# Atomera Inc: Form 10-Q for the period ended Mar 31, 2017

- Company: [Atomera Inc](/companies/atom.md) (CIK 1420520)
- Form: 10-Q
- Filed: 2017-05-05
- Accepted by EDGAR: May 5, 2017, 10:43 ET
- Period: 2017-03-31
- Accession: 0001683168-17-001112
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1420520/000168316817001112/atomera_10q-033117.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1420520/000168316817001112/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2017-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2017-01-01 to 2017-03-31 | $1.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2017-01-01 to 2017-03-31 | −$3.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2017-01-01 to 2017-03-31 | $0 | us-gaap:InterestExpense |
| Net income | 3 months, 2017-01-01 to 2017-03-31 | −$3.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2017-01-01 to 2017-03-31 | −$0.29 | us-gaap:EarningsPerShareBasicAndDiluted |
| Capital expenditure | 3 months, 2017-01-01 to 2017-03-31 | $8.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2017-03-31 | $23.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2017-03-31 | $24.1m | us-gaap:AssetsCurrent |
| Total assets | at 2017-03-31 | $24.2m | us-gaap:Assets |
| Current liabilities | at 2017-03-31 | $674.0k | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2017-03-31 | $23.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 11,905 characters.

*The following discussion and analysis of the financial condition and results of operations of Atomera Incorporated should be read in conjunction with our unaudited condensed financial statements and the accompanying notes that appear elsewhere in this filing. Statements in this Quarterly Report on Form 10-Q include forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Business” section and elsewhere in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All forward-looking statements included in this report are based on information available to us on the date hereof and, except as required by law, we assume no obligation to update any such forward-looking statements.*

### Overview

We are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $350+ billion semiconductor industry. Our lead technology, named Mears Silicon TechnologyTM, or MST®, is a thin film of reengineered silicon, typically 100 to 300 angstroms (or approximately 20 to 60 silicon atomic unit cells) thick. MST® can be applied as a transistor channel enhancement to CMOS-type transistors, the most widely used transistor type in the semiconductor industry. MST® is our proprietary and patent-protected performance enhancement technology that we believe addresses a number of key engineering challenges facing the semiconductor industry. We believe that by incorporating MST®, transistors can be smaller, with increased speed, reliability and energy efficiency. In addition, since MST® is an additive and low cost technology, it can be deployed on an industrial scale, with machines commonly used in semiconductor manufacturing. We believe that MST® can be widely incorporated into the most common types of semiconductor products, including analog, logic, optical and memory integrated circuits.

We do not intend to design or manufacture integrated circuits directly. Instead, we intend to develop and license technologies and processes that will offer the designers and manufacturers of integrated circuits a low-cost solution to the industry’s need for greater performance and lower power consumption. Our customers and partners are expected to include:

- foundries, which manufacture integrated circuits on behalf of fabless manufacturers;
- integrated device manufacturers, or IDMs, which are the fully integrated designers and manufacturers of integrated circuits;
- fabless semiconductor manufacturers, which are designers of integrated circuits that outsource the manufacture of their chips to foundries;
- original equipment manufacturers, or OEMs, which manufacture the epitaxial, or EPI, machines used to deposit semiconductor layers, such as the MST® onto the base silicon wafer; and
- electronic design automation companies, which make tools used throughout the industry to simulate the effects of using different materials, design structures and process technologies on the performance of semiconductor products.

We intend to generate revenue through licensing arrangements whereby foundries and IDMs pay us a license fee for their use of MST® technology in the manufacture of silicon wafers as well as a royalty for each silicon wafer or device that incorporates our MST® technology. We also intend to enter into licensing arrangements with fabless semiconductor manufacturers pursuant to which we will charge them a royalty for each device they sell that incorporates our MST® technology.

We were organized as a Delaware limited liability company under the name Nanovis LLC on November 26, 2001. On March 13, 2007, we converted to a Delaware corporation under the name Mears Technologies, Inc. On January 12, 2016, we changed our name to Atomera Incorporated.

### Results of Operations

### Revenues

We have not commenced revenue-producing operations.

***Research and development expense.*** To date, our operations have focused on the research, development, patent protection, and commercialization of our processes and technologies, including our proprietary and patent-protected MST® performance enhancement technology. Our research and development costs primarily consist of payroll and benefit costs for our engineering staff and costs of outsourced fabrication and metrology of semiconductor wafers incorporating our MST® technology.

The timing and amount of our outsourced fabrication and metrology is highly dependent on evaluations by our prospective customers and partners. As a result, the level of our research and development costs can vary significantly among accounting periods.

For the three months ended March 31, 2017 and 2016, we incurred approximately $1.5 million and $949,000, respectively, of research and development expense, an increase of $507,000 or 53%. The increase in research and development expense is primarily due to an increase of approximately $243,000 in compensation expense which includes an increase of approximately $167,000 in payroll related expenses due to increased engineering headcount and a bonus accrual based on a new compensation plan and an approximately $76,000 increase in stock-based compensation expense. The rest of the increase in research and development expense is due to an increase of approximately $199,000 in outsourced testing and materials.

