IPWR - NASDAQ

Good morning, ladies and gentlemen, and welcome to the Ideal Power Second Quarter 2023 Results Call. [Operator Instructions]. As a reminder, this event is being recorded. I would now like to turn the conference over to Jeff Christensen. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining Ideal Power's Second Quarter 2023 Conference Call. With me on the call are Dan Brdar, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer. Ideal Power's second quarter 2023 financial press release is available on the company's website at idealpower.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 may be 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. And we will also refer you to the company's website for more supporting industry information. Now I'll turn the call over to Ideal Power's President and CEO, Dan Brdar. Dan?

Thank you, Jeff. Good morning, everyone, and welcome to our second quarter 2023 financial results conference call. I'll update you on our progress since the start of the second quarter, including the successful completion of all of our first half 2023 milestones as well as our priorities for the balance of the year to commercialize our B-TRAN semiconductor technology. And then Tim Burns, our CFO, will take you through the numbers, after which we'll take your questions. The second quarter and all of 2023 thus far were transformative in our transition from a technology development company to a commercial company, included some of the most significant accomplishments in the company's history as we continue to advance our aggressive B-TRAN commercialization road map. We're thrilled about our recent success in five major areas. First, we successfully completed the full process flow engineering run as we proved that our B-TRAN device was manufacturable at our high-volume wafer fabrication supplier with high yield and excellent device performance. This cleared the last and by far, the biggest technical risk for B-TRAN development and commercialization. This was a pivotal accomplishment and a prerequisite for commercialization; second, we delivered hundreds of B-TRAN devices to diversify technologies to complete our work under the NAVSEA solid-state circuit breaker program. Third, we implemented an innovation in how we drive and control B-TRAN. Subsequent testing validated an additional 20% improvement in conduction losses, making B-TRAN conduction losses 5x better than conventional bidirectional circuits utilizing two IGBTs and two diodes. This improvement was incorporated into all the B-TRAN customer kits we delivered to test and evaluation program participants; fourth, we completed shipments to the large companies in our customer test and evaluation program; and fifth, we successfully completed all the Phase 1 deliverables under our development agreement with a top 10 global automaker. We're actively engaged with multiple customers in each of our key target markets, and I couldn't be more pleased or excited about our progress. I'll now discuss each of our 2023 milestones along with other key developments. We were excited to announce the introduction of our first commercial product, the SymCool Power Module earlier this year. Our SymCool product is a multi-die B-TRAN module well suited for the large growing solid-state circuit breaker market. The global solid-state switching equipment market is projected to grow at a compound annual growth rate of 7.6% to approximately $9.3 billion by 2028, with semiconductors comprising a significant portion of the switching equipment cost. solid state circuit breakers are of great interest to utility, industrial and military customers since they can act orders of magnitude faster than traditional electromechanical breakers, thereby eliminating electrical arching and its associated maintenance due to contact wear as well as the fire hazard associated with arching. The downside of solid-state circuit breakers has been the high conduction losses of traditional semiconductors, such as IGBTs. Since circuit breakers are continuously conducting devices, high losses from traditional semiconductors results in a significant loss of useful energy and the generation of a large amount of waste heat that must be removed from the breaker, which increases the breaker cost and size. With clear advantages over electromechanical breakers and IGBT-based solid-state circuit breakers, B-TRAN enabled solid-state circuit breakers are ideal for a range of utility, industrial power control and military high-power applications from 600 volts to tens of thousands of volts. We targeted our initial product for the solid-state circuit breaker market because B-TRAN can be an enabling technology for the application due to its very low conduction losses. We continue to see significant customer interest in our SymCool product and the solid-state circuit breaker application as a result of our recently completed program with the U.S. Navy. This interest includes the participation of two Forbes Global 500 power management market leaders in our test and evaluation program. In addition, we recently conducted switching tests on discrete packaged devices up to 150 amps. This compares to the 50-amp rating shown in our B-TRAN discrete data sheet, we're testing at a level of 3x higher than the published device rating. As a result of this testing, the planned 100-amp rating of our multi-die SymCool module will be increased prior to first sales, exceeding the power handling expectations set earlier this year with respective SymCool customers. We've begun fabrication of initial SymCool power modules and continue to expect low volume sales of SymCool to start later this year. The design cycles for industrial applications such as solid-state circuit breakers, varies, it's relatively short, typically about a year. Revenue for SymCool is expected to ramp up in the second half of 2024 as initial customers complete their solid-state circuit breaker product designs. Let's turn to the supply chain necessary to support our sales ramp beginning in the second half of next year. During the second quarter, we qualified a wafer fabrication supplier in Asia with high-volume capability. Test results from the first flow engineering run with this wafer fabricator demonstrated the manufacturability of B-TRAN with high yields and excellent device performance, clearing the last and by far, the biggest technical risk for B-TRAN development and commercialization. This successful fabrication run was accomplished in the wafer foundry's existing silicon fabrication line without the need for any special equipment or capital investment to produce high-quality wafers fabricated on both sides. This was a pivotal accomplishment and was a prerequisite for commercialization. Wafer and device testing results displayed high-yield, minimal die-to-die variability and excellent performance characteristics. While it's reasonable to expect some improvement in results when you transition from a development fab to a production fab, the first run at a wafer foundry is often called the pipe cleaner lot as every production facility has different equipment and established process recipes and there's an expectation that process flow adjustments will be necessary in future lots. Even though it was the first run, and we were working on larger diameter wafers than we used in development, results from this engineering run exceeded expectations and really validated the strength of the full process flow for B-TRAN that we developed over several years working with development fabrication partners. We now have multiple runs ongoing with this high-volume wafer foundry with the first of these runs expected to be completed later this month. These runs will provide ample devices for additional 2023 deliveries under our test and evaluation program, SymCool production in support of our development program with a top 10 global automaker as well as initial internal and third-party discrete device and SymCool testing. We're pleased with both the performance and overall quality of the wafer fabrication and the technical capability of the wafer foundries manufacturing team. This wafer foundry is also already certified to automotive standards, making them a quality supplier for our automotive programs and reflects the high standards capabilities and quality of their wafer fabrication. Also, as I mentioned last quarter, we're working with a second high-volume wafer foundry in Europe and expect to complete a similar full process flow run with them. The second wafer foundry is very experienced in manufacturing bipolar devices such as IGBTs and the detailed review of the process flow went well. We're in the process of qualifying this wafer foundry and expect to begin a wafer run at their production facility later this year. With these two wafer foundry partners on board, we'll have dual sourcing for wafer fabrication in different parts of the world with no exposure to China. This dual sourcing will provide us with sufficient supply capacity for the large customers we're engaging. Both wafer foundries have world-class experience, facilities and capabilities and are eager to be engaged in a new high-performance technology such as B-TRAN. Overall, our dual sourcing strategy will allow us to proactively secure not only the necessary production capacity but also the ability to source components and services from partners in disparate geographies as part of our strategy to mitigate supply chain risk. Now let's turn to our DOD-funded NAVSEA program with the U.S. Navy. We're excited to have shipped hundreds of packaged and tested devices through our partner on the project Diversified Technologies, or DTI completing our work under this program. The medium voltage solid-state circuit breaker designed by DTI for this project will have direct applicability to military