Q2 2022 Atomera Inc Earnings Call
Hello, everyone and welcome to <unk> second quarter fiscal year 2022 update call.
Like to remind everyone that this call and webinar are being recorded and a replay will be available on <unk> IR web site for one year I'm, Mike Bishop with the company's Investor Relations.
As in prior quarters, we are using zoom and we will follow a similar format with participants in a listen only mode. We will open with prepared remarks from Scott with BMO at <unk>, President and CEO and Frank Lorenzo Adam our CFO .
Then.
And we will open the call for questions.
Okay.
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.
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 15th of 2022 and in our prospectus supplement filed with the SEC on May 31 2022.
Except as otherwise required by federal Securities laws, <unk> disclaims any obligation to update or make revisions to such forward looking statements contained herein or elsewhere to reflect changes and 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.
Good afternoon, and welcome to <unk> second quarter 2022 update call.
Once again, we've had a very productive quarter with progress I look forward to sharing then after discussing how the newly passed shifts act effects. So I'll turn the call over to Frank to review, our financials and outlook.
In the first quarter, we saw existing customers re invigorated by the ability to start new wafer runs as fab capacity start to open up the.
Second quarter was where new customer interest in projects with existing customers really starting to grow again.
<unk> received a lot of inbound interest from customers at the industry's most important power and RF focused tradeshows as well as the large VLSI and semicon west conferences held over the last three months. These were great forms for at America have the in depth technical conversations necessary to deepen existing relationships and.
Gain a foothold with new customers.
We are starting to see the fruits of those efforts with our New addition to our customer pipeline.
We expect that trend to continue as the number of targeted applications increases in R&D wafer runs become more accessible as fab capability continues to loosen up.
The bigger news as that progress with our customers in phase III is going particularly well.
A number of important wafer runs underway with licensees J D H partners and other customers, which hopefully will yield.
Our results encouraging them to move on to more licensing phases and ultimately into production.
Although none of those lots are finished we have been able to look at some data prior to lot completion and have been very encouraged by the promising interim test results.
As you know, we use MST CAD with customers to predict what kind of improvements they will see.
Early indications are that the tea CAD simulations, which showed enough potential to initiate customer wafer starts are closely predicting the measured silicon improvements and in many cases, the actual results are exceeding both our expectations and those of our customers.
Results may vary when the final test data becomes available so it must be patient, but those early results have focused very excited.
Programs with all our licensees and GDA partners continues to make good progress with the exception of AKM, which is still recovering from a fab fire.
As you can see from this chart. We now have 26 engagements with one New addition to the first phase.
One customer has been phase two longer than normal which reflects an extended experiment, they're conducting in that phase different in those done by most customers. We believe that results from this effort will lead to a deeper engagement and licensing and production opportunities.
There are two important factors determining how fast an American make progress with new and existing customers our.
Our ability to meet face to face to gain trust and credibility and then our customers keep capacity to start R&D wafers in their fabs.
For the last two years, we've been held back on both fronts.
Today, we can travel freely in the U S and with only a few restrictions in Europe .
So far travel in Asia has been slower to recover but our first trips over there have gotten underway this quarter.
Industry capacity constraints are starting to soften which path, which is a positive for Adam era, but this trend is not uniform.
While memory manufacturers.
Sure notes at Idms, and foundries are starting to loosen up Manny.
Manufacturers are the most advanced nodes are still highly impacted so R&D starts in that area are still hard to come by.
Our goal is to take advantage of lower travel restrictions to get MST wafers started in as many customer fabs as possible and to build on our momentum we experienced in the first half of this year.
We are seeing clear signs of interest in our technology across certain segments of the industry displaying the domino effect I've spoken about in the past.
Engineers are more comfortable using a novel technology, if it's being used by others and we believe this is being initiated because of industry chatter.
Even before anyone has gotten into production.
In particular, our work on RF Soi technology, which is critically important to the <unk> cellular market is something which is interest across the sector because of its ability to solve difficult industry problem.
<unk> cellular devices can have up to 10 times the content of RF components as older <unk> devices at the same time, we hear consistent feedback from customers that continued improvement in key RF devices, such as switches and <unk> are increasingly hard to come by with internal process tweaks.
Accordingly, the path to customers, who can implement industry, leading RF device performance should be very significant.
