Atomera Incorporated

Hello, everyone, and welcome to Adam Ayer's third 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 Ayer's 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 a listen-only mode. We will open with prepared remarks from Scott Bebo, Atomera's President and CEO, and Frank Lorenzio, Atomera's CFO. Then we will open the call to questions. If you are joining by telephone, you may follow a slide presentation to accompany our remarks on the Events and Presentations section of our Investor Relations page on our website. Before we begin, I would like to remind everyone that during today's call, we will make forward-looking statements. These forward-looking statements, whether in prepared remarks or during the Q&A session, are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factor section of our filings with the Securities and Exchange Commission, specifically in the company's end report on Form 10-K filed with the SEC on March 4th, 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'd like to turn the call over to our President and CEO, Scott Bebo. Go ahead, Scott.

Thanks a lot, Mike, and good afternoon, all. This has been a quarter of both challenge and validation. one that underscores the reality of bringing a new material technology to market and the opportunities that come when you solve fundamental problems for the semiconductor industry. I'll start by addressing our update with SE Microelectronics, then depart from our regular format to review the broader picture, the momentum we're building with new customers and the different market opportunities that Atomer's technology is being used to address. As many of you have seen in our announcement, our work with SU Microelectronics on their smart power platform reached an inflection point this quarter. During this program, we were tackling a very difficult performance trade-off for their 200 millimeter platform. We achieved what we set out to do, significant performance improvements in key device metrics. However, that higher performance came with a corresponding reduction in device lifetime, often referred to as reliability, which failed to meet all of ST's specifications. Over many months, our two teams worked closely to resolve this trade-off. Then ST, as part of a reshaping of its manufacturing footprint, announced they would discontinue development on 200 millimeter wafers to focus exclusively on 300 millimeter for the next generation BCD110 platform. At about the same time, Adam Ayer discovered a new MST implementation validated through our TCAD simulations that doubled our performance improvement without the associated reduction in device lifetime. In other words, we found a way around the trade-off, an improvement only made possible by using MST. Over the last few months, ST validated our findings for the new implementation. However, because this new version required a device architecture change that would take multiple learning cycles to validate, they determined that they could not incorporate it and still meet their aggressive BCD 110 launch schedule. Therefore, ST informed us that they will take BCD 110 to market without MST, and currently they have no plan for a future variant that includes it. That means we no longer have a line of sight to royalty revenue at ST for this particular program. While that outcome is certainly disappointing, there are several important positives I want to emphasize. First, at STMicro, we demonstrated significant performance gains and proved MST's integration capability inside a tier one production fab. Second, we've now developed a very high performance solution that eliminates the performance reliability trade-off, which is a significant new differentiator for us going forward. One that we are already actively discussing with other players in this market. And third, ST has reiterated their intent to continue working with us in other technology areas where MST could add value. Under their license with us, they continue to run experiments across several different businesses. This chapter with ST underscores that moving a new material into mass production is rarely linear. The learning from this effort gives us a stronger foundation as we engage with others in the same power market segment, including with a very large existing customer and even a new engagement that began this past quarter. Customers are now evaluating MST for power devices between 5 and 48 volts. It's important to keep in perspective that ST is only one of many large customers we're working with today to take MST into production in the power area. We also have three other very active technology focus areas. In the gate all around space, there are three large competitors and one that's still emerging. We're working with or in discussions with all three of them. I mean, all four of them. In the DRAM space, there are three large manufacturers and we are engaged with two of them right now and have a good relationship with the third. In the RFSOI area, we're doing integration work with four different fabs and a fabless player right now with many of them running wafers. So you can see that we have no lack of opportunities across several different segments. Indeed, during the last three months, we processed a record number of wafers for our customers. When we look at all these opportunities, it's helpful to understand how we prioritize our business in terms of revenue potential. The first being the fastest time to market, second being the highest return on investment, and the third being breakthrough long-term growth. One of the fastest ways to get Atomera's technology to market is through applications which use MST deposited on top of the starting wafer rather than inserted into the middle of the manufacturing line. There are many reasons why this can accelerate revenue. First, customers can simply acquire an MST starting wafer and run it through their standard production flow with very few process modifications for an easy experiment. They don't have to install MST, deal with the complications of wafers being transferred in and out of their fab, make major changes to their process to integrate it, or complete a license agreement. The price of MST can be built into the cost of the starting wafer, which gives Atomera the same revenue, but the customer will not view the cost as a royalty. And it's certainly faster to get MST starting wafers qualified than something integrated into the middle of the process. Today, we use MST starting wafers in our work in RFSOI, in GAN, and possibly soon in next generation DRAM. we actively seek out these implementations because of the relatively easier integration and shorter path to revenue. The second set of applications have enormous revenue potential, but the development process can be more demanding because MSD is inserted into the middle of a complex set of production steps. It is worth it though, because the upside represents a massive return on investment, including in the areas of data around logic, DRAM, power devices, and other memory products. One design win here will ensure the future success of the company. And as I mentioned earlier, we have at least six or seven of those efforts underway today. In GATE All-Around and Advanced Memory, our partnership with a leading capital equipment company announced earlier this year is showcasing our competence at advanced nodes. Using their test infrastructure, we've been able to validate MST's ability to reduce contact resistance, improve channel reliability, and be deposited in the tiny structures of nanosheet transistors. We are very excited by the deep cooperation and customer interest generated through this partnership. This quarter will be hitting the road on joint visits with our customers to persuade them that issues in the manufacturing process can be solved using MST. The weight of our partners endorsement cannot be overstated. Finally, we have an abundance of new breakthrough materials enabled by MST under development in the background through commercial partnerships and university collaborations. For many of them, we've already filed fundamental patents and we're now in the process of making prototypes and understanding their capabilities. This is the type of program, for instance, which launched our GAN work. We have a dozen similar initiatives in early investigation, several of which might become near-term disruptive technology announcements in areas like quantum computing, AI server power, high bandwidth memory architectures, piezoelectric devices, optical networking, and a variety of other areas which have the potential to enable entirely new applications. Farming out the early R&D whenever possible allows Atomera's core team to keep a laser focus on the nearer-term revenue opportunities and apply more resources only when we see the potential of these innovations coming to fruition. Our gallium nitride initiative continues to deliver exciting progress. In collaboration with Sandia National Labs, we're in the process of completing device fabrication to highlight our improved electrical performance. Prior results have confirmed MST's ability to enhance GAN growth on silicon substrates, a major barrier for high-volume production, and have garnered interest from our first commercial customers. We hope to release a complete dataset publicly later this year, which will be the precursor to a full-scale rollout. As we continue our GAN work with Sandia, they are now seeking to expand the areas of R&D engagement on a range of Atomera technologies, corresponding to their highest priority development areas. The semiconductor industry is clearly entering a new materials innovation cycle. Across logic, memory, power, and RF, engineers are hitting the limits of conventional scaling. They're searching for material solutions that can boost performance, improve reliability, and reduce variability, exactly where MSD delivers value. This is particularly true in AI infrastructure and data centers. where the demand for power efficiency and thermal management is driving renewed focus on device-level innovation, which MST can deliver. One of our principal challenges is to ensure that potential customers know about MST, and that is why I'm so excited to welcome Wei Na as our new VP of Sales. Wei has had experience growing a semiconductor technology licensing business, very much like Atomera, from scratch. selling to the exact same customers we are addressing, and we believe his leadership will help us both grow sales and convert existing opportunities into licenses. Our priorities remain clear. Emphasize MSD starting wafer products like RFSOI and existing engagements to get to production and revenue as quickly as possible. Two, leverage our strategic OEM partnership to advance active engagements in gate all-around logic memory, and power through our comprehensive silicon test results and early licenses. Three, bring MST for GAN technology to a customer-ready stage with shareable electrical data. And four, maintain fiscal discipline as we transition from R&D validation and integration to revenue-generating licenses. Our mission hasn't changed. It's to enable better, faster, and more efficient semiconductors through advanced materials engineering. That mission remains as relevant as ever. I want to thank our employees, our customers, and our shareholders for their continued confidence and support. Every quarter, we move closer to the point where MST's impact will be felt across multiple product lines and foundries worldwide. With that, I'll turn the call over to our CFO, Frank Lorenzio, to review our financials.

