Q1 2021 Ideal Power Inc Earnings Call

As I mentioned other than the FC program, the University of Texas at Austin Semiconductor power Electronic center designed the new B Tran device packaging and the collaboration with the commercial packaging firm. The UT Austin design was recently modified to enhance its ability to be manufactured and high volume and to incorporate the size and electrical connections for.

Factor and thermal management required to integrate the semiconductor device into and end user product design.

The packaging for fabricated the packaging materials and assembled trial packages to ensure good mechanical fit and ease of assembly those trial assemblies went well and as I previously mentioned they subsequently package die from the second fabrication run under the <unk> program the.

These package devices are now undergoing testing and characterization using the new device driver also designed by Ut's semiconductor power Electronic center.

This packaging design will be utilized for future B Tran dies under both the nasty program and our customer engineering prototype sampling program and resembles those commonly available for commercial <unk>, which we believe can speed customer adoption.

The Navy has made chip electrification a high priority initiative as it can significantly enhance the energy efficiency of ship operations improved their operational flexibility and lower operating costs.

Distributed power on chips makes them less vulnerable to attack by lowering the noise signature and enhancing their sales capabilities and B Tran technology offer of substantial size heat and loss reduction over continuously conducting semiconductor devices, such as <unk> without using complex large and heavy liquid cooling systems, we're very excited.

And the progress being made under the <unk> program and this progress continues to benefit our overall validation and commercialization efforts.

In addition to this program with the U S. Navy, we're pursuing other opportunities for government funding. The department of energy recently issued a new round of solicitations and and collaboration with both existing and new partners. We submitted multiple proposals for government funding this quarter. Our efforts in this area were aided by our February of hiring of a new vice.

President of business development with an extensive network and the electric vehicle and renewables markets that enabled us to attract the attention and collaboration of several potential partners for these opportunities representing diverse applications, including electric vehicles, UBS systems and power converters for renewable energy applications.

Partnering for government funding opportunities may lead to the development of additional <unk> enabled products and further commercial opportunities.

We've recently released a b Tran information sheet, which is available on our website that provides the technical community with detailed information on <unk> operating characteristics as well as information regarding the packaging and driver of design and operation. This serves as the fundamental technical information for ideal power customer sampling program.

And is being used to facilitate the potential customers technical evaluation of the device.

We're currently engaged with a wide variety of companies and our business development efforts, we hope to be able to name some of the companies and the future. We do want to give you a flavor of.

Some of these companies are or what they do our discussions include two of the worlds largest automobile manufacturers, who are interested and the potential of B Tran for use and EV traction drives our engagement with them and their technical teams is very promising for the long term benefit be trend can bring to the EV market.

While automotive companies move slowly and the adoption of new technology. The feedback we've received from their technical teams has been very positive and were impressed by the size of the teams and resources. They are bringing to these evaluations were also and discussion with one of the world's largest providers of power converters for solar energy, our low loss and bi directionality are of particular.

<unk> interest and solar is increasingly being coupled with energy storage or business development team is also engaged with several companies that supply electronic traction and propulsion systems variable frequency motor drives and battery Chargers to the EV and locomotive market.

Another company as a global Fortune 500 company that provides a wide range of power products and is looking at <unk> for their EV charging systems.

We're also engaged with multiple companies that provide DC to DC and AC to DC power supplies for and industrial military and medical and EV applications. While each of these will progress at their own pace, we're seeing significant resources being brought to the valuation from both large and small companies.

We will continue to add more companies to this pipeline and the coming months as we raise the visibility of the trend within the potential of power equipment manufacturers not all of these engagements will result in a formal agreement. Some of you want a different type of commercial arrangement, while others may ultimately wanted product configuration and different than what we're currently providing and the sampling program.

As the program gathers momentum and we gather more device feedback we will determine the set of common requirements across applications that condemn the incorporated into and intelligent power module.

Offering and intelligent power module, rather than the discrete device should accelerate b trans commercial adoption and we're on track to bring this module to market and 2022 as part of our B Tran and commercialization.

Crucial to the next phase of the device development and optimization is bringing additional talent talent and leadership in house.

After hiring Jeff Knapp as our VP of business development and February we announced last week that we made another key hire naming Dr. John <unk>, Our vice President of Engineering, John Kangas, and accomplished engineer and power semiconductor device design leader with 20 years of experience and leading every aspect of power semiconductor development <unk>.

