Ideal Power Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Ideal Power is focused on developing and commercializing its B-TRAN solid-state switch technology. The company reported grant revenue, not commercial product revenue.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Grant revenue | $242,061 | $0 |
| Cost of grant revenue | $242,061 | $0 |
| Gross profit | $0 | $0 |
| Research and development | $260,880 | $350,664 |
| General and administrative | $600,686 | $579,770 |
| Sales and marketing | $62,578 | $0 |
| Operating loss | $924,144 | $930,434 |
| Net loss | $924,150 | $930,501 |
| Basic and diluted loss per share | $0.17 | $0.31 |
| Net cash used in operating activities | $843,337 | $813,627 |
- Cash and cash equivalents were $26.79 million at March 31, 2021, up from $3.16 million at year-end 2020. Net working capital was $26.50 million.
- Financing provided $24.51 million in Q1: $21.20 million net proceeds from a February public offering and $3.30 million from option and warrant exercises. The offering sold 1,352,975 shares at $17 per share; shares issued increased from 3.27 million at year-end to 5.87 million at quarter-end.
- Investing activities used $30,737. The company had $91,407 of long-term debt at quarter-end, consisting of a PPP loan bearing 1% interest. The SBA approved forgiveness of the loan, including accrued interest, in May 2021.
- Total assets were $29.17 million and total liabilities were $1.62 million at March 31. Other long-term liabilities included $944,026 for estimated future payments under patent licensing agreements.
Changes, outlook, and risks
- Net loss was approximately 1% lower than a year earlier, while loss per share improved from $0.31 to $0.17, alongside a higher weighted-average share count. Grant revenue came from a $1.2 million subcontract with Diversified Technologies for a NAVSEA circuit-breaker development project; associated costs equaled revenue, producing no gross profit.
- Management expected NAVSEA-related grant revenue to continue through 2021, with minimal revenue in 2022, and said grant revenue was likely to be the company’s only revenue source in 2021. It expected no gross profit from this or other grants.
- Management expected higher R&D spending as B-TRAN development accelerates, higher sales and marketing costs as it engages prospective customers, relatively flat G&A, and rising operating cash outflows during 2021. No quantified earnings or revenue guidance was provided.
- The company intends to use offering proceeds for B-TRAN development and commercialization and for general corporate and working-capital purposes. It continues to depend on external funding and identifies its history of losses, ability to commercialize B-TRAN, market acceptance, partnerships, intellectual-property protection, and future financing as risks.
- COVID-19 had not materially adversely affected operations to date, but management cautioned that future disruptions, delays, costs, and capital-market effects were uncertain. The existing Austin lease was due to expire in May 2021; a new 63-month lease was scheduled to commence June 1, 2021.
- No current legal proceedings or off-balance-sheet transactions were reported. Management concluded disclosure controls were effective as of March 31, 2021.
Important facts for investors to verify
- Progress, timing, and technical performance of B-TRAN development, fabrication, customer testing, and commercialization.
- Remaining funding runway and actual cash burn as development and commercialization spending rises; the filing gives no explicit runway estimate.
- Whether grant revenue continues as expected and whether the company secures additional grants, partnerships, or commercial customers.
- Effect of the February offering and warrant and option exercises on share count and potential future dilution.
- Terms, timing, and cash impact of future payments under the patent licensing agreements, as well as the new facility lease obligations.