Ideal Power Inc.: Form 10-Q for the period ended Mar 31, 2026

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 2025 financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. 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, 2025.

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 two commercial products, the discrete B-TRAN® and the SymCool® Power Module. We generated no revenue in the three months ended March 31, 2026 and $12,003 in revenue in the three months ended March 31, 2025.

Product Launches

Our first commercial product launch was the discrete B-TRAN®. This single B-TRAN® die packaged for electrical connection is designed to meet the very low conduction loss needs of the solid-state circuit protection and electric vehicle ("EV”) contactor markets.

Our second commercial product launch was the SymCool® Power Module. This multi-die B-TRAN® module is also designed to meet the very low conduction loss needs of the solid-state circuit protection and EV contactor markets.

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 products described above, we would expect the time from announcing a design win to the sale of the related OEM product to be roughly twelve to eighteen months, although it may vary considerably depending on the customer and application. 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. In August 2025, we secured an order from Stellantis for custom development and packaged devices targeting multiple EV applications. We completed the first of five deliverables under this purchase order in 2025. Also in 2025, Stellantis informed us that they are prioritizing the EV contactor application over the drivetrain inverter application. We are currently working to complete the remaining deliverables under the August 2025 purchase order and engaged with Stellantis on a potential EV contactor program.

Customer Engagements

We have announced several engagements and/or initial orders with large companies, including Stellantis and other global automakers, Forbes Global 500 diverse power management market leaders, global tier 1 automotive suppliers, circuit protection market leaders, inverter / energy storage market leaders 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 multiple distribution partners. We may add other distribution partners in the future. Recently, we signed a letter of intent with a power module maker in Asia to manufacture and offer B-TRAN®-based power modules for sale to their customers. We may engage with other power module manufacturers or others in the power semiconductor ecosystem in the future to further expand the channels to market for products incorporating our technology.

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 data center, renewable energy, energy storage, EV and other industrial 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 included the product design, prototype builds and testing of the SSCB. We completed our deliverables, including SSCB prototypes, under this agreement in the first quarter of 2025. In the third quarter of 2025, 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. In February 2026, we entered into a multi-year strategic cooperation agreement with this customer for the design, development and worldwide sales of circuit protection solutions including SSCBs, battery disconnect units and EV contactors featuring B-TRAN®. We expect to announce additional design wins and/or custom development agreements with this customer and/or other customers in 2026.

Results of Operations

Comparison of the three months ended March 31, 2026 to the three months ended March 31, 2025

Revenue. Revenue was $0 for the three months ended March 31, 2026, compared to $12,003 for the three months ended March 31, 2025. For the three months ended March 31, 2025, our revenue included product sales and development revenue related to our first design win. We expect to recognize modest revenue from both product sales and development agreements in the remainder of 2026.

Cost of Revenue. Cost of revenue was $0 and $30,862 for the three months ended March 31, 2026 and 2025, respectively. For the three months ended March 31, 2025, our cost of revenue included cost of product sales and development expenses related to our first design win.

Gross Loss. We did not have a gross loss in the three months ended March 31, 2026. Our gross loss was $18,859 in the three months ended March 31, 2025 due to the higher costs associated with initial low volume production and costs exceeding revenue under the development agreement with our first design win customer. We expect a modest gross loss in the remainder of 2026 due to the higher costs associated with low volume production.

Research and Development Expenses. Research and development expenses increased by $464,321, or 30%, to $2,032,313 in the three months ended March 31, 2026 from $1,567,992 in the three months ended March 31, 2025. The increase was due to higher stock-based compensation expense of $327,521, semiconductor fabrication costs of $71,654, higher testing costs of $53,278 and other net B-TRAN® development spending of $11,868. We expect lower quarterly research and development expenses in the remainder of 2026 as compared to the first quarter of 2026 due to a decline in stock-based compensation expense as certain awards will be fully expensed early in the second quarter of 2026. There will also be quarter-to-quarterly variability in research and development expenses due to the timing of semiconductor fabrication runs and other development activities.

General and Administrative Expenses. General and administrative expenses increased by $320,190, or 36%, to $1,220,011 in the three months ended March 31, 2026 from $899,821 in the three months ended March 31, 2025. The increase was due to higher stock-based compensation expense of $277,824, related to inducement awards granted to our new CEO in the fourth quarter of 2025, and higher personnel costs of $116,095, partly offset by lower investor relations spending of $70,631 and other spending of $3,098. We expect slightly higher quarterly general and administrative expenses, exclusive of stock-based compensation, in the remainder of 2026 as compared to the first quarter of 2026.

