Earnings Call Transcript
Ideal Power Inc. (IPWR)
Earnings Call Transcript - IPWR Q2 2021
Operator, Operator
Good day, ladies and gentlemen and welcome to the Ideal Power Second Quarter 2021 Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Carolyn Capaccio of LHA. Please go ahead.
Carolyn Capaccio, IR Representative
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 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 will turn the call over to Ideal Power’s President and CEO, Dan Brdar. Dan.
Daniel Brdar, CEO
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 on 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, 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. 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. 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 markets, vehicle electrification and EV charging, renewable energy, UPS systems for data centers, and solid-state circuit breakers. These conversations have progressed and yielded solid 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 evaluate a new power switch architecture as potential use within their target applications. But we are already finding that the talented engineering teams these early collaborating companies are identifying new design approaches and rethinking their applications and power management for both DC and AC implementations, enabling low loss and bi-directional capabilities of B-TRAN. This is very exciting. Let's look at some of the applications for which B-TRAN is being evaluated. In the automotive sector, we are working with a top 10 global automaker, whose advanced technology engineering team will test and evaluate B-TRAN and its driver for various applications including the EV drive train, DC-to-DC power conversion, circuit protection, and other uses within the EV ecosystem. Specifically with this potential customer, B-TRAN is enabling new architectures and solutions to improve EV efficiency, range, and performance by lowering total system size, cost, and component count. B-TRAN target applications include the EV traction inverter and charging circuits, which are inherently bi-directional, supporting vehicle-to-grid applications and emerging EV architectures and applications such as the matrix converter and solid-state circuit breaker. The EV space is already the largest segment in the $6 billion power switch market, which is expected to nearly double by 2026. In EV charging, we are working with a provider of electric vehicle chargers who will test and evaluate B-TRAN for their innovative, portable, and modular EV charging system that is currently under development. This solution combines a DC fast charger with a swappable battery system, designed to allow for scaling, targeting both on-demand fast charging and roadside assistance to eliminate charging anxiety. The advantages that B-TRAN can offer over conventional IGBT switches to EV charging are greater efficiency, high directionality, smaller size, and reduced thermal management, which are critically important to mobile EV charging systems with battery storage. This is the type of innovation and disruptive business model that can contribute to EV adoption and the build-out of the charging infrastructure with the need for smaller, lower operating cost solutions. EV charging companies could potentially be early adopters of B-TRAN, with the 2.1 million unit global EV charging station market expected to grow to an estimated 30.8 million units by the end of 2027. In power management for the data center market, we are working with a top 10 global provider of power conversion solutions to the solar industry that is expanding its portfolio to include a broad array of power conversion application solutions serving multiple sectors. This provider will test and evaluate B-TRAN for its compelling advantages in bi-directional circuits for various applications, starting with interoperable power supplies or UPS systems for data centers, and expanding to include renewable energy, electric vehicles, and other applications. There is intense pressure for data centers, given the trend toward cloud computing and data storage, to reduce electricity costs and power losses. Electricity consumption is the largest operating cost for a data center, and all the electricity entering the data center passes through a UPS system. Currently, UPS systems and their protection account for approximately 6% of data center total energy losses. Replacing conventional power semiconductors in these systems with B-TRAN is expected to resolve substantial annual cost savings for data centers through reduced energy consumption and the ability to migrate to lower-cost, less complex cooling systems. This will be a significant advancement for power switches and UPS systems, which was approximately $0.5 billion in 2020 and is forecast to grow at an estimated 6% compound annual growth rate through 2026. We are in discussions for possible collaborations with additional companies in our target end market applications who have expressed interest in assessing B-TRAN, and we will announce future collaborations as we are able. In the cases I just mentioned, as well as other potential engagements, the customers will share their testing results and provide application-specific feedback on the design and operation of the packaged devices and driver, the feature set and priorities for individual applications, and also enable us to determine common requirements across applications. We will then translate this feature set into an intelligent power module for commercialization and potentially engage with some of these customers for custom modules, primarily for EV and solid-state circuit breaker applications where multiple devices may need to be combined into a single package. The next step to be completed in parallel with further discussions with potential participants is to complete the