Table of Contents

​

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

FORM 10-Q

(Mark One)

​

For the quarterly period ended March 31,June 30, 2021

OR

OR

​

For the transition period from ______________ to _______________

Commission File Number 001-36216

IDEAL POWER INC.

(Exact name of registrant as specified in its charter)

​

4120 Freidrich Lane,5508 Highway 290 West, Suite 100120

Austin, Texas 7874478735

(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:

​

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 x☒ 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 than the registrant was required to submit such files).

Yes x☒ 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.

​

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 x

⌧

As of May 12,August 11, 2021, the issuer had 5,872,046 shares of common stock, par value $.001, outstanding.

​

​

​

​

​

​

Table of Contents

PART I-FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

IDEAL POWER INC.

Balance Sheets

​

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

IDEAL POWER INC.

Statements of Operations

(unaudited)

​

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

​

Table of Contents

IDEAL POWER INC.

Statements of Cash FlowsOperations

(unaudited)

(unaudited)​

​

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

​

Table of Contents

IDEAL POWER INC.

Statements of Cash Flows

(unaudited)

​

​

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

​

​

Table of Contents

IDEAL POWER INC.

Statements of Stockholders’ Equity

For the ThreeThree-Month Periods during the Six Months Ended March 31,June 30, 2021 and 2020

(unaudited)

(unaudited)​

​

The accompanying notes are an integral part of these 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 solely focused on the further development and commercialization of its Bi-directional bi-polar 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 and warrants. 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”"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, 2020 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 26, 2021.

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, 2020. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.

EarningsNet Loss Per Share

In accordance with ASC 260, shares issuable for little or no cash consideration are considered outstanding common shares and included in the computation of basic earningsnet loss per share. As such, for the three and six months ended March 31,June 30, 2021, and 2020, the Company has included pre-funded warrants to purchase 253,828 and 868,443 shares of common stock, respectively,and, for the three and six months ended June 30, 2020, the Company included pre-funded warrants to purchase 718,443 shares of common stock, which were issued in November 2019 with an exercise price of $0.001, in its computation of earningsnet loss per share.

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:

​

​

Amortization expense amounted to $23,698$35,177 and $22,298$58,875 for the three and six months ended March 31,June 30, 2021, respectively, and $23,048 and $45,346 for the three and six months ended June 30, 2020, respectively. Amortization expense for the succeeding five years and thereafter is $100,732 (2021)$72,605 (2021), $134,310 (2022-2025)$145,211 (2022-2025) and $1,118,267$1,136,734 (thereafter).

At March 31,June 30, 2021 and December 31, 2020, the Company had capitalized $245,178$258,354 and $270,000, respectively, for costs related to patents that have not been awarded.

​

Note 4–Loans

In May 2020, the Company entered into a Loan Agreement and Promissory Note (collectively the “PPP Loan”) with BBVA USA pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The Company received total proceeds of $91,407 from the unsecured PPP Loan. The PPP Loan iswas scheduled to mature in May 2022 and hashad an interest rate of 1.00% per annum and iswas subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. The PPP Loan may be prepaid by the Company at any time prior to its maturity with no prepayment penalties. The first payment due date was originally in December 2020 but BBVA USA extended the first due date to August 2021 as the PPP Flexibility Act of 2020 extended the deferral period for payment of principal and interest for all PPP borrowers.

The PPP Loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. Subject to certain conditions, the PPP Loan may be forgiven in whole or in part by applying for forgiveness pursuant to the CARES Act and the PPP. The amount of loan proceeds eligible for forgiveness is based on a formula based on a number of factors, including the amount of loan proceeds used by the Company during the 8-week or 24-week period after the loan origination for certain purposes, including payroll costs, rent payments on certain leases and certain qualified utility payments, provided that, among other things, at least 60% of the loan amount is used for eligible payroll costs, the employer maintaining or rehiring employees and maintaining salaries at certain level. InAct.In accordance with the requirements of the CARES Act and the PPP, the Company used the proceeds from the PPP Loan primarily for payroll costs. The Company applied for forgiveness of the PPP Loan during the first quarter of 2021. See Note 10.2021.In May 2021, the SBA approved forgiveness of the Company’s PPP Loan in the principal amount of $91,407, including accrued interest. The $91,407 gain on forgiveness of the PPP Loan is shown in other (income) expenses in the statement of operations and represents a non-cash financing activity.