Sales and Marketing Expenses. Sales and marketing expenses increased by $101,538, or 30%, to $439,698 in the three months ended March 31, 2026 from $338,160 in the three months ended March 31, 2025. The increase was due to higher personnel costs of $82,991, travel costs of $12,855 and other spending of $5,692. We expect higher quarterly sales and marketing expenses in the remainder of 2026 as compared to the first quarter of 2026 as we add sales personnel, expand our engagement and sales pipeline with prospective customers, and further commercialize our B-TRAN® technology and related products.

Loss from Operations. Our loss from operations for the three months ended March 31, 2026 was $3,692,022, or 31% higher, as compared to the $2,824,832 loss from operations for the three months ended March 31, 2025, for the reasons discussed above.

Interest Income, Net. Net interest income was $60,517 for the three months ended March 31, 2026, compared to $121,808 for the three months ended March 31, 2025, primarily as a result of the impact of decreased interest from a lower average daily cash balance and lower interest rate on our money market account.

Net Loss. Our net loss for the three months ended March 31, 2026 was $3,631,505, or 34% higher, as compared to a net loss of $2,703,024 for the three months ended March 31, 2025, 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 March 31, 2026, we had cash and cash equivalents of $16.4 million. Our net working capital at March 31, 2026 was $15.3 million. We had no outstanding debt at March 31, 2026.

We believe that our cash and cash equivalents on hand will be sufficient to meet our ongoing liquidity needs for at least the next twelve months from the date of filing this Quarterly Report on Form 10-Q; however, we may require additional funds in the future to fully implement our plan of operation and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all. Although we believe we have adequate sources of liquidity over the long term, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets could each impact our business and liquidity.

Operating activities in the three months ended March 31, 2026 resulted in cash outflows of $2,034,860, which were due to the net loss for the period of $3,631,505, partly offset by stock-based compensation of $991,440, favorable balance sheet timing of $488,259 and other non-cash items of $116,946.

Operating activities in the three months ended March 31, 2025 resulted in cash outflows of $2,066,774 which were due to the net loss for the period of $2,703,024, partly offset by stock-based compensation of $384,595, favorable balance sheet timing of $139,102 and other non-cash items of $112,553.

We expect a modest increase in cash outflows from operating activities in the remainder of 2026 as compared to the first quarter of 2026 as we further commercialize our B-TRAN® technology.

Investing activities in the three months ended March 31, 2026 and 2025 resulted in cash outflows of $253,966 and $69,878, respectively, for the acquisition of intangible assets and fixed assets.

Financing activities in the three months ended March 31, 2026 resulted in cash inflows of $12,570,526, as net proceeds from the February 2026 Offering (see below) of $12,574,677 were only slightly offset by the payment of withholding taxes upon the vesting of restricted stock units of $4,151.

Financing activities in the three months ended March 31, 2025 resulted in cash outflows of $9,346 from the payment of withholding taxes upon the vesting of restricted stock units.

May 2026 Offering

On May 14, 2026, we entered into a definitive agreement with certain institutional investors for the purchase and sale of 3,220,961 shares of our common stock at a price of $5.67 per share and 2,070,044 pre-funded warrants to purchase shares of common stock at a price of $5.669 per pre-funded warrant in a registered direct offering (the "May 2026 Offering”). The pre-funded warrants have an exercise price of $0.001 per share and no expiration date. The estimated net proceeds to us from the May 2026 Offering are $27.7 million. The closing of the May 2026 Offering is expected to occur on or about May 18, 2026, subject to the satisfaction of customary closing conditions. We intend to use the net proceeds from the May 2026 Offering to fund further commercialization and development of our B-TRAN® technology and products and general corporate and working capital purposes.

February 2026 Offering

In February 2026, we issued and sold 3,505,855 shares of our common stock at a price of $2.75 per share and 952,881 pre-funded warrants to purchase shares of common stock at a price of $2.749 per pre-funded warrant in an underwritten public offering, and also sold 631,332 pre-funded warrants to purchase shares of common stock at a price of $2.749 per pre-funded warrant in a concurrent private placement (taken together, the "February 2026 Offering”). The shares of common stock underlying the pre-funded warrants issued in the concurrent private placement were subsequently registered for resale on the Registration Statement on Form S-1 (File No. 333-294696) declared effective on April 3, 2026. The pre-funded warrants have an exercise price of $0.001 per share and no expiration date. The estimated net proceeds to us from the February 2026 Offering are $12.6 million. We intend to use the net proceeds from the February 2026 Offering to fund further commercialization and development of our B-TRAN® technology and products and general corporate and working capital purposes.

Critical Accounting Estimates

There have been no significant changes during the three months ended March 31, 2026 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, 2025.

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, 2025.

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 March 31, 2026 and has concluded that, as of March 31, 2026, the Company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have been no material changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2026 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, 2025.