Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the 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 two commercial products, the SymCool® Power Module and SymCool® IQ Intelligent Power Module. We generated $13,278 in revenue in the six months ended June 30, 2025.

Product Launches

In early 2023, we launched our first commercial product, the SymCool® Power Module. This multi-die B-TRAN® module is designed to meet the very low conduction loss needs of the solid-state circuit breaker ("SSCB") market. We commenced shipment of SymCool® Power Modules to fulfill customer orders in 2024.

In late 2023, we launched our second commercial product, 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, electric vehicle ("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 product. 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. This phase is expected to include the extensive testing of the custom B-TRAN® module to meet automotive certification standards enabling B-TRAN® to be the core of the powertrain inverter for the automaker's next-generation EVs.

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 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 later in the year. We completed our deliverables under the agreement in the first quarter of 2025, three months ahead of schedule. We expect to announce additional design wins and/or custom development agreements in the second half of 2025.

Results of Operations

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

Revenue. Revenue was $1,275 for the three months ended June 30, 2025, compared to $1,331 in the three months ended June 30, 2024. Revenue in the three months ended June 30, 2025 and 2024 related to initial orders from customers evaluating our technology for use in their applications.

Cost of Revenue. Cost of revenue was $3,477 for the three months ended June 30, 2025, compared to $17,474 in the three months ended June 30, 2024. Cost of revenue in the three months ended June 30, 2025 related to initial low volume shipments of our products while cost of revenue in the three months ended June 30, 2024 related to initial high cost, low volume shipments of prototype products.

Research and Development Expenses. Research and development expenses increased by $337,272, or 22%, to $1,900,019 in the three months ended June 30, 2025 from $1,562,747 in the three months ended June 30, 2024. The increase was due to higher semiconductor fabrication costs of $283,932, personnel costs of $104,640 and other B-TRAN® development spending of $5,211, partly offset by lower packaging and prototyping costs of $56,511.

General and Administrative Expenses. General and administrative expenses decreased by $50,145, or 5%, to $897,239 in the three months ended June 30, 2025 from $947,384 in the three months ended June 30, 2024. The decrease was due to lower investor relations spending of $75,897 and asset impairments of $66,315 in the three months ended June 30, 2024, partly offset by higher personnel costs of $42,226, stock-based compensation expense of $18,240 and other spending of $16,282 and a gain on lease modification of $15,319 in the three months ended June 30, 2024.

Sales and Marketing Expenses. Sales and marketing expenses decreased by $18,706, or 5%, to $341,033 in the three months ended June 30, 2025 from $359,739 in the three months ended June 30, 2024. The decrease was due to lower personnel costs of $36,424 and stock-based compensation expense of $28,499, partly offset by higher search and placement fees of $27,924, consulting fees of $15,086 and other spending of $3,207.

Loss from Operations. Our loss from operations for the three months ended June 30, 2025 was $3,140,493, or 9% higher, as compared to the $2,886,013 loss from operations for the three months ended June 30, 2024, for the reasons discussed above.

Interest Income, Net. Net interest income was $103,728 for the three months ended June 30, 2025, compared to $223,948 for the three months ended June 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 June 30, 2025 was $3,036,765, or 14% higher, as compared to a net loss of $2,662,065 for the three months ended June 30, 2024, for the reasons discussed above.

Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024

Revenue. Revenue was $13,278 for the six months ended June 30, 2025, compared to $80,070 in the six months ended June 30, 2024. For the six months ended June 30, 2025, our revenue included product sales and development revenue related to our first design win. For the six months ended June 30, 2024, our revenue was primarily related to the completion of the second phase of our development agreement with Stellantis. We expect revenue to increase modestly in the second half of 2025.

Cost of Revenue. Cost of revenue was $34,339 for the six months ended June 30, 2025, compared to $85,972 in the six months ended June 30, 2024. Cost of revenue in the six months ended June 30, 2025 related primarily to initial low volume shipments of our products. Cost of revenue in the six months ended June 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 $538,371, or 18%, to $3,468,011 in the six months ended June 30, 2025 from $2,929,640 in the six months ended June 30, 2024. The increase was due to higher semiconductor fabrication costs of $335,220, personnel costs of $264,645 and other B-TRAN® development spending of $42,908, partly offset by lower packaging and prototyping costs of $104,402. We expect higher research and development expenses in the second half of 2025 as compared to the first half of 2025 as we continue development of our B-TRAN® technology. There will also be quarter-to-quarter variability to research and development expenses due to the timing of semiconductor fabrication runs and other development activities.

General and Administrative Expenses. General and administrative expenses decreased slightly by $4,012, or less than 1%, to $1,797,060 in the six months ended June 30, 2025 from $1,801,072 in the six months ended June 30, 2024. We expect modestly higher general and administrative expenses, exclusive of stock-based compensation, in the second half of 2025 as compared to the first half of 2025.

Sales and Marketing Expenses. Sales and marketing expenses increased by $2,843, or less than 1%, to $679,193 in the six months ended June 30, 2025 from $676,350 in the six months ended June 30, 2024. We expect higher sales and marketing expenses in the second half of 2025 as compared to the first half of 2025 as we further commercialize our B-TRAN® technology.

Loss from Operations. Our loss from operations for the six months ended June 30, 2025 was $5,965,325, or 10% higher, as compared to the $5,412,964 loss from operations for the six months ended June 30, 2024, for the reasons discussed above.

Interest Income, Net. Net interest income was $225,536 for the six months ended June 30, 2025 compared to $281,273 for the six months ended June 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 six months ended June 30, 2025 was $5,739,789, or 12% higher, as compared to a net loss of $5,131,691 for the six months ended June 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 June 30, 2025, we had cash and cash equivalents of $11.1 million. Our net working capital at June 30, 2025 was $10.5 million. We had no outstanding debt at June 30, 2025.

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 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.

Operating activities in the six months ended June 30, 2024 resulted in cash outflows of $3,970,930 which were due to the net loss for the period of $5,131,691, partly offset by stock-based compensation of $745,600, depreciation and amortization of $163,871, favorable balance sheet timing of $155,129 and other non-cash items of $96,161.

We expect an increase in cash outflows from operating activities in the remainder of 2025 as we further develop and commercialize our B-TRAN® technology.

Investing activities in the six months ended June 30, 2025 and 2024 resulted in cash outflows of $220,337 and $239,004, respectively, for the acquisition of intangible assets and fixed assets.

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.

Financing activities in the six months ended June 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 and $86,757 from the exercise of stock options, partly 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 six months ended June 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.