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Operator
Good day, ladies and gentlemen, and welcome to the Ideal Power Second Quarter 2021 Results Conference Call. Today's conference is being recorded. At this time, I'll turn the conference over to Carolyn Capaccio of LHA. Please go ahead.
Carolyn Capaccio
Thanks, Keith, and good afternoon, everyone. Thank you for joining Ideal Power's Second Quarter 2021 Conference Call. With me on the call are Dan Berdar, President and Chief Executive Officer, and Tim Burns, Chief Financial Officer. Ideal Power's second quarter 2021 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 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. We would 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 Burdar. Dan?
Keith
Thank you, Carolyn. Good afternoon, everyone, and welcome to our second quarter 2021 financial results conference call. I'll begin by giving you an update on our progress and our achievements on our strategy to commercialize our B-TRAN semiconductor architecture technology, including progress on our objectives for 2021, which include the engagement of potential customers to test and evaluate V-TRAN, and the completion of multiple fabrication runs for the NAVSEA program, leading to a full-scale circuit breaker demonstration in mid-2022. Then Tim Burns, our CFO, will take you through the numbers, and then we'll take your questions. We're on track with our roadmap to commercialize V-TRAN as a differentiated technology addressing a large and growing market. And since the start of the second quarter, we achieved key milestones on this roadmap. Let's begin with the specifics of our progress toward commercialization, specifically our engagement with potential customers to test and evaluate B-TRAN in their applications. Early in the quarter, we released a B-TRAN information sheet, which you can find on the technology page of our website. It provides detailed information on B-TRAN operating characteristics, as well as information regarding the packaging and driver design and operation that the technical community needs to begin evaluating our technology. Over the last few months, our team has done a great job of leveraging this information to engage with potential customers in our target end markets, vehicle electrification and EV charging, renewable energy, UPS systems for data centers, and solid-state circuit breakers. And these conversations have progressed and yielded solid results. We're now engaged with several potential customers who are committing significant resources and technical expertise to thoroughly evaluate B-TRAN for use in their applications. A significant commitment is required on the part of our potential customers to fully evaluate a new power switch architecture and its potential use within their target applications. What we're already finding is that the talent engineering teams at these early collaborating companies are identifying new design approaches and rethinking their applications and power management for both DC and AC implementations due to the enabling low loss and bidirectional capabilities of vTRAN. This is very exciting. Let's look at some of the applications for which B-TRAN is being evaluated. In the automotive sector, we're working with a top 10 global automaker whose advanced technology engineering team will test and evaluate B-TRAN and its driver for EV applications, including the EV drivetrain, DC to DC power conversion, circuit protection, and other uses within the EV ecosystem. Specifically, with this potential customer, VTRAN is enabling new architectures and solutions to improve EV efficiency, range, and performance, while lowering total system size, cost, and component count. VTRAN target applications include the EV traction inverter and charging circuits, which are inherently bidirectional, supporting vehicle-to-grid applications, and emerging EV architectures and applications, such as the matrix converter and solid-state circuit breaker. The EV space is already the largest segment in the $6 billion power switch market, which overall is expected to nearly double by 2026. In EV charging, we're working with a provider of electric vehicle chargers who will test and evaluate package B-trans for their innovative portable and modular EV charging system that's currently under development. This solution combines a DC fast charger with a swappable battery system and a modular design to allow for scaling, targeting both on-demand fast charging and roadside assistance to eliminate charging anxiety. The advantages that B-Tran can offer over conventional IGBT switches to EV charging, greater efficiency, high directionality, smaller size, and reduced thermal management are critically important to mobile EV charging systems with battery storage. This is the type of innovation and disruptive business model that can contribute to EV adoption and to build out of the EV charging infrastructure with its need for smaller, lower operating cost solutions. EV charging companies could potentially be an early adopter of V-Trans with the 2.1 million unit global EV charging station market expected to grow to an estimated 30.8 million units by the end of 2027. In power management for the data center market, We're working with a top 10 global provider of power conversion solutions to the solar industry that's expanding its portfolio to include a broad array of power conversion application solutions serving multiple sectors. This provider will test and evaluate B-TRAN for its compelling advantages in bidirectional circuits for various applications, starting with uninterruptible power supplies or UPS systems for data centers and expanding to include renewable energy, electric vehicles, and other applications. There's intense pressure