What changed in Ideal Power Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Ideal Power Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+185 added−188 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)
Top changes in Ideal Power Inc.'s 2023 10-K
185 paragraphs added · 188 removed · 141 edited across 5 sections
- Item 1A. Risk Factors+66 / −86 · 63 edited
- Item 7. Management's Discussion & Analysis+60 / −52 · 34 edited
- Item 1. Business+56 / −47 · 41 edited
- Item 5. Market for Registrant's Common Equity+2 / −2 · 2 edited
- Item 2. Properties+1 / −1 · 1 edited
Item 1. Business
Business — how the company describes what it does
41 edited+15 added−6 removed22 unchanged
Item 1. Business
Business — how the company describes what it does
41 edited+15 added−6 removed22 unchanged
2022 filing
2023 filing
Biggest changeFurthermore, in 2021, 2022 and so far in 2023 there has been insufficient fabrication capacity for, and shortages of, certain semiconductor devices and related electronic components due both to the COVID-19 pandemic and increased demand, although this has not materially impacted us to date. 6 Table of Contents Our Technology To further improve the performance of bidirectional technologies and products, we identified the need for a true bidirectional power switch and applied for and, in 2012, received a grant from the U.S.
Biggest changeSee “—Competition.” Our Technology To further improve the performance of bidirectional technologies and products, we identified the need for a true bidirectional power switch and applied for and, in 2012, received a grant from the U.S. Department of Energy’s Advanced Research Projects Agency-Energy (“ARPA-E”) to develop a bidirectional solid-state power switch.
While we initially focused on the development of a BD-IGBT under the ARPA-E grant, we shifted our focus under the grant to the development of a new, highly efficient power switch called a bidirectional bipolar junction transistor, or B-TRAN™, that we believe will allow product manufacturers to substitute one B-TRAN™ for two pairs of IGBTs and diodes used in bidirectional circuits in their products and, more importantly, be a potential replacement for conventional power switches, such as IGBTs, in the broader power semiconductor market.
While we initially focused on the development of a BD-IGBT under the ARPA-E grant, we shifted our focus under the grant to the development of a new, highly efficient power switch called a bidirectional bipolar junction transistor, or B-TRAN™, that will allow product manufacturers to substitute one B-TRAN™ for two pairs of IGBTs and diodes used in bidirectional circuits in their products and, more importantly, be a potential replacement for conventional power switches, such as IGBTs, in the broader power semiconductor market.
In recent years, there has been a greater demand for energy-savings and power consumption reductions and growing demand for electric vehicles and, as a result, the need for power semiconductors that minimize power loss has been increasing. Power semiconductors are solid-state devices that act as a switch without any mechanical movement.
In recent years, there has been a greater demand for energy-savings and power consumption reductions and growing demand for renewable energy and electric vehicles and, as a result, the need for power semiconductors that minimize power loss has been increasing. Power semiconductors are solid-state devices that act as a switch without any mechanical movement.
Industry Background A semiconductor material is a substance that is characterized for “conducting” electricity easily, while at the same time, working as an insulator to prevent the flow of electricity. By using semiconductors, it becomes possible to perform rectification for the one-directional flow of electricity, amplification for increasing electrical signals, and switching to open and close the flow of electricity.
Industry Background A semiconductor material is a substance that is characterized for “conducting” electricity easily, while at the same time, working as an insulator to prevent the flow of electricity. By using semiconductors, it becomes possible to perform rectification for the uni-directional flow of electricity, amplification for increasing electrical signals, and switching to open and close the flow of electricity.
Government Approval and Regulation Government approval is not required for us to license our B-TRAN™ technology or sell B-TRAN™ devices.
Government Approval and Regulation Government approval is not required for us to license our B-TRAN™ technology or sell B-TRAN™ devices or products.
To date, we are not aware of any offerings or potential offerings based on a true high efficiency bidirectional design other than potential products based on our B-TRAN™ technology. 8 Table of Contents Power semiconductor device providers typically compete based on voltage, current and frequency capabilities with the larger providers offering a broad range of standard products, including discrete devices and modules.
To date, we are not aware of any offerings or potential offerings based on a true high efficiency bidirectional design other than potential products based on our B-TRAN™ technology. Power semiconductor device providers typically compete based on voltage, current and frequency capabilities with the larger providers offering a broad range of standard products, including discrete devices and modules.
The heavy consumption of power semiconductors across several end-use markets such as industrial, automotive, consumer electronics and renewable energy is a key growth driver of the power semiconductor market. The telecommunications market is also a significant end-user of power semiconductors. This segment displays demand for radio frequency power amplifiers and IGBTs among others.
The heavy consumption of power semiconductors across several end-use markets such as industrial, automotive, consumer electronics and renewable energy is a key growth driver of the power semiconductor market. 5 Table of Contents The telecommunications market is also a significant end-user of power semiconductors. This segment displays demand for radio frequency power amplifiers and IGBTs among others.
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.
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.
The higher efficiency would substantially reduce the heat generated by the operation of products utilizing this technology. As a result, products incorporating B-TRANs™ would have lower thermal management requirements.
This higher efficiency will substantially reduce the heat generated by the operation of products utilizing this technology. As a result, products incorporating B-TRANs™ will have lower thermal management requirements.
These reports are also available free of charge via EDGAR through the SEC website (www.sec.gov) as soon as reasonably practicable after such materials are electronically filed with (or furnished to) the SEC. We also make available on our website, our corporate governance documents, including our code of conduct and ethics.
These reports are also available free of charge via EDGAR through the Securities and Exchange Commission’s (“SEC”) website (www.sec.gov) as soon as reasonably practicable after such materials are electronically filed with (or furnished to) the SEC. We also make available on our website, our corporate governance documents, including our code of conduct and ethics.
This in turn would require significantly smaller surface area required for heat dissipation which would enable increased power density, or power per pound, and potentially result in smaller original equipment manufacturer, or OEM, products. In addition, B-TRAN™’s symmetric bidirectional operation reduces the number of components by 75% as compared to a conventional bidirectional switch utilizing IGBTs and diodes.
This in turn requires a significantly smaller surface area for heat dissipation which will enable increased power density, or power per pound, and potentially result in smaller original equipment manufacturer, or OEM, products. In addition, B-TRAN™’s symmetric bidirectional operation reduces the number of components by 75% as compared to a conventional bidirectional switch utilizing IGBTs and diodes.
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.
Development Agreement During the fourth quarter of 2022, we announced, and began Phase 1 of, a product development agreement with Stellantis, a top 10 global automaker, for a custom B-TRAN™ power module for use in the automaker’s EV drivetrain inverters in its next generation EV platform.
Government support for semiconductors and our potential target markets could have a material and positive impact on our business if our B-TRAN™ technology is successfully commercialized, particularly in these markets. Employees As of February 28, 2023, we had 8 full-time employees.
Government support for semiconductors and our potential target markets could have a material and positive impact on our business if our B-TRAN™ technology is successfully commercialized, particularly in these markets. Employees As of February 28, 2024, we had 11 full-time employees.
We expect the B-TRAN™ to provide a competitive advantage in several IGBT markets due to its higher expected efficiency and inherent bidirectionality, the growth in bidirectional applications such as electric vehicles and energy storage, and as it seems the IGBT has almost reached its technological limit.
We believe that B-TRAN™ provides a competitive advantage in several IGBT markets due to its higher expected efficiency and inherent bidirectionality, the growth in bidirectional applications such as electric vehicles and energy storage, and as it seems the IGBT has almost reached its technological limit.
Potential target markets for B-TRAN™ devices include, but are not limited to, electric and hybrid electric vehicles, electric vehicle charging, renewable energy and energy storage system power converters, uninterruptible power supplies (“UPS”) for data centers, industrial motor drives, solid-state circuit breakers, distribution and transmission switches and controls and other industrial and military markets.
Target markets for current and future B-TRAN™-based products include, but are not limited to, electric and hybrid electric vehicles, electric vehicle charging, renewable energy and energy storage system power converters, uninterruptible power supplies (“UPS”) for data centers, industrial motor drives, solid-state circuit breakers, distribution and transmission switches and controls and other industrial and military markets.
This highly efficient and, we believe, unique symmetric operation will potentially provide a strong competitive advantage in bidirectional applications which are growing at rapid rates due to the electrification of transportation and the shift to renewable energy coupled with energy storage.
This highly efficient and, we believe, unique symmetric operation should provide a strong competitive advantage in bidirectional applications which are growing at rapid rates due to the electrification of transportation, the shift to renewable energy coupled with energy storage and utility grid modernization.
Information contained on our website (or any other website referred to in this Annual Report on Form 10-K) is not incorporated by reference into this Annual Report on Form 10-K.
Information contained on our website (or any other website referred to in this Annual Report on Form 10-K) is not incorporated by reference into this Annual Report on Form 10-K. 8 Table of Contents
As of December 31, 2022, we had 41 U.S. and 31 foreign issued patents as well as 24 additional pending U.S. and international patent applications on our B-TRAN™ technology. Our first B-TRAN™ patent issued in 2015 and our patents generally have a 20-year life from the date of initial filing prior to expiration.
As of December 31, 2023, we had 45 U.S. and 35 foreign issued patents as well as 38 additional pending U.S. and international patent applications on our B-TRAN™ technology. Our first B-TRAN™ patent issued in 2015 and our patents generally have a 20-year life from the date of initial filing prior to expiration.
These companies, along with other 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.
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. We began B-TRAN™ customer shipments to program participants in mid-2023.
Based on third-party device software simulations and prototype testing to date, we believe that the B-TRAN™ can significantly improve electrical efficiency in power converters and many other power conversion applications. Compared to conventional power switches, such as IGBTs, we believe the B-TRAN™ will reduce power losses by 50% or more depending on the application.
