Atomera - Earnings Call - Q1 2019

Transcript

Speaker 0

Thank you, Sherry, and good afternoon. I'm Mike Bishop with

Speaker 1

the company's Investor Relations. Joining me on today's call is Scott Bibaud, Atomera's President and CEO and Frank Florencio, 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 up the call 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 and 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 ks filed with the SEC on March 1139. 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 Vivo. Go ahead, Scott.

Speaker 0

Thank you, Mike, and good afternoon, everyone. I'm glad you can join us today for a review of our first quarter results. After my remarks, I will turn the call over to Frank so he can go over 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 MIR 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 integration techniques to the industry, which will improve performance, cut power consumption and decrease product costs. Atomera is not a manufacturer. We are an IP provider granting customers the right to manufacture using our technology in exchange for a license fee and royalty payment upon shipment of their products. Before I share updates on the customer front, I'd like to tell you about some exciting outcomes from our recent engineering efforts. Q1 has been a quarter of breakthroughs for Atomera.

All of us within the company feel that we have turned a corner that will lead to accelerated success for the company. I'd like to share with you three of our breakthroughs, two in summary form due to customer confidentiality and the third in more detail. During the last three months, we've gotten some extremely promising data from our ongoing wafer runs. One of the big breakthroughs has been in the industry's more advanced production nodes. Atomera in partnership with UC Berkeley's School of Engineering and Notre Dame's Engineering Department has published papers in the past detailing the advantages that MST could bring to both high k metal gate and FinFET products.

These papers are based on simulation models and only limited experimental results since the advanced process nodes are not widely accessible and are extremely expensive. But they all show impressive performance improvements with MST. Over the last few months, we've had multiple test results from actual silicon runs, which have validated those fundamental mechanisms. It's always been Atomera's goal to have MST become a material included in the industry's international technology roadmap for semiconductors. And these results take a step closer to that outcome.

Unfortunately, since this is customer data, I can't share more details, but the results move us closer to monetizing engagements in the industry's newest product type production nodes and to ensure that MST has a presence in future process developments. A second set of customer results proves that our MST technology is likely to become an important enabling technology for the five gs cellular space. Several years ago, Atomera worked with engineers from Texas Instruments and Sematec in Austin to demonstrate the benefits of MST on silicon on insulator or SOI technology. We showed that MST provided approximately a 30% improvement in performance. During the last three months, we've gotten results from customer wafers which reinforce the great potential of MST in these technologies.

As you know, the high bandwidth of five gs cellular has driven a proliferation of extremely high frequency transmission bands in ranges as high as 100 gigahertz. To make integrated switches in RF devices for these challenging frequencies, the industry has turned to SOI technology. Based on analyst reports, market analysis and conversations with customers, we believe this will be an important growth trend in the semiconductor space. Some analysts have predicted a tenfold increase in dollar value of RF switches in a five gs phone over the four gs phones in production today.

Speaker 2

And it is now clear and validated that MST can be a key contributor to the performance requirements needed to be successful here. Already we are working with multiple customers in this space.

Speaker 0

So we now believe that MST will be an important technology for the five gs rollout. I'm most excited to tell you about our third breakthrough, which we also announced in a press release today and which we believe has the potential to transform the industry and Atomera. As you know, when Atomera went public, we had three customers who all were working with us in the analog market. Although today we are much more diversified, more than a third of our customer engagements are still in the analog space and it's a very lucrative place to be with about 15% of total 300 millimeter wafer output going to the space this year. For a long time, we've been talking about the challenges faced by these customers.

They're working on old technology, which has been so optimized over the last twenty five years that they're happy to get just a few percentage points of improvement in performance per year. In our first meeting with them we typically tell them we can bring a 15% to 20% performance improvement or more which seems too good to be true. But it does take time. Usually in the first run or two they've achieved greater than a 10% improvement and then we focus on fixing integration issues to get the number higher, maybe 14% on the next run and more on the next. Internally, we were also running our own R and D wafers and up until March, we were consistently able to get a 17% or 18% mobility improvement over a non MST baseline device.

And we were regularly making integration changes to move that number a little higher so we could help our customers get the same improvements. Since the industry looks at 15% to 20% as a target for within node improvement for a redesign, 18% should be good enough to justify going to production. But we also had the feeling we were not revealing the full potential of MST. Recently our engineers came up with a brilliant idea of how to combine our MST film with a smarter way of doping the transistor to get a much bigger improvement. Normally that doping technique is not something that the industry would use, but we believe that MST could prevent the problems that typically keep it from succeeding.

