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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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 For the quarterly period ended March 31, 20222023

OR

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For the transition period from ______________ to _______________

Commission File Number 001-36216

IDEAL POWER INC.

(Exact name of registrant as specified in its charter)

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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:

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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 thanthat 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.

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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 11, 2022,10, 2023, the issuer had 5,903,7975,931,569 shares of common stock, par value $0.001, outstanding.

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PART I-FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

IDEAL POWER INC.

Balance Sheets

(unaudited)

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

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IDEAL POWER INC.

Statements of Operations

(unaudited)

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

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IDEAL POWER INC.

Statements of Cash Flows

(unaudited)

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

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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 and warrants.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.

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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, 20212022 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 25, 2022.30, 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, 2021.2022. 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, 20222023 and 2021,2022, 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 prefundedpre-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.

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Note 3 – Intangible Assets

Intangible assets, net consisted of the following:

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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 $36,812$38,226 and $23,698$36,812 for the three months ended March 31, 20222023 and 2021,2022, respectively. Amortization expense for the succeeding five years and thereafter is $110,732$117,740 (remaining nine (2022)months of 2023), $147,642$156,987 (20232024-20262027) and $1,016,200$956,838 (thereafter).

At March 31, 2022 and December 31, 2021, the Company had capitalized $317,923 and $306,640, respectively, for costs related to patents that have not been awarded.

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Note 4 – Lease

The Company previously leased 14,782 square feet of office and laboratory space located in Austin, Texas and subleased approximately seventy-five percent (75%) of this space to a third party. This lease and sublease expired concurrently on May 31, 2021.

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 is 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.

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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.

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Future minimum payments under the lease are as follows:

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At March 31, 2022,2023, the remaining lease term was 5341 months.

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For the three months ended March 31, 20222023 and 2021,2022, operating cash flows for lease payments totaled $18,824$19,333 and $49,889$18,824, respectively. For the three months ended March 31, 20222023 and 2021,2022, operating lease cost, recognized on a straight-line basis, totaled $19,018 and $48,488,$19,018, respectively.

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Note 5 – Commitments and Contingencies

License Agreement

In 2015, the Company entered into a licensing agreementsagreement which expireexpires in February 2033. Per the agreements,agreement, 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$100,000 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). All five patents associated with the agreements are issued.under this agreement.

At March 31, 20222023 and December 31, 2021,2022, the other long-term liability for the estimated present value of future payments under the licensing agreementsagreement was $922,439$843,364 and $917,100,$838,458, respectively. The Company is accruing interest for future payments related to the issued patents associated with these agreements.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.

COVID-19 Pandemic

As of the date of these financial statements, the COVID-19 pandemic continues 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 and its related 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. If the COVID-19 pandemic contributes to additional significant volatility in the global financial markets in the future, the Company’s ability to raise additional capital, if necessary, on acceptable terms or at all, may be impacted, 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.

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Note 6 — Common Stock

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 “Public Offering”). The net proceeds to the Company from the Public Offering were $21.2 million. The Company intends to use the net proceeds from the Public Offering to fund commercialization and development of its B-TRAN™ technology and general corporate and working capital purposes.

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. 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.

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

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During the three months ended March 31, 2022,2023, the Company granted 13,096 stock options27,550 RSUs to Board members and 10,00012,000 stock options to employees under the Plan. The estimated fair value of these stock options,equity grants, calculated using the Black-Scholes option valuation model for the stock options, was $185,889, $29,998$409,376, $78,043 of which was recognized during the three months ended March 31, 2022.

In January 2022, the Compensation of the Company’s Board of Directors (the “Board”) approved a modification of stock option grants to David Eisenhaure, the Company’s former Chairman of the Board, whom passed away in Octobor 2021. The modification extended the post-termination exercise period of his vested stock option grants from 12 months to 5 years. During the three months ended March 31, 2022, the Company recognized $49,327 of expense related to this modification.

At December 31, 2021 and March 31, 2022, there were 100,000 unvested restricted stock units (“RSUs”) outstanding. NaN RSUs were granted, vested or forfeited during the three months ended March 31, 2022.2023.

At March 31, 2022,2023, there was $1,650,209$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 1.30.9 years.

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Note 8 — Warrants

At March 31, 20222023 and December 31, 2021,2022, 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 3.02.0 years.

At March 31, 2022,2023, 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.

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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:

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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 20212022 financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. 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, 2021.2022.

