What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-04-26 · 87 added, 58 removed, 159 unchanged (48% of the section changed)

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services provided to foundries, IDMs and fabless companies and (iv) licensing MSTcad.

In April 2023 we entered into

a license agreement with ST Microelectronics (“ST”), that authorizes ST to manufacture and distribute MST-enabled products

In April 2023, we entered

into a license agreement with ST Microelectronics (“ST”) that authorizes ST to manufacture and distribute MST-enabled products

to its customers.

This agreement provides for payment of license fee payable upon reaching milestones consistent

with Atomera’s standard business model.

Our standard model is based around the two major milestones, namely the installation of

MST in a cu stomer’s fab and qualification of an MST-enabled process.

After process qualification is completed, ST will have

the right to commercially distribute MST-enabled products and, assuming ST brings such products to market, we will receive royalties on

all MST-enabled products manufactured for commercial purposes.

This ST license agreement is our first grant of commercial manufacturing

and distribution rights and, assuming the successful installation of MST and related process qualification, would result in our first

revenue from commercial use of MST-enabled products.

There can be no assurance, however, that ST will pursue the licensed rights through

development and to the manufacture and commercial sale of MST-enabled wafers.

This agreement provides for payment of license fees payable upon reaching milestones consistent with Atomera’s

standard business model.

Our standard model is based around two major milestones, namely the installation of MST in a customer’s

fab and qualification of an MST-enabled process.

After process qualification is completed, ST will have the right to commercially distribute

MST-enabled products and, assuming ST brings such products to market, we will receive royalties on all MST-enabled products manufactured

for commercial purposes.

This license agreement with ST is our first grant of commercial manufacturing and distribution rights and, assuming

the successful installation of MST and related process qualification, would result in our first revenue from commercial use of MST-enabled

There can be no assurance, however, that ST will pursue the licensed rights through development to the manufacture and commercial

sale of MST-enabled wafers.

We were organized as a Delaware

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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 March 31, 2023, approximately

50,000 shares were sold at an average price per share of approximately $6.40, resulting in approximately $274,000 of net proceeds to us

after deducting commissions and other offering expenses.

million in an “at-the-market” offering or “ATM”, to or through the agents.

During the three months ended June

30, 2023, we sold approximately 1.4 million shares pursuant to our ATM at an average price per share of approximately $8.15, resulting

in approximately $10.8 million of net proceeds to us after deducting commissions and other offering expenses.

Results of Operations

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MSTcad licenses are granted on a monthly basis and revenue is recognized over time.

Revenue for the three months

March 31, 2023 and 2023 was $0 and $375,000, respectively.

Our revenue in 2022 consisted of a success fee pursuant to our JDA and a license

fee paid under an integration license agreement.

Revenue was not recorded for

the three months ended June 30, 2023 and 2022.

Revenue for the six month period ended June 30, 2023 and 2022 was $0 and $375,000, respectively.

Our revenue in 2022 consisted of a success fee pursuant to our first JDA and a license fee paid under an integration license agreement.

Cost of revenue .

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in payment of our success fee and wafers delivered as part of the integration license agreement.

Cost of revenue for the three months

ended March 31, 2023 and 2022 was $0 and approximately $81,000, respectively.

Cost of revenue for the six months ended

June 30, 2023 and 2022 was $0 and approximately $81,000, respectively.

We anticipate that our cost of revenue will vary substantially

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customer engagement.

Cost of revenue expenses were not recorded for the three months ended June 30, 2023 and 2022.

Operating expenses.

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For the three

months ended March 31, 2023 and 2022, our operating expenses totaled approximately $5.2 million and $4.3 million, respectively.

months ended June 30, 2023 and 2022, our operating expenses totaled approximately $5.4 million and $4.4 million, respectively.

six months ended June 30, 2023 and 2022, our operating expenses totaled approximately $10.5 million and $8.8 million, respectively.

Research and development

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For the three months ended

March 31, 2023 and 2022, we incurred approximately $3.0 million and $2.3 million, respectively, of research and development expense, an

June 30, 2023 and 2022, we incurred approximately $3.2 million and $2.4 million, respectively, of research and development expenses, an

increase of approximately $759,000, or 31%.

This increase was primarily due to increases of approximately $482,000 in outsourced research

and development mainly related to the purchase of a greater quantity of wafers and a more expensive mix of wafer types, along with associated

outside metrology costs in research and development.

Research and development expenses also increased by approximately $204,000 in employee-related

expenses resulting from new hires, approximately $84,000 in stock-based compensation costs, and travel costs increased by approximately

$53,000 over the prior year.

and development mainly due to price increases for outsourced foundry services combined with an increase in the number of wafers processed.

The increase in research and development expenses also reflected increases of approximately $209,000 in employee-related expenses resulting

from new hires, and approximately $78,000 in stock-based compensation costs.

For the six months ended June

30, 2023 and 2022, we incurred approximately $6.2 million and $4.8 million, respectively, of research and development expense, an increase

of approximately $1.5 million, or 31%.

The increase was primarily due to outsourced research and development of approximately $622,000

due to price increases and increased number of wafers processed.

Additional increases were due to approximately $413,000 in employee costs

for new hires and approximately $111,000 in wafer purchases to support our research efforts.

The price increases by our outsourced foundry

service provider will continue to affect our research and development expenses going forward, but the magnitude of the increase seen in

the first half of 2023 should not recur in the second half due to the larger number of wafer lot starts as cycle time improved.

General and administrative

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General and administrative costs were approximately $1.8 million and $1.7 million for the three months ended

March 31, 2023 and 2022, respectively, representing an increase of approximately $94,000, or 6%.

