Atomera Inc 10-Q

Item 1. Financial Statements Atomera Incorporated Condensed Balance Sheets (in thousands, except per share data) March 31, December 31, 2024 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 14,806 $ 12,591 Short-term investments 4,458 6,940 Unbilled contracts receivable – 550 Interest receivable 73 79 Prepaid expenses and other current assets 328 244 Total current assets 19,665 20,404 Property and equipment, net 83 100 Long-term prepaid maintenance and supplies 91 91 Security deposit 14 14 Operating lease right-of-use asset 459 517 Financing lease right-of-use-asset 2,622 2,903 Total assets $ 22,934 $ 24,029 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 601 $ 618 Accrued expenses 210 222 Accrued payroll related expenses 454 1,382 Current operating lease liability 263 264 Current financing lease liability 1,357 1,328 Deferred Revenue 17 – Total current liabilities 2,902 3,814 Long-term operating lease liability 194 295 Long-term financing lease liability 1,431 1,750 Total liabilities 4,527 5,859 Commitments and contingencies (see Note 9) – – Stockholders’ equity: Preferred stock $ 0.001 par value, authorized 2,500 shares; none issued and outstanding as of March 31 2024 and December 31, 2023 – – Common stock: $ 0.001 par value, authorized 47,500 shares; 26,905 shares issued and 26,885 outstanding as of March 31, 2024; and 26,107 shares issued and outstanding as of December 31, 2023 27 26 Additional paid in capital 226,288 221,229 Other comprehensive income (loss) ( 1 ) – Accumulated deficit ( 207,907 ) ( 203,085 ) Total stockholders’ equity 18,407 18,170 Total liabilities and stockholders’ equity $ 22,934 $ 24,029 The accompanying notes are an integral part of these condensed financial statements. 3 Atomera Incorporated Condensed Statements of Operations (Unaudited) (in thousands, except per share data) Three Months Ended March 31, 2024 2023 Revenue $ 18 $ – Cost of revenue ( 33 ) – Gross margin (loss) ( 15 ) – Operating expenses Research and development 2,858 3,036 General and administrative 1,811 1,742 Selling and marketing 350 389 Total operating expenses 5,019 5,167 Loss from operations ( 5,034 ) ( 5,167 ) Other income (expense) Interest income 205 199 Accretion income 46 2 Interest expense ( 39 ) ( 53 ) Total other income (expense), net 212 148 Net loss $ ( 4,822 ) $ ( 5,019 ) Net loss per common share, basic $ ( 0.19 ) $ ( 0.21 ) Net loss per common share, diluted $ ( 0.19 ) $ ( 0.21 ) Weighted average number of common shares outstanding, basic 26,038 23,660 Weighted average number of common shares outstanding, diluted 26,038 23,660 The accompanying notes are an integral part of these condensed financial statements. 4 Atomera Incorporated Condensed Statements of Comprehensive Loss (Unaudited) (in thousands, except per share data) Three Months Ended March 31, 2024 2023 Net loss $ ( 4,822 ) $ ( 5,019 ) Unrealized gain (loss) on available-for-sale securities ( 1 ) ( 2 ) Comprehensive income (loss) $ ( 4,823 ) $ ( 5,021 ) The accompanying notes are an integral part of these condensed financial statements. 5 Atomera Incorporated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2024 and 2023 (Unaudited) (in thousands) Common Stock Additional Paid-in Other Comprehensive Accumulated Total Stockholders’ Shares Amount Capital Loss Deficit Equity Balance January 1, 2024 26,107 $ 26 $ 221,229 $ – $ ( 203,085 ) $ 18,170 Stock-based compensation 275 – 1,024 – – 1,024 Stock option exercise 13 – 86 – – 86 Forfeiture of restricted stock issuance ( 20 ) – – – – – At-the-market sale of stock, net of commissions and expenses 510 1 3,949 – – 3,950 Net loss – – – – ( 4,822 ) ( 4,822 ) Unrealized gain (loss) on available-for-sale securities – – – ( 1 ) – ( 1 ) Balance March 31, 2024 26,885 $ 27 $ 226,288 $ ( 1 ) $ ( 207,907 ) $ 18,407 Common Stock Additional Paid-in Other Comprehensive Accumulated Total Stockholders’ Shares Amount Capital Loss Deficit Equity Balance January 1, 2023 23,973 $ 24 $ 203,585 $ – $ ( 183,295 ) $ 20,314 Stock-based compensation 297 – 927 – – 927 Stock option exercise 10 – 39 – – 39 At-the-market sale of stock, net of commissions and expenses 50 – 274 – – 274 Net loss – – – – ( 5,019 ) ( 5,019 ) Unrealized gain (loss) on available-for-sale securities – – – ( 2 ) – ( 2 ) Balance March 31, 2023 24,330 $ 24 $ 204,825 $ ( 2 ) $ ( 188,314 ) $ 16,533 The accompanying notes are an integral part of these condensed financial statements. 