So the interest from our customers and using MST to deliver such improvements is very exciting.
Work with multiple customers is also underway with MST SP for power devices at five volts and above this is an area that we will exhibit continuous growth over the next decade due to the emphasis on battery operation and electric cars and we believe <unk> will benefit from this trend.
Now I'd like to take a few minutes explaining quite important new discovery made on MSP for advanced nodes.
Adam <unk> technology is remarkable and a number of different benefits that can bring to semiconductor devices and it does so through several mechanisms, including importantly enhanced electric mobility.
While the elektron mobility improvements have been confirmed for many years, the underlying physics behind how MSC deliveries those enhancements have not been fully understood.
And silicon devices electron mobility can be impeded through three different types of electron scattering columbic phone on and surface roughness scattering.
Until recently, our assumption was that at very advanced nodes, MST, primarily improved phonon scattering leading to about a 5% overall improvement in elektron mobility, which is good but may not drive standalone adoption.
Recently, we completed some characterization of MFC devices at temperatures near absolute zero, which gives us a unique ability to separate out msp's impact on each scattering component.
To our surprise and delight it showed that MST enhanced electric mobility related to surface roughness scattering by over 50%.
Which is a massive improvement and something particularly important in the advanced nodes.
Okay. This is just one factor and a complicated transistor design, but the net result is that this new ability for MST to smooth the surface can bring greater than a 15% electric mobility improvement to the most advanced semiconductor processes.
As the process node get smaller the MSC benefit gets larger which means that MSP for only a modest incremental cost could deliver a full node a performance improvement now that is something that would be very compelling to designers working on the latest two or three nanometer gate all around transistors.
<unk>.
Because of this result is so new Ah full peer reviewed journal article will not be available for some time, but today, we did post a white paper describing the phenomenon in much more detail on our website and this will be used to start discussions with our advanced node partners.
Although a bit technical for most investors. It does provide an excellent background on our technology and explains a significant financial benefit for customers on advanced nodes.
When that when a breakthrough in MSC like this one has achieved our team then goes to work documenting how it can be used in different applications.
This is the valuable IP that forms the underpinning of Adama, Adam Arris business model and I'm pleased to report that as of the end of Q2, we have reached 318 patents granted and pending with particularly strong growth in our foreign patent portfolio.
As the industry has come to understand the benefits of MST and how they might use it in their own future designs.
It is becoming increasingly common for them to refer to our technology in their own patents.
This is a positive development for Adam era, as it not only validates mst's innovative value to the industry, but it also opens another path of dialogue for us and the customer.
Last week Congress passed the chips and Science Act of 2008 $280 billion package that includes $50 billion in funding to develop and enhance domestic semiconductor manufacturing capability.
Among the many reasons for passing this legislation is to make U S companies better at implementing the most advanced technology nodes, we've just been talking about.
But $2 billion of the act was specifically allocated to improving legacy chip production, which is one of the key areas, where MST provides a rare and much needed boost to the industry.
Tomorrow, we'll be working with chips Act administrators, and our U S legacy fab partners to educate them on how our technology can improve existing fab capacity throughput and performance while improving their profitability.
MST can enable those legacy fabs to meet the goals of this new legislation now.
Not sometime in the future and we believe chipset funding can help subsidize the cost of MST implementation at our Fab partners.
The chips Act also initiate a strengthened several R&D initiatives important to <unk>, including the National Semiconductor Technology Center, and our academic partners efforts.
Government advocacy for improving the U S semiconductor manufacturing prowess is another tailwind in conjunction with strong industry Capex growth plans that will be a positive for Adam era as they both provide important catalysts for adoption of our technology.
The chip fact is capped off three months of intensive customer and R&D progress.
The many wafer runs we have underway are progressing well and preliminary rollout results look very promising.
Our team is on the road and new customer activity is starting to pick up in.
Inside the company, we are meeting milestones.
Generating new and innovative IP and strengthening our team.
I think we've accomplished a lot this year, but I also believe that the second half of 2022 will outshine. The first because of the momentum we are carrying today and the customer opportunities in front of us.
Next let's have Frank review our financials.
Yeah.
Okay.
Thank you Scott at.
At the close of the market today, we issued a press release announcing our results for the second quarter of 2022.
This slide shows our summary financials.
