Good day, and welcome to the Ideal Power Third Quarter 2021 Results Conference Call. Today’s conference is being recorded. At this time, I would now like to turn the conference over to Carolyn Capaccio of LHA. Please go ahead, ma'am..

Thank you, Sara. Thank you and good afternoon everyone and thank you for joining Ideal Power's third quarter 2021 conference call. With me on the call are Dan Brdar, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer.

Ideal Power’s third quarter 2021 financial results press release is available on the Company’s website at idealpower.com.

Before we begin, I would 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 will turn the call over to Ideal Power’s President and CEO, Dan Brdar.

Dan?.

Thank you, Carolyn. Good afternoon, everyone and welcome to our third quarter 2021 financial results conference call. I will begin by giving you an update on our progress and achievements on our strategy to commercialize our B-TRAN semiconductor technology as well as the work we’re doing with the U.S Navy and the Department of Energy.

And Tim Burns, our CFO, will take you through the numbers and then we will get -- take your questions. So let's get started.

We made significant progress on our B-TRAN commercialization roadmap during the third quarter moving toward objective of commercially launching B-TRAN in the second half of 2022 as a differentiated technology addressing a large and growing market.

During the past several weeks, we made several announcements regarding large global companies that will be participating in our test and evaluation program.

We have deliberately targeted leading companies in each of our target market segments that are adopters of new technology, have demonstrated a desire to take a new approach to their product offerings, and have the technical resources in-house to commit to evaluating a new innovative technology and the new approaches it can offer them in their product designs.

Our announcements included a top 10 global automaker, a top 10 solar power conversion provider, an EV charging company, each of which will test and evaluate B-TRAN for use in their applications.

We've signed additional test and evaluation agreements we've not announced that represent collaboration partners, or relationships with additional commercial businesses in our target markets, and with universities that present opportunities to pursue additional funding from the Department of Energy or the Department of Defense.

Subsequent to the third quarter, we announced an additional participate -- a discipline in our sampling and evaluation program with a Forbes Global 500 leader in diverse power management markets. We'll evaluate B-TRAN for use in bi-directional direct current solid state circuit breaker applications for solar and wind systems.

This is Ideal Power's first test and evaluation announcement with a global power management product supplier to the industrial and utility circuit breaker market and builds on our work with the Department of Defense and Department of Energy on B-TRAN enabled solid state circuit breakers.

This global power management leader will evaluate B-TRAN initially for multiple solid state circuit breaker applications with other power conversion and distribution applications expected to follow. We're very excited to work with this market leader and with our B-TRANs opportunity in the solid state circuit breaker market.

We now have large program participants in all our target end markets, which include electric vehicles, EV charging, renewable energy, UPS systems for data centers and solid state circuit breakers.

What is common among these collaborations is the level of effort and resources these potential customers are committing to their comprehensive evaluation of B-TRAN for their applications.

We're finding that the talented engineering teams at these companies are identifying new design approaches, and rethinking their applications and power management for both DC and AC implementations to the enabling low loss and bidirectional capabilities of B-TRAN.

It's our hope that as these relationships progress, we'll be able to begin naming at least some of these companies as they lead to more collaborative and potentially strategic supply agreements.

In terms of next steps, we will provide package B-TRAN devices along with a driver to these initial participants in the program to facilitate and accelerate testing.

These customers will share their testing results with us and provide application specific feedback on the design and operation of the package devices and driver, the feature set they require and their priorities for individual applications.

This feedback will enable us to determine common requirements across applications, but may also engage with certain of these customers for custom modules, particularly for electric vehicles and solid state circuit breaker applications for multiple devices may need to be combined into a single package.

We anticipate feedback from these initial entities to provide meaningful input into the design of our intelligent power module, and we think to plan its introduction for commercial sales in the second half of 2022.

To support the evaluation program, we've already incorporated early feedback from some of our partners into an updated packaging design, which is now in fabrication.

We're also in discussions with additional companies in our target end market applications for the testing and evaluation of B-TRAN, including additional electric vehicle, EV charging, traditional automotive, and industrial equipment companies.

We do the evaluation program as an ongoing activity as part of our effort to introduce the technology to OEM end user markets and to raise the awareness of its potential.

These ongoing engagements will likely result in a variety of intelligent power modules over time, targeted for specific market applications and uses, as we commonly see in the traditional power semiconductor market. We will announce future engagements with additional companies in the program as we're able.

