Atomera Incorporated

Hello, everyone, and welcome to Adam Ayers' second quarter 2025 update call. I'd like to remind everyone that this call and webinar are being recorded, and a replay will be available on Adam Ayers' IR website 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 presentation format with participants in the listen-only mode. We will open with prepared remarks from Scott Bebo, Atom Air's president and CEO, and Frank Florencio, Atom Air'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 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 factor 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 March 4, 2025. Except as otherwise required by federal securities laws, Atom Air 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.

Thanks, Mike. Right now, there are a number of macro factors in the semiconductor industry that are in favor of our product initiatives. For this reason, wafer activity at Atomera and customers is currently running at a much higher level than we typically experience, which reflects the number of ions Atomera has in the fire. On today's call, I'd like to give you a flavor of our activity and how new applications of MST are driving our business. Let me start with a review of our work with licensees. A few months ago, SCMicro announced a new initiative to reshape their manufacturing footprint to 300mm silicon production. It was not entirely clear to us how this would affect the smart power segment. Originally, the first BCD110 process with MST was to launch using 200mm wafers, and later the process would be ported to 300mm. We just heard recently, as part of their reshaping initiative, that ST has changed plans and decided to go directly to 300 millimeter, which will delay the rollout of BCD 110 with MST. We do not have a revised schedule, but it's now clear that we will not enter process qualification in 2025. While the delay is disappointing, ST's ambitions for advanced BCD are definitely very aggressive, targeting a significantly higher 300mm wafer capacity at full belt out than we initially expected. We are very excited by the revenue potential represented by those numbers. The move to 300mm wafers is logical since they are fundamentally less expensive than 200mm, which hopefully should assist adoption. As mentioned on our last call, ST has continued to support the adoption of MST and multiple other applications, with more BU's expressing new interest this past quarter as well. We've reached a new high watermark on customer wafer runs at both our facility and our customers' fabs. Many of our licensees are in the process of doing demo runs with us that we hope would lead to production decisions. And during the last quarter, we were able to deliver to them new insights into incremental improvements they can get with MST. Let me provide a few updates on some important customers. At JDA1, meetings with a new senior level management team in conjunction with support from our capital equipment partner, makes us believe that the wafers we are working on for them will drive a decision to use MST in a new application. Both JDA2 and our Fabless licensee are in the process of doing wafer runs with us. We believe these will be critical in reaching a production decision once they've been able to test the final devices. At our foundry licensee, we are currently in a TCAT exercise to define our next steps as well. Two calls ago, I spoke about a couple new, potentially transformative customers we had started working with. Each of these customers is now running wafers with MST, one in a large-scale demo plan encompassing two business units, and the other engaged on multiple wafer runs to test out different MST applications. Several other customers are in various stages of investigating MST for their products as well. As I said at the beginning of the call, our team is very busy right now, and this is a real positive for our future business. A substantial part of our activity is targeting the advanced gate-all-around and DRAM areas where our source drain diffusion blocking capabilities are particularly interesting, but by no means the only solution we are offering. In these new nodes, everyone is focused on yields, and MST is a tool that can help improve yields. In the power area, our ability to simulate different architectures and integration techniques using TCAD and our own internally developed AI tools has allowed us to propose solutions to customers which we do not believe are possible to implement without MST and have led to potential breakthrough levels of performance. Our work with Sandia and other partners on gallium nitride is making great progress. This past quarter, we've come to understand Even better, how MST can benefit GAN devices, causing us to expand our focus from exclusively GAN for power to also include GAN for RF. To accelerate this work, during the last quarter, we announced a strategic collaboration with Insize, a well-recognized and respected RF test house. They will help us characterize this technology in terms that the market will appreciate, making it easier for designers to translate our process changes to RF electrical spec improvements. We believe RF will be an important growth area for GAN in the future, and several potential customers have already stepped forward expressing an interest in our work. Finally, in RF SOI, we have expanded our offerings to also include the key devices for low-noise amplifiers, or LNAs. I'd like to take a few minutes to give some background on why this LNA offering is so important. Historically, we've worked with RF SOI customers primarily on RF power switches. Last year, many of those customers started asking if we could help improve LNAs in their mobile phone front-end products. LNAs are the technology used by cellular phones to receive and amplify small signals. There are a number of reasons why LNAs need further improvement at this time. Carrier aggregation was introduced in LTE Advanced to increase peak data rates and network capacity by combining multiple spectrum chunks, or component carriers, into a single data channel. Manufacturers have been aggregating up to four carriers, but in the future we expect to see six carriers, which means that more LNAs must be turned on to receive these signals, significantly increasing power consumption. New frequency bands associated with the evolution of 5G and 6G cellular are also driving the need for more active LNAs. The net result is that to bring features that customers are demanding for new phones to market, a solution to lower LNA power consumption must be found. That's where MST comes in. We took existing MST RFSOI transistor components silicon test data, and then use TCAD to re-optimize implants for the LNA devices. We determined that MSD can significantly improve the performance of LNAs by lowering the circuit bias current, and hence the power consumption. We believe based on market reaction, we have started promoting this capability just at the right time. Recently, we presented our findings at an RF technical conference and it has generated lots of inbound interest. Indeed, during the last few months, we've worked with several different RFSOI manufacturers to start new wafer runs using our partner, Soitec's special ultra-thin RFSOI wafers to prove out those LNA benefits. We'll be working hard to shore up this evidence with more data to entice customers to take it to market quickly. What is particularly exciting is that we can provide this LNA benefit in addition to the power switch benefit on RF front ends with a single deposition of MSD on a wafer. So our customer can get two much-needed solutions for the cost of one, which should make it even more attractive. We expect that this type of high-visibility solution with end-customer pull should go to market more quickly than a general performance improvement. I'm always impressed by the amazingly high levels of creativity and innovation demonstrated by Atomera employees across many diverse fields. And today I've spoken about some of the solutions we found for industry problems. You can also measure this innovation by the number of patents we file and have approved. This past quarter, our tally of issued and pending patents exceeded 400, which is quite a milestone for a company of our size. We are definitely punching above our weight. In the last month, we also joined the National Semiconductor Technology Center, which has a goal of extending U.S. leadership in semiconductor technology. There, we expect to provide important contributions, but also benefit from the NSTC focus on reducing the time and cost to prototype new semiconductor technologies like the ones Atomair is bringing to market. We believe this organization will help create the ecosystem necessary to continue the advancement of Moore's Law. Finally, I'll just reiterate how many active engagements we have underway at Atomera and how we feel on the brink of several of them turning into commercial agreements. The team is working hard. Indeed, we are looking to hire several additional team members, but morale is high and we're excited to see our innovations getting into production. When that happens, we continue to believe that Adam Miller will see increased adoption rates and shorter time to market as competitors race to catch up with those who are already using MST to get market advantage. We are working hard to make that day come as soon as possible. Now, Frank will review our financials.