<unk> power semiconductors for electric vehicles, and hybrid electric vehicle applications as well as significant experience with conventional power semiconductor devices, such as <unk> and MOSFET.

He also has significant experience working with semiconductor foundries and wafer processing he's authored and co authored numerous publications and has over 30 patents to his name John Ken will further expand our in house expertise and direct the continued advancement of our B Tran technology and products, including the design of intelligent power modules, we will offer for commercial sale.

To ensure sufficient supply capacity for the large potential customers and to mitigate supply chain risk. We began the process of qualifying the second domestic semiconductor fabrication partner we completed.

Of our technical screening of wafer fabrication companies and selected of fabrication partner for qualification runs scheduled to start later this month, we expect this run to be completed next quarter.

In addition to mitigating supply chain risk, having a second fabrication partner also gives us more flexibility to provide both devices and data that are not subject to the restrictions of our ISR and confidentiality requirements of the nasty program the.

And the wafer fabricator, we're qualifying has strong experience, making bipolar devices and we look forward to reporting our progress with them and addition to our continued work with Teledyne.

And we've made significant progress and assembling all of the essential elements needed to support B Tran through customer engineering sampling and into commercialization.

This year, we strengthened our balance sheet added highly qualified power semiconductor business development and engineering leaders to the team develop new packaging and driver designs completed a major milestone under the Nasty program signed sampling agreements with new partners and build a strong pipeline of new customer engagements that include large automobile companies.

The renewable energy equipment providers and power supply and manufacturers for a wide range of applications.

Looking at the B Tran patent of state. We currently have 62 issued B Tran patents with 25 of those issued outside of the United States and 22 pending B Tran patents.

During the first quarter, we had our first patent issuance and South Korea Korea. Our current geographic coverage now includes North America, China, Japan, South Korea, and Europe with the potential to expand coverage into India.

Our focus for 2021 remains twofold to attribute of our milestones under the nasty program with the target of delivering and optimized device near year end for incorporation into the demonstration of the 12, kilovolt and BDC breaker and mid 2022 and to complete the steps and our B Tran strategy to enable commercialization and 2020.

The two.

Our recent submissions to the Doe and other government entities underscore our collaboration with DTI and the naphtha project as potential of catalytic broadening our access to a wide range of opportunities to demonstrate b Tran power semiconductor performance characteristics over conventional power switches, including bi directionality higher efficiency and lower cooling.

The requirements and the smaller OEM product designs as the potential high impact technology for a variety of applications.

We look forward to being able to discuss customers the customer sampling program participants and more detail as we put additional sampling of agreements in place and the coming months and order to gather feedback from customers that will be used to prepare the intelligent power module for initial commercial sales and 2022.

We're excited about the number and caliber of companies engaging with us on our business development efforts.

And we're focused on high growth addressable segments within the overall $6 billion of IGT market that we plan to target for initial commercial sales, including electric vehicles electric vehicle charging.

And wind energy energy storage and data center on it.

Uninterruptible power supplies.

We're looking to establish strategic developmental and commercial partnerships.

<unk> and commercial momentum and laying the foundation for future <unk> revenue streams.

We'd like to remind everyone that the transition from sampling to commercial sales will vary by market segment and individual customers and we expect to continue to add potential customers and applications to the engineering sampling program over time, while simultaneously commercializing b Tran for markets and applications already and the sampling program.

Going forward, we will announce sampling agreements as we are able to provide additional color on the types of companies and our commercial discussions and utilize our strong balance sheet and our efforts to establish relationships as an attractive partner to major players and growing segments.

And our R&D program will move in lockstep with customer sampling incorporating feedback and refining our product offering and pursuit of initial commercial agreements targeted to provide a first commercial revenue and the second half of 2022.

We continued to progress well on our plans as we focus on bringing of differentiated patented technology that can significantly improve the efficiency and economics of electric vehicles, EV charging solar and wind power and energy storage and data center of <unk> systems were particularly excited to be commercializing such an impactful technology at a time.

On our target markets of electric vehicles, EV charging renewable energy and data centers has such a robust long term growth ahead of them now I'd like to hand, the call over to our Chief Financial Officer, Tim Burns for a review of our first quarter of 2021 financial results Tim. Thank.

