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Operator
Welcome to the Ideal Power fourth quarter 2020 results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Caroline Capaccia from LHA. Please go ahead.
Caroline Capaccia
Thank you, Kevin, and good afternoon, everyone. Thank you for joining Ideal Power's fourth quarter 2020 conference call. With me on the line are Dan Vardar, President and Chief Executive Officer, and Tim Byrne, Chief Financial Officer. Ideal Power's fourth quarter and full year 2020 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 will turn the call over to Ideal Power's president and CEO, Dan Burdar. Dan?
Kevin
Thank you, Carolyn. Good afternoon, everyone, and welcome to our fourth quarter and full year 2020 financial results conference call. I'll begin by giving you an update on our progress and achievements toward our strategy to commercialize our B-TRAN semiconductor architecture technology. I'll also describe our objectives for 2021 which are to work toward completion of the NASD program for final device demonstration in mid-2022 and to complete the steps in our BTRAN strategy to enable commercialization. Then Tim Burns, our CFO, will take you through the numbers. Throughout 2020, we sustained momentum toward our commercialization goals and are moving into 2021 with continued excitement about our prospects for BTRAN as a differentiated technology addressing a large and growing market and with a balance sheet strengthened by our recent equity offerings to help make those prospects a reality. Let's start our discussion with our work with United States Navy. Our work for the Naval Sea Systems Command, or NAVSEA, in collaboration with Diversified Technologies, or DTI, remains on schedule. As background, in the second quarter of 2020, we signed a $1.2 million subcontract with DTI on the development and demonstration of a BTRAN-enabled direct current medium voltage circuit breaker as part of the U.S. Navy's strategic focus on ship electrification. The contract 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. Our project with DTI for NAVSEA is intended to develop and demonstrate a B-train-enabled, high-efficiency, 12 kilovolt medium voltage direct current circuit breaker for the U.S. Navy with a subsequent objective of introducing a family of medium-voltage DC circuit breaker products, incorporating B-TRAN for sale to the military, industrial, and utility markets. As we discussed with you on our last call, during the fourth quarter, we completed the first major milestone in the program, the first wafer fabrication run conducted by Teledyne, and we tested and selected wafers for dicing and packaging into B-TRAN devices using our lab-based packaging design. The results from this testing were incorporated into the device and packaging design and manufacturing process improvements for subsequent runs. Recently, we completed the second major milestone in the program and are in receipt of the wafers from Teledyne's second fabrication run incorporating those design and manufacturing process improvements, and we're now testing and selecting these wafers for dicing and packaging into BTRAN devices. The packaging for this run We utilize the new design developed by the University of Texas at Austin under the NAVSEA program. Over the two-year program, we plan a total of five runs over six quarters, aiming for optimized device delivery in late 2021, with the final demonstration of a 12 kilovolt MVDC breaker in mid-2022. The development process is iterative. We're performing multiple wafer fabrication runs, to assess the trade-offs between maximum theoretical device performance and its manufacturability. The purpose of these successive fabrication runs is to optimize the device design for performance and manufacturability. The third fabrication run with Teledyne, which is the next major milestone in the NAVSEED program, has begun and is expected to be completed in the second quarter of 2021. We've been through multiple project reviews with NAVSEED and continue to receive positive feedback on our progress to date. Under the NAFC program, during the fourth quarter, the University of Texas at Austin's Semiconductor Power Electronics Center completed its initial design of a new BTRAN device packaging. In collaboration with a commercial packaging firm, the UT Austin design was modified to enhance its ability to be manufactured in high volume. The new packaging design improves upon the lab-based packaging we've used previously. It's intended to provide the electrical connections, form factor, and thermal management required to incorporate a semiconductor device into an end-user product design. The new packaging will encapsulate the BTRAN dye into a package similar to those commonly available for commercial IGBTs, and this packaging design will be utilized for future BTRAN dyes under the NAVSEED program and our customer engineering prototype sampling program. As a reminder, Ship electrification is a high-priority initiative in the Navy as it can significantly enhance the energy efficiency of ship operations, improve their operational flexibility, and lower cost. Distributed power on ships makes them less vulnerable to attack by lowering their noise signature and enhancing their stealth capabilities. And BTRAN technology offers substantial size, heat, and loss reduction over continuously conducting semiconductor devices, such