Hello, everyone, and welcome to Atomera's Third Quarter Fiscal Year 2021 Update Call. I'd like to remind everyone that this call and webinar are being recorded, and a replay will be available on Atomera's IR website for one year. I'm Mike Bishop with the company's Investor Relations. As in prior quarters, we’re using Zoom and we will follow a similar format with participants in a listen-only mode. We will open up with prepared comments from Scott Bibaud, Atomera's President and CEO; and Frank Laurencio, Atomera's CFO. Then we will open the call to questions. If you are joining by telephone, you may follow a slide presentation to accompany our remarks on the Events and Presentations section of our Investor Relations page on our website. 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 the 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 annual report on Form 10-K filed with the SEC on February 19, 2021. 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 with that, I would like to turn the call over to our President and CEO, Scott Bibaud. Go ahead, Scott.

Thanks Mike. Good afternoon and welcome everyone to our Q3 update call. The semiconductor industry is in a very unusual period, which we believe provides a tailwind for compelling new technologies and is creating the type of long-term opportunities that will benefit Atomera's MST technology and our licensing business model. So, before I go into the details of our last quarter, I'd like to take a few moments to share with you how the macro environment will affect Atomera strategy. Much has been made of the acute supply shortages plaguing our industry, particularly in automotive components. In reality, these challenges cut across the spectrum of electronic products and most predictions are that those shortages continue at least into 2022. As a result, fabs have been focused on solving near-term capacity constraints rather than executing on product costs and performance improvements. Of course, they understand that when times change, they'll need to react quickly with new technology, not only to help avoid a repeat of this situation in the future, but also to maintain or grow market share and protect profit margins as supply normalizes. In a dramatic departure from industry norms, foundries are announcing wafer price increases. Suppliers are demanding 12 months non-cancelable orders, and those are the capacity are stealing share from those without leading to record industry revenues and profitability. Supplier power is at its peak. The total IC market is forecast to grow 24% this year alone. So, our customers have built up significant cash war chest to invest in their future. Semiconductor industry is also being affected by geopolitical forces like never before. U.S., China trade tensions are driving governments around the world to look at building or shoring up self-sufficient semiconductor infrastructure to enhance their own security. The result of those three unusual macro factors…

Thanks, Scott. At the close of the market today, we issued a press release announcing our third quarter 2021 results. This slide shows our summary financials, which I will discuss in more detail. Our GAAP net loss for the three months ended September 30th, 2021 was $4.2 million or $0.19 per share. In the third quarter of 2020, our GAAP net loss was $3.6 million, which was also $0.19 per share. Net loss per share was the same in both periods because our weighted average shares outstanding increased to 22.6 million in Q3, 2021 compared to 19.3 million in Q3, 2020. Sequentially, GAAP net loss increased to $4.2 million in Q3 from $3.7 million in Q2, reflecting a $424,000 quarter-on-quarter increase in operating expenses and $52,000 of interest expense in Q3. Net loss per share increased to $0.19 per share in Q3 compared to $0.17 in Q2 due to the higher net loss, while weighted average shares outstanding increased only slightly from 22.5 million to 22.6 million. At this point, I'd like to talk in a little bit more detail about the accounting and release of our new Epi tool, which as Scott said in his remarks, we have now officially accepted. Acceptance is a key term because none of the lease contract formal acceptance triggers our monthly payment obligation. Although, we've been able to deposit MST using the new tool for several months now, we waited to tender our acceptance until we were comfortable that the supporting equipment around the tool could consistently ensure high quality wafers for delivery to customers even at the more advanced nodes. The lease has a five-year term and is considered a finance lease under GAAP, which means we account for it like an asset purchased with vendor financing. And we recognize both amortization…

Thanks, Frank. I'm glad we were able to share with you the highlights of this last quarter. As we get out on the road, it's clear that our customers appreciate both the benefits of MST and our engineering execution to showcase its potential. We believe customers will take advantage of the upcoming industry investment cycle to incorporate Atomera's technology and expand their competitive advantage in the market. Our team is excited to support this challenge and the results licenses will establish Atomera as a leader in the semiconductor industry. Mike, we will now take questions.

Thank you. [Operator Instructions]

Thank you, Scott. If you wish to ask a question, please click on the Q&A button and type in a question, and we will attempt to answer as many as we can. Alternatively, you can click the raise of hand button and we'll call on you live. Right now, our first question comes from Richard Shannon of Craig-Hallum. Richard?

Thanks Mike. And thanks Scott and Frank. Let's see, a lot of things to ask about here at Scott. First of all, I think I'll ask about your expanded pipeline in JDAs. If we saw your graph, I noticed you haven't had any change in the profile of engagements there. So, clearly, you're adding customers who are previous in the pipeline now into JDA. So, can you maybe talk about the reasons what's -- why -- what's driving that either applications or other dynamics that have created that situation right now?

