Q1 2023 Ideal Power Inc Earnings Call

<unk> the technology development front the testing we've been doing on our lab on the devices, we shipped to the Navy enabled our team to identify and implement what we believe is it patentable innovation and how we drive and control B Tran that's enabled us to realize an additional 20% improvement in conduction losses.

This change does not require any changes to our b Tran die design or packaging is being implemented and the driver that we're using in our customer evaluation program and subsequent intelligent power module products.

This latest improvement means vitro and conduction losses can be more than five times better than bidirectional circuits using <unk> with diodes. We're in the process of now incorporating this improvement in our driver and capturing the innovation and a patent application.

Our vitriol is moving into commercialization at a great time, when renewables energy storage and electric vehicles are in the early stages of their adoption. They still have the largest part of their growth curve ahead of them.

Automotive manufacturers are finding that with <unk>. There is a path to reduce power semiconductor costs. The second largest production cost on electric vehicles and approved vehicle range to mitigate driver range anxiety.

Hi, directionality and lower losses of <unk> are also well suited to renewables, coupled with energy storage, making renewable energy dispatch of our resource and improving the usable kilowatt hours from the systems.

Moving on we are on track to launch our second commercial product in the third quarter, which will build on the multi die packaging design is simple and add a bidirectional intelligent driver.

This product will target renewables, particularly renewables, such as solar and wind coupled with energy storage Standalone energy storage EV charging and other industrial end markets.

This product revenue will start in 2024 and ramp up in late 2024 and into 2025 as it gets through customers OEM product designs.

Moving on to our test and evaluation program.

Since the announcement of our custom module development program with a top 10 global automaker and achievement of several of our milestones under the Navy program. We've had an increasing number of companies engaging with us to learn more about our technology and participate in our <unk> test and evaluation program.

The participants in the program include another top 10 global automaker EV charging company commercial electric vehicle company, leading provider to the solar industry, a Forbes global 500 power management company and several others covering each of our target market segments.

This quarter, we added a global tier one automotive supplier as part of this program is tier one supplier is evaluating <unk> for use in its electric vehicle inverter bidirectional charging and circuit protection applications. Their interest resulted from the announcement of our custom module development agreement with a global top 10 automaker.

We also added a second Forbes global 500 leader in diverse power management markets to the program roster.

This company will evaluate <unk> initially for use in solid state circuit breakers, and its smart infrastructure Division.

We plan to deliver nutrient customer kits for evaluation to test the test and evaluation program participants in the second half of this year following the completion of our deliveries to the Navy.

Customer kits will include the improvements to our B Tran driver of discussed earlier and will consist of a package b Tran device driver passport and safety enclosure to facilitate and accelerate the evaluation process.

As you know our test and evaluation program will remain an embedded process and our sales and marketing effort and a source of input for our next generation of products will continue to add additional potential customers to the program.

Through the test and evaluation program will gather valuable feedback on their application specific product requirements and potentially secure product development or other commercial agreements.

This engagement will allow us to get a good handle on customers' technology evaluation processes for product design cycles and their commercial plans.

Since the start of the year, we've submitted several proposals for government funding opportunities with the department of Energy Air Force NASA and other government entities and collaboration with commercial entities and universities, including other companies in the semiconductor ecosystem.

Proposal topics include solid state circuit breakers grid applications renewables and next generation <unk> technology.

We've also established collaborations with universities and commercial entities to pursue funding under the chips Act as a funding programs are implemented.

In addition, we are involved in multiple regional hubs that are being established under the act.

The competition for these programs is high they provide us an opportunity to collaborate with current fabrication partners and prospective customers both to advance the state of our technology and pursue additional application specific demonstrations of nutrients.

Looking at our expanded B Tran patent estate. We currently have 74 issued B Tran patents with 32 of those issued outside the United States and 22 pending B Tran patents. Our current geographic coverage for our patents includes North America, China, Japan, South Korea, India, and Europe all reps.

<unk>, our high priority patent coverage geographies.

