Ideal Power Inc.

Welcome to the Ideal Power Second Quarter 2022 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. If you require operator assistance, please press star then zero. I would now like to turn the conference over to Carolyn Capaccio, Senior Vice President, LHA Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Thank you for joining Ideal Power's second quarter 2022 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 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 may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks. And we 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 second quarter 2022 Financial Results Conference Call. I'll begin by giving you an update on our progress on our strategy to commercialize our B-TRAN semiconductor technology and review our plans and key priorities for the remainder of the year towards B-TRAN commercialization. Then Tim Burns, our CFO, will take you through the numbers, after which we'll take your questions. Let's get started. During the second quarter, we made strong progress in our B-TRAN commercialization activities. Despite the macro environment, including supply chain disruptions, the COVID pandemic, high inflation, and rising interest rates affecting all businesses, we remain on track to introduce our first commercial product by the end of the year. In fact, B-TRAN is receiving increased attention and inbound inquiries from an array of commercial, research, and government entities as a disruptive, highly efficient, bidirectional semiconductor technology that solves immediate needs in our targeted electric vehicle, electric vehicle charging, renewable energy, energy storage, and interruptible power supplies for data centers and solid-state circuit breaker end markets. Our momentum continues, and we're excited to bring you this update. Let's begin this quarter with our work with the United States Navy. Since our last call, we are very excited to announce that we achieved a major milestone for the company and a key validation of our development work by shipping our first packaged BTRAN devices to Diversified Technologies. our collaboration partner on our project for the Navy Sea Systems Command, or NAVSEA. The objective of the project is to demonstrate a BTRAN-enabled, low-loss, 12 kilovolt DC solid-state circuit breaker for the U.S. Navy. The results of this project will have direct applicability to other commercial markets, such as electric utility distribution and transmission systems and microgrids, as well as solar, wind, and energy storage installations. The devices we shipped were produced using conventional silicon wafer processing equipment using techniques and process steps we developed in collaboration with our fabrication partners and embody a substantial addition to our intellectual property portfolio. These techniques and process flows lend themselves to high-volume manufacturing without the need for capital investment in conventional silicon wafer fabs. The packaged devices were tested in our lab prior to shipment and met the bidirectional operation high voltage rating, fast switching, and most importantly, the very low loss characteristics predicted by our internal and third-party computer simulations. These devices were packaged using our new packaging design that utilizes state-of-the-art packaging techniques designed to provide high reliability and are well-suited for volume production. Also, to facilitate DTI's evaluation of the devices, we also provided them a sample of our driver that we intend to use for our customer sampling program. Additional wafers are now nearing completion of fabrication and will be diced and packaged into BTRAN devices and then tested prior to delivery to DTI. DTI will incorporate these into a full-scale medium voltage direct current circuit breaker, or MVDC, for demonstration. We'll continue to provide program and technical support through the demonstration of the circuit breaker, and we'll provide program updates as we are able to within the limitations of our NASC confidentiality restrictions. The device and packaging design used in this program will be identical to those we will be providing in our customer sampling and will be the basis for the design of the first commercial products we'll be introducing to the market. We are very proud of the excellent work done by our technical team and wafer fabrication and packaging partners as we have now produced and delivered devices that validate the potential of our low-loss bidirectional technology. Let's move on to our test and evaluation program. Since the start of the second quarter, we further expanded our roster of participants in the B-TRAN test and evaluation program. These new participants include a non-domestic designer and manufacturer of grid solutions interested in evaluating B-TRAN for solid-state circuit breaker and other grid applications, a well-established domestic aerospace and defense systems integrator. This integrator is also interested in evaluating B-TRAN for solid-state circuit breakers and is partnering with Ideal Power to pursue additional government grants leveraging their Department of Defense relationships. These two companies, in addition to other previously announced program participants interested in BTRAN for solid-state circuit breaker applications, and the number of government programs focused on circuit breaker research, demonstrate the