Our GAAP net loss for the three months ended June 32022 was $4 5 million for <unk> 20 per share compared to a net loss of $3 7 million or <unk> 17 per share in the second quarter of 2021.
In Q1 of this year, our GAAP net loss was $4 $1 million or <unk> 18 per share.
The sequentially higher net loss in Q2 2022 over Q1 was mainly due to the fact that we recognize revenue in Q1 of $375000, but we did not recognize any revenue in Q2.
At the same time, our operating expenses increased only slightly over Q1.
GAAP operating expenses in Q2 were $4 4 million compared.
Compared to $3 $7 million in Q2 of 2021 and $4 $3 million in Q1 of this year.
non-GAAP net loss for the second quarter of 2022 was $3 5 million compared to losses of $3 $3 million in Q1, and $2 9 million in Q2 of 2021.
non-GAAP operating expenses last quarter were $3 $6 million, which was unchanged sequentially over Q1 and compares to $2 $9 million of non-GAAP operating expense in Q2 of 2021.
The increase in non-GAAP operating expenses in Q2, this year versus the same period last year with $697000.
This increase primarily reflects a $336000 increase in R&D expense due to our 300 millimeter tool lease which commenced in August of 2021, as well as increases of $170000 in sales and marketing and $190000 and G&A expenses.
Our cash balance at June 32022 was two point was $21 8 million compared to $24 5 million at the end of Q1.
We commenced our aftermarket or ATM equity program on May 31, 2022, and during the second quarter. We sold 31662 shares at an average price per share of approximately $11 20.
Resulting in net proceeds of approximately $345000 after sales Commission.
I'd like to point out that on our cash flow stable Q2, ATM proceeds are listed as a $185000 in cash from financing activities because all expenses related to the initial setup of the ATM are netted against the proceeds in that period as required by GAAP accounting rules.
Similar levels of ATM related expenses will not recur in future periods.
As of June 32022, we had $23 5 million shares outstanding.
As Scott mentioned in his remarks, we have made good progress with our <unk> customers and other engagements.
At this time, we're not yet in a position to predict when we may reach revenue generating milestones under our second JV, which we announced last quarter.
We're very happy with our preliminary results are promising and we have increased and they've increased our confidence that this JV will result in us reaching paid licensing phases and recognizing revenue.
Since we cannot yet predict the timing our guide for Q3 revenue is zero.
And consistent with our past practice, we're not providing revenue guidance beyond the current quarter.
On the last update call in May I guided full year non-GAAP operating expenses for 2022 would be in the range of $15 two five to $15 $75 million.
I am happy to announce that we've added two new engineering head count in July .
And we're catching up on our plans to grow or to grow our team.
As a result of these hiring delays our expenses are trending lower than we originally planned and.
And on reducing the full year guidance for non-GAAP operating expenses to a range between 11 points.
Between $14 75, and $15 $5 million.
With that I'll turn the call back over to Scott for a few summary remarks before we open the call up for questions.
Got.
Thanks, Frank for the past three months have been very positive for Adam era with solid progress on the customer front and breakthroughs coming in R&D. Our team is growing and the pace of innovation is exceptional.
Within person customer visits back underway, we expect to improve on the results. We have delivered in the first half of the year and our team is hard at work, making that happen the.
The macro trends in the industry, including strong Capex in combination with the new chips and Science Act continues to provide a very favorable environment for MST adoption. We definitely believe we will be reporting more good news soon and I look forward to sharing it with you in the future.
We can take questions now.
Alright, Thank you Scott.
If you wish to ask a question. Please click the Q&A button at the bottom of the zoom window, then feel for you to type in your question and I will do my best to aggregate the income inquiries and relay them to management.
Lee you can click the Raytheon button and we May call on you to ask your question lives.
And right now our first question comes from Richard Shannon of Craig Hallum, Richard If you would kindly on mute and turn on your camera you may begin.
Great. Thanks, Mike can you hear me yes.
Yes, we can excellent thanks, Scott and frankly, we're having me on here.
A lot of interesting commentary from the call.
No particular order here.
One thing I just wanted to get an update on the on the <unk> contracts and Frank gave US a brief comment about.