6 Atomera Incorporated Condensed Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ ( 4,822 ) $ ( 5,019 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 17 20 Operating lease right of use asset amortization 58 52 Financing lease right of use asset amortization 281 291 Stock-based compensation 1,024 927 Net accretion of discounts on available-for-sale securities ( 46 ) ( 3 ) Changes in operating assets and liabilities: Unbilled contracts receivable 550 – Interest receivable 12 ( 46 ) Prepaid and other current assets ( 84 ) 168 Accounts payable ( 114 ) 26 Accrued expenses ( 12 ) 69 Accrued payroll expenses ( 928 ) ( 675 ) Operating lease liability ( 102 ) ( 44 ) Deferred revenue 17 – Net cash used in operating activities ( 4,149 ) ( 4,234 ) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment – ( 15 ) Purchase of available-for-sale securities ( 1,479 ) ( 4,942 ) Maturity of available-for-sale securities 4,000 – Net cash provided by/(used in) investing activities 2,521 ( 4,957 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from at-the-market sale of stock, net of commissions and expenses 3,950 274 Proceeds from exercise of stock options 86 39 Payments on principal of financing lease ( 193 ) ( 188 ) Net cash provided by financing activities 3,843 125 Net increase/(decrease) in cash and cash equivalents 2,215 ( 9,066 ) Cash and cash equivalents at beginning of period 12,591 21,184 Cash and cash equivalents at end of period $ 14,806 $ 12,118 Supplemental information: Cash paid for interest $ 26 $ 53 Cash paid for taxes $ – $ – The accompanying notes are an integral part of these condensed financial statements. 7 ATOMERA INCORPORATED NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS For the Three Months Ended March 31, 2024 and 2023 1. NATURE OF OPERATIONS Atomera Incorporated (“Atomera” or the “Company”) was incorporated in the state of Delaware in March 2007 under the name MEARS Technologies, Inc. and is engaged in the development, commercialization and licensing of proprietary processes and technologies for the semiconductor industry. On January 12, 2016, the Company changed its name to Atomera Incorporated. Atomera is an early-stage company, having only recently begun limited revenue-generating activities, and is devoting substantially all its efforts toward technology research and development and to commercially licensing its technology to designers and manufacturers of integrated circuits. 2. LIQUIDITY AND MANAGEMENT PLANS At March 31, 2024, the Company had cash, cash equivalents and short-term investments of approximately $ 19.3 million and working capital of approximately $ 16.8 million . The Company has generated only limited revenues since inception and has incurred recurring operating losses. Accordingly, it is subject to all the risks inherent in the initial organization, financing, expenditures, and scaling of a new business that is not generating positive cashflow. On May 31, 2022, Atomera entered into an Equity Distribution Agreement with Oppenheimer & Co. Inc. and Craig-Hallum Capital Group LLC, as agents, under which the Company may offer and sell, from time to time at its sole discretion, shares of its $0.001 par value common stock, in “at the market” offerings to or through the agent as its sales agent, having aggregate offering proceeds of up to $50.0 million (the “ATM Facility”). During the three-month period ended March 31, 2024, the Company sold approximately 510,000 shares pursuant to the ATM at an average price per share of approximately $ 8.06 , resulting in approximately $ 4 .0 million of net proceeds to the Company after deducting commissions and other offering expenses. As of March 31, 2024, the Company has a remaining capacity on the ATM of approximately $ 25.7 million . Based on the funds it has available as of the date of the filing of this report, the Company believes that it has sufficient capital to fund its current business plans and obligations over, at least, 12 months from the date that these financial statements have been issued. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its technology, competing technological and market developments, and the need to enter into collaborations with other companies or acquire technologies to enhance or complement its current offerings. The Company’s operating plans for the next 12 months include increased research and development expenses. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant Accounting Policies There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 15, 2024. 