Executive Summary / Key Takeaways

• Atomera is an early-stage semiconductor materials and IP licensing company focused on its proprietary Mears Silicon Technology (MST), which enhances transistor performance across diverse, high-growth markets like Power, RF-SOI, Memory, and advanced Gate-All-Around logic.
• MST offers quantifiable benefits such as improved performance, power efficiency, and yield, positioning Atomera as a potential solution provider for critical industry challenges like scaling, power consumption in AI/5G, and manufacturing yield in advanced nodes.
• While revenue remains limited ($4k in Q1 2025) and the company incurs recurring operating losses ($5.209M net loss in Q1 2025), significant progress is being made in customer engagements, including ongoing work towards production with STMicroelectronics, advancements with transformative customers, and promising initial electrical data for MST in Gallium Nitride (GaN).
• Recent strategic partnerships, notably with a major capital equipment provider and Soitec, aim to accelerate customer adoption, streamline development, and leverage partner resources for validation and sales, potentially speeding up the path to commercialization and royalty revenue.
• The company maintains a sufficient cash position ($24.1M cash/equivalents at Q1 end) to fund operations for at least 12 months, but future capital needs depend heavily on the timing and success of converting current engagements into high-volume licensing and royalty streams, which remains a key risk.

The Material Science Key to Next-Generation Chips

Atomera Incorporated, operating under the ticker ATOM, is not a traditional semiconductor manufacturer but rather a pioneering materials and intellectual property (IP) licensing company. Since its incorporation in 2007 (initially as MEARS Technologies, Inc., changing to Atomera in 2016), the company has dedicated its efforts to developing and commercializing Mears Silicon Technology (MST), a thin film of reengineered silicon designed to enhance the performance of standard CMOS transistors. This foundational technology, along with related tools like MSTcad simulation software, forms the core of Atomera's business model: licensing its IP to foundries, integrated device manufacturers (IDMs), and fabless companies, aiming to generate revenue through license fees and, ultimately, royalties on manufactured wafers or devices incorporating MST.

Atomera operates within the vast and complex semiconductor ecosystem, a landscape dominated by giants like Applied Materials (AMAT), Lam Research (LRCX), and KLA Corporation (KLAC), primarily focused on providing the sophisticated equipment necessary for chip fabrication. In contrast, Atomera positions itself as a provider of a critical material enhancement and the associated IP, designed to integrate into existing manufacturing processes, particularly epitaxial deposition steps. This "fabless" IP model allows Atomera to avoid the massive capital expenditures associated with building and maintaining semiconductor fabs, offering a different value proposition centered on performance improvement and yield enhancement at the material level.

MST: The Engine of Enhancement

At the heart of Atomera's value proposition is Mears Silicon Technology. Described as a thin film of reengineered silicon, typically only 100 to 300 angstroms thick, MST is designed to be applied as a transistor channel enhancement. The fundamental promise of MST is its ability to address key engineering challenges facing the semiconductor industry as transistors continue to shrink. By modifying the silicon lattice structure at the atomic level, MST is intended to enable transistors that are smaller, faster, more reliable, and significantly more power-efficient.

The tangible benefits of MST are critical to its adoption. While precise, universally applicable quantifiable metrics across all potential applications are complex due to varying customer needs and process nodes, management commentary highlights specific areas of improvement. For instance, the MST-SPX technology, targeting 5-to-48-volt transistors, has demonstrated performance improvements showing a 15% to 30% reduction in RSP (Resistance * Area), a key metric for power transistors. Management notes that it makes financial sense for a customer to implement MST for even less than a 3% RSP improvement, underscoring the compelling economics if these demonstrated gains are realized in production. MST is also designed to improve transistor variability, reduce leakage, and enhance reliability. In the context of advanced nodes like Gate-All-Around, MST's ability to block dopants, particularly phosphorus, is seen as a critical tool for forming advanced source-drain structures, potentially improving high production yields which are a central challenge with increasingly tight channel lengths.

Atomera's R&D pipeline continues to explore new applications and enhance the technology. Recent developments include finalizing a 48-volt version of MST-SPX specifically for the high-demand data center market driven by AI power needs. A significant new area of focus is Gallium Nitride (GaN) on silicon, where early studies showed MST could reduce stresses during growth, improving crystal quality. The company has now fabricated the world's first MST-enabled GaN devices at Sandia National Labs, and initial electrical testing is showing indications of improved performance consistent with the material quality gains. This work aims to produce a complete, customer-shareable data set to drive adoption in the rapidly growing GaN market, which is seen as potentially offering a faster time to revenue compared to traditional silicon engagements.

