Atomera Incorporated

Hello, everyone, and welcome to Adam Ayers' fourth quarter and fiscal year 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 a listen-only mode. We will open with prepared remarks from Scott Bebo, Adam Ayers' president and CEO, and Frank Lorenzio, Adam Ayers' 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 presentation section of our investor relations page on our website. Before we begin, I'd like to remind everyone that during today's call, we will make forward-looking statements. These forward-looking statements, whether in prepared remarks or during the Q&A session, are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factors section of our filings with the Securities and Exchange Commission, specifically in the company's annual report on Form 10-K filed with the SEC on March 4, 2025. Except as otherwise required by federal securities laws, Adam Ayer 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, and good afternoon to everyone. In Admiral's fourth quarter, we made great progress moving existing customers forward in our targeted segment, achieving very strong technical advancements, commencing new customer engagements in non-traditional areas, and made our first foray into the world of government-funded collaborative developments, all positioning us strongly for commercial execution in 2026. Today, I'll give you an update on all of our activities as we set the table for our business prospects in the new year. Technology news recently has been dominated by the rapid advancement of artificial intelligence and the associated semiconductor challenges that AI entails, from the allocation of limited GPU supply, the enormous stresses put on our energy infrastructure, and the associated surge in memory prices. Atomera's technology is positioned to assist with each of these industry issues as we deliver materials which help to relieve each pain point. So let me start off with our recent exciting progress on gate all around transistor technology, which is the foundational architecture used in AI GPUs, CPUs, and bleeding edge network components. The challenges with manufacturing these next generation transistor devices at two nanometer and below are widespread. And a concerted effort by the full ecosystem of industry players is required to manufacture them at scale with economically viable throughput and yield. This has been the focus of our recently announced strategic partnership with a large equipment OEM. Target customers are TSMC, Samsung, and Intel, who are in production, and Rapidus, a new Japanese manufacturer which is deep in development. Atomair's MST technology delivers some very compelling solutions in this space, in particular for diffusion blocking. These tiny gate-all-around transistors require extremely high phosphorus doping levels constrained to a very small area in the source and drain of the nanosheet. Under the intense semiconductor manufacturing environment, It's difficult to keep these dopant atoms in their proper positions, and just a small amount of migration into the channel can severely impact performance, efficiency, and yield. AtomAres MST is uniquely well-suited to hold these roving phosphorus atoms in place. Although this MST characteristic is well proven in older technologies, implementing MST in devices that are around 2 nanometers while maintaining its efficacy is something that industry players insist must be validated on silicon at real-world scale, and we've been working hard to do so. Our target customers have been looking into two results to prove high-volume manufacturability. First, that MST can be effectively deposited into the actual nanosheet structure. And second, that the diffusion blocking characteristics are better than other methods the industry is currently evaluating or using. Obtaining these results is not straightforward and requires access to advanced structures that are not generally available, are very expensive, and frequently proprietary. but we've been able to make steady progress with the help of a gate all around customer and our strategic partner. Just in the last month, we obtained very exciting silicon results in both targeted areas, which we believe provides the definitive proof to drive adoption of MST at all four of the world's gate all around customers in the future. Not only can MST be deposited into those structures using existing tools and standard gases, But it is a far superior diffusion blocking material than those currently used by the industry. We anticipate that we will be able to implement this technology with leading industry players over the next few quarters. Of course, we're quite excited by these recent results since our advanced node, our gate all around business segment, has extremely high revenue potential. But we're also making convincing progress in our other customer areas. So let me provide a short update there. In DRAM, the technology roadmap is at a key inflection point as DRAM finally follows other logic and memory architectures in making better use of the vertical dimension. We are getting involved in offerings to enhance the performance of next-generation architectures, in addition to solutions for products currently in production by the major memory suppliers. During the last few months, we have had two major solution offerings that we're working hard to validate since their market potential is very high. Notably, these are both wafer-based solutions, which are easier to adopt and test, avoiding many of the integration complexities required in some of our other applications. And with the current robust market for memories, we believe our