Ideal Power Inc.: Form 10-Q for the period ended Sep 30, 2025

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 2024 financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition to historical information, the discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Overview

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

To date, operations have been funded primarily through the sale of common stock and pre-funded warrants.

We are in the process of commercializing our B-TRAN® technology and have launched our first three commercial products: the B-TRAN® Discrete, SymCool® Power Module and SymCool® IQ Intelligent Power Module. We generated $37,728 in revenue in the nine months ended September 30, 2025.

CEO Transition

Effective November 2, 2025, R. Daniel Brdar, the President and Chief Executive Officer and member of the Board of Directors of Ideal Power Inc., retired from all positions with us. Effective November 3, 2025, the Board appointed David Somo as the President and Chief Executive Officer and as a member of the Board of the Company.

Product Launches

In early 2023, we launched our SymCool® Power Module. This multi-die B-TRAN® module is designed to meet the very low conduction loss needs of the solid-state switchgear and electric vehicle (“EV”) contactor markets. We commenced shipment of SymCool® Power Modules to fulfill customer orders in 2024.

In late 2023, we launched the SymCool® IQ Intelligent Power Module (“IPM”). The SymCool® IQ IPM builds on the 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, EV charging and other industrial applications. We announced our first order for this product in late 2024.

Upon product launch, we design and build initial prototypes for testing and to solicit customer feedback. Based on the results of testing and customer feedback, we incorporate any necessary changes into the product design, build final prototypes and complete additional testing prior to full commercial release. To date, our customers have purchased prototypes in small quantities for evaluation and provided us feedback that has been incorporated into our final product designs. We expect significantly higher volume orders from customers once we secure a design win from them, and they start to build inventory in advance of launching their OEM products. For the product launches described above, we would expect the time from announcing a design win to the sale of the related OEM product to be roughly one year, although it may vary considerably depending on the customer. We would expect a significantly longer design cycle for automotive applications. Design wins are expected to result in significant revenue growth for us over time as product life cycles tend to be relatively long for power electronics products as changing to another technology would require an OEM to redesign their product. See “First Design Win” below.

Development Agreement

In 2022, we announced, and began the first phase 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. In the first phase of the program, we provided packaged B-TRAN® devices, test kits and technical data to Stellantis for their evaluation. In 2023, we secured, and began the second phase of, this program. In the second phase 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. Also, as part of the second phase of the program, 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 2024, we successfully completed the second phase of the program. The next phase of the program builds on the completion of deliverables from the prior two program phases and transitions to Stellantis’ production team. We are currently finalizing the timing and scope of work for the next phase of the program with Stellantis. In August 2025, we secured an order from Stellantis for custom development and packaged devices targeting multiple EV applications.

Customer Engagements

We have announced several engagements and/or initial orders with large companies, including a second top 10 global automaker, a third global automaker, a top 10 global provider of power conversion solutions to the solar industry, three global diverse power management market leaders, five tier 1 automotive suppliers, a global power conversion supplier and others. These companies intend to test and evaluate, or are already in the process of testing and evaluating, our technology for use in their applications. These engagements could lead to future design wins or custom development agreements. We also announced agreements with four distribution partners. We may add other distribution partners in the future.

First Design Win

In late 2024, we announced our first design win for solid-state circuit breakers (“SSCBs”) with one of the largest circuit protection equipment manufacturers in Asia serving the industrial and utility markets. In connection with this design win, we entered into a joint development agreement for a SSCB product incorporating multiple B-TRAN® devices. The agreement includes the product design, prototype builds and testing of the SSCB, which was targeted for completion in the second quarter of 2025, to be followed by commercial sales. We completed our deliverables, including SSCB prototypes, under the agreement in the first quarter of 2025, three months ahead of schedule. Recently, the customer successfully completed their testing of updated SSCB prototypes that included enhancements requested by the customer. The customer plans on gathering feedback on this new product from their end customers ahead of product launch.

Results of Operations

Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024

Revenue. Revenue was $24,450 for the three months ended September 30, 2025, compared to $554 in the three months ended September 30, 2024. Revenue in the three months ended September 30, 2025 related primarily to our completion of the first deliverable under the purchase order from Stellantis. See “Development Agreement” above.

