Good afternoon. And welcome to the Atomera First Quarter 2020 Earnings Conference Call. All participants will be in listen-only model. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator instructions] This event is being recorded and will be available for replay for approximately one week. I would now like to turn the conference over to Mike Bishop. Please go ahead.

Thank you, and good afternoon. I’m Mike Bishop with the company’s Investor Relations. Joining me on today’s call is Scott Bibaud, Atomera’s President and CEO; and Frank Laurencio, Atomera’s CFO. If you are joining by telephone, please go to the Events section of our Investor Relations page on our website to follow a slide presentation that accompanies our remarks. That presentation will remain available on our website after the call. After prepared comments by Scott and Frank, we will open the call up to your questions. Before we begin, I would like to remind everyone that during today’s call, we will make forward-looking statements. These forward-looking statements, whether in prepared remarks or during our Q&A session, are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the Risk Factors section of our filings with the Securities and Exchange Commission, specifically in the company’s 2019 Annual Report filed on Form 10-K filed with the SEC on March 13, 2020. Except as otherwise required by federal securities laws, Atomera disclaims any obligation to update or make revisions to such forward-looking statements contained herein or elsewhere to reflect changes in expectations with regards to those events, conditions and circumstances. Also, please note that during this call, we will be discussing non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today’s press release, which is posted on our website. Now I would like to turn the call over to our President and CEO, Scott Bibaud. Go ahead, Scott.

Thanks, Mike. And thank you all for joining us to hear about Atomera’s progress during a very trying time in our lives and businesses. Let me start the call by saying that Atomera took measures swiftly as did many other California based companies to be sure our employees and their families remained safe during this pandemic. We have continued to work with customers and partners from around the world who have been exposed to all kinds of hardships, and we count ourselves lucky to have escaped some of the worst of this situation. I hope that you and all your families have been safe as well. In times like this, it would be reasonable for our investors to expect Atomera to announce major slowdowns or cancellations of customer activities. In fact, that has not been the case. Our reality during the last few months has been better than might be expected in these circumstances. Most Atomera employees do engineering design, simulations and analysis that can be conducted remotely. For the few who need to work with specialized tools, accessibility under modified conditions has allowed our work to continue to progress without significant interruption. Most of our customers’ fabs have continued to run during the past month. So our programs which were launched before the virus period have not been affected. Wafers continue to run, analysis is being reviewed and plans are being made for further work. As a matter of fact, over the last three months, we have grown our customer pipeline. As most of you know, very few of our customers have ever dropped out of our development programs. But one of them that had dropped out has now started a new program, which has advanced into Phase 2. Several of our existing customers have two engagements underway. But…

Thank you, Scott. At the close of the market today, we issued a press release announcing our first quarter 2020 results. This slide shows our summary financial results, and I will now review them in more detail. Our GAAP net loss for the three months ended March 31, 2020, was $3.6 million or $0.22 per share compared to a net loss of $3.5 million or $0.24 per share in the first quarter of 2019. GAAP operating expenses were approximately $3.7 million in both Q1 2020 and Q1 2019, while both revenue and interest income declined slightly. Our lower net loss per share was due to an increase in weighted average shares outstanding from $14.8 million in Q1 of 2019, to $16. 8 million in Q1 2020. Revenue in Q1 2020 was $62,000, compared to $71,000 in Q1 2019. Revenue in both periods was derived from integration license agreements. Our press release and this slide contain a reconciliation between our GAAP and non-GAAP results. Although GAAP net loss increased slightly compared to Q1 2019, from $3.5 million to $3.6 million, our non-GAAP adjusted EBITDA, which excludes most non-cash items, remained flat at $2.9 million in both periods. As is typical for us, the biggest difference between our GAAP and non-GAAP results is stock compensation expense, which was $629,000 in Q1 2020, compared to $694,000 in Q1 2019. Q1 2020 also included $138,000 charge related to a warrant that had been issued in connection with our pre-IPO financings. Non-GAAP research and development expense was $1.8 million in Q1 2020, approximately $114,000 less than our $1.9 million of R&D expense in Q1 2019. This decrease was due to lower outsourced fabrication and testing expense, which declined by $180,000, offset in part by new hire payroll expense. As we discussed in prior calls, during…