fabrication runs for dicing and packaging and to pair these packaged dies with the driver for delivery to these initial participants in our customer testing and evaluation program. While each participant in the evaluation program will be working to their own schedule, we anticipate feedback from these initial companies will provide meaningful input into the design of our intelligent power module for commercial sales in the second half of 2022. One of our target end markets for B-TRAN is circuit breakers, an important advancement in a global circuit breaker market projected to grow at a compound growth rate of about 6% to almost $26 billion by 2027. As we have discussed over the last couple of quarters, we have and we will continue to pursue opportunities for government funding. In the second quarter, Diversified Technologies Incorporated was awarded a second project submitted in collaboration with us, a Phase I small business innovation research grant funded by the U.S. Department of Energy. This grant is to develop a B-TRAN-based low loss, 13.8 kilovolt alternating current solid-state circuit breaker, intended to be used in medium voltage power distribution and renewable energy and microgrid applications connected to the utility power grid. We see this application as a significant opportunity to capitalize on the benefits of solid-state circuit breakers, which prevent damage to downstream equipment, upstream power generators, and the grid itself by utilizing microsecond current interruption capability. We expect B-TRAN will make a solid-state circuit breaker significantly more efficient, smaller, and less expensive. Under Phase I of the SBIR project, we will design, fabricate, and pass a module that can allow for multiple devices to be assembled in a parallel configuration for high voltage rating capability. The project will utilize our current design, so we view this initial phase of the project as primarily a packaging and module development activity that enables B-TRAN to be used in applications like AC circuit breakers requiring more than 1200 volt capability. The B-TRAN-based solid-state circuit breaker is expected to limit energy at orders of magnitude faster compared to conventional mechanical circuit breakers. Since this project does not have the strict confidentiality restrictions of our U.S. Navy program, we will be able to provide more insight into the project as we complete the various milestones under the program. We will also be able to leverage the knowledge we gain on combining multiple devices in a parallel program for other applications, such as electric vehicles. We expect that B-TRAN will simplify cooling systems, enabling smaller, lower-cost air cooling instead of complex liquid cooling systems, due to its 50% lower conduction losses compared to conventional power semiconductor switches and reducing the component count due to B-TRAN's unique bi-directional capability requiring a smaller footprint. If Phase I is successful and we are awarded Phase II, the objective will be to build and demonstrate a 50 megawatt, 13.8 kilovolt AC solid-state circuit breaker in collaboration with DTI. 13.8 kilovolt is a voltage level commonly found in utility distribution networks. The resulting breaker design can be applied directly to the existing utility transmission and distribution systems, as well as microgrids. Following the demonstration, DTI would have the ability to sell the breaker to utility, industrial, and military customers and license the design to others for sale to end users. We would also expect to partner with other circuit breaker companies so they can design and bring their own B-TRAN-based products to market. For additional context, while direct current systems are expected to grow rapidly due to the long-term growth of solar, wind, and energy storage, the market today for circuit breakers is predominantly for alternating current circuit breakers, making up the majority of the expected $25 billion circuit breaker market. About 45% of this large circuit breaker market is for medium voltage breakers, which is B-TRAN's sweet spot. Medium voltage circuit breakers are used in the aging utility distribution system that brings power from high voltage transmission lines to the end user. This segment is in the most need of updating due to the age of the existing utility distribution system, its limitations in capacity, and its vulnerability to disruption. As more distributed resources like solar are added to the grid, and to accommodate EV charging and vehicle-to-grid applications, the distribution system is going to require substantial investment. Smarter bi-directional subsystems like solid-state circuit breakers will be needed. This is why we believe the medium voltage class of AC circuit breakers will be the fastest growing segment in the circuit breaker market and where B-TRAN can bring the most value because of its low conduction losses and fast switching times. The SBIR collaboration with DTI is a significant strategic opportunity, one that is incremental to our efforts with the U.S. Navy and critical to electric grid development. We are very excited about this project and look forward to generating promising results. Now let's move to our work with the U.S. Navy. As most of you are aware, Ideal Power is working with the Naval Sea Systems Command or NAVSEA in collaboration with DTI on the development and demonstration of a B-TRAN-enabled direct current medium voltage circuit breaker, as part of the U.S. Navy's strategic focus on ship electrification. This $1.2 million subcontract with DTI is funded under the Department of Defense's rapid innovation fund, the purpose of which is to accelerate the commercialization of high value, high-impact technologies. The project with DTI for NAVSEA is intended to develop and demonstrate a B-TRAN-enabled high-efficiency 12 kilovolt medium voltage