In April 2020, the Company also received a $5,000 advance related to a U.S. Small Business Administration Economic Injury Disaster Loan. The Company expects to repay this advance and has included it within accrued expenses.

​

Note 5 – Lease

The Company leasesleased 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.

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 8% per annum.

In September 2019, the Company entered into a sublease with CE+T Energy pursuant to which the Company subleasesSolutions, Inc. (“CE+T Energy”) subleased approximately seventy-five (75%) percent of its Austin, Texas facility to CE+T Energy. Underthis space from the sublease, CE+T Energy is obligated to make monthly payments equal to 75% of all sums due under the masterCompany. This 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 in July 2019, that contained similar payment obligations by CE+T Energy for utilization of the subleased premises. Consistent with the master lease, the sublease terminatesexpired concurrently on May 31, 2021.

During the three and six months ended March 31,June 30, 2021, CE+T Energy made payments of $53,293 $35,529 and $88,822, respectively,to the Company related to the subleased premises. The payments included CE+T Energy’s share of rent as well as its 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.

Future minimum payments under the lease, as amended, are as follows:

For the three months ended March 31, 2021 and 2020, operating cash flows for lease payments totaled $49,889 and $48,041, respectively. For both the three months ended March 31, 2021 and 2020, operating lease cost, recognized on a straight-line basis, totaled $48,488. At March 31, 2021, the remaining lease term was 2 months.

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 is expected to occuroccurred on June 1, 2021 and the term of the lease is 63 months. The actual base rent in the first year of the lease is $56,471 and is 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 will recognizerecognized 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.

​

Table of Contents

Future minimum payments under the lease are as follows:

​

​

At June 30, 2021, the remaining lease term was 62 months.

​

For the three months ended June 30, 2021 and 2020, operating cash flows for this lease uponpayments totaled $39,534 and $48,658, respectively, and for the six months ended June 30, 2021 and 2020, operating cash outflows for lease commencement.payments totaled $89,423 and $96,699, respectively. For the three months ended June 30, 2021 and 2020, operating lease cost, recognized on a straight-line basis, totaled $38,664 and $48,487, respectively, and for the six months ended June 30, 2021 and 2020, operating lease cost, recognized on a straight-line basis, totaled $87,152 and $96,975, respectively.

​

Note 6 – Commitments and Contingencies

License Agreement

In 2015, the Company entered into licensing agreements which expire in February 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 annually with one-half the annual payment due within 20 days of December 21^st of each year and one-half annual the payment due within 20 days of June 21^st of each year of the agreements, up to a maximum of $100,000 per year (i.e. five issued patents).

In March 2021, two patents associated with these agreements were issued and the Company recorded, as a non-cash activity, an intangible asset and a corresponding other long-term liability of $426,937, representing the estimated present value of future payments under the licensing agreements for these two issued patents. ThroughAs of March 31, 2021, all five patents associated with the agreements werehave been issued. At March 31,June 30, 2021 and December 31, 2020, the other long-term liability for the estimated present value of future payments under the licensing agreements was $944,026$951,717 and $552,031, respectively. The Company is accruing interest for future payments related to the issued patents associated with these agreements.

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

In connection with the sale of its power conversion systems division in September 2019, 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.

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

COVID-19 Pandemic

As of the date of these financial statements, the COVID-19 pandemic continues to spread throughout the United States and the rest of the world. The ultimate extent of the impact of COVID-19 on the financial performance of the Company will depend on future

Table of Contents

developments, including, among other things, the duration and spread of COVID-19, including variants, the timing, scope and efficacy of vaccination efforts, additional governmental restrictions in response to the COVID-19 pandemic and the overall economy, all of which are highly uncertain and cannot be predicted. TheThe COVID-19 pandemic has already caused significant volatility in the global financial markets which may impact the Company’s ability to raise additional capital, if necessary, on acceptable terms or at all, though such risk has not materialized to date. If the financial markets and/or the overall economy are negatively impacted for an extended period, the Company's operating results may be materially and adversely affected.

​

Note 7 — Common Stock

February 2021 Public Offering

In February 2021, the Company issued and sold 1,352,975 shares of its common stock, including 176,475 additional shares of common stock pursuant to the exercise of the underwriter’s option to purchase additional shares in full, in an underwritten public offering at a price of $17.00 per share (the “February 2021 Offering”). The net proceeds to the Company from the February 2021 Offering were $21.2 million. The Company intends to use the net proceeds from the February 2021 Offering to fund commercialization and development of its B-TRAN™ technology and general corporate and working capital purposes.

