The accompanying notes are an integral part
of these condensed financial statements.
The accompanying notes are an integral part
of these condensed financial statements.
The accompanying notes are an integral part
of these condensed financial statements.
The accompanying notes are an integral part
of these condensed financial statements.
Notes to Financial Statements
(unaudited)
Note 1 – Organization and Description
of Business
Ideal Power Inc. (the “Company”)
was incorporated in Texas on May 17, 2007 under the name Ideal Power Converters, Inc. The Company changed its name to Ideal Power
Inc. on July 8, 2013 and re-incorporated in Delaware on July 15, 2013. The Company is located in Austin, Texas. Prior to 2019,
the Company developed power conversion solutions with a focus on solar and storage, microgrid and stand-alone energy storage applications.
The principal products of the Company were 30-kilowatt power conversion systems, including 2-port and multi-port products.
On April 16, 2018, the Company realigned
into two operating divisions: Power Conversion Systems, to continue the commercialization of its PPSA™ technology, and B-TRAN,
to develop its Bi-directional bi-polar junction TRANsistor (B-TRAN™) solid state switch technology. On January 2, 2019, the
Board of Directors of the Company (the “Board”) approved a strategic shift to focus on the further development and
commercialization of its B-TRAN™ technology and a plan to suspend further power converter system development and sales while
the Company located a buyer for its power conversion systems division. On September 19, 2019, the Company closed on the sale of
its power conversion systems division and is now solely focused on the further development and commercialization of its B-TRAN™
technology. See Note 3.
Since its inception, the Company has generated
limited revenues from the sale of products and has financed its research and development efforts and operations primarily through
the sale of common stock. The Company’s continued operations are dependent upon its ability to obtain adequate sources of
funding through future revenues, equity and debt financing, co-development agreements, government grants, sale or licensing of
developed intellectual property or other alternatives.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements
have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”)
for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) have been condensed or omitted pursuant
to such rules and regulations. The Balance Sheet at December 31, 2018 has been derived from the Company’s audited financial
statements included in its Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on April 1,
2019.
In the opinion of management, these financial
statements reflect all normal recurring, and other adjustments, necessary for a fair presentation. These financial statements should
be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2018. Operating results for interim periods are not necessarily indicative of operating results for
an entire fiscal year or any other future periods.
Reverse Stock Split
On August 15, 2019, the Company effected a reverse stock split
of the outstanding shares of its common stock by a ratio of one-for-ten, and its common stock began trading on the Nasdaq Capital
Market on a split-adjusted basis on August 20, 2019. The par value of the Company’s common stock remained unchanged at $0.001
per share after the reverse stock split. All share amounts, per share data, share prices, exercise prices and conversion rates
set forth in these notes and the accompanying unaudited condensed financial statements have, where applicable, been adjusted retroactively
to reflect the reverse stock split. See Note 7.
Liquidity and Going Concern
The Company had a net loss of $3.1 million
and used $2.4 million of cash in operating activities for the nine months ended September 30, 2019. At September 30, 2019, the
Company had net working capital of $0.4 million and the Company’s principal source of liquidity consisted of $0.8 million
of cash and cash equivalents. The Company’s cash and cash equivalent balance at September 30, 2019 relative to its estimate
of future operating cash requirements led to substantial doubt about the ability of the Company to continue as a going concern.
The Company’s independent registered public accounting firm, in its report on the Company’s 2018 financial statements,
raised substantial doubt about the Company’s ability to continue as a going concern. On November 13, 2019, the Company completed
a private placement of the Company’s common stock and warrants to purchase common stock for aggregate gross proceeds of $3.5
million and estimated net proceeds of $3.1 million, thereby alleviating the substantial doubt about the Company’s ability
to continue as a going concern for at least the next twelve months from the date of issuance of these financial statements. See
Note 11.
