For the three months ended March 31, 2022
MANAGEMENT DISCUSSION AND ANALYSIS FOR THE THREE MONTHS ENDED MARCH 31, 2022
The following is a discussion of the financial condition and results of operations of Exro Technologies Inc. ("Exro", the "Company", "we", "our") during the three months ended March 31, 2022, and to the date of this report. The following management discussion and analysis ("MD&A") should be read in conjunction with the Company's condensed consolidated financial statements and notes thereto for the three months ended March 31, 2022 and the December 31, 2021 audited consolidated financial statements and MD&A, prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). This MD&A complements and supplements but does not form part of the Company's condensed consolidated interim financial statements.
This MD&A contains forward-looking statements. All forward-looking statements, including those not specifically identified herein, are made subject to cautionary language on page 12. Readers are advised to refer to the cautionary language when reading any forward- looking statements.
All dollar amounts contained herein are expressed in Canadian dollars unless otherwise indicated. This MD&A has been prepared as of May 12, 2022.
Exro is a clean technology company pioneering intelligent control solutions in power electronics that addresses major electrification transition challenges to help drive the adoption towards a sustainable electrified world. Exro's patented control technology expands the capabilities of electric motors, generators, and batteries. Exro seeks to accelerate the global transition to clean energy by providing products and services for e-mobility manufacturers to optimize the cost, performance, and efficiency of energy systems and electric powertrains.
The technology can optimize a wide range of electric mobility applications, from electric scooters to electric buses and larger. Most variable torque applications with the need for increased torque and speed will be a suitable opportunity for Exro's technology, especially in traction mobility and renewable energy industries. Given that Exro's technology focuses on lowering costs, improving performance and reducing energy consumption in powertrains, it is attractive to the mobility and renewable energy sectors as a technology that is anticipated to return incremental dollars to a user's bottom line. Further, it is also attractive for the corresponding environmental benefits it offers which appeals to organizations following Environmental, Social & Governmental ("ESG") policies.
Currently, about 40% of electricity produced is used in electric motors and related systems, yet the design and technology have remained largely unchanged for decades.1 In the electric mobility space, inherent limitations of traditional electric motor and power technologies available today are unable to support the torque and speed and speed requirements at a competitive cost for mass adoption. Instead, manufacturers are compensating for performance by using additional oversized motors and heavy multi-speed gearboxes.
Exro offers a new power electronics solution for system optimization through the implementation of its technology which increases efficiency, reduces system volume and weight, and expands torque and speed capabilities, the combination of which provides the ability to lower the system cost. Our power electronics technology provides a new brain via enhanced control for motors and batteries.
Exro's advanced motor control technology, the Coil Driver™, expands the capabilities of electric powertrains by enabling two separate torque profiles within a given motor. The Exro Coil Driver™ brings electric gearing to electric vehicles ("EV") by dynamically enabling multiple power settings in a single motor with Coil Switching technology. A major advancement in the sector, dynamic motor configuration that is done electronically enables efficiency optimization for each operating mode resulting in the reduction of energy consumption. The controller automatically selects the appropriate configuration in real-time so that power and efficiency are intelligently optimized. The Coil Driver™ is the first drive to enable intelligent coil switching while in operation, which allows a motor to switch coil configurations based on torque demands from the vehicle. That operation is similar in function to a gearbox in an internal combustion engine. This product has utility in many traction applications, particularly in the transportation and mobility sectors.
