Ideal Power Inc. (NASDAQ:IPWR) Q3 2022 Earnings Call Transcript

Ideal Power Inc. (NASDAQ:IPWR) Q3 2022 Earnings Call Transcript November 14, 2022

Ideal Power Inc. beats earnings expectations. Reported EPS is $-0.28, expectations were $-0.29.

Operator: Good day and welcome to the Ideal Power Third Quarter 2022 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.

Carolyn Capaccio: Thank you, operator and good afternoon everyone. Thank you for joining Ideal Power’s third quarter 2022 conference call. With me on the call are Dan Brdar, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer. Ideal Power’s third 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 Brdar. Dan?

Dan Brdar: Thank you, Carolyn. Good afternoon everyone and welcome to our third quarter 2022 financial results conference call. I’ll first touch on the development agreement that we announced earlier today, then I’ll give you an update on our progress to commercialize our B-TRAN semiconductor technology, the introduction of our first commercial product, and review our other key priorities for the remainder of 2022; and Tim Burns, our CFO will take you through the numbers. After which, we’ll take your questions. So, let’s begin. Earlier today, we made a very exciting announcement. We entered into a development agreement with a top 10 global automotive OEM. This is our second engagement with a top 10 global automaker as we’ve previously announced that a different top 10 global automaker is in our test and evaluation program.

We’re partnering with this automaker’s advanced technology development team to develop a custom B-TRAN power module for use in electric vehicle drivetrain inverters in the automaker’s next-generation EV platform. Ideal Power would collaborate on the development of these multi-die custom modules with a packaging firm selected by the automaker for their innovative technology. Automobile manufacturers are looking for innovative solutions and new approaches as they look to differentiate their EV offerings and are especially targeting innovations that can increase vehicle range and reduce cost. Ideal Power’s B-TRAN technology was selected for entry into this program after the automaker evaluated multiple new suppliers and technologies. Each was evaluated for its innovation, potential performance improvements, and return on investment.

We demonstrated that our B-TRAN technology and its value proposition surpassed that of other power devices and technologies under consideration. B-TRAN was selected because it also offers the potential for new inverter topologies, which are not practical with conventional semiconductor devices is a way to improve EV drivetrain inverter efficiency. In addition, by leveraging the scale and maturity of the established silicon supply chain, we can offer cost advantages over competing technologies that rely on high-cost materials like silicon carbide. Specifically, B-TRAN offers a way to improve efficiency through its superior performance characteristics over IGBTs and MOSFETs including unique inherent bidirectional capability, requiring fewer components and lower switching and conduction losses leading to reduced cooling requirements and an increase in the range of the electric vehicle or a reduction in the size and cost of the battery, which is the largest EV cost component.

And the silicon carbide supply chain improves in cost and quality, B-TRAN can be fabricated in silicon carbide, offering the opportunity to further improve its performance. Signing our first development agreement is a thrilling moment and we are very much looking forward to beginning our work with this automaker in the coming days. It represents the combination of many months of work with the automaker’s advanced technology and procurement teams as they evaluated a variety of technologies their potential performance and cost impact on their future vehicles and the readiness of the technology for incorporation into their development and product roadmaps. The program we announced today is the first step in what is envisioned by the automaker as a multiyear program targeting delivery of production-ready silicon B-TRAN-based modules in 2025.

We’ll have to continue to earn our role in the program as we go along delivering against program requirements and satisfying the key milestones required to make it into actual vehicle production. We’re excited about the magnitude of the opportunity and we’re ready for the challenge. The initial steps in this program will be to start a wafer fabrication run, based on our current die and packaging design, followed by the delivery of initial packaged devices and demonstration boards. The initial deliveries will include our new bidirectional driver and power board as part of the automaker’s evaluation and technology readiness assessment of B-TRAN for inclusion in future high-density power module evaluations and for potential use in EV drivetrain inverters.