The accompanying condensed financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. The ability of the Company to continue as a going concern is dependent on its ability
to raise additional capital and to develop profitable operations through implementation of its current business initiatives, however,
there can be no assurances that the Company will be able to raise additional capital on favorable terms, or at all, or develop
profitable operations. The accompanying condensed financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
Recently Adopted Standards
In February 2016, the Financial Accounting
Standards Board issued Accounting Standards Update2016-02, Leases (Topic 842), to increase transparency and comparability among
organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the
amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous
U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to
assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted this standard effective January
1, 2019. Upon adoption, the Company recognized its lease commitment as a lease liability
and right-of-use asset. For more details regarding the lease commitment, see Note 5.
Recent Accounting Pronouncements
Management does not believe that any other
recently issued, but not yet effective, accounting standard, if adopted, would have a material impact on the Company’s financial
statements.
Note 3 – Sale of Power Conversion Systems Division
On January 2, 2019, the Board approved
a strategic shift to focus on the commercialization of its B-TRAN™ technology and a plan to suspend further power converter
system development and sales while the Company located a buyer for its power conversion systems division. On January 4, 2019, the
Company implemented a reduction-in-force in connection with this exit activity and recognized an expense of $92,600 in involuntary
termination benefits.
The Company’s power conversion system
division, a component supplier to energy storage system integrators, had not achieved the necessary scale to generate positive
cash flows. As the division was dependent on the ability of its customers to scale in the small commercial and industrial segment
of the energy storage market and based on the sales forecasts and commitments provided by these customers, the Company did not
expect its power conversion systems division to scale sufficiently in the short term, requiring an inflow of additional capital
for the business. As such, the decision was made to exit the power conversion systems business and sell the division and the Company’s
PPSA™ technology and focus on the Company’s B-TRAN™ technology.
As a result, the assets held for sale and
discontinued operations criteria were met and the Company’s financial statements are presented in accordance with ASC 205.
Under ASC 205-20-45-10, during the period in which a component meets the assets held for sale and discontinued operations criteria,
an entity must present the assets and liabilities of the discontinued operation separately in the asset and liability sections
of the balance sheet for the comparative reporting periods. The prior period balance sheet should be reclassified for the held
for sale items. For income statements, the current and prior periods should report the results of operations of the component in
discontinued operations when comparative income statements are presented.
On September 19, 2019, the
Company closed on the sale of its power conversion systems division to CE+T Energy Solutions, Inc. (“CE+T
Energy”) The consideration consisted of $200,000 in cash, received at closing, and 50 shares of CE+T Energy’s
common stock, to be issued within 90 days of closing, which represented a 5% ownership interest in CE+T Energy as of the
closing date. The Company did not record any value of the equity consideration obtained in the sale as there is not currently
a market for such shares and the Company does not have access to current financial information and future financial
projections of CE+T Energy. CE+T Energy also assumed certain liabilities of the power conversion systems division in
connection with the sale. The net cash proceeds from the sale were $23,587.
As a result of the sale, the financial
statements for the period ended September 30, 2019 do not include assets held for sale.
The following is a reconciliation of the
carrying amounts of major classes of assets and liabilities of the discontinued operations to assets and liabilities held for sale:
|
|
December 31,
|
|
|
|
2018
|
|
Accounts receivable, net
|
|
$
|
270,768
|
|
Inventories, net
|
|
|
131,342
|
|
Prepayments and other current assets
|
|
|
22,322
|
|
Property and equipment, net
|
|
|
329,738
|
|
Intangible assets, net
|
|
|
342,153
|
|
Current assets held for sale (1)
|
|
$
|
1,096,323
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
356,113
|
|
Accrued expenses
|
|
|
521,642
|
|
Current liabilities held for sale
|
|
$
|
877,755
|
|
|
(1)
|
The assets of the discontinued operations classified as held for sale are classified as current on the December 31, 2018 balance sheet as it was deemed probable that the sale would occur and proceeds would be collected within one year.