for data centers given the secular trend toward cloud computing and data storage to reduce electricity costs and power losses. Electricity consumption is the largest operating cost for a data center, and all the electricity entering the data center passes through a UPS system. Currently, UPS systems and their protection account for approximately 6% of data center total energy losses. Replacing conventional power semiconductors in these systems with B-TRANs is expected to result in a substantial annual cost savings for data centers through reduced energy consumption and the ability to migrate to lower cost, less complex cooling systems. This will be a significant advancement for power switches and UPS systems, a market which was approximately half a billion dollars in 2020 and is forecasted to grow at an estimated 6% compound annual growth rate through 2026. We're in discussions for possible collaborations with additional companies in our target end market applications We've expressed interest in assessing V-TRAN and will announce future collaborations as we're able. In the cases I just mentioned, as well as other potential engagements, the customers will share their testing results and provide application-specific feedback on the design and operation of the package devices and driver, the feature set and priorities for individual applications, and also enable us to determine common requirements across applications. We'll then incorporate this feature set into an intelligent power module for commercialization and potentially engage with certain of these customers for custom modules, primarily for EV and solid-state circuit breaker applications, where multiple devices may need to be combined into a single package. The next step to be completed in parallel with further discussions with potential participants is to complete the fabrication runs for dicing and packaging and to pair these packaged dyes with the driver for delivery to these initial participants in our customer testing and evaluation program. While each participant in the evaluation program will be working to their own schedule, we anticipate feedback from these initial companies will provide meaningful input into the design of our intelligent power module that we intend to introduce for commercial sales in the second half of 2022. One of our target end markets for B-TRAN is solid-state circuit breakers, an important advancement in a very large global circuit breaker market, which in total is projected to grow at a compound growth rate of about 6% to almost $26 billion by 2027. And as we have discussed with you over the last couple of quarters, we have and will continue to pursue opportunities for government funding. In the second quarter, Diversified Technologies Incorporated was awarded a second project submitted in collaboration with us a phase one small business innovation research grant funded by the U.S. Department of Energy. This grant is to develop a DETRAN-based, low loss, 13.8 kilovolt alternating current solid state circuit breaker intended to be used in medium voltage power distribution and renewable energy and microgrid applications connected to the utility power grid. We see this application as a significant opportunity to capitalize on the benefits of solid state circuit breakers which prevent damage to downstream equipment, upstream power generators, and the grid itself by utilizing microsecond current interruption capability. We expect B-TRANS will make a solid state circuit breaker significantly more efficient, smaller, and less expensive. Under phase one of the SBIR project, we'll design, fabricate, and test a module that can allow for multiple devices to be assembled in a parallel configuration for a high voltage rating capability. The project will utilize our current die design, so we view this initial phase of the project as primarily a packaging and module development activity that enables B-TRAN to be used in applications like AC circuit breakers that require more than 1200 volt capability. The B-TRAN based solid state circuit breaker is expected to limit fault energy by orders of magnitude faster compared to conventional mechanical circuit breakers. Since this project does not have the strict confidentiality restrictions of our US Navy program we'll be able to provide more insight into the project as we complete the various milestones under the program. We'll also be able to leverage the knowledge we gain on combining multiple devices in a parallel program for other applications, such as electric vehicles. We expect that V-TRAN will simplify the cooling systems, enabling smaller, lower-cost air cooling instead of complex liquid cooling systems due to its 50% lower conduction losses compared to conventional power semiconductor switches and reduce the component count due to BTRAN's unique bi-directional capability requiring a smaller footprint. If phase one is successful and we're awarded phase two, the objective will be to build and demonstrate a 50 megawatt, 13.8 kilovolt AC solid-state circuit breaker in collaboration with BTI. 13.8 kilovolts is a voltage level commonly found in utility distribution networks. So the resulting breaker design can be applied directly to the existing utility transmission and distribution systems as well as microgrids. Following the demonstration, DTI would have the ability to sell the breaker to utility, industrial, and military customers and license the design to others for sale to end users. We would also expect to partner with other circuit breaker companies so they can design and bring their own DTRAN-based products to market. For additional context, While direct current or DC-based systems are expected to grow rapidly due to the long-term growth of solar, wind, and energy