Atomera Incorporated

Good afternoon, and welcome to Adam Era, fourth quarter 2018 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal our conference specialist by pressing star zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press the pound key. This event is being recorded, and it 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, Sonya, and good afternoon, everyone. I'm Mike Bishop with the company's investor relations. Joining me on today's call is Scott Bibaud, Atom Air's president and CEO, and Frank Laurencio, Atom Air'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 for 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 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 prospectus supplement filed with the SEC on October 11, 2018. Except as otherwise required by federal securities laws, Ed Amer 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.

Thank you, Mike. Welcome to our update call, everyone, and I'm glad to have the opportunity to share with you our progress for the last three months and to summarize our efforts in 2018. After my remarks, I will turn the call over to Frank for a review of our financial results and we will open it up to questions. Atomera is a materials and intellectual property licensing company with a proprietary transistor enhancement film called Mears Silicon Technology or MST. Our company develops new materials designed to improve the performance of semiconductors and helps our customers integrate them into the manufacturing flow of both existing and new fabs. Our technology can address the slowdown in Moore's Law by providing new materials and techniques to the industry which will improve performance, lower power and decrease product costs. Atomair is not a manufacturer, we are an IP provider, granting customers the right to manufacture with our technology in exchange for a license fee and royalty payments upon shipments of their products. Atomera has three different sources of revenue, engineering services, license fees, and royalties. Customer epideposition work as well as integration consulting make up engineering services revenue. In prior years, we had rarely charged for these services, but we expect this revenue will grow as our customer engagements expand. License fees are generated as we sign license agreements with our customers and as they reach progressive licensing stages that grant them additional rights and trigger further payments to us. Once our customers start production shipments of MST enhanced products under a distribution license, we will start receiving royalties. In late Q3, we were happy to announce our first two commercial licenses with STMicro and AKM. We are happy to report that in Q4, we reached our biggest top line number ever with $150,000, including our first ever license fee revenue as well as continued engineering services NRE. Our revenues in Q4, although modest, represent a sustained growth in both licensing and NRE that we hope to continue through 2019. In the last few months, we have seen several announcements by important industry players talking about the challenges and continuing to follow Moore's Law. At CES, NVIDIA's CEO, Jensen Huang, declared that Moore's Law isn't possible anymore. Right now, Moore's Law is only growing a few percentage points a year. He then went on to talk about how material scientists continue to find ways of stretching today's silicon transistor technology. Applied Materials gave an interview in Semiconductor Engineering Magazine about Unsticking Moore's Law Through New Material Advancements. Today, due to the massive expenditures required, only three top semiconductor players continue to develop the latest bleeding-edge semiconductor process technology. It is becoming increasingly clear that the rest of the industry needs new material technology to keep advancing the performance curve, especially for high-growth segments like analog, RF, mixed signal, power, and others. Atomera's MST technology is a proven, available, and low-cost technology to provide that boost. Perhaps as a reflection of this trend, Atomera has continued to see very strong interest from both existing and new customers in using our technology to enhance their products. So the last three months have been very busy around here. As a quick overview to our reporting methodology, Adamera represents customer activity with the phases of engagement shown here. Phase 1 includes customers under NDA who are planning an evaluation of our technology. In Phase 2, we deposit MST film on customers' wafers and conduct physical characterization. Phase 3 is where customers incorporate MST during the production of their wafers and use the test results to justify licensing our technology. It is generally in phase three that we are most likely to sign license agreements with customers. In fact, both of our existing licensees are in phase three. Phases four and five are where customers install our technology in their fab, execute both manufacturing and distribution licenses, and transition to production. I'm pleased to share with you that during the last three months, Adamera has added one new customer to our engagement pipeline. Also, two customers have progressed from Phase 2 to Phase 3. With these changes, today we have 21 engagements underway with 17 different customers. Thirteen of those engagements are in the critical Phase 3, or integration phase. And we continue to have four customers working with us simultaneously on multiple nodes or technologies. According to the SIA, the semiconductor industry is exiting a very strong 2018 with more than 13% growth over 2017, even taking into account a slowdown in Q4, which prevented annual growth figures from being even higher. The expectation is that semiconductor R&D spending will continue to grow in 2019. In prior calls, we have spoken about how the industry's very high demand and capacity utilization were impeding our ability to get R&D wafers run through customer fabs. Although the industry slowdown was starting to become apparent during our last call in November, it had not yet translated into a change in our customer engagements. But in the last three months, we have seen a few positive developments from the industry slowdown. First, some of our wafer lots that were in customer fabs have started moving faster than originally forecast. meaning we will get results more quickly. Second, as customarily happens during a slowdown, more customers are coming to us to seek a possible improvement in their product portfolio so our discussions with new customers has expanded. At some point, if this slowdown continues, we may start hearing about tightening R&D budgets, but so far, those messages have not reached our ears or affected our projects. Instead, Our customers remain committed to finalizing integration and moving towards licensing and volume production as soon as possible. Q4 has been a very productive period for Atomera. We continue to generate new IP and solutions for an industry that desperately needs them. This was well illustrated by the strong interest in our December technical seminar at the IEEE's IEDM show in San Francisco. We have started discussion with new customers and advanced others to the stage where the likelihood of license execution is increased. Our revenue has begun to grow and diversify. We closed the round of financing in a very difficult market environment, adding solid institutional investors and extending our relationship with many existing ones. Atomera is executing very well right now, and we believe that this success will translate into additional license agreements across many segments of the rapidly growing semiconductor industry. Let me turn the call over now to our CFO to discuss our financial results. Frank?