So we built some wafers, tested them and got some very promising results. Then we ran more wafers to quantify the size of the improvement we should expect. We just got the results back two weeks ago. Our internal test showed up to a 50% improvement when we used MST with our Smart Profile engineering. As you can imagine, our team was very excited.

For the more technical listeners, this was for five volt NMOS analog components typically used for switches and power management. Test results showed up to a 50% improvement in specific on resistance for short channel devices as well as a further improvement in breakdown voltage of the device. When we attempted to try the Smart Profile doping technique without MST, it did not show an improvement validating that it was MST that brought the benefit. I should emphasize that this is not a new film. It's just a different integration technique which unleashes much more of the potential of MST, meaning it should be relatively easy to adopt and should not cause a reset of testing efforts among existing customers.

Now I do want to caution that this is two week old data. We're just starting to share it with customers. But this is the type of breakthrough we've all been waiting for and it can mean several great things for our business. First, it is directly applicable to about a third of the customers we're working with today. Second, at these performance improvement levels, we believe customers will move much faster to license and to get into production.

Third, of course greater improvement also means our customers get more benefit, meaning there is more money in the value chain giving us more strength in our negotiations.

Speaker 2

Fourth,

Speaker 0

whereas customers may wait until a planned process change to incorporate an 18% improvement, we believe they will accelerate plans for a process change to take advantage of these higher performance levels enabled by MST Smart Profile engineering. And finally, although we're talking about this improvement for five volt analog initially, we believe it is applicable to even more process technologies possibly speeding our licensing efforts in many other product areas as well. As for sharing results, the good news is that this is data that we own. So we have a lot more freedom to share the results than work we do with customers. We'll be providing more information on this breakthrough technology through our blog, in white papers and with deeper analysis from industry reporters over the next few months.

Now let me bring you up to speed with the latest on our customer pipeline. As a quick overview to our reporting methodology, Atomera represents customer activity with the phases of engagement shown here. Phase one includes customers under NDA who are planning an evaluation of our technology. In Phase two, we deposit MST film on customer wafers and conduct physical characterization. Phase three is where customers incorporate MST on their wafers during an R and D run-in their fab and use the test results to justify licensing our technology.

It is generally in Phase three that we are most likely to sign license agreement with customers. In fact both 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. Over the last quarter, we've seen continued new customer interest and it shows in the growth of our total engagement count and especially with those in Phase one. In the last quarter we've had two customers drop out of Phase three.

One of the customers has been working with us for about two years but had a change in their company strategy which has caused them to cancel their program. We are in discussion with them about reengaging on another program so they have now been downgraded back into Phase one. The second customer who left Phase three was a smaller fast moving company who just started working with us late last year. Just as quickly as they decided to start working with us, they decided that they did not have the budget to sustain development. These customers are the first we've ever had leave Phase three, but I don't view either of them as indicative of a systemic problem.

Consistent with our commentary in prior quarters we expected that these fast moving customers may come and go quickly. And this is one that may come back in the future. Indeed with the new data we spoke about earlier I would not be surprised to see them reengage with us soon. Based on only about a week of discussions with customers, I also anticipate a rapid expansion of our pipeline over the coming quarters. Exiting this quarter, we are up to 22 customer engagements with 17 different customers, representing at least 50% of the industry's largest players.

Our two licensees ST and AKM continue to run wafers with us and make progress towards their ultimate production goals. I know there was strong interest in the investment community for progress updates on these customers, but we are limited by confidentiality agreements on what we can share. We can simply tell you that things continue to move forward with these two customers and the relationship is strong. As discussed on the last call, the current industry slowdown has not negatively affected Atomera. Although we have heard from one customer about R and D spending reductions, we have not seen this as a widespread trend in the industry.

Indeed, we believe it may be positively benefiting us because industry players typically look for technology improvements during slow periods and the throughput of R and D wafers through underutilized fabs are typically faster. The last three months have been truly a leap forward transform our engagements getting both customers and Atomera to meaningful financial results much more quickly. It is still early days, so we've only had a chance to share our results with a few customers, but their reaction has been very enthusiastic. The Atomera team is similarly excited. These results are indeed a breakthrough and we believe that in the future this period will be viewed as a critical turning point for the company.

Of course, we need to translate those results into accelerated revenue and move towards profitability. By achieving breakthrough results in three different technology areas, we believe we are in a better position to make that happen than at any time in our history. In the near future, I expect we will start to see a flow of new customers and faster time to license in production with existing customers. Why? Because MST is addressing the needs of a broad swath of the semiconductor industry with technology that can bring significant improvements today.

Let me now turn the call over to our CFO to discuss our financial results. Frank?

Speaker 3

Thank you, Scott. At the close of the market today, we issued a press release announcing our operating and financial results for the 2019. Our summary financial results are shown here, and I will now review them in more detail. Our GAAP net loss for the three months ended March 3139, was $3,500,000 or $0.24 per share compared to a net loss of $3,100,000 or $0.26 per share in the 2018. Our higher net loss was primarily due to increased operating expenses, which were $3,700,000 in the first quarter of this year as compared to $3,100,000 in the 2018.

Now let me share some color on the components of operating expense. Our R and D expense in Q1 twenty nineteen was $2,100,000 an increase of approximately $436,000 from $1,700,000 in Q1 twenty eighteen. This increase was mainly due to higher spending on outsourced fabrication and test, supporting both customer evaluations and internal R and D work and higher payroll and stock based compensation expense due to increased headcount. Our general and administrative expense in Q1 twenty nineteen was $1,300,000 which was an increase of $119,000 from $1,200,000 in Q1 twenty eighteen and reflected higher stock based compensation expense as well as higher benefits and insurance costs. GAAP net loss on a per share basis declined to $0.24 per share in the 2019 from $0.26 in Q1 twenty eighteen, primarily due to an increase in weighted average shares outstanding to 14,800,000.0 in Q1 twenty nineteen as compared to 12,000,000 shares in Q1 twenty eighteen.

Non GAAP adjusted EBITDA in the first quarter was a loss of $2,900,000 compared to a loss of $2,600,000 in Q1 twenty eighteen, reflecting the same reasons I discussed in explaining our GAAP results. Our press release and this slide contain a reconciliation of our GAAP and non GAAP results. As you can see, the major difference between our GAAP and non GAAP results is stock based compensation expense, which is a noncash item. Our stock compensation expense in Q1 twenty nineteen was $694,000 as compared to $545,000 in Q1 twenty eighteen. Looking now at the results on a sequential quarterly basis.

First quarter twenty nineteen GAAP net loss was $3,500,000 compared to a GAAP net loss of $3,200,000 in the 2018. The sequentially higher net loss was primarily due to an increase in operating expense from $3,200,000 in Q4 to $3,700,000 in Q1 as well as a decline in revenue from $150,000 in Q4 to $71,000 in Q1 of this year. Stock based compensation expense increased slightly to $694,000 in Q1 compared to $629,000 in Q4. Non GAAP adjusted EBITDA loss of $2,900,000 in Q1 compares to a loss of $2,700,000 in Q4 of last year, again reflecting the same factors discussed for our GAAP results. Our stock based compensation expense did not change significantly quarter over quarter.

Turning to the balance sheet. Our cash at March 3139, was $15,100,000 And at the 2018, our cash balance was $18,900,000 Our cash consumption of $3,800,000 compares to $2,800,000 in Q1 twenty eighteen and $2,400,000 in 2018. As has been the case since our IPO, cash usage in the first quarter of each year is higher than in other quarters due to the timing of annual payments that are expensed ratably over the course of the year on our income statement. Specifically, these larger first quarter items consist of the payout of cash bonuses relating to the prior year, payment of annual insurance premiums, annual stock exchange listing fees and certain annual software licenses. During the full year 2018, excluding proceeds from our October equity financing, we consumed $9,800,000 of cash and had $10,800,000 of non GAAP operating expenses.

On our February update call, I gave guidance that 2019 non GAAP operating expense would increase by between 1,000,000 to $2,000,000 in 2019 or to a range of $12,000,000 to $13,000,000 The reasons why we expect increased spending are increased wafer runs for internal R and D, which has already yielded the very promising results Scott described increased customer evaluation runs and our anticipated need later in the year to lease an additional Epi deposition tool. As in 2018, our cash consumption this year will be lower than our non GAAP operating expense due to noncash expense items as well as cash collections on licenses and engineering services. We are still in the very early stages of generating revenue, so we are not providing full year guidance on revenue. But our monthly run rate, excluding the annual Q1 payments, is consistent with gross cash use that is exclusive of cash collections of between 11,000,000 to $12,000,000 for 2019. Our headcount is now 17 full time employees, which includes one new engineer hired this January.

During Q1, we recognized $71,000 of revenue, all of which was from our two licensees, AKM and ST Microelectronics. I want to review our revenue recognition on licenses in a little more detail because the ASC six zero six standard is still fairly new, and our business model involves three different types of license grants. The three types of license grants are integration licenses, manufacturing licenses, and distribution licenses. Our licenses to AKM and STMicro are integration licenses, which grant those customers the right to integrate MST on their wafers. Under an integration license, Atomera deposits the film on wafers sent to us by the customer, and we ship them back to the customer who finishes building the wafer with completed semiconductor devices on them, at which point they perform physical and electrical tests.

Because we have to deposit our film on the wafer, this work is considered a performance obligation under ASC six zero six, and we can only recognize revenue when we have met that performance obligation, not immediately upon contract signing. If contracts specify the time and quantity of wafer delivery, we would recognize revenue as we deliver wafers to our customers. But when there is no specified quantity or delivery date, we recognize revenue ratably over the period during which the customer is entitled to receive wafers. That period could be explicitly stated in the contract, or if it's not specified, we use the period that we estimate for wafer deliveries. Neither the STMicro nor AKM contracts specifies delivery quantities or dates.

So the $71,000 of revenue this quarter is the ratable revenue recognition from licenses with those two customers. As of March 31, our deferred revenue balance was $34,000 Manufacturing licenses grant customers the right to deposit MST on their wafers in their own fab, but the customer can only use those wafers for internal testing. In order to sell wafers to third parties, a customer must buy a distribution license from us, and we will also collect royalties on actual wafers sold. I will provide additional color on the revenue recognition for manufacturing and distribution licenses on later calls as we announce those types of contracts. Given the ratable revenue recognition on the integration licenses with STMicro and AKM and the fact that we have not signed any new license agreements, we expect license revenue in Q2 to be roughly in line with Q1.

We also continue to work with customers on engineering services engagements. But as I've discussed on prior calls, the timing of engineering services revenue is difficult to predict because our work for customers is highly dependent on their fab capacity. Our outstanding share count as of March 3139, was approximately 15,300,000.0 shares. Now Scott will give a few summary remarks before we open up the call to questions. Scott?

Speaker 0

Thanks, Frank. Q1 was a quarter of major innovation for Atomera. Our team is very excited because it appears that we have unlocked a whole new level of performance in a wide variety of segments, all over just a few months. This new work will extend our already very strong IP portfolios, which this quarter has exceeded over 200 patents granted and pending. Our engineers continue to innovate with new ways to improve results for customers across more process nodes and technologies than we were a year ago.

Atomera is delivering compelling solutions to some of the most difficult problems in the semiconductor industry. And unlike other exotic options, the technology is available today. It is very clear that the Atomera of today is far more valuable than at any point in the life of the company. Our years of innovation investment are starting to pay off. We look forward to sharing information on our technology and business with you as we continue to build Atomera into an important and successful technology provider to the semiconductor industry.

Operator, we will now take questions.

Speaker 4

Thank you. Our first question comes from Cody Acree with Loop Capital.

Speaker 5

Thanks for taking my questions guys and congrats on the progress. Just a point of clarification Frank, I had to drop off for a second. Your cash burn in the quarter was what?

Speaker 3

$3,800,000 in the quarter.

Speaker 5

$3,800,000 And then you made the comment that 11,000,000 to $12,000,000 for the year, is that correct, in 2019?

Speaker 3

Yes, that's right. That's the Okay.

Speaker 5

So you were so let me just make sure I've got this correct. With your monthly revenue run rate, you are then expecting if it's 11,000,000 to $12,000,000 exiting 2019, are you expecting to be at the breakeven level by the end of this year on a run rate basis?

Speaker 3

Well, as I said earlier, we're not giving revenue guidance for the full year. But consistent with what I've said before, that is possible based on engineering services engagements or getting customers to what we call Phase four, which would be manufacturing licenses, which involve larger upfront fees than the integration licenses. So it's dependent on those on the revenue side, which again, as I said, we're not giving full year guidance.

Speaker 5

Yes. Thank you for that. Scott, the two engagements that dropped from Stage three, can you talk just a little bit more about the reasoning? Was there any concerns, issues about the performance they expected versus the performance they were seeing? And did that play into the decision at all?

Speaker 0

So as I mentioned two customers. One that we have been working with for a longer time. We were working in one particular segment with them and their company made a decision about what they're going to do in that segment. And so they didn't want to continue with further internal development for it. And so they, you know, they canceled that program.

We as I said, we're still in discussions with them about another segment. So I don't think it was performance related. The second customer yeah, I mean with them we didn't even really get a chance to complete a full set of runs and the analysis that we do and try to figure out how good or bad the performance was and plan for next steps before they just decided that they didn't have the budget. And so, you know, I've been talking about this for some time. We now, you know, we decided a year ago or more, we wanted to start engaging with some smaller customers because they move fast, they make quick decisions, we can work with their senior management directly and get buy in.

But at the same time, they also can decide to change their mind very quickly. And that's what happened in this case. You know, the remainder of our engagements in Phase III are, you know, are strong and steady. And I don't see this happening with other folks on the horizon. As a matter of fact with our new performance levels that we've been talking about just in the past week we've been in phone calls with customers.

I think universally they think this is really amazing results that we're presenting and we're going be meeting with all of them and giving details of it. And I wouldn't be surprised to see growth in our customer pipeline related to that.

Speaker 5

Thanks for that, Scott. And then lastly, just on the MSTSP with the initial applications, it looks like switches and power management. Do you have an estimation of the size of applicability of that technology? What kind of market you might be able to service just within that? And then where would the natural extension of that technology be beyond switches and power management?

Speaker 3

I think the data that we saw, you know, just looking at published market size data, about $469,000,000,000 semiconductor market for last year. If you looked at power management

Speaker 0

Yes, I mean the About 15%. Yes, about 15%. I mean from our quick analysis it looked like about 15% of the total market would be would fall into this category, with power and analog, right? But the and I think one of the things that you need to understand about our announcement is we have been working with a lot of customers on this specific five volt problem. As a matter of fact as I said it's more than a third of the customers that are in our overall pipeline.

And those customers the reason why we have so many customers working on the five volt problem is because it's a very popular technology. I think Cody you're very schooled in this analog space and know how important the five volt is for mobile phones and any kind of battery products and a whole bunch of other areas. And it's been a very, very intractable problem that we've been working on for a long time and our customers have been interested in a solution. I think they're very interested in our solutions at 1516%, 18%, 20%. At 50% it's like a game changer.

So I know this is early. I know it's kind of technical for many investors to you know just look at it and understand on the face of it. But I would encourage people to go out and like do a little bit of research on the importance of R ON for these type of products and you'll get a very good idea about the potential of it.

Speaker 5

Great. Thank you and congrats.

Speaker 4

Thank you. Our next question comes from Suji Desilva with Roth Capital.

Speaker 2

Hi Scott. Hi Frank. Congratulations on the progress made in these three months.

Speaker 3

Thank you Suji.

Speaker 2

So on the comment Frank you made about the ratable recognition of the AKM and STM revenues, you said that the customers did not specify delivery dates. So in that case what period is this being ratably recognized over? I just wasn't clear on that.

Speaker 3

Yes. So basically it'll all be recognized by the end of Q3.

Speaker 2

Okay.

Speaker 3

So we signed the contracts in at the beginning of Q4 last year. So basically, we'll have recognized all of the revenue from those two contracts during one year.

Speaker 2

So one year is the time frame. Okay, good. And then another question on the numbers you gave. You gave a customer total of 17 and engagements of 22 versus seventeen and twenty one last quarter. How did the two folks that dropped out of the third Phase three factor in here?

Is that are the one, two numbers net of those? Or are they still in there? Can you just clarify that for me?

Speaker 0

Well one of the customers didn't drop out entirely. They moved from Phase three to Phase one. So that customer is still in But the and they were just like one engagement. And then we yeah, I'm trying to remember. We had one or two customers enter into the Phase one.

Yeah so we had two additional engagements begin in phase one. And one was with a customer who added a second technology node and the other one was a new customer.

Speaker 2

That helps. I do remember you said you had another project going with the one that dropped the Phase three project. I understand why the customer is still there. That makes sense. Okay.

And my third question really is around the weaker macro environment that's happening now. And you know, you said kind of hypothetically that people would have more free time to potentially progress evaluating MST or would be able to run more tests. Are you actually seeing that manifest, Scott, in this environment, People being able to pull in projects that maybe would have taken a little longer given the environment?

Speaker 0

Yes. We did see some of that in Q1 and I'm hopeful we continue to see it. You know in my long experience in semiconductors I know a bunch of people on this call have the same. I've seen a lot of slowdowns that start in Q4 and by the second half of Q3 you've forgotten that they were there, right? So I hope we can I mean it's our goal to really try to take advantage of this time period when there's a little bit more space in the fab?