Stock Issuance

In February 2021, the Company issued 4,000 unregistered shares of common stock, valued at $68,680 at the time of issuance, to a third-party vendor as compensation for services performed.

​

Note 8 — Equity Incentive Plan

OnIn May 17, 2013, the Company adopted the 2013 Equity Incentive Plan (as amended, the(the “Plan”) and reserved shares of common stock for issuance under the Plan.Plan, which was amended effective June 16, 2021. As a result of the amendment, the number of shares authorized for issuance under the Plan increased by 500,000 shares and the Plan will now terminate on June 16, 2031, unless sooner terminated or extended by the Board. The Plan is administered by the Compensation Committee of the Company’s Board of Directors.

At March 31,Directors.At June 30, 2021, 92,140567,140 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:

​

​

During the threesix months ended March 31,June 30, 2021, the Company granted 31,821 stock options to Board members and 25,00050,000 stock options to employees under the Plan. The estimated fair value of these stock options, calculated using the Black-Scholes option valuation model, was $497,461, $55,708$691,728, $141,193 of which was recognized during the threesix months ended March 31,June 30, 2021.

At March 31,June 30, 2021, there was $482,900$585,457 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 1.11.2 years.

​

Note 9 — Warrants

The Company had 1,040,248 warrants outstanding at March 31,June 30, 2021 with a weighted average exercise price of $3.92 per share, down from 2,273,369 warrants outstanding at December 31, 2020.2020 due to the exercise of 1,233,121 warrants in the three months ended March 31, 2021. NaN warrants were exercised in the three months ended June 30, 2021.

Table of Contents

At March 31,June 30, 2021, all warrants are exercisable, although the warrants held by eachcertain of the Company’s four largest beneficial ownerswarrant holders may be exercised only to the extent that the total number of shares of common stock then beneficially owned by such shareholderwarrant holder does not exceed 4.99% (or, at the investor’s election, 9.99%) of the outstanding shares of the Company’s common stock.

​

In May 2021, the SBA approved forgivenessTable of the Company’s PPP Loan in the principal amount $91,407, including accrued interest.Contents

Table of our efforts to manage cash spending, particularly prior to the commercialization of our B-TRAN™ technology;Contents

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 2020 financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. 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, 2020.

Overview

Ideal Power Inc. is located in Austin, Texas. With headquarters in Austin, Texas, theThe Company is solely focused on the further development and commercialization of its Bi-directional bi-polar junction TRANsistor (B-TRAN™) solid state switch technology.

To date, operations have been funded primarily through the sale of common stock and warrants. Total revenue generated from inception to date as of March 31,June 30, 2021 amounted to $15.6$15.7 million with approximately $12.4 million of that revenue from discontinued operations and the remainder from grant revenue for bi-directional power switch development. Revenue was $242,061$84,705 and $0$326,766 in the three months and six months ended March 31,June 30, 2021, respectively, and $6,515 in the three and six months ended June 30, 2020. Revenue for the three and six months ended June 30, 2021 and 2020 respectively, and the revenue for the three months ended March 31, 2021 was related to a government grant. We may pursue additional research and development grants, if and when available, to further develop and/or improve our technology.

COVID-19 Impact

As of the date of this report, the COVID-19 pandemic continues to spread throughout the United States and the rest of the world. The ultimate extent of the impact of COVID-19 on the financial performance of the Company will depend on future developments, including, among other things, the duration and spread of COVID-19, including variants, the timing, scope and efficacy of vaccination efforts, additional governmental restrictions in response to the COVID-19 pandemic, and the overall economy, all of which are highly uncertain and cannot be predicted. The COVID-19 pandemic has caused significant volatility in the global financial markets, which may impact the Company’s ability to raise additional capital, if necessary, on acceptable terms or at all, though such risk has not materialized to date. If the financial markets and/or the overall economy are negatively impacted for an extended period, the Company's operating results may be materially and adversely affected.

While the outbreak of COVID-19 initially caused some disruption to our business in the first and second quarters of 2020, the COVID-19 pandemic has not had a material adverse impact on our operations to date. However, the COVID-19 pandemic may disrupt our business in the future and cause delays in critical development and commercialization activities and/or result in potential incremental costs associated with mitigating the effects of the COVID-19 pandemic. The COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak, the timing, scope and efficacy of vaccination efforts and additional actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to forecast the effects on our business and results of operations for the remainder of 2021 and thereafter.