as ITBTs, without using complex, large, and heavy liquid cooling systems. We're very excited about the progress being made under the NAMC program, and this progress continues to benefit our overall validation and commercialization efforts. During the fourth quarter, the Semiconnective Power Electronics Center at the University of Texas at Austin also designed and fabricated an initial laboratory version of a B-Tran driver. Subsequently, as we announced earlier this month, the talented postdoc who designed the lab prototype of the device also completed a first-generation commercial version of a B-Tran driver. incorporating feedback from our testing. The new driver design removed some of the features that were included in the laboratory version, truly for debugging purposes, and also reduced the footprint of the driver by over 50%. The new driver design also adds additional operating capabilities to the programming of the driver, including an improvement to the switching performance through faster turn-off, resulting in significantly lower switching losses. The postdoc's work has been closely supervised by Dr. Alex Wine, the leader of the semiconductor power electronics center, and a world-renowned expert in power semiconductor devices and power electronics. The new driver has been fabricated and tested, and additional units are being fabricated for use in our engineering prototype sampling program. Our development of a B-TRAN dedicated driver is a crucial step in the commercialization of B-TRAN devices. B-TRAN is a double-sided device with unique architecture, and our developing, designing, and fabricating this driver removes the need for potential customers to do so, facilitating their technical evaluation of the device by presenting them with test-ready engineering prototype samples. The sampling program will provide engineering samples to potential end users and gather their feedback on the device, the packaging design, the driver, as well as general feature sets and priorities. This feedback will allow us to determine common requirements across applications that can then be incorporated into intelligent power module design that we plan to bring to market in 2022 as part of our B-TRAN commercialization. Offering an intelligent power module rather than a discrete device should accelerate B-TRAN's commercial adoption. With our new packaging design and driver design complete, we're now ready to engage with customers for our engineering prototype sampling program. To this end, we recently announced the hiring of a vice president of business development who joined our team in late February. Jeff Knapp brings an impressive and successful background in sales and business development for both silicon and silicon carbide devices, as well as established customer relationships in the electric vehicle and renewable energy markets, two markets which we're targeting for our customer sampling program. Bringing on a dedicated senior business development leader is an exciting step forward for Ideal Power as we begin collaborating with customers for the engineering sampling program and subsequent commercialization. Thanks to his strong semiconductor background and customer relationships, Jeff's been able to hit the ground running. He's prioritized the inbound requests we've received from potential customers, added numerous high-profile targets to the list, and is actively engaged with several of our highest priority target customers to drive customer sampling agreement disclosure. We're looking forward to being able to talk more about the high-quality companies and institutions we're engaging with for the program as we formalize our relationships. Looking at the B-TRAN patent estate, we currently have 58 issued B-TRAN patents, one more than last quarter, with 21 of those issued outside of the United States and 26 pending patents. Our geographic coverage includes North America, China, Japan, and Europe, with potential to expand coverage into South Korea and India. As part of the driver development process, we identified improvements in performance and device protection that enhanced the capability of B-TRAN, Patent protection for these inventions was filed with the U.S. Patent Office. Our focus for 2021 remains twofold, to achieve our objectives under the NAVSEA program with a target of delivering an optimized device in late 2021 for incorporation into the demonstration of a 12 kilovolt NVDC breaker in mid-2022, and to complete the steps in our BTRAN strategy, staging BTRAN technology for commercialization in 2022. With respect to NAVSEA, As we progress toward delivery, we continue to view our collaboration with VTI as a significant, potentially catalytic opportunity. VTRAN's performance characteristics over conventional power switches, including higher efficiency and lower cooling requirements, and thus smaller OEM product designs, enable the solid-state circuit breaker application. Its potential is high as a game-changer for distributed DC networks across a wide variety of military, industrial, and utility applications. including medium to high voltage DC transmission and distribution systems, microgrids, and electrical generation related to renewable solar and wind energy and energy storage. With respect to BTRAN commercialization, the engineering sampling program is now underway as we've begun to engage with prospective program participants targeting