# Ideal Power Inc.: Form 10-Q for the period ended Mar 31, 2015

- Company: [Ideal Power Inc.](/companies/ipwr.md) (CIK 1507957)
- Form: 10-Q
- Filed: 2015-05-06
- Accepted by EDGAR: May 6, 2015, 06:09 ET
- Period: 2015-03-31
- Accession: 0001144204-15-027790
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1507957/000114420415027790/v409135_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1507957/000114420415027790/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2015-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2015-01-01 to 2015-03-31 | $1.2m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2015-01-01 to 2015-03-31 | $1.0m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2015-01-01 to 2015-03-31 | $178.5k | us-gaap:GrossProfit |
| Research and development | 3 months, 2015-01-01 to 2015-03-31 | $992.2k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2015-01-01 to 2015-03-31 | −$2.2m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2015-01-01 to 2015-03-31 | −$2.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2015-01-01 to 2015-03-31 | −$0.31 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 3 months, 2015-01-01 to 2015-03-31 | −$1.6m | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 3 months, 2015-01-01 to 2015-03-31 | $150.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2015-03-31 | $6.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2015-03-31 | $7.5m | us-gaap:AssetsCurrent |
| Total assets | at 2015-03-31 | $9.0m | us-gaap:Assets |
| Current liabilities | at 2015-03-31 | $1.7m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2015-03-31 | $7.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,133 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited 2014 financial statements and related notes included in our Annual Report on Form 10-K. In addition to historical information, the discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” in Part II, Item 1A of this report.*

### OVERVIEW

Ideal Power is located in Austin, Texas. We have developed an electronic power conversion technology called Power Packet Switching Architecture (“PPSA”). PPSA is a new universal power conversion technology intended to improve upon current power conversion technology in key product metrics, such as weight, size, cost, efficiency and flexibility. PPSA utilizes standardized hardware with application specific embedded software. We have been granted 19 United States patents and 4 international patents on PPSA and its applications, and are continuing to build an intellectual property portfolio around it. The electronic power conversion industry’s vertical markets are large and include power conversion systems for residential, commercial, and utility-scale renewable energy systems, including photovoltaic (“PV”) systems, battery energy storage systems (“BESS”), microgrids, electric vehicle (“EV”) fast chargers, variable frequency drives (“VFDs”) for motors, and on-board power converters for electric vehicles. Due to the design advantages inherent in its PPSA technology, the Company believes it can provide solutions that are both efficient and economically advantageous to many of these markets.

Ideal Power’s initial product focus provides solutions for high-growth markets such as battery energy storage systems, integrated renewable energy and storage, and microgrid applications. The Company has designed its products to target commercial and industrial applications, which it believes have the highest economic value and fastest growth potential in these vertical markets. Within its product family, the Company offers value-enhancing solutions for integrating renewable energy with storage systems as well as microgrid capabilities for grid resiliency and off-grid power.

Currently, the Company’s products are designed by Ideal Power, manufactured by contract manufacturers, and sold by Ideal Power both directly to its customers and through a distribution channel partner. The Company may consider additional go-to-market strategies in the future including but not limited to product licensing arrangements with leading global electronics companies. Such arrangements could allow for regional manufacturers to build the Company’s products under license for specific markets or specific applications.

The Company was founded on May 17, 2007. To date, operations have been funded primarily through the sale of common stock, U.S. Department of Energy grants and, prior to its initial public offering, issuance of convertible debt. Total revenue generated from inception to date at March 31, 2015 amounted to $7,275,187 with approximately a third of that revenue coming from government grants. The Company has applied these revenues to research and product development, thereby reducing its capital requirements. The Company may continue to pursue research and development grants, if and when available, for the purpose of developing new products and improving current products. The Company can make no assurances that additional grants will be available in the future.

#### Business Strategy

The Company’s business strategy is to promote and expand the uses of its PPSA technology initially through product development and product sales, potentially followed by licensing product designs to other OEMs all while continuing to innovate and expand the Company’s intellectual property portfolio in the power conversion space. To bring its products to market, the Company will seek out best-in-class partners who will build Ideal Power’s innovative products into higher value products, which the Company believes will result in multiple strategic sales channels with Ideal Power’s core PPSA technology as a key aspect of a system. Additionally, the Company has begun to partner with battery manufacturers, who will offer a battery system to end users which has been sized to pair with the Company's power conversion products. These systems will be sold to system installers and electrical contractors and end-user customers. The Company currently serves this channel through a distribution agreement with Rexel / Gexpro who will inventory its products to best meet the broad needs of this rapidly growing industry.