As evidenced by our most recent announcements, we're seeing growing interest in government funded R&D and commercial partnering on solid state circuit breakers, which is a tremendous opportunity for B-TRAN as an enabling technology.

This is being driven by the need to upgrade our electrical distribution and transmission systems to accommodate the growing use of distributed generation, the adoption of intermittent generation in the form of solar and wind, a continued build out of the EV charging infrastructure and the coming widespread adoption of batteries for peak shaving and to enhance the value of renewable energy systems when energy storage is coupled with solar and wind generation.

Circuit breakers perform a critical function in power generation, transmission and distribution systems to protect against power surges and short circuits. And the circuit breaker market overall is projected to grow at a compound annual growth rate of over 6% to approximately $26 billion by 2027.

As you may have seen we recently released a white paper, B-TRANS devices and solid state circuit breaker applications, which examines how B-TRAN'S fast switching, low conduction losses and bi-directional capability and solve the challenges the current solid state circuit breakers face, potentially enabling solid state circuit breakers to become a broadly adopted solution.

This appears to both existing mechanical circuit breakers and the high loss semiconductor solid state circuit breaker alternatives.

This is particularly applicable as the expected increase in electrification of all aspects of daily life reach increasing demand on our circuit protection requirements from solar and wind power, energy storage, electric vehicles and EV charging and associated vehicle to grid networks.

So all of these circuit breakers offer significant advantages over mechanical circuit breakers. Mechanical circuit breakers operate roughly 10x slower than solid state circuit breakers, which can open or close a circuit in microseconds.

Due to their slower speed of operation, mechanical breakers can see fault currents that are orders of magnitude higher than a solid state device.

These high fault currents can damage downstream equipment, and also result in arcing, which can be a potential fire and safety hazard as well as create wear on the mechanical contacts in the breaker shortening its operating life.

Limitation to adoption of solid state circuit breakers using conventional switches such as IGBTs has been there high conduction losses, which results in significant wasted energy, it must be dissipated in the form of heat. Heat transfer inherently low conduction losses solve this problem.

Along with energy savings, the inherent bi-directionality of B-TRAN, it also reduce component count and thermal management requirements. And therefore the cost of solid state circuit breakers.

For perspective B-TRAN could potentially reduce power loss in a unidirectional solid state circuit breaker application a nearly two thirds and then a bi-directional application I almost 80%. Let's move on now to our work with the United States Navy.

And our first of two collaborations with Diversified Technologies, Ideal power is working with the Naval Sea Systems Command or NAVSEA on the development and demonstration of a B-TRAN enabled direct current medium voltage solid state circuit breaker.

This program is part of the U.S Navy's strategic focus on ship electrification and is funded under the Department of Defense's rapid innovation fund, the purpose of which is to accelerate the commercialization of high value, high impact technologies.

Our project with DTI for NAVSEA is intended to develop and demonstrate a B-TRAN enabled high efficiency 12 scalable medium voltage direct current circuit breaker for the U.S Navy.

For the subsequent objective of introducing a family of medium voltage DC circuit breaker products, incorporating B-TRAN for sale to the military, industrial and utility markets. Our fabrication partner Teledyne completed their most recent run and will be testing and packaging devices from that run with our updated packaging design.

We'll be providing packaged devices to DTI for evaluation this quarter. Final fabrication run is now underway. The completion of which represents the final major milestone in the program for us.

Will subsequently deliver optimized B-TRAN devices to DTI, continue to provide program support through the full scale demonstration of the B-TRAN enabled breaker in mid 2022. Let's move now to our work with the Department of Energy.

We're working with DTI on a second collaboration under a Phase 1 small business innovation research grants funded by the U.S Department of Energy.

This grant is to develop a B-TRAN based low loss, 13.8 kilovolt alternating current solid state breaker intended to be used in medium voltage power distribution and renewable energy and micro grid applications connected to the authority power grid.

Phase 1 of the SBIR project is focused on the simulation, device design and module packaging concepts that allow BTRANS to be assembled in series or parallel configurations for a high voltage rating capability, leveraging our current Bi-design.

This phase of the project is primarily a packaging and module development activity that enables B-TRAN to be used in applications like AC circuit breakers that require more than 1,200 volt capability.

We've completed the first milestone of the program, which is to conduct device simulations to assess the current B-TRAN design for the alternating current circuit breaker. These simulations evaluated breakdown voltage conduction losses, turn on and turn off performance and looked at initial approaches for parallel and devices.