putting multiple sample agreements in place in order to gather feedback from customers that can be used to prepare an intelligent power module for initial commercial sales in 2022. Our commercialization efforts will focus on establishing strategic development and commercial partnerships, building commercial momentum, and laying the foundation for future BTRAN revenue streams. The IGBT market is already a $6 billion market estimated to grow to $9.4 billion by 2025. The key high growth segments within the IGBT market that we plan to target for initial commercial sales include electric vehicles and electric vehicle charging, solar and wind energy and energy storage, and data center uninterruptible power supplies. Since the transition from sampling to commercial sales will vary by market segment and individual customers, we expect to continue to add potential customers and applications to the engineering sampling program over time, while simultaneously commercializing B-TRAN for markets and applications already in the sampling program. The timeline for these phases will also vary as prospective customers, even those with similar applications, have different technology evaluation cycles and design periods for incorporating new technologies into their products. Overall, we recently achieved our second milestone with NASC, completed a dedicated B-Tran driver, created a manufacturing-ready packaging design, We expect to start announcing sampling agreements in the coming months that we expect to lead to initial commercial agreements targeting first commercial revenue in 2022. Our strong balance sheet will support our efforts and positions us to be an attractive partner to the corporations of size that we're targeting for our customer sampling programs. In all, testing results of B-Tran WaveFirst and Dye underscore our belief in IdeaPower's B-Tran technology that's potentially transformational with its unique bidirectional switching capability lower switching and conduction losses, lower user costs, and improved and more compact thermal management. With these advantages, BTRAN has the ability to solve the immediate needs of power electronics applications in both high growth, high demand markets, while enabling new market segments. We continue to progress well on our plans and are now entering a key step in our commercialization strategy, engaging prospective customers in our engineering prototype sampling program. As we enter 2021, we are very excited about our future as we have a differentiated, patented technology that can address a large and rapidly growing market while armed with a strong balance sheet to make our vision a reality. Now I'd like to hand the call over to our Chief Financial Officer, Tim Burns, for a review of our fourth quarter and full year 2020 financial results.
Carolyn
Tim? Thank you, Dan. I will review fourth quarter and full year 2020 financial results. In the fourth quarter, we recorded approximately $274,000 of grant revenue totaling $428,000 of grant revenue for the year with offsetting cost of grant revenue as we continued our work on the Navy-funded NAVSEA demonstration project under the DTI contract, which began in late June. Fourth quarter 2020 operating expenses were $1.1 million compared to $0.8 million in the fourth quarter of 2019. The increase in operating expenses in the quarter was due to higher research and development spending. Full year 2020 operating expenses were $4.1 million compared to $3.1 million in full year 2019. The full year increase in operating expenses related to B-TRAN wafer fabrication and driver development spending as well as higher non-cash stock compensation expense. Fourth quarter 2020 net loss was $1.1 million compared to $0.8 million in the fourth quarter of 2019 as a result of higher research and development expenses. Net loss in the full year 2020 was $7.8 million, inclusive of non-cash warrant inducement expense of $3.7 million, compared to $3.9 million in full year 2019. The full year 2019 net loss included a $0.8 million loss from discontinued operations, related to the PPFA operations, which we sold in September 2019. Fourth quarter 2020 cash used in operating activities was $0.7 million, flat compared to cash used in operating activities in the fourth quarter of 2019, and down from $0.8 million in the third quarter of 2020. Full year 2020 cash used in operating activities was $3 million, consistent with the approximately $750,000 per quarter earn rate that we had forecasted for 2020. During 2020, we raised $2.5 million in net proceeds from the early warrant exercise transaction that we completed in August, as well as an additional $0.6 million from other warrant exercises. Cash and cash equivalents totaled $3.2 million as of December 31, 2020. Our debt outstanding remains $0.1 million as, in the second quarter, we received a Paycheck Protection Program loan to temporarily subsidize payroll and facilities costs in a business landscape impacted by the COVID-19 pandemic. We recently applied for forgiveness of our PPP loan, and while our expectation is that this loan will be forgiven, we cannot provide assurance that we'll be granted forgiveness of the loan in whole or in part. Subsequent year end and through the end of February 2021, we raised an additional $3.2 million from the exercise of warrants. Also, in February 2021, we completed an underwritten public offering of 1.4 million