storage, the market today for circuit breakers is predominantly for alternating current or AC circuit breakers, which make up the majority of the expected $25 billion circuit breaker market. Also, of this large circuit breaker market, about 45% is for medium voltage breakers, which is B-TRAN's sweet spot. Medium voltage circuit breakers are used in the aging utility distribution system that brings power from high voltage transmission lines to the end user. This is also the segment that is in the most need of updating due to the age of the existing utility distribution system and the limitations in its capacity and its vulnerability to disruption. Also, as more distributed resources like solar are added to the grid and to accommodate EV charging and vehicle to grid applications, The distribution system is going to require substantial investment, and smarter bidirectional subsystems like solid-state circuit breakers will be needed. This is why we believe the medium voltage class of AC circuit breakers will be the fastest growing segment of the circuit breaker market, and it's where BCREN can bring the most value due to its low conduction losses and fast switching times. The SBIR collaboration with DTI is a significant strategic opportunity, one that is incremental to our efforts with the U.S. Navy and also critical to electric grid development. So we're very excited about this project and look forward to generating promising results. Let's move now to our work with the U.S. Navy. As most of you are aware, Idaho Power is working with the Naval Sea Systems Command, or NAVSEA, in collaboration with DTI on the development and demonstration of a BTRAN-enabled direct current medium voltage circuit breaker as part of the U.S. Navy's strategic focus on ship electrification. This $1.2 million subcontract with DTI 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 DTRAN-enabled high-efficiency 12 kilovolt medium voltage direct current circuit breaker for the U.S. Navy with a subsequent objective of introducing a family of medium voltage DC circuit breaker products incorporating DTRANs for sale to military, industrial, and utility markets. The major milestones under the program for us are the wafer fabrication runs conducted by Teledyne, our fabrication partner. This development process is iterative, so we're performing multiple wafer fabrication runs under the program to yield wafers and results dye to test and assess the tradeoffs between maximum theoretical device performance and manufacturability, incorporating our findings and adjustments into subsequent runs. During the second quarter, we had a commercial packaging vendor adapt the packaging design initially developed by the University of Texas at Austin's Semiconductor Power Electronics Center for high-volume production. in which the materials were fabricated and assembled in the trial packages to ensure a good mechanical fit and ease of assembly. Those trial assemblies went well, and the subsequently packaged dye were tested and characterized internally at ideal power using our driver, also designed by UT Austin, and they generated switching and other data consistent with our expectations and simulations. We recently began our next wafer fabrication run on the NAVSEA program, the completion of which is the next major milestone in the NAVSEA program. In total, we planned five runs over the two-year program, aiming to deliver an optimized power switch for use in the full-scale demonstration of a 12 kilovolt MVDC breaker in mid-2022. We're very excited about this progress, which continues to benefit our overall validation and commercialization efforts. To support our next phase of development and optimization, we're utilizing our strong cash position to modestly invest in our team capabilities. As you know, this year we've brought on board Jeff Knapp as Vice President of Business Development and Dr. John Kang-Boo as Vice President of Engineering. Both highly qualified and accomplished leaders in their respective disciplines, and both are already making a significant positive impact on our development and commercialization efforts. In the coming months, we'll make a few other additions to our team to bring more capabilities in-house, particularly in applications, driver design, and testing to support our commercialization efforts. We're also in the process of qualifying a second domestic semiconductor fabrication partner that has strong experience making bipolar devices to ensure sufficient supply capacity for future potential large customers and to mitigate supply chain risk. We currently have a qualifying semiconductor fabrication run in progress with this new partner. The second fabrication partner will also give us more flexibility to provide both package devices and data that are separated from and not subject to the restrictions and confidentiality requirements of our NAVSEA program. Looking at the B-TRAN patent estate, we currently have 65 issued B-TRAN patents with 27 of those issued outside of the United States and another 23 pending patents. Our current geographic coverage includes North America, China, Japan, South Korea, and Europe, with the potential to expand coverage into India. In the last 12 months, nine BTRAN patents have been issued, with seven of the nine issued outside of the United States, including Ideal Power's first patent issuance in South Korea. In all, we continued our record of progress in the past three months from a development perspective. More notably, our recent announcements of test and evaluation collaborations with leaders in the electric vehicle, uninterruptible power supplies for data centers, and renewable energy markets is the beginning of our commercialization of B-TRAN. These customer engagements represent a