Exro is also currently developing a new battery management technology called the Battery Control System ("BCS"), innovated by integrating a battery management system (BMS) with a Coil-Driver inverter. BCS enables a next generation of Energy Storage System (ESS) solutions for first and second life batteries. EV battery cells reach end of life within 8-12 years. Exro's unique BCS technology extends batteries into second life for an extra 5-10 years in an ESS application, enabling greater use of existing resources and recycling to promote a circular economy. Exro expects the BCS to provide an improvement over existing battery Energy Storage Systems ("ESS") in reliability and versatility of power while enabling the repurposing of electric vehicle ("EV") batteries for second-life application. The BCS will facilitate cell-level monitoring and control of batteries in energy storage systems. The expectation is total control over the flow of energy, which would allow enhanced storage of energy, while also making battery energy storage solutions of any size more cost- effective. The first BCS proof of concept was completed at the end of Q4 2020, with an energy storage pilot project to demonstrate the BCS ongoing. A grid-simulated pilot of a 25kW energy storage system was successfully completed in Q2 2021. The development of a grid-connected energy storage system pilot unit to demonstrate commercial viability is currently underway. The BCS Stationary Energy
For the three months ended March 31, 2022
Storage pilot unit will be sent to UL (Underwriters Laboratories) for certification and a commercially viable product is expected to be ready in Q4 2022.
Exro's business model is to develop partnerships with companies that are established in their respective markets, specifically those that welcome potentially disruptive innovation in their product lines and have adequate internal engineering capacity, growing sales, and an existing customer base. These include companies that manufacture automotive equipment such as electric bikes, electric cars, and electric commercial vehicles. Manufacturers of electric motors, generators, batteries, electric axles ("e-Axles") also make ideal partners, since Exro's patented technology and engineering capabilities act as the "intelligence" to enhance performance characteristics of overall power systems.
Exro has built a foundation of intellectual property in power electronics and intends to protect and commercialize new innovations in this space. It is Exro's intent to either manufacture its inverters when the quantity can be supported by its low volume manufacturing facility capacity or license its technology where applicable for high volume manufacturing. It will also consider outsourcing and engaging in manufacturing partnerships to accelerate supply to customers where necessary. Exro believes this business model is scalable, requiring much lower capital investment than building a full high-volume manufacturing business. This approach offers the opportunity to address several market segments concurrently, incrementally and in rapid succession by building on earlier success. Exro will work closely with development partners and customers to integrate its technology into their products and develop new intellectual property for Exro.
Exro's technology and intellectual property is wholly owned in thirteen patent families providing or seeking global protection in strategically important countries. Today there are 25 issued patents and 12 pending applications, and 6 published applications. Exro also uses trade secrets to protect proprietary software and algorithms.
The Coil Driver™ is an inverter that integrates control of electric motor coil configuration into the power electronics. This gives the power electronics control of the electric motor coil configuration in real-time, providing a range of additional options, as opposed to a fixed motor configuration. This enhanced control allows the Coil Driver™ to intelligently coil switch, or in other words, switch between optimal coil configurations while in operation. The intelligent coil switching is what enables the power optimization of the electric motor for improved performance and increased efficiency as shown in Figure 1.
Figure 1. Performance charts are based on simulation results from a system comprised of 800V Coil Driver™ HV and TSA TMPW 38-26-8 permanent magnet synchronous motor and are subject to change.
The Coil Driver™ accomplishes intelligent coil switching with its advanced control algorithms and innovative drive topology. The controller will select the optimal configuration for a given operating condition and enable two separate torque profiles that expand the capabilities of the electric motor throughout the speed range. Traditionally, electric motor coils have been wired in a single configuration and the designer had to select the configuration that was the best compromise throughout the speed range.
The recent patent filing in July 2021 by Exro introduced that the Coil Driver™ technology can also be used as a grid-level power charger to deliver Level 1 to Level 4 charging capabilities and provide electricity back to the grid. This includes charging capabilities from renewable energy sources like solar and wind power. Currently, EVs require three different types of power electronics components to power the vehicles in motion and charge the batteries from the grid or renewable energy sources: a motor drive, on-board charger
For the three months ended March 31, 2022
("OBC") and external DC fast charging station. Exro engineers found that the Coil Driver™ technology can replace all three components, significantly reducing the cost and complexity of deploying EVs and the charging infrastructure at scale.2
Figure 2. The drawings are to illustrate how Exro's Coil Driver™ technology new feature can eliminate the need for onboard OBC or external charging infrastructure.3
With the innovative foundation of the Coil Driver's topology and advanced algorithms, the Company has been able to develop the BCS. The Company is optimistic the BCS can become a market leader in second-life battery energy storage solutions. The upfront cost for batteries is one of the major roadblocks to mass-market electric vehicle and electric technology adoption. In short, "second life" use consists of reusing a battery which no longer meets the requirements of one application but can still be used for a less-demanding application. Exro's BCS technology applies the principle of controlling energy at the individual cell level to lithium-ion batteries in stationary storage. Exro aims to improve battery performance and efficiencies, which could result in longer usage and a second life battery application.
