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 would like to turn the conference over to Carolyn Capaccio of LHA. Please go ahead.

Thank you, Keith. And Good afternoon everyone. Thank you for joining Ideal Power's second quarter 2021 conference call. With me on the call are Dan Brdar, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer. Ideal Power’s second quarter 2021 financial results press release is available on the Company’s website at idealpower.com. Before we begin, I would like to remind everyone that statements made on the call and webcast, including those regarding future financial results and industry prospects are forward-looking, and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the Company’s SEC filings for a list of associated risks. We would also refer you to the Company’s website for more supporting industry information. Now, I will turn the call over to Ideal Power’s President and CEO, Dan Brdar. Dan.

Thank you, Carolyn. Good afternoon, everyone. And welcome to our second quarter 2021 financial results conference call. I will begin by giving you an update on our progress and achievements on our strategy to commercialize our B-TRAN semiconductor architectures technology, including progress our objectives for 2021, which includes the engagement of potential customers, to test and evaluate B-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, we will take you through the numbers, and then we will take your questions. We are on-track with our roadmap to commercialize B-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 towards 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 that provides detailed information on B-TRAN operating characteristics, as well as information regarding the packaging and driver design and operation. But 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 and 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 real results. We are 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…

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 sub contract, which began in mid 2020. The amount of grant revenue recognized each quarter will vary, as it is a function of the timing spending in 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 market and other general corporate expenses. We expect research and development and sales and marketing spending to trend higher in the balance of 2021, as we accelerate development of the B-TRAN 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 for the second quarter of 2021 was $1.2 million, compared to $0.8 million in the second quarter of 2020. Second quarter of 2021 net loss includes the gain on forgiveness of long-term debt of $91,000 awaiting for a payroll protection program loan received in the second quarter of 2020 forgiven by the SBA in May, 2021. As a result of the loan forgiveness, we had no long-term debt outstanding at June 30, 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…

Thank you. [Operator Instructions]. We will take our first question from Shawn Severson with WTR. Please go ahead.

Hey guys. Thanks for taking my question. Just trying to figure out, do you have any more automotive EV companies in the pipeline and those in are going through pilot programs are going to pilot?

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 would like to have, two or three, at least in each of those targeted segments, because they are each going to have different ideas and different approaches. So, we have some that we hope we get over the finish line, but they are their names that people will recognize if we are able to get them actually in the program with so far, we think we have got a pretty, pretty robust pipeline based on the relationships that Jeff Knapp and his experience working in the EV space is bringing the company.

And when you look at all of those, those applications in various markets that are coming in, that are coming to the pipeline, which ones do you think would go to commercialization the fastest? I assume there is some difference depending on the application and what it is, but which one priority do you think gets the fastest?

I think we will see the circuit breaker and EV charging probably go first. Circuit breaker will certainly be helped by the fact that we will be doing full scale demonstrations of design that incorporates technology, EV charging, because there is such a for us to build out that infrastructure and are looking for innovative solutions so, we are seeing shorter design cycles there. After that, I think will come some things in the renewable space, particularly renewables coupled with energy storage, and the automobile folks will probably last, but we think based on what we are 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, we are already seeing, we have a lot of pressure to catch up. So, things that have been driven by some of the new companies like Tesla that has come along.

And my last question is, when you get into an automotive, or an ABB 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 are, you are in one vehicle, the it is very easy to get into the set of one model into 10. Let's say for example, if you understand what I mean?

Yes, I do. What we are finding is that what the automobile companies are really trying to do is get to a common platform 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 are seeing is some innovation of just taking clean sheets of paper and say, okay. This is the drive train that we are going to use for the entire classes vehicle. So, we think if we can get to the point where there is a module that incorporates what they are looking for, from a packaging standpoint, we will see it used across a whole variety of models for a given manufacturer.

Great, thanks guys.

Thank you.

Thanks Shawn.

We will take our next question from David Williams with The Benchmark Company. Please go ahead.

Thanks, hey Dan and Tim. Good afternoon. appreciate you taking time to let me ask a question here. First, I want to ask maybe if you kind of think about your customers you have in the evaluation and testing phase now. Have you receive feedback yet in terms of maybe how they are thinking about using the product, and maybe their design cycles, just anything, any color around just any of the testing an evaluation that you have ongoing today?

Well we don't have parts in their hands yet. But what we have been learning about is they have learned about the technology, we are our technical teams have had a whole series of meetings with most of these customers. We are learning about how they are thinking about using the technology and how they are thinking about changing their approach to the drive trains and how they are changing the approach or some of the other technologies that go into the car because of the fact that B-TRAN is enabling them to do different approaches. And the example that I use is, a matrix converter. Matrix converters are technologies they've been around for a long time. But the challenge has always been there is not a good bi-directional AC switch out there so you don't see them very often. Well, that is a different story now. So we see automobile manufacturers looking at matrix converters, as an approach where previously they haven’t. So part of why we ended up being under NDAs is we learn a lot about their application and what they are thinking about, as well as them learning about our device. So I think we are going to see some pretty innovative approaches come to market as some of the more established automobile manufacturers take the work that is already been done in this space and look at new ways to do it.

