Ideal Power Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are with fiscal 2020. Ideal Power is a small, pre-commercialization company focused on developing and commercializing its B-TRAN bidirectional solid-state power switch. It reported no product revenue; revenue consisted of government-funded development subcontracts.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Grant revenue | $576,399 | $428,129 |
| Gross profit | $0 | $0 |
| Research and development expense | $1.93 million | $1.72 million |
| General and administrative expense | $2.41 million | $2.31 million |
| Sales and marketing expense | $512,807 | $40,000 |
| Loss from operations | $4.85 million | $4.07 million |
| Net loss | $4.77 million | $7.79 million |
| Net loss per share, basic and diluted | $0.80 | $2.20 |
| Net cash used in operating activities | $4.28 million | $3.02 million |
| Cash and cash equivalents at year-end | $23.17 million | $3.16 million |
- Grant revenue was fully offset by the related cost of grant revenue, so grants generated no gross profit. Product revenue and product gross margin were not reported.
- At December 31, 2021, working capital was $22.90 million. The company reported no long-term debt; it had $326,448 of lease liabilities and $917,100 of long-term licensing liabilities.
- Total assets were $25.88 million and stockholders’ equity was $24.15 million at year-end.
Material changes versus 2020
- Net loss narrowed by $3.02 million, primarily because 2020 included a $3.72 million non-cash warrant inducement expense. Operating loss, however, increased 19% as operating expenses rose.
- Research and development expense increased 12%, reflecting higher contract labor, personnel and device/driver development costs, partly offset by lower stock-based compensation.
- Sales and marketing expense increased to $512,807 from $40,000, following the hiring of a business development executive and increased commercialization activity.
- Operating cash use increased by $1.26 million. Year-end cash rose substantially following the February 2021 public offering and warrant and option exercises.
Outlook, commentary and risks
- Management expected to introduce an initial product for commercial sale in the second half of 2022. It expected higher 2022 research and development and sales and marketing spending, and increased operating cash outflows.
- Management believed cash on hand would fund ongoing liquidity needs for at least 12 months from the filing’s reporting context; it cautioned that future financing may still be needed and is not assured.
- The February 2021 offering raised $21.2 million net, intended to support B-TRAN development, commercialization and general working capital. The company also received $3.33 million from warrant and option exercises in 2021.
- During 2021 and early 2022, the company announced test-and-evaluation agreements with prospective customers, including companies in automotive, power conversion, power management, electric vehicles and charging. These evaluations do not guarantee design wins, sales or licensing revenue.
- Management cited prototype, packaging and driver development; manufacturing scale-up and two-sided wafer processing; dependence on third-party fabricators and consultants; supply-chain and semiconductor capacity constraints; long customer design and certification cycles; competition; and the need for financing as significant risks. COVID-19 and logistics disruptions had not materially affected operations to date, but could cause delays or added costs.
- The company had incurred approximately $79.9 million in cumulative net losses and expected continued losses and negative operating cash flows until commercialization and a stable revenue base. It had seven employees as of February 28, 2022.
- Unusual items included a $91,407 gain from forgiveness of the 2020 PPP loan in 2021. In 2020, a warrant inducement resulted in a $3.72 million non-cash expense. The company reported no material pending legal proceedings.
- The auditor issued an unqualified opinion on the 2021 financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Whether packaged B-TRAN samples, drivers and commercial products meet performance, cost and delivery targets, and whether the second-half 2022 product-sale expectation was achieved.
- Whether customer evaluations convert into design wins, production orders, licensing agreements or material revenue, and the timing of any resulting revenue.
- Actual cash burn and remaining liquidity relative to management’s at-least-12-month estimate, including whether additional financing is required and its potential dilution or terms.
- Progress in securing fabrication capacity, scaling wafer processing and managing supply-chain constraints and related costs.
- Future grant funding and the impact of the $917,100 licensing liability, lease commitments and outstanding warrants and options on cash needs and shareholder dilution.