June 30, 2023 and 2022, respectively, representing an increase of approximately $108,000, or 6%.

The increase is primarily related to

higher stock-based compensation costs.

an increase in stock-based compensation costs of approximately $71,000 and an increase of approximately $26,000 in IT support services.

General and administrative

costs were approximately $3.5 million and $3.3 million for the six months ended June 30, 2023 and 2022, respectively, representing an

increase of approximately $202,000, or 6%.

The increase is primarily related to an increase in stock-based compensation costs of approximately

$167,000 and an increase of approximately $53,000 in IT support services.

Selling and marketing expense.

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consulting services.

Selling and marketing expenses for the three months ended March 31, 2023 and 2022 were approximately $389,000 and

Selling and marketing expenses for the three months ended June 30, 2023 and 2022 were approximately $393,000 and

$347,000, respectively, representing an increase of approximately $46,000, or 13%.

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travel and stock-based compensation costs.

Selling and marketing expenses

for the six months ended June 30, 2023 and 2022 were approximately $782,000 and $672,000, respectively, representing an increase of approximately

$110,000, or 16%.

The increase in costs is primarily related to increased travel and stock-based compensation costs.

Interest income.

income for three months ended March 31, 2023 and 2022 was approximately $199,000 and $3,000, respectively.

Interest income for the three

months ended March 31, 2023 related to interest earned on our cash, cash equivalents and short-term investments.

Interest income for the

three months ended March 31, 2022 related to interest earned on our cash and cash equivalents.

income for three months ended June 30, 2023 and 2022 was approximately $152,000 and $35,000, respectively.

Interest income for six months

ended June 30, 2023 and 2022 was approximately $351,000 and $38,000, respectively.

Interest income for the periods presented related to

interest earned on our cash, cash equivalents and short-term investments.

Accretion income.

income for the three and six months ended June 30, 2023, was approximately $107,000 and $109,000 respectively.

Accretion income relates

to the increase in value of our available-for-sale securities from the purchase date through the maturity date.

There was no income from

accretion for the three or six months ended June 30, 2022.

Interest expense.

expense for the three months ended March 31, 2023 and 2022 was approximately $53,000 and $71,000, respectively.

Interest expense is related

to the tool financing lease entered into in August 2021.

expense for the three months June 30, 2023 and 2022 was approximately $51,000 and $69,000, respectively.

Interest expense for the six

months June 30, 2023 and 2022 was approximately $104,000 and $140,000, respectively.

Interest expense is related to the tool financing

lease entered into in August 2021.

Cash Flows from Operating, Investing and Financing

Net cash used in operating

activities of approximately $4.2 million for the three months ended March 31, 2023 resulted primarily from our net loss of approximately

$5.0 million offset by approximately $927,000 million stock-based compensation.

activities of approximately $8.2 million for the six months ended June 30, 2023 resulted primarily from our net loss of approximately

$10.2 million offset by approximately $2.0 million of stock-based compensation.

Net cash used in operating

activities of approximately $4.1 million for the three months ended March 31, 2022 resulted primarily from our net loss of approximately

$4.1 million and an increase in prepaid assets offset by stock-based compensation.

activities of approximately $6.6 million for the six months ended June 30, 2022 resulted primarily from our net loss of approximately

$8.6 million and an increase in prepaid expenses, offset by stock-based compensation and amortization of right-of-use assets.

Net cash used in investing

activities of approximately $5.0 million and for the three months March 31, 2023 consisted primarily of the purchase of short-term investments.

Net cash used in investing activities of approximately $16,000 for the three months ended March 31, 2022 consisted of the purchase of

computers and lab tools in Tempe, AZ.

activities of approximately $10.9 million and for the six months ended June 30, 2023 consisted primarily of the purchase of short-term

Net cash used in investing activities of approximately $19,000 for the six months ended June 30, 2022 consisted of the purchase

of computers and lab tools in Tempe, AZ.

Net cash provided by financing

activities of approximately $125,000 for the three months ended March 31, 2023 primarily related to the net proceeds from our ATM offering,

activities of approximately $10.8 million for the six months ended June 30, 2023 primarily related to the net proceeds from our ATM offering,

offset by the principal payments on our financing lease.

Net cash used in financing

activities of approximately $121,000 for the three months ended March 31, 2022 related to principal payments on our financing lease offset

by proceeds from the exercise of stock options.

Net cash used by financing

activities of approximately $227,000 for the six months ended June 30, 2022 primarily related to principal payments on our financing lease

offset by proceeds from the exercise of stock options and net proceeds from our ATM offering.

Liquidity and Capital Resources

As of March 31, 2023, we had

As of June 30, 2023, we had

cash and cash equivalents of approximately $12.9 million, short-term investments of approximately $11.0 million and working capital of

approximately $21.6 million.

For three months ended March 31, 2023, we had a net loss of approximately $5.0 million and used approximately

For six months ended June 30, 2023, we had a net loss of approximately $10.2 million and used approximately

$8.2 million of cash and cash equivalents in operations.

Since inception, we have incurred recurring operating losses.

During the three months ended

March 31, 2023, we sold approximately 50,000 shares pursuant to our ATM at an average price per share of approximately $6.40, resulting

in approximately $274,000 of net proceeds to us after deducting commissions and other offering expenses.

During the six months ended

June 30, 2023, we sold approximately 1.4 million shares pursuant to our ATM at an average price per share of approximately $8.09, resulting

in approximately $11.1 million of net proceeds to us after deducting commissions and other offering expenses.

Since June 30, 2023 we have

issued approximately 24,000 additional shares through our ATM offering at an average price per share of $9.17 resulting in additional

net proceeds of approximately $214,000.

We believe that our available

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis