10-Q - IPWR - Equibles

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File Number 001-36216

IDEAL POWER INC.

(Exact name of registrant as specified in its charter)

Delaware	14-1999058
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

5508 Highway 290 West, Suite 120

Austin , Texas **** 78735

(Address of principal executive offices)

(Zip Code)

( 512 ) 264-1542

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	IPWR	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 10, 2023, the issuer had 5,931,569 shares of common stock, par value $0.001, outstanding.

Table of Contents TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3
Item 1.	Unaudited Condensed Financial Statements	3
	Balance Sheets at March 31, 2023 and December 31, 2022	3
	Statements of Operations for the three months ended March 31, 2023 and 2022	4
	Statements of Cash Flows for the three months ended March 31, 2023 and 2022	5
	Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022	6
	Notes to Unaudited Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	16
PART II	OTHER INFORMATION	17
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	18
SIGNATURES		19

Table of Contents PART I-FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

IDEAL POWER INC.

Balance Sheets

(unaudited)


		March 31,			December 31,
	****	2023		****	2022
ASSETS
Current assets:
Cash and cash equivalents		$	14,520,450		$	16,345,623
Accounts receivable, net			66,600			65,936
Prepayments and other current assets			436,655			491,365
Total current assets			15,023,705			16,902,924

Property and equipment, net			230,126			200,103
Intangible assets, net			2,022,660			2,036,431
Right of use asset			233,542			248,720
Other assets			11,189			11,189
Total assets		$	17,521,222		$	19,399,367

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	68,810		$	130,503
Accrued expenses			366,411			254,218
Current portion of lease liability			66,085			64,597
Total current liabilities			501,306			449,318

Long-term lease liability			186,007			202,987
Other long-term liabilities			843,364			838,458
Total liabilities			1,530,677			1,490,763

Commitments and contingencies (Note 5)

Stockholders’ equity:
Common stock, $0.001 par value; 50,000,000 shares authorized; 5,932,890 shares issued and 5,931,569 shares outstanding at March 31, 2023 and 5,926,001 shares issued and 5,924,680 shares outstanding at December 31, 2022			5,933			5,926
Additional paid-in capital			105,621,237			105,011,318
Treasury stock, at cost, 1,321 shares at March 31, 2023 and December 31, 2022			(13,210)			(13,210)
Accumulated deficit			(89,623,415)			(87,095,430)
Total stockholders’ equity			15,990,545			17,908,604
Total liabilities and stockholders’ equity		$	17,521,222		$	19,399,367

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents IDEAL POWER INC.

Statements of Operations

(unaudited)


		Three Months Ended
		March 31,
	****	2023		****	2022
Grant revenue		$	664		$	125,008
Cost of grant revenue			664			125,008
Gross profit			—			—

Operating expenses:
Research and development			1,440,028			828,547
General and administrative			894,933			852,949
Sales and marketing			304,326			219,429
Total operating expenses			2,639,287			1,900,925

Loss from operations			(2,639,287)			(1,900,925)

Interest income (expense), net			111,302			(3,716)

Net loss		$	(2,527,985)		$	(1,904,641)

Net loss per share – basic and diluted		$	(0.41)		$	(0.31)

Weighted average number of shares outstanding – basic and diluted			6,178,508			6,155,352

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents IDEAL POWER INC.

Statements of Cash Flows

(unaudited)


		Three Months Ended
		March 31,
	****	2023		****	2022
Cash flows from operating activities:
Net loss		$	(2,527,985)		$	(1,904,641)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			53,198			44,190
Stock-based compensation			609,926			231,765
Stock issued for services			—			100,100
Decrease (increase) in operating assets:
Accounts receivable			(664)			(28,875)
Prepaid expenses and other assets			69,888			(62,721)
Increase (decrease) in operating liabilities:
Accounts payable			(61,693)			249,533
Accrued expenses and other liabilities			101,607			(46,474)
Net cash used in operating activities			(1,755,723)			(1,417,123)

Cash flows from investing activities:
Purchase of property and equipment			(44,995)			(11,031)
Acquisition of intangible assets			(24,455)			(16,585)
Net cash used in investing activities			(69,450)			(27,616)

Net decrease in cash and cash equivalents			(1,825,173)			(1,444,739)
Cash and cash equivalents at beginning of period			16,345,623			23,170,149
Cash and cash equivalents at end of period		$	14,520,450		$	21,725,410

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents IDEAL POWER INC.

Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2023 and 2022

(unaudited)


							Additional											Total
		Common Stock					Paid-In			Treasury Stock					Accumulated			Stockholders’
	****	Shares	****	Amount		****	Capital		****	Shares	****	Amount		****	Deficit		****	Equity
Balances at December 31, 2021		5,893,767		$	5,894		$	104,063,321		1,321		$	(13,210)		$	(79,906,080)		$	24,149,925
Exercise of options		1,351			1			(1)		—			—			—			—
Stock issued for services		10,000			10			100,090		—			—			—			100,100
Stock-based compensation		—			—			231,765		—			—			—			231,765
Net loss for the three months ended March 31, 2022		—			—			—		—			—			(1,904,641)			(1,904,641)
Balances at March 31, 2022		5,905,118		$	5,905		$	104,395,175		1,321		$	(13,210)		$	(81,810,721)		$	22,577,149

Balances at December 31, 2022		5,926,001		$	5,926		$	105,011,318		1,321		$	(13,210)		$	(87,095,430)		$	17,908,604
Vesting of restricted stock units		6,889			7			(7)		—			—			—			—
Stock-based compensation		—			—			609,926		—			—			—			609,926
Net loss for the three months ended March 31, 2023		—			—			—		—			—			(2,527,985)			(2,527,985)
Balances at March 31, 2023		5,932,890		$	5,933		$	105,621,237		1,321		$	(13,210)		$	(89,623,415)		$	15,990,545

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents IDEAL POWER INC.

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. With headquarters in Austin, Texas, the Company is focused on the further development and commercialization of its Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state switch technology.

Since its inception, the Company has financed its research and development efforts and operations primarily through the sale of common stock. The Company’s continued operations are dependent upon, among other things, its ability to obtain adequate sources of funding through future revenues, follow-on stock offerings, issuances of warrants, 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 have been condensed or omitted pursuant to such rules and regulations. The balance sheet at December 31, 2022 has been derived from the Company’s audited financial statements included in its Annual Report on Form 10-K filed with the SEC on March 30, 2023.

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, 2022. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.

Net Loss Per Share

In accordance with Accounting Standards Codification 260, shares issuable for little or no cash consideration are considered outstanding common shares and included in the computation of basic net loss per share. As such, for the three months ended March 31, 2023 and 2022, the Company included pre-funded warrants to purchase 253,828 shares of common stock in its computation of net loss per share. The pre-funded warrants were issued in November 2019 with an exercise price of $0.001. See Note 8.

In periods with a net loss, no common share equivalents are included in the computation of diluted net loss per share because their effect would be anti-dilutive. At March 31, 2023 and 2022, potentially dilutive shares outstanding amounted to 1,630,695 and 1,382,402 shares, respectively, and exclude pre-funded warrants to purchase shares of common stock.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standard, if adopted, would have a material impact on the Company’s financial statements.

Table of Contents Note 3 – Intangible Assets

Intangible assets, net consisted of the following:


		March 31,			December 31,
	****	2023		****	2022
		(unaudited)
Patents		$	1,281,721		$	1,263,930
Trademarks			6,664			—
Other intangible assets			1,391,479			1,391,479
			2,679,864			2,655,409
Accumulated amortization - patents			(225,118)			(211,078)
Accumulated amortization - other intangible assets			(432,086)			(407,900)
		$	2,022,660		$	2,036,431

At March 31, 2023 and December 31, 2022, the Company had capitalized $320,134 and $341,610, respectively, for costs related to patents and trademarks that have not been awarded. Cost related to patents that have not yet been awarded are not amortized until patent issuance.

Amortization expense amounted to $38,226 and $36,812 for the three months ended March 31, 2023 and 2022, respectively. Amortization expense for the succeeding five years and thereafter is $117,740 (remaining nine months of 2023), $156,987 (

2024

2027

) and $956,838 (thereafter).

