Atomera Inc Annual Report - A Deep Dive for Investors

For investors tracking Atomera Inc., understanding the company's performance is key. This summary distills Atomera's annual report for the fiscal year ended December 31, 2025, offering a clear, jargon-free overview. We aim to help you assess if Atomera aligns with your investment objectives by providing insights into its business, financial performance, strategic direction, and the opportunities and risks it faces.

What Atomera Does (Their Business Overview)

Atomera Inc. (NASDAQ: ATOM) drives semiconductor innovation by enhancing, rather than manufacturing, chips. The company developed Mears Silicon Technology (MST®), a patented, ultra-thin layer of reengineered silicon applied during standard semiconductor manufacturing.

MST significantly improves transistor performance, making chips smaller, faster, more reliable, and dramatically more power-efficient. This is crucial for the growing demands of modern electronics, including AI, IoT, high-performance computing, and mobile devices. As an "additive" technology, MST integrates seamlessly and cost-effectively into existing fabrication lines using standard equipment. This broad applicability benefits various chip types, such as power devices, radio frequency (RFSOI) devices, and advanced computer chips (CMOS logic and memory).

How They Make Money (Their Business Model & Strategy)

Atomera's core business model involves licensing its MST technology to leading semiconductor companies through a two-step process:

1. R&D License: Customers, including chip design firms (fabless designers), contract manufacturers (foundries), and integrated device manufacturers (IDMs), pay an upfront fee to install MST in their facilities for testing and development. This allows them to evaluate MST's benefits for their specific products.
2. High-Volume Manufacturing (HVM) License: After a customer validates MST and commits to using it in commercial products, they pay a larger upfront fee. Atomera then receives ongoing royalty payments based on the volume of MST-enabled chips the licensee sells.

Beyond these licenses, Atomera also provides:

• MSTcad® software: This proprietary software allows customers to simulate MST's performance improvements before physical fabrication, accelerating development.
• Engineering services: Atomera offers direct technical support and expertise to help customers integrate MST, often through paid evaluations and joint development agreements.

Atomera's customers span the entire semiconductor ecosystem, from chip designers to manufacturers and equipment suppliers, all seeking a competitive edge in performance and power efficiency. The company's strategy focuses on securing more HVM licenses, which drive long-term revenue growth, by demonstrating MST's value through successful R&D engagements.

Financial Snapshot (Fiscal Year Ended December 31, 2025 - Financial Performance)

In fiscal year 2025, Atomera continued significant investment in R&D while advancing its licensing pipeline.

• Revenue: The company reported $5.2 million in revenue for 2025, primarily from R&D licenses and engineering services. This marks a 25% increase from $4.1 million in 2024, reflecting growing customer engagement in the R&D phase.
• Net Loss: As a development-stage company, Atomera recorded a net loss of $20.5 million for 2025, compared to $18.8 million in 2024. This loss primarily resulted from increased R&D expenses and general administrative costs associated with expanding operations and patent protection.
• Research & Development (R&D) Expenses: R&D remained a significant investment, totaling $14.8 million in 2025, up from $13.5 million in 2024. This underscores Atomera's commitment to advancing MST.
• Cash and Equivalents: As of December 31, 2025, Atomera held $35.7 million in cash and cash equivalents, a decrease from $50.1 million at the end of 2024. This indicates the company used approximately $14.4 million in cash for operations during the year, excluding any financing activities.
• Market Capitalization: As of the last business day of the second fiscal quarter in 2025, the market value of common stock owned by the public (non-affiliates) was approximately $150.1 million. As of February 24, 2026, Atomera had approximately 38.7 million shares of common stock outstanding.

Management's Discussion and Analysis (MD&A) Highlights & Financial Health

Management's discussion highlights that the 2025 revenue increase reflects successful progress in securing new R&D licenses and providing engineering services, signaling growing industry interest in MST technology. Atomera's continued net losses directly result from its strategic decision to heavily invest in research and development. These investments aim to advance MST, expand its intellectual property portfolio, and scale operational capabilities to support future commercialization. The rise in R&D expenses is crucial for maintaining a technological edge and broadening MST's applicability across various semiconductor platforms.