Thanks, Frank. As you have heard on this call, while the coronavirus has caused some minor delays in our programs, our business has continued to grow stronger during this period. Our engagement numbers continue to grow with an even larger stable of customers running multiple programs. Both Atomera and our customers continue to be committed to the JDA agreements we introduced in February. Our focused technical areas continue to gain notoriety in the industry and we are building on their success. Our new 300-millimeter epi tool is going to give Atomera capabilities that should enable us to accelerate programs in higher revenue potential process nodes. We continue to execute aggressively to take advantage of the momentum we’ve built during this period, and I believe that Atomera will exit from this coronavirus period stronger than ever. I look forward to sharing the results of those efforts with you in the future. Operator, we will now take questions.

Yes, sir. [Operator Instructions] Our first question or comment comes from the line of Cody Acree from Loop Capital. Your line is open.

Thank you for taking my questions and – and to stating a strong progress even given the current environment, unfortunately. Frank, could you talk about the expense associated with the 300-millimeter tool? And do you have any associated drawdown of your leasing expenses on your 200-millimeter tool?

Yeah. So those expenses on the 300-millimeter tool eventually do replace the 200-millimeter tool. So the exact sort of timing of when the new expenses commence and others would draw down really is dependent on the acceptance of the tool. It’s both delivery by the vendor and also acceptance by us. So there’s a little bit of uncertainty there. I guided an increase in spending this year over last year. And even with some reduction, we will have our operating expenses about $1 million higher than last year. That being said, only a small part of that is reflected in the tool, because, as you accurately pointed out, these are not going to be additive expenses; one comes in place of the other. I’m not ready to give exact guidance on the timing, because there’s a part of this that’s subject to when the acceptance takes place. And as you can imagine, that process will impact the amount of usage that we need of other tools. Scott even alluded to the fact that our current status quo is if we need to do 300-millimeter evaluations, we need to do some spending to get access to those tools at a higher cost. Until we have the new tool totally up and running, we can’t be sure that that won’t happen again. We have some buffer built in for that, should we need it. But, yeah, Cody, unfortunately, I can’t give you sort of an exact date of the switchover.

Sure. Maybe for Scott then. The JDA potential that you’re working with, even though the timing of actual the engagements may be unclear, if you had to look at the potential pipeline of signing of those JDAs, what does that look like? Or is there any way to quantify?

Yeah. I think, so we’ve been talking to people about multiple JDAs. And so a couple of different, I’d say timings that would come to the floor [ph]. With one of our JDAs, we thought we were very far along in negotiations on that when the coronavirus struck and slowed things down. Discussions continue on that. I’m hopeful that we’d be able to still close that one in the nearer term. I can’t tell you exactly when, for obvious reasons. When we negotiate with these large companies, they move at their own pace, with their own pace. Their decision making process is quite opaque to us. And so we have made it a policy to not announce when we’re going to close something until it’s literally closed. With another of our JDA customers we had - they are starting to worry about some cost, some cost concerns, and so that one will probably be delayed a little bit longer. But again, we continue to talk with them about doing the JDA. And so I think that one might be a little later out in the year.

I see. Thank you. And then lastly, just, Frank, what is kind of a base level, minimum level of cash that you’re comfortable operating the company with?

Yeah. That’s something that, obviously, we look at carefully. And we have no near term plans to raise any additional capital. But that’s something that we’ll continue to monitor very closely and monitor the market conditions, which, obviously, have been pretty volatile in recent months.

Great. Thank you, guys. Appreciate the help.