These parameters will be evaluated for applications to the current bi-design and any changes required will be addressed in the second major program milestone. The last milestone in Phase 1 for the program will be to develop a multi di-module conceptual design that allows for double sided cooling to maximize performance and operating life.

The Phase 1 of the project is successful and were awarded Phase II to Phase Two objective will be to build and demonstrate a 50 megawatt 13.8 kV AC solid state circuit breaker, a voltage level that is commonly found in utility distribution networks, so the resulting breaker design can be applied directly to existing utility transmission and distribution systems and micro grids.

Following that demonstration, DTI would have the ability to sell the breaker designed to utility, industrial and military customers and license the design to others for sale to end users. We'd also expect to partner with other circuit breaker companies so they can design and bring their own B-TRAN based products to market.

We will provide more insight into the project as our work progresses, that the program does not carry the confidentiality restrictions of our U.S Navy program. Also, we expect to leverage the knowledge we gain on combining multiple devices in parallel and in serious configurations for other applications such as electric vehicles.

To support our future growth, we are progressing in our qualification of a second domestic fabric semiconductor fabricator that has strong experience making bipolar devices to ensure sufficient supply capacity for future potential large customers and to mitigate supply chain risk.

Utilizing a second semiconductor fabrication partner will enable us to provide both packaged devices and data independent of the confidentiality requirements of our NFC program. We are close to completing or qualifying Wafer Fabrication run in the interim testing we have had with them performance to date has been very positive.

And we're expecting to have working devices from their first run. Shortly will have their finish wafers and these will be diced, packaged and tested will likely be used as part of our initial customer sampling deliverables.

To support our need for additional technical information with our potential customers, and also, they also intend to use devices from our second source for testing an independent third-party lab. Although most semiconductor companies generate their own device data, we intend to use a third-party for a significant part of our testing.

This will enable us to conduct some of the tests that we're not equipped to perform in our lab, but also provide an independent source of data that is not constrained by the confidentiality requirements of our DOD funded activities.

We're in the process of evaluating and selecting third-party we will use and expect to make that selection this quarter.

Looking at the B-TRAN patent estate, we currently have 65 issued B-TRAN patents with 27 of those issued outside the United States and 23 pending patents are current geographic coverage includes North America, China, Japan, South Korea and Europe, the potential to expand coverage into India.

Since the beginning of this year, eight B-TRAN patents have issued where six of those issued outside of the United States, including Ideal Powers first patent issuance in South Korea. We've made tremendous progress toward commercialization in 2021. And our plan for the remainder of the year remains the same.

First to continue to engage with prospective customers and support existing participants in our test and evaluation program. Second, to continue to achieve our milestones under the [indiscernible] program with a target of delivering an optimized packaged device from incorporation into the demonstration of a 12 kilovolt MVDC breaker in mid 2022.

And third, to achieve our initial objectives on the Phase one SBIR grant, which is deliver a low loss B-TRAN, multi di-module concept suitable for subsequent incorporation into a 13.8 kilovolt alternating current solid state circuit breaker. If we are awarded Phase two and the program.

We continue to apprise you of the companies we add to our customer test and evaluation program as we're able.

And we'll update you as we're permitted on the feedback we receive from the program and how this data feeds into determinations of common requirements across applications that can then be incorporated into an intelligent power module that we anticipate will accelerate B-TRANs commercial adoption.

It's a very exciting time for Idle Power as we move closer to realizing the potential B-TRANs unique advantages of bi directional switching capability, lower switching and conduction losses. And as a result, lower user costs and improved and more compact thermal management requirements for OEM products incorporating the beat trend.

The trend is an innovative technology with the capability of enabling emerging markets, displacing conventional power semiconductors in many applications, solving problems in existing markets, and addressing the immediate needs of many power electronics applications, both high growth and high demand market segments.

We are executing well and making consistent progress toward commercialization of our technology. Before I turn the call over to Tim for the financials. I want to take a moment to acknowledge the passing of our Chairman of our Board to Directors Mr. David Eisenhaure.

Dave served on Ideal Power's Board since August of 2013 was named Chairman in June of 2020, and was an engineering visionary, successful entrepreneur, an accomplished inventor with over 20 engineering patents to his name. Dave made instrumental contributions to Ideal Power.