Based on discrete B-TRAN™ device and SymCool™ power module testing, we believe that the B-TRAN™ can significantly improve electrical efficiency in power converters and many other power conversion applications. Compared to conventional power switches, such as IGBTs, B-TRAN™ can reduce power losses by 50% or more depending on the application.
Our testing of B-TRAN™ silicon dies, prototypes and packaged devices to date is consistent with third-party simulations that predict significant performance and efficiency improvements over conventional power switches such as silicon-controlled rectifiers (“SCRs”), IGBTs and MOSFETs.
The results from our testing of discrete B-TRAN™ devices and SymCool™ power modules is consistent with third-party simulations that predicted significant performance and efficiency improvements over conventional power switches such as silicon-controlled rectifiers (“SCRs”), IGBTs and MOSFETs.
Competition We will compete against well-established incumbent power semiconductor device suppliers, including companies that already operate at a large scale in the single-sided (unidirectional) power switch market with IGBTs and MOSFETs, including silicon carbide MOSFETs.
We are accruing interest for future payments related to these agreements. 7 Table of Contents Competition We compete against well-established incumbent power semiconductor device suppliers, including companies that already operate at a large scale in the single-sided (unidirectional) power switch market with IGBTs and MOSFETs, including silicon carbide MOSFETs.
While these companies are potential competitors, they are also potential licensees for our B-TRAN™ technology as there is not, to our knowledge, a high-efficiency bidirectional design available in the market. See “—Competition.” There are a limited number of semiconductor fabrication development facilities in the United States and abroad.
While these companies are potential competitors, they are also potential licensees for our B-TRAN™ technology as there is not, to our knowledge, a high-efficiency bidirectional design available in the market.
We expect to initially target large and growing segments of the IGBT market, such as electric vehicles, electric vehicle charging, renewable energy, data center UPS systems and solid-state circuit breakers.
We are initially targeting large and growing segments of the IGBT market, such as solid-state circuit breakers, electric and hybrid electric vehicles, electric vehicle charging, renewable energy and energy storage.
Test and Evaluation Agreements During 2021 and 2022, 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 commercial EV manufacturer and an EV charging company.
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, two global diverse power management market leaders, a tier 1 automotive supplier and a global power conversion supplier.
Grant revenue was $203,269 and $576,399 in the years ended December 31, 2022 and 2021, 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.
Grant revenue was $37,388 and $203,269, respectively, in the years ended December 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.
As part of the B-TRAN™ development process and in partnership with our semiconductor fabrication partners, we continue with additional B-TRAN™ wafer runs, incorporating the results of prior runs and subsequent testing into the B-TRAN™ wafer fabrication.
Test results measured B-TRAN™ electrical losses at less than 50% that of conventional power switches such as silicon IGBTs. 6 Table of Contents As part of the B-TRAN™ development and commercialization process and in partnership with our semiconductor fabrication partners, we continue with additional B-TRAN™ wafer runs, incorporating the results of prior runs and subsequent testing into the B-TRAN™ wafer fabrication.
IGBTs switch current in only one direction and require the use of a blocking diode to prevent current from flowing back through the device. To enable a product to perform bidirectional power conversion, for each IGBT and diode used in a circuit, a second IGBT and diode must also be utilized.
A bidirectional circuit incorporates multiple IGBTs, which are power switches used in the process to convert power from one current form to another. IGBTs switch current in only one direction and require the use of a blocking diode to prevent current from flowing back through the device.
These additional components add voltage drops that affect the electrical efficiency of end-use products and generate heat that must be dissipated. To eliminate the need to utilize four devices to create one bidirectional switch and to improve the performance of bidirectional switching, a true bidirectional switch is necessary.
To eliminate the need to utilize four devices to create one bidirectional switch and to improve the performance of bidirectional switching, a true bidirectional switch is necessary.
These markets typically utilize IGBTs for power switching in their applications. According to Mordor Intelligence, the IGBT market is already several billion dollars and is projected to be valued at $11 billion by 2026.
These markets typically utilize IGBTs for power switching in their applications. According to Mordor Intelligence, the power electronics market was $29.2 billion in 2022 and is forecasted to grow to $37.7 billion by 2028.
Therefore, methods have been developed to reduce the amount of power semiconductor loss, which is the cause of the heat generation, while also effectively releasing the generated heat to the outside. 5 Table of Contents Power semiconductors are mostly used in power conversion such as in changing voltages and frequencies, as well as changing direct current (“DC”) to alternating current (“AC”) and AC to DC.
Therefore, methods have been developed to reduce the amount of power semiconductor loss, which is the cause of the heat generation, while also effectively releasing the generated heat to the outside.
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.
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 commenced shipment of SymCool™ Power Modules to fulfill customer orders in early 2024. In late 2023, we launched our second commercial product, the SymCool™ IQ Intelligent Power Module (“IPM”).
The samples will also include a second-generation prototype driver. Initial samples will be packaged B-TRAN™ dies with a driver and test boards in a safety enclosure. Feedback from potential customers in the test and evaluation program will be incorporated into future B-TRAN™ products. The primary raw material used in the fabrication of B-TRAN™ devices is silicon wafers.
Feedback from potential customers in the test and evaluation program will be incorporated into future B-TRAN™ products. In early 2024, we commenced shipments of our SymCool™ power module to fulfill customer orders. The primary raw material used in the fabrication of B-TRAN™ devices is silicon wafers.
We expect to continue to build our patent estate for our B-TRAN™ technology and other technological developments that broaden the scope of our technology platform. License Agreements In 2015, we entered into licensing agreements which expire on February 7, 2033. Per the agreements, we have an exclusive royalty-free license associated with semiconductor power switches which enhances our intellectual property portfolio.
We expect to continue to build our patent estate for our B-TRAN™ technology and other technological developments that broaden the scope of our technology platform. In addition, we treat the proprietary dual-sided wafer fabrication process we developed to produce B-TRAN™ wafers as a trade secret. License Agreements In 2015, we entered into a licensing agreement which expires in February 2033.
Department of Energy’s Advanced Research Projects Agency-Energy (“ARPA-E”) to develop a bidirectional solid-state power switch. At the outset, our efforts under the ARPA-E grant were focused on the development of, including the manufacturing process development for, a bidirectional insulated gate bipolar transistor (“BD-IGBT”).
At the outset, our efforts under the ARPA-E grant were focused on the development of, including the manufacturing process development for, a bidirectional insulated gate bipolar transistor (“BD-IGBT”). Although work on BD-IGBTs had previously been done by others in research labs, it was a technology that had not yet been commercialized.
Silicon is abundant and the production of silicon wafers is a large, global business with most manufacturers in Europe and Asia. 7 Table of Contents Business Strategy and Target Markets Once we have delivered engineering sample kits to potential customers and partners for testing and evaluation for use in their applications, we intend to engage these potential customers and partners for B-TRAN™ utilizing a strategic partnership model.
Silicon is abundant and the production of silicon wafers is a large, global business with most manufacturers in Europe and Asia. Business Strategy and Target Markets We utilize a strategic partnership model focused on leveraging the existing silicon processing infrastructure, allowing us to focus on the further development and commercialization of our B-TRAN™ technology.
We began to commercialize our B-TRAN™ technology in 2021 as we reached agreements with several potential customers and partners to participate in our B-TRAN™ test and evaluation program. See “Test and Evaluation Agreements” above. More recently, we entered into our first product development agreement and launched our first commercial product. See “Development Agreement” and “Product Launch” above.
See “Test and Evaluation Agreements” above. In late 2022, we entered into our first product development agreement and, in 2023, we launched our first two commercial products. See “Development Agreement” and “Product Launches” above.
At December 31, 2022 and 2021, the corresponding long-term liability for the estimated present value of future payments under the licensing agreements was $838,458 and $917,100, respectively.
We pay $50,000 annually under this agreement. At inception, we recorded an intangible asset and other long-term liability of $451,557 for the estimated present value of future payments under this licensing agreement. At December 31, 2023, the corresponding long-term liability for the estimated present value of future payments under these licensing agreements was $1,125,173.
We have also successfully confirmed the proof of concept of double-sided B-TRAN™ prototypes and packaged devices, validating the ability to make B-TRAN™ semiconductor power switches using conventional silicon semiconductor fabrication equipment and processes. Test results on the standard double-sided prototypes measured B-TRAN™ electrical losses at less than 50% that of conventional power switches such as silicon IGBTs.
We have also qualified a high-volume production foundry that successfully fabricated B-TRAN™ wafers, validating the ability to make B-TRAN™ semiconductor power switches using conventional silicon semiconductor fabrication equipment and processes.
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.
In Phase 1 of the program, we provided packaged B-TRAN™ devices, test kits and technical data to Stellantis for their evaluation. During the third quarter of 2023, we secured, and began Phase 2 of, this program.
We expect that these power semiconductor device providers will base their products on current technologies serving the unidirectional power switch market, although we continue to monitor the competitive landscape for offerings or potential offerings based on new technologies.
Many of these suppliers are now selling modules that utilize multiple conventional power switches to form a bidirectional circuit. We continue to monitor the competitive landscape for offerings or potential offerings based on new technologies with inherent bidirectionality.
Removed
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.
Added
We are in the process of commercializing our B-TRAN™ technology and launched our first two commercial products, the SymCool™ Power Module and SymCool™ IQ Intelligent Power Module, in 2023. We generated $161,483 in commercial revenue in the year ended December 31, 2023. Product Launches In early 2023, we launched our first commercial product, the SymCool™ Power Module.
Removed
The delivery of production-ready B-TRAN™-based modules is targeted for 2025. We expect to record modest revenue under this agreement in 2023.
Added
The SymCool™ IQ IPM builds on the bidirectional B-TRAN™ multi-die packaging design of our SymCool™ Power Module and adds an integrated intelligent driver optimized for bidirectional operation. This product targets several markets including renewable energy, energy storage, electric vehicle (“EV”) charging and other industrial applications. We expect initial sales of this product in late 2024.