February 2021 Offering

In February 2021, we issued and sold 1,352,975 sharesTable of our common stock, including 176,475 additional shares of common stock pursuant to the exercise of the underwriter’s option to purchase additional shares in full, in an underwritten public offering at a price of $17.00 per share (the “February 2021 Offering”). The net proceeds to us from the February 2021 Offering were $21.2 million. We intend to use the net proceeds from the February 2021 Offering to fund commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes.Contents

Table of Contents

Cost of Grant Revenues. Cost of grant revenues for the six months ended June 30, 2021 and 2020 was $326,766 and $6,515, respectively. The cost of grant revenues relates to the subcontract with DTI discussed above and are equal to the associated grant revenues resulting in no gross profit. We expect no gross profit under the subcontract with DTI or from other grants that we are pursuing or may pursue in the remainder of 2021.

Research and Development Expenses. Research and development expenses increased by $154,584, or 23%, to $821,573 in the six months ended June 30, 2021 from $666,989 in the six months ended June 30, 2020. The increase was due to higher contract labor for driver development and the expansion of internal test capabilities of $125,899, an initial license fee of $50,000 for the right to certain semiconductor technology and higher other B-TRAN™ spending of $16,675, partly offset by lower stock-based compensation expense of $37,990. We expect higher quarterly research and development expenses, as compared to the three months ended June 30, 2021, for the remainder of 2021 as we accelerate development of our B-TRAN™ technology. Research and development expenses will be subject to quarterly variability due primarily to the timing of semiconductor fabrication costs.

General and Administrative Expenses. General and administrative expenses increased by $108,556, or 10%, to $1,204,204 in the six months ended June 30, 2021 from $1,095,648 in the six months ended June 30, 2020. The increase was due to higher investor relations spending of $153,320, a $110,117 higher bonus accrual, primarily related to bonuses approved by the Board for successful completion of the February 2021 Offering (as defined below), and professional services paid in stock of $68,680, partly offset by CEO search fees in the first quartersix months of 2020 of $133,078$137,968, lower stock-based compensation expense of $71,699 and moderately lower other costs of $24,150.$13,894. We expect general and administrative expenses to be relatively flat to modestly down, as compared to the three months ended March 31,June 30, 2021, for the remaining quarters of 2021.

Sales and Marketing Expenses. Sales and marketing expenses were $62,578$174,611 in the threesix months ended March 31,June 30, 2021. We did not have sales and marketing expenses in the threesix months ended March 31,June 30, 2020. The increase was due primarily to the hiring of a Vice President of Business Development in the first quarter of 2021 and related expenses. We expect higher sales and marketing expenses, as compared to the three months ended March 31,June 30, 2021, for the remaining quarters of 2021 as we engage with prospective customers in advance of the commercialization ofand thereby begin to commercialize our B-TRAN™ technology.

Loss from Operations. Our loss from operations for the threesix months ended March 31,June 30, 2021 was $924,144$2,200,388 or 1% lower25% higher than the $930,434$1,762,637 loss from operations for the threesix months ended March 31,June 30, 2020 for the reasons discussed above.

Other (Income) Expenses. Other income was $89,545 for the six months ended June 30, 2021 compared to other expenses of $1,122 for the six months ended June 30, 2020. The other income in the six months ended June 30, 2021 was due to a $91,407 gain on the forgiveness of our PPP Loan in May 2021.

Net Loss. Our net loss for the threesix months ended March 31,June 30, 2021 was $924,150,$2,110,843, or 1% lower,20% higher, as compared to a net loss of $930,501$1,763,759 for the threesix months ended March 31,June 30, 2020, for the reasons discussed above.

Liquidity and Capital Resources

We currently generate grant revenue only and expect grant revenue to likely be our only source of revenue for 2021. We have incurred losses since inception. We have funded our operations to date through the sale of common stock and warrants.

At March 31,June 30, 2021, we had cash and cash equivalents of $26,789,017.$25,716,977. Our net working capital and long-termat June 30, 2021 was $25,242,612. We had no outstanding debt at March 31, 2021 were $26,499,349 and $91,407, respectively.

June 30, 2021.