To integrate its technology to different electric vehicle platforms, Exro has engaged multiple partners, who are defined and explained in the next section.4 This approach enables Exro to build the product portfolio that can serve as many product segments as possible. The estimated costs in the table below are based on management best estimates considering the information available on supply costs, wages, and timelines. There is a risk that the estimates and/or timelines will not be achieved.
Table 1. Product segments associated research and development costs
Scooters; electric bikes; recreational; light
Low Voltage (LV) - 48 to 100V
Fleet vans; electric buses; passenger vehicles,
High Voltage (HV) - 400 to 800V
long-haul trucks; and industrial vehicles
For the three months ended March 31, 2022
PARTNERS STRATEGY, PROJECT STATUS AND PRODUCTION READINESS
There is never a guarantee to the execution of a commercial plan, but we are confident in the road ahead. We have a robust pipeline of partners and are engaged in customer conversations which are the foundation to our target milestones for this year. In 2020, we created versatile partnerships across different applications and segments to validate our technology. In 2021, the Company continued to sign additional commercial partnerships and a strategic partner that fits alongside our partner model. In 2022 the Company continues to focus on delivery on its commercial and strategic partners in order to progress towards commercialization.
As the Company continues to grow and evolve, so do our valued partnerships. The partner model includes four different types of partners that will encompass our current product roadmap and encourage continued versatility alongside new partners. The four partnership types are:
Exro will work with Development Partners to develop technology beyond a proof-of-concept stage to validation in a relevant environment. The objective of this partnership will be to demonstrate the technology in new segments and applications with the intent of a future commercial product that will differentiate our partners. An example of a Development Partnership we have today would be Clean Seed as we develop our technologies to electrify the next generation of agricultural seeders.
Commercial Partners are interested in becoming customers for Exro's commercialized products but first require validated integration of our technology within their application(s). In some cases, this might require meeting highly regulated auto industry standards. The objective of this kind of partnership is the delivery of purchase orders for low-volume production of Exro products after successful integration. An example of a Commercial Partnership we have today would be SEA Electric, as we integrate the Coil Driver into SEA commercial trucks to enhance their performance.
Strategic Partners are focused on potential high-volume production making use of our technology. This partner may start in development phase and progress to operating application validation for long term serial production. This partnership is ideal for revenue models surrounding high-volume contracts, licensing, or contract manufacturing. An example of this would be our partnership with Linamar Corporation ("Linamar") as we co-develop an e-axle that will enable Exro's automotive strategy. Linamar is a leading tier one manufacturer of advanced mobility solutions for the automotive industry with customers that include top automotive manufacturers, commercial vehicle manufacturers and multinational delivery services companies.
Motor Partners will be an integral part of accelerating the delivery of our Coil Driver™ to market by enabling system solutions for each segment of our product line. These partners will work with us to develop an optimized motor to integrate with our Coil Driverᵀᴹ and provide a packaged motor and inverter system solution we can deliver to specific applications or market segments. An example of a Motor Partner we have today would be Traktionssysteme Austria ("TSA"), where we work together to optimize a heavy-duty traction motor to deliver alongside our High-Voltage Coil Driver™.
Here are our partnerships today within this model:
For the three months ended March 31, 2022
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Exro Technologies Inc. published this content on 20 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 May 2022 17:24:06 UTC.