Q2 2021 Ideal Power Inc Earnings Call

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Good day, ladies and gentlemen, and welcome to the ideal power second quarter 2021 results Conference call Today's conference is being recorded.

At this time I will turn the conference over to Carolyn capacity you have early Jay. Please go ahead.

Thanks, Keith and good afternoon, everyone. Thank you for joining ideal Power's second quarter 2021 conference call with me on the call are Jennifer to our President and Chief Executive Officer, and Jim Burns Chief Financial Officer ideal Power's second quarter 2021 financial results press release is available on the company's website at ideal power dot.

Com.

Before we begin I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and industry prospects are forward looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks.

We would also refer you to the company's website for more supporting industry information.

Now I'll turn the call over to ideal powers, President and CEO Denver Guard Dan.

Thank you Carolyn and good afternoon, everyone and welcome to our second quarter of 2021 financial results Conference call.

I'll begin by giving you an update on our progress and our achievements on our strategy to commercialize our B Tran semiconductor architecture technology, including progress on our objectives for 2021, which includes the engagement of potential customers, the Tesla and evaluate B Tran and the completion of multiple fabrication runs for the NAV C program, leading to a full scale circuit.

Breaker demonstration in mid 2022, then Tim Burns, our CFO will take you through the numbers and then we'll take your questions.

We're on track with our roadmap to commercialize B Tran is a differentiated technology addressing a large and growing market and since the start of the second quarter, we achieved key milestones on this roadmap.

Let's begin with the specifics of our progress towards commercialization, specifically, our engagement with potential customers, the Tesla and evaluate b Tran and their applications.

Early in the quarter, we released a b Tran information sheet, which you can find on the technology page of our website.

<unk> detailed information on nutrient operating characteristics as well as information regarding the packaging and driver design in operation, but the technical community needs to begin evaluating our technology.

Over the last few months our team has done a great job of leveraging this information to engage with potential customers in our target end markets vehicle electrification and EV charging renewable energy systems for data centers and solid state circuit Breakers, and these conversations have progressed and yielded solid results.

We're now engaged with several potential customers, who are committing significant resources and technical expertise to thoroughly evaluate b tran for use in their applications.

Significant commitment is required on the part of our potential customers to fully evaluate our new power switch architecture as potential use within their target applications.

Well, we're already finding is that the talented engineering teams that at these early collaborating companies are identifying new design approaches and rethinking their applications and power management for both DC and AC implementations.

Two the enabling low loss and bi directional capabilities of <unk>. This is very exciting.

Let's look at some of the applications for which <unk> is being evaluated.

In the automotive sector, we're working with a top 10 global automaker, who has advanced technology engineering team will test and evaluate B Tran and its driver for EV applications, including the EV drivetrain DC to DC power conversion circuit protection and other uses within the ecosystem.

Specifically with this potential customer B Tran is enabling new architectures and solutions to improve <unk> efficiency range and performance, while lowering total system size cost and component count.

We try to target applications include the EV traction inverter and charging circuits, which are inherently bidirectional supporting vehicle to grid applications and emerging EMEA architectures and applications such as the matrix converter and solid state circuit breaker.

<unk> space is already the largest segment in the $6 billion power switch market, which overall is expected to nearly double by 2026.

And EV charging we're working with a provider of electric vehicle Chargers with Tesla and evaluate package b trans for their innovative portable and modular EV charging system is currently under development.

This solution combines a DC fast charger with a swappable battery system and a modular design to allow for scaling targeting both on demand fast charging and roadside assistance to eliminate charging anxiety if need be.

Just the B Tran can offer over conventional argued beauty switches CEB charging greater efficiency I directionality smaller size and reduce thermal management are critically important the mobile EV charging systems with battery storage. This is the type of innovation and disruptive business model that can contribute to EV adoption and the build out of the EV charging.

Infrastructure with this need for smaller lower operating cost solutions EBIT.

EV charging companies could potentially be an early adopter of retrans with the $2. One unit to buy 1 million unit global EV charging station market expected to grow to an estimated 30 million units by the end of 2027.

