Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

References to "we," "us," "our," or the "Company" refer to Independence Power Holdings, Inc. (either individually or together with its subsidiaries, as the context requires). The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying financial statements and related notes. The following discussion contains "forward-looking statements" that reflect our plans, estimates, beliefs and expected performance. Our actual results may differ materially from those anticipated as discussed in these forward-looking statements as a result of a variety of risks and uncertainties, including those described above in "Cautionary Statement Regarding Forward-Looking Statements" included elsewhere in this Quarterly Report and "Risk Factors" included in our 2025 Form 10-K, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements except as otherwise required by law.

Overview

The Company's primary business activity is the software and hardware development, implementation and installation of industrial battery management and monitoring systems for high voltage battery storage systems. The Company's Software Platform for BESS is targeted to be deployed to end markets, including data centers, energy, and other commercial and industrial sectors.

The Cooperative, is an independent separate legal entity organized in April 2025 as a rural electric cooperative. It is responsible for owning and leasing BESS equipment to its patron-members, qualifying for and monetizing investment tax credits and receiving any refundable direct-pay credits under applicable tax provisions. The Cooperative does not operate, dispatch or market power; those functions are expected to be performed by Independence Power pursuant to the Asset Management Agreement and other patron-member operators under separate agreements, with Independence Power also supplying the software and control layer.

The Cooperative, through its wholly-owned affiliate, DBD Express, is the owner of the BESS Fleet, 101 utility scale batteries representing 241 megawatts of nameplate capacity, which it acquired from GridCore for approximately $216.9 million in 2025.

In 2025, the Company installed its Software Platform on the BESS Fleet. The Company delivered its Software Platform installation services pursuant to the GridCore Agreement. We refer to the installation of the Software Platform on the BESS Fleet as the "GridCore Installation Project." GridCore in turn delivered the entire system to the Cooperative, as end-user. Based on an independently executed Battery Energy Storage System Placed-in-Service Certificate dated October 26, 2025, and a related Technical Addendum thereto, each executed by a licensed professional engineer in the State of Texas following on-site inspection and testing, the BESS Fleet was determined to be fully installed, energized, and ready for its intended operational use as of September 26, 2025.

The contract price was $97.2 million, of which the Company received a cash down payment of $10.6 million on September 11, 2025. The remaining purchase price of $86.6 million was paid in the form of a secured promissory note issued by GridCore calling for semi-annual interest payments beginning in March 2026 and quarterly principal payments of $21.65 million beginning in December 2026, with the final payment due in September 2027. The Company received the first interest payment of approximately $1.7 million under the GridCore Note in March 2026 and recognized interest income of $868,567 during the three months ended March 31, 2026.

While the Company recognized a substantial amount of revenue in connection with the GridCore Installation Project on the BESS Fleet, it is uncertain whether the Company will generate revenues from similar installation projects in the future. Therefore, you should not assume that the Company will generate such revenue from installation projects in the future. We recognized a substantial amount of revenue on the GridCore Installation Project, most of it in the form of a the GridCore Note, but we expect our revenues in the future to be primarily related to servicing BESS, and there can be no assurance that we will be able to enter into similar installation contracts in the future.

The Company's revenues in the future are expected to be derived primarily from software license and subscription fees and related services, and, in some cases, from performance-based fees. Additionally, it is expected that the Company and other service providers will provide field operations.

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For example, the Company has entered into the Asset Management Agreement with the Cooperative, effective October 1, 2025, pursuant to which the Company provides administrative, monitoring, advisory and consulting services, including quarterly business analysis, daily operations of deployed BESS Units, maintenance services, marketing services, customer support for End Customers, marketing services and negotiation of rental agreements with End Customers. Under the Asset Management Agreement, the Cooperative is obligated to pay to the Company on a quarterly basis an amount calculated as a percentage, to be agreed per the terms of the Asset Management Agreement, of the aggregate gross rental fees that the Cooperative actually receives under all rental agreements with End Customers, subject to an aggregate maximum amount.

Such fee shall not be less than $5,000 per month per BESS Unit (initially, 101 units, with three in reserve) deployed and managed by the Company. If the parties cannot agree on the percentage and maximum amount of the fee, such terms will be determined by binding arbitration.

As of the date of this Quarterly Report, the Cooperative, through its subsidiary DBD Express, acquired the initial BESS Fleet, and the Software Platform is expected to be used on that BESS Fleet. The timing and scale of deployments of the BESS Units will significantly influence the Company's near-term operating results. To the extent we are not successful in deploying a significant percentage of the BESS Fleet, our operating results and financial position will be adversely affected.

Basis of Presentation

On December 30, 2025, the Company entered into and completed an Agreement and Plan of Merger by and among the Company, Merger Sub, Independence Power and Independence Investors, pursuant to which Merger Sub merged with and into Independence Power (the "Merger"), with Independence Power continuing as the surviving company and a wholly owned subsidiary of the Company. The Merger was completed in a simultaneous sign and close transaction.

