Ideal Power Inc.: Form 10-Q for the period ended Jun 30, 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 $5,800 in revenue in the six months ended June 30, 2026 and $13,278 in revenue in the six months ended June 30, 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 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 deliverable 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. Recently, we delivered next generation B-TRAN® custom-packaged samples and development kits for evaluation to Stellantis for EV applications under the purchase order. 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. Companies in our sales pipeline 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 previously announced agreements with multiple distribution partners. We may add other distribution partners in the future. Recently, we signed a letter of intent with an industry partner to co-develop a B-TRAN®-enabled intelligent solid-state circuit breaker (“SSCB”) prototype for evaluation by a U.S. hyperscaler in its development environment for the NVIDIA Rubin Ultra 800V direct current AI data center power distribution system. We may engage with 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 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 the coming quarters.

Results of Operations

Comparison of the three months ended June 30, 2026 to the three months ended June 30, 2025

Revenue. Revenue was $5,800 for the three months ended June 30, 2026, compared to $1,275 in the three months ended June 30, 2025. Revenue in the three months ended June 30, 2026 related to shipments under our purchase order from Stellantis. Revenue in the three months ended June 30, 2025 related to initial orders from customers evaluating our technology for use in their applications.

Cost of Revenue. Cost of revenue was $4,008 for the three months ended June 30, 2026, compared to $3,477 in the three months ended June 30, 2025. Cost of revenue in the three months ended June 30, 2026 related to the cost of products shipped under our purchase order from Stellantis. Cost of revenue in the three months ended June 30, 2025 related to initial low volume and high-cost shipments of prototype products.

Research and Development Expenses. Research and development expenses decreased by $469,885, or 25%, to $1,430,134 in the three months ended June 30, 2026 from $1,900,019 in the three months ended June 30, 2025. The decrease was due to lower semiconductor fabrication costs of $161,091, resulting from improvements in the efficiency of our manufacturing footprint, and lower stock-based compensation expense of $138,000, packaging and testing costs of $109,908, engineering services of $54,290 and other B-TRAN® development spending of $6,596.

General and Administrative Expenses. General and administrative expenses increased by $760,733, or 85%, to $1,657,972 in the three months ended June 30, 2026 from $897,239 in the three months ended June 30, 2025. The increase was due to higher stock-based compensation expense of $420,255, of which $266,926 related to the vesting of a performance stock unit with a performance condition that was previously deemed not probable, non-cash patent impairment charges of $215,133, higher personnel costs of $98,425 and other costs of $26,920.

Sales and Marketing Expenses. Sales and marketing expenses increased by $195,801, or 57%, to $536,834 in the three months ended June 30, 2026 from $341,033 in the three months ended June 30, 2025. The increase was due to higher personnel costs of $144,271, travel costs of $70,354, stock-based compensation expense of $31,800 and other spending of $9,543, partly offset by lower search and placement fees of $60,167.

Loss from Operations. Our loss from operations for the three months ended June 30, 2026 was $3,623,148, or 15% higher, as compared to the $3,140,493 loss from operations for the three months ended June 30, 2025, for the reasons discussed above.

Interest Income, Net. Net interest income was $210,222 for the three months ended June 30, 2026, compared to $103,728 for the three months ended June 30, 2025, due primarily to the impact of a higher cash balance after the May 2026 Offering on interest earned on our money market accounts. This was partly offset by lower interest rates on these accounts in the second quarter of 2026 compared to the second quarter of 2025.

Net Loss. Our net loss for the three months ended June 30, 2026 was $3,412,926, or 12% higher, as compared to a net loss of $3,036,765 for the three months ended June 30, 2025, for the reasons discussed above.

Comparison of the six months ended June 30, 2026 to the six months ended June 30, 2025

Revenue. Revenue was $5,800 for the six months ended June 30, 2026, compared to $13,278 in the six months ended June 30, 2025. Revenue in the six months ended June 30, 2026 related to shipments under our purchase order from Stellantis. Revenue in the six months ended June 30, 2025 included prototype 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 second half of 2026.