crucial step forward in establishing B-TRAN as a differentiated semiconductor technology addressing a large and growing market. Back by our strong balance sheet and with the recent additions of highly qualified business development and engineering leaders, we're well positioned to support our B-TRAN commercialization plan. Our focus for 2021 is threefold. to continue to engage with prospective customers and to support existing customers in our test and evaluation program, to achieve our milestones under the NAVSEA program with a target of delivering an optimized package device for incorporation into the demonstration of a 12 kilovolt MVDC breaker in mid 2022, and to achieve our initial objectives under the phase one SBIR grant, which is to deliver a low loss BTRAN module suitable for subsequent incorporation into a 13.8 kilovolt alternating current solid state circuit breaker if we are awarded phase two of the program. As we're able, we will appraise you of the companies we add to our customer test and evaluation program in the coming months. We'll also update you, as permitted, on the feedback that we receive from the program and how this data feeds into our common requirements across applications that can then be incorporated into an intelligent power module that we will introduce to the marketplace in the second half of 2022. IDO Power is on the cusp of realizing the potential of D-TRAN's unique advantages, bi-directional switching capability, lower switching and conduction losses, lower user costs, and improved and more compact thermal management. D-TRAN has the ability to solve the immediate needs of many power electronics applications in both high growth and high demand market segments while enabling new applications and market segments. We're making consistent progress on our strategy, moving along our intended trajectory with a differentiated patent technology that can substantially improve existing and enable new solutions for many of today's power needs. Now I'd like to hand the call over to our Chief Financial Officer, Tim Burns, for a review of our second quarter 21 financial results.
Carolyn
Tim? Thank you, Dan. I will review second quarter 2021 financial results. In the second quarter, we recorded approximately $85,000 in grant revenue with 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. The amount of grant revenue recognized each quarter will vary as it is a function of the timing of spending and scheduled milestones under the program. We expect almost all of the grant revenue for this program to be recognized by early 2022. Operating expenses were $1.3 million in the second quarter of 2021 compared to $0.8 million in the second quarter of 2020 as we invested in research and development, sales and marketing, and other general corporate expenses. We expect research and development in sales and marketing spending to trend higher in the balance of 2021 as we accelerate development of the vTran technology, including qualifying a second domestic semiconductor fabrication partner, and now that we have begun to commercialize B-TRAN as evidenced by recent announcements. We do expect some quarter-to-quarter variability in our research and development spending due to the timing of semiconductor fabrication runs and other development activities. Net loss in the second quarter of 2021 was $1.2 million compared to $0.8 million in the second quarter of 2020. Second quarter 2021 net loss includes a gain on forgiveness of long-term debt of $91,000 relating to a payroll protection program loan received in the second quarter of 2020 and forgiven by the SBA in May 2021. As a result of the loan forgiveness, we had no long-term debt outstanding at June 30th, 2021. Second quarter 2021 cash used in operating and investing activities was $1.1 million, compared to $0.7 million in the second quarter of 2020. Our second quarter cash burn was consistent with the expectation we provided on our first quarter call. We continue to expect our cash burn to increase in the second half of the year as we invest in both sales and marketing and research and development. We expect a cash burn of approximately $1.2 million to $1.3 million in the third quarter of 2021, and continue to expect a full-year cash burn of approximately $4.5 million. Cash and cash equivalents total $25.7 million at June 30th, 2021. Our strong balance sheet since our February public offering is enabled and will continue to enable us to support and be a more attractive partner to the larger corporations that are participating and that we expect to participate in our customer test and evaluation program Modestly build out our internal research and development capability in our product design team, bring driver design expertise, an area we are now relying on third parties in-house. Modestly build out our commercial team and front-end talent, including applications engineering expertise, to support our customer test and evaluation program in BTRAN commercialization. We complete the qualification of a second domestic semiconductor fabrication partner now that we're engaging with large companies in our customer test and evaluation program and to support our working capital needs. As of June 30th, we had 5,872,046 shares outstanding and 1,040,248 warrants outstanding. including 455,937 stock options outstanding, our diluted shares outstanding at June 30th was 7.4 million shares. Our balance sheet gives us ample liquidity, particularly given our planned continued modest cash burn to fund multiple years of operations. We are a well-capitalized partner for the larger companies that are participating, and we expect to participate in the testing and evaluation of our B-TRAN technology. At this time, I'd like to open up the call for questions. Operator?