And power management for the data center market, we're working with a top 10 global provider of power conversion solutions to the solar industry that is expanding its portfolio to include a broad array of power conversion application solutions, serving multiple sectors.

This provider will test and evaluate b tran for its compelling advantages in bi directional circuits for various applications, starting with their optical power supplies or UBS systems for data centers and expanding to include renewable energy electric vehicles and other applications. There is intense pressure for data centers given the secular.

And toward cloud computing and data storage to reduce electricity costs and power losses.

Electricity consumption as the largest operating costs for a data center and all of the electricity entering the data center passes through UBS system.

Currently UBS systems, and their protection and account for approximately 6% of datacenter total energy losses, replacing conventional power semiconductors. In these systems with Retrans is expected to result in a substantial annual cost savings for data centers through reduced energy consumption and the ability to migrate to lower cost less complex coexist.

This will be a significant advancement for power switches and UBS systems market, which was approximately half a billion dollars in 2020 is forecasted to grow at an estimated 6% compound annual growth rate through 2026.

We're in discussions for possible collaborations with additional companies in our target end market applications, who expressed interest in assessing b Tran and we'll announce future collaborations as we're able.

In the cases, I, just mentioned as well as other potential engagements the customers will share their testing results and provide application specific feedback on the design and operation of the package devices a driver.

The feature set and priorities for individual applications and also enable us to determine common requirements across applications.

We will then incorporate this feature set into an intelligent power module for commercialization and potentially engage with certain of these customers for custom modules, primarily for EV and solid state circuit breaker applications, where multiple multiple devices may need to be combined into a single package.

The next step to be completed in parallel with further discussions with potential participants.

Is to complete the fabrication runs for Deicing in packaging and to pair. These packaged dies with the driver for delivery to these initial participants in our customer testing and evaluation program.

While each participant in the evaluation program will be working to their own schedule. We anticipate feedback from these initial companies will provide meaningful input into the design of our intelligent power module.

I want to introduce for commercial sales in the second half of 2022.

One of our target end markets for B Tran is solid state circuit breakers and important advancement in a very global large global circuit breaker market, which is which in total is projected to grow at a compound growth rate of about 6%, so almost $26 billion by 2027.

And as we have discussed with you over the last couple of quarters, we have and will continue to pursue opportunities for government funding.

In the second quarter diversified technologies incorporated was awarded a second project submitted in collaboration with US a phase one small business innovation research grant funded by the U S Department of energy. This grant is to develop a <unk> based low loss of $13 eight kilovolt alternating current solid state circuit breaker.

Intended to be used in medium voltage power distribution and renewable energy and micro grid applications connected to the utility power grid we.

We see this application as a significant opportunity to capitalize on the benefits of solid state circuit breakers, which prevent damage to downstream equipment upstream power generators generators and the grid itself are utilizing micro second current interruption capability.

We expect Retrans will make a solid state circuit breaker significantly more efficient smaller and less expensive.

Under phase one of the Spi our project will design fabricate and passed a module that can allow for multiple devices to be assembled in a parallel configuration for a high voltage rating capability the project will.

We'll utilize our current die design. So we view this initial phase of the project is primarily our packaging and module development activity that enables <unk> to be used in applications like AC circuit breakers that require more than 1200 volt capability.

<unk> solid state circuit breaker is expected to limit all of energy by orders of magnitude faster compared to conventional mechanical circuit breakers.

Since this project does not have the strict confidentiality restrictions of our U S. Navy program, we'll be able to provide more insight into the project as we complete the various milestones under the program will also be able to leverage the knowledge, we gain on combining multiple devices in a parallel program for other applications such as electric vehicles.

We expect the B Tran will simplify the cooling systems, enabling smaller lower cost air cooled air cooling instead of complex liquid cooling systems due to its 50% lower conduction losses.

Third the conventional power semiconductor switches and reduce the component count due to <unk> unique bi directional capability, requiring a smaller footprint.

The phase one is successful and we were awarded as to the objective will be to build and demonstrate a 50 megawatt 13.8, kilovolt AC solid state circuit breaker in collaboration with DTI.

<unk> eight kilovolt as a voltage level, commonly found in utility distribution networks. So the resulting breaker design can be applied directly to the existing utility transmission and distribution systems as well as micro grids.

