# Atomera Inc: Form 10-Q for the period ended Sep 30, 2021

- Company: [Atomera Inc](/companies/atom.md) (CIK 1420520)
- Form: 10-Q
- Filed: 2021-11-01
- Accepted by EDGAR: Nov 1, 2021, 16:47 ET
- Period: 2021-09-30
- Accession: 0001683168-21-005174
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1420520/000168316821005174/atomera_i10q-093021.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1420520/000168316821005174/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-07-01 to 2021-09-30 | $0 | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2021-01-01 to 2021-09-30 | $400.0k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-07-01 to 2021-09-30 | $0 | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2021-01-01 to 2021-09-30 | $0 | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2021-07-01 to 2021-09-30 | $0 | us-gaap:GrossProfit |
| Gross profit | 9 months, 2021-01-01 to 2021-09-30 | $400.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2021-07-01 to 2021-09-30 | $2.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2021-01-01 to 2021-09-30 | $6.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2021-07-01 to 2021-09-30 | −$4.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-01-01 to 2021-09-30 | −$11.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2021-07-01 to 2021-09-30 | $52.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2021-01-01 to 2021-09-30 | $52.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2021-07-01 to 2021-09-30 | $17.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-01-01 to 2021-09-30 | $48.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-07-01 to 2021-09-30 | −$4.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-01-01 to 2021-09-30 | −$11.5m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2021-01-01 to 2021-09-30 | −$9.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-01-01 to 2021-09-30 | $102.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2021-09-30 | $31.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-09-30 | $32.2m | us-gaap:AssetsCurrent |
| Total assets | at 2021-09-30 | $39.7m | us-gaap:Assets |
| Current liabilities | at 2021-09-30 | $2.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-09-30 | $8.2m | us-gaap:Liabilities |
| Shareholders' equity | at 2021-09-30 | $31.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,432 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. 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. Although forward-looking statements in this Quarterly Report reflect the good-faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks, uncertainties, and changes in condition, significance, value and effect, including those risk factors set forth under the heading “Risk Factors” within our Annual Report on Form 10-K filed with the SEC on February 19, 2021, quarterly reports on Form 10-Q and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report and are based on information currently and reasonably known to us. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.*

### Overview

We are engaged in the business of developing, commercializing and licensing proprietary materials, processes and technologies for the $450+ 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 made smaller, with increased speed, reliability and energy efficiency. In addition, since MST is an additive and low-cost technology, we believe it can be deployed on an industrial scale, with equipment commonly used in semiconductor manufacturing. We believe that MST can improve existing products due to the physical properties of the film and can also enable customers to design products with performance, power and scaling characteristics that are not possible using their current process technologies. We believe that MST can be incorporated into a wide range of 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 develop and license technologies and processes that we believe 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 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, deposition machines used to deposit semiconductor layers, such as the MST film onto the silicon wafer; and
- electronic design automation companies, which make tools used throughout the industry to simulate the performance of semiconductor products using different materials, design structures and process technologies.

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Our commercialization strategy is to generate revenue through licensing arrangements whereby foundries, IDMs and fabless semiconductor manufacturers pay us a license fee for their right to use MST technology in the manufacture of silicon wafers as well as a royalty for each silicon wafer or device that incorporates our MST technology. To date we have generated revenue from (i) a joint development agreement, or JDA, with a leading semiconductor provider that includes license grants and engineering services, (ii) licensing agreements with two IDMs and one fabless manufacturer and (iii) engineering services provided to foundries, IDMs and fabless companies.

We were organized as a Delaware limited liability company under the name Nanovis LLC on November 26, 2001. On March 14, 2007, we converted to a Delaware corporation under the name Mears Technologies, Inc. On January 12, 2016, we changed our name to Atomera Incorporated.

On May 15, 2020, we closed an underwritten public offering of 2,024,000 shares of common stock at a public offering price of $5.00 per share, resulting in approximately $9.4 million of net proceeds to us after deducting underwriting commission and other offering expenses.

On September 2, 2020, we entered into an Equity Distribution Agreement with Craig-Hallum Capital Group LLC, as agent, under which we could offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $25.0 million in an “at-the-market” or ATM offering, to or through the agent. We announced the completion of this offering on January 5, 2021 after 2,221,575 shares had been sold at an average price per share of approximately $11.25, resulting in approximately $24.2 million of net proceeds to us after deducting commissions and other offering expenses.