Thank you. [Operator Instructions] Our next question or comment comes from the line of Suji Desilva from Roth Capital. Your line is open.

Hi, Scott. Hi, Frank. Good job on the progress here in a challenging environment, for sure. I ask this question I think of Scott every call. Which of the nodes, technology nodes do you think, kind of three months advanced here, that you think has the best near-term opportunity to turn into licensing across the trailing edge and some of the leading edge?

Yes. Suji, I think, so we talk about a few different focused areas, especially we’ve been talking about RF SOI and the power management and areas. And so we actually believe that RF SOI has the potential to be an earlier ramp to production, because it’s using our MST1 technology which is easier to integrate and easier to adopt by a factory, basically because they’re kind of taking bulk silicon with MST on top of it and starting it at the front of their line. So we’re very hopeful about that one. But the power management business is an extremely large and lucrative market where we think we have a very strong technical offering right now with our MST SP technology. And so if we can achieve widespread adoption there, then that would be a much bigger business. So both of them are great if you think the - I mean, if the answer is which one would happen first, I would probably put my money on RF SOI. But the other one is also extremely attractive. We’ve also spoken in the past about our work that’s going on in kind of on the bleeding edge. And that one typically will probably take a little bit longer. Bleeding edge technologies take some time to develop. But the good news is, if we’re adopted as it goes to production, there’s a good chance we could be adopted across multiple players in the industry with that.

Okay. And then on the customer side, the new engagement clearly added an interesting customer, and now up to three engagements in one customer. Is that kind of traction that you’re getting, which is very impressive, is that kind of traction kind of a precursor indication that JDA type agreements are the kind of thing customers are interested in? Is that the right way to read the fact that you’re broadening out of the customers you already have?

Yeah, I think that’s actually - I hadn’t put that connection together or anything. But that’s very bright [ph] of you to pick that up, because that’s exactly what a JDA tries to capture. This customer who is expanded to three things right now, we started working on one technology with them, they were seeing good benefits. Then other groups started to say, on my technology this might be really useful too, so we did that. On the second one, both of them seemed to be having some nice looking results, and so now a third one’s coming onboard. What a JDA would typically do is that a central organization would evaluate our technology and then approve it for going to production. And then all of the different business units who are interested in using it could kind of take advantage of that early work and maybe even get it to production faster since it would be pre-approved. So yeah, so I think, we’re hoping that what we’re accomplishing with this customer who’s doing three programs with us now will also be - will be enabled by doing JDAs with other large customers.

Okay. And then my last question for Frank, perhaps. On the 300-millimeter tool you’re going to be putting in, as that gets running, is this the right way to think about this, that because the runs you were doing before were outsourced, it could be a cash burn benefit of having the tool in house? Is that the right framework to think about the benefit? Or is it just more productivity at the same cost?

I think it’s - well, it’s more productivity. It’ll be a slightly higher cost than what our run rate was in the past, but it’s also a much more predictable run rate of expense on it because we won’t have the episodic need to go out and get short-term capacity, which we have to pay a premium for and do it less efficiently. So, yeah, it’ll be on a steady-state basis, higher expense, but it’s a more predictable and more efficient use of our money for that.

Okay. That helps frame it. Thanks. Great job on the progress, guys.

Thank you.

Thank you. I’m showing no additional questions in the queue at this time. I would like to turn the conference over to Mr. Bibaud for any closing remarks.

I want to thank you all for attending today’s presentation. Atomera is pleased to be able to report our growing momentum and progress towards unlocking what we believe is our huge potential in 2020. Please continue to look for our news articles and blog posts to keep you up to date on our progress. You can sign up for them along with investor alerts on our website, atomera.com. Should you have additional questions, please contact Mike Bishop, and we’ll be happy to follow up. We look forward to seeing some of you during our scheduled marketing activities such as the Oppenheimer Emerging Growth Virtual Conference on May 12. And we thank you again for your support and look forward to our next update call. Stay healthy.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.