Note 4 – Lease

In March 2021, the Company entered into a lease agreement for 4,070 square feet of office and laboratory space located in Austin, Texas. The commencement of the lease occurred on June 1, 2021 and the initial term of the lease was 63 months. The actual base rent in the first year of the lease was $56,471 and was net of $18,824 in abated rent over the first three months of the lease term. The annual base rent in the second year of the lease is $77,330 and increases by $2,035 in each succeeding year of the lease. In addition, the Company is required to pay its proportionate share of operating costs for the building under this triple net lease. The lease contains a 5-year fair market renewal option. It does not contain a termination option. The Company recognized a right of use asset of $339,882 and a corresponding lease liability for this lease upon lease commencement.

For purposes of calculating the right of use asset and lease liability included in the Company’s financial statements, the Company estimated its incremental borrowing rate at 6% per annum.

Future minimum payments under the lease are as follows:


For the Year Ended December 31,
2023 (remaining)	$	59,185
2024		80,552
2025		82,587
2026		56,132
Total lease payments		278,456
Less: imputed interest		(26,364)
Total lease liability		252,092
Less: current portion of lease liability		(66,085)
Long-term lease liability	$	186,007

At March 31, 2023, the remaining lease term was 41 months.

For the three months ended March 31, 2023 and 2022, operating cash flows for lease payments totaled $19,333 and $18,824, respectively. For the three months ended March 31, 2023 and 2022, operating lease cost, recognized on a straight-line basis, totaled $19,018 and $19,018, respectively.

Table of Contents Note 5 – Commitments and Contingencies

License Agreement

In 2015, the Company entered into a licensing agreement which expires in February 2033. Per the agreement, the Company has an exclusive royalty-free license associated with semiconductor power switches which enhances its intellectual property portfolio. The Company will pay $100,000 annually under this agreement.

At March 31, 2023 and December 31, 2022, the other long-term liability for the estimated present value of future payments under the licensing agreement was $843,364 and $838,458, respectively. The Company is accruing interest for future payments related to this agreement.

Legal Proceedings

The Company may be subject to litigation from time to time in the ordinary course of business. The Company is not currently party to any legal proceedings.

Indemnification Obligations

The employment agreements of Company executives include an indemnification provision whereby the Company shall indemnify and defend, at the Company’s expense, its executives so long as an executive’s actions were taken in good faith and in furtherance of the Company’s business and within the scope of the executive’s duties and authority.

Note 6 — Common Stock

Stock Issuances

In January 2022, the Company issued 10,000 unregistered shares of common stock, valued at $100,100 at the time of issuance, to a third-party vendor as compensation for services performed.

Note 7 — Equity Incentive Plan

In May 2013, the Company adopted the 2013 Equity Incentive Plan (as amended and restated, the “Plan”) and reserved shares of common stock for issuance under the Plan, which was last amended in June 2021. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. At March 31, 2023, 136,880 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:


							Weighted
				Weighted			Average
				Average			Remaining
		Stock		Exercise			Life
	****	Options	****	Price		****	(in years)
Outstanding at December 31, 2022		513,948		$	7.59		6.6
Granted		12,000		$	11.96
Outstanding at March 31, 2023		525,948		$	7.69		6.4
Exercisable at March 31, 2023		451,617		$	6.97		6.0

Table of Contents A summary of the Company’s restricted stock unit (RSU) and performance stock unit (PSU) activity is as follows:


	****	RSUs	****	PSUs
Outstanding at December 31, 2022		183,666		114,000
Granted		27,550		—
Vested		(6,889)		—
Outstanding at March 31, 2022		204,327		114,000

During the three months ended March 31, 2023, the Company granted 27,550 RSUs to Board members and 12,000 stock options to employees under the Plan. The estimated fair value of these equity grants, calculated using the Black-Scholes option valuation model for the stock options, was $409,376, $78,043 of which was recognized during the three months ended March 31, 2023.

At March 31, 2023, there was $3,073,279 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 0.9 years.