#### Our Products

The Company has developed products commercializing its PPSA technology and makes these products available for sale both directly to customers and through a distributor. The Company is currently selling six power conversion products utilizing its patented PPSA technology. These products are described as follows:

- A 30kW Battery Converter for the growing commercial and industrial grid-tied distributed energy storage market. This product received UL1741 certification, required for connection to the power grid in the United States, in January 2013. The 30kW bi-directional Battery Converter uses the same hardware design as the 30kW PV Inverter, but with more sophisticated embedded software for bi-directional power conversion and control. This product has significant performance advantages over other solutions in the market for BESS including its 96.5% CEC-weighted efficiency. Traditional, transformer-based power conversion systems typically have a 92 – 93% CEC-weighted efficiency. Ideal Power’s 4% improvement is effectively an 8% improvement due to the fact that the CEC weighting only counts efficiency in one conversion step but two are required (grid → battery & battery → grid) due to the bi-directional nature of BESS applications. As a result, a BESS using a transformer-based product requires 8% more input electricity and 4% more battery storage capacity to create the same electrical output as a BESS using Ideal Power’s product. Ideal Power’s product is approximately 1/5th the size and weight of transformer-based products, reducing the costs of materials, manufacturing, shipping, installation and maintenance. Ideal Power’s 30kW Battery Converter also has a significantly lower acoustic noise profile, which allows for installation in buildings without the need for acoustic isolation or insulation. This product is selling in volume today and it represented the majority of 2014 and first quarter 2015 product revenue.
- A 30kW grid-resilient AC-DC-DC multi-port power conversion system, formerly known as a “hybrid” power conversion system, which has two DC ports enabling both PV and a DC battery system to be installed with one simple connection. This product was introduced in summer 2014 and is capable of operating in both 50Hz and 60Hz environments making it Ideal Power’s first “world-product”. This product also has the ability to form and manage a “micro-grid”, effectively using energy storage with distributed generation resources to make its own power grid to support critical loads or simply allow a building to disconnect from the utility power grid. This product is used in both off-grid and grid-tied applications and, in 2014, received the “Electrical Energy Storage Award” for product innovation at InterSolar, Germany, the world’s largest solar exhibition. For grid-tied applications, this product is expected to receive its UL 1741 certification in Spring 2015.

15

- A 125kW grid-resilient AC-DC power conversion system, which was introduced in October 2014, for higher power applications. This 125kW system has over four times the power of the 30kW product, is also a “world-product”, and also has the ability to form and manage a micro-grid. First articles of this new product will be delivered to customers in Spring 2015. This product is primarily for use in grid-tied applications and as such it is expected to receive its UL 1741 certification in late Summer 2015 and begin shipping in volume shortly thereafter.
- A 125kW grid-resilient AC-DC-DC multi-port power conversion system, which was also introduced in October 2014, for higher power applications with multi-port capabilities. This 125kW system has over four times the power of the 30kW multi-port product, is also a “world-product,” and also has the ability to form and manage a micro-grid. First articles of this new product will be delivered to early customers in Spring 2015. This product is mostly for off-grid and micro-grid management applications and as such is not currently planned to receive a UL 1741 certification in 2015.
- A new 30kW grid-resilient AC-DC power conversion system, which was introduced in February 2015 as the next generation of Ideal Power’s 30kW Battery Converter. This new product has all of the design features of Ideal Power’s new “world-products” and is targeted for those customers who want Ideal Power’s best-selling 30kW Battery Converter but need to use the product overseas or need the ability to form and manage a micro-grid. This new product is not a replacement for the 30kW Battery Converter but rather it is a complimentary product with additional features that will open up new markets for Ideal Power.
- A 30kW PV Inverter, which is available in the United States as a UL 1741 Certified product for commercial and industrial PV installations. This product was Ideal Power’s first product and was an important building block in validating the Company’s technology and provided valuable operating experience in conditions outside of the laboratory. This product shares the same hardware as the Company’s 30kW Battery Converter but uses embedded software specific to a PV application. While it is still available for sale it is not actively marketed and the Company expects it to have little to no revenue going forward as the Company’s product focus has shifted to higher value bi-directional applications.