direct current circuit breaker for the U.S. Navy. The subsequent objective of introducing a family of medium voltage DC circuit breaker products incorporating B-TRAN for sale to military, industrial, and utility markets. The major milestones under the program for us are the wafer fabrication runs conducted by Teledyne, our fabrication partner. This development process is iterative. So, we are performing multiple wafer fabrication runs under the program to yield wafers and results, to test and assess the trade-offs between maximum theoretical device performance and manufacturability incorporating our findings into subsequent runs. During the second quarter, we had a commercial packaging vendor adapt the packaging design initially developed by the University of Texas at Austin's semiconductor power electronics center for high volume production. The materials were fabricated and assembled in the drop packages to ensure a good mechanical fit and ease of assembly. Those trial assemblies went well, and the packaged dies were tested and characterized internally at Ideal Power using our driver, also designed by UT Austin, and they generated switching and other data consistent with our expectations and simulations. We recently began our next wafer fabrication run under the NAVSEA program, the completion of which is the next major milestone. In total, we plan five runs over a three-year program aiming to deliver an optimized power switch for a full-scale demonstration of a 12 kilovolt MVDC breaker in mid-2022. We are very excited about this progress, which continues to benefit our overall validation and commercialization efforts. To support our next phase of development and optimization, we are utilizing our strong cash position to modestly invest in our team capabilities. This year, we brought on board Jeff Knapp as Vice President of Business Development and Dr. Jiankang Bu as Vice President of Engineering, both highly qualified and accomplished leaders in their respective disciplines, and both are already making a significant positive impact on our development and commercialization efforts. In the coming months, we will make a few other additions to our teams to bring more capabilities in-house, particularly in applications driver design and testing to support our commercialization efforts. We are also in the process of qualifying a second domestic semiconductor fabrication partner that has strong experience making bipolar devices to ensure sufficient supply capacity for future potential large customers and to mitigate supply chain risk. We currently have a qualifying semiconductor fabrication run in progress with this new partner. The second fabrication partner will also give us more flexibility to provide both packaged devices and data that are separated from and not subject to the restrictions and confidentiality requirements of our NAVSEA program. Looking at the B-TRAN patent stake, we currently have 65 issued B-TRAN patents, with 27 of those issued outside of the United States and another 23 pending patents. Our current geographic coverage includes North America, China, Japan, South Korea, and Europe, with the potential to expand coverage into India. In the last 12 months, nine B-TRAN patents have been issued, with seven of the nine issued outside of the United States, including Ideal Power's first patent issuance in South Korea. In total, we continued our record of progress in the past three months from a development perspective. More notably, our recent announcements of test and evaluation collaborations with leaders in the electric vehicle, uninterruptible power supplies for data centers, and renewable energy markets mark the beginning of our commercialization of B-TRAN. These customer engagements represent a crucial step forward in establishing B-TRAN as a differentiated semiconductor technology addressing a large and growing market. Backed by our strong balance sheet and the recent additions of highly qualified business development and engineering leaders, we are well positioned to support our B-TRAN commercialization plan. Our focus for 2021 is threefold. We continue to engage with prospective customers and support existing customers in our test and evaluation program, to achieve our milestones under the NAVSEA program with a target of delivering an optimized package device for incorporation into the demonstration of a 12 kilovolt MVDC breaker in mid-2022, and to achieve our initial objectives under the Phase 1 SBIR grant, which is to deliver a low loss B-TRAN module suitable for subsequent incorporation into a 13.8 kilovolt alternating current solid-state circuit breaker, if we are awarded Phase 2 of the program. After we are able, we will apprise you of the companies we add to our customer test and evaluation program in the coming months. We will also update you as permitted on the feedback that we receive from the program and how this data feeds into our common requirements across applications that can then be incorporated into an LGM hour module that we will introduce to the marketplace in the second half of 2022. Ideal Power is on the cusp of realizing the potential of B-TRAN's unique advantages, bi-directional switching capability, lower switching and conduction losses, lower user costs, and improved and more compact thermal management. B-TRAN has the ability to solve the immediate needs of many power electronics applications in both high growth and high demand market segments or enabling new applications and market segments. We are making steady progress on our strategy, moving along our intended trajectory to differentiate patent technology that can substantially improve existing and enable new solutions for many of today's power needs. Now, I would like to hand the call over to our Chief Financial Officer, Tim Burns, for a review of our second quarter of 2021 financial results. Tim?
