Ideal Power Inc.

Good day and welcome to the Ideal Powers 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, Sarah. Thank you and good afternoon, everyone, and thank you for joining Ideal Powers Third 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 third 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 webcasts, 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 Berdar. Dan?

Thank you, Carolyn. Good afternoon, everyone, and welcome to our third quarter 2021 financial results conference call. I'll 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. Then Tim Burns, our CFO, will take you through the numbers, and then we'll take your questions. So let's get started. We've made significant progress on our BTRAN commercialization roadmap during the third quarter, moving toward our objective of commercially launching BTRAN 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 participant in our sampling and evaluation program will be a Forbes Global 500 leader in diverse power management markets who will evaluate B-TRAN for use in bidirectional 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 BTRAN-enabled solid-state circuit breakers. This global power management leader will evaluate BTRAN 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 about BTRAN's 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 BTRAN 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 due 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 the next steps, we'll provide packaged 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. We may also engage with certain of these customers for custom modules, particularly for electric vehicles and solid state circuit breaker applications, where 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 continue 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 view 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'll 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 BTRAN 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, the 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 go 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-TRAN devices and solid-state circuit breaker applications, which examines how B-TRAN's fast switching, low conduction losses, and bidirectional capability solve the challenges the current solid-state circuit breaker space potentially enabling solid-state circuit breakers to become a broadly adopted solution that is superior 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 creates increasing demand on our circuit protection requirements from solar and wind power and energy storage, electric vehicles, and EV charging, and associated vehicle-to-grid networks. Solid-state circuit breakers offer significant advantages over mechanical circuit breakers. Mechanical circuit breakers operate roughly 10 times 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. The limitation to adoption of solid-state circuit breakers using conventional switches such as IGBTs has been their high conduction losses, which results in significant wasted energy that must be dissipated in the form of heat. Heat trans inherently low conduction losses solve this problem. Along with energy savings, the inherent bidirectionality of VTRAN could also reduce component count and thermal management requirements, and therefore the cost of solid-state circuit breakers. For perspective, VTRAN could potentially reduce power loss in a unidirectional solid-state circuit breaker application by nearly two-thirds, and then a bidirectional application by almost 80%. Let's move on now to our work with the United States Navy. In 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 BTRAN-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 BTRAN-enabled, high-efficiency, 12 kilovolt medium voltage direct current circuit breaker for the U.S. Navy, with the subsequent objective of introducing a family of medium voltage DC circuit breaker products, incorporating BTRAN for sale to the military, industrial, and utility markets. Our fabrication partner Teledyne completed their most recent run, and we'll be testing and packaging devices from that run with our updated packaging design. will be providing package devices to DTI for evaluation this quarter. The final fabrication run is now underway, the completion of which represents the finer major milestone in the program for us. We'll subsequently deliver optimized BTRAN devices to DTI and continue to provide program support through the full-scale demonstration of the BTRAN-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 one small business innovation research grant funded by the U.S. Department of Energy. This grant is to develop a BTRAN-based low-loss 13.8 kilovolt alternating current solid state breaker intended to be used in medium voltage power distribution and renewable energy and microgrid applications connected to the utility power grid. Phase one of the SBIR project is focused on the simulation device design, and module packaging concepts that will allow B-TRAN to be assembled in series or parallel configurations for a high voltage rating capability, leveraging our current dive 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 1200 volt capability. We've completed the first milestone of the program, which is to conduct device simulations to assess the current VTRAN 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 paralleling devices. These parameters will be evaluated for applications to the current guide design, and any changes required will be addressed in the second major program milestone. The last milestone in phase one for the program will be to develop a multi-die module conceptual design that allows for double-sided cooling to maximize performance and operating life. If phase one of the project is successful and we're awarded phase two, the 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 using utility transmission and distribution systems and microgrids. Following that demonstration, DTI would have the ability to sell the breaker design 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 VTRAN-based products to market. We'll provide more insight into the project as our work progresses, but 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 series configurations for other applications, such as electric vehicles. To support our future growth, we are progressing in our qualification of a second domestic 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 package devices and data independent of the confidentiality requirements of our NAVSEA program. We are close to completing a qualifying wafer fabrication run, and the interim testing we have had with them performed to date has been very positive, and we're expecting to have working devices from their first run. Shortly, we'll have their finished wafers, and these will be diced, packaged, and tested, and 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, we also intend to use devices from our second source for testing at 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 the 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. Our current geographic coverage includes North America, China, Japan, South Korea, and Europe with potential to expand coverage into India. Since the beginning of this year, eight B-Tran patents have issued, with six of those issued outside of the United States, including Ideal Power's 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 NAVSEED program with the target of delivering an optimized package device for incorporation into the demonstration of a 12 kilovolt MPDC breaker in mid-2022. And third, to achieve our initial objectives on the Phase 1 SBIR grant, which is to deliver a low-loss VTRAN multi-die module concept suitable for subsequent incorporation into a 13.8 kilovolt alternating current solid state circuit breaker if we are awarded phase two of the program. We'll 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. It can then be incorporated into an intelligent power module that we anticipate will accelerate B-TRAN's commercial adoption. This is a very exciting time for ideal power as we move closer to realizing the potential of B-TRAN's unique advantages of bidirectional 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 B-TRAN. B-TRAN 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 in both high-growth and high-demand market segments. We're 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 of Directors, Mr. David Eisenhower. 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, and 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 D-TRAN, Dave's guidance and technical 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 2021 financial results. Tim?