Following the demonstration DTI would have the ability to sell the breaker to utility industrial and military customers and licensed the design to others for sales to end users. We would also expect to partner with other circuit breaker companies. So they can design and bring their own <unk> based products to market.

For additional context, while direct current or DC based systems are expected to grow rapidly due to the long term growth of solar wind and energy storage market today for circuit Breakers is predominantly for alternating current or AC circuit breakers, which make up the majority of the expected $25 billion circuit breaker market.

Also of this large circuit breaker market about 45% is for medium voltage breakers, which is b Tran sweet spot meat.

Liam voltage circuit breakers are used in the aging utility distribution system that brings power from high voltage transmission lines to the end user.

This is also the segment that is in the most need of updating due to the age of the existing utility distribution system and the limitations in its capacity and its vulnerability to disruption.

Also as more distributed resources like solar are added to the grid and to accommodate EV charging and vehicle to grid applications. The distribution system is going to require a substantial investment and smarter bidirectional sub systems like solid state circuit breakers will be needed.

This is why we believe the medium voltage class of AC circuit Breakers will be the fastest growing segment of the circuit breaker market and it's where b Tran can bring the most value due to its low conduction losses and fast switching times.

The SBR collaboration with DTI is a significant strategic opportunity one that is incremental to our efforts with the U S. Navy and also critical to electric grid development. So we're very excited about this project and look forward to generating promising results.

Let's move now to our work with the U S Navy as.

As most of you are aware, Idaho power is working with enable C systems command or Nazi in collaboration with DTI on the development of a demonstration of our B Tran enabled direct current medium voltage circuit breaker as part of the U S Navy strategic focus on ship electrification.

This $1.2 million subcontract with DTI is funded by the department of Defense's Rapid innovation fund the purpose of which is to accelerate the commercialization of high value high impact technologies or.

Our project with DTI for NAV C is intended to develop and demonstrate a <unk> enabled high efficiency 12, kilovolt medium voltage direct current circuit breaker for the U S Navy.

Subsequent objective of introducing a family of medium voltage DC circuit breaker products, incorporating b trans for sale to military industrial and utility markets.

The major milestones under the program for US are the wafer fabrication runs conducted by Teledyne, our fabrication partner this.

This development process is iterative so were performing multiple wafer fabrication runs under the program the yield wafers and result die to test and assess the tradeoffs between maximum theoretical device performance and manufacturer ability incorporating our findings and adjustments into subsequent rounds.

During the second quarter, we had a commercial packaging vendor adapt the packaging design initially developed by the University of Texas at Austin Semiconductor power Electronics Center for high volume production.

The materials were fabricated and assembled in the trial packages to ensure good mechanical fit and ease of assembly.

Those trial assemblies went well and the subsequently package die or tested and characterize internally at Idaho power using our driver also designed by UT Austin and they generated switching and other data consistent with our expectations and simulations.

We recently began our next wafer fabrication run under the Nasty program. The completion of which is the next major milestone in the Nasty program in total we plan five runs over the two year program aiming to deliver an optimized power switch for use in the full scale demonstration of a 12 kilovolt N V DC breaker in mid 2022.

We're very excited about this progress which continues to benefit our overall validation and commercialization efforts. This.

To support our next phase of development and optimization, we are utilizing our strong cash position to modestly invest in our team and capabilities.

No. This year, we've brought on board, Jeff Knapp, as Vice President of business development and Dr. John Kangoo as Vice President of Engineering.

Highly qualified and accomplished leaders in their respective disciplines and both are already making a significant positive impact on our development and commercialization efforts in the coming months will make a few other additions to our teams to bring more capabilities in house, particularly in applications driving the design and testing to support our commercialization efforts.

We're also in the process of qualifying second domestic semiconductor fabrication partner that has strong experience, making bipolar devices to ensure to ensure sufficient supply capacity for future potential large customers and to mitigate supply chain risk. We currently have a qualifying semiconductor fabrication run in progress with this new partner.

The second fabrication partner will also give us more flexibility to provide both packaged devices and data that are separated from and not subject to the restrictions and confidentiality requirements of our Nap C program.

