Hello, everyone and welcome to Atomera's Fourth Quarter and Fiscal Year 2023 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 website for 1 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 presentation format with participants in a listen-only mode. We will open with prepared remarks 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, the company's annual report on Form 10-K filed with the SEC on February 15, 2023 and its quarterly report on Form 10-Q filed with the SEC on November 1, 2023. 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 regard 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 also posted on our website. And with that, I'd like to turn the call over to our President and CEO, Scott Bibaud. Go ahead, Scott.

Good afternoon and welcome to Atomera's fourth quarter and full year 2023 update call. I believe that when we look back at 2023, we will consider it the catalyst year, where our first major business deal that drove our success was announced and our fourth quarter will be where the execution of that mission became most obvious. In addition, we've seen excellent results from customers and partners and strong advances in R&D that will ultimately result in more commercial licenses. We will dive into the details but first, let me give you a view of the industry status and how to flex Atomera. As you know, 2023 was not the strongest year in the semiconductor industry, characterized by negative growth cutbacks in CapEx plans and some slowdown in spending. As is usually the case in this type of environment, we saw increased interest in new design activity and plenty of fab capacity to run R&D lots. As we enter 2024, we are seeing much more optimism as growth prospects driven by new artificial intelligence capabilities start to emerge. We are happy to see this since our customers' cash flow will improve but we still expect to see modest fab utilization rates which benefits our business development prospects. This is really the ideal time for customers to adopt MST. Obviously, the big news of the quarter was the installation of our technology at STMicro's fab in Agrate, Italy. In case you are new to the Atomera name, in April of last year, we announced a commercial license agreement with STMicroelectronics that was important for our company in several ways. First, it validates our business model and the value that MST brings to customers when they truly appreciate its capabilities. Second, it is certainly an important signal to industry participants when a…

Thank you, Scott. At the close of the market today, we issued a press release announcing our fourth quarter and full-year results with 2023. This slide shows our summary financials. Revenue in 2023 was $550,000, all of which was recognized in Q4 and resulted from installation and acceptance of our MST technology at ST Fab. Our GAAP net loss for the year ended December 31, 2023, was $19.8 million or $0.80 per share compared to a net loss of $17.4 million or $0.75 per share in 2022. GAAP operating expenses were $21.2 million in 2023 which was an increase of approximately $3.4 million from $17.8 million in 2022. The biggest driver of the year-on-year increase was a $2.5 million increase in R&D expenses, approximately $1.4 million of which was due to higher spending on foundry services, metrology and other outsourcing and $739,000 of which was due to higher payroll and related costs. General and administrative expenses increased by approximately $634,000 reflecting higher payroll expenses as well as higher legal fees. Sales and marketing expenses increased by approximately $251,000. Other income net in 2023 increased by $802,000 as compared to 2022, mainly due to the higher interest rates on cash and short-term investments. Turning to our quarterly results; Q4 2023 GAAP net loss was $4.6 million or $0.18 per share compared to a net loss of $4.3 million in Q4 2022 which was also $0.18 per share. In the third quarter of 2023, GAAP net loss was $5 million or $0.20 per share. The lower net loss in Q4 compared to Q3 was due to our Q4 revenue. While GAAP operating expenses were basically flat at $5.3 million in Q4 in 2023 compared to $5.4 million in the preceding quarter as R&D expenses declined due to the winding down of activities…

Thanks, Frank. As you can see, we made great progress towards commercialization this past quarter and in 2023. We are doing everything in our power to get ST to production quickly but we also have an incredibly valuable portfolio of other potential customers who we are working to take into the commercial stage. Our team is confident that it's only a matter of time before we can announce license deals that will further solidify the potential of that Merus business for the future. Mike, we will now take questions.

Okay. Thanks, Scott. [Operator Instructions] And right now our first question comes from Richard Shannon of Craig-Hallum. Richard, please go ahead.

Thanks, Mike and thanks, Scott and Frank, for getting me on your call here and congratulations on the great success of indels year here. Maybe a couple of questions related to STMicro about the time frame to productization of 1.5 to 2 years here. It sounds like you're talking about some very interesting work with them. I don't want to get out ahead of my skis here but there's any reason to think that, that time frame could be at the lower end of that just because of all the engagement you've been having. I don't want to read too much into it but I just want to get your thoughts there, Scott.