|
The following is a reconciliation of the
major classes of line items constituting loss from discontinued operations to loss from discontinued operations shown in the Statement
of Operations:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
342,661
|
|
|
$
|
115,000
|
|
|
$
|
1,144,103
|
|
Cost of revenue
|
|
|
1,337
|
|
|
|
552,127
|
|
|
|
141,647
|
|
|
|
1,471,890
|
|
Research and development
|
|
|
12,613
|
|
|
|
527,631
|
|
|
|
197,663
|
|
|
|
1,774,193
|
|
General and administrative
|
|
|
40,332
|
|
|
|
9,513
|
|
|
|
79,306
|
|
|
|
33,762
|
|
Sales and marketing
|
|
|
24,514
|
|
|
|
264,705
|
|
|
|
59,431
|
|
|
|
588,937
|
|
Impairment (1)
|
|
|
—
|
|
|
|
—
|
|
|
|
405,000
|
|
|
|
—
|
|
Loss from discontinued operations
|
|
$
|
(78,796
|
)
|
|
$
|
(1,011,315
|
)
|
|
$
|
(768,047
|
)
|
|
$
|
(2,724,679
|
)
|
|
(1)
|
Impairment charge was calculated as the net book value of assets held for sale prior to the impairment less the expected net proceeds from the planned sale. The expected net proceeds were based on the estimated fair value of the net assets held for sale less the estimated cost to sell the net assets held for sale. For the three and nine months ended September 30, 2019, the Company recorded a loss on the sale of discontinued operations of $9,107.
|
Note 4 – Intangible Assets
Intangible assets, net consisted of the
following:
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
|
|
Patents
|
|
$
|
898,346
|
|
|
$
|
824,004
|
|
Other intangible assets
|
|
|
964,542
|
|
|
|
732,175
|
|
|
|
|
1,862,888
|
|
|
|
1,556,179
|
|
Accumulated amortization
|
|
|
(217,333
|
)
|
|
|
(159,770
|
)
|
|
|
$
|
1,645,555
|
|
|
$
|
1,396,409
|
|
Amortization expense amounted to $21,554
and $57,563 for the three and nine months ended September 30, 2019, respectively, and $16,323 and $48,534 for the three and nine
months ended September 30, 2018, respectively. Amortization expense for the succeeding five years and thereafter is $21,771 (2019),
$87,084 (2020-2023) and $936,428 (thereafter).
At September 30, 2019 and December 31,
2018, the Company had capitalized $339,020 and $354,427, respectively, for costs related to patents that have not been awarded.
Note 5 – Lease
The Company leases 14,782 square feet of
office and laboratory space located in Austin, Texas. On April 20, 2018, the Company entered into an amendment to its existing
operating lease which extended the lease term from May 31, 2018 to May 31, 2021. The annual base rent in the first year of the
lease extension was $184,775 and increases by $7,391 in each succeeding year of the lease extension. In addition, the Company is
required to pay its proportionate share of operating costs for the building under this triple net lease. The lease does not
contain renewal or termination options.
On January 1, 2019, the Company adopted
ASC 842 utilizing a modified retrospective approach with a date of initial application at the beginning of the period of adoption.
At adoption, the Company recognized a right of use asset of $422,819 and lease liability of $427,131. As the discount rate implicit
in the lease was not readily determinable and the Company did not have any outstanding indebtedness, the Company utilized market
data, giving consideration to remaining term of the lease, to estimate its incremental borrowing rate at 8% per annum for purposes
of calculating the right of use asset and lease liability.