Timothy Burns, CFO
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 costs 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, and scheduled milestones under the program. We expect almost all of the grant revenue for this program to be recognized by early 2022. Operating expenses were $1.3 million in the second quarter of 2021 compared to $0.8 million in the second quarter of 2020, as we invested in research and development, sales and marketing, and other general corporate expenses. We expect research and development and sales and marketing spending to trend higher in the balance of 2021, as we accelerate the development of the B-TRAN technology, including qualifying a second domestic semiconductor fabrication partner. 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. The net loss for the second quarter of 2021 was $1.2 million, compared to $0.8 million in the second quarter of 2020. The second quarter of 2021 net loss includes the gain on forgiveness of long-term debt of $91,000 awaiting 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 cash burn was consistent with the expectation we provided in our first quarter call. We continue to expect our cash burn to increase in the second half of the year as we invest in both sales and marketing and research and development. We expect cash burn of approximately $1.2 million to $1.3 million in the third quarter of 2021 and we expect a full-year cash burn of approximately $4.5 million. Cash and cash equivalents totaled $25.7 million at June 30th, 2021. Our strong balance sheet since our February public offering has enabled and will continue to enable us to support and be a more attractive partner to the larger corporations that are participating and that we expect to participate in our customer test and evaluation program, modestly build out our internal research and development capability, and our product design team, bringing in driver design expertise in areas we are narrowing on third parties in-house. We modestly build our commercial team in front-end talent, including applications engineering expertise to support our customer testing evaluation program and B-TRAN commercialization. As of June 30th, we had 5,872,046 shares outstanding and 1,040,248 warrants outstanding. Including 455,937 stock options outstanding, our diluted shares outstanding at June 30th was 7.4 million. Our balance sheet gives us ample liquidity, particularly given our planned continued modest cash burn to fund multiple years of operations, and we are a well-capitalized partner for the larger companies that are participating and we expect will participate in the testing and evaluation of our B-TRAN technology. At this time, I would like to open up the call for questions. Operator.
Operator, Operator
Thank you. We will take our first question from Shawn Severson with WTR. Please go ahead.
Shawn Severson, Analyst
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 or going to pilot?
Daniel Brdar, CEO
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. We have some that we hope we can get over the finish line, but they are names that people will recognize if we are able to get them actually in the program. So far, we think we have got a pretty robust pipeline based on the relationships that Jeff Knapp and his experience working in the EV space is bringing the company.
Shawn Severson, Analyst
And when you look at all of 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?
Daniel Brdar, CEO
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 need for us to build out that infrastructure and they 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 since most of the large OEMs that are traditional car companies are already feeling a lot of pressure to catch up. So, the innovations driven by some of the new companies like Tesla.
Shawn Severson, Analyst
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?
Daniel Brdar, CEO
Yes, I do. What we are finding is that what the automobile companies are really trying to do is get to a common platform with as much commonality as parts as possible because they don't want to have all these different designs and parts and supply chain challenges that come with it. Part of what we are seeing is some innovation of just taking clean sheets of paper and saying, okay, this is the drive train that we are going to use for the entire class of vehicle. 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.
Timothy Burns, CFO
Thank you.
Daniel Brdar, CEO
Thanks Shawn.
Operator, Operator
We will take our next question from David Williams with The Benchmark Company. Please go ahead.
David Williams, Analyst
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 received feedback yet in terms of maybe how they are thinking about using the product and maybe their design cycles, just any color around just any of the testing and evaluation that you have ongoing today?
Daniel Brdar, CEO
Well, we don't have parts in their hands yet. But what we have been learning about is they have learned about the technology through a whole series of meetings with most of these customers. We are learning about how they are thinking about using the technology, 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. An example is matrix converters; matrix converters have been around for a long time, but the challenge has always been that there is not a good bi-directional AC switch out there, so you don't see them very often. That is a different story now. We see automobile manufacturers looking at matrix converters as an approach where previously they hadn’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. I think we will see some pretty innovative approaches come to market as some of the more established automobile manufacturers take the work that has already been done in this space and look at new ways to do it.