#### Future Innovations

Ideal Power continues to focus its long-term development efforts on next-generation power switches, including the Bi-Directional Insulated Gate Bipolar Transistors (“BD-IGBT”). Standard, single-direction IGBTs are widely used in power conversion systems today. In conventional power conversion systems, IGBT’s are used as power switches to conduct and block current in a single direction. Ideal Power believes that its technology can potentially be even more efficient. With new, bi-directional power switches conducting and blocking current in both directions, Ideal Power believes that it may be able to replace two traditional IGBT’s and two diodes with one new BD-IGBT in its systems, potentially enabling even higher efficiency and further reducing material costs which may further enhance the market competitiveness of Ideal Power’s products and core PPSA technology.

Our BD-IGBT development effort was partially funded by the U.S. Department of Energy’s $2.5 million ARPA-E grant. The grant funds were fully utilized at December 31, 2014 and the Company is self-funding current development efforts.

The Company believes that the commercialization of these next generation power switches may further improve the Company’s advantages in efficiency, weight and cost across its entire range of products. Among other efforts in this area, Ideal Power is actively filing patents on this core technology, the semiconductor processing techniques involved, and the variety of applications for these new power switches. If the Company is successful in its efforts to commercialize these new power switches, it will extend the Company’s product performance advantages in efficiency, power density, reliability, and cost in its current market applications, as well as accelerate its ability to deliver disruptive solutions in larger mature markets.

#### Targeted Markets

#### The Commercial BESS Market

The commercial and industrial battery energy storage system (“BESS”) market is the primary vertical power conversion market for the Company’s 30kW Battery Converter, Grid-Resilient 30kW Power Conversion System, and Grid-Resilient 125kW Power Conversion System. These products are currently being sold to commercial BESS integrators such as Sharp Electronics, Green Charge Networks, EOS Energy, and Coda Energy. As these products gain traction in the market with these and other customers, the Company believes that it is well positioned to emerge as the market-leader in power conversion solutions to the commercial and industrial segment of the BESS vertical and will benefit from this market’s rapid growth.

The primary value proposition for commercial or industrial BESS is to reduce monthly utility demand charges. For example, the cost of installing commercial BESS in California may be recovered over a period of three to five years when combined with high demand charges and the State’s Self Generation Incentive Program. Increasing demand charges and lower system costs should also make commercial BESS solutions financially attractive to commercial businesses in New York, where systems are already being installed, and in many other states. The Company expects the cost of commercial and industrial BESS systems to continue to decline due primarily to lower battery costs. Many larger BESS installations have traditionally used several of our 30kW Battery Converters. With direct customer feedback, the Company developed its new 125kW products to help reduce installation and system costs for these larger installations. The Company believes the combination of lower BESS costs, third-party financing, continued increases in utility demand charges, and the continued entrance of large, established companies to the BESS space will all contribute to accelerating market growth.

#### Commercial BESS with PV Systems

Commercial and industrial BESS systems are able to generate value far beyond peak demand reduction. The Company believes it will become increasingly attractive to co-locate BESS systems with distributed PV. IHS, a global research firm with a renewable industry focus, forecasts that global installations of grid-tied commercial BESS systems coupled with PV, a subset of the battery and microgrid market, will grow 111% annually from 2014 to over 600 MW of BESS systems by 2018. Also according to IHS, the global PV industry is projected to grow from 45GW of annual installations in 2014 to 71GW in 2018. The growth rate of the industry during the next few years is projected to slow to 11% CAGR from a 21% CAGR between 2012 and 2014. Providing a new generation of solutions with integrated energy storage will enable the PV industry to address new markets with high growth potential. These new PV+BESS markets include providing backup power during blackouts, improving grid stability in high penetration PV areas and reducing diesel fuel consumption in remote off-grid microgrids. In the event of a grid failure, grid-tied PV installations are not capable of operating independently. For example, during Superstorm Sandy grid-tied PV installations without energy storage would not operate. Systems incorporating Ideal Power’s mulit-port power conversion systems along with PV and a BESS will be capable of providing backup power during grid blackouts. The Company expects its multi-port products to be attractive to existing customers as a low-cost system upgrade to improve integration of PV. The Company further expects its products to provide competitive solutions for these market requirements.

