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Item 2. Management’s Discussion and Analysis

2024-10-29 compared with 2024-07-30 · 104 added, 100 removed, 134 unchanged (60% of the section changed)

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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

statements and the accompanying notes that appear elsewhere in this Quarterly Report on Form 10-Q.

Statements in this Quarterly Report

include forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,

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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.

fourth quarter of 2023, we completed the first major milestone under the ST license agreement by delivering our MST film recipe and ST

accepting the film, resulting in our recognizing license revenue associated with that milestone.

ST is currently performing testing to

optimize their integration of MST as part of their qualification process.

Upon qualification, we will earn additional license fees for

the distribution license, after which ST will be entitled to MST-enabled products and royalties will be payable to us for every product

There can be no assurance, however, that ST will complete its process qualification and pursue the licensed rights through development

to the manufacture and commercial sale of MST-enabled products.

Our license agreement with ST is our first grant of commercial manufacturing and distribution

In the fourth quarter of 2023, we completed the first major milestone under the ST license agreement by delivering our MST film

recipe and ST accepting the film, resulting in our recognizing license revenue associated with that milestone.

ST is currently performing

testing to optimize their integration of MST as part of their qualification process.

Upon qualification, we will earn additional license

fees for the distribution license, after which ST will be entitled to MST-enabled products and royalties will be payable to us for every

product sold.

There can be no assurance, however, that ST will complete its process qualification and pursue the licensed rights through

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

We were organized as a Delaware

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During the three-month period ended

June 30, 2024, we sold approximately 669,000 shares pursuant to the ATM at an average price per share of approximately $3.82, resulting

September 30, 2024, we sold approximately 691,000 shares pursuant to the ATM at an average price per share of approximately $3.18, resulting

in approximately $2.1 million of net proceeds to the Company after deducting commissions and other offering expenses.

During the six-month

period ended June 30, 2024, we sold approximately 1.2 million shares pursuant to the ATM at an average price per share of approximately

During the nine-month

period ended September 30, 2024, we sold approximately 1.9 million shares pursuant to the ATM at an average price per share of approximately

$4.74, resulting in approximately $8.5 million of net proceeds to the Company after deducting commissions and other offering expenses.

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we have only generated limited revenue from customer engagements for engineering services, integration license agreements, a manufacturing

license granted under a JDA and licensing of MSTcad.

Our license agreement with ST, which was executed in April 2023, is our first commercial

manufacturing and distribution agreement and, assuming successful completion of contractual milestones and payments of associated fees,

will entitle us to royalties on all MST-enabled products manufactured for commercial purposes.

Our MSTcad licenses grant customers the

right to use MSTcad software to simulate the effects of incorporating MST technology into their semiconductor manufacturing process.

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

license granted under a JDA, our license agreement with ST and licensing of MSTcad.

Our license agreement with ST, which was executed

in April 2023, is our first commercial manufacturing and distribution agreement and, assuming successful completion of contractual milestones

and payments of associated fees, will entitle us to royalties on all MST-enabled products manufactured for commercial purposes.

licenses grant customers the right to use MSTcad software to simulate the effects of incorporating MST technology into their semiconductor

manufacturing process.

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

Revenue for the three and

six months ended June 30, 2024 was approximately $72,000 and $90,000 respectively.

Our revenue in 2024 consisted of MSTcad license revenue,

consulting services related to MSTcad and the delivery of MST wafers.

Revenue was not recorded during the three and six months ended June

nine months ended September 30, 2024 was approximately $22,000 and $112,000 respectively.

Our revenue in 2024 consisted of MSTcad licensing

and related consulting services revenue, and engineering services revenue from the delivery of MST wafers.

Revenue was not recorded during

the three and nine months ended September 30, 2023.

Cost of revenue .

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Cost of revenue for the three and

six months ended June 30, 2024 was approximately $74,000 and $107,000, 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

nine months ended September 30, 2024 was approximately $3,000 and $110,000, 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.

Cost of revenue was not recorded during the three and six months ended June 30, 2023.

Cost of revenue was not recorded during the three and nine months ended September 30, 2023.

Operating expenses.

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For the three

months ended June 30, 2024 and 2023, our operating expenses totaled approximately $4.6 million and $5.4 million, respectively.

six months ended June 30, 2024 and 2023, our operating expenses totaled approximately $9.6 million and $10.5 million, respectively.

months ended September 30, 2024 and 2023, our operating expenses totaled approximately $4.8 million and $5.4 million, respectively.

the nine months ended September 30, 2024 and 2023, our operating expenses totaled approximately $14.5 million and $15.9 million, respectively.