8 Basis of Presentation of Unaudited Condensed Financial Information The unaudited condensed financial statements of the Company for the three months ended March 31, 2024 and 2023 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and its results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2023 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 15, 2024. These unaudited condensed financial statements should be read in conjunction with that report. Cash, Cash Equivalents, and Short-Term Investments The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Cash equivalents may be invested in money market funds or U.S. agency bonds. Cash and cash equivalents are carried at cost, which approximates their fair value. The Company's portfolio of short-term investments is comprised solely of U.S. treasury bills and agency bonds with maturities of more than three months, but less than one year. The Company classifies these as available-for-sale at purchase date and will reevaluate such designation at each period end date. The Company may sell these marketable debt securities prior to their stated maturities depending upon changing liquidity requirements. These debt securities are classified as current assets in the consolidated balance sheet and recorded at fair value, with unrealized gains or losses included in accumulated other comprehensive income (loss). Gains and losses are recognized when realized. Gains and losses are determined using the specific identification method and are reported in other income (expense), net in the consolidated statements of operations. Recent Accounting Standards From time to time, new accounting standards are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. No new accounting standards issued or effective during the period ended March 31, 2024 have had or are expected to have a significant impact on the Company’s financial statements. 4. FAIR VALUE MEASUREMENTS Accounting Standards Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”) states that fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, consists of: Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 9 The Company’s cash equivalents and short-term investments that were measured at fair value on a recurring basis as Level 1 assets. The Company’s cash, cash equivalents and short-term investments classified by security type as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands): Schedule fair value measurements March 31, 2024 Cost Unrealized Gain/(Loss) Accretion of Discount Fair Value Cash $ 1 $ – $ – $ 1 Money market funds 14,805 – – 14,805 US treasury bills 1,958 – 15 1,973 US agency bonds 2,455 ( 1 ) 31 2,485 Total $ 19,219 $ ( 1 ) $ 46 $ 19,264 December 31, 2023 Cost Accretion of Discount Fair Value Cash $ 157 $ – $ 157 Money market funds 12,434 – 12,434 US treasury bills 2,931 50 2,981 US agency bonds 3,938 21 3,959 Total $ 19,460 $ 71 $ 19,531 5. REVENUE The Company recognizes revenue in accordance with ASC No. 606. The Company generates revenues from engineering service contracts, license agreements and joint development agreements. The amount of revenue that the Company recognizes reflects the consideration it expects to receive in exchange for goods or services and such revenue is recognized when the Company satisfies a performance obligation by transferring the product or service to the customer. When the Company’s performance obligation is to grant a license, revenue is recognized either at a point in time (such as a right to use licensed technology that is under the customer’s control), or over time (typically a right to access technology without obtaining control). Revenue from integration license agreements and from MSTcad licenses are recognized over the length of the license. The following table provides information about disaggregated revenue by primary geographical markets and timing of revenue recognition (in thousands): Schedule of disaggregated revenue and timing of revenue Three Months Ended March 31, 2024 2023 Primary geographic markets North America $ 18 $ – Asia Pacific – – Total $ 18 $ – Timing of revenue recognition Products and services transferred at a point in time $ – $ – Products and services transferred over time 18 – Total $ 18 $ – 10 Unbilled contracts receivable Timing of revenue recognition may differ from the timing of invoicing customers. Accounts receivable includes amounts billed and currently due from customers. Unbilled contracts receivable represents unbilled amounts expected to be received from customers in future periods, where the revenue recognized to date exceeds the amount billed, and the right to receive payment is subject to the underlying contractual terms. Unbilled contracts receivable amounts may not exceed their net realizable value and are classified as long-term assets if the payments are expected to be received more than one year from the reporting date. All unbilled contracts receivable as of December 31, 2023 were billed and received during the three months ended March 31, 2024. Deferred Revenue The Company records deferred revenue for customers that were issued invoices, but the Company has not yet recognized the revenue based on its revenue recognition policy. As of March 31, 2024, the Company has approximately $ 17 ,000 of deferred revenue that it expects to recognize over the next 12 months. 