In the development program, we’ll further optimize our device design to incorporate improvements in power density and further improvements we have planned to increase efficiency, while collaborating with the module design firm, as they develop the custom multi-die module incorporating B-TRAN into their innovative packaging technology. This B-TRAN module will then go through initial testing and evaluation followed by an automotive qualification process. The automotive qualification consists of unique and rigorous standards including testing for things such as shock and vibration, which are not applicable to stationary applications. Meeting these rigorous standards will benefit our overall commercialization efforts, due to the demanding requirements for product quality and long-term reliability.

The module will then be evaluated in an EV drivetrain inverter. Although, it’s not part of what is targeted for 2025 production-ready modules, there is also a longer-term target under the program that a silicon carbide B-TRAN will be developed for use in EV drivetrain inverters. The development of the silicon carbide B-TRAN would not only support the EV drivetrain application, but would also enable use cases for innovative power conversion architectures and additional applications such as AC-DC converters, vehicle-to-grid vehicle-to-home, and vehicle-to-vehicle charging which require bidirectional switching. Numerous automakers have announced EV road maps and some have publicly discussed EV dealership investment requirements to facilitate the transition from the Internal Combustion Engine or ICE vehicles to Electric Vehicles.

Even at today’s high prices, due to high materials cost and production cost, EVs are not profitable for most automakers. Although, there’s a strong legislative support, from the U.S. government for EV development and adoption, Automakers need to identify and implement innovative ways to address current materials costs, production cost and performance efficiency challenges. This exerts intense pressure on their R&D teams to lower EV production costs, while simultaneously improving performance and range. B-TRAN offers a distinct advantage over other technologies in EV drivetrain applications and a compelling value proposition. Having the opportunity to engage with one of the world’s largest automakers at such an early stage in the development and adoption of Electric Vehicles is a particularly exciting opportunity which we hope to leverage within the EV industry and other applications where B-TRAN can bring value and in some cases act as an enabler for new products.

We’ll share further updates on future calls, but this is a proprietary program, so we need the concurrence of the automaker on what we can publicly share. Our team is very excited to start work with this customer. Now, let’s turn to our work on the United States Navy and our partner Diversified Technologies. Last week, we began shipping additional B-TRAN devices to Diversified Technologies on our project for the Naval Sea Systems Command or NAVSEA to develop and demonstrate a B-TRAN enabled low-loss, 12-kilovolt DC solid-state breaker for the U.S. Navy. This represents another significant accomplishment and advances us toward fulfillment of our program deliverables to DTI in the coming months. In contrast to prior devices, we delivered — we’ve delivered the DTI for testing, these devices will be paralleled into an array for incorporation into the full-scale MVDC solid-state circuit breaker that DTI is building for demonstration.

As with the initial devices we shipped to DTI, these devices were produced using existing silicon wafer processing equipment, employing techniques and process flows, we developed in collaboration with our wafer fabrication partners. The process and fabrication techniques we developed are specifically designed to be used in traditional high-volume silicon manufacturing facilities without the need for substantial capital investment in the conventional wafer fabs, thereby removing a potential hurdle in the manufacturing of an inherently bidirectional die. We tested these packaged devices in our lab, prior to shipment and they met the fast switching and low conduction loss characteristics predicted in our simulations. These devices are packaged, in our latest packaging design that utilizes the state-of-the-art techniques designed to provide high reliability.

DTI is currently designing the driver, for the solid-state circuit breaker and we’re supporting them in this effort due to the uniqueness of B-TRAN’s bidirectional operation and our prior experience in designing a B-TRAN driver for discrete devices. Additional wafers are now being fabricated at both of our development fab partners, and will be diced, packaged into devices and tested prior to further shipments to DTI. The medium voltage DC circuit breaker that results from this project will have direct applicability to military applications and commercial markets where circuit breakers are in wide use such as electric utility distribution and transmission systems and microgrids, as well as solar, wind, and energy storage installations. Circuit breakers perform a critical function of power generation, transmission and distribution systems to protect against power surges and short circuits.