Future undiscounted minimum payments under
the lease, as amended, are as follows:
For the Year Ended December 31,
|
|
Master Lease
|
|
|
Sublease Income
|
|
|
Net
|
|
2019
|
|
$
|
48,041
|
|
|
$
|
(36,031
|
)
|
|
$
|
12,010
|
|
2020
|
|
|
196,477
|
|
|
|
(147,357
|
)
|
|
|
49,120
|
|
2021
|
|
|
83,149
|
|
|
|
(62,362
|
)
|
|
|
20,787
|
|
Total future undiscounted minimum lease payments
|
|
$
|
327,667
|
|
|
$
|
(245,750
|
)
|
|
$
|
81,917
|
|
Less: imputed interest
|
|
|
(20,003
|
)
|
|
|
|
|
|
|
|
|
Total lease liability
|
|
$
|
307,664
|
|
|
|
|
|
|
|
|
|
For the three and nine months ended September
30, 2019, operating cash flows for lease payments totaled $48,042 and $141,045 and the operating lease cost, recognized on a straight-line
basis, totaled $48,488 and $145,463. At September 30, 2019, the remaining lease term was 20 months.
On September
19, 2019, the Company entered into a sublease with CE+T Energy pursuant to which the Company subleases
approximately seventy-five (75%) percent of its Austin, Texas facility to CE+T Energy. Under the sublease, CE+T Energy is
obligated to make monthly payments equal to 75% of all sums due under the master lease and 100% of any maintenance and
repair costs related to the subleased premises. The sublease replaced a temporary agreement between the Company and CE+T
Energy, effective July 22, 2019, that contained similar payment obligations by CE+T Energy for utilization of the subleased
premises. Consistent with the master lease, the sublease terminates on May 31, 2021. During the three months ended September
19, 2019, CE+T Energy made payments of $38,949 to the Company related to the subleased premises. The payments included
CE+T Energy’s prorated share of rent as well as its prorated and proportionate share of operating costs for the
building under the master lease. The Company recognized these payments as a reduction in general and administrative
expenses.
Note 6 – Commitments and Contingencies
License Agreement
In 2015, the Company entered into licensing
agreements which expire on February 7, 2033. Per the agreements, the Company has an exclusive royalty-free license associated
with semiconductor power switches which enhances its intellectual property portfolio. The agreements include both fixed payments,
all of which were paid prior to 2017, and ongoing variable payments. The variable payments are a function of the number of associated
patent filings pending and patents issued under the agreements. The Company will pay $10,000 for each patent filing pending and
$20,000 for each patent issued each year of the agreements, up to a maximum of $100,000 each year (i.e. five issued patents). In
April 2019, a patent associated with these agreements was issued and the Company recorded, as a non-cash activity, an asset and
a corresponding liability of $232,367, representing the estimated present value of future payments under the licensing agreements
for this issued patent. Through September 30, 2019, a total of three patents associated with the agreements were issued. The estimated
present value of future payments under the licensing agreements is shown on the Balance Sheet as other long-term liabilities while
the capitalized licensing agreement assets are shown on the Balance Sheet as intangible assets. The Company is accruing interest
for future payments related to the issued patents associated with these agreements.
Indemnification Obligations
In connection with the sale of
its power conversion systems division, the Company entered into an Asset Purchase Agreement with CE+T Energy that
contains mutual indemnification obligations for breaches of representations, warranties and covenants and for certain other
matters, including indemnification by the Company for assets and liabilities excluded from the sale and by CE+T Energy for
liabilities assumed in the sale.
Note 7 – Common and Preferred Stock
On February 21, 2019, a shareholder converted
708,430 shares of preferred stock to 70,843 shares of common stock.
On March 7, 2019 and following an initial
notice of non-compliance from Nasdaq on September 7, 2018, the Company received a notice letter from Nasdaq indicating that it
had not regained compliance with the minimum bid price requirement of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2).
However, Nasdaq determined that the Company was eligible for an additional 180-day period, or until September 3, 2019, to regain
compliance based on the fact that it met the continued listing requirement for market value of publicly held shares and all other
initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and it had provided
written notice to Nasdaq of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock
split, if necessary.