Thank you, Scott. At the close of the market today, we issued a press release announcing our results for the second quarter of 2025. Our summary financials are shown on this slide. Our gap net loss for the second quarter of 2025 was $5 million, or 17 cents per share, compared to a net loss of $4.4 million in Q2 of last year, which was 16 cents per share. GAAP operating expenses in the second quarter of this year were $5.2 million, which was an increase of $565,000 from $4.6 million in Q2 2024. The increase in OPEX was due to a $415,000 increase in R&D expenses, reflecting both higher outsourced device fabrication work and increased payroll costs, and a $215,000 increase in G&A expense, primarily due to higher payroll costs. These were partly offset by a decline in sales and marketing expense due to lower headcount. Non-GAAP net loss in Q2 2025 was $4 million, compared to a loss of $3.6 million in Q2 of last year, due to a $275,000 increase in non-GAAP OPEX, reflecting the same factors I just discussed. Stock compensation expense, which is the main difference between GAAP and non-GAAP operating expenses, was $1.3 million in Q2 2025 and $1 million in Q2 2024. Sequentially, Q2 2025 non-GAAP net loss of $4 million compares to a $4.4 million loss in Q1. primarily due to lower payroll expenses reflecting lower headcount in sales and marketing, as well as 401k timing issues. Our balance of cash and cash equivalents as of June 30, 2025, was $22 million, compared to $24.1 million as of March 31st. We used $3.5 million of cash in operating activities during Q2 compared to $4.8 million in the first quarter. The first quarter of every year has higher cash outweighs for items that are expensed throughout the year. During Q2, we raised approximately $800,000 under our ATM facility, net of commissions and expenses of filing our shelf registration. by selling approximately 185,000 shares at an average price of $5.21. Since the end of the quarter, we've raised an additional $2 million from sales of approximately 392,000 shares at an average price of $5.23, putting our current cash balance higher than at the end of Q2, which will allow us to be selective in accessing the market going forward. For Q3, we expect to recognize a small amount of NRE revenue from wafer shipments to our faultless licensee and to the customer running a large-scale demo that Scott mentioned in his remarks. Timing of that revenue will depend on when wafers are shipped out to those customers. Given FST's shift to rolling out BCD 110 only on 300 millimeter wafers, we do not expect that milestone payments for process qualification will happen until next year. Moving to expenses, on our last call, I narrowed our expected range of non-GAAP OPEX for 2025 to a range of $17.25 to $17.75 million. I'm maintaining that guidance, though we are tracking to the low end of the range. We've spread our outsourced fabrication work over multiple vendors to enable us to address the range of technology areas we're working on, and this spending should trend back to our prior spending levels with TSI Semiconductor. We're also making solid progress in adding new leadership in sales and marketing and bolstering our engineering staff to support our unprecedented level of customer activity. With that, we'll turn the call back over to Scott for a few summary remarks before we open the call up for questions. Scott?