The Merger was accounted for as a "reverse merger," and Independence Power was deemed to be the accounting acquirer in the Merger. Independence Power was formed on October 22, 2025, for the purpose of acquiring all of the equity interests in Kyma Batteries, and has had no operations prior to completion of its acquisition of Kyma Batteries effective November 1, 2025. Consequently, the financial condition, results of operations and cash flows discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations discussed below are those of Kyma Batteries. References herein to the" Company" and to "Independence Power" include Kyma Batteries, unless the context otherwise requires.

Key Factors Affecting Results

Key factors that will affect our results of operations and financial condition include:

	·	Pace and extent of BESS Fleet deployment and utilization by the Cooperative and its patron members, and by other BESS asset owners of their systems;
	·	Independence Power's ability to win new contracts to provide its management services to other BESS asset owners;
	·	Execution and pricing of commercial arrangements for software and services, including the outcome of negotiations with the Cooperative of the percentage pricing model under the Asset Management Agreement;
	·	Investment in software development, integration capabilities and personnel;
	·	Dependence on a limited number of counterparties (including the Cooperative, Independence TX and a small group of customers);
	·	Any increases in headcount or other costs necessary to support delivery of services to the Cooperative under the Asset Management Agreement and to other customers in the future;
	·	Macroeconomic and industry conditions in the oil and gas sector, including commodity prices and capital spending levels.

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In addition, the Company's operations have been materially expanded, which will require the Company to hire additional personnel and implement and apply procedures and processes to its operations in order to address public company regulatory requirements and customary practices. The Company expects to incur significant additional expenses as a result.

Results of Operations

To date, the Company has generated revenue only from the GridCore Installation Project. Future revenue is expected to be derived primarily from software license and subscription fees and related services, and, in some cases, from performance-based fees. Operating expenses have consisted primarily of cost of sales, employment, research and development ("R&D") and general and administrative ("G&A") costs. The Company reported loss of $237,285 and $3,006,255 for the three months ended March 31, 2026 and 2025, respectively.

As the BESS Fleet is commissioned and deployed, the Company expects its revenue mix to shift toward recurring software license and subscription fees and related services, with potential performance-based components. The timing and amount of revenue recognized will depend on the specific terms of the Company's contracts, including whether fees are structured as fixed license fees, usage-based charges, shared-savings components or a combination thereof, and on the utilization patterns of the BESS Units.

Comparison of the Three Months Ended March 31, 2026 and 2025

Revenue

We did not recognize any revenue in the three months ended March 31, 2026 and 2025. All of the revenue recognized in the year ended December 31, 2025 was realized under the GridCore Installation Project and related to the installation of the battery software management system on the BESS Fleet. Approximately $10.6 million of this revenue was received in cash during 2025, and the remaining $86.6 million in revenue was received in the form of the GridCore Note. There can be no assurances that we will collect all, or any, payments under the GridCore note.

Cost of Sales and Gross Profit

We did not recognize any cost of sales in the three months ended March 31, 2026 and 2025.

Employment Expense

Employment expense for the three months ended March 31, 2026 increased by $22,616 or 11%, as compared to the same period in 2025 and represents fairly flat headcount period to period.

Research and Development Expense

Research and Development expense for the three months ended March 31, 2026 decreased by $772,640, or 86%, as compared to the same period in 2025 and is largely due to shift in business strategy from a manufacturer of batteries to the BESS Software Platform deployment.

General and Administrative Expense

General and administrative expense for the three months ended March 31, 2026 decreased $1,092,718, or 57%, as compared to the same period in 2025 and is largely due to the termination of the management agreement with Independence TX LLC, an affiliate, whereby the affiliate provided management services, including executive services, to the Company for $500,000 per month. This agreement was terminated effective September 30, 2025.

Despite the decrease quarter-over-quarter, the Company's operations have been materially expanded, which will require the Company to hire additional personnel and implement and apply procedures and processes to Independence Power and its operations in order to address public company regulatory requirements and customary practices. The Company expects to incur significant additional expenses as a result.

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Taxes

The Company recognized a tax benefit of $62,987 for the three months ended March 31, 2026, which was a result of the loss from operations of $300,272. The tax benefit resulted in an increase to the Company's net operating loss carryforward, which is available to future periods and reduced the Company's deferred tax liability as of March 31, 2026.

We did not recognize any income tax expense or benefit in the three months ended March 31, 2025.

Liquidity and Capital Resources

Historically, the Company has funded operations through equity contributions from its majority shareholder and indirect owner and has had limited revenue. As of March 31, 2026, the Company had cash and cash equivalents of $1,552,375, a note receivable of $86,600,000, of which $43,300,000 is due within one year, and total liabilities of $20,374,764, of which $17,878,989 was related to a net deferred tax liability as a result of the GridCore Note. The Company also has a line of credit agreement with Independence Investors, our majority shareholder, which allows for borrowings up to $4,000,000 for working capital needs and was $1,800,000 drawn as of March 31, 2026.

