# Atomera Inc: Form 10-Q for the period ended Sep 30, 2022

- Company: [Atomera Inc](/companies/atom.md) (CIK 1420520)
- Form: 10-Q
- Filed: 2022-11-09
- Accepted by EDGAR: Nov 9, 2022, 16:31 ET
- Period: 2022-09-30
- Accession: 0001683168-22-007448
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1420520/000168316822007448/atomera_i10q-093022.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1420520/000168316822007448/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $2.0k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $377.0k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $0 | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $81.0k | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $2.0k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $296.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-07-01 to 2022-09-30 | $2.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-01-01 to 2022-09-30 | $7.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$4.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$13.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $60.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $200.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$4.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$13.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.20 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.57 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.20 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.57 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 23,294,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 23,029,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$9.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $26.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-09-30 | $23.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $23.9m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $29.4m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $2.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $6.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-09-30 | $22.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,784 characters.

*The following discussion and analysis of the financial condition and results of operations of Atomera Incorporated should be read in conjunction with our financial statements and the accompanying notes that appear elsewhere in this Quarterly Report. 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 in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 15, 2022. 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 processes and technologies for the $550+ billion semiconductor industry. Our lead technology, named Mears Silicon Technology™, 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 power efficiency. In addition, since MST is an additive and low-cost technology, we believe 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 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 manufacturing of their chips to foundries;
- original equipment manufacturers, or OEMs, that manufacture the epitaxial, or epi, machines used to deposit semiconductor layers, such as the MST film, onto silicon wafers; and
- electronic design automation companies, which make tools used throughout the industry to simulate performance of semiconductor products using different materials, design structures and process technologies.

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. We also license our MSTcadTM software to our customers for use in simulating the effects of using MST technology on their wafers and/or devices. To date, we have generated revenue from (i) licensing agreements with two IDMs, one fabless manufacturer and one foundry, (ii) a joint development agreement, or JDA, with a leading semiconductor provider, (iii) engineering services provided to foundries, IDMs and fabless companies and (iv) licensing MSTcad.

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.

On May 31, 2022, we entered into an Equity Distribution Agreement with Oppenheimer & Co. Inc and Craig-Hallum Capital Group LLC, as agents, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million in an “at-the-market” or ATM offering, to or through the agents. During the three months ended September 30, 2022, approximately 386,000 shares were sold at an average price per share of approximately $12.34, resulting in approximately $4.6 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 for integration engineering services, integration license agreements, a manufacturing license granted under a JDA and licensing of MSTcad. In the future, we expect to collect increased fees from license agreements and JDAs as well as royalties from customer sales of products that incorporate our MST technology, subject to our ability to enter into manufacturing and distribution license agreements with our current and future licensees. 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 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 MST-enabled wafers in their facilities or to sell products incorporating MST. Our JDA included the grant of a manufacturing license to our customer and we were paid for such license upon delivery of our IP transfer package which enabled our customer to install MST in a tool in their facility and to use it to manufacture wafers for internal use. This JDA also contained targeted technical specifications that, if met, would result in payment of a success fee to us. Those technical objectives were met and we have collected the success fee.

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. We have also determined that the grant of our manufacturing license under the JDA confers a right to use our technology and accordingly revenue was recognized at the point in time when we delivered our IP transfer package. The success fee under our JDA was treated as engineering services revenue and recognized upon our customer’s confirmation that the JDA’s technical objectives had been met. Our licensing of MSTcad grants customers the right to use MSTcad software to simulate the effects of incorporating MST technology into their semiconductor manufacturing process. Such MSTcad licenses are granted on a monthly basis and revenue is recognized over time.

Revenue for the three months ended September 30, 2022 and 2021 was $2,000 and $0, respectively. Revenue for the three months ended September 30, 2022 consisted of MSTcad licensing. Revenue for the nine months ended September 30, 2022 and 2021 was $377,000 and $400,000, respectively. Our revenue for the nine months ended September 30, 2022 consisted of a success fee pursuant to our JDA, a license fee paid under an integration license agreement and MSTcad license revenue. Our revenue for the nine months ended September 30, 2021 consisted of a manufacturing license fee pursuant to our JDA.

**Cost of revenue**. Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide support for our success fee and wafers delivered as part of the integration license agreement. Cost of revenue was not recorded for the three months ended September 30, 2022 or 2021. Cost of revenue was approximately $81,000 and $0 for the nine months ended September 30, 2022 and 2021, respectively. We anticipate that our cost of revenue will vary substantially depending on the mix of license and engineering services revenues we receive 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, 2022 and 2021, our operating expenses totaled approximately $4.7 million and $4.1 million, respectively. For the nine months ended September 30, 2022 and 2021, our operating expenses totaled approximately $13.4 million and $11.9 million respectively.