Yeah. I think the reason why we're seeing more expanded JDAs is based on those two key technologies I was talking about with the RF-SOI and the MST SP. And what we're seeing is customers who are interested and starting to do work on that ahead of this capacity crunch ending. And so, we have to structure kind of a program that includes some TCAD, includes some joint R&D work upfront, and then to be ready for when wafers will become available for us to start moving forward. At least one of our JDAs is also with customers who we believe can run wafers much more quickly than others. Because as I mentioned in my remarks, I would say this isn't a perfect statement, but I would say the foundries are more impacted by the capacity constraints than some of the IDMs. And so some of the IDMs have a little more ability to continue to run R&D wafers today even in the capacity crunch.

That's helpful, Scott. Maybe just kind of quick detail on the topic of these new JDAs and the pipeline here. Are these customers that are like in Phase 3 or Phase 1, or kind of a mix, how would you characterize where they are as a whole?

Well, some are in Phase 3, some are in Phase 1. We have some discussions with other people that we hope will turn into JDAs that aren't in Phase 1 yet.

Okay. Great. That's helpful perspective. Let's see here, with your current JDA partner, I think you've given some timeframes that you generally expect to see them move to Phase 5 and then eventually Phase 6 how much you know, and have seen so far in the past quarter, those timeframes still fit.

I mean, remember the timeframe for the JDA, last quarter, I gave some explanations about how -- because this is -- Phase 4 being conducted by a central engineering group in the company. They will then deliver the technology out to other groups that will have to do some kind of Phase 3 level integration work before they go into Phase 5 for production. So, the timing is a little tough to call, but once they get into Phase 5, we think that timing is easier to understand. It's about nine months before they're into volume production.

Okay. Okay. That is helpful. Let's see here, you've talked a little bit about advanced -- kind of activity in advanced nodes here. The paper that you published, some was very interesting, although admittedly, a bit above my head or maybe below my head, whichever way to describe it here. You've noted in the last two conference calls some activity here. Maybe if you can discuss, relative to a lot of commentary we're seeing in the industry, we've had a lot of earnings releases and even analyst events from fabless suppliers and equipment makers here in the last few months. We kind of were revolving, what's going on here. Maybe you can discuss kind of the applicability of your technology to any of these approaches, extended FinFETs versus gate-all-around the nano sheets and things like that. Where can you, or maybe if it's easier to describe where you don't think you'd play, that'd be a great perspective.

Actually, we -- I think our paper gave a little bit of a hint at it, and obviously we're presenting a lot more than that to the potential customers who have the most advanced nodes, but we believe that MST brings very significant advantages, both to FinFETs and to gate-all-around through the dopant diffusion blocking capabilities that become more and more important as you get down to those very, very small process nodes. There's also a number of other things that we think can be very helpful in the construction of those gate-all-around and FinFET devices. Unfortunately, we -- one thing we can't really do is make our own FinFET devices and prove it out, because it's just a super expensive process. So what we're hoping to do is to work with one or two of those leading suppliers, but when we do get data from doing work with them, they won't let them -- share them with the industry or with investors, because they'll consider it private data. So, we have to talk at a very high level for that, at least for the time being without giving many specifics, unfortunately.

Okay. And on the topic of customers in advance, so, I think everyone's aware that they're basically only three companies who can really afford to invest at the very leading edge. So, is it -- are we kind of looking at a customer base for those nodes here, basically numbers in three, or do you also talk about or work with the fabless guys who want to work with those fabs? How do we think about the potential customer base?

Yeah. So, far we haven't really worked with fabless guys in that area, but we're trying to work with those top three, obviously, without giving any details about who we are working with. But also I would say we see the memory makers as other folks who they're not necessarily making gate-all-around or FinFETs, but they are making very advanced architectures to try to move to the next level of memory technology. And we also see a really great viability for MST there.

Okay. That's great perspective. Maybe two last quick questions. I'll jump out of the line and see if there's other questions here. Scott, you've said this is more than one conference call here, but is it your distinct belief that when you're entering production, you're almost certainly going to be intersecting a new fab and the new node, or do you think there's actually -- do you think a possibility of getting into a kind of existing node and then which one will be first? Obviously we're -- obviously very interested in the first one that gets across the finish line. How do you think about that?

I would say, and I think I've said in the past, we're doing a lot of work on RF-SOI and on the power products, they tend to be an older nodes and we definitely could intersect one of those in existing fab. Or what's interesting about some of the CapEx growth that I talked about is that a lot of those players have announced they're adding a lot of capacity into those older nodes. And obviously, it's very easy to throw in an extra Epi tool when you're building a $2.5 billion fab out there, that would be able to implement MST. So, we see great opportunity with existing fabs and with the build out of the newer ones that people are talking about.