In particular, as we made the very weighty decision of selling our power converter business and embarked exclusively on developing B-TRAN, his guidance and technical [indiscernible] expertise were invaluable. We all miss him and send our deepest sympathies to his family.

The Board of Directors has begun the process of identifying and interviewing candidates for addition to the Board, as well as the identification of a new Chairman. We'll keep you apprised as that process continues. Now I'd like to turn the call over to our Chief Financial Officer, Tim Burns for a review of the third quarter of 2021 financial results.

Tim?.

Thank you, Dan. I will review third quarter 2021 financial results. In the third quarter, we recorded $121,000 in grant revenue, as offsetting cost of grant revenue as we continued our work on the Navy funded NAVSEA demonstration under the DTI subcontract, which began in mid 2020.

As we've noted on previous calls, the amount of grant revenue recognized each quarter will vary, as this is a function of the timing of spending in scheduled milestones under the program. We continue to expect almost all of the grant revenue for this program and our SBIR Phase 1 project to be recognized by early next year.

Operating expenses were $1.2 million in the third quarter of 2021, flat compared to $1.2 million in the third quarter of 2020. While we invested over $200,000 more in research and development and sales and marketing in the third quarter, compared to the third quarter of 2020.

This increase was largely offset by lower general and administrative expenses.

We continue to expect research and development and sales and marketing spending to trend higher in the fourth quarter and throughout 2022 As we accelerate development and commercialization of our B-TRAN technology, including conducting additional wafer fabrication runs, third-party testing of the B-TRAN, adding more engineering and front end talent supporting our Test and Evaluation program, designing an intelligent power module and other B-TRAN commercialization activities with potential new customers and partners.

We do 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. Net was in the third quarter of 2021 was $1.2 million, compared to $4.9 million in the third quarter of 2020.

The year-ago period included a one-time non cash warrant inducement expense of $3.7 million. Third quarter 2021 cash used in operating and investing activities was $1.2 million, up from $0.8 million in the third quarter of 2020 and $1.1 million in the second quarter of this year.

Our third quarter cash burn was consistent with the guidance we provided in our second quarter call. We continue to invest in both sales and marketing and research and development, expect fourth quarter cash burn of approximately $1.3 million in a full year cash burn of approximately $4.5 million.

Cash and cash equivalents totaled $24.5 million in September 30, 2021. Our balance sheet gives us ample liquidity, particularly given our plan continued modest cash burn to fund multiple years of operations.

And we are a well capitalized partner for the larger companies that are engaged and we expect to engage in the testing and evaluation of our B-TRAN technology.

As of September 30, we had 5,872,046 shares outstanding and 1,040,248 warrants outstanding, including 455,937 stock options outstanding, our diluted shares outstanding and September 30 was 7.4 million shares unchanged from our diluted shares outstanding at June 30. At this time, I'd like to open up the call for questions.

Operator?.

Thank you. We'll take our first question from Don Slowinski with Winslow Asset Group..

Good afternoon, gentlemen. Thanks for taking my questions. Can you hear me, okay? Dan, could you please clarify a couple of issues around total addressable markets? Because there were some presentations by Ideal Power that talked about the IGBT market growing to $11 billion. And then you talk about the circuit breaker market at growing to $26 billion.

So I assume that's the overall circuit breaker market? Do you have a breakdown of what the solid state circuit breaker market looks like? And what that component in the IGBT segment is? Can you just give us a little more color on that, total addressable market?.

Yes, you're correct. That $26 billion is the total circuit breaker market. About 40% of that market is really where B-TRAN is sort of in the sweet spot. If you think about circuit breakers, there's a lot of really small, small circuit breakers that are low voltage for things like your home and so forth.

And some that are very, very high voltage that would use a different technology altogether. So about 40% of that market, let's call it 10 million. 10 billion is the section that applies to B-TRAN. What portion of that 10 billion will be the cost of the B-TRANs is too early to tell.

I think, as we get through, certainly through this demonstration that we're doing with DTI for the Navy, we'll have a pretty good feel of what the percentage of the circuit breaker cost is related to B-TRAN. And we'll be able to give a little bit more information at that point in time..

Okay. So it looks like 10 billion addressable market for B-TRAN within solid state circuit breakers, and then outside of that segment, there are additional use cases for -- are there additional use cases for B-TRAN outside of that? Where's that? Yes.

And when you talk about components in electric vehicles or electric vehicle charging stations are those solid state circuit breakers within those applications or as others completely different than that's another additional addressable market..