And thank you Dan.

I'll review first quarter 2021 financial results.

And the first quarter, we recorded approximately $242000.

And grant revenue with offsetting cost of grant revenue as we continued our work on the Navy funded nasty demonstration project under the DTI contract, which began in mid 2020.

Operating expenses in our net loss were flat at <unk> $9 million and both the first quarters of 2021 and 2020.

The first quarter 2021, cash Houston, and operating and investing activities was zero point.

And $9 million compared to <unk> 8 million and the first quarter of 2020.

Our first quarter cash burn was consistent with the guidance we provided on our year end call in March.

And we expect our cash burn to increase throughout 2021, as we invest in both sales and marketing and research and development.

We expect the cash burn of approximately $1 million to $1 $1 million and the second quarter of 2021.

With the expectation of our full year cash burn of approximately $4 $5 million.

As previously reported during the first quarter, we raised $21 2 million and net proceeds through the.

The underwritten public offering of common stock.

And the first quarter, we also raised $3 $3 million from the exercise of options and awards.

With our strengthened balance sheet, we will be.

Able to support and be a more attractive partner to the larger corporations that we expect to participate and our customer sampling program as.

And as well as modestly build out our internal research and development capability and our product design team, which began with bringing on Dr. John Kangoo as our vice President of engineering.

And as an example, we expect to bring the driver design expertise and area, where we are now relying on third parties and house.

To modestly build on our commercial team and front and talent to support our customers sampling program and B Tran commercialization.

Engaging and additional domestic semiconductor fabrication partner now that we are engaging with large companies and our customer sampling program.

And for general corporate and working capital purposes.

Cash and cash equivalents totaled $26 8 million at March 31, 2021.

Our debt outstanding remains zero point of $1 million at March 31, 2021, and represented the Paycheck protection program loan we received last year to temporarily subsidized payroll and facilities costs and the business landscape impacted by the COVID-19 pandemic.

Earlier this week forgiveness of our PPP loans was granted by the SBA.

As a result, we no longer having the outstanding debt.

As of March 31, we had $5 million 872, and <unk> 46 shares outstanding and 1 million 4200, 48 warrants outstanding.

Including 430937 stock options outstanding our diluted shares outstanding was $7 3 million share as at March 31.

Our balance sheet gives us ample of liquidity, particularly given our plant continued modest cash burn to fund multiple years of operations and.

And we are well capitalized partner for the larger companies and we expect to participate and our customer sampling program.

At this time I would like to open up the call for questions.

Great.

Thank you once again to ask a question. Please press star one on your telephone keypad.

And first of all go to Shawn Severson with water tower of research.

Hello, and thanks for taking my questions guys.

And I just wanted to go back to the EV opportunity on.

Expand on that a little bit helped me understand the value proposition that youre, bringing on and maybe I'm not and quantify the enhanced performance or.

Really of what it is.

Really the impact that it would have fallen out of the fan.

<unk> performance.

Yes.

Based on the discussions and we're having with with the <unk> folks the real interest and is the fact that we will be trying does two things for the one debt. It's bidirectional. So when you start looking at both the traction drive and regenerative braking systems.

Having bidirectional power flow is really attractive for them, but more importantly, it's the lower losses associated with B Tran.

The losses and electric vehicle of substantial part of it are due to the semiconductor power switches.

And if you look at the improvement that you can get with B Tran compared to a regular semiconductor it directly translates into 7% to 10% more range out of the batteries on of vehicles. So it has a significant impact in terms of the range that you get out of the batteries, which is the most expensive component on the electric vehicle.

And so this is this something that.

That model years, and what are you talking 2023 20.

The 22% to help me give some of his perspective on the timing of it.

Yes, we don't have better visibility to that yet we have to understand a little bit further on terms of what the uptake cycle is for for.

And for the automotive manufacturers and their design cycles tend to be long. So we look of the EV space, We would expect to see deployment of B Trans and the EV charging systems before we actually get them into automotive vehicles. Some of the because there's a fairly long cycle of certification and evaluation that the automobile folks go through for any new technology.

Understood. Thank you.

And once again, it and star one for questions moving on we will go to.

Don Slowinski with Winslow asset group.

