Good day and welcome to the Ideal Power, First Quarter 2022 Results Conference Call. Today’s conference is being recorded. At this time, I’d now like to turn the conference over to Carolyn Capaccio of LHA. Please go ahead ma’am..

Thank you, operator. And good afternoon everyone. Thank you for joining Ideal Power's first quarter 2022 conference call. With me on the call are Dan Brdar, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer. Ideal Power’s first 2022 financial results 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 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. And 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?.

supply chain disruptions, COVID pandemic, high inflation and rising interest rates we remain on track to introduce our first commercial product by the end of the year. We're increasingly excited by new customer and collaboration opportunities that were being created as a result of our government funded solid-state circuit breaker projects.

As multiple years of cash on the balance sheet, a talented and highly motivated team, strong IT portfolio, a world class fabrication and packaging partners. We're fortunate to be able to remain focused on executing our commercialization strategy, delivering on our 2022 objectives and realizing the potential of our technology.

We'll keep you updated on our progress as we hit each milestone on our roadmap. Now I'd like to hand the call over to chief financial patrol officer Tim burns for review of our first quarter, 2022 financial results.

Tim?.

Thank you, Dan. I will review first quarter 2022 financial results. In the first quarter we recorded $125,000 in grant revenue with offsetting cost of grant revenue as we continued our work on the Navy Funded NAVSEA program and completed our work under the DOE funded SBIR Phase 1 grant.

We expect almost all of the remaining grant revenue under the NAVSEA program to be recognized in the next one to two quarters. If our SBIR Phase 2 application is approved, we potentially expect revenue under this program to begin in the fourth quarter.

We also continue to pursue additional government funding opportunities that if awarded could result in initial revenue as early as the second half of 2022. Consistent with our expectations operating expenses were $1.9 million in the first quarter of 2022 compared to $924,000 in the first quarter of 2021.

Research and development and sales and marketing expenses trended higher on additional wafer fabrication runs and higher personnel costs for employees added over the course of the last year to support both development activities and the test and evaluation program, as well as higher third-party development costs.

The incremental growth and expenses was planned as we increase our development and commercialization efforts in advance of introducing our initial commercial product by the end of the year.

General and administrative expenses increased this quarter on higher investor relations spending in board, search and replacement fee as we added two Independent Directors to our Board. Operating expenses were also impacted by higher non-cash stock based compensation expense.

Our development in commercialization plans for the balance of 2022 include additional larger wafer fabrication runs including a qualifying run with a high volume production wafer fabricator.

Third-party testing of the B-TRAN adding more engineering and front end talent supporting our test and evaluation program, designing and introducing our initial commercial product and other B-TRAN commercialization activities with potential new customers and partners.

We continue to expect some quarter-to-quarter variability and operating expenses, particularly our research and development spending due to the timing of semiconductor fabrication runs and other development activities, as well as the potential impact of additional government funding.

We expect general and administrative expense to be relatively flat over the remainder of the year despite the impact of inflation on the cost of services. Net was in the first quarter of 2022 was $1.9 million compared to $924,000 in the first quarter of 2021.

First quarter 2022 cash used in operating and investing activities which is net of the cost reimbursement under the NAVSEA program was $1.4 million, up from $874,000 in the first quarter of 2021, and from $1.3 million in the fourth quarter of 2021. This is consistent with the expectations we provided on our year-end call.

We continue to invest in both sales and marketing and research and development, and continue to expect cash burn for full year 2022 of approximately $7 million with a second quarter 2022 cash burn of $1.7 million to $1.8 million. Cash and cash equivalents totaled $21.7 million at March 31, 2022.

Given our plan cash burn, which remains modest, our balance sheet gives us ample liquidity to fund multiple years of operations and to be a well capitalized partner for the broad spectrum of companies that are either already participating or we expect to participate in the testing and evaluation of our B-TRAN technology.