potential customers will have a generous R&D budget to pursue these ideas. Atomera is currently conducting many wafer runs with our various customers. Most of these are processing through their fabs, so we will expect more information soon. But one customer has just gotten preliminary results which look promising. But we will get a better view when the final data is available in about a month. If the results look good, we'll be pushing for a joint development agreement and a license to advance this technology to production. In the RF-SOI space, our offering is very strong, considering that it can provide performance improvements for multiple important areas, including for the RF switch and the low noise amplifier. Because we are working with so many of the key players in this industry, including foundry and fabless suppliers, we hope to drive adoption broadly. Again, in this space, our solution can be implemented with a wafer-based solution, meaning our customers can choose to deposit it on wafers themselves before starting their full manufacturing process, or they could even buy RFSOI MST wafers from a third-party supplier. Our license structure supports both of these approaches. In power, we are working with some very large players to ultimately be incorporated into their product offerings. Although we had a setback with ST last year, we continue to work with them on MST solutions across multiple business units. In addition to our traditional BCD business opportunities, this quarter we had several other inbound interest emerge for power applications. Through our own internal analysis and modeling, we have uncovered an opportunity for MST in trench vets, which are an important component in optimizing energy efficiency in AI data centers. Our simulations show the potential for MST to improve performance by more than 40%. We got this result after Christmas and already have a customer interested in kicking off development. Similarly, using our MST CAD simulation capability, we have demonstrated how MST can improve HVT devices, which are high-speed transistors frequently used for amplifying and switching signals in RF communication systems. Discussions are underway with a potential first customer in this application as well. In GAN, I'm happy to report that our first commercial customer has now started running wafers for GAN on silicon with MST technology. For many reasons, this is exciting. This large customer can grow their own GAN wafers and manufacture electrical devices on them, which means they can move even faster than our in-house work with Sandia National Labs and Texas State. So we expect that we will actually move ahead of our own internal development efforts over the next few quarters. Second, they are exploring GAN in both RF and power technologies. These independent efforts by multiple industry and scientific partners frequently can accelerate time to revenue, which is what we're hoping to accomplish. Last month, we announced that our GAN on silicon concept paper had been approved to move to the proposal stage for a project with Power America to advance the state-of-the-art on wideband gap materials. We announced this for a variety of reasons. First, we wanted to show the widespread interest from customers, the science community, and industrial organizations for an MST solution for GAN on silicon. Indeed, we've already received several letters of support from multiple future customers showing interest in this solution. Second, this concept paper was our first application for outside development funding. And although the funds sought for this first effort are modest, they put us in the pathway for a variety of future material development funding opportunities, which can provide us assistance going down a path we were planning to travel anyway. By engaging in these joint development opportunities, we are promoting our technology, receiving financial assistance, and assuring a customer base all in one project. To summarize, the past few months have been an incredibly productive time in terms of technical development and the buildup of a variety of new customer opportunities that I believe will lead to business deal announcements later this year. Finally, as we close up 2025, let me give you a few thoughts on our accomplishments. Last year, we took our early development and simulation results on gate all around and converted it into what I now believe is our greatest company opportunity. We did that through working with a lead customer and with a strategic partner who's also a major equipment OEM. This is a significant departure from how we've approached the market in the past. The industry has a long history of relying on this OEM to deliver them material solutions for their problems. So we truly believe that their influence will help us to convert our recent strong technical results to licenses and revenue. We make technical breakthroughs in our other core markets to enable killer applications like LNA for RFSOI, a new architecture for BCD, and next-gen DRAM solutions. Using AI, our development team has gotten better results more efficiently than ever before. We kicked off a record number of wafer runs with our leading customers, initiated several new projects, and solidified the business talent on our team, which should lead to further contract announcements over the course of this year. And much of this work was done emphasizing wafer-based products, which we believe will result in faster time to revenue. In short, 2025 efforts have set us up well for commercial announcements later this year. With that, I'll turn the call over to Frank to review our financials.