Good afternoon, and thanks for taking my call and.

Congratulations on the progress you are making this quarter.

And you answered my auto range question, but I do have a couple of all of those if you don't mind.

The.

Additional government funding opportunities if you could just go into a little bit more on the number of these opportunities the timing and maybe the potential size.

Yes, we have we have three that are and the multimillion dollars range.

One of which includes.

It's basically a.

Current source of inverter for wind energy.

There is another one that is UBS based incorporation of B, Tran and and at more advanced version of B Tran.

And then the third one I don't recall, what it is on top of head and then those are each potentially $2 million to $3 million of piece and then we also submitted a another proposal and collaboration with DTI, because the <unk> pretty happy with what we're doing on the Navy program for and AC Circuit breaker.

The timing of those our understanding is it <unk>.

Selections get made sometime in the October November timeframe the.

The these are always long youre, probably one and 10, but what's interesting is for the all of the three big proposals. They are all new partners that we are participating with so it's interesting how we're actually starting to see new and pre significant players that want to collaborate with us for some of these opportunities as the trends getting further advanced here and as we've got.

<unk> as a result of the Navy program.

Okay sounds good and just one.

Separate question in regards to form factor you have stated in the past the size advantages to the B Tran technology, but at the same time, you're stating that the size of your offering.

Through the sampling program is the same as <unk>. So it sounds like Theres, a little bit of a disconnect there, but if you could clarify that strategy is it just so that you can get people to see something that's the same form factor, but then as you go down the road, you'll be able to get them to take advantage of the.

Additional size or smaller benefits going forward, yes sort of as confusion about that.

The B Tran packaged device will be about the same size and IGT, but where the size factor comes in is and all power electronics the size of the device.

And is driven by the surface area that you need to dissipate the heat from the power switches. So it's the actual product that incorporates <unk> that can get smaller because you only have half as much heat you have to dissipate. So the surface area. It can be a lot smaller which is what drives the size of enclosures for things like power converters. So it's really an OS.

<unk> product size shrink not just of the <unk>.

Size of the Beecher and so if you think about it you're not only get this performance improvement, but if youre, making of power converter for example, youre and closure, which is typically one of the most expensive parts on the bill of material gets smaller the heat sinks go into power converter get smaller and the fans. The typically are used the cool devices get smaller so the size the impact is really.

On the OEM product and not so much of the B Tran itself because of the lower heat that's generated.

For the last left thermal management parts of our dedication to the <unk> as well, Okay. Alright that makes the that makes a lot of sense for gray.

Great job on the progress so far this year and look forward to talk to you soon.

Okay. Thank you.

Yes.

And once again as a reminder, please press star one for questions, we'll pause for just a moment.

We will take our next question from David Schneider private Investor.

Hi.

Just one question regarding the vehicle chart.

Alex on highways and gas stations are currently installing chargers so.

And you're correct and the charter et cetera, the people's homes and apartment buildings or where do you think that would go.

For our product because of the fact, it's really well suited for high voltage <unk>.

Most likely see them and the highway installed Chargers, particularly the fast charging installations, where you really need to have the ability to also incorporate buffer batteries and case youre trying to charge of vehicle at times of peak demand on the grid.

Okay got that.

Clearly that would be we have of chicken and egg issue regarding people buying electric vehicles versus the.

Relative to recharge zone.

You need the recharge and capability.

Theres more becomes available then.

Theres less barrier for people to.

And by electric vehicles so.

Can you tell us anything that will and.

So of the fear that you may Miss this window do true Bill.

And building the new charging infrastructure.

Yes, the buildout of the infrastructure.

Is going to take years, while theres been a lot that's invested.

It's still a fraction of what it ultimately is going to be and you think about over the longer term.

The electric vehicles right now are still a very small percentage of those that are out there. So the need for just that continued buildout as they get to be more and more electric vehicles on the road is going to take a decade.

And now we're actually starting to see support from the current administration and others from a policy standpoint, that's also going to drive some longer term infrastructure around the deployment of charging stations. So.

And I think we are we.

We made out of the very beginning of it but I think it's certainly and.

And investment that is going to go and the infrastructure globally for many years to come.

And that's good.

The other thing is it's really quite interesting and that when you did your stock of print.

And with such a small offering.

And.