For investors, the "so what" of this technology is the potential for a significant competitive moat. If MST can consistently deliver quantifiable performance, power, and yield benefits that are difficult or impossible to achieve through conventional scaling or alternative methods, it creates a strong incentive for semiconductor manufacturers to license the technology. This differentiation is foundational to Atomera's strategy to capture value through high-margin IP licensing and royalties, contrasting with the scale-driven, lower-margin nature of equipment manufacturing.

Strategic Market Pursuits and Customer Engagements

Atomera's strategy revolves around engaging with key players across multiple high-value semiconductor market segments where MST can address critical challenges. These include:

• Power Chips: A market exceeding $52 billion in 2024, driven by AI, data centers, and vehicle electrification. The focus is on improving efficiency and power delivery. STMicroelectronics (STM) is the lead customer, with whom Atomera is working closely on optimizing manufacturability, yield, and throughput for high-volume production of next-generation smart power products. While the timeline to production is controlled by ST, development is reported to be progressing well. Atomera is also in active discussions with three other product areas within ST, highlighting a potential "land-and-expand" opportunity within this major IDM. Beyond ST, Atomera is pursuing opportunities with other power customers, particularly leveraging the new 48V MST-SPX for data centers.
• RF-SOI: A growing segment, largely driven by 5G, where MST can enhance performance in components like power switches and Low Noise Amplifiers (LNAs). Atomera works with the majority of RF-SOI wafer consumers. A key development was the partnership with Soitec (SOI) to provide MST-enabled thin RF-SOI wafers, streamlining the supply chain and accelerating customer development. Recent emphasis on LNA improvements by mobile phone manufacturers has generated widespread interest, leading to new wafer runs with several RF-SOI manufacturers using the Soitec wafers.
• Memory: A massive market, over $125 billion in 2024, particularly DRAM and High Bandwidth Memory (HBM) critical for AI infrastructure. While cost-focused, the increasing use of Epitaxy in memory flows makes MST an incremental, potentially high-value addition. Atomera is engaged with multiple major memory manufacturers, leveraging new patents focused on DRAM sense amplifiers.
• Gate-All-Around (Advanced Logic): A $150+ billion market at the leading edge (2nm and below), where materials engineering, especially Epi, is increasingly crucial. MST can address challenges like dopant control and yield. Atomera is working with major manufacturers in this space. A significant recent development is the strategic marketing agreement with a major capital equipment provider, aimed at accelerating MST adoption in gate-all-around by leveraging the partner's detailed customer knowledge, extensive resources for silicon validation, and direct sales force assistance. This partnership is expected to accelerate the path to production for mutual customers.
• Gallium Nitride (GaN): An emerging, rapidly growing market (projected $12B in 5 years) for power electronics and other applications. Early positive results with Sandia National Labs on MST-enabled GaN devices, showing improved electrical performance, are paving the way for customer engagements. This segment is viewed as potentially offering a faster time to revenue than traditional silicon due to a potentially shorter qualification path for substrate enhancements.

Beyond these segments, Atomera is actively pursuing opportunities with new customers, including two described as transformative due to their size and market position. While one previously discussed transformative negotiation stalled, the company has initiated work with two new transformative customers who are reportedly moving quickly with comprehensive wafer runs. The "land-and-expand" strategy is also gaining momentum, with existing customers exploring MST in entirely new product areas, indicating growing internal belief in the technology's versatility.

Financial Performance and Liquidity

As an early-stage company focused on R&D and commercialization, Atomera has consistently incurred operating losses and generated only limited revenue. For the three months ended March 31, 2025, revenue was $4 thousand, down from $18 thousand in the same period of 2024, consisting primarily of MSTcad licensing and related consulting services. The net loss for Q1 2025 was $5.209 million, compared to $4.822 million in Q1 2024.

Operating expenses totaled $5.467 million in Q1 2025, an increase from $5.019 million in Q1 2024. This increase was primarily driven by higher Research and Development expenses ($3.255M vs. $2.858M), reflecting increased device fabrication costs, employee costs, and outside metrology, and higher General and Administrative expenses ($2.088M vs. $1.811M) due to increased legal costs related to patents and corporate matters. These increases were partially offset by a significant decrease in Selling and Marketing expenses ($124k vs. $350k) due to reduced headcount.

Cash flow from operations remains negative, with $4.782 million used in operating activities during Q1 2025, compared to $4.149 million used in Q1 2024. This burn rate is primarily driven by the operating loss.