Note 8 — Warrants

At March 31, 2023 and December 31, 2022, the Company had 786,420 warrants outstanding with a weighted average exercise price of $5.19 per share and 253,828 pre-funded warrants outstanding with an exercise price of $0.001 per share. The weighted average remaining life, excluding the 253,828 pre-funded warrants with no expiration date, of the outstanding warrants is 2.0 years.

At March 31, 2023, all warrants were exercisable, although the warrants held by certain of the Company’s warrant holders may be exercised only to the extent that the total number of shares of common stock then beneficially owned by such warrant holder does not exceed 4.99% (or, at the investor’s election, 9.99%) of the outstanding shares of the Company’s common stock.

Table of Contents 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, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements include, but are not limited to, statements regarding our future financial performance, business condition and results of operations, future business plans and pursuing additional government funding. 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:

●	our history of losses;
●	our ability to generate revenue;
---	---
●	our limited operating history;
---	---
●	the size and growth of markets for our technology;
---	---
●	regulatory developments that may affect our business;
---	---
●	our ability to successfully develop new technologies, particularly our bidirectional bipolar junction transistor, or B-TRAN™;
---	---
●	our expectations regarding the timing of commercial fabrication of B-TRAN™ devices;
---	---
●	our expectations regarding the performance of our B-TRAN™ and the consistency of that performance with prototypes as well as internal and third-party simulations;
---	---
●	our ability to successfully develop new products and the expected performance of those products;
---	---
●	the performance of third-party consultants and service providers whom we have and will continue to rely on to assist us in development and commercialization of our B-TRAN™ and related drive circuitry;
---	---
●	the rate and degree of market acceptance for our B-TRAN™ and future B-TRAN™ products;
---	---
●	the time required for third parties to redesign, test and certify their products incorporating our B-TRAN™;
---	---
●	our ability to successfully commercialize our B-TRAN™ technology;
---	---
●	our ability to secure strategic partnerships with semiconductor fabricators and others related to our B-TRAN™ technology;
---	---

Table of Contents

●	our ability to obtain, maintain, defend and enforce intellectual property rights protecting our technology;
●	the success of our efforts to manage cash spending, particularly prior to the commercialization of our B-TRAN™ technology;
---	---
●	general economic conditions and events, including inflation, and the impact they may have on us and our potential partners and licensees;
---	---
●	our dependence on the global supply chain and impacts of supply chain disruptions;
---	---
●	our ability to obtain adequate financing in the future, if and when we need it;
---	---
●	the impact of global health pandemics on our business, financial condition and results of operations;
---	---
●	our success at managing the risks involved in the foregoing items; and
---	---
●	other factors discussed in this report.
---	---

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, except as required by applicable law. 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.

Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited 2022 financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. In addition to historical information, the discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Overview

Ideal Power Inc. is located in Austin, Texas. We are solely focused on the further development and commercialization of our Bidirectional bipolar junction TRANsistor (B-TRAN™) solid-state switch technology.

To date, operations have been funded primarily through the sale of common stock and we have generated $3.7 million in grant revenue for bidirectional power switch development. Grant revenue was $664 and $125,008 in the three months ended March 31, 2023 and 2022, respectively. We may pursue additional research and development grants, if and when available, to further develop and/or improve our technology. We are in the process of commercializing our B-TRAN™ technology.

Product Launch

In January 2023, we launched our first commercial product, the SymCool™ Power Module. This multi-die B-TRAN™ module is designed to meet the very low conduction loss needs of the solid-state circuit breaker (SSCB) market. We expect fabrication and initial sales of this product later in 2023.

Development Agreement

During the fourth quarter of 2022, we announced, and began Phase 1 of, a product development agreement with a top 10 global automaker for a custom B-TRAN™ power module for use in the automaker’s electric vehicle (EV) drivetrain inverters in its next generation EV platform. In Phase I of the program, we will provide packaged B-TRAN™ devices, drivers and technical data to the top 10 global automaker for their evaluation. Our expectation is that a successful Phase 1 will lead to us securing Phase 2 of the program. Assuming we secure Phase 2 of the program, we will collaborate with a packaging company selected by the automaker that will fabricate the custom B-TRAN™ modules. In Phase 3, the final development phase under the program, the custom B-TRAN™ power module is expected to be tested and certified in accordance with automotive codes and standards. The delivery of production-ready B-TRAN™-based modules is targeted for 2025. We expect to record modest revenue under this agreement in 2023.