And in the beginning of your conference call today, you discuss really very small cash burn and that you have enough cash to last.

I guess from your words on configuring two to three years, so that the with the Fury.

I would expect it to be longer than that but yes.

So it says to me that that's pretty amazing and hiring.

And the lines literally hundreds and hundreds of companies over.

All of my career and it's a premium.

It's just amazing.

On the other hand.

And your market cap of so small that most of the actively managed funds are now looking at your company and say all of this is so small we can take and look at.

So and hindsight.

If you Didnt raised more money than you need.

While the funds could actually look at your company and on her.

Okay.

But.

It's a good thing that you did not raise that amount.

But.

Yes.

You are in an interesting situation.

We had the opportunity to raise more I mean, the offering was more than three times oversubscribed, but.

And it's no matter what about you raised its all dilutive to existing shareholders. So we don't want to raise more money than we need to.

And we wanted to have enough money. So we would be viewed as the strong partner for some of the large companies that were currently engaged with and if we need to raise money and somewhere down the road as we continue to make progress it can be at a much higher valuation so just treating the shareholders better.

Moving on we'll go to Cody Acree with benchmark.

Hey, guys. Thanks for taking my questions all of them.

The key.

The loss of.

The discussion about Clarkson.

Yes.

The low burden, while you do have the balance sheet.

Could you if you extended your generic business.

Could you accelerate any of these programs will take on the program.

And the toward commercialization faster.

Yes, it's one of the things that gives us some flexibility and I'll give you. An example of some of the auto makers that we're talking to.

While we're bringing out a single package die coupled with the.

The driver for the Telecom power module, the some of the automobile guys actually want a different configuration they want.

A multi die package.

We have the capital now the.

And if there was <unk>.

Significant incentive on their part to go do something we actually have the ability to actually go tackle something like that whereas before we would have had to be very singular in terms of what we bring out.

And.

We're also using that money to basically expand the capability of the team too so.

There is you can only.

The accelerating so much but it does give us flexibility in terms of who we engage with what we can commit to do and the capability that we can bring in house that we've previously had the rely on for third party services.

Okay.

Your balance sheet.

The improvement on the balance sheets opened the doors for in <unk>.

Engagement or any discussions warehouse maybe prior.

You would have been the days, maybe a little too.

Yes.

Some of the large companies.

It was pretty clear.

Early on and just from other other Ceos that I've talked to you that are small companies doing similar kinds of things and other industries. The large companies are reluctant if you don't have a strong balance sheet because their concern is while they might like your technology debt in order to really see it serve their purpose you start to look to them as being your bank and they just don't want that.

I want to get technology, that's driven and volume so they get the benefit of the lower cost.

But there are always leery of small companies, if theyre not well capitalized. So I think it's really helped us accelerate some of the engagement with some of the big players and open the door two of <unk>.

The new ones that we probably would have had a hard time getting their attention.

Got you and then lastly bits on a set of high level.

With the developments on the malls and.

Applications.

And on the markets.

Could you just give us your.

Beth.

Shot on a.

Walk through revenue.

And your thoughts on on the which verticals may.

And start to generate for foreigners.

Yes, I would think that youre going to see both EV charging and renewable energy, particularly solar and solar coupled with storage first.

Youll see the EPS systems come after that and the.

And then lastly, we'll be the electric vehicles themselves, although the EV guys have the ability to spend money to do.

A significant volume for us in terms of just reliability testing and qualification of parts, but in terms of true revenue that that segment could generate that will be the last segment that I would expect to see revenue.

And I guess and closing on renewables.

What is the window.

And Brett Youre shooting for I guess.

Not to give them also and prediction, but.

Would you expect to be able to see that in either of them for.

The second half with certainty on zone.

And Europe in.

General and.

We expect to see that to start to happen and the second half of 2020, two and then ramp up into 2023.

Okay very good alright, thank you for sure.

Sure thing.

And that concludes our question and answer session and I would like to turn it back to management for any additional or closing comments.

Well. Thank you everyone for joining our call. Today later this month, we will be presenting at the 16th annual Needham Virtual technology and media conference everyone have a good day and we'll speak to you again, when we reported our second quarter results. Thank you.

And that does conclude today's conference we'd like to thank everyone for their participation you may now disconnect.

Okay.