Operator
Thank you. Ladies and gentlemen, if you'd like to ask a question, you may do so by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to let your signal reach your equipment. Again, star 1 for questions. We'll pause a moment to assemble the phone queue. We'll take our first question from Sean Severson with WTR. Please go ahead.
Jeff Knapp
Hey, guys. Thanks for taking my question. We're just trying to figure out, do you have any more automotive EV companies in the pipeline that are going through pilot programs or going to pilot?
Keith
We do. We view things that are going on in the EV space, renewable, EV charging, all the target applications. We want to continue to bring companies into that pipeline because we'd like to have you know, two or three at least in each of those targeted segments because they're each going to have different ideas and different approaches. So we have some that we hope we get over the finish line, but they're names that people will recognize if we're able to get them actually in the program. But so far, we think we've got a pretty robust pipeline based on the relationships that Jeff Knapp and his experience working in the EV space is bringing to the company.
Jeff Knapp
And when you look at all of those applications in various markets that are coming in the pipeline, Which ones do you think would go to commercialization the fastest? I assume there's some difference depending on the application and what it is, but which one in priority do you think gets there the fastest?
Keith
I think we'll see the circuit breaker and EV charging probably go first. The circuit breaker will certainly be helped by the fact that we'll be doing full-scale demonstrations of a design that incorporates the technology. EV charging, because there's such a Pressed to build out that infrastructure and they're looking for innovative solutions So we're seeing shorter design cycles there on that after that I think will come some things in a renewable space particularly renewables coupled with with energy storage and The automobile folks will probably last but we think based on what we're seeing They will be significantly faster than what you would typically see in the EV sector simply because most of the large OEMs that are the traditional car companies are really seem to have a lot of pressure to catch up to things that have been driven by some of the new companies like Tesla that have come along.
Jeff Knapp
Thanks. My last question is, when you get into an automotive or an EV platform, is there a lot of redesign that has to take place between different models in that platform? Or like you get into an OEM and you're in one vehicle, it's very easy to get into instead of one model into 10, let's say, for example, if you understand what I mean.
Keith
Yeah, I do. What we're finding is what the automobile companies are really trying to do is get to a common platform with as much commonality as parts as possible because they don't want to have all these different designs and parts and supply chain challenges that come with it. So part of what we're seeing is some innovation of just taking clean sheets of paper and saying, okay, This is the drivetrain that we are going to use for an entire class of vehicles. So we think if we can get to the point where there's a module that incorporates what they're looking for from a packaging standpoint, we'll see it used across a whole variety of models for a given manufacturer. Great. Thanks, guys. Thank you. Thanks, John.
Operator
We'll take our next question from David Williams with the Benchmark Group. Excuse me, the Benchmark Company. Please go ahead.
David Williams
Thanks. Hey, Dan, Tim, good afternoon. I appreciate you taking the time to let me ask a question here. First, I wanted to ask maybe if you kind of think about the customers you have in the evaluation and testing phase now. Have you received feedback yet in terms of maybe how they're thinking about using the product and maybe their design cycles? Just anything, any color around just any of the testing and evaluation that you have ongoing today?