shares of our common stock at $17 per share for net proceeds of $21.2 million. We expect to use a portion of the proceeds from the underwritten public offering and warrant exercises in 2021 to, one, modestly build out our commercial team, which started with bringing Jeff Knapp on board as our Vice President of Business Development. We plan on hiring additional talent to focus on the front-end customer-facing part of the business, including additional resources to support our customer sampling program and B-Train commercialization. Two, to build out our technical team, expanding our capabilities, and bringing on a few additional internal resources to provide expertise where we previously relied on third parties Three, now that we're engaging with large companies in our customer sampling program, qualifying an additional domestic semiconductor fabrication partner. And four, for general corporate and working capital purposes. As a result of these activities designed to enable the commercialization of our VTRAN technology in 2022, we expect an overall moderately upward trend in our quarterly cash burn in 2021. For the first quarter of 2021, We expect cash used in operating activities of approximately $850,000 to $875,000 compared to an approximately $750,000 per quarter cash burn in 2020. For the full year 2021, we currently expect cash used in operating activities of approximately $4 million, although our cash burn may be modestly higher depending on the pace of the commercialization activities that I just mentioned. As a result of the underwritten public offering and warrant exercises, and as of February 28, 2021, we have 5.9 million shares of common stock outstanding. We also have 1 million in the money warrants outstanding, as well as 0.4 million stock options outstanding for fully diluted shares outstanding of 7.3 million shares. At February 28, 2021, Our unaudited cash balance was $27.2 million. With our strengthened balance sheet, we have ample liquidity, particularly given our modest cash per earned, to fund multiple years of operations, and we are now a well-capitalized partner for the larger companies that we expect to participate in our customer sampling program. At this time, I'd like to open up the call for questions. Operator?
Operator
Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. We'll take a brief pause to allow all participants the opportunity to signal for questions. Our first question today comes from Ruben Roy of The Benchmark Company.
Ruben Roy
Hi, thank you. Thanks for taking my questions and congrats, Dan and Tim, for the continued progress through year end and so far in 21. Dan, I wanted to drill in a bit on the upcoming sampling programs. It's great to hear about the driver progress over at UT. And you did talk about some additional runs that are going to be happening at Teledyne over the next few quarters, several quarters as you're working with NAVSEA. What needs to happen to get sort of the sampling out to other customers going? Do we need to get several more runs going? Do you need a data sheet now that you have the driver? Maybe you can just help us understand kind of the timing and the puts and takes of getting to actual samples in the hands of customers.
Kevin
Sure. There's a whole variety of things that are happening. For those that are kind of already in the queue and that we're already engaged with, we already shared information with them in terms of device performance and some features about the driver, but there'll be more information coming about the driver. For those that are likely to be candidates, we're going to be putting together basically a product information sheet that we'll have to put on the website that will give people a lot of information about the device, its operation, the usual things that the technical team are looking at in terms of operating parameters, plus also information about the physical package in terms of its size, its dimensions, and also information about the driver itself. As it relates to actually getting the physical samples in people's hands, we are already having multiple copies of the driver that has now been designed and tested already made since, you know, that's done by a third-party PCB firm. So those are actually in queue, and we'll make more of those as we go along. And then for the devices themselves, we will either be able to take some from NAPC with their cooperation, or we'll do an additional run that is dedicated just for, you know, for the customer sampling program. We'll have some flexibility, and it's really going to be up to a discussion we have to have with NAPC in terms of how many they will let us use for the sampling program because it's not going to be a big portion of a run versus what needs to be used to satisfy the nasty program.
Ruben Roy
Okay. That's very helpful. So you also mentioned sort of the new packaging design, which is improving on your lab-based packaging designs that you're already using. And it sounds like the encapsulation of that BTRAN in a commercial package at some point is going to be similar to an IGBT. Maybe you could just walk me through how to think about that from the footprint perspective. How does it work with the driver in some of these end markets? Is the PCB going to be encapsulated in the package itself? And is it going to be a consistent package across some of these end market applications that you're targeting?