Looking at the B Tran patent estate. We currently have 65 issued B Tran patents with 27 of those issued outside of the United States and another 23 pending patents.

Our current geographic coverage includes North America, China, Japan, South Korea, and Europe, with the potential to expand coverage into India.

In the last 12 months nine B Tran patents have been issued with seven of the nine issued outside of the United States, including ideal powers first patent issuance in South Korea.

And all we continued our record of progress in the past three months from a development perspective, more notably our recent announcements of test and evaluation collaborations with leaders in the electric vehicle.

Throw off the bow power supplies for Datacenters and renewable energy markets at the beginning of our commercialization of B Tran.

Customer engagements represents a crucial step forward in establishing <unk> as a differentiated semiconductor technology addressing a large and growing market.

Backed by our strong balance sheet and with the recent additions of highly qualified business development and engineering leaders, we're well positioned to support our B Tran commercialization plan.

Our focus for 2021 is threefold.

Continued to engage with prospective customers and to support existing customers and our test and evaluation program.

To achieve our milestones under the <unk> program with a target of delivering an optimized package device for incorporation into the demonstration of a 12 kilovolt N V. DC breaker in mid 'twenty, two and to achieve our initial objectives under the phase one Spi, our grant which is to deliver a low loss b Tran module suitable for subsequent incorporate.

<unk> into a $13 eight kilovolt alternating current solid state circuit breaker. If we are awarded phase two of the program.

As we are able we will apprise you of the company's we add to our customer test and evaluation program in the coming months. We will also update you as permitted on the back on the feedback that we receive from the program and how this data feeds into our common requirements across applications that can then be incorporated into an intelligent power module.

That we will.

Introduced to the marketplace in the second half of 2022.

Idaho Power's on the cusp of realizing the potential of Retrans unique advantages bidirectional switching capability, lower switching and convection losses, lower user cost and improved and more compact thermal management.

China has the ability to solve the immediate needs of many power electronics applications.

With high growth and high demand market segments, while enabling new applications and market segments, we're making consistent progress on our strategy moving along our intended trajectory the differentiated patent technology that can substantially improve existing and enable new solutions for many of today's power needs now I'd like to hand the call over.

Two our Chief Financial Officer, Tim Burns for a review of our second quarter 'twenty, One financial results Tim.

Thank you Dan I'll review second quarter 2021 financial results.

In the second quarter, we recorded an approximately $85000 in grant revenue with offsetting cost of grant revenue as we continued our work on the Navy funded NAV C demonstration under the DTI sub contract, which began in mid 2020.

The amount of grant revenue recognized each quarter will vary as a function of the timing of spending and scheduled milestones under the program.

We expect almost all of the grant revenue for this program to be recognized by early 2022.

Operating expenses were $1.3 million in the second quarter of 2021% compared to zero point $8 million in the second quarter of 2020, as we invested in research and development sales and marketing and other general corporate expenses.

We expect research and development and sales and marketing spending to trend higher in the balance of 2021, as we accelerate development of the B Tran technology, including qualifying a second domestic semiconductor fabrication partner.

And now that we've begun to commercialize b Tran as evidenced by recent announcements.

We do expect some quarter to quarter variability in our research and development spending due to the timing of semiconductor fabrication runs and other development activities.

Net loss in the second quarter of 2021 was $1.2 million compared to zero point $8 million in the second quarter of 2020.

Second quarter 2021, net loss includes a gain on forgiveness of long term debt of $91000 relating to a payroll protection program loan received in the second quarter of 2020 and forgiven by the SBA in May 2021.

As a result of the loan forgiveness, we had no long term debt outstanding at June 32021.

Second quarter 2021 cash used in operating and investing activities was $1.1 million compared to zero point $7 million in the second quarter of 2020.

Our second quarter cash burn was consistent with the expectations, we provided on our first quarter call.

We continue to expect our cash burn to increase in the second half of the year as we invest in both sales and marketing and research and development.

We expect a cash burn of approximately $1.2 million to $1.3 million in the third quarter of 2021.

Continue to expect our full year cash burn of approximately $4.5 million.