GridCore Note

At March 31, 2026, the Company's principal asset was the $86.6 million GridCore Note, issued by GridCore to the Company in connection with entry into the GridCore Agreement. The GridCore Note pays semi-Quarterly interest payments at a rate of 4.0% per annum, beginning March 10, 2026, and four equal quarterly principal payments of $21.65 million beginning December 10, 2026, with the final payment due on September 10, 2027. The Company received the first interest payment of approximately $1.7 million under the GridCore Note on March 10, 2026. GridCore may prepay all or a portion of the outstanding principal amount under the GridCore Note at any time and from time to time without premium or penalty. From and after the occurrence and during the occurrence of any event of default under the GridCore Note, the rate of interest on the entire then-outstanding principal amount will increase to 12.0% per annum and the Company may declare the entire unpaid principal amount, together with all accrued and unpaid interest, to be immediately due and payable. Such events of default include failure to pay principal or interest, breach of covenants, breach of representation, cross default under the GridCore Agreement or the GridCore Security Agreement, or an insolvency event.

The GridCore Note is secured by the security agreement, dated as of September 10, 2025, by and between GridCore and the Company (the "GridCore Security Agreement"). Pursuant to terms of the GridCore Security Agreement, GridCore has pledged a broad range of assets, including its accounts, equipment, intellectual property and inventory, the DBD Express Note, its rights under the DBD Express Security Agreement (as defined below) and the Cooperative Guarantee described below, certain other assets and proceeds from all of the foregoing. Additionally, GridCore assigned to the Company all of GridCore's right, title, and interest in and to, including all proceeds received under the DBD Express Note described below, any and all such collateral.

In connection with the delivery by GridCore to DBD Express of the BESS Fleet, DBD Express issued GridCore the DBD Express Note in the principal amount of $193.42 million, which pays semi-Quarterly interest payments at a rate of the applicable federal rate plus 6.0% per annum, beginning March 10, 2026, and four equal quarterly payments of $48.355 million beginning February 10, 2027, with the final payment due on September 10, 2027. Pursuant to the terms of the DBD Express Note, DBD Express granted to GridCore a first priority security interest in and to all of DBD Express' right, title, and interest in, to and under the BESS Fleet and related collateral. Further, the Cooperative, DBD Express and GridCore entered into a continuing guaranty agreement (the "Cooperative Guarantee"), pursuant to which the Cooperative absolutely, unconditionally and irrevocably guaranteed to GridCore the full and prompt payment of all obligations of DBD Express to GridCore.

There can be no assurances that we will collect all, or any, payments under the GridCore Note.

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The Company's primary future cash requirements are expected to include:

	·	funding operating losses until sufficient scale in software and services revenues is achieved;
	·	supporting software development, integration and support activities;
	·	hiring and retaining personnel in engineering, operations and corporate functions; and
	·	satisfying working capital needs, including accounts receivable and payables associated with software and services contracts.

Because the Company does not expect to fund BESS equipment purchases, its capital needs are primarily operating in nature. Following the business combination, sources of liquidity consist of existing cash and cash equivalents, cash flows from operations, receipt of interest and principal payments on the GridCore Note and any future capital raised through equity or debt financing.

Management believes that existing cash and cash equivalents, together with expected cash flows from operations and payment of principal and interest on the GridCore Note, will be sufficient to meet anticipated operating requirements for at least twelve months from the date of this Quarterly Report. Any such assessment should be read in conjunction with any going concern disclosures in the Company's financial statements.

Cash Flows

Net cash used in operating activities has primarily reflected net losses, partially offset by non-cash charges and changes in working capital. Net cash used in investing activities consists primarily of capitalized purchases of property and equipment. Net cash provided by financing activities has reflected equity contributions from owners and borrowings on line of credit, related party.

The Company expects cash used in operating activities to increase in absolute terms in the near term as it invests in scaling the Software Platform and public-company infrastructure, partially offset by any increases in revenue.

Contractual Obligations and Off-Balance Sheet Arrangements

The Company's contractual obligations as of March 31, 2026, consist primarily of lease commitments, service and support contracts and software and cloud services agreements, as described in the notes to its condensed consolidated financial statements.

The Company does not currently have any material off-balance sheet arrangements, as such term is defined in Item 303 of Regulation S-K.

While the Company expects to enter into additional commercial agreements with the Cooperative, Independence TX and other counterparties, including software license, maintenance and service agreements, such arrangements are not expected to create significant fixed capital commitments with respect to BESS equipment, as ownership and financing of such equipment will reside with the Cooperative and other asset owners.

Recent Developments

None.