applications and commercial markets where circuit breakers are in wide use, such as electric utility, solar, wind and energy storage installations. As I mentioned, our participation in this highly visible NAVSEA program resulted in the expansion of companies participating in our test and evaluation program. As part of its final deliverables to the Navy, DTI will introduce a family of solid-state circuit breakers for potential sales to the Navy as part of its future ship electrification program. Our objective is to continue to build on our work for the Navy we're pursuing other solid-state circuit breaker opportunities with DTI while commercializing B-TRAN for utility and industrial solid-state circuit breaker applications, a process that started earlier this year with the launch of our SymCool product. On the technology development front, the testing we conducted in our lab on the devices we shipped to DTI, enabled our technical team to realize an additional 20% improvement in conduction losses, making B-TRAN conduction losses of 5x better than conventional bidirectional circuits utilizing two IGBTs and two diodes. This improvement did not require any changes to the B-TRAN die design or packaging and was incorporated into the driver provided to participants in our test evaluation program. It will also be used in the company's intelligent power module product we'll be introducing later this year and is the basis for one of several new patent applications we filed in the quarter. Following the completion of our deliveries to DTI for the NAVSEA program, we completed B-TRAN customer shipments to the large companies in our test and evaluation program utilizing package devices from our newly qualified fabrication partner. The response from customers in the program has been overwhelmingly positive as they appreciate an innovative, very low loss new semiconductor and the advantages it could bring to the OEM products. This quarter, and as previously announced, we also added a second Forbes Global 500 leader in diverse power management markets to the B-TRAN test and evaluation program roster. This company will evaluate B-TRAN initially for use in solid-state circuit breakers in its smart infrastructure division. Power management companies make things like protective relays for utilities, circuit breakers, power converters for renewable energy and a whole variety of power electronics equipment for high-power applications. The companies you typically think of as being in that group are companies like Siemens, Eaton, ABB and Schneider, very large, well-recognized equipment providers in the power space. B-TRAN customer shipments to program participants included multiple package B-TRAN devices, advice driver, and a power test board housed in the safety enclosure to facilitate and accelerate the valuation process. B-TRAN shipments to date for test and evaluation program participants include a top 10 global automaker, a global Tier 1 automotive supplier, a leading provider in the solar industry, two Forbes Global 500 power management companies and a global provider of backup power and energy management solutions with additional kits to follow for current and new program participants. As you know, our test and evaluation program will remain an embedded process in our sales and marketing effort and a source of input to our next generation of products. We'll continue to add additional potential customers to the program. Through the test and evaluation program, we'll gather valuable feedback on their application-specific product requirements and potentially secure product development or other commercial agreements. The program will allow us to get a good handle on customers' technology evaluation process, their product design cycles and their commercial plans. Moving on, we entered into a development agreement late last year with a global top 10 automotive OEM. We're partnering with this automaker's advanced technology development team to develop a custom B-TRAN power module in collaboration with an innovative packaging company also selected by the automaker. This custom B-TRAN-based model module is targeted for use in electric vehicle drivetrain inverters in the automakers next-generation electric vehicle platform. This represents our second engagement with the world's leading automotive manufacturers as another top 10 global automaker is already in our test and evaluation program. This program is on an accelerated time line to get the custom module production ready by 2025 as the customers stated goal for the program. We successfully completed all Phase 1 deliverables of this multiyear program, including the completion of a wafer run, shipment of devices and test boards to both the automaker and the packaging company, they selected. And providing technical support and test data on B-TRAN, its performance and drive circuitry. Working closely with the automaker, we've already agreed on the scope of work and objectives for Phase II of the program with their engineering team and await final approval of the Phase II purchase order. In Phase II, we'll work closely with the automakers innovative packaging company to integrate B-TRAN dive into the power module design. Phase III will be extensive testing of the custom module incorporating B-TRAN devices to meet automotive certification standards, which are pretty substantial. So it's really us and the packaging company working independently in Phase I and then Ideal Power providing devices to the packaging company for incorporation into the module in Phase II. And then Phase III is all about testing and certification of the module itself, so we can be the core of the powertrain inverter for their next-generation electric vehicles. Shifting to our upcoming milestones. We're on track to launch our second commercial product in the third quarter which will build upon the multi-die packaging design of SymCool and add a bidirectional intelligent driver. This product will target renewables -- particularly renewables, such as solar and wind, coupled with energy storage, stand-alone energy storage, EV charging and other industrial end markets. Similar to the solid-state circuit breaker market, these markets typically have design cycles closer to a year. Revenue for the intelligent power module will start in late 2024 and ramp into early 2025 as it gets through OEM product design cycles. Our B-TRAN is moving into commercialization, a great time when renewables, energy storage, electric vehicles, electric vehicle charging are in the early stages of their adoption. These market segments still have the largest part of their growth curve ahead of them. Automotive manufacturers are finding with B-TRAN, there's a path to reduce power semiconductor costs, the second largest production cost on electric vehicles and simultaneously improve vehicle range to mitigate driver range anxiety. The inherent bidirectionality and lower losses of B-TRAN are well suited to renewables coupled with energy storage, making renewable energy a dispatchable resource and improving the usable kilowatt hours from these systems. Our approach is that we'll be feeding the marketplace with products and incorporating customer feedback into our product planning. In the long term, as large customers such as electric vehicle manufacturers, look for second sources of supply, our objective will be to license our technology to other large players in this space that have production capacity and who've already invested in the front end of the business for sales and service support. This will allow us to stay focused on technology and not be spending capital replicating what's already out there for semiconductor distribution and service to customers. Looking at our expanding B-TRAN patent estate, we currently have 75 issued B-TRAN patents, with 32 of those issues outside of the United States. Our current geographic coverage for our patents includes North America, China, Japan, South Korea, India and Europe, all representing our high-priority patent coverage geographies. As part of our product development and introductions, we're expanding our patent efforts to include improvements in the architecture itself and what we believe to be high-value patents on our driver and packaging designs as both are unique to the bidirectional nature of our technology. As a result of our continued innovation, our list of pending patents increased from 22 to 35 since our last report. In addition, we treat our double-sided wafer fabrication process as a trade secret. So even studying our patents, somebody wouldn't have the know-how to be able to fabricate the device. There's an enormous amount of learning that's gone into the fabrication process flow to make high-quality, high-performing double-sided devices for commercial sale. In summary, the second quarter was transformative for the company as we prove that our double-sided B-TRAN device was manufacturable at a high-volume wafer foundry with high yield and without the need for capital investment. The fabricated devices improved upon the already high expectations for B-TRAN performance as demonstrated through the testing of hundreds of packaged devices. Market interest is strong and we remain focused on executing on our B-TRAN commercialization road map. We're thrilled that we are successfully executing to plan, having already met all our milestones for the first half of the year and being on track to meet the key milestones and objectives I outlined for the remainder of 2023. We're confident B-TRAN will displace conventional power semiconductors in many applications within the electric vehicle, renewable energy, energy storage solid-state circuit breaker and motor drive markets. Now I'd like to hand the call over to our Chief Financial Officer, Tim Burns, to review our second quarter financial results. Tim?