As of March 31, we had 5,903,797 shares outstanding, and $1,040,248 warrant outstanding, including 595,982 stock options in restricted stock unit's outstanding, diluted shares outstanding at December 31 totaled 7.5 million shares. At this time I would like to open up the call for questions.

Operator?.

Thank you. [Operator Instructions] We'll take our question from the line of David Williams with Benchmark. Please go ahead. Your line is now open..

Hey, good afternoon and congrats on the progress..

Thanks David..

Thanks David..

Forgive me. I jumped on a bit late here.

So if you discussed this and I missed my apologies, but I guess as you kind of think about your commercial revenue, when do you think that that falls in? I know before we thought we'd have first commercial sales in 4Q, is that still on track? And is there anything there that's been pushed or pulled?.

Yes. The Q4 of this year is still an opportunity for our first initial revenue. The 2023 is really where we're going to start to see revenue just because of the timeframe that it takes to actually get through these evaluation cycles and get through design cycles, but it'll be modest.

We also think there's opportunity for non- recurring engineering dollars with some of the customers we're working at that want us to do some work that is specific for them for or products they would ultimately use in their OEM products..

Okay, fantastic. And I know you touched on this a bit in your script, but just kind of given the test and evaluation program ramps, you added a few to this quarter.

What types of applications are these being tested for, maybe just a little more color into that? And then are you seeing new used cases developed or may be traction area is not previously thought of to be an opportunity?.

Yes. The one thing that is actually been a little bit of a surprise to us is, we initially pursued this solid-state circuit breaker concept in the project that we've proposed to the Navy but we've got several players now that are in our program that it is a specific interest of theirs.

From very large players to universities to commercial companies that have been kind of just patiently waiting for there to be a better solution because solid-state circuit breakers can be applied in electric vehicles, they can be applied in utility and distribution systems, protecting data center is as a whole, protecting renewable energy installation.

So the popularity of the solid-state circuit breaker I think catches a little bit by surprise. And then we have a couple other folks that are in our program that are looking at some unique applications that we hadn't been thinking about.

Some things that are power control sort of applications that are really all about getting fast acting devices, to protect equipment, a little different than circuit breakers but really power control devices.

And as you think about the applications the ones that we're seeing that there's sort of the most interest in is obviously electric vehicles with several portions of the EVs, the drivetrain, the DC to DC charger and the onboard charger.

We're seeing a lot of interest in EV charging solutions as people look at mobile EV charging solutions and stationary ones, particularly those that might incorporate offer batteries.

And then the interest in renewable energy coupled with energy storage where you need bidirectionality is another one that seems to be pretty popular with the folks that are in the program..

Perfect.

And then as you – just when your – how is your customer reception been when engaging with prospective customers and the prototypes as you're sampling? And have you seen that change at all in terms of those types of customers beyond maybe what you just spoke to?.

We're seeing it's really good. We're finding that we're as the visibility of B-TRAN is grown, as people are learning about the projects rather than us just reaching out to the targets that are on our list, we're starting to see more and more inbounds.

So our business development guys are having to screen out a little bit of folks that we think it makes sense to spend time with. And some that maybe it's too small, where we really have to think about what's the opportunity cost if we were to get tied up with some of the smaller companies that are out there that would need a lot of technical support.

So just happy to see that there's more inbound and at the last couple of conferences, the Bipower Electronics Conference, and then also at the Power Control Conference here last week.

Just a lot of people seeking us out wanting to learn more to think about how they can incorporate B-TRAN into some of their potential products, so it's nice to see the recognition rising and us not having to pursue everybody directly, but have them start to look – look to us as a way to collaborate..

Great. And then maybe just one last one for me.

Just on the custom driver, any color around that and again forgive me if I missed this, but just kind of curious how that is going and maybe what the reception has been around the custom driver?.

Well, the driver that we are bringing out, it's fairly complicated because we wanted to make sure we had a driver that could pretty much do everything for everybody. So it has more features than the commercial version of it would have.