Yes. As I said, we can't predict the timing of it. They haven't actually given us a schedule that they're trying to hit. However, I will say the progress we've made in just the last couple of months, we did -- since we did the installation is really quick in our experience and they have the possibility of moving very fast. Once MST is installed inside someone's fab, they can literally crank up the engines and turn out these new wafer experiments very quickly. So, there is some chance, I would say. I would say I'm still holding to the 1.5 to 2 years from our announcement date last May but there's a chance it could be on the earlier end.

Okay. When you say have we gotten the schedule from STMicro, would you expect that? And what kind of -- any way you can characterize what that means? Is that a normal process of bringing up any Sengupta process? Or is there any specifics to Atomera that create the deviations from the normal, I guess?

I don't think there's anything that's a deviation from the normal in this case. That being said, I am not privy to what they consider a normal development time frame for an analytic product like this. I know that for some of our customers, they may have done a lot of that development work in Phase III. And when they get to Phase IV, they have most of it done. But as people will remember for ST, they did their Phase III work a long time ago, kind of put it on the shelf and now they're kind of -- they're taking this and they're doing it for a brand-new process node. So, they do have some work to try to -- I mean, I think they're going to get very good results on their first run but their goal is to spread MST in a lot of places, so they can get good results across more and more components in their designs.

Okay, fair enough. And a follow-on question on the topic STMicro here. We've talked about this since the day that you announced this back in April of last year but you talked about -- I guess I'll refer to it as a halo effect of driving other companies to want to adopt MST. Maybe you could just characterize any of the discussions that you're having. And I guess the key for me is do people need to see this in production and actually chips coming out the factory before they pull the trigger? Or do you think this can be an accelerator catalyst before then?

It's definitely already an accelerator and catalyst. In conversations with customers now, we're discussing our business model and what we'd like to see from them, they say, yes, I recognize that ST is doing it and then we go on from there. But that's great because in the past, they could say to us, nobody has ever done this before. So why do you think we should do it? So, it's really a big game changer.

Okay, great to hear there. You talked about this last quarter in terms of -- and now you have -- I think you used the word license for MS TCAD with the large analog manufacturer. Is this an example of this halo effect? Or is it separate and even started before ST was publicized?

I think it's definitely an example of the halo effect. Of course, we were going to convince these guys before we announced ST and we actually did work with them. But seeing ST has caused them to take it to the next level. And I hope that the MSTcad is the first step in kind of moving along to doing an actual installation and license. Although we haven't announced that yet but that's what we hope is the trajectory.

Okay. Well, you kind of co-opted my follow-on question on this topic which is what are those next steps here, both internally that you could characterize plus any public events, so to speak, like the license as you just mentioned.

Yes. I mean if you look at what I talked about for the productization effort for ST, they are starting all of their work with TCAD; An MS TCAD is an add-on to a standard TCAD that adds the MST stuff into it. So, for any of our customers, it would be -- in the semiconductor industry, I would say the majority of manufacturers are a -- they want to see actual physical results on a piece of silicon before they make a decision. But for some of the players in the industry, they want to run simulations first and then make their decision to move to silicon. And so, I think it's really good that they're doing both paths. We're prepared to support them on both paths and it shows the seriousness. It's not a small deal to dedicate a few engineers and a few very expensive Synopsys TCAD seats to working exclusively on integrating MST into your process technology. And so we hope that goes someplace is good.

Okay. And I'm assuming since you described this as a large analog manufacturer that this is something they would install and use internally as opposed to working with somebody else like perhaps a current engaged Atomera customer. Is that fair?

Yes. I don't think they would work with an engaged Atomera customer. I think every company in the globe today is even if they're an IDM; they are probably fab light, so they use some outside foundry as well as inside capacity. So these guys could go in either direction but -- yes.

Okay. Two quick questions and I'll get a line here. I'm sure there are a couple of others to want to ask questions here but just related to GD1 here. Sounds like you made some progress in discussions with some business units there but it didn't detect anything that was imminent and you're just hopeful. I don't want to put words in your mouth, so maybe you can just characterize the dynamics there. And do you think you've gotten past I know at this point in certain other learning cycles you've gone through them with them, I think, over the last two -- I think it's been more than two years, correct?

Yes. I mean we've done a lot of stuff with them. We've shown them a lot of data. And by the way, we are continuing to do technical work for them to show them even more results of things that can be done with MST. We started in discussions with them on the business side in kind of in the fourth quarter. And no, we haven't completed that yet. I don't think that's that unusual. And obviously, we can't give details of exactly where we are on those discussions but these are the types of things that take some time. And over the Christmas holidays, we certainly didn't slow down but every big company has got a lot of things happening at the end of the year with goal setting and reorgs and compensation discussions and everything. And so, I definitely feel like they were a bit distracted at the end of the year. And so in January, we started to really try to get it ramped back up. And hopefully, we'll make better progress now.