Okay. Great. And then maybe from the automotive side, if we think about kind of the qualification cycle there and the certification for those parts. That is a fairly elongated cycle, and it is a thing that we hear a lot from other semi especially 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 are still some time away from that as you had mentioned, maybe being the last really take off?

Well, 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 sub systems and bring new technology to the OEM. That has changed. What we are 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 are trying to shorten that cycle. So they are taking the lead and saying, here is what we are going to use from a technology perspective. Here is our platform and you are a Tier 1 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 are 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 said is we will introduce you. We will 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 are on a mandate from us. So we don't necessarily have to learn a lot this with a packaging company ourselves. They are 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.

Great. And then 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 it into the hands of the customers or are there other hurdles maybe in terms of the technology or the capability that has to be overcome?

We know this technology 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, now we are fortunate that we have 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 is going to be really more that educational process that will be the pacing item for our really large scale adoption.

And maybe Tim, as you think about the balance sheet, obviously 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 lock.

Yes. So we will always have a relatively small team. It is really just some are very strong technical expertise in the front end of the business, really interacting with the customer. So we will never be a company with hundreds of employees. So for us, it is actually pretty manageable. I mean, we went from $3 million last year cash burn, we are forecasting about $4.5 million here for this year. I'm sure we will probably be, we will wait-and-see. It is a little bit early, but maybe we are another $1.5 million 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 will have much better visibility as we get into that in early next year, as well as the commercialization of the technology in the second half of 2022. But from our perspective, we knew when we went and did the raise here back in February, that we are going to have multiple years of cash and we would have a really strong balance sheet coming out of it. So, capital is not something that is a high concern for us at this point.

Great. Well, congrats on the progress guys. Looking forward to seeing the rest of the progress next quarter.

Thanks David.

We will take our next question from [Kelly Thurman] (Ph), Private Investor. Please go ahead.

Hey, Dan. 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 are significantly undervalued?

Let me address the first one and I will let Tim speak to the second part of your question. We actually so far have been prohibited from announcing the names and we have told these companies that we are working with. Our investors are to want to know, and the response that we routinely get is that, look, we don't want our competitors knowing what we are doing, which I understand and appreciate. But it is a little frustrating because rather than announcing, it is one of the Top 10 global automakers, we would 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 are probably going to have some ability to say something at that point in time, but so far it is really, it is always been driven by their lack of desire to let their competitors know what kind of technologies they are looking at, and exploring for their products, basically that simple.

Yes. And is it relates to the second question that you had? So I would say that is something that is a concern of ours as well as whether getting taken out too early, potentially. For us, we are trying to establish as many of your way she says we can across multiple applications, and in doing so we try to hold off a specific application acquisition or a specific company from an application acquiring company. I would say that is probably one of the higher areas of concern. When we look at it. We would really like to get through into the commercialization process and we have a much higher evaluation than we are now, before we have to deal with some of those conversations potentially. But, I would say that that is either risk.

[Operator Instructions]. We will take our next question from Don Slowinski with Winslow Asset Group. Please go ahead.

Thanks for taking my question today. Hey, guys. Congratulations on your progress. It seems like you are on the latter portion of a Phase II of your Phase III a plan towards B-TRAN 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?

Well, let's talk about what will happen is one of the things that we were going to do is because we believe that B-TRAN is a new technology, we are better off bringing the intelligent power modules the a package guide coupled with a driver to market, we are going to take the feedback from the early participants in this program and bring out that intelligent power monitor. That is what we actually are going to be looking for commercialization. But the other thing that that we see the potential for as our relationships with some of these companies start to progress, I think there is 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 are looking for, for devices and packaging, I think there is an opportunity for us to get some funded co-development work that we would do. That would be certainly getting us deeper in bed with some of these folks, but also generating some, some revenue on the development side to just get ready for that market entry that we could then leverage with, with other people in that same market segment.

Okay, so that wouldn't be commercial revenue, but development revenue?

Correct.

And then, what is your anticipated revenue model when you get to commercialization?

I think it is a little bit too early to say Don what the revenue numbers roll look like at this point. And I think we have a pretty good sense of what the gross margin numbers would be like. And we are thinking from that perspective, 50% to 60%, gross margins. But in terms of the adoption rate, we are just too early in conversations with these companies to really have visibility into that, but it is next year as we start getting some of that information. We will try to start providing some guidance as soon as we can.

Okay. Well that is a good margin profile. Thanks for taking questions and congrats again on all the progress.

Thank you.

Thank you. Ladies and gentlemen, this concludes today's question-and-answer session. At this time, I would like to turn the conference back to Dan Brdar for any additional closing remarks.

Thanks, everyone, for joining us our call today. Next week, we will be presenting at the Sidotti August Micro Cap Conference, and also the Q3 Virtual Investor Summit. So, there is 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 will speak to you again when we report the third quarter results. Thank you.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.