Thank you, Scott. At the close of the market today, we issued a press release announcing our fourth quarter and full year results for 2025. This slide shows our summary financials. Revenue in 2025 was $65,000 and consisted of NRE fees for wafer deliveries and MST CAD licensing. Our gap net loss for the year ended December 31, 2025 was 20.2 million or 65 cents per share compared to a net loss of $18.4 million or 68 cents per share in 2024. On a non-GAAP basis, 2025 net loss was $16.1 million or 52 cents per share. And 2024 net loss was 15.4 million or 57 cents per share. GAAP operating expenses were $20.9 million in 2025, which was an increase of approximately $1.5 million from $19.3 million of GAAP operating expense in 2024. The main driver of the increase in GAAP operating expense was a $1.1 million increase in stock compensation expense due to a change in our executive equity-based compensation. In Q1 2025, we implemented PSUs for executives, which vest based on the performance of our stock price as compared to the Russell 2000 Index. These PSUs vest over three years, whereas the options and time-based RSUs that had been granted to executives in prior years vested over four years. Although the vesting period is shorter, executives only vest in PSUs based upon our stock price performance. With the exception of stock compensation expense, the drivers of GAAP and non-GAAP expenses are substantially the same. And therefore, the rest of my remarks will only refer to non-GAAP results. Please refer to the slide presentation for a reconciliation between GAAP and non-GAAP expenses. Total operating expenses in 2025 were $15.9 million, an increase of $429,000 from $15.4 million in 2024. R&D expenses increased by $794,000 from $9.4 million in 2024 to $10.2 million in 2025, primarily due to a $676,000 increase in outsourced engineering as we utilize various new device fabrication vendors replacing TSI Semiconductor. G&A expenses decreased by $272,000 from $5.1 million to $4.8 million, primarily due to a $421,000 decrease in compensation expense, offset in part by $118,000 increase in professional fees for legal, IP, and audit fees. Sales and marketing expense decreased by $94,000, reflecting lower headcount, but offset by some recruiting fees. Company-wide, our compensation expense, again, on a non-GAAP basis, excluding stock compensation, declined by $582,000 in 2025 compared to 2024. The reduction in compensation expense reflects our board's pay for performance discipline. While we achieved important technical milestones in 2025, the compensation committee determined that payout of the full executive bonus was not justified by commercial progress made during the year. Therefore, the committee withheld approximately $669,000 in executive bonus compensation affecting the full executive team. The withheld amount may be earned in 2026 based on achieving rigorous commercial objectives. Turning to our quarterly results, Fourth quarter 2025 non-GAAP net loss was $3.3 million or 10 cents per share compared to a net loss of $4.4 million or 14 cents per share in Q3 and a net loss of $3.9 million or 14 cents per share in Q4 2024. Non-GAAP operating expenses decreased by $1.1 million to $4.3 million sorry, from 4.3 million in Q3 2025 to 3.2 million in Q4, primarily due to the reversal of our bonus accrual, which occurred in Q4. Our balance of cash, cash equivalents and short-term investments on December 31 was $19.2 million compared to 26.7 million at the end of 2024 and 20.3 million at the end of Q3, 2024. We used $14.9 million of cash in operating activities during 2025, 3.2 million of which was used in Q4. During 2025, we sold approximately 1.6 million shares under our ATM facility at an average price per share of $5.15, resulting in net proceeds of approximately $7.6 million after commissions and offering expenses. As of December 31, 2025, we had 32.4 million shares outstanding. After year end, we've raised an additional $3.2 million of net proceeds by selling approximately 1.3 million shares at an average price of $2.47. For Q1, we expect to recognize revenue in the range of 50 to $100,000 from shipment of MST wafers to customers. Consistent with our usual practice, we are not providing revenue guidance beyond this quarter. Our 2025 non-GAAP operating expense was $15.9 million, which is well below the guidance range I provided last quarter. That's primarily due to reversing $669,000 of accrued bonus. For 2026, we will continue to aggressively control costs And we've limited our expense growth to those areas directly related to revenue and near-term commercial progress. Those increases mainly consist of adding two senior go-to-market leaders. The first of those was our VP of sales, who came on board in October. And the next will be a new head of marketing. The comparison of our planned spending in 2026 versus 2025 looks distorted by the potential payout this year of the executive bonus withheld from 2025, because the withheld amount will have to be accrued this year on top of accruing 2026 bonus. As a result, we expect our non-GAAP operating expense to be approximately $18.5 million in 2026. Now on paper, this is a 17% increase, but if normalized for the timing of the executive bonus accrual, it is more in the range of 8%. I would point out also that earning back deferred executive bonuses, as well as earning 2026 bonus will require us to execute against aggressive, commercially focused milestones. With that, I will turn the call back over to Scott for a few summary remarks before we open the call up to questions.