Overview

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

To date, operations have been funded primarily through the sale of common stock and warrants. Total revenuewe have generated from inception to date as of March 31, 2022 amounted to $16.0$3.7 million with approximately $12.4 million of that revenue from discontinued operations and the remainder fromin grant revenue for bidirectional power switch development. RevenueGrant revenue was $125,008$664 and $242,061$125,008 in the three months ended March 31, 2023 and 2022, and 2021, respectively. Revenue for both the three months ended March 31, 2022 and 2021 related to government grants. 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.

COVID-19 ImpactProduct Launch

AsIn 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 datesolid-state circuit breaker (SSCB) market. We expect fabrication and initial sales of this report,product later in 2023.

Development Agreement

During the COVID-19 pandemic continues throughoutfourth 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 United States and the restautomaker’s electric vehicle (EV) drivetrain inverters in its next generation EV platform. In Phase I of the world. The ultimate extentprogram, 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 impactprogram. Assuming we secure Phase 2 of COVID-19 on our financial performancethe program, we will depend on future developments,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 among other things, the duration and spreada second top 10 global automaker, a top 10 global provider of COVID-19 and its related variants, the timing, scope and efficacy of vaccination efforts, additional governmental restrictions in responsepower conversion solutions to the COVID-19 pandemic,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 overall economy, all of which are highly uncertain and cannot be predicted. IfB-TRAN™ for use in their applications. We expect to incorporate the COVID-19 pandemic contributes to significant additional volatility in the global financial markets in thefeedback from these customers into our future our ability to raise additional capital, if necessary, on acceptable terms or at all, may be impacted, though such risk has not materialized to date. If the financial markets and/or the overall economy are negatively impacted for an extended period, our operating results may be materially and adversely affected.

While the COVID-19 pandemic has caused some disruption to our business, it 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 electrical component shortages and unavailability, difficulties in securing fabrication capacity, delays in critical development and commercialization activities and/or result in potential incremental costs associated with mitigating the effects of the COVID-19 pandemic. There has been a significant disruption in the supply chain for semiconductors due both to the COVID-19 pandemic and increased demand for semiconductors. While this disruption has not materially impacted us to date, it may materially and adversely impact us in the future. The COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus and its related variants, the duration of the pandemic, the timing, scope and efficacy of vaccination efforts and additional actions that may be taken by governmental authorities in response to the pandemic, makes it difficult to forecast the effects on our business and results of operations for the remainder of 2022 and thereafter.commercial products.

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Results of Operations

Comparison of the three months ended March 31, 20222023 to the three months ended March 31, 20212022

Grant Revenues.Revenue. Grant revenuesrevenue for the three months ended March 31, 2023 and 2022 was $664 and 2021 were $125,008, and $242,061, respectively. The grant revenues relate primarilyrevenue in the three months ended March 31, 2023 relates to a $1.2 million subcontract with Diversified Technologies, Inc. (“DTI”)(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”)(NAVSEA) for the development and demonstration of a B-TRAN™ enabled high efficiency direct current solid state circuit breaker (“SSCB”)(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”)(SBIR) grant from the Department of Energy (“DOE”) to develop a B-TRAN™-driven low loss alternating current SSCB. We completed ourthis work under this subcontract in Februarythe 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 subcontract with DTI for the NAVSEA program to continue overbe recognized in the nextsecond quarter with minimal revenue recognized thereafter through completion of the NAVSEA demonstration.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 introduce ourgenerate initial product for commercial salerevenue later in late 2022.2023.

Cost of Grant Revenues.Revenue. Cost of grant revenuesrevenue for the three months ended March 31, 2023 and 2022 was $664 and 2021 was $125,008, and $242,061, respectively. The cost of grant revenues relates to the subcontracts with DTI discussed above and areis equal to the associated grant revenuesrevenue resulting in no gross profit. We expect no gross profit under the remaining subcontract with DTI related to the NAVSEA program or from other grants that we are pursuing or may pursue in the remainder of 2022.2023.

Research and Development Expenses. Research and development expenses increased by $567,667,$611,481, or 218%74%, to $1,440,028 in the three months ended March 31, 2023 from $828,547 in the three months ended March 31, 2022 from $260,880 in the three months ended March 31, 2021.2022. The increase was due to higher stock-based compensation expense of $280,829, semiconductor fabrication costs of $250,537,$214,971 and personnel costs of $99,917, stock-based compensation expense of $82,177, professional fees of $52,722, contract labor of $39,608, engineering services of $36,360 and$121,203, partly offset by lower other B-TRAN™ development spending of $6,346. In the three months ended March 31, 2021, all of our semiconductor fabrication costs were funded by government grants. In the three months ended March 31, 2022, a majority of our semiconductor fabrication costs were not funded by government grants.$5,522. We expect higher research and development expenses in the remainder of 2023 as compared to 2022 as we continue to accelerate development of our B-TRAN™ technology and self-fund, at least in the short term, semiconductor fabrication costs and other development previously funded through government grants. Research and development expenses will be subject to quarterly variability due primarily to the number, size and timing of semiconductor fabrication runs and their associated cost.technology.