Thank you, Dan. I will review the second quarter 2023 financial results. In the second quarter, we recorded development revenue of $98,000 and grant revenue of $37,000. We completed our work on the subcontract with DTI and will not recognize any additional grant revenue for the NAVSEA program. As a result, we do not expect grant revenue in the third quarter. Development revenue in the third quarter is dependent on the timing of the Phase II work under our development agreement with a top 10 global automaker. Operating expenses were $2.4 million in the second quarter of 2023, compared to $1.7 million in the second quarter of 2022, driven primarily by higher research and development expenses and part weighted packaging costs associated with devices shipped to DTI the top 10 global automaker under Phase 1 of the program and with the large companies in our test and evaluation program. Operating expenses were also impacted by higher personnel costs as we added head count over the last year, and reflected higher stock-based compensation expense on performance stock unit and new hire grants. Although we expect higher research and development spending in the balance of 2023 at or above that seen in the second quarter, we continue to expect some quarter-to-quarter variability in operating expenses, particularly our research and development spending due to the timing of semiconductor fabrication runs and other development activities and hiring as well as the potential impact of additional government funding. We expect to keep general and administrative expenses in 2023 close to 2022 levels, excluding 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 second quarter of 2023 was $2.3 million compared to $1.7 million in the second quarter of 2022. Second quarter 2023 cash burn was $1.8 million on the lower end of our guidance of $1.8 million to $2 million. Cash burn in the second quarter was unchanged from the first quarter of 2023. Cash burn was $3.7 million in the first half of 2023. We expect third quarter 2023 cash burn of approximately $1.9 million to $2.1 million and full year 2023 cash burn of $8 to $8.5 million. Cash and cash equivalents totaled $12.7 million at June 30, 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 participating or that we expect to participate in the testing and evaluation of our B-TRAN technology as well as the global top 10 automakers that has engaged us for development program. We have no debt, a clean capital structure and an asset-light business model. At June 30, we had 5,938,458 shares outstanding up slightly from the 5,931,569 shares outstanding at the end of March and 1,040,248 warrants outstanding, unchanged from the end of March. Including 849,586 stock options, restricted stock units and performance stock units outstanding, we had 7,828,292 diluted shares outstanding at June 30. At this time, I'd like to open up the call for questions. Operator?

