, and the company has incurred losses since inception.
- The company expected to recognize the remaining $36,724 of NAVSEA grant revenue in Q2 2023 and may pursue additional government funding. Grant contracts generally yield no gross profit.
- Commitments include a $100,000 annual payment under a license agreement expiring in 2033 and office lease obligations. The present value of future license payments recorded as a long-term liability was $843,364. The company reported no current legal proceedings and no material change in risk factors from its 2022 Form 10-K.
- Risks highlighted include commercialization and market acceptance of B-TRAN, product performance and certification, securing fabrication and strategic partners, intellectual-property protection, cash management, and access to future financing.
Important facts for investors to verify
- Whether SymCool fabrication and initial sales, and the second product launch, occurred on the anticipated timelines and generated meaningful revenue.
- Progress and milestones in the automaker development agreement, including whether the company advances beyond Phase 1 and achieves its 2025 production-ready target.
- Actual cash burn, remaining liquidity runway and any need for additional financing, considering management’s stated expectation of increased outflows.
- Whether anticipated grant revenue and additional funding materialize, and how the transition from grant work to commercial sales affects revenue and gross margins.
- Potential dilution: at March 31, 2023, 786,420 warrants and 253,828 pre-funded warrants were outstanding; the filing also disclosed 1,630,695 potentially dilutive shares, excluding pre-funded warrants.