#### Microgrid Applications

PV has one of the lowest levelized costs of energy for new electrical generation capacity and this is expected to remain true in the near term. Over the next decade the greatest demand for new power generation capacity is likely to occur in regions with less reliable power grids such as Southeast Asia, Africa, the Middle East, and Central and South America. Remote communities and infrastructure in these regions are more likely to depend on expensive diesel generators for their primary fuel supply and may not have a utility power grid to access for high quality, reliable power.

In contrast to grid-tied BESS and PV applications that we expect to be driven by North American installations, we expect off-grid BESS and PV applications to rapidly be installed across many regions including Central and South America, Southeast Asia, Africa and the Middle East. IHS recently forecasted the off grid microgrid BESS installations with PV market to reach 400MW by 2018. We feel that our 30kW and 125kW hybrid converters offer a superior solution for these applications.

The Company believes that its award-winning multi-port power conversion architecture is a highly attractive solution for integrating BESS, PV and diesel generators for both grid-tied and off grid markets. Customer and industry forecasts indicate that these markets will grow dramatically in the coming years, and the Company expects to benefit from this growth.

#### Other Markets

Although our technology may be suitable for VFD and additional vertical markets within the global power conversion market landscape, Ideal Power does not currently offer products for sale directly to the VFD, uninterruptible power supply, rail, wind, or EV traction drive markets. Ideal Power products are suitable for use as PV inverters but this market is saturated with incumbents offering devices that are single-direction and suitable only for this application. As such, while Ideal Power does have a number of PV inverters in field service today, the stand-alone PV inverter market is not a primary growth market for the Company. As discussed above, the Company is instead focused on PV integrated BESS applications for its multi-port products where the fullest potential of its technology can be utilized.

In addition to the markets discussed above, the Company has opportunities for market expansion into fast electric vehicle chargers in certain applications where its products compact size and multi-port capabilities can unlock value for the system integrator particularly in locations where battery storage is coupled with the charging system to eliminate demand charges or expand the charging systems response capabilities. The Company also sees future potential in the commercial wind turbine market where we received our first order in 2014. The customer plans to use Ideal Power products in a new 100kW turbine to serve agricultural load requirements.

Ideal Power plans to continue to monitor all power conversion markets for opportunities to create solutions for customers which unlock the value of the Company’s patented technology.

### Plan of Operation

Ideal Power has completed development, UL Certification, and commercialization for its first two products and has launched four additional products that are actively being developed with plans to obtain UL Certification for three of these products in 2015. All four of these new products have firm customer orders behind them. The Company’s 30kW Battery Converter is being ordered and deployed by market-leading customers at increasing volumes for commercial and industrial applications.

With the introduction of our new grid-resilient 30kW 2-port and multi-port conversion systems as well as our grid-resilient 125kW 2-port and multi-port power conversion systems, the Company now offers a family of fully compatible products for broad and rapidly growing power conversion markets. Ideal Power products are well suited for commercial and industrial scale energy storage systems, systems combining PV and storage, and for on-grid and off-grid microgrid applications integrating the Company’s power conversion systems with batteries, photovoltaics, diesel, wind and other types of distributed generation in a flexible, modular approach. By using multiple 125kW products in parallel, customers can cost effectively deploy systems to up to many megawatts in scale.

Ideal Power is further developing its technology to allow it to launch additional products, enhance its competitive advantages and enter other large vertical markets. The Company’s goal is to establish PPSA as the leading technology for electronic power conversion for several large markets through both product sales and potentially licensing in selected geographies and markets. The Company’s objectives are to continue to commercialize its technology through the development of a variety of power conversion products and expand its channels to target markets. Ideal Power may eventually license the manufacture of its products to original equipment manufacturers (“OEMs”) and, in certain markets, directly to large customers.