Cash and cash equivalents totaled $25.7 million at June 32021.

Our strong balance sheet since our February public offering has enabled and will continue to enable us to support and be more attractive partner to the larger corporations that are participating.

And that we expect to participate in our customer test and evaluation program.

Modestly build out our internal research and development capability and our product design team, bringing driver design expertise and area. We are narrowing on third parties in house.

To modestly build out our commercial team in front end talent, including applications engineering expertise to support our customer test and evaluation program and be trained commercialization.

To complete the qualification of a second domestic semiconductor fabrication partner now that we are engaging with large companies and our customer test and evaluation program.

And to support our working capital needs.

As of June 30, we had $5 million 872046 shares outstanding.

And 1 million 40248 warrants outstanding.

Including 455937 stock options outstanding our diluted shares outstanding at June 30 was seven 4 million shares.

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

And we are well capitalized partner for the larger companies that are participating and we expect to participate in the testing and evaluation of our B Tran technology.

At this time I'd like to open up the call for questions operator.

Thank you, ladies and gentlemen, if you'd like to ask a question you may do so by pressing star one on your telephone keypad using a speaker phone. Please make sure. Your mute function is turned off to let your signal to reach our equipment again star one for questions, we'll pause a moment to assemble the phone queue.

We will take our first question from Shawn Severson with W. T. R. Please go ahead.

Hey, guys. Thanks for taking my question just we're just trying to figure out do you have any more automotive EV companies in the pipeline in those and those that are going to pilot programs are going to pilot.

We do a we view things that are going on in the EV space renewable EV charging.

Target applications, we want to continue to bring companies into that pipeline because we'd like to have.

Two or three at least in each of those targeted segments, because they're each going to have different ideas and different approaches. So we have some that we are we hope we get over the finish line, but there are there names that people will recognize if we're we're able to get them actually in the program, but so far we think we've got a pretty pretty robust pipeline based on the relationships that Jeff Knapp in his <unk>.

<unk> working in the EV space is bringing to the company.

And when you look at all of those those applications in various markets that are coming that are coming to the pipeline, which ones do you think would go to commercialization the fastest I assume theres some difference depending on the application and what it is but.

Which one which with one priority do you think gets the fastest.

I think we'll see the circuit breaker and EV charging probably go first on the <unk>.

Circuit breaker will certainly be helped by the fact that we'll be doing full scale demonstrations of design that incorporates a technology EV charging because there's such a.

Press to build out that infrastructure. They are looking for innovative solutions. So we're seeing shorter design cycles. There on that after that I think will come some things in the renewable space, particularly renewables coupled with.

With energy storage and <unk>.

The automobile folks will probably be last but we think based on what we're seeing they will be significantly faster than what you would typically see in the EV sector simply because most of the large Oems that are the traditional car companies.

Really seem to have a lot of pressure to catch up the things that had been driven by some of the new companies like Tesla that have come along.

Thanks, So much and my last question is when you get into an automotive or an EV platform.

Is there a lot of redesign that has to take place between different models and that platform, where like you'd get into an OEM in Europe, you're in one vehicle, it's very easy to get into instead of one model into patent let's say for example, if you understand what I mean.

Yes, I do what we're finding is that what the automobile companies are really trying to do is get through a common platform with much commonality as parts as possible because they don't want to have all these different designs and parts and supply chain challenges that come with it. So part of what we're seeing is some innovation of just taking clean sheets of paper and say Okay. This is the drive.

Train that we were going to use for an entire classes vehicles. So we think if we can get to the point, where there is a module that incorporates what they're looking for from a packaging standpoint, we will see it used across a whole variety of models for a given manufacturer.

Great. Thanks, guys.

Thank you thanks, Sean.

We will take our next question from David Williams with the Benchmark group excuse me the benchmark company. Please go ahead.

Thanks, Hey, Dan Good afternoon I appreciate you taking the time, let me ask a question here.

First I wanted to ask maybe if you kind of think about Europe.

Customers you have in the evaluation.

Testing phase now how do you have you received feedback yet in terms of maybe how they're thinking about using the product and maybe their design cycles, just anything any color around just any of the testing and evaluation that you have ongoing today.