Kevin
Yeah, for the package itself, For those that are familiar with what IGBTs look like as discrete devices, it will look just like an IGBT with a fourth lead instead of three leads. So if you're familiar with what a TO247 looks like for an IGBT, it looks very much like that, the same dimensions. The only difference is just a fourth connection. For the sampling program, the driver and the package BTRAN will be physically separate. and the VTRAN package is basically soldered to the driver. So if you want to test multiple devices, you can solder the desolder, the package VTRAN, and we'll give you one driver that you can use for all of those. Our expectation is that based on what we're seeing for performance of devices and also the early feedback that we're getting from people that we're engaging with on the sampling program is The B-Tran itself is going to likely be identical for all the applications because we don't have to do the typical trade-offs that IGB manufacturers do where they're trading off conduction loss versus current kills. And so the nature of B-Tran eliminates a lot of those IGBT-specific operating issues. So at least for certainly the foreseeable future, the B-Tran die will be the same regardless of the application. The packaging will likely be the same for most applications. We may ultimately go to some bigger packages that have multiple DAI in a package, just like you can find with IGBTs. And changes that are application-specific are more likely going to end up being reflected in the driver versus the actual wafers that we have to fabricate at Teladoc.
Ruben Roy
Got it. Interesting. Well, I guess the last question for you, and then I decided to click one for Tim. Just on sort of the timing of you know, how to think about 22 and as we get to later stages of commercialization and revenues, you guys have been talking about potentially working with DPI on additional circuit breaker products, you know, as you flow through this now, see, you know, the objectives, et cetera, and potentially, you know, have circuit breakers for sale to other customers, industrial and otherwise. What's your thinking, Dan, in terms of, you know, timing of revenue? Do you think we'll be seeing, you know, kind of circuit breaker package products out in market? And then, you know, beyond that, we'll start to see some sales of actual B-Tran devices into other markets? Or do you think it's, you know, it's going to just depend and maybe we'll see a little bit of both as we kind of flow through 22?
Kevin
I think we'll actually see B-Tran device sales probably before we see our circuit breaker sales. And this really comes for two reasons. One is, well, DTI wants to bring out a variety of products. In fact, they're obligated to come out with a variety of products for the Navy and for the military more broadly. That is a longer sales cycle in terms of just how the military does things. There's an interest in the ability to sell them to industrial and utility markets, but that's not DTI's strong suit. So we fortunately are not constrained in our relationship with DTI or the program. So I think once the demonstration itself is successful, we'll actually engage with other companies that are more targeted at the utility and industrial segment and actually this would give them an opportunity to have something that would be a unique and differentiated product compared to what they already have. So I expect we'll ultimately end up with multiple players who are bringing a B-Trend-based solid-state breaker to market. But from what we're seeing, I think there's going to be earlier opportunities for things particularly related to electric vehicles and electric vehicle charging and renewables for actually selling D-Trans, particularly once we get to the integrated power module.
Ruben Roy
Okay, excellent. Great. And just a quick follow-up for Tim. Tim, you mentioned a couple of the areas that you're targeting for use of funds, all understandable given kind of where we are with progress on the technology. One thing you did note, which I found interesting, was the qualification potentially for an additional domestic wafer fabrication partner. What's kind of driving that at this point? Is it just kind of making sure you have multiple sources? Is it closer to commercialization or is there something going on at Teledyne or otherwise that's driving kind of how you're thinking about an additional partner there?
Kevin
Let me take the first crack at that and then get at his thoughts. There's a couple things that are driving it. We're engaged with some customers who will potentially be adopting our technology whose volume demand is going to be very big if we're successful with them. We know from the things that Jeff has done with them in the past and things that I've done with some of them in the past, they will require a second source. It's not an option. It wouldn't matter if we were making things at XFAB. They'll require a second source for risk mitigation because the impact to them from a loss of supplies is too big. We view it also as an opportunity just as our own risk mitigation. Now, we really like Teledyne. We like the team, the facilities. They have great expertise. But we want to make sure that, for example, the staff that we work with Teledyne in California, if there is an earthquake, we don't lose the ability to run wafers. So we think as part of our own risk mitigation, it makes sense to do it too. So we're basically just getting ahead of what we know the customer push is going to be to make sure there's a second source.