Keith
Well, we don't have parts in their hands yet, but what we have been learning about is they have learned about the technology. Our technical teams have had a whole series of meetings with most of these customers. We are learning about how they're thinking about using the technology and how they're thinking about changing their approach to the drivetrains and how they're changing the approach of some of the other technologies that go into the car because of the fact that VTRAN is enabling them to do different approaches. An example that I'll use is a matrix converter. Matrix converters are technologies that have been around for a long time, but the challenge has always been there's not a good bidirectional AC switch out there, so you don't see them very often. Well, that's a different story now. So we see automobile manufacturers looking at matrix converters as an approach where previously they hadn't. So part of why we end up being under NDAs is we learn a lot about their application and what they're thinking about as well as them learning about our device. So I think we're going to see some pretty innovative approaches come to market as some of the more established automobile manufacturers take the work that's already been done in the space and look at new ways to do it.
David Williams
Okay, great. And then maybe from the automotive side, if we think about kind of the qualifications cycle there and the certification for those parts, that's a fairly elongated cycle, and it's a thing that we hear a lot from other semis, especially in the power space. How do you think about your certification and qualification as you get into producing these products that typically have two- to three-year design cycles? Do you think you can accelerate that, just kind of given your discussions with customers today, or do you think that we're still some time away from that, as you had mentioned, maybe being the last to really take off?
Keith
Well, it may be the last segment, but we think it is going to be accelerated for two reasons. One is typically the OEMs rely on their Tier 1 suppliers to do a lot of new work on new subsystems and bring new technology to the OEM. That's changed. What we're seeing is most of the major OEMs have actually created their own internal teams to look at new technology and to look at how to bring it to their products because they're trying to shorten that cycle. So they're taking the lead and saying, here's what we're going to use from a technology perspective. Here's our platform and you are tier one supplier. This is how you'll do it. So they are actually changing their process to accelerate the ability to get models into the marketplace. The other thing that we're seeing that is really, it was a bit of a surprise to us, as we talked to them about, for example, how they want devices packaged, what they've said is, we will introduce you. We'll take the lead and introduce you to the packaging firms that know our requirements, what we want, and you can work directly with them knowing that you're on a mandate from us. So we don't necessarily have to learn a lot of this with a packaging company ourselves. They're going to leverage the relationships and expertise and the qualified suppliers they already have and connect us to them. So we think that will also certainly accelerate that cycle.
David Williams
Great. And maybe if you can just talk about any hurdles that you see between now and commercialization, what are the biggest challenges, I guess, between here and there, is it really just the adoption and the sampling getting into the hands of the customers, or are there other hurdles maybe in terms of the technology or the capability that have to be overcome?
Keith
Well, we know that the technology, it certainly works. We know it performs as we have simulated. So I think for us, the challenge is really raising the visibility, raising the awareness, getting those potential end users through that learning curve, that adoption cycle, particularly as a small company. We're fortunate that we've got folks like Jeff that have established relationships. But without that, it would be tough to get to some of the right people in these organizations to really start that process. So I think for us it's going to be really more that educational process that will be the pacing item for really large-scale adoption.
David Williams
And maybe, Tim, as you kind of think about the balance sheet, obviously you're in a very good position there, but how do you think about your cash needs maybe as you ramp into commercialization and those associated costs, particularly as you run through some of these engineering or these sampling lots?
Carolyn
Yeah, so we will always have a relatively small team that's really just some very strong technical expertise in the front end of the business, really interacting with the customers. So we'll never be a company with hundreds of employees. So for us, it's actually pretty manageable. I mean, we went from $3 million last year cash burn. We're forecasting about $4.5 million here for this year. I'm sure we'll probably be And we'll wait and see it's a little bit early, but maybe we're another million and a half next year of growth. It really just depends on how many participants we get in the program, how many participants in that program that we need to support. And we'll have much better visibility as we get into that. And really next year as well, get into the commercialization of the technology in the second half of, But from our perspective, we knew when we went and did the raise here back in February that we were going to have multiple years of cash, and we had a really strong balance sheet coming out of it. So capital is not something that's a high concern for us at this point.
David Williams
Great. Well, congrats on the progress, guys. Looking forward to seeing the rest of the progress next quarter.
Kelly Thurman
Thanks, David.
Operator
We'll take our next question from Kelly Thurman, private investor. Please go ahead.