widespread interest in the development of innovative technologies that can solve the problems inherent in both traditional mechanical circuit breakers and solid-state circuit breakers utilizing conventional semiconductors. The high visibility of the NAVSEED program in the technical community is drawing increased inbound interest in collaborating with us for a variety of applications and products. Low-loss semiconductor technology is essential for the broader adoption of solid-state circuit breakers, and our government-funded demonstration project is raising the availability of B-TRAN as a low-loss, fast-acting, enabling technology. This application represents a new and potentially very large market for which B-TRAN is particularly well-suited. Last, two universities have joined our test and evaluation program. These two universities are interested in testing and evaluating DTRAN for electric vehicle charging applications and are working closely with large commercial entities to develop new solutions using our technology. Working with these universities is leading to additional government funding opportunities and commercial relationships with companies partnering with universities. The test and evaluation program enables B-TRAN to be tested by prospective customers and partners in their labs and for use in their applications. It also allows us to collect data and feedback from these program participants on performance and features for incorporation into our future commercial products and custom modules for use in specific applications. Program participants are all looking to advance their own technology and product roadmaps by incorporating innovative advanced technologies and new approaches to improve their product's performance, increase efficiency, and lower cost. They are all committing substantial in-house technical resources to evaluating a cutting-edge technology and the improvements and capabilities BTRAN can create for them in their product designs. BTRAN continues to be recognized as a potential game changer outside the U.S. The Japan External Trade Organization, or JETRO, is a Japanese government-funded organization that works to promote mutual trade and investment between Japan and the rest of the world. Jetro selected Ideal Power to present DETRAN solutions at their carbon neutrality-themed event taking place later this month, which is focused on identifying and highlighting new innovative technologies that can significantly advance energy efficiency and thereby reduce carbon emissions. The targeted audience consists of Japanese corporations interested in collaborating with American companies in the carbon-neutral field. We have test and evaluation agreements in place in each of our target markets, and our pipeline of potential additional collaborations remains robust. These collaborations are creating opportunities to partner on additional government funding opportunities, and will also drive the features and performance requirements of our commercial product offerings, with ongoing engagements likely resulting in a variety of BTRAN-based modules customized for specific applications over time, as is common in the traditional power semiconductor market. With respect to our submissions for other government funding opportunities, since the start of the second quarter, we submitted several proposals and concept papers for government funding opportunities with the Department of Defense, the Department of Energy, and Department of Commerce. While there's always intense competition for these funds and the probability of winning any given solicitation is low, these programs provide the potential for additional grant funding and also the opportunity to collaborate with new partners and customers. All of our new proposal efforts have involved new partners, many of which are in our sampling program, each focused on a specific application that offers a potential new level of performance or capability as a result of using V-TRAN in the application. We now have a number of proposals submitted in collaboration with a variety of partners for opportunities to participate in government-funded programs that support technology development for future commercial applications. In addition to DTI, these collaborations include the Aerospace and Defense System Integrator I mentioned earlier, a system integrator, a firm with packaging and driver expertise, and universities acting as technology evaluators for large commercial businesses. These proposals cover several applications, including modules for electric vehicles, current source inverters, and of course, solid-state circuit breakers. Depending on the proposal, we could either be the prime or subcontractor if awarded funding under one or more of these submissions. Additionally, as you're probably aware, the CHIPS and Science Act of 2022, a bipartisan bill, was signed into law. The CHIPS Act is expected to spur investment in domestic semiconductor manufacturing by providing $200 billion over five years in subsidies, including $52.7 billion for chip manufacturing and research to semiconductor manufacturers in the U.S. and enabling sizable investments in science and technology innovation. This is a key piece of legislation as it seeks to help the domestic semiconductor industry bring production back to the U.S., correcting a decades-long lag in competitiveness and self-reliance. Given the strong demand and