Cost of Revenue. Cost of revenue was $26,069 for the three months ended September 30, 2025, compared to $1,511 in the three months ended September 30, 2024. Cost of revenue in the three months ended September 30, 2025 related primarily to the first deliverable under the purchase order from Stellantis.

Research and Development Expenses. Research and development expenses increased by $109,099, or 6%, to $1,793,162 in the three months ended September 30, 2025 from $1,684,063 in the three months ended September 30, 2024. The increase was due to higher semiconductor fabrication costs of $279,898, search and placement fees of $106,798 and other B-TRAN® development spending of $29,491, partly offset by lower personnel costs of $147,091 and stock-based compensation expense of $159,997.

General and Administrative Expenses. General and administrative expenses increased by $64,969, or 7%, to $958,938 in the three months ended September 30, 2025 from $893,969 in the three months ended September 30, 2024. The increase was due to higher search and placement fees of $121,900, patent impairments of $34,363 and other spending of $8,884, partly offset by lower investor relations spending of $100,178.

Sales and Marketing Expenses. Sales and marketing expenses decreased by $54,044, or 17%, to $266,598 in the three months ended September 30, 2025 from $320,642 in the three months ended September 30, 2024. The decrease was due to lower personnel costs of $101,131, partly offset by higher search and placement fees of $46,596 and other spending of $491.

Loss from Operations. Our loss from operations for the three months ended September 30, 2025 was $3,020,317, or 4% higher, as compared to the $2,899,631 loss from operations for the three months ended September 30, 2024, for the reasons discussed above.

Interest Income, Net. Net interest income was $79,667 for the three months ended September 30, 2025, compared to $209,283 for the three months ended September 30, 2024, due primarily to the impact of a declining cash balance on interest earned on our money market account.

Net Loss. Our net loss for the three months ended September 30, 2025 was $2,940,650, or 9% higher, as compared to a net loss of $2,690,348 for the three months ended September 30, 2024, for the reasons discussed above.

Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024

Revenue. Revenue was $37,728 for the nine months ended September 30, 2025, compared to $80,624 in the nine months ended September 30, 2024. For the nine months ended September 30, 2025, our revenue related to our completion of the first deliverable under the purchase order from Stellantis, development revenue in connection with our first design win and product revenue. For the nine months ended September 30, 2024, our revenue was primarily related to the completion of the second phase of our development agreement with Stellantis.

Cost of Revenue. Cost of revenue was $60,408 for the nine months ended September 30, 2025, compared to $87,483 in the nine months ended September 30, 2024. Cost of revenue in the nine months ended September 30, 2025 related to costs incurred to complete the first deliverable under the purchase order from Stellantis, development costs in connection with our first design win and costs from initial low volume shipments of our products. Cost of revenue in the nine months ended September 30, 2024 related primarily to our development agreement with Stellantis. We expect negative gross margin from product revenue at low volumes with significant improvement in gross margins as we commence higher volume production and shipments in the future.

Research and Development Expenses. Research and development expenses increased by $647,470, or 14%, to $5,261,173 in the nine months ended September 30, 2025 from $4,613,703 in the nine months ended September 30, 2024. The increase was due to higher semiconductor fabrication costs of $615,118, personnel costs of $117,555 and search and placement fees of $103,454, partly offset by lower stock-based compensation expense of $181,021 and other B-TRAN® development spending of $7,636. We expect relatively flat to modestly lower research and development expenses in the fourth quarter of 2025 as compared to the third quarter of 2025. There will be quarter-to-quarter variability to research and development expenses due to the timing of semiconductor fabrication runs, hiring and other development activities.

General and Administrative Expenses. General and administrative expenses increased by $60,957, or 2%, to $2,755,998 in the nine months ended September 30, 2025 from $2,695,041 in the nine months ended September 30, 2024. The increase was due to higher search and placement fees of $120,792, personnel costs of $82,880, stock-based compensation expense of $53,528 and other spending of $23,914, partly offset by lower investor relations spending of $220,157. We expect relatively flat to modestly higher general and administrative expenses, exclusive of stock-based compensation, in the fourth quarter of 2025 as compared to the third quarter of 2025.