Ruben Roy
Right. That makes a lot of sense. All right. Yeah. Well, great. Congrats again, guys, and that's all I had for right now. Thank you. Thanks, Rudy. Thanks, Rudy.
Operator
Our next question comes from Don Slowinski of Winslow Asset Group. Good afternoon.
Carolyn
Thanks for taking the call.
Richard King
Good afternoon.
Carolyn
Congratulations on all your progress. Dan, as you collaborate with these new high-profile targets, as you put it, and there might be a little crossover with what you discussed with Ruben, but what end markets seem closest at hand other than the Navy, and could you provide maybe real-world examples where BTRAN is displacing existing IGBTs, and also just additionally, are there greenfield opportunities we haven't discussed?
Kevin
Yeah, when you think about sort of the things that are greenfield, you know, the DC circuit breaker is one of those where there isn't a market without better semiconductor switches, which we can provide. When we think about some of the more mature markets, let's call them mature, things like electric vehicles, a significant push is going on across the board in electric vehicles to improve efficiency because semiconductor losses are actually a major contributor to the inefficiency that currently exists for electric vehicles and electric vehicle charging. So a significant improvement in power switches for electric vehicles means either more range out of the batteries, or because the batteries are the highest cost component, if they wanted to reduce that cost component and get the same amount of range, a better semiconductor switch would allow them to do that. Same if you think about what's going on with solar energy and energy storage. Unfortunately, solar is kind of peaking from a power converter standpoint in terms of efficiency. There's not much way to get better. So you need a new technology to do that. And the alternatives have been to try and move to silicon carbide, which has been a long, challenging process and expensive. Here with B-TRAN, particularly if it's solar coupled with storage where you can take advantage of the bidirectionality, you can significantly impact the amount of useful energy that's available from that system to sell versus just staying with the traditional silicon I2B2. So are there...
Carolyn
In existing electric vehicle manufacturing, would you be displacing IGBT technology within that electric vehicle segment that's manufactured now, or is there another competitive technology in existence that competes against IGBT that will compete against B-TRAN? How does that play out?
Kevin
Yeah, it's predominantly IGBT that we're competing against in that segment. Electric vehicles also use MOSFETs for some of the things where it's really high switching frequency, but IGBTs generally don't play in the same market space. It's really going after the IGBT market, particularly as people look at trying to do traction drives, as they try to do more efficient onboard storage devices. It's really going to be all about leveraging where IGBTs play in that market space today.
Carolyn
Okay, that's very helpful. Well, I'll make some room for another caller, but thanks, and I look forward to hearing more updates in the future.
Kevin
Okay, thanks, Don.
Operator
Take care. As a reminder, ladies and gentlemen, please press star 1 to ask a question. Our next question comes from Richard King of Individual Index.
Richard King
Hello, Dan, can you hear me?
Operator
Yes, I can, Richard.
Richard King
Hi, just a very bad reception on this end. I wanted to get a better understanding of how you function, your company functions technologically. Do you, in fact, have your own technical team, you know, Bill Alexander type of people, or is most of the technological advancement coming from the partners that you're working with, the university and Teledyne and DTI and so on?
Kevin
Sure. Good question. The core B-TRAN technology is in-house. We have a great PhD that really is the lead for our semiconductor physics work, who really drives the actual device design, who understands wafer fabrication processes, and who provides the technical direction to Teledyne. The driver, we have outsourced that to the University of Texas at Austin, but that capability, now that we actually have a driver and we know that it will go through its own generations of evolution and improvement, is part of what we're looking to bring in-house as we add a few more people to the technical team. So we've done, I think, a pretty balanced blend of keeping our core technology in-house and well-protected and well-patented and a trade-off between patents and trade secrets and then relying on third parties for things that are more commercially available, like packaging designs and wafer fabrication.