And I think what we're finding is people are appreciating the fact that if they're thinking about B-TRAN for multiple different applications, there's a driver that can kind of do it all for them. And then we can start to parse out what needs to be in a driver for individual applications as a result of their testing.

What we are seeing though is the folks that want to do their own driver and the electric vehicle folks are perfect example of it. They like having a driver to start with because the things we have to think about in terms of how you control bidirectional device we've already spent a lot of time working on.

One of the things that’s been exciting for us is we got a great post hoc at UT Austin who developed initial version of this driver and he has now joined us.

So we have his as an ongoing source of all the taught that went into, all the used-cases and all the things that driver is going to be capable of doing but you can speak to customs about, why do we made certain design decisions and what the pros and cons of that are..

Thank you. We'll take our next question from the line of Orin Hirschman with AIGH Investment Partners. Please go ahead. Your line is now open..

Hi, congratulations on a lot of progress..

Thanks..

I dialed in a drop [ph] late. I apologize; I dialed in a drop [ph] late. Can you go through and you may have answered it, so I apologize.

Can you go through what you think is going to be the first one or two or three products released and are they going to be a standard product? I’m little confused on that, or a family of standard products?.

Yes. The first one's going to be a module.

It'll either be a module that includes the driver – a simplified version of the driver that we have or it may be a multi-die module also because we're finding that there's increased interest in that where it could be used for things like the solid-state circuit breaker application, where they want to put multiple dies together to achieve either higher current rating or higher voltage rating.

And the electric vehicle folks are interested in multi-die versions of a module as well.

So it'll be something coming out of our current effort here with solid-state circuit breaker activities or an adaption of the engineering prototypes that would be useful for any power converter application, things like renewable energy or energy storage?.

Is that product going to be in a form where it's customized enough for a mainstream use or it's going to be, have almost for an initial usage like almost overkill in terms of capabilities. And it has to be almost dummy down for most customers.

How should we view that?.

We're really going to target something that will really hit a mainstream opportunity that does not have the long design cycles like EV, typical power converter application, where we're going to take what we've got. It'll be the by itself, will be packaged in a form that the industry would recognize, and it'll be a simpler version of the driver.

That takes a lot of the features and capability out that you don't need for all the applications where we currently have it covered. So it'll be smaller, simpler, really targeting initial applications that don't have the long design cycles of EVs..

Okay.

And if you can just reiterate once again, those initial applications and whether the customers that you've been in tests with are really the lead customers there to start?.

Yes. It'll be things like solar coupled with energy storage or standalone energy storage or EV charging..

And the initial customers are the same ones that have actually been going through tests right now, or not necessarily, or them plus more?.

Well, the testing with those customers hasn't started yet. After we finish our deliveries to NAVSEA we’ll be delivering the prototypes for the customers in the program.

We've been engaged with them, really going through, bringing them up to speed, technically on the technology, on the driver design and them bringing us up to speed on their application how they are thinking about using it. So when they get parts, everybody will be able to hit the ground running with the evaluations..

Okay, great. Thank you very much..

Thanks Orin..

[Operator Instructions] We'll take our next question from the line of Don Slowinski with Winslow Asset Group. Please go ahead, your line is open..

Good afternoon. Thanks for taking my questions,.

Hi, Don. .

How you doing today?.

Good.

Yourself?.

Good, good. Congratulations on the APEC presentation award. Good job. .

Yes, thank you. It's nice to have the industry actually acknowledge what the team did. It's good work..

Yes, fantastic. In regards to that APEC presentation, the technical data was that real-world manufactured B-TRAN devices, or were you still talking about simulations? Because it seemed like that was actual die that were tested and then compared to simulations.

Can you clarify that?.

Yes, it was actual die compared to simulations..

Wow! Congrats to come that close to your simulated models. That's fantastic. Another question that came to mind was you had mentioned on a previous call that you were talking to a major auto company about maybe a large number of device samples. It would be a custom project and maybe result in some development revenue.