Okay. That's helpful. Last question from me, I'll jump out of line. Scott, I've asked you this question off line, I think at least once in the last few years here. But thinking about the other kinds of activities that, that IDMs and fabless companies undergo to try to push the ball forward on cost performance, power, whatever. And obviously, they've been getting these advancements from their internal R&D teams maybe from equipment guys and other industry consortium. How do you get a sense of how you fit relative to all the other activities are going on and confidence that companies that you're interfacing with even in -- especially the JDA customer at Phase 4, that MST is going to be the -- if not an included approach to their future plans.

Yeah. It's a great question, because every one of these big companies has got a big pipeline of R&D things that they're working on and where do we fit with those? And I can only say that the fact that we continue to get new engagements and new wafer runs with those guys says that they consider us in the top tier of R&D projects they would consider. It's very normal for kind of a CTOs office to be looking at 30 potential things they can do in the next year. And maybe they're only going to fund the top 10 or the top eight, but in many cases, we find that we're among those top eight or 10. It's not true in all cases. And we believe that in the cases that we aren't included in the top 10, it's because the customer doesn't quite understand exactly how much benefit that we can bring to them. And we hope that we can help sell it to them more effectively.

Okay. That's excellent perspective. Thanks for that. All that details, Scott, I will jump out of the line. Thank you.

Okay. Hey, thanks Richard for the questions. We have a number of questions coming in, on the Q&A window here. And so, I'll just go ahead and summarize them. A number of the questions are obviously overlapping from the audience here. So, I'll just categorize them and ask a few. The first question with the build out of a number of fabs industry wide, does that build out will it hurt Atomera because once those are all active, the supply of semiconductors will greatly increase. So the question is, what's the impact to Atomera once the fab build out? Is this underway?

Yeah. I actually think it proves a great opportunity for us. So think about the semiconductor industry over the years, back in the 1990s, in the early 2000s, it was more common for there to be massive boom and bust cycles in the industry where people would build out a bunch of fabs simultaneously they'd all hit the market. And then suddenly there was excess capacity and profitability declined a lot of these companies. You can kind of see that the same thing could happen coming ahead here in the future. And there's been a lot of articles written about it. So, what's the reaction of companies when they build a fab and they can't fill it? Because when you build a fab, it becomes your first priority to maximize your capacity utilization in that place. It's incredibly expensive to run every single day. And so you got to fill it up as fast as you can. What would they do? Well, they try to -- I mean, one thing they could do is sell at a lower cost than everyone else. There's a chance they could do that. And if that's the case, MST could help by allowing them buy -- a lot of the things we present or about how you make chips, like for example, power management chips, so you can shrink them by 20% and then you could sell them at much lower costs. So that would be a great opportunity for someone who has put in a lot of new wafer capacity. For other players who are trying to compete against them, they need to figure out how to differentiate, to be able to look a little different and to be able to create their market share and grow it. So, definitely -- and as you dig down into the -- after the fabs are built, what's going to happen next and what's going to happen next. It just reveals opportunity after opportunity for MST. And so we're out there today talking to customers about that. And I can tell you that they see the same thing and their reaction is they'd like to start working with us earlier rather than later.

Great. A number of questions here. We put out a blog a while back on hiring a PR firm, and folks are wondering what the motivation there for the -- for hiring a PR firm.

Okay. Yeah. Great question. So as you know, we brought on a new Head of Marketing. He has lots of great ideas about how we expand our reach. One of the things that we're going to be trying to do, especially with these new technologies, like MST SP and RF-SOI is to more aggressively expand our reach beyond foundries and IDMs to the fabless players. Now, when you're talking about foundries and IDMs, you're probably talking about really 50 or 60 customers who really matter. So, it's an amount of people that with our team here, we can get our hands around and we know, but when you start adding in fabless customers, there's probably hundreds, hundreds more that you need to be concerned with. So one of the ways to get our word out to them is to start doing it through targeted media advertising, like with trade journals. And so that's one of the reasons that we brought on the PR firm. And I know that we brought them on in August and you haven't seen much from them yet, but I can tell you that they're working on things and you'll start to see much more activity from us in the near future.

Thanks, Scott. And then, we've seen a number of questions here on timeline. So, there are a number of questions about how long till Phase 5, and then how long has it been to royalty? So maybe give an overview on what you expect the timeline to be -- for both how long the JDA rolls into production, and then maybe what the royalty phase looks like, the timing on that.