And so we're pushing our customers very hard to start a lot of wafer runs and get results that we can work with quickly.

Speaker 2

All right. I guess you appreciate it can be a narrow window and that's probably accurate. My other question is around the as you have these initial integration licenses, I know you're not giving revenue guidance or sort of notion of when manufacturing licenses come in. But what's the framework for us to think about how the timing of manufacturing licenses come in after a customer has begun the integration phase? What's the way to think about that progression?

Is it number of runs before they get there or some other Anything would help in terms of knowing when manufacturing licenses or what you know, how those would come on next?

Speaker 0

Yes. You know, we've always said that's the most unpredictable, the hardest thing to predict. You know, we set a goal for ourselves at the very beginning that when we start working with a customer in integration we would like to do three integration with the runs with them before they were ready to move to manufacturing. But I would not say that we've had that experience so far. And, you know, and all learning a little bit.

I still think that's the right goal for us. And I think with 50% improvement then we're going to get people who do a first run and get much higher performance numbers than they've gotten in the past. And maybe it only takes, you know, one or two more before they go to that manufacturing license and start transitioning to production. So yes, early days to see the reaction to how customers will change behavior based on this new data. But like I said in my remarks, we believe it will cause people to decide faster to get to numbers that will justify changing over to new process node a lot quicker.

And it will give us a lot more negotiating leverage to say hey you want to get 50% improvement you've got to pay us for the engineering services fees and you've to pay us the licenses quicker. So I think it's all giving us much more power.

Speaker 2

And can you remind us Scott how long a typical run takes? Is it one to two quarters or a few weeks or just

Speaker 0

No a typical run I think the fastest run we've ever done was about five months. But a typical run is about eight months. And that's from like planning the thing to actually reviewing the test results.

Speaker 2

That's great. My last question is one more on the technology side. The MST SP you announced you talked about the doping profile being a proprietary element of that. What specifically is it that you're able to do that is differentiated from, you know, potential competitors in the MST SP where you can manage the doping process and how that's proprietary? Thanks.

Speaker 0

No you know what? I'm not even going to say it's proprietary. So the SP is a technique that you know, the industry has known about for some time. But it just doesn't really provide any benefit. I mean if you were a new semiconductor designer you might go and say hey this would be interesting.

It might have an improvement but then when you implemented it you would find that it really didn't provide any benefit. It adds complexity without a benefit. So they haven't used it in the industry. It was the innovation that we came up with was that because of the characteristics of MST and its ability to block dopants and keep them in certain regions where you want to have dopants and keep them out of regions where you don't want to have dopants that if we use this technique in conjunction with MST that we would get, you know, a big breakthrough. And that's exactly what has happened.

So although the SP is some, you know, know how that we have and we do actually have the ability to patent the concept of using SP with MST the SP technology is really not a proprietary technique that no one has ever done before. And so, you know, this is one thing I think it's important to understand and I mentioned in my remarks but today when we work with customers we get to a certain performance level and then both of us put our heads together and we say what are we going to what's the next thing we're going to tweak the integration process to get to a much higher level of performance. That's expected. You're tweaking these things in the integration process. SP is basically a tweak.

It's not a small tweak. It's a kind of a breakthrough tweak obviously. But it's exactly what customers expect to be doing between runs to get their performance level higher. So we're not going into existing customers and saying hey let's throw out the film development and all the work you've done and start over. No we're saying hey let's make this next level tweak and see if we can get to a much higher level of performance.

So yes so we think it can be implemented pretty quickly by a lot of our customers.

Speaker 2

Okay. That's helpful Scott. Thanks. Nice job again guys.

Speaker 4

Thank you. Speakers I'm showing no further questions from the phone lines at this time. I would now like to turn the call back over to Mr. Scott Bibow for any closing remarks.

Speaker 0

All right. Thank you. I want to thank you all for attending today's presentation. As I mentioned Q3 has been a quarter of breakthroughs for us. And we really look forward to continuing to update with you with news on both our technical and business improvements through news articles.

We'll be putting up blog posts on this in the near future, white papers and all of those 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 call Mike Bishop and we'll be happy to follow-up. We look forward to seeing some of you during our scheduled marketing activities which we'll be announcing soon. Again we thank you for your support and look forward to our next update call in August.

Speaker 4

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