[Operator Instructions]. Our first question is coming from David Williams.

Congrats on the progress, and it's really come a long way this year. So definitely a deserving congratulations there. Just a couple of quick things. But one I wanted to see if you could touch on just the importance of the initial T&E customer shipments. And maybe talk a little bit about the early feedback that you received.

Yes. Part of what we're going through is an education process because it is a new semiconductor architecture. So getting devices in people's hands on the technical teams of our customers is really key to just get them comfortable with it. The feedback that we've been getting has been really positive because we position this with educating about the technology before we ships, getting to the data sheet. And what they're finding is that the devices that we gave them are performing better than we said they would. So engineers, I think kind of engineers, because I am one, we get excited when we get new technology and that does better than it was supposed to. So what they saw were the devices that we shipped them have lower losses. The switching was better than, I think, what they were expecting and they got this kit that's already just ready for them to hook up instrumentation and made it really easy for them to start exercising devices. So we've got a lot of excitement from people that have received their kits and are starting to exercise them.

Yes, fantastic. I just want to see if you could provide a little more color maybe on the performance improvements that you realized on the production units versus what was observed in the lab or on the development devices. What led to that and is this something you think you can further expand on? Or have we reached some kind of theoretical threshold in terms of performance advantages?

We don't think we're at the theoretical threshold. In fact, our team has already got sort of the next generation that they've been doing simulations on. There's a couple of things that really led to it. On a lesser level, at the die level as we transitioned from the development fab to the production level fab, we incorporated some of the last changes that we learned in the development process into the die design itself. But the bigger change really happened on the driver and how we were choosing to drive the device itself. Once we -- once the technical team actually had a whole bunch of devices that could go in the lab and really start to test and forced to failure and really explore the margins in terms of the design. What they discovered were there are some pretty innovative ideas of what we can incorporate into the driver itself that allowed us to drive the device even more efficiently, that gave us the lower conduction losses and ultimately, the subject of a patent that we've submitted.

Is that also what has helped you achieve the 3x increase in the -- both the tested amperage. I know you talked about 150 amps. Is that right?

It's not. But our focus here has been with a new technology under promise and over deliver. So we were very conservative in terms of what we rated the initial devices at in terms of what was in our data sheet and what we're sharing with customers. Because the last thing you want is for customers to find out that there's either no margin in your design or even worse, it doesn't meet the specs that you gave them. So it was really us just being conservative in terms of how we were introducing the technologies to customers because we wanted to continue to be excited in a good way, not excited because it didn't do what they was supposed to do.

Does that open up additional TAM, do you think with the increased power level?

Yes, it does because -- and some of the folks that we're talking to, for example, with circuit breakers, the way people are going to make solid-state circuit breakers is they're going to parallel devices. And if your current rating is significantly higher, it just means you need less devices to get to the power levels that you ultimately want to size the breaker for. So it makes the breaker even more cost effective if you have to use fewer semiconductors because there's more current carrying capability in them.

And then lastly, just wanted to see if you've seen an acceleration in the inbound calls or maybe customer activity after the recent announcements that clearly point to the progression towards commercial availability here and just is the activity picked up any, I guess?