Cost of Revenue. Cost of revenue was $4,008 for the six months ended June 30, 2026, compared to $34,339 in the six months ended June 30, 2025. Cost of revenue in the six months ended June 30, 2026 related to the cost of products shipped under our purchase order from Stellantis. Cost of revenue in the six months ended June 30, 2025 related primarily to initial low volume and high-cost shipments of prototype products. We generally 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. Development revenue may result in either positive or negative gross margin depending on our scope for any specific program.

Research and Development Expenses. Research and development expenses decreased by $5,564, or less than 1%, to $3,462,447 in the six months ended June 30, 2026 from $3,468,011 in the six months ended June 30, 2025. We expect flat to lower quarterly research and development expenses in the second half of 2026 as compared to the first half of 2026 due to a decline in stock-based compensation expense as certain awards were fully expensed upon vesting in the first half 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 $1,080,923, or 60%, to $2,877,983 in the six months ended June 30, 2026 from $1,797,060 in the six months ended June 30, 2025. The increase was due to higher stock-based compensation expense of $698,079, of which $266,926 related to the vesting of a performance stock unit with a performance condition that was previously deemed not probable, non-cash patent impairment charges of $215,133, higher personnel costs of $214,521 and other spending of $9,524, partly offset by lower professional fees of $56,334. We expect flat to slightly higher quarterly general and administrative expenses, exclusive of stock-based compensation, in the second half of 2026 as compared to the first half of 2026.

Sales and Marketing Expenses. Sales and marketing expenses increased by $297,339, or 44%, to $976,532 in the six months ended June 30, 2026 from $679,193 in the six months ended June 30, 2025. The increase was due to higher personnel costs of $227,262, travel costs of $83,209, stock-based compensation expense of $33,300 and other spending of $14,869, partly offset by lower search and placement fees of $61,301. We expect higher quarterly sales and marketing expenses in the second half of 2026 as compared to the first half 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 six months ended June 30, 2026 was $7,315,170, or 23% higher, as compared to the $5,965,325 loss from operations for the six months ended June 30, 2025, for the reasons discussed above.

Interest Income, Net. Net interest income was $270,739 for the six months ended June 30, 2026 compared to $225,536 for the six months ended June 30, 2025 due primarily to the impact of a higher cash balance after the May 2026 Offering on interest earned on our money market accounts. This was partly offset by lower interest rates on these accounts in the first half of 2026 compared to the first half of 2025.

Net Loss. Our net loss for the six months ended June 30, 2026 was $7,044,431, or 23% higher, as compared to a net loss of $5,739,789 for the six months ended June 30, 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 June 30, 2026, we had cash and cash equivalents of $41.3 million. Our net working capital at June 30, 2026 was $40.1 million. We had no outstanding debt at June 30, 2026.

Operating activities in the six months ended June 30, 2026 resulted in cash outflows of $4,473,167, which were due to the net loss for the period of $7,044,431, partly offset by stock-based compensation of $1,635,526, favorable balance sheet timing of $480,283, patent impairment charges of $215,133, depreciation and amortization of $194,454, and other non-cash items of $45,868.

Operating activities in the six months ended June 30, 2025 resulted in cash outflows of $4,425,301, which were due to the net loss for the period of $5,739,789, partly offset by stock-based compensation of $714,625, depreciation and amortization of $182,107 and favorable balance sheet timing and other non-cash items of $417,756.

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

Investing activities in the six months ended June 30, 2026 and 2025 resulted in cash outflows of $364,048 and $220,337, respectively, for the acquisition of intangible assets and fixed assets.

Financing activities in the six months ended June 30, 2026 resulted in cash inflows of $40,259,375 in net proceeds from the issuance and sale of common stock and pre-funded warrants and $267 from the exercise of pre-funded warrants, partly offset by $256,988 in tax payments related to the vesting of restricted stock units.

Financing activities in the six months ended June 30, 2025 resulted in net cash outflows of $91,659 with a cash outflow of $91,769 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.

May 2026 Offering

In May 2026, we issued and sold 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 net proceeds to us from the May 2026 Offering were $27.7 million. 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 net proceeds to us from the February 2026 Offering were $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 six months ended June 30, 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 June 30, 2026 and has concluded that, as of June 30, 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 June 30, 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.