These needs have traditionally been filled by mechanical circuit breakers, which are orders of magnitude slower prone to arcing and failure and require manpower and cost to maintain. Solid-state circuit breakers relying on conventional power semiconductors such as IGBTs have not seen widespread adoption, primarily because of their high conduction losses, which results in wasted energy and the need to dissipate heat produced by their high losses. B-TRAN with its fast switching and low conduction losses is a potentially enabling solution for large scale solid-state circuit breaker adoption. We’ll continue to provide program and technical support through the demonstration of the B-TRAN-enabled breaker and I’ll provide program updates as we’re able within the limitations of our NAVSEA confidentiality restrictions.

As we’ve discussed with you before, the device and packaging design used in this program will be leveraged for our customer test and evaluation program and for the design of our first commercial products. Our technical teams and fabrication and packaging partners have done outstanding work and we’re proud to ship these devices further validating the expected performance of our low loss bidirectional technology, DTI and in turn to the Navy. Our progress introducing our first commercial product by year-end, a multi-die power module designed primarily for the solid-state circuit breaker application continued during the third quarter and we expect to introduce this product by year-end. We continue to receive strong inbound levels of inquiries particularly in applications involving circuit breakers from a broad range of commercial, research and government entities and are excited to introduce new B-TRAN-based products to the market in the coming months.

Let’s move on to our test and evaluation program. Since the start of the third quarter, we further expanded our roster of participants in the B-TRAN test and evaluation program with three new participants, which include a non-domestic designer and manufacturer of grid solutions interested in evaluating B-TRAN for solid-state circuit breakers and other grid applications. This further illustrates the high visibility of the NAVSEA program in the technical community and this community’s broad interest in the development of an innovative lower-loss fast-acting technology that are necessary to solve fundamental problems in both mechanical circuit breakers and solid-state circuit breakers using conventional devices. B-TRAN’s characteristics and benefits make it particularly well suited to and a potential game changer in a very large circuit breaker market.

Also two universities working closely on technology collaboration with large commercial businesses entered our evaluation program. Partnering with these universities is an important part of our strategy to capture additional government funding opportunities and to leverage their commercial relationships of these targeted universities with strong industrial companies. As a reminder, our prospective customers and partners who were looking to advance their technology road maps will rigorously test and evaluate B-TRAN for use in their particular applications in their labs many considerable in-house technical resources for evaluating a cutting-edge technology and the improvements and capabilities B-TRAN can create for them in their product designs.

These tests will yield results, data and feedback on performance and features will incorporate into our future commercial products and custom modules for use in specific applications. We have one or more test and evaluation agreements in place in each of our target markets and our pipeline of potential additional collaborations is healthy especially in the solid-state circuit breaker and EV markets. These relationships are opening new doors to partner on additional government funding opportunities in turn driving additional features and performance requirements for our commercial product offerings. We expect this repeating cycle of ongoing engagements that resulted in our introducing over time a range of B-TRAN-based modules customized for specific applications as is common in the traditional power semiconductor market.

Next, we continue to submit for other government funding opportunities. Since the start of the third quarter and in collaboration with universities and commercial entities, we’ve submitted several proposals and concept papers for government funding opportunities with the Department of Energy, the Department of Defense and NASA. These submissions include applications in the areas of EV drivetrain, solid-state circuit breakers for renewables, grid and aircraft, as well as advanced B-TRAN concepts. While the competition for these programs and their funding is very high and the chance of winning any given opportunity is low this exercise provides us the opportunity to collaborate with current partners in the test and evaluation program and prospective customers that may enter that program and/or development agreements with us.