Yes. What we're really starting to see is we worked pretty early on to get some really high-quality names. But now as we're starting to approach other customers, we're finding these customers already know who we are. So clearly, we're seeing technical teams that are going to do background work on the technology. We're finding -- when we're talking to these large customers, we're not starting from ground 0 of what is a B-TRAN. They're diving right into very deep technology questions that indicate that they've already been doing their homework in the technology. So it's all part of that missionary work that we need to do to raise the awareness in the technical community.

[Operator Instructions]. Our next question is coming from Jeff Grampp.

Curious on SymCool, what would you guys kind of characterize as the biggest risk to achieving the first commercial sales later this year? And maybe just taking a step back, if you guys kind of had to do a postmortem on where you are today versus where you thought you'd be at the start of the year here? Are we kind of on track, ahead of schedule, behind schedule? Just kind of qualitatively, directionally, how would you kind of characterize the progress year-to-date there?

Year-to-date, we're tracking to exactly what we said we were going to do this year. So we're actually -- which when you're doing a new technology, new products, there's always surprises that come along, but our team has been really, I think, just diligent and just very countered hard-working group of people. When we get a surprise, we all get together and we figure out what to do about it and get corrective action in place and move forward. So we are very much on schedule for everything we said we were going to do this year and our team just gets kind of more and more excited as we go along here because it's becoming very, very real for them. On the SymCool module itself, part of it is, it is a device that doesn't have a long operating history. So I think it's going to take us doing some independent reliability testing, which we have planned to start here a little bit later this year. And the customers deliberately breaking some devices themselves to find out how much margin is in the design to make themselves comfortable. So I think it's really getting everybody comfortable that you're not looking at a product that's got tens of thousands of operating hours in the field on it. But we see that all the time. I mean, silicon carbide had to go through that, GaN devices have had to go through that. Even new designs of IGBTs kind of have to go through that. It's just the natural course of convincing the technical community that the device will do what it's supposed to do. And the fact that we've been conservative in how we've approached the rating, I think gives the technical community that we've been talking to, a lot of confidence that we're not hiking what the device will do.

And for my follow-up, you guys should have two commercial products in the market as we look into '24. I think you guys had mentioned maybe some change to the OpEx profile as it relates to having those products in the market. But like philosophically, how do you guys think about balancing conserving the burn rate, conserving the capital versus making sure you put enough kind of proverbial kindling wood to make sure your products have the best chance to succeed. How do you strike that balance?

Yes. So for us, I mean, that's what it is. It's a balance. We try to be very judicious in our cash use. And as we look forward, we try to plan for the major expenditures and also see where we can potentially cut back a little bit. So we'll still have a modest increase in cash burn as we look at 2024. But if you look at even 2022 versus 2023, we were at 6.8 in 2022 for cash burn. We'll probably be in the low 8s here coming out this year. They'll probably be somewhat close to a similar increase next year. . Because we'll continue to make sure we leverage the resources we have, leverage our internal capabilities, the silicon infrastructure that's out there. And then for the things we can control, like G&A, for instance, where we won't be adding people, and we'll be keeping a really tight rate on that kind of spend as well. So it is a balancing act, but it's one that I think we can do pretty well here as we commercialize the technology.

One of the things we do, too, Jeff, is we've been able to build a great network of partners and folks that we collaborate with. So for example, we need to do high-power testing of our SymCool module. While we'd like to do it in our lab, we have to spend money on capital to go do that. So we'll go do it at UT Austin, if there are semiconductor center. So having access to places where we can avoid or defer any capital investment on our own by working with some of the development partners we have really helps us be pretty aggressive in keeping the cost side of this as low as possible.

Is there an argument to be made that maybe in '24, you might reallocate R&D investments into kind of sales and marketing? Or is the R&D just too important, a lifeblood of the company to view that way?

I think the competition is always getting better. So if you're not continuing to invest in your technology and bring products out that really give you a competitive advantage in the market segments you're going after, you're putting the company at risk.

I will now turn this call back to Jeff Christensen to read any submitted questions through the webcast. Thank you.

Thank you, operator. And I wanted to -- those questions that were asked there were asked by David Williams. They're both analysts, sell-side analysts, David Williams, of benchmark and Jeff Grampp of Alliance Group Partners. We have several questions that have been posted into the ask a question in the webcast portal. Our first question is, where do you see the sales of products and markets that will contribute to revenue the most over the next 24 months?

Yes. It's clearly going to be how we're switching activities like solid-state circuit breakers, protective relays, that will be sort of where the first revenue is. And then things that will take advantage of our intelligent power module that's coming out later this year that are really going to be things like solar coupled with energy storage. Variety of power converter applications that can use bidirectionality because they incorporate batteries. So really more industrial kind of applications while we get through the longer design cycle and certification requirements for the automobile sector.

Thank you. What reception and traction have you seen from B-TRAN devices released to participants in the test and evaluation program, anything that surprised you?