### Results of Operations

***Revenues***. To date, we have only generated limited revenue from customer engagements through a JDA, integration engineering services and integration license agreements. In the future, we expect to collect increased fees from license agreements, which in some cases may be part of a JDA, and royalties from customer sales of products that incorporate our MST technology. Our JDA includes the grant of an upfront, paid manufacturing license allowing the customer to install the recipe for our MST film into a tool in their fab and to fabricate semiconductor wafers incorporating MST, as well as development milestones that, if achieved, could result in additional revenue to Atomera. However, the JDA does not confer commercial distribution rights. Revenue from the grant of licenses to MST is recognized either at a point in time or over time, depending on the nature of the grant. We have determined that the limited manufacturing license granted to our JDA customer when we delivered the MST recipe was distinct from any obligations to provide other goods or services and was a right to use our intellectual property and therefore recognized revenue at the point in time when we delivered the recipe.

Our integration services consist of depositing our MST film on semiconductor wafers, delivering such wafers to customers to finalize building devices, and performing tests for customers evaluating MST. The integration license agreements we have entered into to date grant the licensees the right to build products that integrate our MST technology deposited by us onto their semiconductor wafers, but the agreements do not grant the licensees the rights to manufacture on their site or to sell products incorporating MST. For revenue recognition purposes, we have determined that the grant of rights in integration licenses is not distinct from the delivery of integration services, and therefore revenue from both integration licenses and integration services is recognized as the services are provided to the customer. In general, this is proportionate to the delivery of MST processed wafers to the customer, but if the agreements do not specify a time and quantity of wafer delivery, we will record revenue over the period of time of which we anticipate delivering an estimated quantity of wafers.

Revenue for each of the three months ended September 30, 2021 and 2020 was $0. Revenue for the nine months ended September 30, 2021 and 2020 was approximately $400,000 and $62,000, respectively.

***Cost of Revenue.*** Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide integration engineering services. Cost of revenue was $0 for each of the three months ended September 30, 2021 and 2020. Cost of revenue was approximately $0 and $13,000 for the nine months ended September 30, 2021 and 2020, respectively. We anticipate that our cost of revenue will vary substantially depending on the mix of integration license and integration engineering services and the nature of products and/or services delivered in each customer engagement.

***Operating Expenses*** Operating expenses consist of research and development, general and administrative, and selling and marketing expenses. For the three months ended September 30, 2021 and 2020 our operating expenses totaled approximately $4.1 million and $3.6 million, respectively. For the nine months ended September 30, 2021 and 2020, our operating expenses totaled approximately $11.9 million and $11.1 million, respectively.

***Research and development expense.*** To date, our operations have focused on the research, development, patent protection, and commercialization of our processes and technologies related to MST. 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.

Research and development costs were approximately $2.2 and $2.0 million for the three months ended September 30, 2021 and 2020, respectively representing an increase of approximately $183,000, or 9%. This increase in primarily due to our new tool lease that began in August 2021.

For the nine months ended September 30, 2021 and 2020, we incurred approximately $6.5 million and $6.2 million, respectively, of research and development expense, an increase of approximately $333,000 or 5%. The increase in research and development expense is primarily due to additional headcount and the new tool lease, offset by a decrease in outsourced research and development costs.

***General and administrative expense.*** General and administrative expenses consist primarily of payroll and benefit costs for administrative personnel, office-related costs and professional fees. General and administrative costs were approximately $1.6 and $1.3 million for the three months ended September 30, 2021 and 2020, respectively. The increase of approximately $315,000, or 24% is primarily due to increases in patent-related legal fees and higher insurance costs.

General and administrative costs for the nine months ended September 30, 2021 and 2020 were approximately $4.7 million and $4.2 million, respectively, representing an increase of approximately $409,000, or 10%. The increase in costs was primarily due to increases of approximately $214,000 in insurance costs, approximately $90,000 in rent costs and approximately $182,000 in stock-based compensation, offset in part by a decrease of approximately $111,000 in professional fees.