Kelly Thurman
Hey, Dan, and thanks for taking my call. I was curious to see when we will maybe hear some company names and why they haven't wanted to reveal their names on some of the sampling that you guys are doing. And the second question is, do you guys have anything in place to prevent a larger company from coming in and acquiring you guys when you're significantly undervalued?
Keith
Let me address the first one, and then I'll let Tim speak to the second part of your question. We actually so far have been prohibited from announcing the names, and we've told these companies that we're working with, our investors are going to want to know. And the response that we routinely get is that, look, we don't want our competitors knowing what we're doing, which I understand and appreciate, but it's a little frustrating because rather than announcing it's one of the top 10 global automakers, we'd like to say who it is. As we move into what, as these relationships advance and they might turn into something that might be co-development agreements or a more strategic relationship, I think we're probably going to have some ability to say something at that point in time. But so far, it's really, it's always been driven by their lack of desire to let their competitors know what kind of technologies they're looking at and exploring for their product. It's basically that simple.
Carolyn
Yeah, and it relates to the second question that you had. So I would say that's something that's a concern of ours as well as whether, you know, getting taken out too early potentially. For us, we're trying to establish as many relationships as we can across multiple applications. And in doing so, at least try to hold off a specific application acquisition, a specific company from an application acquiring the company. But I would say that is probably one of the higher areas of concern when we look at it. We'd really like to get through into the commercialization process, and we have a much higher valuation than we are now before we have to deal with some of those conversations potentially. But I would say that that is a risk.
Operator
Ladies and gentlemen, as a reminder, star one for questions. We'll take our next question from Don Sulwinski. With Winslow Asset Group, please go ahead.
Donna
Thanks for taking my question today, guys. Congratulations on your progress. It seems like you are on the latter portion of phase two of your phase three plan towards BTRAN commercialization. Is there anything in between this testing and evaluation and the next step, which would be the strategic development and commercial partnerships? Is there prototyping or is there anything else we can consider and can you give us some timing on these expected strategic development and commercial partnerships?
Keith
Well, let me tell you about what will happen. One of the things that we were going to do is, because we believe that B-TRAN is a new technology, we're better off bringing an intelligent power module, a package that I coupled with a driver to market. We're going to take the feedback from the early participants in this program and bring out that intelligent power module. That's what we actually are going to be looking for for commercialization. But the other thing that we see the potential for as our relationships with some of these companies start to progress, I think there's certainly opportunities to form a little bit more strategic relationships where we may be doing co-development for them. For example, for the EV space, because their requirements are unique in terms of what they're looking for for devices and packaging, I think there's an opportunity for us to get some funded co-development work that we would do that would be, you know, certainly getting us deeper in bed with some of these folks, but also generating some, you know, some revenue on the development side to just get ready for that market entry that we can then leverage with other people in that same market segment.
Donna
Okay, so that wouldn't be commercial revenue, but development revenue.
David Williams
Correct.
Donna
And then... What is your anticipated revenue model when you get to commercialization?
Carolyn
I think it's a little bit too early to say, Donna, what the revenue numbers will look like at this point. I mean, I think we have a pretty good sense of what the gross margin numbers would be like, and we're thinking from that perspective, 50 to 60 percent gross margins. But in terms of the adoption rate, we're just too early in conversations with these companies to really have visibility into that. But next year, as we start getting some of that information, we'll try to start providing some guidance as soon as we can.
Donna
Okay. Well, that's a good margin profile. But thanks for taking my questions, and congrats again on all the progress. Thank you.
Carolyn
Thanks, Don.
Operator
Ladies and gentlemen, this does conclude today's question and answer session. At this time, I'd like to turn the conference back to Dan Bergar for any additional or closing remarks.
Keith
Thanks, everyone, for joining us on our call today. Next week, we will be presenting at the Sedoti August Microcap Conference and also the Q3 Virtual Investor Summit. So there's an opportunity to talk to us again there if anybody's going to be participating in those conferences. So we hope everybody has a good day, and we'll speak to you again when we report the third quarter results. Thank you.
Operator
Ladies and gentlemen, this does conclude today's conference. We appreciate your participation, and you may now disconnect.
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