I'm not sure when the second G&A will necessarily get to revenues here, but maybe you can talk about the progress here and I guess my two specific questions here with the first Jay I think you are just working with a single business unit after having transitioned out of work with the central engineered organization wondering if any progress there or multiple business units and then I guess with the <unk>.
J D here.
Sounds like you've made some progress overall here, maybe you can just kind of add a little bit more color as to what progress you have made with the second one.
Yeah, So let me.
I'll start with the second one so.
I think we mentioned when we talked about originally talked about J D that we would be working with a no kind of a lead business unit that was going to be pushing to move very quickly.
And we have been pleased at the pace that things have been going.
The industry is still somewhat impacted so at a really.
Hum.
Had more capacity available I think we would have we would've expected to move even faster but.
But good.
The progress so far but as I said in my commentary, we haven't gotten the final results. So we don't really have a good insight into what.
Happen next we got most of the.
The legal work done.
Okay.
Hum.
I'm getting some some echo deal.
Yes.
Yes.
Yeah, We got we got most of the legal work done before we signed that J D E and so we believe that we will move pretty quickly once we go from here.
Yeah.
On the first J D a.
Probably.
Well I can't give a lot of details about where we are with specific business units until.
Until they reach a milestone that we can announce something with them I can tell you that we continue to work with.
With that.
That first J D a customer pretty intensively.
<unk>.
And we're hopeful that we'll be able to get to a point, where we can make some announcements of it late.
Later, this year, but I can't I can't really give much more insight from that.
Okay Fair enough Scott Thanks for that.
In the early part of your prepared remarks, you talked about some.
Some data from recent wafer runs that havent been quite completed here Alright, I guess one specific lead in question that topic here is I don't think you mentioned.
Oh, you're characterizing the technology or know that you were working on and whether this was an adder mirror or customer infrastructure.
Yes.
Yeah, I didn't talk about that but.
Generally speaking I would say, it's almost always on customer infrastructure, we can.
We can do kind of phase two type of setup and material characterization work with our customer on our equipment, but if it goes if we're doing phase III. It really has to be on their equipment and their fab and so that's really where it's been.
Okay.
Okay.
How long before you get the full data and can can it fully characterize what that really means here.
Yeah.
<unk>.
I don't want to talk about specific schedules I would say, we're getting close and expect to learn a lot more of this quarter. It might go out into Q4.
But and by the way, we're not just talking about one wafer run we have a number of different <unk> with different customers and so I expect that we'll be getting some data out this quarter and some of it will be coming later on and hopefully that will turn into more way firms come there.
Okay.
Okay fair enough.
In terms of the discussion.
As you heard on the advanced nodes in the White paper that came out I brought it up but.
Probably read about two sentences before the call started here.
It sounds like it's fairly early stage in terms of of engagement here.
Is that a fair characterization of what's going on or is it more advanced than what I guess my interpretation.
I would say that the testing work the R&D work is pretty advanced.
We've gotten a lot of data and I think we have enough too.
Make these type of assertions, which we're not making just make them flippantly based on a lot of simulations.
And so forth, but we don't have any ability to actually run wafers in the most advanced nodes to run.
Experiments, we have to work with customers to that so yeah I would say it's quite early in our engagements with customers on this now we have been talking to customers in the advanced nodes about our technology because it can be used in many ways, but this is a new phenomenon that we didn't know about before that we think will be.
We will be very interesting to people.
Okay, Alright thats helpful.
<unk>.
In the past few quarters and I know for reviewing the transcript from last quarter, you talked about the statistically in terms of of RF Soi and I think the comments you made on today's call was that.
If I caught this incorrectly.
Correct me, but it sounds like Youre, having nearly full full engagement across the industry for RF Soi.
Is that fair and then also do you still see that as a good candidate for the technology that takes you first across the finish line to volume production.
Yeah, I don't know if I would say across the entire industry, but across a lot of the industry absolutely.
The word is out on our technology for RF Soi and were solving a problem that <unk> been struggling with for years and.
And everybody is trying to figure out that is a very very fast growing market.
Lot of innovation happening in everybody's trying to figure out how to get the next leg up. So we're talking about is a real potential game we are there.
The second question about whether it would be the first to production I've always said that we have been working on our power technology longer than the RF technology.
So.
Some of our customers that are doing power work or are longer in the tooth, but we'll see.
So I don't want to make a prediction, but I would say it would probably be one of those two that might you early production.