Atomera's financial health and liquidity primarily rely on its cash and cash equivalents. The $35.7 million cash balance as of December 31, 2025, provides capital for ongoing operations and R&D activities. The company's current stage of development means it spends cash on technology advancement and market penetration before generating substantial royalty revenues. Atomera operates with minimal long-term debt, primarily funding operations through equity. Management acknowledges the company will likely need to raise additional capital in the future to sustain operations and execute its growth strategy until it achieves significant high-volume manufacturing royalty revenues. Securing such capital on favorable terms will be crucial for Atomera's long-term financial stability and growth.

Key Risks (Things to Keep in Mind)

Investing in Atomera carries several specific risks inherent to its development stage and industry:

• Technology Adoption and Commercialization: The primary risk involves successfully transitioning from R&D licenses to high-volume manufacturing (HVM) licenses and generating subsequent royalties. This process is lengthy, complex, and depends on customer validation and market acceptance.
• Competition: The highly competitive semiconductor industry means Atomera faces competition from alternative materials, different process optimization techniques, and the internal R&D efforts of major chip manufacturers.
• Intellectual Property Protection: Atomera's value is closely tied to its MST patents. Any failure to protect its intellectual property could severely impact its competitive position.
• Funding and Liquidity: Given its current net losses and cash usage, Atomera will likely need to raise additional capital to fund operations until significant royalty revenues materialize. There is no guarantee such funding will be available on favorable terms.
• Customer Concentration: Initial HVM licenses may come from a limited number of customers, making Atomera susceptible to the business cycles and strategic decisions of those key partners.
• Semiconductor Industry Cycles: The semiconductor industry is cyclical; downturns can impact customer investment in new technologies and delay MST adoption.
• Long Sales Cycles: The time from initial engagement to HVM license and royalty generation can span several years, making revenue forecasting challenging.

Competitive Position

Atomera operates within a highly competitive and rapidly evolving semiconductor industry. Its competitive advantage stems primarily from its proprietary Mears Silicon Technology (MST®) and extensive patent portfolio. MST offers a unique value proposition: it enhances transistor performance and power efficiency using existing manufacturing infrastructure, differentiating it from solutions that require significant capital expenditure or entirely new process flows.

Atomera faces competition from several sources:

• Alternative Materials and Process Technologies: Other companies and research institutions develop different materials or process enhancements to improve semiconductor performance.
• Internal R&D of Major Semiconductor Manufacturers: Large integrated device manufacturers (IDMs) and foundries often possess significant internal research and development capabilities. These capabilities may lead to their own proprietary solutions or improvements that could compete with MST or reduce the need for it.
• Other IP Licensors: While less direct, other companies licensing intellectual property for semiconductor design or manufacturing processes can indirectly compete for customer R&D budgets and strategic partnerships.

Atomera's strategy to maintain and strengthen its competitive position focuses on continuous innovation, expanding its patent portfolio, demonstrating MST's superior performance benefits through customer engagements, and ensuring seamless integration into existing fabrication processes.

Future Outlook and Strategy

Atomera's future outlook centers on executing its licensing strategy, aiming to convert its growing pipeline of R&D engagements into high-volume manufacturing (HVM) licenses. The company's strategic priorities include:

• Expanding Customer Engagements: Secure new R&D licenses and deepen existing relationships to demonstrate MST's value across a wider range of applications and device types.
• Advancing MST Technology: Invest in ongoing research and development to enhance MST's capabilities, expand its applicability, and maintain its technological leadership.
• Protecting Intellectual Property: Vigorously defend and expand its patent portfolio to secure its competitive advantage and long-term revenue streams.
• Driving HVM Adoption: Focus resources on supporting customers through the validation process to accelerate the transition from R&D to commercial HVM royalty agreements.

This is due to the long sales cycles and the variable nature of HVM license conversions and royalty streams. However, management remains optimistic about MST's long-term potential to become a foundational technology in the semiconductor industry. This optimism is driven by the increasing demand for higher performance and lower power consumption in electronic devices. Atomera's future hinges on its ability to successfully navigate these challenges, convert its strong R&D pipeline into commercial success, and demonstrate MST's tangible benefits at scale.