Removed
Although work on BD-IGBTs had previously been done by others in research labs, it was a technology that had not yet been commercialized. A bidirectional circuit incorporates multiple IGBTs, which are power switches used in the process to convert power from one current form to another.
Added
In Phase 2 of the program, we collaborated with Stellantis and the program partners, including both the program’s packaging company and the organization building the initial drivetrain inverter, to supply B-TRAN™ devices for integration into the custom power module and inverter designs.
Removed
With the double-sided transistor behavior and low conduction losses measured and upgrades and improvements in the manufacturing process implemented, the next goal is to deliver packaged, prototype engineering samples for testing and evaluation by potential customers and partners. These samples will include a packaging design, incorporating input from a design for manufacturability review from a commercial packaging house.
Added
Also, as part of Phase 2, we provided Stellantis a comprehensive test plan for the testing required to achieve certification to automotive standards for B-TRAN™. The test plan was subsequently approved as submitted. In early 2024, we successfully completed Phase 2 of the program.
Removed
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.
Added
Phase 3 builds on the completion of all Phase 1 and 2 deliverables and therefore transitions to Stellantis’ production team. We are currently finalizing the scope of work for the next phase of the program with Stellantis.
Removed
We will pay $10,000 for each patent filing pending and $20,000 for each patent issued each year of the agreements, up to a maximum of $100,000 each year (i.e. five issued patents). All five patents associated with the agreements were issued.
Added
This phase is expected to include the extensive testing of the custom B-TRAN™ module to meet automotive certification standards enabling B-TRAN™ to be the core of the powertrain inverter for the automaker’s next-generation EVs. The objective of this phase is the completion and certification of a production-ready B-TRAN™-based module and is targeted for 2025.
Added
We recorded all of the revenue under Phase 1 and $61,483 of the revenue under Phase 2 in the year ended December 31, 2023.
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We will record the remaining Phase 2 revenue in the first quarter of 2024. 4 Table of Contents March 2024 Offering In March 2024, we issued and sold 1,366,668 shares of our common stock at a price of $7.50 per share and 633,332 pre-funded warrants to purchase shares of our common stock at a price of $7.499 per pre-funded warrant in an underwritten public offering (the “March 2024 Offering”).
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The pre-funded warrants have an exercise price of $0.001 per share. The underwriter has a 30-day option to purchase up to an additional 300,000 shares of our common stock at the offering price, less the underwriting discounts and commissions.
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The estimated net proceeds to us from the March 2024 Offering are $13.6 million or $15.7 million if the underwriter exercises its option to purchase additional shares in full. We intend to use the net proceeds from the March 2024 Offering to fund further commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes.
Added
Power semiconductors are mostly used in power conversion such as in changing voltages and frequencies, as well as changing direct current (“DC”) to alternating current (“AC”) and AC to DC.
Added
To enable a product to perform bidirectional power conversion, for each IGBT and diode used in a circuit, a second IGBT and diode must also be utilized. These additional components add voltage drops that affect the electrical efficiency of end-use products and generate heat that must be dissipated.
Added
With the double-sided transistor behavior and low conduction losses validated and upgrades and improvements in the manufacturing process implemented, we began shipping multiple packaged B-TRAN™ devices, a device driver, and a power test board housed in a safety enclosure to the large companies in our test and evaluation program in mid-2023.
Added
We began to commercialize our B-TRAN™ technology in 2021 as we reached agreements with several potential customers and partners to participate in our B-TRAN™ test and evaluation program. We delivered multiple packaged B-TRAN™ devices, a device driver, and a power test board housed in a safety enclosure to the large companies in our test and evaluation program in mid-2023.
Added
Per the agreement, we have an exclusive royalty-free license associated with semiconductor power switches which enhances our intellectual property portfolio. We pay $100,000 annually under this agreement. In 2023, we amended a 2021 license agreement which expires in February 2034. Per the agreement, we have an exclusive royalty-free license associated with semiconductor drive circuitry which enhances our intellectual property portfolio.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
63 edited+3 added−23 removed67 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
63 edited+3 added−23 removed67 unchanged
2022 filing
2023 filing
Biggest changeWe have also incurred losses in prior periods, expect to incur losses in the future, currently generate no product revenue and we may not achieve or maintain profitability in the future. We have a limited operating history that makes it difficult to evaluate our business. Our focus is on the development and commercialization of our B-TRAN™ technology.
Biggest changeWe have a limited operating history that makes it difficult to evaluate our business. Our focus is on the development and commercialization of our B-TRAN™ technology. We cannot say with certainty when we will successfully commercialize our B-TRAN™ technology, if ever, and thus we may not generate significant commercial revenue in the near future, or ever.
Our inability to engage such partners in a cost-effective manner, the loss of any fabrication development partner once engaged or industry supply chain disruptions may materially delay our development efforts and may have a materially adverse effect on our business, financial condition and results of operations.
Our inability to engage such partners in a cost-effective manner, the loss of any fabrication partner once engaged or industry supply chain disruptions may materially delay our development efforts and may have a materially adverse effect on our business, financial condition and results of operations.
We also may intentionally accelerate our development costs or may be faced with unexpected delays or challenges with development that could significantly impact our operating results. Significant adverse fluctuations in our research and development spending and other operating costs from period to period could adversely affect the market price for our common stock.
We also may intentionally accelerate our development and/or commercialization costs or may be faced with unexpected delays or challenges with development and/or commercialization that could significantly impact our operating results. Significant adverse fluctuations in our research and development spending and other operating costs from period to period could adversely affect the market price for our common stock.
In the event we are not able to continue operations, you will likely suffer a complete loss of your investment in our securities. Product development is an inherently uncertain process, and we may encounter unanticipated development challenges and may not be able to meet our product design and commercialization milestones.
In the event we are not able to continue operations, you will likely suffer a complete loss of your investment in our securities. Product development and commercialization is an inherently uncertain process, and we may encounter unanticipated development and/or commercialization challenges and may not be able to meet our product design and/or commercialization milestones.
We believe that equipment manufacturers often select their suppliers based on factors including long-term relationships and end user demand. Accordingly, we may have difficulty achieving design wins from equipment manufacturers as our products will be new entrants into the market.
We believe that equipment manufacturers often select their suppliers based on factors including long-term relationships and end user demand. Accordingly, we may have difficulty achieving design wins from equipment manufacturers as our products are, and new products will be, new entrants into the market.
If any of these competitors develop products to compete with our technology, we may not be able to commercialize our technology and our technology may not result in sufficient, or any, product and/or licensing revenue. We may not be able to use some or all of our net operating loss carryforwards to offset future income.
If any of these competitors develop products to compete with our technology, we may not be able to successfully commercialize our technology and our technology may not result in sufficient product revenue and/or sufficient, or any, licensing revenue. We may not be able to use some or all of our net operating loss carryforwards to offset future income.
Our research and development costs may vary significantly from quarter to quarter depending on the current phase of development and commercialization of our technology and the timing of pre-commercial semiconductor fabrication, commercial production and revenue generation and negotiations with potential strategic partners.
Our research and development costs may vary significantly from quarter to quarter depending on the current phase of development and commercialization of our technology and the timing of semiconductor fabrication, commercial production and revenue generation and negotiations with potential strategic partners.
We may face significant expenses and liability in connection with the protection of our intellectual property and, if we are unable to successfully protect our rights or resolve intellectual property conflicts with others, our business or financial condition could be adversely affected. 12 Table of Contents Our success depends in large part on our proprietary technology for which we seek protection under patent, copyright, trademark and trade secret laws in the United States and abroad.
We may face significant expenses and liability in connection with the protection of our intellectual property and, if we are unable to successfully protect our rights or resolve intellectual property conflicts with others, our business or financial condition could be adversely affected. 11 Table of Contents Our success depends in large part on our proprietary technology for which we seek protection under patent, copyright, trademark and trade secret laws in the United States and abroad.
In addition, global inflation has contributed to already higher incremental freight and component costs and such inflation may continue to result in higher costs. Logistics delays could result in delays to critical development activities.
In addition, global inflation has contributed to already higher incremental freight and component costs and such inflation may continue to result in higher costs. Logistics delays could result in delays to critical development and commercialization activities.
We, or our potential future licensees, must achieve design wins to obtain customers, although design wins achieved may not necessarily result in substantial sales or licensing revenue to us. We anticipate that our future designs will typically be integrated into systems by our potential customers.
We, or our potential future licensees, must achieve design wins to obtain customers, although design wins achieved may not necessarily result in substantial sales or licensing revenue to us. We anticipate that our current and future designs will typically be integrated into systems by our current and potential customers.
If we are unable to raise funds on acceptable terms if and as needed, we may be forced to curtail our operations or even cease operating altogether. Therefore, unfavorable macroeconomic conditions, particularly in the United States, including as a result of COVID-19 or inflation, and any resulting recession or slowed economic growth, could have an outsized negative impact on us.
If we are unable to raise funds on acceptable terms if and as needed, we may be forced to curtail our operations or even cease operating altogether. Therefore, unfavorable macroeconomic conditions, particularly in the United States, including as a result of inflation, and any recession or slowed economic growth, could have an outsized negative impact on us.
We have net operating loss carryforwards due to prior period losses generated before January 1, 2023 which if not utilized will begin to expire in 2031 for net operating loss carryforwards prior to 2018 and which do not expire for net operating loss carryforwards for 2018 and thereafter.
We have net operating loss carryforwards due to prior period losses generated before January 1, 2024 which if not utilized will begin to expire in 2031 for net operating loss carryforwards prior to 2018 and which do not expire for net operating loss carryforwards for 2018 and thereafter.