Well, we don't have parts in their hand, yet, but what we have been learning about is they have learned about the technology, where our technical teams have had.

A whole series of meetings with most of these customers. We are learning about how they are thinking about using the technology and how they are thinking about changing their approach to their drivetrains and how they're changing the approach of some of the other.

Technologies that go into the car because of the fact that B Tran is enabling them to do different approaches and the example that Oh uses a matrix converter matrix converters or technologies had been around for a long time.

But the challenge has always been there is not a good bi directional AC switch out there. So you don't see them very often well that's that's a different story now so we see automobile manufacturers looking at matrix converters as an approach where previously they haven't so part of why we ended up being under NDA is as we learn a lot about their application and what theyre thinking about as well.

As them learning about our device. So I think we're going to see some pretty pretty innovative approaches come to market as some of the more established automobile manufacturers take the work that's already been done in this space and look at new ways to do it.

Okay, Okay great.

And then maybe from from the automotive side, if we think about kind of the qualification.

Michael Barry and the certification for those parts, that's a fairly elongated cycle and kind of.

Thing that we hear a lot from from other semi expected in the power space. How do you think about your certification and qualification as you get into producing these products typically have two to three year design cycles. Do you think you can accelerate that just kind of given your discussions with customers today or do you think that we're still some time away from that as you had mentioned maybe in the last.

Take off.

Well it may be the last segment, but we think it is going to be accelerated for two reasons.

One is.

Typically the Oems rely on their tier one suppliers to do a lot of new work on new sub systems and bring new technology to the OEM.

That's changed what we're seeing is most of the major Oems have actually created their own internal teams.

To look at new technology and to look at how to bring it to their products because they're trying to shorten that cycle. So they are taking the lead in and saying here's what we're going to use from a technology perspective, Here's our platform and you are tier one supplier. This is how youll do it. So they are actually changing their process to accelerate the ability to get models into the marketplace.

The thing that we're seeing that is really it was a bit of a surprise to us as we talk to them about for example, how they want devices packaged.

What they've said is we will introduce you will take the lead and introduce you to the packaging firms that know our requirements. What we want and you can work directly with them knowing that you're at a mandate from us. So we don't necessarily have to learn a lot of this with a packaging company ourselves, they're going to leverage the relationships and expertise.

Qualified suppliers, they already have and connect us to them. So we think that will also certainly accelerate that cycle.

Okay, Great and then maybe if you didn't just talking about any hurdles that you see between now and commercialization what are the biggest challenges I guess between here and there is it really just the adoption and the sampling getting into the hands of the customers who are are there other hurdles maybe in terms of the technology or the capability that they have to be overcome.

Well, we know the technology. It certainly works we know it performs as we have stimulated so I think for US. The challenge is really raising the visibility raising the awareness getting those potential end users.

Through that learning curve that adoption cycle, particularly as a small company now we're fortunate that we've got folks like Jeff that have established relationships, but without that it would be tough to get to some of the the right people in these organizations to really start that process. So I think it's for us it's going to be really more that educational process that will be the pacing item for us.

Really large scale adoption.

And maybe Tim as you kind of think about the balance sheet. Obviously, you had a very good position there.

But how do you think about your cash needs, maybe as you ramp into commercialization and those associated costs, particularly as you as you run through some of these are engineering or these are the sampling lots.

Yes, so we will always have a relatively small team that's really just some very strong technical expertise in the front end of the business really interacting with the customers. So we will never be a company with hundreds of employees. So for us it's actually pretty manageable I mean, we went from $3 million last year cash burn we're forecasting.

About four and a half million dollars here for this year.

I'm sure, we will probably be and we'll wait and see it's a little bit early but maybe where another million and a half next year of growth.

Really just depends on how many participants we get into the program. How many participants in that program that we need to support.

And we will have much better visibility as we get into that.

And really next year as well going into the commercialization of the technology in the second half of two.

<unk> 2022, but from our perspective, we knew when we went and did the raise here back in February. So we're going to have multiple years of cash and we didnt really strong balance sheet coming out of it so capital is not something thats.

A high concern for us at this point.