Part of our product development and introductions, we're expanding our patent efforts to include what we believe to be high value patents on our packaging designs and driver, including the innovative approach to driving on controlling <unk> that I discussed earlier as both are unique to the bi directional nature of our technology.

Moving on we recently issued a new <unk> White paper. This white paper includes recent testing results using our driver and devices with our double sided packaging. It shows switching characteristics and wave forms using bidirectional double pulse testing, which is important for customer technical teams linked to the new White paper is on our website.

We attended this year's applied power Electronics conference in March our technical Whitepaper B Tran optimization and performance characterization was selected for presentation at the conference. Our Booth was very well attended and generated significant new interest from large industrial companies and our test and evaluation program.

In summary, we are thrilled that we introduced our first commercial product made our first volume shipments to DTI under the Nasty program with clear line of sight to completing the remaining volume shipments made improvements to further reduce vitriolic convection losses and are adding new potentially high volume company store test and evaluation program also.

We're also very much on track to meet the key milestones and objectives I outlined for this year.

<unk> unique architecture offers advantages of inherent I directional switching capability.

Just switching in production losses, and more compact thermal management requirements potentially leading to lower costs and improve performance for OEM products.

<unk> has the potential to displace conventional power semiconductor solutions in many applications, including electric vehicles renewable energy energy storage. So I would say its circuit breakers and motor drives.

I would like to hand, the call over to our Chief Financial Officer, Tim Burns to review the first quarter financial results Tim.

Thank you Dan.

Will review first quarter 2023 financial results.

We recorded minimal grant revenue for the first quarter.

At March 30, <unk> current revenue of $36724 remains to be recognized under the Navy funded NAV C program.

In the second quarter of 2023, we expect to recognize revenue related to the NAV C program as well as revenue from phase one of the custom module development program with a top 10 global automaker.

Operating expenses were $2 6 million in the first quarter 2023, compared to $1 $9 million in the first quarter of 2022.

Driven primarily by higher research and development expenses.

Due to additional semiconductor fab runs in related wafer costs.

Operating expenses were also impacted by higher personnel costs and reflects higher stock based compensation expense.

Although we expect higher research and development spending in the balance of 2023 at or above that seen in the first quarter. We continue to expect some quarter to quarter variability in operating expenses.

Our research and development spending due to the timing of semiconductor fabrication runs and other development activities and hiring as.

As well as the potential impact of additional government funding.

We expect to keep general and administrative expenses in 2023 close to 2022 levels.

The impact of stock based compensation expense, despite the impact of inflation on the cost of services.

Sales and marketing spending is expected to increase modestly in 2023 from 2022 levels due to hiring and cost associated with commercialization efforts, including new product launches.

Net loss in the first quarter of 2023 was $2 $5 million compared to $1 9 million in the first quarter of 2022.

First quarter 2023, cash burn was $1 $8 million on the lower end of our guidance of $1 $8 million to $2 million.

And down from $2 1 million in the fourth quarter of 2022.

We expect second quarter 2023 cash burn.

There are approximately one $8 million to $2 million.

And full year 2023, cash burn of approximately $8 to $8 $5 million.

Cash and cash equivalents totaled $14 5 million at March 31, 2023.

Given our planned cash burn, which remains modest we have.

Ample liquidity on our balance sheet to fund operations through 2024, as we commercialize our technology and also to be a well capitalized partner for the broad spectrum of companies that are either already are participating or do we expect to participate in the testing and evaluation of our B Tran technology as well as our global Pumpkin automaker is engage us for development program.

We are an asset light business model and licensing as part of our strategies we've discussed on prior calls.

At March 31, we had $5 million 931569 shares outstanding.

Up slightly from December 31.

And 1 million 4200, 48 warrants outstanding.

Change from year end.

Including 844275 stock options restricted stock units and performance stock units outstanding.

We had $7 million 816092 diluted shares outstanding at March 31.

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

Operator.

We are conducting a Q&A session.

That does conclude the question within the meeting webcast by typing them.

On the inside of the newest screen.

Sell side analysts ask questions on the phone.

For analysts to ask a question on the phone. Please press Star then one.

One on your phone to withdraw your question. Please.

No.