Thanks, Scott. At the close of the market today, we issued a press release announcing our results for the third quarter of 2025. Our summary financials are shown on this slide. Our gap net loss for the third quarter of 2025 was $5.6 million, or 17 cents per share, compared to a net loss of $4.6 million, which was also 17 cents per share in Q3 of last year. Gap operating expenses in the third quarter of this year were $5.7 million, an increase of $857,000 from $4.8 million in Q3 of 2024. This was due to a $544,000 increase in R&D expenses, reflecting both higher outsourced device fabrication work and increased compensation expenses, and a $353,000 increase in G&A expenses, primarily consisting of higher stock compensation expense. Sales and marketing expenses were basically flat. Non-GAAP net loss in Q3 2025 was $4.4 million compared to a loss of $3.9 million in Q3 of last year due to a $423,000 increase in non-GAAP operating expense, primarily reflecting the higher R&D expenses I just discussed. Stock compensation expense, which is the main difference between GAAP and non-GAAP operating expenses, was $1.3 million in Q3 of 2025 and $907,000 in Q3 2024. The increase in stock compensation expense, which is non-cash, reflects the adoption of performance-based RSUs or PSUs for executive equity-based compensation in March of last year. PSUs vest over three years rather than four years, as is the case for time-based RSUs. However, PSUs will only vest if we deliver shareholder returns that meet minimum targets relative to the Russell 2000 Index. Sequentially, Q3 2025 non-GAAP net loss of $4.4 million compares to a $4 million net loss in Q2, primarily due to higher R&D expenses. Our balance of cash and cash equivalents as of September 30th, 2025 was $20.3 million compared to $22 million as of June 30, 2025. We used $3.4 million of cash in operating activities during Q3 compared to 3.5 million in the second quarter of this year. During Q2, sorry, during Q3, we raised approximately $2 million under our ATM facility net of commissions and expenses by selling approximately 393,000 shares at an average price of $5.23. Since the end of the quarter, we've raised an additional $836,000 from sales of approximately 171,000 shares at an average price of $5.03. As of today's date, we have 31.7 million shares outstanding. In Q4, we expect to recognize between $75,000 and $125,000 of NRE revenue from wafer shipments to customers running the demos that Scott mentioned in his remarks. Those shipments and the associated revenue recognition will happen in Q4 as well as into next year. Gross margin was negative this quarter because a portion of the cost for MST deposition on those wafers was incurred during this quarter, but the revenue will be recognized as we ship the wafers going forward. Moving to expenses, I expect our non-GAAP operating expense for the full year 2025 to be in the range of 17 and a quarter to 17 and a half million dollars. Sales and marketing expenses ticked up last quarter in connection with recruiting for both sales and marketing leadership roles. The compensation expenses associated with those roles are built into our plan. Our recruiting efforts have started to pay off with the hiring of Wei Na as our VP of sales. With that, I'll turn the call back over to Scott for a few summary remarks before we open the call up to questions. Scott?