Continued or further disruptions to the supply chain for semiconductors and related electronic components could delay our critical development and commercialization activities and/or result in significantly higher costs for us for semiconductor components and/or semiconductor foundry and related services.
Disruptions to the supply chain for semiconductors and related electronic components could delay our critical development and commercialization activities and/or result in significantly higher costs for us for semiconductor components and/or semiconductor foundry and related services.
We can give no assurance that we will be able to identify and secure the necessary expertise at the appropriate time or at all. 15 Table of Contents Our operating results for any quarterly reporting period may fluctuate significantly depending on the timing and pace of our development spending and costs to commercialize our technology.
We can give no assurance that we will be able to identify and secure the necessary expertise at the appropriate time or at all. Our operating results for any quarterly reporting period may fluctuate significantly depending on the timing and pace of our development spending and costs to commercialize our technology.
The trading market for our common stock may be influenced by the research and reports that industry or securities analysts publish about us or our business. In 2022, one securities analyst published reports on us.
The trading market for our common stock may be influenced by the research and reports that industry or securities analysts publish about us or our business. In 2023, one securities analyst published reports on us.
See also “— Our semiconductor fabrication partners may be unable to successfully and cost-effectively develop and implement new process steps necessary for bidirectional semiconductor device development at scale. ” 13 Table of Contents Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs.
See also “— Our semiconductor fabrication partners may be unable to successfully and cost-effectively develop and implement new process steps necessary for bidirectional semiconductor device fabrication at scale. ” 12 Table of Contents Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs.
If we do not obtain additional grants or our efforts to obtain additional grants take longer than expected to be successful, we will need to rely on other means to fund our development. We are highly dependent on the services of key members of our management and technical teams.
If we do not obtain additional grants or our efforts to obtain additional grants take longer than expected to be successful, we will need to rely on other means to fund our development. 13 Table of Contents We are highly dependent on the services of key members of our management and technical teams.
Our stock price may be significantly affected by factors such as, among others: ● variations in the volume of trading activity; ● actual or anticipated fluctuations in our liquidity, financial condition and operating results; 16 Table of Contents ● quarterly and yearly operating results compared to market expectations; ● quarterly and yearly operating results of other companies in our industry compared to market expectations; ● general trends in markets we expect to serve; ● competition from existing products or new products that may emerge; ● future announcements concerning our business or our competitors’ businesses; ● additions or departures of key management or other technical personnel; ● the public’s reaction to our press releases, other public announcements and filings with the Securities and Exchange Commission (the “SEC”); ● issuances or sales, or expected issuances or sales, of our capital stock; ● disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; ● litigation involving us, our general industry or both; and ● changes in state or federal regulations affecting us and our industry.
Our stock price may be significantly affected by factors such as, among others: ● variations in the volume of trading activity; ● actual or anticipated fluctuations in our liquidity, financial condition and operating results; ● quarterly and yearly operating results compared to market expectations; ● quarterly and yearly operating results of other companies in our industry compared to market expectations; ● general trends in markets we expect to serve; ● competition from existing products or new products that may emerge; ● future announcements concerning our business or our competitors’ businesses; ● additions or departures of key management or other technical personnel; ● the public’s reaction to our press releases, other public announcements and filings with the SEC; ● issuances or sales, or expected issuances or sales, of our capital stock; ● disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; ● litigation involving us, our general industry or both; and ● changes in state or federal regulations affecting us and our industry.
Therefore, you should not expect to receive cash dividends on our common stock. 17 Table of Contents Shares eligible for future sale, including warrants and options exercisable into shares of our common stock, may cause dilution to our existing stockholders and may adversely affect the market for our common stock.
Therefore, you should not expect to receive cash dividends on our common stock. Shares eligible for future sale, including warrants and options exercisable into shares of our common stock, may cause dilution to our existing stockholders and may adversely affect the market for our common stock.
Accordingly, we cannot predict that products incorporating our technology will be accepted on a scale sufficient to support development of mass markets for them. 10 Table of Contents Our semiconductor fabrication partners may be unable to successfully and cost-effectively develop and implement new process steps necessary for bidirectional semiconductor device development at scale.
Accordingly, we cannot predict that products incorporating our technology will be accepted on a scale sufficient to support the development of mass markets for them. Our semiconductor fabrication partners may be unable to successfully and cost-effectively develop and implement new process steps necessary for bidirectional semiconductor device fabrication at scale.
While the manufacturing of B-TRAN™ devices uses conventional equipment and process steps, there is heightened risk in the fabrication process due to the handling and processing of both sides of the wafer and achieving the required front to back alignment of the features.
While the fabrication of B-TRAN™ wafers uses conventional equipment and process steps, there is heightened risk in the fabrication process due to the handling and processing of both sides of the wafer and achieving the required front to back alignment of the features.
Macro-economic conditions in the United States and abroad may result in a tightening of the credit markets and/or less capital available for small public companies, which may make it more difficult for us to raise capital on commercially reasonable terms or at all.
Macro-economic conditions in the United States and abroad, like those currently in effect, may result in a tightening of the credit markets and/or less capital available for small public companies, which may make it more difficult for us to raise capital on commercially reasonable terms or at all.
If an ownership change has occurred or does occur in the future, our ability to utilize our net operating losses to offset income if we attain profitability may be limited. Risks Related to Owning Our Common Stock The public market for our common stock may be volatile.
If an ownership change has occurred or does occur in the future, our ability to utilize our net operating losses to offset income if we attain profitability may be limited. 14 Table of Contents Risks Related to Owning Our Common Stock The public market for our common stock may be volatile.
Further, failure to adequately fabricate and timely ship our prototypes and, when commercially available, products to potential customers could lead to delays in their testing and evaluation and/or adoption of our technology, lost potential revenue, failure to meet customer demand and strained relationships with customers.
Further, failure to adequately fabricate and timely ship our products to customers could lead to delays in their testing and evaluation and/or adoption of our technology, lost potential revenue, failure to meet customer demand and strained relationships with customers.
At February 28, 2023, we had 1,637,584 potentially dilutive shares outstanding, exclusive of pre-funded warrants to purchase shares of common stock that are considered outstanding common shares and included in our computation of basic earnings per share, and we may grant additional options, restricted stock units, performance stock units, other stock-based awards and/or warrants in the future.
At February 28, 2024, we had 1,640,274 potentially dilutive shares outstanding, exclusive of pre-funded warrants to purchase shares of common stock that are considered outstanding common shares and included in our computation of basic earnings per share, and we may grant additional options, restricted stock units, performance stock units, other stock-based awards and/or warrants in the future.
Although we intend to initially employ a product sales strategy for products incorporating our B-TRAN™ technology, we also expect to employ a licensing strategy for the production and potentially the sale of our future B-TRAN™ products in certain instances.
Although we are initially employing a product sales strategy for products incorporating our B-TRAN™ technology, we also expect to employ a licensing strategy for the production and potentially the sale of our B-TRAN™ products in certain instances.
Future facility closures and/or disruptions may occur if additional COVID-19 breakouts occur in areas where we rely on third parties. We and certain of our suppliers also rely on international shipping to transport wafers, circuit boards and other electronic components to us and our other suppliers.
Future facility closures and/or disruptions may occur if additional pandemic breakouts or geopolitical events occur in areas where we rely on third parties. We and certain of our suppliers also rely on international shipping to transport wafers, circuit boards and other electronic components to us and our other suppliers.
We currently have a test and evaluation program whereby certain potential customers will be testing our B-TRAN™ technology for use in their applications. We can provide no assurance that participation by a potential customer in our test and evaluation program will result in a design win.
We currently have a test and evaluation program whereby program participants test our B-TRAN™ technology for use in their applications. We can provide no assurance that participation by a potential customer in our test and evaluation program will result in a design win.
Further, the award of grants is a subjective process and government agencies often do not provide detailed feedback on why a grant was not received. A factor that could negatively impact our ability to obtain government grants is that our technology is not yet commercialized.
Further, the award of grants is a subjective process and government agencies often do not provide detailed feedback on why a grant was not received. A factor that could negatively impact our ability to obtain government grants is that our technology is in the early stages of commercialization.
We currently rely upon the facilities of our semiconductor fabricator partners in the western United States, including California, to support our business as well as vendors throughout the United States and abroad to supply silicon wafers and other materials and processing and engineering capabilities and expertise.
We currently rely upon the facilities of our semiconductor fabricator and packaging partners in the United States and abroad to support our development and production as well as vendors throughout the United States and abroad to supply silicon wafers and other materials and processing and engineering capabilities and expertise.
Our ability to manage such relationships and timely replace such partners, if necessary, is critical to our success. The loss of and our failure to timely replace third-party resources, fabrication partners and other suppliers within the power switch ecosystem, should that become necessary, could materially and adversely affect our results of operations and relations with our partners and future customers.
The loss of and our failure to timely replace third-party resources, fabrication partners and other suppliers within the power switch ecosystem, should that become necessary, could materially and adversely affect our results of operations and relations with our partners and future customers.
We have been funding operations primarily through the sale of common stock. We currently generate no product revenue, although we expect initial modest product revenue in late 2023, and, in order to fund our operations until we are profitable, we may need to raise additional funds and such funds may not be available on commercially acceptable terms, if at all.
We have been funding operations primarily through the sale of common stock. We currently generate limited commercial revenue, and, in order to fund our operations until we are profitable, we may need to raise additional funds and such funds may not be available on commercially acceptable terms, if at all.
At February 28, 2023, we had 5,924,680 shares of common stock outstanding and 253,828 pre-funded warrants with an exercise price of $0.001 that are included in our computation of basic earnings per share.
At February 28, 2024, we had 6,005,031 shares of common stock outstanding and 253,828 pre-funded warrants with an exercise price of $0.001 that are included in our computation of basic earnings per share.