We were a little surprised that just how excited some of the things were when they actually -- they wanted to make sure that they were using the kit correctly because the data they were getting was better than what we told them in the initial data sheet. So it's energizing for our team, too, to see that the customers are excited about what they're getting, and they're actually really starting to dig pretty deeply into the device and now starting to share with us their thoughts on how they might want to use it. For example, one of the Fortune 500 -- Fortune Global 500 companies that's in our test and evaluation program, they want to start with solid-state circuit breaker. But as we talk to them, we realize that they're thinking about this for a bunch of other things that are in their smart infrastructure division like protective relays and power converters and a few other things. So it's just nice to see the technical community really responding in such a positive way now that they have got devices in their hands.

Our next question that was posted is, are you still pursuing the data center market? This appears to be a promising opportunity.

Yes. In fact, one of the companies that's in our test and evaluation program, they make UPS systems. That's one of their main product lines. So we actually had our technical teams meet together here, when was it? About 2 weeks ago. Just taking them through the test and evaluation kit, and they're talking about issuing a solicitation to us to get us to do some co-development work for them. So it looks like it's still going to be a pretty nice market for us in the long term.

[Operator Instructions]. Our next question is has B-TRAN been tested for reliability or failure rate compared to conventional solutions? Does any improvement simply correlate to lower compact count, subcomponent count? Or does the B-TRAN technology have an additional reliability benefit compared to conventional solutions.

Well, we've done some of our own reliability testing here in-house, but we're actually going to go to a third party to be in reliability testing here later this year, now that we've got many devices. Because when you do third-party reliability testing, you actually need a lot of devices, hundreds and hundreds of devices, and they need to come from multiple fabrication lots, so they can make sure that there's no lot-to-lot variability issues. . What we are seeing is there are things that are inherently indicative of higher reliability for B-TRAN for two reasons. One is, if you look at a typical IGBT, they use wire bonding as part of the process. And if you look at -- in IGBT failure modes, one of the things that is a high area for failure are the wire bonds that are used within the package to connect dies electrically to the IGBT. Our design deliberately does not use any wire bonding. It is what's called the flip chip design, where everything is soldered to conductive surfaces. So there's not a wire bond that can fatigue and fail. The other key contributor that we're seeing, that looks like it's going to be a major factor in reliability is the fact that we just generate less heat and heat is the killer of electronics. So if you're producing less heat and if you have less heat, you've got to take out of the package you inherently should expect longer life from that. But we'll get that all validated because the reliability testing we'll do it to third party. We'll have temperature extremes and cycling at a whole bunch of other stuff. But so far, it's looking pretty encouraging in terms of some of the design choices that we made that will really drive high reliability for the package.

Another question that was posted was Onsemi CEO recently stated that drivetrain content for ICE is $50 per vehicle versus $750 per vehicle for EVs. How are you positioned to compete against that what I think is the silicon carbide products that companies like On have?

Well, I think Tesla put a pretty good stake in the ground here a couple of months ago where they said they're going to reduce their amount of silicon carbide by 75%. The challenge is it's a cost issue. I mean, silicon carbide is a much more expensive material. It's harder to process. We know from our own work in wafer supply. If we go buy a silicon wafer, it costs us about $60. If you want to buy a silicon carbide wafer, it's $800. And you take that coupled with the fact that it's a much harder material to polish, to process. You can see why silicon carbide devices are much more expensive. Now, silicon carbide will get better in terms of cost and quality over time. But for now, part of what we're seeing directly from the OEMs in the automobile side is they're looking for lower-cost solutions that help them improve range because of the fact that silicon carbide is just -- it really is a challenge for the EV makers because cost is one of their big impediments right now to broad-scale adoption.

Congratulations on removing the manufacturing risk. Now the remaining risk seems to be adoption. How should we think about the speed and breadth of adoption in the corresponding TAMs associated with the markets you are targeting?

Yes. If you take a look at our website, we have a presentation that gives you some idea of the TAM. The IGBT market is really the market that we are pursuing because it's the high-power semiconductor market, which is really where our technology fits best. And that is, what? $11 billion by 2026, I think, is the targeted market. What's interesting is things like the solid-state circuit breaker market are incremental to that because IGBTs haven't made much progress in those kind of markets. So we think the addressable market is going to be pretty substantial for us. The adoption really varies a lot by industry. Obviously, automotive is the most challenging due to long design cycle certification standards, products have to withstand shock and vibration. So that's why we're targeting things in the industrial space that are less demanding in terms of certifications, things like solid-state circuit breakers, protective relays, power converters for renewable energy. Their design cycles are lower, their risk profiles are lower, and that will be where the early adoption is. And that all helps us build volume to really satisfy the data and the operating time that's going to be needed for the automobile sector. So they really fit together pretty nicely. And they both have these two large macro trends behind them, the adoption of renewable energy and electric vehicles.

We've had several questions posted, continue to post them, please, and look forward to answering them. What are the specific opportunities you see as a result of the massive tailwinds we expect for Greentech from thereon the Inflation Reduction Act and the CHIPS Act?