Test and Evaluation Agreements

Since the middle of 2021, we announced several test and evaluation agreements with prospective customers, including a second top 10 global automaker, a top 10 global provider of power conversion solutions to the solar industry, a global diverse power management market leader, a tier 1 automotive supplier, a commercial EV manufacturer and an EV charging company. These companies, along with other current and future participants in our test and evaluation program, intend to test and evaluate the B-TRAN™ for use in their applications. We expect to incorporate the feedback from these customers into our future commercial products. 13

Table of Contents Results of Operations

Comparison of the three months ended March 31, 2023 to the three months ended March 31, 2022

Grant Revenue. Grant revenue for the three months ended March 31, 2023 and 2022 was $664 and $125,008, respectively. The grant revenue in the three months ended March 31, 2023 relates to a $1.2 million subcontract with Diversified Technologies, Inc. (DTI) to supply B-TRAN™ devices as part of a two-year contract awarded to DTI by the United States Naval Sea Systems Command (NAVSEA) for the development and demonstration of a B-TRAN™ enabled high efficiency direct current solid state circuit breaker (SSCB). The program started in late June 2020. In 2022, NAVSEA approved two 6-month extensions to the program. No additional grant revenue was associated with these extensions.

In September 2021, we entered into and began work under a $50,000 subcontract with DTI under a Phase I Small Business Innovation Research (SBIR) grant from the Department of Energy to develop a B-TRAN™-driven low loss alternating current SSCB. We completed this work in the first quarter of 2022. The grant revenue in the three months ended March 31, 2022 relates to both the NAVSEA and SBIR programs.

We expect the remaining grant revenue of $36,724 related to the NAVSEA program to be recognized in the second quarter of 2023. We also expect to pursue additional government funding that may result in additional grant revenues in the future.

We entered into a development agreement in late 2022 and launched our first commercial product in January 2023. As a result, we expect to generate initial commercial revenue later in 2023.

Cost of Grant Revenue. Cost of grant revenue for the three months ended March 31, 2023 and 2022 was $664 and $125,008, respectively. The cost of grant revenues relates to the subcontracts with DTI discussed above and is equal to the associated grant revenue resulting in no gross profit. We expect no gross profit under the subcontract with DTI related to the NAVSEA program or from other grants that we are pursuing or may pursue in 2023.

Research and Development Expenses. Research and development expenses increased by $611,481, or 74%, to $1,440,028 in the three months ended March 31, 2023 from $828,547 in the three months ended March 31, 2022. The increase was due to higher stock-based compensation expense of $280,829, semiconductor fabrication costs of $214,971 and personnel costs of $121,203, partly offset by lower other B-TRAN™ development spending of $5,522. We expect higher research and development expenses in the remainder of 2023 as compared to 2022 as we continue development of our B-TRAN™ technology.

General and Administrative Expenses. General and administrative expenses increased by $41,984, or 5%, to $894,933 in the three months ended March 31, 2023 from $852,949 in the three months ended March 31, 2022. The increase was due to higher stock-based compensation expense of $84,143, personnel costs of $60,170 and professional fees of $47,914, partly offset by services paid in stock in the three months ended March 31, 2022 of $100,100, lower board of directors’ fees and expenses of $49,000 and other general and administrative spending of $1,143. We expect relatively flat general and administrative expenses, exclusive of stock-based compensation, in the remainder of 2023 as compared to 2022.

Sales and Marketing Expenses. Sales and marketing expenses increased by $84,897, or 39%, to $304,326 in the three months ended March 31, 2023 from $219,429 in the three months ended March 31, 2022. The increase was due to higher search and placement fees of $43,750, personnel costs of $21,730, stock-based compensation expense of $13,188 and other spending of $6,229. We expect higher sales and marketing expenses in the remainder of 2023 as compared to 2022 as we engage more broadly with prospective customers and launch our second commercial product in the second half of 2023.