As of March 31, 2025, Atomera held cash and cash equivalents of approximately $24.1 million and working capital of approximately $21.7 million. The company utilized its At-the-Market (ATM) facility to raise approximately $2.4 million in net proceeds during Q1 2025 by selling 164,000 shares at an average price of $15.19 before the facility expired on March 18, 2025. Based on its current cash position, management believes it has sufficient capital to fund its current business plans and obligations for at least 12 months from the filing date of the Q1 2025 report (May 8, 2025).

Compared to large, established competitors like AMAT, LRCX, and KLAC, Atomera's financial profile is vastly different. These equipment manufacturers boast significant revenue (billions annually), high gross margins (45-60%+), strong operating and net margins (20-35%+), robust cash flow generation, and healthy balance sheets (Current Ratios typically >2, Debt/Equity ratios below 1). Atomera's TTM ratios reflect its early stage: negative gross, operating, and net margins, a high Current Ratio (8.59) indicating significant cash holdings relative to current liabilities, a low Debt/Equity ratio (0.07), and a very high Price-to-Sales ratio (1532.67) reflecting minimal current revenue relative to market capitalization. This stark contrast highlights that Atomera's investment case is not based on current profitability or scale, but on the potential for future high-margin royalty revenue if its technology achieves widespread adoption, leveraging its IP-centric model against the competitors' equipment-centric scale.

Outlook and Risks

Management's guidance for Q2 2025 revenue is in the range of zero to $50,000, dependent on the timing of wafer shipments to a fabless licensee. The next significant revenue milestone is the formal process qualification with STMicroelectronics, which would trigger a license payment and pave the way for future royalties, but the timing remains under ST's control.

For the full year 2025, non-GAAP operating expenses are expected to be in the range of $17.25 million to $17.75 million. This represents an increase from the $15.4 million non-GAAP OpEx in 2024 and is attributed to planned increases in outsourced device fabrication work (potentially returning closer to historical levels after the closure of the previous vendor, TSI Semiconductor) and strategic headcount additions, particularly in engineering (focused on production transition) and sales/marketing (focused on closing deals).

The broader outlook is tied to converting the extensive pipeline of customer engagements into revenue. Key catalysts include the progression of ST towards qualification and production, the speed of engagement with the two new transformative customers, the outcome of wafer runs with JDA-2 and the fabless licensee (expected later in 2025), and the successful generation and sharing of compelling electrical data for GaN applications. Management is actively recruiting to support anticipated business growth and believes the new capital equipment partnership will accelerate progress, particularly in the advanced node space.

Despite the positive momentum in customer engagements and technological development, significant risks remain. The company's history of recurring operating losses and limited revenue generation means it relies on its existing cash reserves and the ability to raise future capital. While the current cash runway is estimated at over 12 months, the need for additional funds will depend on the pace of commercialization. Customer adoption timelines are notoriously difficult to predict and are largely outside of Atomera's direct control, as evidenced by the delays with ST (partially due to third-party logistics) and the stalled negotiation with a previously discussed transformative customer. Resistance to adopting new, externally developed technology and the royalty-based business model are inherent challenges. Furthermore, the company is working to remediate a material weakness in its internal controls over financial reporting. Competition from established players and alternative technologies, while qualitatively different in nature, poses a constant challenge to gaining market share.

Conclusion

Atomera stands at a pivotal juncture, armed with a differentiated material science technology (MST) that holds the potential to address critical performance and yield bottlenecks in the semiconductor industry's most dynamic segments, including those powering the AI revolution. Its IP licensing model offers a capital-efficient path to market, aiming for high-margin royalty streams that could represent significant value if its technology achieves widespread adoption. The company has built a compelling pipeline of engagements with major industry players across power, RF-SOI, memory, and advanced logic, bolstered by strategic partnerships and promising new applications like GaN.

However, the path to commercial success is challenging, marked by the inherent delays in customer qualification cycles, the need to overcome resistance to new technologies and business models, and the ongoing requirement for significant R&D investment that currently outstrips revenue. The ability to convert the current momentum with ST, transformative customers, and emerging GaN opportunities into definitive licensing agreements and, crucially, high-volume production royalties will be paramount. Investors should closely monitor progress on these fronts, particularly the timing of ST's qualification milestone and the outcomes of ongoing wafer runs and negotiations with other high-potential customers, as these will be key indicators of Atomera's ability to translate its technological promise into sustainable financial performance and realize its potential as a significant player in the future of semiconductor materials.