6. BASIC AND DILUTED LOSS PER SHARE Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the sum of the weighted average number of shares of common stock outstanding and the dilutive common stock equivalent shares outstanding during the period. The Company’s potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and (ii) vesting of restricted stock units and restricted stock awards, are only included in the calculation of diluted net loss per share when their effect is dilutive. Since the Company has had net losses for all periods presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net loss per share are equal. The following potential common stock equivalents were not included in the calculation of diluted net loss per common share because the inclusion thereof would be anti-dilutive (in thousands): Schedule of anti dilutive shares Three Months Ended March 31, 2024 2023 Stock Options 3,670 3,374 Unvested restricted stock 620 582 Total 4,290 3,956 7. LEASES The Company accounts for leases over one year under ASC 842. Lease expense for the Company’s operating leases consists of the lease payments recognized on a straight-line basis over the lease term. Expenses for the Company’s financing leases consists of the amortization expenses recognized on a straight-line basis over the lease term and interest expense. The Company’s lease agreement for a tool used in the development and marketing of the Company’s technology established a monthly lease payment of $150,000 per month. The lease contains a provision for an annual adjustment of lease payments based on tool availability and usage during the preceding 12 months and the adjusted payment is calculated on August 1 of each year of the lease. Effective August 1, 2023, the lease payments for this tool were adjusted to $137,650 per month for the period August 1, 2023 through July 31, 2024. This adjustment to the lease payments also resulted in a reduction in the ROU and corresponding lease liability. 11 Effective May 1, 2023, the Company leased an additional 404 square feet at its Tempe office location under an amendment to its current lease. The monthly rent payment increased from $1,277 per month to $2,365 per month and the increased rent under the amended lease is accounted for as a modification to the lease under ASC 842 at the time of commencement. At the effective date of the lease amendment, a right-of-use asset of approximately $ 33,000 was recorded along with a short-term operating lease liability of approximately $ 12,000 and long-term operating lease liability of approximately $ 21,000 . The amended lease ends in February 2026. In December 2023, the Company entered into a lease agreement for a tool in Tempe, Arizona. The term of this lease is for 12 months beginning on January 1, 2024 for $87,000 per month. Since the lease term is not for more than one year and there are no extension provisions in the lease, the future lease payments are not included in the lease obligations on the Company’s condensed balance sheets. The Company terminated its office lease in Cambridge, Massachusetts as of March 31, 2023. The cost of the lease was $2,942 per month. The components of lease costs were as follows (in thousands): Schedule of lease costs Three Months March 31, 2024 2023 Financing lease costs: Amortization of ROU assets $ 281 $ 291 Interest on lease liabilities 39 53 Total financing lease costs $ 320 $ 344 Operating lease costs: Fixed lease costs $ 66 $ 62 Short-term lease costs 261 297 Total operating lease costs $ 327 $ 359 Future minimum payments under non-cancellable leases as of March 31, 2024 were as follows (in thousands): Schedule of future minimum payments For the Year Ended December 31, Financing leases Operating leases Remaining 2024 $ 1,037 $ 181 2025 1,436 298 2026 478 24 Total future minimum lease payments 2,951 503 Less imputed interest ( 163 ) ( 46 ) Total lease liability $ 2,788 $ 457 The below table provides supplemental information and non-cash activity related to the Company’s operating and financing leases are as follows (in thousands): Schedule of supplemental information Three Months Ended March 31, 2024 2023 Operating cash flow information: Cash paid for amounts included in the measurement of operating lease liabilities $ 110 $ 56 Cash paid for amounts included in the measurement of financing liabilities $ 219 $ 241 The table above does not include short-term leases that are one-year or less. 12 The weighted average remaining discount rate is 5.50 % for the Company’s operating leases and 5.25 % for the financing lease. The weighted average remaining lease term is 2.3 years for the Company’s operating leases and 1.9 years for the financing lease. 