Okay.
Sure.
Perhaps this is my last question here I'll speak to the says I'm hearing your answer here, but one of your more interesting comments was.
That you think a lot of the interest coming into at Amira here recently is coming from industry chatter.
I assume this is more kind of anecdotal, but maybe you can just share what why you said that what you are hearing in.
Kind of the benefit that you're that you're receiving from that yeah, well you know it's inevitable that we.
We've been working in the industry for a while if you're working at one customer and you bring them a big potential solution for a problem that's going to be a number of engineers in that company that know about it they might change companies. They might have a friend they might go to trade shows they might actually see our presentation to start just chatting among.
Them in a specialty that that certain engineers will have chat rooms, and things set up around.
And so we are seeing that people from companies that are kind of.
Reaching out to us.
Unexpectedly because they heard from some other sources.
And then and hopefully that will lead us to some.
New engagements.
Some good opportunities.
That's the type of thing that we expected to really happen once we got into volume production because.
Customers are really risk averse, but we're starting to see it happen just based on chatter.
Okay interesting interesting comments.
I think that might be it for me I'll jump out of line, maybe a reenter here, but congratulations guys on what sounds like some great progress and keep up the good work that's all from me.
Thanks Richard.
Alright, Thanks, Richard and Coty acreage from benchmark hazardous handler, it's Tony.
Please go ahead, yes.
Yes, Thanks Scott.
So I guess, maybe if we can start with.
With Scott just on the capacity.
Comments that you made.
200, 300 millimeter infrastructure how is that.
Running I guess Youre talking you talked about utilization being a key driver to engagement.
So are you still running available capacity or are you at limitations now yeah.
Yeah I mean.
I would say in general I'm speaking more about our customers capacity than our capacity to the extent that they want to run wafers with us we find a way to make that happen with our infrastructure of epic tools that we have and are are too different.
Epic facilities, but what else.
We're saying on the call.
It is our customers.
Fab is completely full it's very hard for them to run any R&D wafers are starting to see that loosen but.
More so in the older nodes and the legacy nodes and also in the memory area, obviously, there as well.
A well documented kind of slowdown in.
Memory area.
But for the most advanced nodes. They are still really really Paul and it's hard to make faster progress as we would like with them.
And you mentioned that you could only really run.
Wafer characterization through phase two.
Wait so base to exit.
Good question, because I mentioned, a customer that is in phase III and has been there for a while so typically our definition of phase III a customer sends us their wafers, we deposit MST on there and then.
We and the customer look at how MSC physically integrate under their wafer and in most cases this is a.
A step that only takes a month, maybe a month and a half on the deposit side and make a few tweaks and then it works fine and you move forward with moving into phase III running wafers, but some customers wanted to do much more complicated structures are patterns on their wafers and they want to.
See how the MSC deposits there and in some cases, we do work with them to get it to turn out to work exactly the way that they would like it to so yes typically characterization of the MSC itself is done in phase two and from there we know that we're going to have a.
Good deposition and on our on our phase III.
Your comments on MST CAD.
How important is this progress that you called it out in the press release.
<unk>.
Are you seeing.
More recent improvements in the characterization of the year.
Your results or is this something that's been consistent and you just called it out here on a specific program yeah.
It's the type of thing that we did our we announced our first.
Major release of MST, CAD, I think a year and a half ago.
And but it's been continuously improved and improved and.
Some people in the industry can be skeptical of the results that you get on <unk>.
<unk>, it's such a complicated process that typically process engineers that work in the in the factories. They say, let me just round wafers and look at the results because <unk> can be all over the place and I tell me I'm going to get a big improvement and then when I run the wafers I get.
A reduction instead.
But what we have been seeing is that our tea CAD that we've that we've been working on so hard is actually validating the improvement that we're showing beforehand and thats always what you need to build credibility and your simulation tools and so.
Yeah. So that's been really really gratifying to see because we can do a quick simulation with a customer before they run any wafers and show them what kind of benefits. They can get and then if we can say okay. This worked for the last 10 times, we tried it and so this is very accurate depiction that's very helpful.
Are you getting them to I guess, except your your results.
As validation or are they still at the stage, where theyre going to need their own internal wafers to.
I think it's I think it's going to always be like a precursor to a real wafers being run.
But.