On August 15, 2019, after receipt of stockholder
and Board approval, the Company filed a Certificate of Amendment to the Certificate of Incorporation of Ideal Power Inc. to effect
a one-for-ten (1:10) reverse stock split of all issued and outstanding shares of the Company’s common stock. The Company’s
common stock began trading on the Nasdaq Capital Market on a split-adjusted basis when the market opened on August 20, 2019. The
par value of the Company’s common stock remained unchanged at $0.001 per share after the reverse stock split.
The reverse stock split reduced the number
of shares of the Company’s common stock outstanding from 14,722,840 to 1,474,001, inclusive of full shares received for fractional
interests. The number of shares of the Company’s common stock issuable upon conversion of the outstanding shares of the Company’s
preferred stock was reduced from 810,000 shares to 81,000 shares. The number of authorized shares of the Company’s common
stock was not changed by the reverse stock split.
The reverse stock split proportionately
affected the number of shares of the Company’s common stock available for issuance under the Company’s equity incentive
plans. The number of shares of the Company’s common stock subject to all options, warrants and stock awards of the Company
outstanding immediately prior to the reverse stock split were proportionately adjusted in accordance with their terms.
On September 4, 2019, the Company received
a notice letter from Nasdaq that the Company had regained compliance with the minimum bid price requirement and the matter was
closed.
On August 21, 2019, the Company was notified
by the Nasdaq Listing Qualifications Department that the Company was not in compliance with the minimum stockholders’ equity
requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on the Nasdaq Capital Market because the Company’s
stockholders’ equity was below the required minimum of $2.5 million, and, as of the date of the notification, the Company
did not meet the alternatives of market value of listed securities or net income from continuing operations. In accordance with
Nasdaq Listing Rules, the Company had 45 calendar days, or until October 3, 2019, to submit a plan to regain compliance. The Company
submitted a plan of compliance on October 3, 2019 addressing how it intends to regain compliance with Nasdaq Listing Rule 5550(b).
On October 31, 2019, Nasdaq notified the Company of approval of the compliance plan, and Nasdaq granted the Company an extension
through November 30, 2019 to take action to evidence compliance with Nasdaq Listing Rule 5550(b), which will require, among other
things, that the Company demonstrate compliance within its periodic report for the fiscal year ending December 31, 2019. If the
Company does not regain compliance, the Company may be subject to delisting.
Note 8 – Equity Incentive Plan
On May 17, 2013, the Company adopted the
2013 Equity Incentive Plan (the “Plan”) and reserved shares of common stock for issuance under the Plan. The Plan is
administered by the Compensation Committee of the Board.
On April 4, 2019, the Company entered into
Award Forfeiture Agreements (“Forfeiture Agreements”) with certain of the Company’s executives and members of
its Board. Pursuant to the Forfeiture Agreements, these individuals voluntarily forfeited their equity award grants with a grant
date prior to January 1, 2018. The forfeitures included 49,584 stock options and 11,900 performance stock units issued under the
Plan, and 25,000 stock options not issued under the Plan. In April 2019, the Company accelerated the recognition of $80,492 of
stock compensation expense in connection with the unvested, forfeited awards.
At September 30, 2019, 116,663 shares of
common stock were available for issuance under the Plan.
A summary of the Company’s stock
option activity and related information is as follows:
|
|
Stock
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Life
(in years)
|
|
Outstanding at December 31, 2018
|
|
|
147,054
|
|
|
$
|
50.79
|
|
|
|
6.8
|
|
Granted
|
|
|
24,400
|
|
|
$
|
4.25
|
|
|
|
|
|
Forfeited/Expired/Exchanged
|
|
|
(95,474
|
)
|
|
$
|
67.64
|
|
|
|
|
|
Outstanding at September 30, 2019
|
|
|
75,980
|
|
|
$
|
14.67
|
|
|
|
8.4
|
|
Exercisable at September 30, 2019
|
|
|
69,130
|
|
|
$
|
15.70
|
|
|
|
8.3
|
|
During the nine months ended September
30, 2019, the Company granted 23,400 stock options to the independent directors and 1,000 stock options to employees, the fair
value of which was determined to be $65,386 and $2,999, respectively.