Prototype and other pre-commercial, as well as product, development and testing may be subject to unanticipated and significant delays, expenses and technical or other problems. We cannot guarantee that we will successfully achieve our milestones within our planned timeframe or ever. We have developed and tested prototypes of B-TRAN™ devices.
Prototype and product development and testing may be subject to unanticipated and significant delays, expenses and technical or other problems. We cannot guarantee that we will successfully achieve our milestones within our planned timeframe or ever. We have developed and tested discrete B-TRAN™ devices and SymCool™ power modules.
Overall, there is a high degree of uncertainty in obtaining grants, particularly for technologies that have not been demonstrated with commercial devices, and we can provide no assurance that we will be able to obtain additional government grants to offset a significant, or any, portion of our development spending.
Overall, there is a high degree of uncertainty in obtaining grants and we can provide no assurance that we will be able to obtain additional government grants to offset a significant, or any, portion of our development spending.
In addition, if one or more analysts issues an adverse opinion regarding our stock, our stock price would likely decline. ITEM 1B: UNRESOLVED STAFF COMMENTS None.
In addition, if one or more analysts issues an adverse opinion regarding our stock, our stock price would likely decline.
Two-sided wafer processing and handling is necessary as the B-TRAN™, unlike conventional power semiconductor devices, is a two-sided bidirectional device. In addition, the cost to manufacture a B-TRAN™ will be impacted by the number of process steps, the processing time and the size of the wafer.
Two-sided wafer processing and handling is necessary as the B-TRAN™, unlike conventional power semiconductor devices, is a two-sided bidirectional device. In addition, the cost to manufacture a B-TRAN™ will be impacted by the number of process steps, the processing time and the size of the wafer. B-TRAN™ fabrication currently utilizes smaller 6-inch diameter wafers resulting in fewer die per wafer.
During the years ended December 31, 2021 and 2022, international shipping to the U.S. was disrupted and delayed due to congestion in west coast ports and other causes. Continued or additional delays in shipping may cause us or our suppliers to have to use more expensive air freight or other more costly methods.
During the COVID-19 outbreak, international shipping to the U.S. was disrupted and delayed due to congestion in west coast ports and other causes. Future delays in shipping may cause us or our suppliers to have to use more expensive air freight or other more costly methods.
We previously received grant funds from the United States for the development of a bidirectional switch. In certain instances, the United States may obtain title to inventions related to this effort. If we were to lose title to those inventions, we may have to pay to license them from the United States in order to manufacture the inventions.
In certain instances, the United States may obtain title to inventions related to this effort. If we were to lose title to those inventions, we may have to pay to license them from the United States in order to manufacture the inventions.
In 2021, 2022 and thus far in 2023, there have been global industry-wide logistics challenges, including those caused by COVID-19 outbreaks. While these logistics challenges have caused some disruption in our business, these disruptions have been manageable and their impact on us has not been significant to us to date.
In recent years, there have been global industry-wide logistics challenges, including those caused by COVID-19 outbreaks. While these logistics challenges have caused some disruption in our business, these disruptions were manageable and their impact on us was not significant.
Since inception, we have sustained approximately $87.1 million in net losses and we had net losses for the years ended December 31, 2022 and 2021 of approximately $7.2 million and $4.8 million, respectively.
Since inception, we have sustained approximately $97.0 million in net losses and we had net losses for the years ended December 31, 2023 and 2022 of approximately $10.0 million and $7.2 million, respectively.
The marketing and sale of our future products to end user customers may be conducted by us, future licensees of our technology or a combination thereof. Consequently, commercial success of our products may depend, to a great extent, on the efforts of others. We may not be able to identify, maintain or establish appropriate relationships in the future.
The marketing and sale of our future products to end user customers may be conducted by us, distributors, sales representatives, future licensees of our technology or likely a combination thereof. Consequently, the commercial success of our products may depend, to a great extent, on the efforts of others.
More generally, the future commercialization of products using our technology and designs may also be adversely affected by many factors not within our control, including: ● the willingness of market participants to try new products incorporating our technology and the perceptions of these market participants of the safety, reliability, functionality and cost effectiveness of these products; ● the emergence of newer, possibly more effective technologies; ● the future cost and availability of the raw materials and components needed to manufacture and use products incorporating our technology; and ● the adoption of new regulatory or industry standards that may adversely affect the use or cost of products incorporating our technology.
Driver development is subject to similar risks as the B-TRAN™ prototype and product development including being subject to unanticipated and significant delays, expenses and technical or other problems. 9 Table of Contents More generally, the commercialization of products using our technology and designs may also be adversely affected by many factors not within our control, including: ● the willingness of market participants to try new products incorporating our technology and the perceptions of these market participants of the safety, reliability, functionality and cost effectiveness of these products; ● the emergence of newer, possibly more effective technologies; ● the cost and availability of the raw materials and components needed to manufacture and use products incorporating our technology; and ● the adoption of new regulatory or industry standards that may adversely affect the use or cost of products incorporating our technology.
If we or our potential future licensees are not successful in achieving design wins, or if we or our potential future licensees do achieve design wins but the customers’ systems that utilize our designs are not successful, our business, financial condition, and results of operations could be materially and adversely impacted.
If we or our potential future licensees are not successful in achieving design wins, or if we or our potential future licensees do achieve design wins but the customers’ systems that utilize our designs are not successful, our business, financial condition, and results of operations could be materially and adversely impacted. 10 Table of Contents Even if we, or our potential future licensees, achieve design wins, the timing of generation of sales and/or licensing revenue will be dependent on the customer’s product design cycle.
For example, if an 8-inch wafer was used it would have four times the area and thus could produce four times as many die as a 4-inch wafer, or almost two and one half times the area and produce almost two and one half times as many die as a 6-inch wafer, resulting in a lower cost per die.
As a result, the cost per die is higher than if larger diameter wafers were utilized. For example, if an 8-inch wafer was used it would have almost two and one half times the area and produce almost two and one half times as many die as a 6-inch wafer, resulting in a lower cost per die.
We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.
As a result, only appreciation in the price of our common stock, which may never occur, will provide a return to stockholders. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.
If our semiconductor fabrication partners are unable to successfully and cost-effectively develop and implement new process steps necessary for bidirectional semiconductor device development at the prototype stage or at scale, our business, financial condition and results of operations would be materially and adversely affected. There are a limited number of semiconductor fabrication development facilities in the United States and abroad.
If we, in partnership with our semiconductor fabrication partners, are unable to successfully and cost-effectively develop and implement new process steps necessary for bidirectional semiconductor device fabrication at scale or encounter unforeseen issues in transitioning to larger diameter wafers, our business, financial condition and results of operations would be materially and adversely affected.
There are also a limited number of well-capitalized semiconductor fabricators working with the small diameter wafers necessary for our current development.
There are also a limited number of well-capitalized semiconductor fabricators working with the smaller diameter wafers currently utilized by us for development and production.
In that event, the trading price of our common stock could decline, and you may lose all or part of your investment in our shares.
In that event, the trading price of our common stock could decline, and you may lose all or part of your investment in our shares. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed herein.
These third-party resources include experts in power semiconductor switches and drivers, semiconductor fabrication suppliers, and other resources within the power switch ecosystem. The loss of one or more of our third-party resources could have a material adverse effect on the timing of our development efforts which could, in turn, result in our business and results of operations being adversely affected.
The loss of one or more of our third-party resources could have a material adverse effect on the timing of our development and/or commercialization efforts which could, in turn, result in our business and results of operations being adversely affected. We also rely on our semiconductor fabrication partners and packaging firms to develop commercial devices and modules.
We cannot predict whether future prototypes of the B-TRAN™ and B-TRAN™ products will achieve results consistent with our prototype testing to date, expectations, third-party simulations or the expectations of our potential customers and/or licensees.
We cannot predict whether future prototypes of, or actual, B-TRAN™ products will achieve results consistent with our expectations, third-party simulations or the expectations of our potential customers and/or licensees. A prototype or product could cost significantly more than expected or the prototype or product design fabrication process could uncover problems that are not consistent with our expectations.
We can give no assurance that any such third parties will focus adequate resources on selling our products or will be successful in selling them. In addition, these third parties may require customization of our designs or other concessions that could reduce the potential profitability of these relationships.
We may not be able to identify, maintain or establish appropriate relationships in the future. We can give no assurance that any such third parties will focus adequate resources on selling our products or will be successful in selling them.
We also rely on our semiconductor fabrication partners and packaging firms to develop prototype and, in the future, commercial devices and modules. There can be no assurance that these manufacturing partners will provide devices and/or modules in a timely and cost-efficient manner, provide quality devices and/or modules or otherwise meet our needs and expectations.
There can be no assurance that these manufacturing partners will provide devices and/or modules in a timely and cost-efficient manner, provide quality devices and/or modules or otherwise meet our needs and expectations. Our ability to manage such relationships and timely replace such partners, if necessary, is critical to our success.
At December 31, 2022, we had no shares of preferred stock outstanding. We have not paid dividends in the past and have no immediate plans to pay dividends. We plan to reinvest all of our earnings, to the extent we have earnings, in order to market our products and to cover operating costs and to otherwise become and remain competitive.
We plan to reinvest all of our earnings, to the extent we have earnings, in order to market our products and to cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future.
In addition, the sales cycle into certain potential target markets such as the automotive market are typically very long. Our future growth could experience material and prolonged adverse effects if we fail to achieve design wins or if the design wins do not result in substantial revenue for us within a reasonable timeframe.
Our future growth could experience material and prolonged adverse effects if we fail to achieve design wins or if the design wins do not result in substantial revenue for us within a reasonable timeframe. We previously received grant funds from the United States for the development of a bidirectional switch.
We can give no assurance that we could find satisfactory replacements for these individuals on terms that would not be unduly expensive or burdensome to us. We do not currently carry a key-man life insurance policy that would assist us in recouping our costs in the event of the death or disability of any of these persons.