Let’s move on to our development activities. As we grow closer to B-TRAN commercialization, our development activities are on target. Recently, our non-domestic fabrication partner with high-volume production capability, successfully completed engineering short loops for thin wafer handling and front-to-back feature alignment and validated key process steps, for a bidirectional device on existing silicon processing equipment. While we’re working well in advance of the need for high-volume production, it’s been critical for us to validate that some of the unique processing steps for thin double-sided wafers, our product requires can be addressed in a true production level facility, without the need for significant capital equipment expenditures.

Production at a high-volume fabrication partner, will result in improved quality and yield, as a result of the elimination of manual wafer handling and rigorous and repeatable quality processes, faster runs and a greater number of larger diameter wafers per run, compared to development fabs. It will also help us to ensure there’ll be sufficient production capacity for the large customers that we’re engaging and to mitigate supply chain risks. We fabricated and successfully tested our latest B-TRAN driver, and have multiple drivers built and ready to support our test and evaluation program. For this program, we’ve also designed and fabricated a full test and evaluation kit that will include B-TRAN device, a bidirectional driver, power board and enclosure for safety and ease of connection for instrumentation to facilitate and accelerate setup test and evaluation by our technology participants in the program.

As we mentioned on our last call, during the third quarter, we completed the qualification of a world-class packaging firm, to transition our new packaging concept for volume production, now have qualified both a domestic and non-domestic packaging firm. These firms completed their design work including a joint design review with us, trial mechanical builds and packaged their first devices with the packaging of these devices successfully tested by a third-party. Our packaging partners also have the capability to design and fabricate multi-die B-TRAN modules, which are in high demand in solid-state circuit breaker and electric vehicle applications. One of these firms is working closely with us, on our module design — in our module design firm to ensure our initial commercial product is, manufacturable in high volume.

To support the commercialization of B-TRAN, we engaged a third-party firm that will conduct long-term reliability testing, which involves amongst other tests tens of thousands of power cycles to assess the mechanical integrity and durability of the design. In addition, we’ve identified a firm to conduct additional third-party device characterization and testing following the completion of our deliveries under the NAVSEA program. We also selected a design firm who is nearing completion of the packaging design of our first commercial product, a multi-die power module, planned for introduction later this year. The power module packages Ford MACH- E without a driver. This type of product is particularly attractive for the solid-state circuit breaker application where the driver is typically done at the system level rather than the module level.

We have several participants in our customer sampling program, as well as inbound inquiries from potential collaborators, focused on the solid-state circuit breaker application. The multi-die power module will form the basis of our second commercial product, an intelligent power module intelligent power module takes the multi-die power module design and adds a multi-die driver. This type of product is targeted at the renewables, energy storage and other industrial end markets. We’re targeting the introduction of this product in the first half of 2023. So now with sufficient capability and capacity, to support the introduction of our first commercial products and our ongoing development activities along our product and technology road map, here are our objectives for the remainder of the year: First, we’ll start a wafer fabrication run to support the newly announced development program, for the top 10 global automaker.

Second, we’ll complete our first multi-die power module design, targeting the introduction of this commercial product by year-end. This design will leverage learnings from our discrete device fabrication and packaging efforts. Third, we’ll continue to collaborate with DTI on our B-TRAN enabled solid-state circuit breaker project for Navy and chip additional B-TRAN devices to DTI for incorporation into the demonstration, of a 12-kilovolt MVDC breaker at a site selected by the Navy. We expect to complete deliveries to DTI in early 2023. The objective of this program post-demonstration, is for DTI to introduce a family of MVDC circuit breakers incorporating B-TRAN for sales to military industrial and utility markets. Fourth, with respect to our B-TRAN test and evaluation program, we’ll fabricate additional customer kits to provide a B-TRAN device driver, power board and safety and closure to facilitate and accelerate the evaluation process.

After delivery of the kits, we’ll gather testing results from these customers that provides feedback on the design and operation of the packaged devices and driver, the feature set these customers require free to application and their priorities for individual applications. We’ll then use this feedback to determine common requirements across applications and act as a foundation for the development of future B-TRAN products. And as you know, our test and evaluation program will remain an embedded process in our sales and marketing effort and we’ll continue to work to add additional potential customers to it. Looking at our expanding B-TRAN patent estate, we currently have 71 issued B-TRAN patents, with 31 of those issued outside of the United States and 22 pending B-TRAN patents.