Loss from Operations. Our loss from operations for the three months ended March 31, 2023 was $2,639,287, or 39% higher, as compared to the $1,900,925 loss from operations for the three months ended March 31, 2022, for the reasons discussed above.

Interest Income (Expense), Net. Net interest income was $111,302 for the three months ended March 31, 2023 compared to net interest expense of $3,716 for the three months ended March 31, 2022 as the result of the impact of higher interest rates on our money market account.

Net Loss. Our net loss for the three months ended March 31, 2023 was $2,527,985, or 33% higher, as compared to a net loss of $1,904,641 for the three months ended March 31, 2022, for the reasons discussed above. 14

Table of Contents Liquidity and Capital Resources

We currently generate grant revenue only. We expect to generate grant revenue as well as initial commercial revenue in 2023. We have incurred losses since inception. We have funded our operations to date primarily through the sale of common stock.

At March 31, 2023, we had cash and cash equivalents of $14.5 million. Our net working capital at March 31, 2023 was also $14.5 million. We had no outstanding debt at March 31, 2023.

We believe that our cash and cash equivalents on hand will be sufficient to meet our ongoing liquidity needs for at least the next twelve months from the date of filing this Quarterly Report on Form 10-Q; however, we may require additional funds in the future to fully implement our plan of operation and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all. Although we believe we have adequate sources of liquidity over the long term, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets could each impact our business and liquidity.

Operating activities in the three months ended March 31, 2023 resulted in cash outflows of $1,755,723, which were due to the net loss for the period of $2,527,985, partly offset by stock-based compensation of $609,926, favorable balance sheet timing of $109,138 and depreciation and amortization of $53,918.

Operating activities in the three months ended March 31, 2022 resulted in cash outflows of $1,417,123, which were due to the net loss for the period of $1,904,641, partly offset by stock-based compensation of $231,765, favorable balance sheet timing of $111,463, stock issued for services of $100,100 and depreciation and amortization of $44,190.

We expect an increase in cash outflows from operating activities in the remainder of 2023 as we commercialize our B-TRAN™ technology, including the launch of our second commercial product.

Investing activities in the three months ended March 31, 2023 and 2022 resulted in cash outflows of $69,450 and $27,616, respectively, for the acquisition of intangible assets and fixed assets.

Critical Accounting Estimates

There have been no significant changes during the three months ended March 31, 2023 to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Trends, Events and Uncertainties

There are no material changes from trends, events or uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide this information. 15

Table of Contents ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of its Chief Executive Officer (principal executive officer) and its Chief Financial Officer (principal financial and accounting officer) of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2023 and has concluded that, as of March 31, 2023, the Company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have been no material changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on the Effectiveness of Controls

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are being met. Further, the design of any system of controls must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Table of Contents PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We may be subject to litigation from time to time in the ordinary course of business. We are not currently party to any legal proceedings.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

Table of Contents ITEM 6. EXHIBITS

Exhibit<br>Number		Document

31.1*		Certification of Principal Executive Officer pursuant to Exchange Act Rule, 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer pursuant to Exchange Act Rule, 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

10.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).
*	Filed herewith
---	---

**Furnished herewith

Table of Contents SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 12, 2023	IDEAL POWER INC.
	By:	/s/ R. Daniel Brdar
		R. Daniel Brdar
		Chief Executive Officer
	By:	/s/ Timothy W. Burns
		Timothy W. Burns
		Chief Financial Officer

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, R. Daniel Brdar, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Ideal Power Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2023
/s/ R. Daniel Brdar
R. Daniel Brdar
Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy W. Burns, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Ideal Power Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2023
/s/ Timothy W. Burns
Timothy W. Burns
Chief Financial Officer (Principal Financial and
Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the periodic report of Ideal Power Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission (the “Report”), we, R. Daniel Brdar, Chief Executive Officer (Principal Executive Officer) and Timothy W. Burns, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: May 12, 2023
/s/ R. Daniel Brdar
R. Daniel Brdar
Chief Executive Officer (Principal Executive Officer)
/s/ Timothy W. Burns
Timothy W. Burns
Chief Financial Officer (Principal Financial and
Accounting Officer)