David Williams, Analyst
Okay, great. And then maybe from the automotive side, if we think about the qualification cycle and certification for those parts, that is a fairly elongated cycle, and it is a thing that we hear a lot from other semi especially in the power space. How do you think about your certification and qualification as you get into producing these products that typically have two to three-year design cycles? Do you think you can accelerate that, just kind of given your discussions with customers today? Or do you think that we are still some time away from that as you had mentioned, maybe being the last really take-off?
Daniel Brdar, CEO
Well, while we may be the last segment, we think it is going to be accelerated for two reasons. One is typically the OEMs rely on their Tier 1 suppliers to do a lot of new work on new subsystems and bring new technology to the OEM. That has changed, as we see most of the major OEMs have created their own internal teams to look at new technology and how to bring it to their products, because they are trying to shorten that cycle. 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. The other thing we are seeing that is really, it was a bit of a surprise to us, is that we talked to them about how they want devices packaged. They said, we will take the lead and introduce you to the packaging firms that know our requirements, and you can work directly with them knowing that you are on a mandate from us. So, we think that will certainly accelerate that cycle.
David Williams, Analyst
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 customers' hands or are there other hurdles maybe in terms of the technology or the capability that has to be overcome?
Daniel Brdar, CEO
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, and getting those potential end-users through that learning curve, that adoption cycle. Particularly as a small company, we are fortunate to have folks like Jeff who have established relationships. But without that, it would be tough to get to some of the right people in these organizations to 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.
David Williams, Analyst
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 sampling lock?
Timothy Burns, CFO
Yes. So we will always have a relatively small team. It is really just some 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. For us, it is manageable. We went from a $3 million cash burn last year, we are forecasting about $4.5 million here for this year. I'm sure we will probably be 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 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 did the raise back in February that we had multiple years of cash and a strong balance sheet coming out of it. So, capital is not a high concern for us at this point.
David Williams, Analyst
Great. Well, congrats on the progress guys. Looking forward to seeing the rest of the progress next quarter.
Daniel Brdar, CEO
Thanks, David.
Operator, Operator
We will take our next question from Kelly Thurman, a private investor. Please go ahead.
Unidentified Analyst, Analyst
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?
Daniel Brdar, CEO
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 want to know, and the response 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 these relationships advance and 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 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.
Timothy Burns, CFO
Yes. And as it relates to the second question that you had? I would say that is something that is a concern of ours as well as whether getting taken out too early is potentially. For us, we are trying to establish as many of areas as we can across multiple applications. 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 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 is a risk.
Operator, Operator
We will take our next question from Don Slowinski with Winslow Asset Group. Please go ahead.
Don Slowinski, Analyst
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 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 anything else we can consider? And can you give us some timing on these expected strategic development and commercial partnerships?
Daniel Brdar, CEO
Well, let's talk about what will happen, because we believe that B-TRAN is a new technology. We are better off bringing the intelligent power modules, packaged die 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 are actually going to be looking for commercialization. The other thing that we see the potential for is as our relationships with some of these companies start to progress, I think there are certainly opportunities to form a little bit more strategic relationships where we may be doing co-development for them, especially for the EV space, because their requirements are unique in terms of what they want from devices and packaging. I think there is an opportunity for us to get some funded co-development work that we would do, which would get us deeper in with some of these folks, but also generate some revenue on the development side to get ready for that market entry, which we can leverage with other people in that same market segment.
Don Slowinski, Analyst
Okay, so that wouldn't be commercial revenue, but development revenue?
Daniel Brdar, CEO
Correct.
Don Slowinski, Analyst
And then, what is your anticipated revenue model when you get to commercialization?
Daniel Brdar, CEO
I think it is a little bit too early to say, Don, what the revenue numbers will look like at this point. And I think we have a pretty good sense of what the gross margin numbers would be like. We expect around 50% to 60% gross margins. But in terms of the adoption rate, we are just too early in conversations with these companies to determine that. Next year, as we start getting some of that information, we will try to provide some guidance as soon as we can.
Don Slowinski, Analyst
Okay. Well that is a good margin profile. Thanks for taking questions and congrats again on all the progress.
Daniel Brdar, CEO
Thank you.
Operator, Operator
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.
Daniel Brdar, CEO
Thanks, everyone, for joining 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. We hope everybody has a good day, and we will speak to you again when we report the third quarter results. Thank you.
Operator, Operator
Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.