***Selling and marketing expense.*** Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel. Selling and marketing expenses for the three months ended September 30, 2021 and 2020 were approximately $267,000 and $208,000, respectively, representing an increase of approximately $59,000, or 28%. The increase in costs is primarily related to increased spending in new marketing initiatives.

Selling and marketing expenses for the nine months ended September 30, 2021 and 2020 were approximately $670,000 and $648,000, respectively, representing an increase of approximately $22,000, or 3%. The increase in costs is primarily related to increased spending in new marketing initiatives offset by lower payroll and related expenses.

***Interest income.*** Interest income for the three months ended September 30, 2021 and 2020 was approximately $2,000 and $1,000, respectively. Interest income for the nine months ended September 30, 2021 and 2020 was approximately $7,000 and $41,000, respectively. Interest income for each period related to interest earned on our cash and cash equivalents. The decrease in interest income was due to the fall in interest rates during 2020 and into 2021.

***Interest expense.*** Interest expense for the three and nine months ended September 30, 2021 and 2021 was approximately $52,000 for each period. There was no interest expense recorded for the three and nine months ended September 30, 2020. Interest expense is related to the new tool financing lease entered into in August 2021.

***Provision for income taxes.*** The provision for income taxes for the three months ended September 30, 2021 and 2020 was approximately $17,000 and $0, respectively. The provision for income taxes for the nine months ended September 30, 2021 and 2020 was approximately $48,000 and $0, respectively. Our provision is for income taxes due to a foreign country arising from withholding taxes imposed on payments received for revenue.

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

Net cash used in operating activities of approximately $9.4 million for the nine months ended September 30, 2021 resulted primarily from our net loss of approximately $11.5 million and an increase of approximately $297,000 in prepaid expenses and other assets, offset by approximately $2.3 million of stock-based compensation.

Net cash used in operating activities of approximately $9.1 million for the nine months ended September 30, 2020 resulted primarily from our net loss of approximately $11.0 million adjusted by approximately $2.2 million in stock-based compensation expense, offset by an increase of approximately $499,000 in prepaids and other assets.

Net cash used in investing activities of approximately $102,000 for the nine months ended September 30, 2021 and approximately $56,000 for the nine months ended September 30, 2020 consisted of the purchase of computers, lab tools and leasehold improvements for the remodeled Los Gatos office space and new Tempe office space.

Net cash provided by financing activities of approximately $3.4 million for the nine months ended September 30, 2021 related to the exercise of approximately 506,000 stock options and net proceeds from our at-the-market offering which began in September 2020 and concluded in January 2021.

Net cash provided by financing activities of approximately $19.6 million for the nine months ended September 30, 2020 was primarily related to the net proceeds from our underwritten public offering in May 2020, proceeds from our ATM program in September 2020 and the exercise of approximately 386,000 warrants and approximately 136,000 stock options during this nine month period.

### Liquidity and Capital Resources

As of September 30, 2021, we had cash and cash equivalents of approximately $31.8 million and working capital of approximately $29.3 million. For the nine months ended September 30, 2021, we had a net loss of approximately $11.5 million and used approximately $9.4 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses.

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, and there can be no assurance of the timing of our receipt of meaningful amounts of revenue.

Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our MST technology, competing technological and market developments, and the need to enter into collaborations with other companies or acquire technologies to enhance or complement our current offerings. If we are not able to generate sufficient revenue from license fees and royalties in a timeframe that satisfies our cash needs, we will need to raise more capital. In the event we require additional capital, we will endeavor to acquire additional funds through various financing sources, including follow-on equity offerings, debt financing 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. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve its cash.

### Off-Balance Sheet Arrangements

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

### Recent Accounting Standards

We are required to adopt certain new accounting standards, see note 3 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, 2020 filed with the SEC on February 19, 2021

## Controls and procedures

As filed, 872 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(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of September 30, 2021.

### Changes in Internal Control over Financial Reporting

There have not been any changes to our internal controls over financial reporting (as defined by Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the three-month period ended September 30, 2021 that have material affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 219 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, 2020 filed with the SEC on February 19, 2021.

Filed Nov 1, 2021.
Source: SEC EDGAR, the filing index for accession 0001683168-21-005174. Last ingested by Listed: Nov 5, 2026, 02:11 ET. No prices; not investment advice.