***General and administrative expenses.*** General and administrative expenses consist primarily of payroll and benefit costs for administrative personnel, office-related costs and professional fees. General and administrative costs for the three months ended March 31, 2017 and 2016 were approximately $1.6 million and $861,000, respectively, representing an increase of approximately $742,000 or 86%. Approximately $810,000 of the increase in general and administrative costs is due to increased compensation expense, of which approximately $805,000 was due to additional stock-based compensation expense related to restricted stock and options issued to certain officers and directors in connection with our IPO. The remaining increase can be attributed to board of directors’ fees of approximately $57,000 that were not incurred in the three months ended March 31, 2016. We commenced compensating our non-employee directors effective September 1, 2016 in connection with becoming a publicly-traded company.

***Selling and marketing expenses.*** Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel and business development consulting services. For the three months ended March 31, 2017 and 2016 selling and marketing expenses were approximately $509,000 and $119,000, respectively, representing an increase of approximately $390,000 or 328%. Approximately $270,000 of the increase is due to stock based compensation expense and $96,000 in payroll related expenses due to the hiring of a new Vice President of Business Development and Sales.

***Interest income and expense.*** Interest income and interest expense for the three months ended March 31, 2017 and 2016 consisted of the following (dollars in thousands):

|  | Three Months Ended March 31, 2017 | 2016 |
| --- | ---: | ---: |
| Interest income | $28 | $– |
| Interest expense | – | (562) |
|  | $28 | $(562) |

Interest income for the three months ended March 31, 2017 related to interest earned on our cash and cash equivalents. Interest expense for the three months ended March 31, 2016 related to accrued interest on our Secured Notes. These notes were converted into shares of common stock upon the completion of our IPO in August of 2016.

***Other expense.*** Other expense for the three months ended March 31, 2017 consisted of currency exchange losses related to our accounts payable of approximately $4,000. We did not have any currency exchange losses for the three months ended March 31, 2016.

### Liquidity and Capital Resources

At March 31, 2017, we had cash and cash equivalents of approximately $23.8 million and working capital of approximately $23.4 million. For the three months ended March 17, 2017, we had a net loss of approximately $3.5 million with $2.9 million used in operations. We have not generated revenues since inception and has incurred recurring operating losses. At March 31, 2017, we had an accumulated deficit of approximately $99.5 million.

### Cash Flows from Operating, Investing and Financing Activities

We believe that our available working capital is sufficient to fund our presently forecasted working capital requirements for, at least, the next 12 months following the date of the filing of this report. However, the semiconductor industry is generally slow to adopt new manufacturing process technologies and conducts long testing and qualification processes which we have limited ability to control. Accordingly, we may require additional capital in order to get to full-scale industrial production of a device that incorporates our MST®. In the event we require additional capital over and above the amount raised and on hand, we will endeavor to acquire additional funds through various financing sources, including follow-on equity offerings, debt financing, licensing fees for our technology and joint ventures with industry partners. In addition, we will consider alternatives to our current business plan that may enable to us to achieve revenue producing operations and meaningful commercial success with a smaller amount of capital. However, there can be no guarantees that additional capital will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations.

Net cash used in operating activities of approximately $2.9 million for the three months ended March 31, 2017 resulted primarily from our net loss of approximately $3.5 million, a decrease of approximately $331,000 in accrued payroll expenses and an increase of approximately $212,000 in prepaid expenses, adjusted by approximately $1.2 million for stock-based compensation expense.

Net cash used in operating activities of approximately $1.7 million for the three months ended March 31, 2016 resulted primarily from our net loss of approximately $2.5 million, adjusted by approximately $368,000 in non-cash interest expense, approximately $194,000 for non-cash amortization of debt issuance costs, and approximately $188,000 for non-cash settlement of subscription receivable.

Net cash used in investing activities of approximately $8,000 for the three months ended March 31, 2017 and approximately $9,000 for the three months ended March 31, 2016 consisted of the purchase of property and equipment.

No cash was used in or provided by financing activities in the three months ended March 31, 2017. Net cash used in financing activities of approximately $36,000 for the three months ended March 31, 2016 consisted primarily of debt issuance costs paid.

### Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements or issued guarantees to third parties.

### Recent Accounting Pronouncements

We are required to adopt certain new accounting pronouncements. See note 2 to the condensed financial statements included in Item 1 of this Form 10-Q.

### Critical Accounting Policies

There have been no changes to our critical accounting policies from those included in our Annual Report on Form 10-K for the year ended December 31, 2016.

## Controls and procedures

As filed, 861 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and principal financial and accounting officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of March 31, 2017.

### Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the three-month period ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 179 characters.

The primary risk factors affecting our business have not changed materially from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016.

Filed May 5, 2017.
Source: SEC EDGAR, the filing index for accession 0001683168-17-001112. Last ingested by Listed: Nov 5, 2026, 02:11 ET. No prices; not investment advice.