We expect to continue to use the net proceeds received from the initial public offering of our common stock for new product research, new product and existing product development, the commercialization of our products, protection of our intellectual property, purchases of property and equipment and for working capital and other general corporate purposes. The net cash proceeds from the initial public offering of our common stock totaled approximately $15 million. Our actual and anticipated costs include employee salaries and benefits, compensation paid to consultants, capital costs for research and development lab and other equipment, costs associated with development activities, legal expenses, sales and marketing costs, general and administrative expenses, and other costs associated with an early stage, publicly-traded technology company. We added 12 employees from our initial public offering through March 31, 2015 and anticipate increasing the number of employees of the Company by approximately 5 – 10 employees by the end of 2015. However, this increase is highly dependent on the nature of our development efforts. We have added and anticipate adding employees in the areas of research and development and product engineering and, to a lesser extent, sales and marketing and general and administrative functions as required to support our efforts. We have and expect to incur consulting expenses related to technology development and other efforts as well as legal and related expenses to protect our intellectual property. We also have incurred and expect to incur capital expenditures for the purchase of testing and other lab equipment and leasehold improvements.

The amounts that we actually spend for any specific purpose may vary significantly and will depend on a number of factors including, but not limited to, the pace of progress of our commercialization and development efforts, actual needs with respect to product testing, development and research, market conditions and changes in or revisions to our marketing strategies. In addition, although we do not have any plans for acquisitions at this time, we may use a portion of the net proceeds to acquire complementary products, technologies or businesses.

We received an award of $2.5 million from ARPA-E. Through December 31, 2014, we had recognized the full amount of the award under this grant. This award was used in the development of our BD-IGBT power switches and other related power semi-conductor technology. While we currently successfully use commodity silicon IGBT and diode components in our products, we are developing BD-IGBT devices that we believe could significantly improve the efficiency, weight and manufacturing costs of our products as well as have broader potential applications. We have run successful simulations on the BD-IGBT power switches and have begun initial runs of prototype switches at our semiconductor fabrication subcontractor.

### Critical Accounting Policies

There have been no significant changes during the three months ended March 31, 2015 to the critical accounting policies disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

### Results of Operations

### Comparison of the three months ended March 31, 2015 to the three months ended March 31, 2014

*Revenues.* Revenues for the three months ended March 31, 2015 of $1,197,991 were $906,896, or 312%, higher than the $291,095 we earned in revenues for the three months ended March 31, 2014. The increase in revenue was driven by a $1,089,491 increase in product revenues, primarily associated with sales of our 30kW Battery Converter.

There were no grant revenues for the three months ended March 31, 2015, as compared to grant revenues for the three months ended March 31, 2014 of $182,595. At December 31, 2014, we had recognized all grant revenues related to the ARPA-E grant.

*Cost of Revenues.* Cost of revenues increased for the three months ended March 31, 2015, to $1,019,501 compared to $397,224 for the three months ended March 31, 2014 due to $825,160 increase in product cost of revenue partially offset by a $202,883 decrease in grant research and development costs. The increase was primarily due to higher unit sales volumes compared to the three months ended March 31, 2014, as well as higher personnel costs of $76,931. The decrease in grant research and development costs is due to the ARPA-E grant being fully funded at December 31, 2014.

*Gross Profit (Loss).* Gross profit for the three months ended March 31, 2015 was $178,490 compared to a gross loss for the three months ended March 31, 2014 of $106,129. Our gross profit was due to the impact of $1,089,491 of higher product sales compared to the three months March ended 31, 2014. Gross profit was also negatively impacted due to increased engineering personnel costs as we added resources to support our existing products.

*Research and Development Expenses.* Research and development expenses increased by $682,669, or 221%, to $992,232 in the three months ended March 31, 2015 from $309,563 in the three months ended March 31, 2014. The increase was due primarily to higher personnel costs of $199,672 and stock-based compensation of $41,695 as we added both firmware and hardware engineering personnel. We also recognized $180,571 of costs related to advanced power switch development as we self-funded these efforts in the three months ended March 31, 2015 after fully utilizing the ARPA-E grant program funding in December 2015 and $162,851 of additional supplies and materials used in the ongoing development of new product prototypes.