We can give no assurance that we could find satisfactory replacements for these individuals within a reasonable time or on terms that would not be unduly expensive or burdensome to us.
Even if we, or our potential future licensees, achieve design wins, the timing of generation of sales and/or licensing revenue will be dependent on the customer’s product design cycle. There may be significant time between when we, or our potential future licensees, achieve design wins and when we generate initial sales and/or licensing revenue from these design wins.
There may be significant time between when we, or our potential future licensees, achieve design wins and when we generate initial sales and/or licensing revenue from these design wins. Significant delays in our customers’ product design cycles, or long product design cycles by these customers, could materially and adversely affect our business, financial condition and result of operations.
If we are unable to raise additional funds if and when needed, we may be required to delay, limit, reduce or terminate our development and commercialization efforts. Our ability to raise capital is limited by the Securities Act and SEC rules and regulations.
If we are unable to raise additional funds if and when needed, we may be required to delay, limit, reduce or terminate our development and commercialization efforts. 16 Table of Contents Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable.
In addition, as a small team we will need additional commercial and semiconductor expertise to successfully develop products and commercialize our technology.
We do not currently carry a key-man life insurance policy that would assist us in recouping our costs in the event of the death or disability of any of these persons. In addition, as a small team we will need additional commercial and semiconductor expertise to successfully develop products and further commercialize our technology.
Furthermore, in 2021,2022 and thus far in 2023 there has been insufficient fabrication capacity for, and shortages of, certain semiconductor devices and related electronic components, although this has not materially impacted us to date.
There are a limited number of semiconductor fabrication development facilities in the United States and abroad. Furthermore, from time to time there has been insufficient fabrication capacity for, and shortages of, certain semiconductor devices and related electronic components.
A prototype or product could cost significantly more than expected or the prototype or product design fabrication process could uncover problems that are not consistent with our expectations. Prototypes of B-TRAN™ devices are a material part of our business plan, and if they are not proven to be successful, our business and prospects would be harmed.
Prototypes of B-TRAN™ devices and new product introductions are a material part of our business plan, and if they are not proven to be successful, our business and prospects would be harmed. In addition, for both testing and commercialization purposes, the B-TRAN™ needs to be packaged and paired with an efficient double-sided driver.
The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed herein. 9 Table of Contents Risks Related to the Company We lack an established operating history on which to evaluate our business and determine if we will be able to execute our business plan.
Risks Related to the Company We lack an established operating history on which to evaluate our business and determine if we will be able to execute our business plan. We have also incurred losses in prior periods, expect to incur losses in the future, currently generate limited commercial revenue and we may not achieve or maintain profitability in the future.
Significant delays in our customers’ product design cycles, or long product design cycles by these customers, could materially and adversely affect our business, financial condition and result of operations. 11 Table of Contents Once a manufacturer chooses a component for use in a particular system, it is likely to retain that component for the life of that system.
Once a manufacturer chooses a component for use in a particular system, it is likely to retain that component for the life of that system. In addition, the sales cycle into certain of our target markets, such as the automotive market, are typically very long.
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We cannot say with certainty when we will successfully commercialize our B-TRAN™ technology, if ever, and thus we may not generate any product revenue in the near future, or ever.
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In addition, these third parties may require customization of our designs or other concessions that could reduce the potential profitability of these relationships.
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In addition, for both testing and commercialization purposes, the B-TRAN™ will need to be packaged and paired with an efficient double-sided driver. The driver development is subject to similar risks as the B-TRAN™ prototype and product development including being subject to unanticipated and significant delays, expenses and technical or other problems.
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These third-party resources include experts in power semiconductor switches and drivers, semiconductor fabrication suppliers, and other resources within the power switch ecosystem.
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To date, B-TRAN™ prototypes under development have utilized smaller 4-inch and 5-inch diameter wafers resulting in fewer die per wafer. As a result, the cost per die is higher than if larger diameter wafers were utilized.
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At December 31, 2023, we had no shares of preferred stock outstanding. 15 Table of Contents We have not paid dividends in the past and have no immediate plans to pay dividends.
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Despite our actions to mitigate these impacts, we may be impacted by global logistics challenges in 2023. Our business, including our supply chain, liquidity, financial condition and financial results may be materially adversely disrupted and impacted due to the COVID-19 pandemic.
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In 2020, 2021 and 2022, the COVID-19 pandemic drove global uncertainty and disruption and spread throughout the geographic region in which we operate our business and the geographic regions where our suppliers, business partners and potential customers are located.
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While the COVID-19 pandemic caused some disruption to our business in 2020, the COVID-19 pandemic has not had a material adverse impact on our operations to date.
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Potential financial impacts associated with the COVID-19 pandemic include, but are not limited to, delays in critical development and commercialization activities, including delays due to supply chain disruptions, and temporary and potential incremental costs associated with mitigating the effects of the COVID-19 pandemic, including increased freight and logistics costs and other expenses.
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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 any effects on our results of operations for 2023 and thereafter.
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Furthermore, we rely upon the facilities of our semiconductor fabricator partners in the western United States, including California, to support our business as well as vendors throughout the United States and abroad to supply silicon wafers and other materials and processing and engineering capabilities and expertise.
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Accordingly, a significant portion of our supply chain is located in California and other locations domestically and abroad where the COVID-19 impacts have been in the past, and in the future may be, significant.
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We may also increasingly utilize partners abroad and the impact of the COVID-19 pandemic on these partners, and thereby to us, cannot be predicted at this time.
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The COVID-19 pandemic has resulted in significant governmental measures being implemented to control the spread of the virus and its related variants, including, among others, restrictions on manufacturing and the movement of employees in many states or regions of these countries.
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As a result of COVID-19 and the measures designed to contain the spread of the virus and its related variants, our suppliers may not have the materials, capacity, or capability to supply us the components needed to continue our development efforts according to our schedule.
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Any reduction in manufacturing or supply capacity may reduce or even halt the supply of necessary components needed for us to continue these activities. Further, there may be logistics issues, including our ability and our supply chain’s ability to operate, and transportation demands that may cause further delays.
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Item 2. Properties
Properties — owned and leased real estate
1 edited+0 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
1 edited+0 added−0 removed0 unchanged
2022 filing
2023 filing
Biggest changeITEM 2: PROPERTIES Our principal office is located at 5508 Highway 290 West, Suite 120, Austin, Texas 78735. We lease 4,070 square feet of office and laboratory space. The lease commenced on June 1, 2021 and, as of December 31, 2022, the remaining term of the lease is 44 months.
Biggest changeITEM 2: PROPERTIES Our principal office is located at 5508 Highway 290 West, Suite 120, Austin, Texas 78735. We lease 4,070 square feet of office and laboratory space. The lease commenced on June 1, 2021 and, as of December 31, 2023, the remaining term of the lease is 32 months.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+0 added−0 removed2 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+0 added−0 removed2 unchanged
2022 filing
2023 filing
Biggest changePurchases of Equity Securities by the Issuer None. ITEM 6: [Reserved]
Biggest changeRecent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer None.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the Nasdaq Capital Market under the symbol “IPWR.” As of March 24, 2023, we had 23 shareholders of record.
ITEM 5: MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the Nasdaq Capital Market under the symbol “IPWR.” As of March 28, 2024, we had 22 shareholders of record.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
34 edited+26 added−18 removed16 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
34 edited+26 added−18 removed16 unchanged
2022 filing
2023 filing
Biggest changeContractual Obligations and Commitments Lease In March 2021, we 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.
Biggest changeWe intend to use the net proceeds from the March 2024 Offering to fund further commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes. 22 Table of Contents Contractual Obligations and Commitments Lease In March 2021, we entered into a lease agreement for 4,070 square feet of office and laboratory space located in Austin, Texas.
We account for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.
Income Taxes. We account for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.
Our intangible assets are composed of patents, which are recorded at cost, and other intangible assets, which are recorded at cost plus the estimated present value of all future payments associated with the other intangible assets. We capitalize third-party legal costs and filing fees, if any, associated with obtaining patents or other intangible assets.
Our intangible assets are composed of patents and trademarks, which are recorded at cost, and other intangible assets, which are recorded at cost plus the estimated present value of all future payments associated with the other intangible assets. We capitalize third-party legal costs and filing fees, if any, associated with obtaining patents, trademarks or other intangible assets.
ITEM 7: 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 audited financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
ITEM 7: 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 audited financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
We are solely focused on the further development and commercialization of our 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 $203,269 and $576,399, respectively, in the years ended December 31, 2022 and 2021, respectively.
We are solely focused on the further development and commercialization of our 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 $37,388 and $203,269, respectively, in the years ended December 31, 2023 and 2022, respectively.
Operating activities in the year ended December 31, 2022 resulted in cash outflows of $6,383,914, which were due to the net loss for the period of $7,189,350 and unfavorable balance sheet timing of $458,479, partly offset by non-cash items including stock-based compensation of $975,801, depreciation and amortization of $187,077, stock issued for services of $100,100 and the write-off of long-lived assets of $937.
Operating activities in the year ended December 31, 2022 resulted in cash outflows of $6,383,914, which were due to the net loss for the period of $7,189,350 and unfavorable balance sheet timing of $516,931, partly offset by non-cash items including stock-based compensation of $975,801, depreciation and amortization of $187,077, stock issued for services of $100,100, amortization of right of use asset of $58,452 and the write-off of long-lived assets of $937.
For the other intangible assets, we amortize the asset over the 17-year term of the underlying agreements. 21 Table of Contents Impairment of Long-Lived Assets .
For the other intangible assets, we amortize the asset over the 17-year term of the underlying agreements. Impairment of Long-Lived Assets .
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 and launched our first commercial product, the SymCool™ Power Module, in January 2023.
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 and launched our first two commercial products, the SymCool™ Power Module and SymCool™ IQ Intelligent Power Module, in 2023.