Operating activities in the threesix months ended March 31,June 30, 2021 resulted in cash outflows of $843,337,$1,801,095, which were due primarily to the net loss for the period of $924,150$2,110,843 and unfavorablea non-cash gain on loan forgiveness of $91,407, partly offset by stock-based compensation of $153,644, favorable balance sheet timing $79,315, partly offset byof $107,960, depreciation and amortization of $70,343 and stock issued for services of $68,680, stock-based compensation of $61,933 and depreciation and amortization of $29,515.$68,680. Operating activities in the threesix months ended March 31,June 30, 2020 resulted in cash outflows of $813,627,$1,497,357, which were due to the loss from continuing operations for the period of $930,501$1,763,759 and unfavorable balance sheet timing of $45,080$85,249 partly offset by stock-based compensation of $116,497,$226,168, depreciation and amortization of $28,113$57,248, stock issued for services of $50,000 and patent impairment charges of $17,344.$18,235. We expect a modest ramp up in cash outflows from operating activities for the remainder of 2021 as we accelerate development and commercialization of our B-TRAN™ technology. We expect cash outflows from operating activities to trend upward in 2021.

Table of Contents

Investing activities in the threesix months ended March 31,June 30, 2021 and 2020 resulted in cash outflows of $30,737$145,019 and $24,063,$33,966, respectively, for the acquisition of intangible assets and fixed assets.

Financing activities in the threesix months ended March 31,June 30, 2021 resulted in cash inflows of $21,204,609 from the net proceeds from our February 2021 Offering and $3,301,226 from the exercise of warrants and stock options. Financing activities in the threesix months ended March 31,June 30, 2020 resulted in no cash inflows or outflows.

of $267,223 and included net proceeds from the exercise of warrants of $175,816 and proceeds from our PPP Loan of $91,407.

PPP Loan

In May 2020, we entered into a Loan Agreement and Promissory Note (collectively the “PPP Loan”) with BBVA USA pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (“SBA”). We received total proceeds of $91,407 from the unsecured PPP Loan. The PPP Loan iswas scheduled to mature in May 2022 and hashad an interest rate of 1.00% per annum and iswas subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. The PPP Loan may be prepaid by us at any time prior to its maturity with no prepayment penalties. The first payment due date was originally in December 2020 but BBVA USA extended the first due date to August 2021 as the PPP Flexibility Act of 2020 extended the deferral period for payment of principal and interest for all PPP borrowers.

The PPP Loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. Subject to certain conditions, the PPP Loan may be forgiven in whole or in part by applying for forgiveness pursuant to the CARES Act and the PPP. The amount of loan proceeds eligible for forgiveness is based on a formula based on a number of factors, including the amount of loan proceeds used by us during the 8-week or 24-week period after the loan origination for certain purposes, including payroll costs, rent payments on certain leases and certain qualified utility payments, provided that, among other things, at least 60% of the loan amount is used for eligible payroll costs, the employer maintaining or rehiring employees and maintaining salaries at certain level. In accordance with the requirements of the CARES Act and the PPP, we used the proceeds from the PPP Loan primarily for payroll costs. We applied for forgiveness of the PPP Loan during the first quarter of 2021. In May 2021, the SBA approved forgiveness of our PPP Loan.

February 2021 Offering

In February 2021, we issued and sold 1,352,975 shares of our common stock, including 176,475 additional shares of common stock pursuant to the exercise of the underwriter’s option to purchase additional shares in full, in an underwritten public offering at a price of $17.00 per share. The net proceeds to us from the February 2021 Offering were $21.2 million. We intend to use the net proceeds from the February 2021 Offering to fund commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes.

Critical Accounting Policies

There have been no significant changes during the threesix months ended March 31,June 30, 2021 to the critical accounting policies 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, 2020.

Off-Balance Sheet Transactions

As of March 31,June 30, 2021, we did not have any off-balance sheet transactions.

Trends, Events and Uncertainties

There are no material changes from trends, events or uncertainties disclosed in our 2020 Annual Report on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Table of Contents

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,June 30, 2021 and has concluded that, as of March 31,June 30, 2021, 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,June 30, 2021 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.

​

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 2020 Annual Report on Form 10-K.

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

None.

On February 26, 2021, we issued 4,000 unregistered shares of common stock, valued at $68,680 at the time of issuance, to a third-party vendor as compensation for services performed. The shares of common stock were issued in a private placement pursuant to Section 4(a)(2) of the Securities Act.​

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

​

Table of Contents