When you run wafers you typically have you try a lot of experiments. So if you don't believe the stimulation you could.
You try a thousand experiments and still <unk>.
Miss what you are trying to do because.
You needed to do 2000, right, but if you use T. Kat it can help to narrow that down so you need a lot fewer experiments to actually see the results that you're going after and of course to believe that and narrow down your set of experiments you need to you need to have faith in the P. GAAP results themselves.
Yes, if I could.
Jumping on that because thats sort of observed the dynamic.
What we've seen recently and that we talked about.
Our release and on the call about T cab.
You may have a situation, where our customers fueling marginal about.
The on the.
The cost benefit of doing another.
Set of wafers, particularly recent times when capacity is tight and it's difficult to justify R&D runs and as they see that the tea CAD predictions are actually being validated in the experiments. They do run badly it helps to build more trust.
In our models.
If there is someone who is needs to be convinced or they want sort of further evidence to continue to run experiments in a particular direction.
It has helped us to gain a lot more credibility with customers around trying other experiments with NFC than they would have previously so I think seeing they'll always want to see it validated in silicon, but that dynamic.
Helps too.
<unk>.
It helps our engagement with customers a lot and we've seen that in.
And playing out in real life.
Thanks, Frank and then lastly for you I guess.
Just with the chips Act.
With there being a.
Sizable portion towards R&D and legacy development.
You are.
You mentioned on the remarks about.
Endorsement or.
Our.
Funding for your customers to reimburse for to.
To cover their implementation cost but.
Is there any opportunity in the chipset that you understand that would be a direct beneficiary to you.
It can I mean, the the approach the allocation of a.
Certain amount specifically called out for.
What they call sort of mature technology nodes in the in the trip back can be interesting and these tend to be ones, where if you can find an application that addresses an industry that's great.
Great kind of concerned of the domestic economy like automotive products, which many of them are our legacy technologies.
I think that we could do that.
Still relatively small so we're not of a scale, where we engage them directly lobby politicians. So from my standpoint, the work for US begins more now.
Talking to folks about.
Where.
As you know as I understand the process you get into not just the approval of the funds, but now the appropriations bills to allocate that into specific programs.
So I think that that's where we could be.
Direct beneficiary, so I think that we're going to be only ramping up our our efforts there.
Even more.
Great. Thank you thanks, Brian Thanks, Scott Alright.
Alright.
Thanks, Cody and I don't see any raised hands at this point in time, but we do have a number of questions that came in on the Q&A chat.
And the first one is just basically a review of what the phases mean.
So maybe Scott if you could review what with the phases are.
For that we display and our charts absolutely, yes, I do have we do have formal definitions but.
Let me just talk them through planning so.
Planning is not like the big opening on our customer funnel that you would think of in a traditional sales funnel planning is once we have worked with our customer long enough that they have number one they've signed an NDA with us meaning that they're going to start telling us about their manufacturing process.
I'll leave it or not these customers are very hard to get an NDA done with because they are very protective of that technology number two they have to be actively planning on doing a wafer run with us. So they are in engineering discussions between their team and our team many cases and phase one they started running tea CAD with us.
So there's a lot of work going on there they're not just any customer we've spoken about on the street.
Phase two is when they've actually started wafers in their fab.
To send to US and then we do our first deposition of MST.
Wafers, and then they characterize that like physical characterization and not so much electrical characterization, but more physical characterization.
Generally phase III <unk> is pretty short three months or so but in some cases, they can do much longer experiments.
Phase III is the big.
Unpredictable phase, where a customer starts wafers, they typically send them to us.
And we do the MSC deposition on those wafers and then we send them back to them and they they they.
Build the wafers to the end of the line and then they can test to see what impact MST had and it's very typical for customers to do many of those wafer runs.
Once they've done enough wafer until they feel comfortable they moved to phase four which is where we are.
We give them a light manufacturing license at that point, so they can get our secret sauce to installing MST onto their.
Onto their fab tool in their fab and then they can do that the deposition themselves. So they start the wafers and then they just run it right through the MST deposition in their factory.
And they can continue their development until they're ready to go into qualification. So qualification is when a customer has decided to go to production and so they are setting up their production line and they need to make sure that they can manufacture these wafers very uniformly.
Application as a standard process that everyone in the semiconductor industry uses it takes about six to nine months and at the end of the qualification phase you're in production.