The studies that I have looked at so far for circuit breakers really don't do a very good job of accounting for the circuit protection, like protection relays and the circuit breakers that are part of the EV space. They tend to do more straight line productions of what the market has been for the past year.

So I think in terms of the actual size of the circuit breaker market, I think it's probably being underestimated. And the fact that they only show it expected to grow at 6% a year when the EV portion of power switches is growing at 15% a year. Seems a little, I think modest in terms of their projections.

So I think it will actually be bigger than what the expert study share..

Yes, that makes sense. Just one for other one. When you talk about bringing in a third-party Lab, which I think is a great idea. Can you give us some idea on timing on that? When you think you'll identify someone and then how long it'll take them to actually take B-TRAN devices and come back with performance and validation results..

We're going through that selection process, as we speak. There are actually were calls on it earlier today, just evaluating the various companies that our team is familiar with, the sensor capability to make sure that there's nothing that they can't do in terms of some of the things that we want to have done for our data sheets and data information.

We're going to make that selection this quarter, like to try and do by the end of the month if we can.

And then we'll have a better feel on how long it will take them once we see their formal quotes and they lay out what's their timeframe, because what we're finding is that, depending on who you talk to you, they have a different backlog of work of when they can actually get started.

But I would expect that we're going to have the information sometime in Q1 that will be able to go into our public data sheet..

That's fantastic. Okay. I appreciate you taking the questions..

Sure. Thanks..

Take care..

Thank you. [Operator Instructions] The next we will take Kelly Thurman..

Hey, Dan. Thanks for taking my question..

Sure..

Once the sampling program is over, and the next stage takes in where you guys will be developing the product for and moving it along.

Will you guys be earning any type of revenue once you're past that sampling program?.

Yes, in fact, some of the folks that we're talking to the reason I brought up, for example, custom modules that some of the customers have talking to us about, they would actually be paying us for that. So there would be paid work for that. We will have, we hope we'll have some additional R&D funds from the grants.

But for also for customers that want more than a handful of devices to sample. And for example, the automobile companies are typically like that, we would actually charge them for those parts, because we're not going to make hundreds and hundreds of parts of them evaluate on our nickel, and they're willing to pay for those things..

Okay, And then next question and final question, Who do you guys feel you're farthest along with taking a company sampling right now from a prospect to a customer? And are you having success cross selling B-TRAN into multiple product lines, even though they're only sampling one product? Are you having any success cross selling B-TRAN into multiple product lines?.

Yes. Part of why we have targeted some of the bigger companies that we have, like the power management company that we announce; the solar power converter company, we announced this because they do multiple things. And we've had multiple discussions with those folks where they say, here's the application we want to start with.

But we would also see using it for applications B and C as well. So I think now that getting the leverage out of those larger companies, I think it's going to be pretty helpful in terms of being able to proliferate B-TRAN into other products other than just the initial one that we might be using as the basis for our discussions with them.

We actually have multiple companies now that are literally ready, they have budgets approved, they're basically just waiting for us to hand them devices. So we have there's three companies that are definitely in that mode right now, and a couple others that are going through their budget approval process..

When do you think we'll hear some company names? Will that not be till next year? Well, I'm hoping it'll be next year, I think it's going to be a function of what happens with a couple where there's opportunities for code development.

If they end up being substantial programs, I think we're going to have to have a discussion with the companies about our obligations to disclose things that will be considered material to our investment community.

I'm hoping that even before we get too far into the sampling program itself, we've got a couple other activities that we'll be able to start naming some people..

All right. Thank you for taking my question..

The main thing [indiscernible] confirmed about the -- just one of the thought ad is just what we find is that most people just don't want their competitors to know what they're doing. But at some point, I think the sensitivity of that goes down as we start to work with more and more companies that are out there..

All right. Thanks for taking my question..

Thank you. And this will conclude today's question-and-answer session.

I would now like to turn the conference back over to Dan Brdar, [indiscernible] for closing remarks?.

Well, thanks everyone for joining our call today. For the remainder of the year, we'll be presenting at the Benchmark Companies technology one on one conference. The Benchmark company discovery one on one investor conference and also with the Sidoti December Microcap conference.

Wish everybody a happy and safe rest of 2021 Look forward to giving you another update on our fourth quarter call. Have a great day..

Thank you. And that does conclude today’s teleconference. We do appreciate your participation. You may now disconnect..