*General and Administrative Expenses.* General and administrative expenses increased by $165,809, or 22%, to $910,777 in the three months ended March 31, 2015 from $744,968 in the three months ended March 31, 2014. The increase was due primarily to higher stock-based compensation of $95,697 and higher legal and patent fees of $58,094 compared to the three months ended March 31, 2014.

*Sales and Marketing Expenses.* Sales and marketing expenses increased by $204,733, or 76%, to $472,952 in the three months ended March 31, 2015 from $268,219 in the three months ended March 31, 2014. The increase was due primarily to severance costs of $139,955, higher contract labor costs of $36,660, personnel costs of $21,714 and stock-based compensation of $16,422.

*Loss from Operations.* Due to the increase in our operating expense which is partially offset by our gross profit, our loss from operations for the three months ended March 31, 2015 was $2,197,471 or 54% higher than the $1,428,879 loss from operations for the three months ended March 31, 2014.

*Interest Income.* Interest income decreased from $8,137 for the three months ended March 31, 2014 to $4,473 for the three months ended March 31, 2015, as the balance of the money market account declined.

*Net Loss.* As a result of a higher loss from operations, our net loss for the three months ended March 31, 2015, was $2,192,998 as compared to a net loss of $1,420,742 for the three months ended March 31, 2014.

### Liquidity and Capital Resources

Although our revenues have increased every full calendar year from the date of our inception, we do not generate enough revenue to sustain our operations. Our revenues are derived from the sales of our products and from grants we have received for the development of our technology. We have primarily funded our operations through the sale of common stock, U.S. Department of Energy grants and, prior to its initial public offering, issuance of convertible debt.

At March 31, 2015, we had cash and cash equivalents of $6,169,375. Our net working capital and long-term debt at March 31, 2015 were $5,796,263 and $0, respectively.

Operating activities in the three months ended March 31, 2015 resulted in cash outflows of $1,592,263, which were due primarily to the net loss for the period of $2,192,998, partly offset by non-cash items of $464,460, related primarily to stock-based compensation, and positive working capital changes of $136,275. Operating activities in the three months ended March 31, 2014 resulted in cash outflows of $1,517,477, which were due primarily to the net loss for the period of $1,420,742 and negative working capital changes of $328,353, partly offset by non-cash items, related primarily to stock-based compensation, of $231,618.

Investing activities in the three months ended March 31, 2015 and 2014 resulted in cash outflows of $235,186 and $175,068, respectively, for development of patents and acquisition of fixed assets.

Financing activities in the three months ended March 31, 2015 resulted in cash inflows of $84,813 related to stock options exercises. Financing activities in the three months ended March 31, 2014 resulted in cash outflows of $9.

On December 1, 2014, the Company filed a Form S-3 shelf registration statement with the Securities and Exchange Commission. The registration statement allows the Company to offer up to an aggregate $75 million of common stock, preferred stock, warrants to purchase common stock or preferred stock or any combination thereof and provides the Company with the flexibility over three years to potentially raise additional equity in a public or private offering on commercial terms.

### Off-Balance Sheet Transactions

We do not have any off-balance sheet transactions.

### Trends, Events and Uncertainties

Research and development of new technologies is, by its nature, unpredictable. Although we will undertake development efforts with commercially reasonable diligence, there can be no assurance that the net proceeds from the initial public offering of our common stock will be sufficient to enable us to develop our technology to the extent needed to create future sales to sustain operations as contemplated herein. If the net proceeds from the initial public offering of our common stock are insufficient for this purpose, we will consider other options to continue our path to commercialization, including, but not limited to, additional financing through follow-on stock offerings, debt financing, co-development agreements, curtailment of operations, suspension of operations, sale or licensing of developed intellectual or other property, or other alternatives.

We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, since we have no committed source of financing, we cannot assure you that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

Other than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

## Controls and procedures

As filed, 1,055 characters.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Act”) is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer), has concluded that, as of March 31, 2015, our disclosure controls and procedures are effective.

There have been no other material changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Filed May 6, 2015.
Source: SEC EDGAR, the filing index for accession 0001144204-15-027790. Last ingested by Listed: Nov 5, 2026, 19:31 ET. No prices; not investment advice.