Once the patent asset has been placed in service, we amortize these costs over the shorter of the asset’s legal life, generally 20 years from the initial filing date, or its estimated economic life using the straight-line method.
Once the patent asset has been placed in service, we amortize these costs over the shorter of the asset’s legal life, generally 20 years from the initial filing date, or its estimated economic life using the straight-line method. Trademarks are not amortized as they have an indefinite useful life.
In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. We determined that there were immaterial impairments in the value of long-lived assets during the years ended December 31, 2022 and 2021. Income Taxes.
In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. We determined that there was no impairment in the value of long-lived assets during the year ended December 31, 2023 and immaterial impairments in the value of long-lived assets during the year ended December 31, 2022.
Financing activities in the year ended December 31, 2022 resulted in cash outflows of $127,872 for the payment of withholding taxes on the vesting of restricted stock units.
Financing activities in the years ended December 31, 2023 and 2022 resulted in cash outflows of $216,264 and $127,872, respectively, for the payment of withholding taxes on the vesting of restricted stock units.
Our net working capital and long-term debt at December 31, 2022 were $16,453,606 and $0, respectively. We believe that our cash and cash equivalents on hand will be sufficient to meet our ongoing liquidity needs for at least the next 12 months.
As of December 31, 2023 and 2022, we had cash and cash equivalents of $8,474,835 and $16,345,623, respectively. Our net working capital and long-term debt at December 31, 2023 were $8,178,282 and $0, respectively. We believe that our cash and cash equivalents on hand will be sufficient to meet our ongoing liquidity needs for at least the next 12 months.
We expect an increase in cash outflows from operating activities in 2023 as we commercialize our B-TRAN™ technology, including the launch of our first two commercial products. Investing activities in the years ended December 31, 2022 and 2021 resulted in cash outflows of $312,740 and $236,935, respectively.
We expect an increase in cash outflows from operating activities in 2024 as we further commercialize our B-TRAN™ technology. Investing activities in the years ended December 31, 2023 and 2022 resulted in cash outflows of $522,946 and $312,740, respectively.
We have concluded that it is more likely than not that we will not have sufficient foreseeable taxable income within the carryforward period as applicable and permitted by current law to allow for the utilization of certain of the deductible amounts generating the deferred tax assets; therefore, a full valuation allowance has been established to reduce the net deferred tax assets to zero at December 31, 2022 and 2021.
Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. 20 Table of Contents We have concluded that it is more likely than not that we will not have sufficient foreseeable taxable income within the carryforward period as applicable and permitted by current law to allow for the utilization of certain of the deductible amounts generating the deferred tax assets; therefore, a full valuation allowance has been established to reduce the net deferred tax assets to zero at December 31, 2023 and 2022.
The grant revenues related primarily 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”).
(“DTI”) to supply B-TRAN™ devices as part of a contract awarded to DTI by the United States Naval Sea Systems Command for the development and demonstration of a B-TRAN™ enabled high efficiency direct current solid-state circuit breaker.
We cannot assure you that our research and development will be successful, our technology will be adopted, that we will ever earn revenues sufficient to support our operations or that we will ever be profitable.
Trends, Events and Uncertainties Research and Development Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our research and development will be successful, our technology will be adopted, that we will ever earn revenues sufficient to support our operations or that we will ever be profitable.
Future minimum payments under the lease are as follows: For the Year Ended December 31, 2023 $ 78,517 2024 80,552 2025 82,587 2026 56,132 Total lease payments 297,788 Less: imputed interest (30,204) Total lease liability $ 267,584 Licensing Agreements In 2015, we entered into licensing agreements which expire in February 2033.
Future minimum payments under the lease are as follows: For the Year Ended December 31, 2024 $ 80,552 2025 82,587 2026 56,132 Total lease payments 219,271 Less: imputed interest (16,284 ) Total lease liability $ 202,987 Licensing Agreements In 2015, we entered into a licensing agreement which expires in February 2033.
For the year ended December 31, 2022, cash outflows for the acquisition of intangible assets were $130,089 and capital expenditures were $182,651, primarily for lab testing equipment. .For the year ended December 31, 2021, cash outflows for the acquisition of intangible assets were $192,668 and capital expenditures were $44,267.
For the year ended December 31, 2023, cash outflows for the acquisition of intangible assets were $282,121 and capital expenditures were $240,825. For the year ended December 31, 2022, cash outflows for the acquisition of intangible assets were $130,089 and capital expenditures were $182,651. Our capital expenditures in both years were primarily for lab testing equipment.
Net Loss. Our net loss increased by $2,419,081, or 51%, to $7,189,350 for the year ended December 31, 2022 from a net loss of $4,770,269 for the year ended December 31, 2021 for the reasons discussed above. Liquidity and Capital Resources In 2022, we generated grant revenue only.
Our net loss increased by $2,764,670 or 38%, to $9,954,020 for the year ended December 31, 2023 from a net loss of $7,189,350 for the year ended December 31, 2022 for the reasons discussed above. Liquidity and Capital Resources In 2023, we generated commercial revenue of $161,483 and grant revenue of $37,388.
Research and development expenses increased by $1,439,033, or 75%, to $3,366,776 in the year ended December 31, 2022 from $1,927,743 in the year ended December 31, 2021.
Research and development expenses increased by $2,376,435, or 71%, to $5,743,211 in the year ended December 31, 2023 from $3,366,776 in the year ended December 31, 2022.
General and administrative expenses increased by $715,427, or 30%, to $3,123,852 in the year ended December 31, 2022 from $2,408,425 in the year ended December 31, 2021.
General and Administrative Expenses. General and administrative expenses increased by $409,531, or 13%, to $3,533,383 in the year ended December 31, 2023 from $3,123,852 in the year ended December 31, 2022.
Critical Accounting Estimates The following discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America.
We intend to use the net proceeds from the March 2024 Offering to fund further commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes. 19 Table of Contents Critical Accounting Estimates The following discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America.
Our loss from operations for the year ended December 31, 2022 was $7,342,959 or 51% higher than the $4,848,975 loss from operations for the year ended December 31, 2021, driven by the factors discussed above. Other Income. Other income increased by $74,903 to $153,609 for the year ended December 31, 2022 from $78,706 for the year ended December 31, 2021.
Our loss from operations for the year ended December 31, 2023 was $10,352,088 or 41% higher than the $7,342,959 loss from operations for the year ended December 31, 2022, driven by the factors discussed above. Interest Income, Net.
We are accruing interest for future payments related to the issued patents associated with the agreement.
We are accruing interest for future payments related to these agreements.
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.
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.
In addition, we are required to pay our 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. We recognized a right of use asset of $339,882 and a corresponding lease liability for this lease upon lease commencement.
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, we are required to pay our proportionate share of operating costs for the building under this triple net lease. The lease contains a 5-year fair market renewal option.
We expect higher sales and marketing expenses in 2023 as we engage more broadly with prospective customers and launch our first two commercial products. Loss from Operations.
We expect higher sales and marketing expenses in 2024 as we expand our engagement with prospective customers and support the roll-out of our SymCool™ and SymCool™ IQ products. 21 Table of Contents Loss from Operations.
Operating activities in the year ended December 31, 2021 resulted in cash outflows of $4,280,864, which were due to the net loss for the period of $4,770,269, unfavorable balance sheet timing of $137,573 and a non-cash gain on the forgiveness of our PPP Loan of $91,407, partly offset by other non-cash items including stock-based compensation of $352,313, stock issued for services of $207,980, depreciation and amortization of $157,564 and patent impairment charges of $528.
Operating activities in the year ended December 31, 2023 resulted in cash outflows of $7,131,578, which were due to the net loss for the period of $9,954,020, partly offset by other non-cash items including stock-based compensation of $2,321,380, depreciation and amortization of $271,746 and amortization of right of use asset of $62,150 and favorable balance sheet timing of $167,116.
Other income for the year ended December 31, 2022 related to interest income as a result of the impact of higher interest rates on our money market account. Other income for the year ended December 31, 2021 was due to a $91,407 gain on the forgiveness of our PPP Loan (as defined below) partly offset by interest expense of $12,701.
Interest income, net increased by $244,459 to $398,068 for the year ended December 31, 2023 from $153,609 for the year ended December 31, 2022 due to the impact of higher interest rates on our money market account in 2023. Net Loss.
As a result, we expect to generate initial commercial revenue later in 2023. Cost of Grant Revenues. Cost of grant revenues decreased by $373,130 to $203,269 for the year ended December 31, 2022 from $576,399 for the year ended December 31, 2021.
Cost of grant revenue decreased by $165,881 to $37,288 for the year ended December 31, 2023 from $203,269 for the year ended December 31, 2022 due to the completion of our subcontract with DTI. The cost of grant revenue is equal to the associated grant revenue resulting in no gross profit.
We expect relatively flat general and administrative expenses, exclusive of stock-based compensation, in 2023. 22 Table of Contents Sales and Marketing Expenses. Sales and marketing expenses increased by $339,524, or 66%, to $852,331 in the year ended December 31, 2022 from $512,807 in the year ended December 31, 2021.
Sales and marketing expenses increased by $261,421, or 31%, to $1,113,752 in the year ended December 31, 2023 from $852,331 in the year ended December 31, 2022. The increase was due primarily to higher personnel costs of $191,480 and stock-based compensation expense of $76,486, slightly offset by lower other costs of $6,545.
Per the agreements, we have an exclusive royalty-free license associated with semiconductor power switches which enhances our 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.
Per the agreement, we have an exclusive royalty-free license associated with semiconductor power switches which enhances our intellectual property portfolio. We pay $100,000 annually under this agreement. In 2023, we amended a 2021 license agreement which expires in February 2034. Per the agreement, we have an exclusive royalty-free license associated with semiconductor drive circuitry which enhances our intellectual property portfolio.