So that's the definition of our paces.
Alright, Scott, Thanks, and I'm going to combine a couple of questions here. The first one is.
How many tools are at customer sites that can create the MST layers on wafers and then also.
Can existing tools to be used with modifications will they need to go to order and install tools to go to production.
And then there is another question in there is will applied materials be scaling effie tools that already come with MSP capabilities. So maybe can.
Can you address the number of custom.
Customer sites that create MSP and also now let me take let me take all of them first of all.
We have one customer site with an MP tool one EPPY tool at our first J D. A customer has.
<unk> MST installed on them.
We have three more upbeat tools are.
Just so there's no confusion.
We have three more effie chambers, because we have one tool with two chambers in that tool can do 200 millimeter wafer and a 300 millimeter wafer.
I have another.
Happy to have it can do 200 million.
We have been working with.
Applied materials.
And <unk>.
Sam on their epic tools for more than a decade now if a customer called up applied materials and said Hey, we want to buy a tool for Adam era to do MST deposition apply.
Well I would say, okay. We understand what that is it's one of their standard tools.
But it does it will have to get hooked up to different gas lines, but that's always the case when you set up an etsy tool. This different gas configurations, you can set it up for they know all about ours.
They've done safety checks to make sure. This now.
Problems with multiple gases mixing together.
And they are fully prepared to do that sort of it's basically a standard set up with an epic tool when someone orders. It and then we can help the customer do installation and setup MSC.
Straightforward process and the same would be true for an ASM tool.
Alright, Thank you Scott.
Hum.
I had a question on the foundry license from Q1 can you elaborate on what kind of progress that's been made.
This is the sorry. This is the first first J D. A second J D J.
No no I'm sorry, the licensee.
Oh, sorry, Okay, Yes foundry licensee that we announced in Q1, thanks a lot.
Yeah, they continued their running wafers.
It's another case of some wafers that are in the fact that we haven't gotten final result song, but Ah, but we have seen some preliminary results there as well and they look promising as we mentioned in our remarks, so gone pretty well.
I wish that they could run a little bit faster than I think they do too, but it's again it's.
Although the.
Asked me in the industry are starting to loosen up it's still not loose enough that we can get super Hot lots that goes through very very fast.
So we're waiting on results, but things going well.
And the corollary to that is the wafers youre running with four customers are they predominantly 200 millimeter or 300 millimeter wafers.
Yeah, I would say today that predominantly 300 millimeter, but we do have a lot of 200 millimeter wafers and just to clarify that a little bit more in the semiconductor industry, if you're making a technology at smaller than 130 nanometer node youre, probably using 300 millimeter.
Wafers.
You're using a technology that's older than 130 nanometer youre, probably using a 200 millimeter wafer and then at 130 nanometer there's a mixture.
A lot of our customers in power and RF are using 200 millimeter some of our customers in power and RF are using 300 millimeter and anybody that we work with on any more advanced node is always on 300 millimeter wafer.
Okay, and then Theres a follow up.
Two the number of Fabs question and that is the second GBA does not have their own effie tool or do they.
Yes, so I can take that because it kind of dovetails also.
Round.
Revenue generating milestones.
That customer does have that need tools.
But they.
Have not taken a manufacturing license, which is what we are.
Charge customers for when we deliver the MST recipe for them to install and tool so that would be an important milestone to reach and as we've talked about with.
With the first J D. A that was a sort of a first revenue milestone was when we deliver the MST recipe to them and they installed it in the tool set.
Second J D. A customer does have a tool to receive the recipe.
And we are hopeful that they will get to that milestone soon and there'll be depositing NFC in their own fab.
Okay, and just to recap Scott Howe.
How long do wafer runs take.
Yeah, So a typical weight per run.
They are sending us wafers to do deposition takes around nine months the fastest we've ever done has been a six month run where everything when.
Very very fast on both sides. These days with the capacity issues, we haven't seen a wafer run that quick quite a while.
Some of them can last longer but that but its fairly typical that it's about nine months from starting on wafers until we get the test results.
Alright, great and at this point, Scott I'll turn the call to you for closing comments.
Alright.
Uh huh.
Thanks, a lot Mike.
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Alright. Thank you Scott at this point you may disconnect from the call.