During the quarter, two patents were issued in the US one related to our driver and another related to our paralleling and controlling multiple B-TRAN die in a common module. Our current geographic coverage includes North America, China, Japan, South Korea, India and Europe, all of which along with the United States represent all of our high-priority geographies for patent coverage. In summary, we are thrilled to enter our first B-TRAN product development agreement for a custom module with a top 10 global automaker. We’re also proud of the progress we’ve made along our road map for this year and excited to be shipping additional devices to DTI for the NAVSEA program and introducing our first commercial product by year-end. B-TRAN’s unique architecture offers the advantages of inherent bidirectional switching capability, reduce switching and conduction losses, improved and more compact thermal management requirements, potentially leading to lower user costs for OEM products, incorporating B-TRAN and high-growth applications.

We’re hitting our milestones with the qualification of world-class design, packaging and testing partners, a growing IP portfolio, a dedicated and talented team and ample cash on our balance sheet. We cannot wait to start the development program with a top 10 global automaker and launch our first B-TRAN commercial product bringing the potential of our technology into reality. Now I’d like to hand the call over to Chief Financial Officer, Tim Burns, for a review of our third quarter financial results. Tim?

Tim Burns: Thank you, Dan. I will review third quarter 2022 financial results. In the third quarter, we recorded $11,000 in grant revenue with offsetting cost of grant revenue, as we continued our work on the Navy fund and NAVSEA program. At September 30, grant revenue of $54,000 remains to be recognized under this program. Operating expenses were $1.8 million for the third quarter of 2022, slightly lower than our expectations, compared to $1.7 million in the second quarter of 2022 and $1.2 million in the third quarter of 2021. Research and development and sales and marketing expenses were higher in the third quarter of 2022, compared to the third quarter of 2021 on; one wafer costs associated with future fabrication runs as we received wafers this quarter that we’ve ordered earlier in the year to mitigate potential supply chain delays; two, higher research €“ higher search and placement fees and personnel costs due to head count additions to support both B-TRAN development and our test and evaluation program.

And three, other development activities including the fabrication of B-TRAN drivers. This growth represents our planned investment in development and commercialization activities in advance of introducing our initial commercial product by the end of the year. General and administrative expenses increased this quarter on higher professional fees. Operating expenses also reflect higher stock-based compensation expense. For the fourth quarter, our development and commercialization plans include additional wafer fabrication runs including starting a run under our new development program, designing beginning fabrication of and introducing our initial commercial product, further deliveries to DTI under the NAVSEA program, fabrication of additional B-TRAN drivers and customer kits to support the test and evaluation program, adding more engineering and product management talent, starting the design of our second commercial product an intelligent power module and other B-TRAN commercialization activities with potential new customers and partners.

We continue to expect some quarter-to-quarter variability in operating expenses, particularly our research and development spending, due to the timing of semiconductor fabrication runs and other development activities and hiring as well as the potential impact of additional government funding. We continue to expect general and administrative expense in the fourth quarter to be relatively flat sequentially excluding the impact of stock compensation expense, despite the impact of inflation on the cost of services. Net loss in the third quarter of 2022 was $1.7 million compared to $1.2 million in the third quarter of 2021. Third quarter 2022 cash used in operating and investing activities was $1.6 million, up from $1.2 million in the third quarter of 2021 and down slightly from $1.7 million in the second quarter of 2022.