A summary of the Company’s restricted
stock unit activity is as follows:
|
|
Restricted Stock Units
|
|
Outstanding at December 31, 2018
|
|
|
6,938
|
|
Granted
|
|
|
—
|
|
Vested
|
|
|
—
|
|
Forfeited
|
|
|
(6,938
|
)
|
Outstanding at September 30, 2019
|
|
|
—
|
|
The Company had 0 and 11,900 performance
stock units outstanding at September 30, 2019 and December 31, 2018, respectively.
At September 30, 2019, there was $19,033
of unrecognized compensation cost related to non-vested equity awards granted under the Plan. That cost is expected to be recognized
over a weighted average period of 0.4 years.
Note 9 – Warrants
The Company had 684,095 and 713,652 warrants
outstanding at September 30, 2019 and December 31, 2018, respectively, with a weighted average exercise price of $25.37 and $26.19
per share, respectively. During the three and nine months ended September 30, 2019, 19,355 and 29,557 warrants expired, respectively.
At September 30, 2019, all warrants are exercisable, although warrants held by the Company’s two largest beneficial owners
may be exercised only to the extent that the total number of shares of common stock then beneficially owned by these shareholders
does not exceed 9.99% of the outstanding shares of the Company’s common stock.
Note 10 – Legal Proceedings
On April 11, 2019, the Company
entered into an asset purchase agreement (the “APA”) with Pathion Holdings, Inc., a Delaware corporation, and Pathion,
Inc., a Delaware corporation (together “Pathion”) to sell certain assets (the “PPSA Assets”) related to
the Company’s PPSA™ / Power Conversion Systems business (“PPSA Business”). The purchase price consisted
of $500,000 in cash and 150,000 shares of the common stock of Pathion Holdings, Inc. Pursuant to the APA, Pathion would also assume
certain liabilities relating to the PPSA Business.
On June 13, 2019, the Company filed a petition
in the district court of the 250th Judicial District in Travis County (the “Court”), naming Pathion and
certain Pathion officers as defendants. The petition asserts breach of the APA and the related Sublease Agreement for failure by
Pathion to pay any cash amounts due thereunder, and fraudulent inducement as Pathion and the individual defendants misrepresented
Pathion’s financial position and its stock value. The petition also requested a declaratory judgment that Pathion has no
rights to the PPSA Assets.
On July 15, 2019, Pathion filed a general
denial to the Company’s petition.
On July 22, 2019, the Company filed a motion
for partial summary judgment on its declaratory judgment action and for severance. Pathion responded to the motion for summary
judgment on August 6, 2019. That same day, Pathion filed a counterclaim, and requested injunctive relief and a declaratory judgment.
On August 13, 2019, the Court conducted
a hearing on the Company’s motion for summary judgment. On August 23, 2019, the Court issued an order granting the Company’s
motion for summary judgment and fees and severing judgment from remaining claims. Under this order, the Court declared and decreed
that Pathion has no rights to the PPSA Assets and awarded the Company $24,800 in legal fees. On October 15, 2019, the Court issued
a writ of garnishment against Pathion’s bank to enable collection of these legal fees.
On October 14, 2019, the Court granted
Pathion’s counsel’s motion to withdraw. Ten days later, a new lawyer appeared for the Pathion Defendants, and the next
day, October 25, 2019, the Court issued a scheduling order requiring Pathion to produce documents and appear for deposition in
December 2019. The Court set trial to begin on August 31, 2020.
At this time, the Company is unable to
estimate the possible gain or loss, if any, related to this proceeding.
Note 11 – Subsequent Events
On October 28, 2019, the Company granted
94,000 stock options to executives, the fair value of which was determined to be $184,689.