Okay, fair enough. And the last question, I'll jump on the line here. You signed a license with an unnamed fabless RF customer, I think, back in like 2018 or something like that; I haven't heard much about them since. You talked every quarter about what sounds like some bridge engagement in RF SOI in general. Maybe just characterize what the specific customer has been doing since that announcement or recently? And does that overlap with any of the commentary on RF SOI you had mentioned today in the past...

Yes, sorry; it definitely overlaps. We're still working with that customer. We're still doing development with them and we hope that turns into something very good in the future; probably could have done a better job in my prepared remarks of connecting that particular customer with our RF SOI work but that is something that is continuing and we're quite excited about.

Our next question comes from Cody Acree of Benchmark.

Congrats on the progress this year. Frank, if we can be really clear on your guidance for Q1, you said ratable STMicro license. Can you just be clear on what you're expecting for the first quarter?

Yes. No, I was not referring to STMicro. I was talking to license revenue from MS TCAD. So yes, that's -- and those are not large amounts. So, I didn't go into details but I think in the past, the largest we've had of revenue from a single in this quarter from MS TCAD was under $10,000. So, this is a larger engagement but it's still kind of in that range. Yes, that's separate from STMicro.

Any impact on your delay with TSI? I understand the R&D push, the lumpiness, that will come in next year but -- or later this year. But is there any business impact on that delay?

We don't see any business impact from the delay. None of our wafers would go to a customer of any kind, whether it be -- certainly with ST, they're now installed and doing everything in quick turns in their fab. But for customers that would have been sending wafers to us for MST deposition, that never disflow through TSI either. TSI was solely a vehicle for us to be able to do internal R&D testing. And so, it has no impact on customers. In terms of longer-term R&D, yes, prolonged inability to work with the foundry would have some impact on us but we're not seeing that. We actually had a much higher spend in the first 3 quarters of 2023 than we had in previous years with TSI. Now part of that was price increases and kind of faster turnaround but we were able to -- as we kind of got into Q4, anticipate that they were winding down and run quite a few wafers that we can use for additional internal testing and for TCAD calibration. And so that's keeping us plenty busy now. And we are very close in discussions with signing up a new foundry. So, we don't anticipate that that's going to hurt us commercially at all.

Excellent. And Scott, maybe can you talk a bit more about this engagement with MST, SP and SPX, the new engagement that you mentioned in your prepared remarks.

Yes, I'm not sure what else I can say about it. So maybe you can just talk about what it means to license MS TCAD. So our MS TCAD is a software package that sits on top of Synopsys' TCAD software and it gives people to analyze the performance that MST could bring. This particular customer wants to do kind of a comprehensive analysis of how MST could get added into their product line. And so that means it's a fairly big installation for them. And so we're charging them at a monthly level to be able to use it and we're providing quite a bit of support to them. Now that -- what's frequently the case for customers who are experts in higher voltage technology is they aren't going to use our MST SPX or SP packaged product but they will look at how we do that and then they use the tricks we figured out to how -- so that MST can make their product better. So, we'll train them how to put all of the tricks in the trade into their development and then they can change their existing designs to get higher performance levels out of those. I talked a little bit about this trend where higher voltage ships is going to China. We're seeing that more and more. And so definitely, many of the players are trying to either make their existing portfolios, higher performance for lower costs so then compete better with those with the Chinese fabs.

And then lastly, just you mentioned some increased interest in DRAM around a chiplet strategy. Are you seeing engagements in the DRAM that are material? Or is this just more road map plausibility?

Now we've been talking to DRAM manufacturers for a little while now. We don't have anything to announce there yet but we definitely are still in discussions with a number of companies there. It's not specifically related to chiplets but it is something that I think would be used in chiplets just like any memory technology. But we're talking to people about DRAM. We're talking to people about other memory architectures and we're even doing some work on how MST could help to change memory architectures to make them more responsive to the needs of AI memory demands. So again, a number of things that we're working on in R&D that we haven't announced yet but that we hope will turn into something soon.

Would you characterize these as fairly early stage yet?

Our work with DRAM manufacturers is not early stage but some of the other work, I would say, is earlier stage, yes.

A couple of questions on the Q&A line here. Scott, you mentioned tech in the prepared comments. Are you -- the question that came in is, are you involved with Soitec Technology Smart SIC going into production with STMicro this year?