Yeah. So, as you know, it's notoriously difficult to predict and we try to -- we try not to give exact forecast on that, but I can give you what I think is my best guess. So, with the JDA customers or at least with this JDA customer, as I mentioned earlier to Richard, we have their -- they've installed the technology in the factory, which is a huge step and will make everything run much faster. Once they're completed with the JDA, they're going to tell other businesses inside the company, they can start working with MST. Now those guys will have to take MST and integrate it into their products, which is kind of what we would call a Phase 3 thing, integrating into the products. But then they don't have to go through Phase 4 that part's done. They would jump straight to Phase 5 and then go to production. How long does it take them to adopt and integrate into their products? I think it will be much quicker than it has been traditionally, because they have the tool in their fab and they can build wafers really quickly and run a lot of experiments and get things done much more quickly, but it is very hard to call until the JDA end. And we start finding out what businesses adopt the technology and how much work they have to do to integrate them. So, I would -- I mean, hopefully I can -- I mean, give you an idea of that it could be as short as maybe nine months or so to do that Phase 3 redo before they went into production qualification, but it could be much longer. I can't really say for certain.

Okay. And then a question that just came in. With more customers moving phases, do you expect newer customers to move along faster, or is every customer unique on how they progress?

Yeah. So every customer is certainly unique, but let me just say this one interesting phenomenon that's happening. I've talked about it in the prepared remarks. We're engaging with a lot of customers today, who want to do development work with us, but they can't get R&D wafer, so what they're doing is they're saying, okay, let's do a bunch of TCAD and then do whatever we can without a lot of wafers. And then, so the day that we get wafers, we have everything ready to go really fast towards product development and hopefully getting to production quickly. Now, the way that we've defined Phase 1 and Phase 2 and Phase 3, people who are doing that type of work, won't really progress. They won't look like they're progressing through those phases very fast, because Phase 2 is about processing wafers and Phase 3 is about processing more wafers. So even though we're doing a lot of work, it'll look like they're still in Phase 1. We haven't figured out how to give insight to our investors in that yet, but we'll try to do what we can in upcoming calls to give you more insight to where we're doing more of that early teakettle work.

Okay. And then, after a customer goes into the royalty phase, we had a question that asks how -- for how many years does -- do you anticipate royalty stream to last?

Well, it's our going in negotiating position that the royalty stream will last indefinitely. Of course, everyone would probably try to talk us down to a much shorter time period. I would expect that we'll end up with a point where we're getting royalties on the order. Well, actually, I don't want to even say it because I'll be in negotiating that's myself, but I think it's reasonable that we would get royalties for long period of time, eight, nine, 10 years or more. If you think about what arm does, there's no sunset on the royalty that you get from a device in most -- I mean, they negotiate licenses individually with many customers. But in most cases they just continue getting a royalty as long as you produce the chip. And I think that's going to be the model that we're talking.

Okay. So, a question is that we referred to three areas for MST and MST SP, RF-SOI and advanced nodes. How much of the $450 billion market in percentage terms, do you think that these three areas cover?

Well, RF-SOI is a relatively small slice, it's growing rapidly. But only three or four years ago, it wasn't really a big factor. And it started to become very important, especially in RF products. So -- and you can -- if you want to see more and how fast that market's growing, you can look at Soitec, who's the key provider of those SOI wafers and they have some good data about how their revenue has grown there. For the MST SP, that is a huge market. Yeah. I hate to quote it because I don't know it off the top of my head, but it's on the order of several hundred billion dollars a year. No, sorry. Yeah. Okay. I'm not going to quote it because I don't remember the number straight up my head, Frank might know, but it's very, very large market. One of the -- there was an article today out in the Wall Street Journal talking about how this industry supplies shortages persisting. And one of the products they talked about, which was in shorter supply is something called power management chip. That is exactly what MST SP is designed to address. And it would not only give people the ability to make higher performance power management chip, but also produce them at much higher volumes because they could do shrinks if they implemented them MST SP. So -- and then of course, from a dollar perspective, the leading edge is the most valuable sector in the industry. The wafer count -- I mean, wafers they're running on there is not as high, but they sell each wafer for a very large amount of money. And of course, that would give us a bigger royalty opportunity. So altogether, I think we're talking about very, very large teams.

Okay. Well, I think we covered most of the ground that was asked in the questions. So, I'll turn it back to you for closing comments.

Well, okay. Great. I want to thank you all for attending today's presentation. We're very pleased to be able to share with you the results of the last three months and to provide a sense of the excitement we feel inside Atomera. 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 at atomera.com. We look forward to seeing some of you during our scheduled marketing activities, including the Craig-Hallum Alpha Select conference in November and the Needham Growth conference in January. Should you have additional questions, please contact Mike Bishop who will be happy to follow up. Thank you again for your support. And we look forward to our next update call.

Thank you. And this concludes Atomera's third quarter fiscal 2021 conference call. Have a good evening.