Sales and Marketing Expenses. Sales and marketing expenses decreased by $51,201, or 5%, to $945,791 in the nine months ended September 30, 2025 from $996,992 in the nine months ended September 30, 2024. The decrease was due to lower personnel costs of $101,659 and stock-based compensation expense of $38,476, partly offset by higher search and placement fees of $75,654 and other spending of $13,280. We expect relatively flat sales and marketing expenses in the fourth quarter of 2025 as compared to the third quarter of 2025 as we further commercialize our B-TRAN® technology.

Loss from Operations. Our loss from operations for the nine months ended September 30, 2025 was $8,985,642, or 8% higher, as compared to the $8,312,595 loss from operations for the nine months ended September 30, 2024, for the reasons discussed above.

Interest Income, Net. Net interest income was $305,203 for the nine months ended September 30, 2025 compared to $490,556 for the nine months ended September 30, 2024 due primarily to the impact of a declining cash balance on interest earned on our money market account.

Net Loss. Our net loss for the nine months ended September 30, 2025 was $8,680,439, or 11% higher, as compared to a net loss of $7,822,039 for the nine months ended September 30, 2024, for the reasons discussed above.

Liquidity and Capital Resources

We have incurred losses since inception. We have funded our operations to date primarily through the sale of common stock and pre-funded warrants.

At September 30, 2025, we had cash and cash equivalents of $8.4 million. Our net working capital at September 30, 2025 was $7.8 million. We had no outstanding debt at September 30, 2025.

These consolidated financial statements have been prepared on a going concern basis, which assumes we will continue in operation for the foreseeable future and will be able to realize our assets and discharge our liabilities in the ordinary course of business. Our operations have resulted in a net loss of $8.7 million for the nine months ended September 30, 2025 and an accumulated deficit of $116.1 million at September 30, 2025. Our existing sources of liquidity at September 30, 2025 include cash and cash equivalents of $8.4 million. We have historically funded operations primarily through the sale of common stock and prefunded warrants. We are dependent on additional capital in order to sustain our ongoing operations as we currently generate minimal revenue with negative cash flows from operations since inception. The current cash balance and negative cash flow raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the issuance of this Quarterly Report on Form 10-Q. Although we believe we have access to adequate sources of capital to fund our operations, we can provide no assurance that we will be able to secure additional equity or debt financing on terms acceptable to us or at all.

Operating activities in the nine months ended September 30, 2025 resulted in cash outflows of $6,973,275, which were due to the net loss for the period of $8,680,439, partly offset by stock-based compensation of $997,840, depreciation and amortization of $276,332, favorable balance sheet timing of $328,510 and other non-cash items of $104,482.

Operating activities in the nine months ended September 30, 2024 resulted in cash outflows of $6,192,707 which were due to the net loss for the period of $7,822,039, partly offset by stock-based compensation of $1,163,808, depreciation and amortization of $250,936, other non-cash items of $117,136 and favorable balance sheet timing of $97,452.

Investing activities in the nine months ended September 30, 2025 and 2024 resulted in cash outflows of $376,738 and $445,100, respectively, for the acquisition of intangible assets and fixed assets.

Financing activities in the nine months ended September 30, 2025 resulted in net cash outflows of $98,724 with a cash outflow of $98,834 in tax payments related to the vesting of restricted stock units slightly offset by a cash inflow of $110 from the exercise of pre-funded warrants.

Financing activities in the nine months ended September 30, 2024 resulted in cash inflows of $15,724,818 in net proceeds from the public offering of our common stock and pre-funded warrants, $1,018,898 from the exercise of warrants, and $86,757 from the exercise of stock options, slightly offset by $11,579 in tax payments related to the vesting of restricted stock units.

Critical Accounting Estimates

There have been no significant changes during the nine months ended September 30, 2025 to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Trends, Events and Uncertainties

There are no material changes from trends, events or uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of its Chief Executive Officer (principal executive officer) and its Chief Financial Officer (principal financial officer) of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2025 and has concluded that, as of September 30, 2025, the Company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have been no material changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on the Effectiveness of Controls

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

There are no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.