This is slightly lower than the expectations we provided on our second quarter call due to the timing of hiring and other development expenses. As I mentioned, we continue to invest in both sales and marketing and research and development and now expect the cash burn for full year 2022 of approximately $6.7 million to $6.9 million with a fourth quarter 2022 cash burn of approximately $2 million to $2.2 million. Cash and cash equivalents totaled $18.5 million at September 30, 2022. Given our planned cash burn, which remains modest, we have ample liquidity on our balance sheet to fund operations as we commercialize our technology and to be a well-capitalized partner for the broad spectrum of companies that are either already participating or that we expect to participate in the test and evaluation of our B-TRAN technology as well as the top 10 global automaker that has engaged us for development program.

As of September 30, we had 5,903,797 shares outstanding and 1,040,248 warrants outstanding unchanged from the end of June. Including 625,948 stock options and restricted stock units outstanding, diluted shares outstanding at September 30, totaled 7,569,993 shares. At this time, I’d like to open up the call for questions. Operator?

Q&A Session

Operator: Thank you. Our first question comes from David Schneider, private investor. Please go ahead.

Unidentified Analyst: Yes, hi. I have to apologize initially, because I actually have seven questions. As far as the development agreement with the automotive OEM, what do you think might be the soonest that I could go by a vehicle with your technology in it, as far as the year…?

Dan Brdar: Yes, they’re targeting production-ready devices from us in 2025. So, I would think, it’s 2025 or 2026, depending on the timing of when they roll those out.

Unidentified Analyst: Okay. Okay. That’s really not that far away, especially from an investment point of view.

Dan Brdar: The automakers are really focused on, how do they shorten that cycle for getting their electric vehicle products out. It’s just — they can’t follow the traditional five-year path. They just — they don’t have that luxury.

Unidentified Analyst: Yes. What about — I’ve seen other breakthrough technologies and electrification first take hold in, let’s say, not in the auto industry, but actually in motorcycles. So, it’s a little surprising to me that well, we don’t have a very large sample size. But, I’m wondering if you’re talking to any of the motorcycle companies.

Dan Brdar: We’re not really engaged with the motorcycle folks but what we are engaged with are — and there are actually companies that are already in our sampling program that are focused on commercial vehicles, delivery trucks, buses and so forth, where the standards are a little bit different but there’s a desire and electrification there as well.

Unidentified Analyst: Okay. Okay. That’s very good. Also, as far as modules per vehicle, I’m wondering if the number of B-TRAN modules per vehicle would vary versus — if you’re talking about a sedan versus an SUV, because that could help establish, although it’d be extremely back of the envelope we would have to assume what a B-TRAN module would sell for and what your margins would be. But how many modules per vehicle? And would it vary?

Dan Brdar: It will vary, because the number of modules will be a function of what’s the rating size of the battery, which will drive what’s the total voltage and current you have to support. But also it depends on the topology that they use, because one of the things that B-TRAN enables is some different topologies than what you can do with conventional semiconductor devices. So there’s a couple of things that come in the mix that really reflect some of the novelty that we see some of the automakers pursuing to come up with a differentiated high-performance approach to the vehicles that they bring out.

Unidentified Analyst: Okay. And Toyota is hedging its bets on electrification. They’ve got — they’re spending a lot of money on researching hydrogen as a fuel. So is there any role for B-TRAN in hydrogen fuel vehicles?

Dan Brdar: Yes, absolutely. The fuel cells when they produce the energy, I mean, it’s in a basically a lower voltage DC form depending on how big the fuel cell stack is that ultimately has to go through power switches to convert to different voltages and convert DC to AC, or again AC back to DC depending on how they’ve configured their systems. So there would definitely be a role for us. It wouldn’t be as big as if we were a key component of the drivetrain in a conventional battery, but there’s definitely a role for B-TRAN in hydrogen vehicles.

Unidentified Analyst: Okay. That’s very good. And is it as a result of you getting, let’s say, more visibility in the engineering community, because you’re getting more partners are you finding that engineers are starting are you getting more inbound calls from engineers saying, I am interested in working there?

