Atomera Inc 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NASDAQ Capital Market under the symbol “ATOM”. Holders of Record As of February 10, 2021, there were 206 holders of record of our common stock. Dividend Policy We have never declared or paid cash dividends on our common stock. We presently intend to retain earnings, if any, to finance the operation and expansion of our business. Item 6. Selected Financial Data As a “smaller reporting company” under Item 10 of Regulation S-K, we are not required to provide the information under this item. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 Annual Report. Statements in this Annual Report on Form 10-K 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 Annual 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 this Annual Report. 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 Annual 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 Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual 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 $450+ billion semiconductor industry. Our lead technology, named Mears Silicon Technology TM , 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. 18 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, that manufacture the epitaxial, or EPI, 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 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. To date we have generated revenue from (i) licensing agreements with two IDMs and one fabless manufacturer and (ii) 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 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 30, 2019, we closed a registered direct offering of 1,675,000 shares of common stock at a price of $4.00 per share, resulting in approximately $6.4 million of net proceeds to us after deducting placement agent fees and other offering expenses. 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 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 $25.0 million in an “at-the-market” or ATM offering, to or through the agent. As of December 31, 2020, 2,206,895 shares had been sold at an average price per share of approximately $11.22, resulting in approximately $24.0 million of net proceeds to us after deducting commissions and other offering expenses. Results of Operations for the Years Ended December 31, 2020 and 2019 Revenues. To date, we have only generated limited revenue from customer engagements for integration engineering services and integration license agreements. In the future, we expect to collect increased fees from license agreements and 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 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. 19 Revenue for the years ended December 31, 2020 and 2019 was approximately $62,000 and $533,000, respectively. Our revenue in 2020 and 2019 was generated from integration services engagements and integration license agreements. 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 approximately $13,000 and $253,000 for the years ended December 31, 2020 and 2019, 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 years ended December 31, 2020 and 2019 our operating expenses totaled approximately $15.0 million and $13.9 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 our MST 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. For the years ended December 31, 2020 and 2019, we incurred approximately $8.4 million and $7.7 million, respectively, of research and development expense, an increase of approximately $676,000 or 9%. The increase in research and development expense is primarily due to an increase of approximately $309,000 stock-based compensation expense and approximately $510,000 in payroll related costs due to headcount growth. These increases in expenses were offset by an approximately $216,000 decrease in travel costs as a result of halting travel due to the COVID-19 pandemic. 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 for the years ended December 31, 2020 and 2019 were approximately $5.6 million and $5.2 million, respectively, representing an increase of approximately $421,000 or 8%. The increase is costs was primarily due to an increase in professional fees related to legal and patent fees. 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 years ended December 31, 2020 and 2019 were approximately $921,000 and $954,000, respectively, representing a decrease of approximately $33,000 or 4%. The decrease in primarily due to a decrease in travel offset by increase in consulting fees. Interest income. Interest income for the years ended December 31, 2020 and 2019 was approximately $42,000 and $325,000, respectively. Interest income for each period related to interest earned on our cash and cash equivalents. Interest income for each period related to interest earned on our cash and cash equivalents. Interest rates continued to fall during 2020 and while our cash balance grew substantially in 2020, this was heavily weighted to the end of the year due to the timing of our at-the-market equity financing. Liquidity and Capital Resources In May 2019, we closed a registered direct offering of 1,675,000 shares of common stock at a price of $4.00 per share. We received approximately $6.4 million of net proceeds after deducting commissions and other offering expenses. As of December 31, 2020, we had cash and cash equivalents of approximately $37.9 million and working capital of approximately $36.6 million. For the year ended December 31, 2020, we had a net loss of approximately $14.9 million and used approximately $12.1 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses. 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. 20 On September 2, 2020, we entered into an Equity Distribution Agreement with Craig-Hallum Capital Group LLC, as agent, 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 $25.0 million in an “at-the-market” or ATM offering, to or through the agent. As of December 31, 2020, 2,206,895 shares have been sold at an average price per share of approximately $11.22, resulting in approximately $24.0 million of net proceeds to us after deducting commissions and other offering expenses. On January 5, 2021 we announced the completion of this offering after an additional 14,680 shares were sold for an average price per share of $16.97, in January 2021 resulting in additional net proceeds of approximately $243,000. 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. Cash Flows from Operating, Investing and Financing Activities: Net cash used in operating activities of approximately $12.1 million for year ended December 31, 2020 resulted primarily from our net loss of approximately $14.9 million adjusted by approximately $3.0 million for stock-based compensation expense. Net cash used in operating activities of approximately $10.4 million for year ended December 31, 2019 resulted primarily from our net loss of approximately $13.3 million adjusted by approximately $2.9 million for stock-based compensation expense. Net cash used by investing activities of approximately $131,000 and approximately $51,000 for the years ended December 31, 2020 and 2019, respectively, consisted of the purchase of property and equipment. In 2020, we refurnished our offices in Los Gatos, California and also purchased lab equipment to be used in connection with an epi tool that we plan to lease in Tempe, Arizona . Net cash provided by financing activities of approximately $35.3 million for the year ended December 31, 2020 related to the net proceeds from our underwritten public offering of common stock in May 2020 and our at-the-market offering beginning in September 2020 and continuing through the end of 2020. Net cash provided by financing activities of approximately $6.4 million for the year ended December 31, 2019 related to the net proceeds from our registered direct offering in May 2019. Off-Balance Sheet Arrangements We have not entered into off-balance sheet arrangements or issued guarantees to third parties. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 21