We will pause momentarily to assemble our roster.

I'll now turn the.

Call back over to Jeff Christensen.

Question for Matthew.

Thank you.

Gentlemen, the first question that was submitted is what differences have you seen in working with a production fab compared to your work with development pads.

Good question.

Quite a bit.

There's a few things that are really substantial in terms of the development fabs versus the production tabs first is the production Fabs. We can go to larger wafers and we're running at the development Fabs. So we can literally produce twice as many devices out of a wafer.

Of the larger wafer size.

Probably one of the biggest differences there the production perhaps have a lot of automation where development fab. There's a lot of things that are done manually and that drives two things it drives very long cycle times to complete a run.

And it also drives.

A lot of scratches as the wafers are handled manually.

What we have seen with this first run and the production fab.

Was already better than anything we've done it a development fab in terms of the device performance and just the yield per wafer, even though we're working on a larger wafer than the development fabs. So a pretty substantial improvement across the board in terms of volume cycle time and quality.

Thank you.

Our next question submitted is you mentioned Forbes' Global 500 power management market leaders, what kind of products to those companies make and what are some examples of those types of companies.

The power management companies are companies that make things like protective relays for utilities circuit breakers, they make power converters for renewable energy a whole variety of power electronics equipment for.

High power applications.

The companies that you typically think of that are in that group are companies like Siemens Eaton ABB Schneider very large well recognized companies in the power space.

Thank you. Our next question submitted in is what you referenced you will have two high volume Fab partners can you quantify their volume capacity.

Yeah, Let me, let me answer that just a little bit differently, let's talk about their available volume capacity because they're all running.

Other products as well.

The one that we have just finished.

They are a very deliberate kind of firm while right now they have available.

The we could tap into capacity to make about 250000 units a year.

The other one that we are starting our has the capacity to do well over $1 million a year of actual available capacity that we can tap into so between the two of them. We think we've got plenty of capacity for the near term and hopefully have the opportunity to get them to sort of compete against each other a little bit for our business both in terms of cost and quality.

Okay. Thank you.

Yes. The investors. We appreciate your questions and you can submit your questions by clicking on that button in the webcast portal. Our next question that was submitted is what you mentioned that Youll you realized an additional 20% improvement in conduction losses are there specific applications or target markets that will benefit most from this impairment.

Yes, the ones, where you are continuously conducting things like circuit breakers in particular will benefit even though the applications, where youre doing a lot of switching like <unk>.

Energy storage, coupled with solar will benefit from it as well.

And just to give people some context improvements and losses in semiconductors are usually pretty hard to come by so when we discovered that we could do something that really didn't affect very need to change what we are making in the fabs at all and get a 20% improvement was it was pretty exciting day around here for sure.

Okay. Thank you.

Next question Eds in renewables are two markets that garner most of the attention but by.

But you are so cool is targeting solid state circuit breakers, we're be trained as enabling technology could you provide additional color on this specific market opportunity why you chose the Sim cool as your first product.

Why it should excite investors.

Yes, one of the reasons is when you look at industrial products like circuit Breakers. The design cycle is a lot shorter typically have a an industrial company and design, a new product in a year or sometimes even less versus the automobile cycle. I think most people realize is a long design cycle to get through that whole process. It's three to five years, depending on the <unk>.

So we chose that partly because its a faster path to revenue it'll be our early revenue. While we go through these automotive qualification programs, but it's also one where we are truly an enabling technology.

Technology solid state circuit breakers have made but.

<unk> been made before with traditional semiconductors like RGB Ts, but if you can bring something that has dramatically lower losses. It results in a solution that really becomes viable for the marketplace versus something that's more of a technical curiosity, which is what's been done to date with conventional semiconductors.

Thank you.

There are no other questions at this time, Dan do you have any closing remarks.

Just want to thank everybody for joining our call today and we've made great progress over the first few months of the year and on our path to commercialize our technology and our talented team is on track for a successful 2023 and hitting the milestones that we've laid out there for our people to monitor our progress and we appreciate the opportunity to share our progress and we look forward to speaking with you again on the next.

Carl.