Could you just maybe give us an update on what's going on there?.

Well, in terms of engaging with them we're increasingly understanding why car designs take so long. The [indiscernible] manufacturers they are slow. We're still engaged with that customer. They have a program that they working on. For them, when you think about it, I mean, they do things at very large scale.

So their development work and their programs to evaluate technology are pretty in depth with a lot of resources, a lot of rules that they got to follow in terms of how they structure programs, how they get funded. So it's been a long process with them, but I think, we're getting there with them.

I wish they could move more quickly, but it's just the nature of the industry..

Well, I mean, I realize that the automotive sector is going to be your longest adoption cycle just from the nature of that business. So that does make sense..

Yes..

So it looks like the solid-state circuit breakers would be kind of the low-hanging fruit.

Is that accurate?.

Yes, it is. We continue to be surprised by the number of companies that want to do something on the solid-state circuit breaker side.

Companies that have good power electronics products do other things like power converters, and so forth and view the solid-state circuit breaker, just kind of a logical extension of their capability, which is a pleasant surprise. And I think there will probably be some other ones as B-TRAN becomes just more widely known in the technical community..

Well, fantastic. Thanks for taking my questions and congratulations on all the progress and look forward to hearing more in the future..

Thanks, Don,.

We'll take our last question from the line of Kelly Thurman [ph] Private Investor. Please go ahead your line is now open..

Hey, Dan, Tim thanks for taking my question.

I was wondering as far as scaling up on the circuit breakers for especially the Navy, do you guys see any issues at all scaling up to a large run on those once an order is placed?.

No, we don't because part of the way we've approached this is the actual die itself is going to be the same regardless of the applications, because we really wanted to make sure that the changes were dealt with either in the packaging of the die or in the driver.

So if we had to make a lot of devices for a circuit breaker or for a power converter or one of the EV guys, if they want to test something for a traction drive in terms of what we would do at the wafer fab, it's the exact same wafers that we would run and the changes all happen and how they get placed up and packaged..

Okay.

And the next question are you guys going to have any kind of formal announcement about the companies that you picked up at these conferences?.

Our hope is that as we get a little bit further with them, particularly those who we are going to do a program where they might be funding something, we'll be able to announce them..

Okay.

And last question are any, IGBT companies interested in testing BTRAN and how are you going to handle that when that situation occurs?.

We do have a semiconductor company that is actually in our test and evaluation program. They have some specific applications they are interested in. They are not one of the giant players.

But our approach is going to be, we want to be able to collaborate with these guys because the large end user customers like the automobile folks are going to want to have an alternate source of supply other than just a small company, like Ideal Power.

So, if we think it's somebody where there's a good fit we would want to explore some kind of a collaboration where we can leverage the front end of the industry.

They have already built the sales, service and support and distribution networks and potentially even license the technology to them where they could leverage the scale that they have in wafer fab..

And final question is when do you think the circuit breaker for the Navy will be finalized? Will they actually be able to purchase a large quantity of them?.

It's going to be part of a program with the Navy because the Navy is looking for this family of products that DTI needs to propose to them at the end of that program. We think the Navy program is great, because it's great validation.

But we think the alternating current circuit breaker that we're doing at the Department of Energy is going to be a much quicker opportunity for products. It's really the market that's here today. The utility and distribution network is alternating current.

The customers that are coming to us that want to partner to do evaluations for circuit breakers, they are thinking alternating current. So we think that's actually the quicker opportunity for product revenue..

All right. Thanks for taking my question..

Okay. Thanks Kelly [ph]..

There are no further questions at this time. Mr. Brdar I'd like to turn the conference back to you for any additional or closing remarks..

I just want to thank everybody for joining us on the call today. We will be participating in the H.C. Wainwright Global Investment Conference in May. And we look forward to giving you another update on our second quarter call. Have a great day, everyone..

This concludes today's call. Thank you for your participation. You may now disconnect..