Yes. Let me start with the CHIPS Act. The CHIPS Act, is initially focused on wafer fabrication, where a lot of investment is going to go. And then there's going to be programs that come out after that relate to R&D. We will certainly be pursuing some of the R&D kind of activities that come out for funding. But more interestingly for us is it should create the opportunity to have a domestic fab as the investment in wafer production facilities goes into building our capability here on market, which for us is important for markets, particularly like the military, where they want domestic sourcing. So I think it's going to generally be beneficial. Unfortunately, it's going to just take a while because these government programs take quite a while to get formed, to get funded, and to go through their solicitation process. But in the long term, I think we'll see opportunities both on the R&D side and future wafer fab collaboration. On the push for Greentech, it really fits into our sweet spot because what we're going to see here as more and more solar and wind are deployed, you really need to start coupling energy storage with them because of their intermittency. It makes them a more valuable resource and as battery costs continue to decline, it creates the need for fast-switching bidirectional devices that can operate as efficiently as possible, and that really is what we do very, very well. So I think it's going to create a really great global opportunity for us as we bring the particular intelligent power module to the marketplace.

For the [indiscernible] for Dan and Tim in the second quarter, were those open market buys?

Yes, they were. They're all open market buys.

When do you expect being able to disclose who some of your development partners are?

That's a good question. We're hoping on the automobile side that we can start to put some pressure on them that it's material relationship for us, particularly as they start to ramp up their spending with us for development. For the rest of them, it's kind of case by case. I think most of them, they don't want their competitors to know what they're doing. But I think at some point, when they're far enough along, we'll be able to start naming who they are. In my written comments, I mentioned some companies, for example, that are in like the power management markets. Obviously, I won't say which ones, but some of the companies I named are in our test and evaluation program. So we hope to be able to be more specific about that as some of these companies get further along and start to actually buy product from us.

How should we think about your revenue model and expect to implement across your offerings, whether it's SymCool or the custom drivetrain modules for the top auto OEMs or other offerings?

So for the revenue model overall, so initially, there will be some development revenue, probably relatively modest with product sales. So our initial focus will be on product sales. But longer term, we are open and part of our overall strategy is to start licensing the technology as well to some of the large semiconductor players that are out there that already have the infrastructure in place to expand the sales of the B-TRAN product offering. For the SymCool, again, we're going to have initial sales here later this year due to the timing and design cycles with those OEMs, it will really be the second half of 2024 until we see the revenue ramp and the intelligent power module is probably 3 to 6 months behind that in terms of the overall ramp. And then the EV revenue really will start probably in '25, but it will be after that when you really start to see the ramp as it's incorporated into production models for sale.

If the automaker is expecting to include B-TRAN in its 2025 EV models, when would the company expect to deliver product to the automaker and realize revenue?

We'll actually start to see revenue in '25 because to get through that certification process, it's not a matter of tens of thousands of dollars. They've got to spend quite a bit to get all the modules built that they need to take through automotive certification and all the reliability testing they're going to need to do. So while we won't in the production vehicle yet, we'll start to see revenue from it in 2025 to support their plan to actually have a production ready in the design of cars that will be coming out in subsequent years.

What is the revenue range per electric vehicle that Ideal Power will recognize?

It's going to vary somewhat based on the vehicle. We've been targeting the drivetrain inverter as the first point of this. But there's also other places in the vehicle where our technology applies. Some of the circuit protection that's in vehicles, the onboard chargers, DC to DC converters and so forth. If you look at what's been published, the semiconductors that are in an electric vehicle tend to make up about 8% to 10% of the full production cost of the vehicle. So if you think about cars that are in the $80,000 to $100,000 range, which is where they are now, that would tell you it's going to be in the range of $800 to $1,000. So it's really going to be a function of how do they use semiconductors, how do they drive cost out of the products. But for us, the per vehicle cost is pretty substantial. I think most people are surprised that after the batteries, the semiconductors are the second highest cost component.

And I'm sure it will decrease over time somewhat. But right now, we estimate based on some data that's out there, that it's about $2,000 to $3,000 per vehicle for power semiconductor devices in your average EV.

What does production ready in 2025 mean for the automotive OEM. Does that mean that they'd have in their vehicles in 2025?

No. That means that there is a design that has been completed. It's been tested. It's been through certifications automobile standards, and it's been proven that it can be made in sufficient volumes at sufficient costs so that the rest of the vehicle design is already incorporating it, and you would expect to see it coming into the vehicle probably in the subsequent model year.

The warrants that are outstanding. When those are exercised, will they bring cash into the company?

Yes, they will. So there's a couple of different tranches of those warrants. All of them are highly in the money. There's some $2.32 warrants and some at $8.59 as well. The first warrants expire actually in November of 2024. So we're forecasting cash coming in for those warrants, again in November '24. The other large tranche of warrants is in -- I believe it's August of 2025. So overall, there's over $4 million of exercise price out there that we'd anticipate over that period.

How should we think about your margin profile?