8. STOCK BASED COMPENSATION In May 2017, the Company’s shareholders approved its 2017 Stock Incentive Plan (“2017 Plan”) after its 2007 Stock Incentive Plan (“2007 Plan”) had expired in March 2017. The 2017 Plan provides for the grant of non-qualified stock options and incentive stock options to purchase shares of the Company’s common stock and for the grant of restricted and unrestricted shares. The 2017 Plan provides for the issuance of 3,750,000 shares of common stock. In May 2023, the Company’s shareholders approved its 2023 Stock Incentive Plan (“2023 Plan”). The 2023 plan provides for the issuance of 2,000,000 shares of common stock. All employees and employees of any subsidiary (including officers and directors who are also employees), as well as all of the nonemployee directors and other consultants, advisors and other persons who provide services to the Company are eligible to receive incentive awards under the 2017 Plan and 2023 Plan. Generally, stock options and restricted stock issued under the 2017 Plan and 2023 Plan vest over a period of one to four years from the date of grant. As of March 31, 2024, approximately 1.4 million shares remain available for issuance under both available plans. The following table summarizes the stock-based compensation expense recorded in the Company’s results of operations during the three months ended March 31, 2024 and 2023 for stock options and restricted stock granted under the Company’s incentive plans (in thousands): Schedule of stock-based compensation expense Three Months Ended March 31, 2024 2023 Research and development $ 377 $ 328 General and administrative 583 525 Selling and Marketing 64 74 Total $ 1,024 $ 927 As of March 31, 2024, there was approximately $ 8.6 million of total unrecognized compensation expense related to unvested share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of 3.1 years. The weighted average grant date fair value per share of the options granted under the Company’s Plans were $ 4.98 and $ 4.95 for the three March 31, 2024 and 2023, respectively. The following table summarizes stock option activity during the three months ended March 31, 2024 (in thousands except exercise prices and contractual terms): Schedule of stock option activity Number of Shares Weighted- Average Exercise Prices per Share Weighted- Average Remaining Contractual Term (In Years) Intrinsic Value Outstanding at January 1, 2024 3,369 $ 7.04 Granted 366 $ 6.46 Exercised ( 13 ) $ 6.60 Forfeited ( 52 ) $ 10.43 Outstanding at March 31, 2024 3,670 $ 6.93 4.82 $ 2,093 Exercisable at March 31, 2024 2,926 $ 6.68 3.70 $ 2,093 13 During the three months ended March 31, 2024, the Company granted options under the 2017 and 2023 Plans to purchase approximately 366,000 shares of its common stock to its employees and consultants. The fair value of these options was approximately $ 1.8 million at the time of grant. The Company issues restricted stock to employees, directors and consultants and estimates the fair value based on the closing price on the day of grant. The following table summarizes all restricted stock activity during the three months March 31, 2024 (in thousands except per share data): Schedule of restricted stock activity Number of Shares Weighted-Average Grant Date Fair Value per Share Outstanding at January 1, 2024 419 $ 9.21 Granted 275 $ 6.46 Forfeited ( 20 ) $ 8.24 Vested ( 54 ) $ 8.35 Outstanding non-vested shares at March 31, 2024 620 $ 8.09 During the three months ended March 31, 2024, the Company granted approximately 275,000 restricted stock awards under the 2017 and 2023 Plans. The fair value of these awards was approximately $ 1.8 million at the time of grant. 9. COMMITMENTS AND CONTINGENCIES Litigation, Claims and Assessments The Company may be subject to periodic lawsuits, investigations and claims that arise in the ordinary course of business. The Company is not party to any material litigation as of March 31, 2024, or through the date these financial statements have been issued. 10. SUBSEQUENT EVENTS Management has evaluated subsequent events and transactions through the date these financial statements were issued. 14