current high pricing for electric vehicles, the expected explosion in demand for power semiconductors with the increasing electrification of everything from automobiles to distributed generation, and the intended need for increased national security in today's geopolitical climate, the legislation represents a seismic positive change and an opportunity for significant investment for our domestic developmental fabrication and packaging partners. It could also directly benefit ideal power in the form of additional funding opportunities as a part of the act is focused on providing R&D funding for new leading edge semiconductor technologies such as B-TRAN. Staying on the topic of legislation, both the House and Senate passed the Inflation Reduction Act, another leap forward in combating climate change and supporting clean energy development in the U.S. It contains significant spending and tax breaks intended to boost the clean energy industry in the United States that complement existing provisions in the Infrastructure Investment and Jobs Act signed into law in November. The Inflation Reduction Act provides $369 billion in subsidies and tax credits, including funding for clean vehicle manufacturing and retooling of existing auto manufacturing and the transition to zero-emission vehicles and technologies. and creates tax credits for renewable energy component production and clean sources of electricity generation and energy storage, among other provisions. This legislation stands to benefit several of B-Trans target end markets. When signed into law, it will likely create a significant increase in the already robust demand we are experiencing for the benefits B-Trans provides. Moving on to our next topic, our development activities remain on track. First, we've completed the testing of our latest generation driver and begun fabrication of this driver to support the test and evaluation program. On the fabrication side, we continue to work with Teledyne, who's been a valuable fabrication partner as part of our government-funded development projects. We've also qualified a second domestic semiconductor fabrication partner who brings bipolar as well as silicon carbide fabrication experience to support our ongoing development activities, and our long-term technology roadmap to develop a silicon carbide B-tran. During the second quarter, we progressed in our qualification of a non-domestic production level fabrication partner. A fabrication partner capable of higher volume production will help ensure sufficient supply capacity for large customers and mitigate supply chain risk while driving improved quality, faster runs, and higher wafer output per run compared to developmental fabricators. Initial work has been focused on thin wafer handling for key equipment and process steps, most importantly, using larger diameter wafers than we've used to date. The larger diameter wafers will allow us to produce more devices per wafer, providing more devices per run and reducing die cost. The thin wafer handling evaluation has gone very well with no wafer breakage, and we're pleased with the results to date. Next, we'll begin running engineering short loops using the process steps and techniques we're sharing with this high volume fab to evaluate key process steps. Once these critical process steps are evaluated, if satisfactory, it will lead to a full process flow engineering run later this year. On the packaging side, we completed the qualification of our world-class packaging partners to transition a new packaging concept for volume production. These partners completed the design, including a joint design review, as well as trial mechanical builds and the packaging of first devices. We now have qualified both a domestic and non-domestic packaging firm. These firms have proven they can package individual D-Trend dyes using state-of-the-art packaging techniques that avoid conventional IGBT packaging practices that ultimately reduce reliability in high-power cycling applications. Our packaging partners also have the capability to design and fabricate multi-die B-TRAN modules, which are of strong interest from customers needing high current rated modules for applications such as electric vehicles and solid state circuit breakers. To support the commercialization of B-TRAN, we've engaged a third party firm that will conduct long-term reliability testing of packaged B-TRAN devices involving tens of thousands of power and temperature cycles to assess the mechanical integrity of the design. We've also identified and qualified two firms to conduct additional third-party device testing to support device characterization and to provide third-party validation of the information, including our BTRAN data sheet, which will be provided to prospective customers. Third-party testing will be conducted following the completion of deliveries under the NAVSEED program. Our roster of production partners is building nicely to ensure we have sufficient capability to support our ongoing development activities and prepare for the rampant volume expected as we introduce our first and subsequent commercial products. We're making strong progress along our roadmap for this year, and our 2022 objective remains to introduce our first commercial product emerging from our collaborative development and evaluation processes by year-end. BTREN's unique advantages of bi-directional switching capability, lower