**Research and development expense**. To date, our operations have focused on the research, development, patent prosecution, and commercialization of our MST technology and related technologies such as MSTcad. Our research and development costs primarily consist of payroll and benefit costs for our engineering staff and costs of outsourced fabrication (including epi tool leases) and metrology of semiconductor wafers incorporating our MST technology.

For the three months ended September 30, 2022 and 2021, we incurred approximately $2.7 million and $2.2 million, respectively, of research and development expense, an increase of approximately $511,000, or 23%. The increase was primarily due to approximately $315,000 of outsourced research and development, approximately $110,000 in recruiting fees for newly-hired employees and approximately $64,000 in consulting fees.

For the nine months ended September 30, 2022 and 2021, we incurred approximately $7.5 million and $6.5 million, respectively, of research and development expense, an increase of approximately $985,000, or 15%. The increase was primarily due to approximately $908,000 of tool lease related expenses as the tool lease commenced in August 2021, an increase of approximately $70,000 in recruiting costs for newly-hired employees and an increase in stock-based compensation of approximately $86,000 The increases in these costs was partly offset by a reduction in payroll-related expense of approximately $183,000.

**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 million in both the three months ended September 30, 2022 and 2021, representing a decrease of approximately $70,000, or 4%. The decrease is primarily related to reduced patent-related costs offset by higher payroll-related costs and stock-based compensation.

General and administrative costs for the nine months ended September 30, 2022 and 2021 were approximately $4.9 million and $4.7 million, respectively, representing an increase of approximately $226,000, or 5%. The increase in costs was primarily due to increases of approximately $107,000 in employee-related costs and $95,000 in insurance expenses.

**Selling and marketing expense.** Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel and business development consulting services. Selling and marketing expenses for the three months ended September 30, 2022 and 2021 were approximately $347,000 and $267,000, respectively, representing an increase of approximately $80,000, or 30%. The increase in costs is primarily related to increased costs related to payroll, travel and stock-based compensation.

Selling and marketing expenses for the nine months ended September 30, 2022 and 2021 were approximately $1.0 million and $670,000, respectively, representing an increase of approximately $349,000, or 52%. The increase in costs is primarily related to increased spending in employee-related costs of approximately $117,000, an increase in outsourced marketing expenses of approximately $88,000 and an increase in stock-based compensation of approximately $58,000.

**Interest income.** Interest income for three months ended September 30, 2022 and 2021 was approximately $113,000 and $2,000, respectively. Interest income for the nine months ended September 30, 2022 and 2021 was approximately $151,000 and $7,000, respectively. Interest income for each period related to interest earned on our cash and cash equivalents.

**Interest expense.** Interest expense for the three and nine months ended September 30, 2022 was approximately $60,000 and $200,000, respectively. Interest expense was approximately $52,000 for each of the three and nine months ended September 30, 2021. Interest expense is related to the tool financing lease entered into in August 2021.

**Provision for income taxes**. The provision for income tax for the three and nine months ended September 30, 2021 was approximately $17,000 and $48,000, respectively, and related to income taxes due to a foreign country arising from withholding taxes imposed on payments received for revenue. There was no provision for income tax recorded for the three or nine months ended September 30, 2022.

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

Net cash used in operating activities of approximately $9.6 million for the nine months ended September 30, 2022 resulted primarily from our net loss of approximately $13.2 million offset by approximately $2.5 million stock-based compensation and approximately $1.1 million in amortization of right-of-use assets.

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 investing activities of approximately $26,000 for the nine months ended September 30, 2022 and approximately $102,000 for the nine months ended September 30, 2021 consisted of the purchase of computers, lab tools and leasehold improvements for the remodeled Los Gatos office space and lab tools to use with the epi tool leased in Tempe, Arizona.

Net cash provided by financing activities of approximately $4.2 million for the nine months ended September 30, 2022 primarily related to the net proceeds from our ATM offering, offset by the principal payments on our financing lease.

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.

### Liquidity and Capital Resources

As of September 30, 2022, we had cash and cash equivalents of approximately $23.3 million and working capital of approximately $21.1 million. For the nine months ended September 30, 2022, we had a net loss of approximately $13.2 million and used approximately $9.6 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses.

During the three months ended September 30, 2022, we sold approximately 386,000 shares pursuant to our ATM at an average price per share of approximately $12.34, resulting in approximately $4.6 million of net proceeds to us after deducting commissions and other offering expenses.

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, 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 our ATM Facility, 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.

### Critical Accounting Estimates

There have been no changes to our critical accounting estimates from those included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 15, 2022.

## 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, 2022.

### 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, 2022 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, 2021 filed with the SEC on February 15, 2022.

Filed Nov 9, 2022.
Source: SEC EDGAR, the filing index for accession 0001683168-22-007448. Last ingested by Listed: Nov 5, 2026, 02:11 ET. No prices; not investment advice.