In 2023, we expect to generate grant revenue as well as initial commercial revenue. We have incurred losses since inception. We have funded our operations to date primarily through the sale of common stock. As of December 31, 2022 and 2021, we had cash and cash equivalents of $16,345,623 and $23,170,149, respectively.
In 2024, we expect modest commercial revenue from product sales and product development agreements. While we do not have any active government programs, we are pursuing government funding opportunities that may result in additional grant revenue in the future. We have incurred losses since our inception. We have funded our operations to date primarily through the sale of common stock.
As of March 2021, all five patents associated with the agreements were issued and, as a result, the annual payment amount through expiration of the licensing agreements is $100,000. At December 31, 2022, the corresponding long-term liability for the estimated present value of future payments under the licensing agreement was $838,458.
We pay $50,000 annually under this agreement. At inception, we recorded an intangible asset and other long-term liability of $451,557 for the estimated present value of future payments under this licensing agreement. At December 31, 2023, the corresponding long-term liability for the estimated present value of future payments under these licensing agreements was $1,125,173.
Removed
We expect initial sales of this product later in 2023. 20 Table of Contents Trends, Events and Uncertainties Research and Development Research and development of new technologies is, by its nature, unpredictable.
Added
We generated $161,483 in commercial revenue in the year ended December 31, 2023. 18 Table of Contents Product Launches In early 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 market.
Removed
Public Offering In February 2021, we received net proceeds from the Public Offering, as defined and discussed in more detail below, of $21.2 million.
Added
We commenced shipment of SymCool™ Power Modules to fulfill customer orders in early 2024. In late 2023, we launched our second commercial product, the SymCool™ IQ Intelligent Power Module. The SymCool™ IQ IPM builds on the bidirectional B-TRAN™ multi-die packaging design of our SymCool™ Power Module and adds an integrated intelligent driver optimized for bidirectional operation.
Removed
Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.
Added
This product targets several markets including renewable energy, energy storage, EV charging and other industrial applications. We expect initial sales of this product in late 2024.
Removed
Results of Operations Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 Grant Revenues. Grant revenues decreased by $373,130 to $203,269 for the year ended December 31, 2022 from $576,399 in the year ended December 31, 2021 due to the timing of milestones under the program.
Added
Development Agreement During the fourth quarter of 2022, we announced, and began Phase 1 of, a product development agreement with Stellantis, a top 10 global automaker, for a custom B-TRAN™ power module for use in the automaker’s EV drivetrain inverters in its next generation EV platform.
Removed
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.
Added
In Phase 1 of the program, we provided packaged B-TRAN™ devices, test kits and technical data to Stellantis for their evaluation. During the third quarter of 2023, we secured, and began Phase 2 of, this program.
Removed
In September 2021, we entered into and began work under a $50,000 subcontract with DTI under a Phase I Small Business Innovation Research 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.
Added
In Phase 2 of the program, we collaborated with Stellantis and the program partners, including both the program’s packaging company and the organization building the initial drivetrain inverter, to supply B-TRAN™ devices for integration into the custom power module and inverter designs.
Removed
We expect the remaining grant revenue of $37,388 related to the NAVSEA program to be recognized in the first half 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.
Added
Also, as part of Phase 2, we provided Stellantis a comprehensive test plan for the testing required to achieve certification to automotive standards for B-TRAN™. The test plan was subsequently approved as submitted. In early 2024, we successfully completed Phase 2 of the program.
Removed
The cost of grant revenues relates to the subcontracts 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 related to the NAVSEA program or other grants that we are pursuing, or may pursue, in 2023. Research and Development Expenses.
Added
Phase 3 builds on the completion of all Phase 1 and 2 deliverables and therefore transitions to Stellantis’ production team. We are currently finalizing the scope of work for the next phase of the program with Stellantis.
Removed
The increase was due to higher self-funded wafer fabrication runs of $649,044, stock-based compensation expense of $335,227, materials and supplies, primarily wafers, of $218,394, personnel costs of $215,584 and other B-TRAN™ spending of $20,784.
Added
This phase is expected to include the extensive testing of the custom B-TRAN™ module to meet automotive certification standards enabling B-TRAN™ to be the core of the powertrain inverter for the automaker’s next-generation EVs. The objective of this phase is the completion and certification of a production-ready B-TRAN™-based module and is targeted for 2025.
Removed
We expect higher research and development expenses in 2023 as we continue development of our B-TRAN™ technology and self-fund, at least in the short term, development previously partially funded through government grants. General and Administrative Expenses.
Added
We recorded all of the revenue under Phase 1 and $61,483 of the revenue under Phase 2 in year ended December 31, 2023. We will record the remaining Phase 2 revenue in the first quarter of 2024.
Removed
The increase was due primarily to higher stock-based compensation expense of $219,017, professional fees of $185,067, Board fees and expenses of $122,037, personnel costs of $77,927 and other costs of $111,379, including items such as insurance and franchise taxes.
Added
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, two global diverse power management market leaders, a tier 1 automotive supplier and a global power conversion supplier.
Removed
The increase was due primarily to the higher personnel costs of $172,005, stock-based compensation expense of $69,243, travel costs of $32,873, professional fees of $26,342 and other spending of $39,061 as we work towards commercializing our B-TRAN™ technology.
Added
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. We began B-TRAN™ customer shipments to program participants in mid-2023.
Removed
Financing activities in the year ended December 31, 2021 resulted in cash inflows of $21,204,609 from the net proceeds from our Public Offering and $3,326,083 from the exercise of warrants and stock options. 23 Table of Contents 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, at a price of $17.00 per share (the “Public Offering”).
Added
March 2024 Offering In March 2024, we issued and sold 1,366,668 shares of our common stock at a price of $7.50 per share and 633,332 pre-funded warrants to purchase shares of our common stock at a price of $7.499 per pre-funded warrant in an underwritten public offering. The pre-funded warrants have an exercise price of $0.001 per share.
Removed
The net proceeds to us from the Public Offering were $21.2 million. We are utilizing, and intend to continue to utilize, the net proceeds from the Public Offering to fund commercialization and development of our B-TRAN™ technology and general corporate and working capital purposes.
Added
The underwriter has a 30-day option to purchase up to an additional 300,000 shares of our common stock at the offering price, less the underwriting discounts and commissions. The estimated net proceeds to us from the March 2024 Offering are $13.6 million or $15.7 million if the underwriter exercises its option to purchase additional shares in full.
Removed
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.
Added
Results of Operations Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 Commercial Revenue. We began to commercialize our B-TRAN™ technology in 2023. For the year ended December 31, 2023, we recognized commercial revenue of $161,483. Our commercial revenue consisted of development revenue (see Development Agreement above) including the sale of packaged B-TRAN™ devices.
Removed
The PPP Loan was scheduled to mature in May 2022 and had an interest rate of 1.00% per annum and was subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act.
Added
In the year ended December 31, 2022, we did not recognize any commercial revenue as we were still focused on the development of our B-TRAN™ technology. We expect to recognize modest commercial revenue from both product sales and development agreements in 2024. Grant Revenue.
Removed
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.
Added
Grant revenue decreased by $165,881 to $37,388 in the year ended December 31, 2023 from $203,269 in the year ended December 31, 2022 due to the completion of our $1.2 million subcontract with Diversified Technologies, Inc.
Removed
We will pay $10,000 for each patent filing pending and $20,000 for each patent issued annually with one-half of the annual payment due within 20 days of December 21 st of each year and one-half of the annual payment due within 20 days of June 21 st of each year of the agreements, up to a maximum of $100,000 each year (i.e. five issued patents). 24 Table of Contents In March 2021, two patents associated with these agreements were issued and we 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.
Added
We do not have any active government programs although we are pursuing additional government funding opportunities that may result in additional grant revenue in the future. Cost of Commercial Revenue. Cost of commercial revenue was $123,225 for the year ended December 31, 2023.
Added
In the year ended December 31, 2022, we did not recognize any cost of commercial revenue as we were still focused on the development of our B-TRAN™ technology. Cost of Grant Revenue.
Added
We expect no gross profit from other grants that we are pursuing, or may pursue, in 2024. Gross Profit. Gross profit was $38,258 in the year ended December 31, 2023 compared to $0 in the year ended December 31, 2022.
Added
While we may recognize a gross profit in 2024 from development agreements, we do not expect to recognize a positive gross profit from product sales in 2024 due to the higher costs associated with initial low volume production. Research and Development Expenses.
Added
The increase was due to higher stock-based compensation expense of $959,561, wafer fabrication runs of $902,810, engineering services, primarily packaging costs, of $324,455 and personnel costs of $275,420, partly offset by lower other B-TRAN™ spending of $85,811. We expect higher research and development expenses in 2024 as we further develop our B-TRAN™ technology and related drive circuitry.
Added
The increase was due primarily to higher stock-based compensation expense of $309,530, personnel costs of $147,063 and other costs of $3,594, partly offset by lower Board fees and expenses of $50,656. We expect relatively flat to slightly higher general and administrative expenses, exclusive of stock-based compensation, in 2024. Sales and Marketing Expenses.
Added
March 2024 Offering In March 2024, we issued and sold 1,366,668 shares of our common stock at a price of $7.50 per share and 633,332 pre-funded warrants to purchase shares of our common stock at a price of $7.499 per pre-funded warrant in an underwritten public offering. The pre-funded warrants have an exercise price of $0.001 per share.
Added
The underwriter has a 30-day option to purchase up to an additional 300,000 shares of our common stock at the offering price, less the underwriting discounts and commissions. The estimated net proceeds to us from the March 2024 Offering are $13.6 million or $15.7 million if the underwriter exercises its option to purchase additional shares in full.
Added
It does not contain a termination option. We recognized a right of use asset of $339,882 and a corresponding lease liability for this lease upon lease commencement.