So at volume, we're expecting margins in roughly the 50% range. So if you look at gross margin. So in lower volumes, obviously, we're going to have to work up to that number. Initially, I would even probably say we shouldn't be expecting gross profit on initial very well volume sales just because of the volume number. But the B-TRAN technology, if we start to scale it here, we think 50% is probably the right target longer term.

And as you think about particularly the automakers who are going to want a second source, that will ultimately be a licensing arrangement that we put in place with another semiconductor company and licensing revenue is essentially 100% gross margin.

The Ideal shareholder -- as an Ideal shareholder-friendly company that is committed to maximizing future dilution to the benefit of shareholders and rewarding long-term shareholders commencement with the company's growth?

Yes. So Jeff, first, I'd say it would be minimizing future dilution would be our goal. So yes, we're very considered of how and when we raise money and the impact that, that will have on our investors. That's why we take the approach when we can, you don't want to try to raise money when you need money because that's -- those deal terms just don't look as good to the current existing shareholder base. So we evaluate the impact on the existing shareholder base anytime we consider anything involving capital.

Do you anticipate or are interested in entering into any exclusivity agreements with customers such as automakers?

Me personally, no. I don't like exclusive agreements. But typically what you get for them, particularly if you're an early-stage company, you give up an awful lot. And I think it's too early to really know who are going to be the volume customers for us in the long term. So our objective is really going to be, let's get as many customers engaged as possible. It helps drive volume and drive cost down, it just opens more markets. So we would not be terribly interested in exclusivity, particularly at such an early stage in the company.

Can you talk about other companies developing this bidirectional power switch? Who are your competitors?

Yes, there's a lot of interest in bidirectional switching just a result of the fact that energy storage is going into so many applications. But what we've seen are approaches that are out there that are basically using existing topologies and just putting devices back to back and doubling their losses. Our technical team -- and in fact, some of them were at a conference this week. And so we scan pretty routinely to see what's being done out there for bidirectional switching. And we haven't seen anything that is really terribly innovative that is going to dramatically impact the losses the way B-TRAN can. It's just these repackaging of multiple MOSFETs or multiple IGBTs as a way to make a bidirectional switch that might be convenient for electrical connection, but doesn't bring any significant improvement in terms of losses.

Do you have any specific opportunities in EV charging? Can you comment about those?

Yes. In fact, we have some folks that are involved in EV charging in our test and evaluation program. EV charging really is focused on a couple of things. One is faster charging. So if you can push more power into a battery, you're charging it, you can charge it in a lower amount of time. The other thing we're seeing is some of the business models that are coming out for the EV charging folks are actually incorporating buffer batteries with the EV chargers because what they're finding is for a lot of people, they're charging their electric vehicles on their way home from work, if they stop at the grocery store or stop to run errands. So the electric vehicles are being charged during the peak demand of the day and the highest rates if they couple backup batteries with them, they can charge those batteries from the grid at night and then use those to charge vehicles. So there's an interest in the bidirectionality that we're seeing and EV charging as people get more sophisticated business models out there. So I think there's going to be some pretty good opportunities for us in that marketplace because those business models are certainly evolving and looking to innovate so that they have something that helps them get more useful kilowatt hours into the vehicles.

What about garnering capital support from some of these major players you are dealing with?

I think if there is an opportunity to particularly form a little more strategic relationship with some of them, we would certainly be open to that discussion because it certainly gives you validation, among others in the customer base. I think we have to get a little bit further along in terms of our engagement with some of them where they're actually starting to incorporate actual finished product into their OEM products, but I think it's something that could be pretty important for us in terms of just the strategic relationships and how we access capital and how we grow the market.

How is semiconductor supply, chain disruptions impacted the company to date? And what will be the impact as you commercialize the technology and start to ramp volumes?

Well, as we were going through the development work, we use development fabs in the U.S. So we didn't really see any disruption in what we were doing. As we were working on our driver, we saw some issues with parts availability. But generally, when you're designing a circuit board, if there's not a certain resistor that you're looking for, there's one that is close to it that you can get as an alternative. But it's been very much our focus in terms of where should our wafer fabs be, who should they be, who are we partnering with for packaging. So I think the disruptions that the industry saw as a result of COVID figure very prominently in our thinking in terms of who we work with and what those arrangements look like. Fortunately, since we are working in silicon, the wafers that we use are commonly available, they're typically the same kind of specs you would make in IGBT with. So they're made in high volume in many places around the world. So it's really who's fabricating your wafers and who's doing your packaging that we focus on making sure that we've got diversity in terms of capability and geography. So if there is another global disruption in supply chains, we've done the best that we can do to insulate ourselves from interrupting the business.

It looks like we're all out of time. Dan, do you have any closing remarks?

I just want to thank everybody for joining our call. We've made great progress on our path to commercialize our technology, our talented team is on track for a very successful 2023. We look forward to some commercial announcements in advance of our next update call and also our introduction of our next product to the marketplace, and we'll continue to actively share our story with the investment community. So at this point, I'd like to thank everybody for joining us. And operator, you may end the call.