General and Administrative Expenses. General and administrative expenses increased by $252,263,$41,984, or 42%5%, to $894,933 in the three months ended March 31, 2023 from $852,949 in the three months ended March 31, 2022 from $600,6862022. 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, 2021. The increase was due to higher investor relations spending, inclusive2022 of services paid in stock, of $107,128,$100,100, lower board of directors’ search and placement fees and expenses of $85,941, stock-based compensation expense of $55,301$49,000 and other general and administrative spending of $3,893.$1,143. We expect relatively flat to slightly lower 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 $156,851,$84,897, or 251%39%, to $304,326 in the three months ended March 31, 2023 from $219,429 in the three months ended March 31, 2022 from $62,578 in the three months ended March 31, 2021.2022. The increase was due to higher search and placement fees of $43,750, personnel costs of $93,956 as we hired our first two sales and marketing employees in 2021,$21,730, stock-based compensation expense of $32,355$13,188 and other spending as we work towards commercializing our B-TRAN™ technology of $30,540.$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 commercializelaunch our B-TRAN™ technology.second commercial product in the second half of 2023.

Loss from Operations. Our loss from operations for the three months ended March 31, 20222023 was $1,900,925,$2,639,287, or 106%39% higher, as compared to the $924,144$1,900,925 loss from operations for the three months ended March 31, 2021,2022, for the reasons discussed above.

Interest Expense,Income (Expense), Net. InterestNet interest income was $111,302 for the three months ended March 31, 2023 compared to net interest expense net wasof $3,716 for the three months ended March 31, 2022 compared to $6 foras the three months ended March 31, 2021.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, 20222023 was $1,904,641,$2,527,985, or 106%33% higher, as compared to a net loss of $924,150$1,904,641 for the three months ended March 31, 2021,2022, for the reasons discussed above.

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Liquidity and Capital Resources

We currently generate grant revenue only. We expect to generate grant revenue and potentiallyas well as initial commercial revenue in 2022, depending on the ultimate date that our initial product is introduced for commercial sale.2023. We have incurred losses since inception. We have funded our operations to date primarily through the sale of common stock and warrants.stock.

At March 31, 2022,2023, we had cash and cash equivalents of $21.7$14.5 million. Our net working capital at March 31, 20222023 was $21.4also $14.5 million. We had no outstanding debt at March 31, 2022. Accordingly, management expects2023.

We believe that our cash and cash equivalents on hand will be sufficient to fundmeet our activitiesongoing 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.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. Operating activities in the three months ended March 31, 2021 resulted in cash outflows of $843,337, which were due to the net loss for the period of $924,150 and unfavorable balance sheet timing $79,315, partly offset by stock issued for services of $68,680, stock-based compensation of $61,933 and depreciation and amortization of $29,515.

We expect an increase in cash outflows from operating activities throughout 2022in the remainder of 2023 as we continue to accelerate development and commercializationcommercialize our B-TRAN™ technology, including the launch of our B-TRAN™ technology.second commercial product.

Investing activities in the three months ended March 31, 20222023 and 20212022 resulted in cash outflows of $27,616$69,450 and $30,737,$27,616, respectively, for the acquisition of intangible assets and fixed assets.

Financing activities in the three months ended March 31, 2022 did not result in any cash inflows or outflows. Financing activities in the three months ended March 31, 2021 resulted in cash inflows of $21,204,609 from the net proceeds from our Public Offering (as defined below) in February 2021 and $3,301,226 from the exercise of warrants and stock options.

Public 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 “Public Offering”). The net proceeds to us from the Public Offering were $21.2 million. We intend to use the net proceeds from the Public Offering to fund commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes.

Critical Accounting Estimates

There have been no significant changes during the three months ended March 31, 20222023 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, 2021.2022.

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, 2021.2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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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, 20222023 and has concluded that, as of March 31, 2022,2023, 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, 20222023 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.

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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, 2021.2022.

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

In January 2022, we 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. The shares of common stock were issued in a private placement pursuant to Section 4(a)(2) of the Securities Act.

​None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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Table of Contents

ITEM 6. EXHIBITS