On November 7, 2019, the Company
entered into a securities purchase agreement with certain institutional and accredited investors, including Dr. Lon E. Bell,
Chief Executive Officer and Chairman of the Board, for a private placement of the Company’s common stock
and warrants to purchase common stock for aggregate gross proceeds of $3.5 million and estimated net proceeds of $3.1 million
(the “Offering”). The Offering closed on November 13, 2019. In the Offering, the Company issued an aggregate of
(i) 544,950 shares of common stock and (ii) pre-funded warrants to purchase 868,443 shares of common stock that are
immediately exercisable and have no expiration date, in each case at a price of $2.4763 per share (or pre-funded warrant).
The Company also issued to the investors warrants to purchase up to an aggregate of 1,766,751 shares of common stock at an
exercise price of $2.32 per share that are immediately exercisable and will expire five years from the issuance date. As compensation to the placement agent in the Offering, in addition to a cash fee for its services, the Company also issued
to the placement agent a warrant to purchase up to 70,670 shares of common stock, with an exercise price of $2.9716 per share.
The other terms of the placement agent warrant are substantially the same as the investor warrants. For his
investment of $500,000, Dr. Bell received 201,914 shares of common stock and 252,393 warrants in the Offering. Pursuant to a
registration rights agreement, the Company has agreed to file a registration statement with the SEC to register the resale of
the shares of common stock and the shares of common stock issuable upon exercise of the warrants issued in the Offering
within 30 days of the closing of the Offering.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS AND OTHER INFORMATION
CONTAINED IN THIS REPORT
This report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give our
current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly
to historical or current facts. You can find many (but not all) of these statements by looking for words such as "approximates,"
"believes," "hopes," "expects," "anticipates," "estimates," "projects,"
"intends," "plans," "would," "should," "could," "may" or other similar
expressions in this report. In particular, these include statements relating to future actions, prospective products, applications,
customers, technologies, future performance or results of anticipated products, expenses, and financial results. These forward-looking
statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical
experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed
in the forward-looking statements include, but are not limited to:
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our ability to generate revenue;
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our limited operating history;
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the size and growth of markets for our technology;
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regulatory developments that may affect our business;
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our ability to successfully develop new technologies, particularly our bi-directional bipolar junction transistor, or B-TRAN™;
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our expectations regarding the timing of prototype and commercial fabrication of B-TRAN™ devices;
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our expectations regarding the performance of our B-TRAN™ and the consistency of that performance with both internal and third-party simulations;
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the expected performance of future products incorporating our B-TRAN™;
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the performance of third-party consultants and service providers whom we have and will continue to rely on to assist us in development of our B-TRAN™ and related drive circuitry;
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the rate and degree of market acceptance for our B-TRAN™;
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the time required for third parties to redesign, test and certify their products incorporating our B-TRAN™;
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our ability to successfully commercialize our B-TRAN™ technology;
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our ability to secure strategic partnerships with semiconductor fabricators and others related to our B-TRAN™ technology;
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our ability to obtain, maintain, defend and enforce intellectual property rights protecting our technology;
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the success of our efforts to manage cash spending, particularly prior to the commercialization of our B-TRAN™ technology;
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general economic conditions and events and the impact they may have on us and our potential partners and licensees;
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our ability to obtain adequate financing in the future, as and when we need it;
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our ability to maintain listing of our common stock on the Nasdaq Capital Market;
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our success at managing the risks involved in the foregoing items; and
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other factors discussed in this report, our Annual Report on Form 10-K for the year ended December 31, 2018 and our other filings with the Securities and Exchange Commission (the “SEC”).
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The forward-looking statements are based
upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly
update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking
statements.
Unless otherwise stated or the context
otherwise requires, the terms “Ideal Power,” “we,” “us,” “our” and the “Company”
refer to Ideal Power Inc.