Dan Brdar: Yes. It’s — we’re seeing — it’s slowly starting to improve. As people are becoming aware of the technology and things like the award that we won with our APAC Paper and so forth, it’s raising the visibility where people want to learn more and it’s just getting some inbound people responding to some of our job postings rather than having to find them through the recruiter. The downside of that is the capability of our technical team is very high. So, the standards of who they’re willing to hire to work with is also equally high. So it’s getting better but it’s nice to actually see some people that are reaching out to us rather than having to rely on recruiters to try and find people.

Unidentified Analyst: Yes. I don’t think there’s downside to having super highly qualified engineers at your firm.

Dan Brdar: Well, the fact is that not doing a good job is high. So we’re particular, so.

Unidentified Analyst: Yes. Yes. Intuitively, I would think that there’s more, let’s call it, bigger bang for the buck the larger the vehicle incorporating B-TRAN like just because if you had General Motors Humvee or Hummer I don’t know how many — how much that thing weighs. But in the battery pack must — is probably the weight of a baby elephant. But — so I would think that there’s a greater role for B-TRAN based on maybe based on the size of the vehicle would that be correct?

Dan Brdar: Yes. You’re correct. That’s part of why — rather than looking at the motorcycles we’ve been focusing more on the commercial vehicles and buses as people get in the sampling program in addition to just the passenger vehicles.

Unidentified Analyst: Okay. Well, yes, I know the electrification of buses is — there’s a huge effort in that. So I’ll get off right now and let other people ask questions. Thank you.

Dan Brdar: Okay.

Unidentified Analyst: Thanks, Dan and Tim.

Operator: The next question comes from Kelly Serman , private investor. Please go ahead.

Unidentified Analyst: Hey, guys, congrats on today to announcement. That’s great stuff.

Dan Brdar: Thank you.

Unidentified Analyst: The drivetrain at the company you talked about today, are they only going to be making drivetrains for themselves, or is this going to be an opportunity where they are going to be actually be selling them on the open market?

Dan Brdar: We don’t see anybody yet that are the big established automakers wanting to do that, but it doesn’t mean it won’t change as part of their own strategies to build volume. This is an automaker that has multiple brands that you would recognize. So I think they’re looking for what are the platforms that they actually want to start with and how can they build those platforms out within the rest of the brands that they manufacture.

Unidentified Participant: Okay. And on July 20, 2021, you guys announced a top 10 automaker to go into the sampling program. Is this a different automaker than what you announced on July 20, 2021?

Dan Brdar: Yes, it is. It’s — we now have two of the top 10 global automakers engage with us in one form or another. This is obviously a deeper level of engagement, since we’re actually going to go do a custom module with them. But the one that we announced previously is a different automaker.

Unidentified Participant: Okay. Where do we stand with them right now as far as moving the ball forward?

Dan Brdar: They are signing up for the sampling program our teams have met with them. And then basically as soon as we get through our deliveries for NAVSEA, we’ll be shipping them parts and drivers for their evaluation. And hopefully, we can build that into a custom module program like the one we just announced today.

Unidentified Participant: Okay. And then where do we stand with the power management company? Is that progressing along nicely?

Dan Brdar: Yeah, it is. Part of this is our teams kind of have to work together one for us to get them up to speed on B-TRAN and how it operates, but also for us to learn their application a little bit, so we can guide them to how to incorporate it and get the most out of it. So the folks that we’ve got engaged in the program, a lot of them are still in that learning curve process where we’re making them smarter about the device work. They can do their own circuit design and simulation work to get ready to get devices in hand. So as they tested in the context of their application, they hit the ground running.

Unidentified Participant: Okay. And the last one I got you guys is for the EV charging companies. I know you guys have somebody in the sampling program. At the last trade show bi-directionality was one of the number one topic at the show. Are you seeing a significant number of inbound activity from the EV charging company because I’m surprised that you only have one in the sample program right now. Do you anticipate that number to grow quickly?