Great well congrats on the progress guys looking forward to seeing.

In the rest of the progress next quarter.

Thanks, David.

We will take our next question from Kelly Thurman private Investor. Please go ahead.

Hey, Dan and thanks for taking my call.

I was curious to see what when we will maybe hear some company names.

And why they havent wanted to reveal their names and some of the sampling that you guys are doing and the second question is do you guys have anything in place to prevent a larger company from coming in and acquiring you guys. When you are significantly undervalued.

Now, let me address the first one and I'll, let him speak to the second part of your question.

We actually so far have been prohibited from announcing the names and we've pulled these companies that we're working with our investor is that our investors are going to want to know.

And the response that we routinely get is that look we don't want our competitors knowing what we're doing.

Which I can understand and appreciate but it's a little frustrating for us.

Rather than announcing its one of the top 10 global automakers, we'd like to say who it is.

As we move into what is these relationships advance and they might turn into something that might be co development agreements or a more strategic relationship.

I think we're probably going to have some ability to say something at that point in time, but so far it's really it's always been driven by their lack of.

Desire to let their competitors know what kind of technologies. They are looking at and exploring for their product basically that's simple.

Yeah, and as it relates to the second question that you had.

So I would say that's something that's a concern of ours as well as whether youre getting.

Taken out to early potentially.

For us we're trying to establish as many relationships we can across multiple applications.

And in doing so at least trying to hold off a specific application acquisition with specific company from an application of acquiring the company.

I would say that is probably one of the higher areas of concern when we look at it.

We'd really like to get through into the commercialization process and we have a much higher valuation than we are now before we have to deal with some of those conversations potentially but I would say that that is at risk.

And ladies and gentlemen, as a reminder, star one for questions.

We'll take our next question from Don Slowinski with Winslow asset group. Please go ahead.

Thanks for taking my questions Hey, guys. Congratulations on your progress.

It seems like you are on the.

Latter portion of a phase two of your phase III plan towards B Tran commercialization is there anything in between this testing and evaluation and the next step which would be the strategic development and commercial partnerships as theyre prototyping or is there anything else. We can consider and can you give us some timing.

These expected strategic development and commercial partnerships.

Well, let me talk a about what will happen is one of the things that we were going to do is.

Because we believe that B Tran is a new technology, we're better off bringing an intelligent power module.

A packaged XI coupled with the driver of the market.

Take this feedback from the early participants in this program and bring out that intelligent power module. That's what we actually are going to be looking for for commercialization.

The other thing that we see the potential for as our relationships with some of these companies starting to progress I think there's certainly opportunities to form.

A little bit more strategic relationships, where we may be doing co development for them for example for the EV space because their requirements are unique in terms of what they're looking for for devices and packaging I think there is an opportunity for us to get some funded co development work that we would do that would be certainly getting us deeper in.

Bed with some of these folks, but also generating some revenue on the development side.

Get ready for that market entry that we could then leverage with other people in that same market segment.

Okay, so that wouldn't be.

Commercial revenue, but development revenue.

Correct.

And then what is your anticipated revenue model when you get to commercialization.

I think it's a little bit too early to say on what the revenue numbers will look like at this point I mean, I think we have a pretty good sense of what the gross margin numbers would be like and we're thinking from that perspective, $50 to 60% gross margins, but in terms of the adoption rate and we're just too early and conversations with these companies to really have visibility into.

That but it is next year as we start getting some of that information, we'll try to start providing some guidance as soon as we can.

Okay, well, that's a good margin profile, but thanks for taking my questions and congrats again on all the progress.

Thank you thanks Don.

Ladies and gentlemen, this does conclude today's question and answer session. At this time I'd like to turn the conference back to Dan <unk> for any additional or closing remarks.

Well, thanks, everyone for joining us on our call today next week, we will be presenting at the Sidoti August Microcap Conference and also the QC Q3 virtual Investor Summit. So there's an opportunity to talk to US again, there if anybody is going to be participating in those conferences. So we hope everybody has a good day and we'll speak to you again, when we report the third.

Quarter results. Thank you.

Ladies and gentlemen, this does conclude today's conference. We appreciate your participation and you may now disconnect.

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