Richard King
And how are those people at the University of Texas, for example, how are they compensated? Do they have some form of ownership, or do they have some kind of participation when things finally move to sales revenues and so on?
Kevin
Yeah, Richard, you hit upon what was probably the biggest challenge in getting our agreement in place with the University of Texas. We were not willing to share any technology rights for any work that they were going to do. We basically wanted to use them for their technical expertise, their facilities, and to do a piece of design work. It took quite a few rounds of negotiation to finally get that. Ultimately, they are basically a high technology engineering service for us, although they don't like to have it looked at that way. That is essentially the function that they're performing. We retained all the rights that came out of the work that they did.
Richard King
Okay. I really apologize. The reception is so bad and so choppy at this end that I didn't fully understand everything. But to you and Tim, congratulations on the progress you're making. You guys deserve a great deal of reward for listening as time goes by. I wish you all the very best.
Kevin
Thank you.
Richard King
You got it.
Operator
Our next question comes from Bruce Palmer.
Ruben Roy
Thank you for taking my call. Afternoon. Can you hear me? Yes, we can, Bruce. Thank you. Thank you. A little more on timing is kind of my question, and I know some of that might be hypothetical, but to just understand, related to the sampling program, and I know you said people will look at things over various times, but for example, if you're working with one of your high targets now, and let's say you sign an agreement for them to sample, let's say by the end of the second quarter. How long do you envision people are going through to determine whether they want to use it? Give you feedback, I guess, on the time you'll take to incorporate their suggestions for the driver, I guess, to get to agreement. So I just want to Kind of the timing as you think about it is a full agreement capable by the end of the first quarter of 2022 when you envision maybe a first agreement? What might be some expectations that we could look at?
Kevin
Well, you know, it's going to vary based on the individual company. And as we get a little further into this, we'll have a better color on it. The way we expect this to go based on the discussions we're having so far is that Once engaged, we'll be getting feedback from them as soon as they begin testing. So it's not a case of they go away for six months and come back and tell us something. So as part of their own evaluation work that they're going to do, as part of their own testing that they're going to do, there will be a lot of collaboration with our technical team to make sure that they understand the device correctly, they understand the driver and how it operates, and they understand the design margins that are built into the product. Some of them will want to drive things to break them, to just validate design margins. Some of them will just want to actually be able to replicate some of the information that we're going to provide for them. So we'll be getting technical feedback from their team very quickly after they start working with the device. Now, getting the feedback in terms of what they ultimately want and what the package looks like, I think that is probably going to take more time. And I think once we get a little bit further along with a couple of these players, we'll have a better sense of what that time period looks like. But it would be really just kind of guesswork on my part at this point.
Ruben Roy
Okay. And question, if you add a second fabricator and you're into 2022, is there a volume? I mean, can you guys crank out 2 million devices, 3 million devices? What kind of volume would you be able to do?
Kevin
Well, with Paladine, we can actually make all the devices that we anticipate needing over the next couple of years, and Teledyne, in our discussions with them, already has another facility identified where they could take this process to actually supplement what they can do with the fab we work with in California. So, you know, for me, it's really a matter of let's safeguard ourselves in case something were to happen to that fab, but also to make sure that if you're working, for example, with the automobile makers, they think in millions of units and they want to know that there is a path for you to get there. So I think having multiple players that collectively can get you there, I think just helps them feel comfortable that they don't have to worry about whether we can keep up with them if they start to adopt and ramp things up.
Ruben Roy
Okay.
Kevin
All right. Okay. Thank you very much.
Ruben Roy
Thank you, Bruce.
Operator
As there are no further questions, I'd like to turn the call back to Mr. Werner for any additional or closing remarks.
Kevin
Well, thanks, everyone, for joining our call today. We'll be presenting at the Investor Summit virtual conference next week, and we invite you to tune into the webcast. In the meantime, everyone keep safe, and we will look forward to speaking with you again when we report our first quarter results. Thank you.
Operator
Ladies and gentlemen, that concludes today's conference call. Thank you for your participation.
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