Dan Brdar: Yeah, we do. I think the early EV charging stations that were being put out there were really all about how do you get something out here to satisfy the demand. But what’s happening now is I think part of what’s driving all this discussion of bi-directionality with them is they’re finding that for a lot of these locations, particularly in urban areas, they have a couple of storage batteries to deal with mitigating the demand charges where people want to charge their vehicle during peak hours of the utility rates. So the offerings from the EV charging companies are getting a little bit more sophisticated. They’re having more capability and it drives the need for a little better solutions than just taking the conventional semiconductor devices and designing a one-way charging system.

Unidentified Participant: How far along with you are the company that’s sampling currently? How far along with you — are you with them?

Dan Brdar: Most of them are probably to the point where they’re ready for us to give them devices. We got a couple of more we’re doing some circuit analysis with them. But as soon as we complete the NAVSEA deliveries, we’ve got several that are ready to go.

Unidentified Participant: Okay. Congratulations again you guys. Very proud of the job you guys are doing. Keep it up.

Dan Brdar: Thank you very much, Kelly.

Operator: And our next question comes from Bruce Palmer , Private Investor. Please go ahead.

Unidentified Analyst: Hi. Thanks for taking my call. Congratulations on the agreement today.

Dan Brdar: Thank you very much.

Unidentified Analyst: Follow-up on that. The article says a custom inverter. So when you’re done development do you own that inverter design or does the car company? And is it interchangeable to another company? And is it exclusive to this automobile so you’d never make an inverter for someone else. How does that work?

Dan Brdar: Yeah, we’re actually not going to make the inverter. We’re just going to make the semiconductor devices that go into the inverter. We will work with a packaging firm that has some unique approaches to semiconductor packaging that have been selected by this automaker also. And then what the automaker will do they will take the design work that we do collaboratively with the packaging firm and they are designing an inverter for their EV platforms as a part of that. Now, it will be €“ the inverter design will be there. All the work that we do as part of our technology remains ours. And we’re not constrained being able to work with any other automakers or anybody else as a result of what we’re doing.

Unidentified Analyst: Okay. So if I understand correctly, you €“ no one outside of it would appear this automobile company they either, I guess, maybe have gotten a B-TRAN from you or just working through the design of it on paper. No one in the test and evaluation has a B-TRAN yet that’s not until after you’ve delivered NAVSEA is that correct?

Dan Brdar: Correct. The deliveries for NAVSEA, they need large numbers of devices for the breaker. So, those deliveries since we have a contractual obligation is coming first. And then we are ready to support the folks in the sampling program, with the work that we’ve been doing with getting their drivers ready getting the sampling kit ready for them and then being able to provide devices for them once the NAVSEA deliveries are done.

Unidentified Analyst: So if NAVSEA has sounded like, you were going to get DTI in that by the end of the first quarter. If I’m sitting here by mid-next year, if you’ve delivered to NAVSEA, how many people do you think would have a device from your test and evaluation by midyear or at the end of the third quarter where will these people finally get the 5, 10 agreements you have? How many agreements are out there? And how many €“ is it by midyear you see them having them or end of third quarter what could we expect from that perspective?

Dan Brdar: I expect, we’ll see the people that are in the program. We’ve kind of prioritize them in terms of those that we think we want to serve first, so we do take some technical support but we would expect most of the major players that we really want to capture would have devices in the whole sampling kit with driver in the first half of the year.

Unidentified Analyst: Okay. Perfect. All right. Well, thanks for taking my questions.

Dan Brdar: Thanks.

Operator: It appears there are no further questions at this time. Mr. Brdar, I’d like to turn the conference back to you for any additional or closing remarks.

Dan Brdar: I just want to thank everybody for joining our call. We will be participating in the Benchmark Discovery Conference in December, and hope to be able to speak with those that are in attendance. In the meantime, have a happy and safe holiday season, and we look forward to giving you another update on our fourth quarter call.

Operator: This concludes today’s call. Thank you for your participation and you may now disconnect.