switching on conduction losses, improved and more compact thermal management requirements, and potentially lower user costs for OEM products incorporating B-TRAN make it a potentially disruptive technology in our target markets. To recap, the remaining key steps along our roadmap for this year are, first, we'll continue to collaborate with DTI on our B-TRAN-enabled solid-state circuit breaker project for NAVSEA. We expect to complete deliveries of optimized package devices later this year for incorporation into the demonstration of a 12 kilovolt medium voltage DC breaker at a site selected by the U.S. Navy. Subsequent to the demonstration, an objective of this program is for DTI to introduce a family of medium voltage DC circuit breaker products incorporating B-TRAN for sale to military, industrial, and utility markets. Second, we're working closely with the growing number of participants in our B-TRAN test and evaluation program We'll be providing packaged BTRAN devices, paired with a data sheet, and our latest generation drivers to facilitate and accelerate their evaluation process. The testing results these customers will share with us will provide feedback on the design and operation of package devices and driver, the feature set these customers require for each application, and their priorities for individual applications. This feedback will allow us to determine common requirements of cost applications and act as the foundation for the development of future VTRAN modules. Our test and evaluation program will remain an ongoing aspect of our sales and marketing process and will continue to work to add additional potential customers to it. Third, with a proven and scalable wafer fabrication process and packaging design, we've kicked off our design work for our first multi-die module that will be the basis of our first commercial product offering. We've also engaged a third-party firm with module design and packaging expertise to support our design efforts. Our conceptual design and specifications will be used in close collaboration with our design partners to leverage all the work from our discrete device fabrication and packaging and incorporate the feedback we have from potential customers interested in a high current rated product for their target applications. Based on the significant interest we've received to date for the use of VTRAN as an enabling technology for solid-state circuit breakers, our initial product will be a multi-die module targeting this application. This initial product will be followed by our second product, an intelligent power module, that will utilize the multi-die module design and add a multi-die driver into a single integrated package. We've recently begun discussions with the design houses for this intelligent power module. This intelligent power module will accelerate V-train commercialization and adoption in a variety of target applications by solving the hurdles we know customers will face with respect to a bidirectional driver and packaging optimization, saving customers from having to design these themselves. Fourth, we're progressing on the completion of the qualification process of a high-volume production wafer fabricator to assess their potential to support our plans for commercial sales with favorable results to date. Our intent is to have a high-volume wafer fab ready to support our volume requirements for 2023 and beyond. Lastly, we continue to work on submitting additional proposals for government funding with, as I mentioned, the potential to be the prime or subcontractor should we win. We expect to collaborate with additional OEMs and universities on submitting proposals as funding opportunities become available, including potential opportunities as a result of the CHIPS Act. Looking at the B-TRAN patent state, we currently have 69 issued patents with 30 of those issued outside of the United States and 23 pending B-TRAN patents. As I mentioned on our last call in April, we added a geographic breadth of our patent portfolio with the issuance of our first patent in India. Our current geographic coverage includes North America, China, Japan, South Korea, India, and Europe. And these, along with the United States, represent all of our high-priority geographies for patent coverage. In summary, we continue to make strong progress on our roadmap toward commercialization of B-TRAN. We are very happy with our expanding collaborations and demonstration opportunities as a result of our NAVSEA program and the excitement that B-TRAN is receiving as a prospective disruptive technology with wide-ranging applications across a large number and growing end markets. We're particularly excited about our first deliveries of bi-directional low-loss devices under the NAVSEED program. We remain on track to introduce our first commercial product by the end of the year. Our focus remains on executing our commercialization strategy backed by multiple years of cash on the balance sheet, an energized and talented team, a growing IT portfolio, and world-class fabrication and packaging partners. We look forward to delivering on our 2022 milestones and realizing the potential of our technology. We'll keep you updated on our progress as we hit each milestone on our BTRAN commercialization roadmap. I'd like to hand the call over to Chief Financial Officer Tim Burns for review of our second quarter 2022 financial results.