Yes. So we have been working with Soitec for a number of years. As you guys know, we've been talking about RF SOI and the benefits we bring there for a long time. And most -- I would say, a good percentage of that RF SOI that's delivered to the market is delivered by Soitec. So we have been working with them to ensure that our product works well with theirs. We have not announced any kind of a partnership with them or any kind of engagement with a joint customer, like the question you're asking about STMicro but we certainly hope that any customer who would be using RF SOI would be very interested in working with both us and Soitec.

All right. And one for you, Frank. There was a comment about the increase in sales and marketing expenses in the fourth quarter. Do you want to address that?

Yes. This kind of applies actually across all areas of operating expenses. But as you saw, we had the $550,000 of revenue in Q4 which is an important milestone. One of the things that impact our expenses across all departments is the annual bonus that we accrue as we achieve certain milestones. And so with an important milestone like that in Q4, that certainly increased the amount of bonus accrual in the quarter. Otherwise, though sales and marketing can be very spotty. There's a lot of travel and we certainly spent a lot of time this year traveling to customers. But I wouldn't read anything more into that other than just travel and overall across the company, accrual of bonuses which is not always linear every quarter.

Okay. And there's a request for an update for -- about the Chips Act and the news that we put out last year. And I was wondering, Scott, if you could provide an update on the CHIPS Act.

Yes. Of course, we talked last year about what -- I mean we think the CHIPS Act really provides a tailwind for us in many ways and especially the establishment of the new national semiconductor development center that they're talking about. So, we have gotten involved and a lot of that, as you know, our announcement is about our involvement out in Arizona with Arizona State University. But the other thing about the CHIPS Act is to -- in the early rounds of RFQs that chipset has been putting out, it's been about people building fabs. First, the big companies, building fabs and then some medium-sized companies. We weren't really eligible for those but we are doing a lot of work to get engaged with the government at different levels, so we could be eligible for work on the CHIPS Act in other areas. And so again, nothing to announce there but I would tell you that, that's something that we're working on.

Okay. And I see Richard Shannon has his hand up. Richard, did you have another -- a follow-up question?

I did, Mike. Thank you. Scott, I'm going to reask Cody's last question on a different topic. He asked kind of the maturity of work in the DRAM space and thanks for that answer here. But I'll turn around and throw it at the advanced nodes. And I want to get your update on and ultimately characterizing the situation there relative to DRAM or other dynamics and how that workflow is consistent with work you've done in other areas like power and RF SOI, etcetera.

Yes. I think it's interesting. It's not exactly the same type of work that we're doing in power and RF SOI. Let me address a few things. First, in the advanced nodes, the sizes that you're working with are so small that it really has required us to do new R&D to prove our capabilities to prove that we can develop a film and deliver it at the tiny process geometries that they have and when we do that if it can still be effective. And so, we have done that and we did that working in conjunction with some of the advanced node customers who've really guided us towards what they would need if we were able to bring them some solutions. We've also -- I think in the past, we've put some papers out and maybe even some white papers about some other things that are very useful. One of which is the surface roughness scattering improvements. This is quite technical but there are different scattering mechanisms that happen in transistors when they're sending electrons across them and they impede the mobility of electron flow. As you get to very, very small process geometries, one of the most difficult scattering mechanisms that's gotten very -- has gotten a lot worse is the surface roughness and we actually proved that MST is a very rare solution or at least improvement to surface runes scattering. And so that's something that's garnering attention from a lot of industry participants. And then actually, earlier in the fall, we put out a white paper and I talked a little bit on the earnings calls about random dopant fluctuation. Again, at very small process nodes, you can imagine if you have a feature on your transistor, that's only several silicon atoms wide and you…

All right. So, one last question from the Q&A line here and that is about MST at STMicro and if it's going to be used in more than the Smart Power products.

Yes, nothing to announce there yet, obviously. STMicro is a big company. I think they're learning about our technology and one of the things they can do with this new installation in their fab is just try it out on other technologies. So, we would be delighted if they tried something else out and decided that it was good for them. And we will certainly be encouraging that type of behavior.

All right. Well, if you want to proceed with any closing comments. Scott?

Sure. All right. Well, I want to just thank you all for joining us today. I'm pleased to have shared with you our efforts toward commercialization and technology development this past year. Please continue to look for our news, articles and blog posts which are available, along with investor alerts on our website, atomera.com. 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, Scott. And this concludes the Atomera Conference Call.