Research and development

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For the three months ended

June 30, 2024 and 2023, we incurred approximately $2.6 million and $3.2 million, respectively, of research and development expenses, a

decrease of approximately $600,000, or 19%.

September 30, 2024 and 2023, we incurred approximately $2.8 million and $3.3 million, respectively, of research and development expenses,

a decrease of approximately $546,000, or 17%.

This decrease was primarily due to decrease of approximately $540,000 in outsourced research

and development as we discontinued working with our foundry services provider, TSI Semiconductor, as of January 31.

We are currently

seeking a replacement provider of foundry services.

Additionally, there were decreases of approximately $101,000 in payroll and benefits

costs for reduced headcount and bonus accrual.

For the six months ended June

30, 2024 and 2023, we incurred approximately $5.4 million and $6.2 million, respectively, of research and development expenses, a decrease

of approximately $781,000, or 13%.

This decrease was primarily due to a decline of approximately $776,000 in outsourced research and development

as we discontinued working with TSI Semiconductor as of January 31.

and development as our foundry services provider, TSI Semiconductor, ceased providing these services as of January 31, 2024 after it was

acquired by Robert Bosch LLC.

For the nine months ended

September 30, 2024 and 2023, we incurred approximately $8.2 million and $9.5 million, respectively, of research and development expenses,

a decrease of approximately $1.3 million, or 14%.

This decrease was primarily due to a decline of approximately $1.4 million in outsourced

research and development as we discontinued working with TSI Semiconductor as of January 31, 2024.

General and administrative

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costs and professional fees.

General and administrative costs were approximately $1.8 million for each of the three-month periods ended

June 30, 2024 and 2023, representing an increase of approximately $57,000, or 3%.

The increase is primarily related to increases of approximately

$101,000 in professional fees, related primarily to legal costs and fees related to our patent portfolio.

These costs are partially offset

by a decrease of approximately $44,000 in stock-based compensation costs.

General and administrative costs were approximately $1.8 million and $1.7 million for the three-month periods

ended September 30, 2024 and 2023, respectively, representing an increase of approximately $129,000, or 8%.

The increase is primarily

related to increases of approximately $108,000 in employee costs and approximately $67,000 in legal costs and fees related to our patent

These costs are partially offset by a decrease of approximately $82,000 in stock-based compensation costs.

General and administrative

costs were approximately $3.6 million and $3.5 million for the six months ended June 30, 2024 and 2023, respectively, representing an

increase of approximately $126,000, or 4%.

The increase is primarily related to increases of approximately $99,000 in payroll and benefits

costs and approximately $158,000 in legal costs and fees related to our patent portfolio.

These increases were partly offset by a decrease

of approximately $89,000 in corporate legal expenses and approximately $42,000 in director and officer insurance.

costs were approximately $5.5 million and $5.2 million for the nine months ended September 30, 2024 and 2023, respectively, representing

an increase of approximately $255,000, or 5%.

The increase is primarily related to increases of approximately $207,000 in payroll and

benefits costs and approximately $226,000 in legal costs and fees related to our patent portfolio.

These increases were partly offset

by decreases of approximately $85,000 in corporate legal expenses and approximately $69,000 in stock-based compensation expense.

Selling and marketing expense.

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consulting services.

Selling and marketing expenses for the three months ended June 30, 2024 and 2023 were approximately $207,000 and

$393,000, respectively, representing a decrease of approximately $186,000, or 47%.

Selling and marketing expenses for the six months ended

June 30, 2024 and 2023 were approximately $557,000 and $782,000, respectively, representing a decrease of approximately $225,000, or 29%.

The decrease in costs for both the three and six-month periods is primarily due to a reduction in headcount.

Selling and marketing expenses for the three months ended September 30, 2024 and 2023 were approximately $248,000

and $365,000, respectively, representing a decrease of approximately $117,000, or 32%.

Selling and marketing expenses for the nine months

ended September 30, 2024 and 2023 were approximately $805,000 and $1.1 million, respectively, representing a decrease of approximately

$342,000, or 30%.

The decrease in costs for both the three and nine month periods is primarily due to a reduction in headcount.

Interest income.

income for three months ended June 30, 2024 and 2023 was approximately $185,000 and $152,000, respectively.

Interest income for six months

ended June 30, 2024 and 2023 was approximately $390,000 and $351,000, respectively.

Interest income for the periods presented was due

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

income for three months ended September 30, 2024 and 2023 was approximately $176,000 and $177,000, respectively.

Interest income for nine

months ended September 30, 2024 and 2023 was approximately $566,000 and $528,000, respectively.

Interest income for the periods presented

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

Accretion income.

income for the three months ended June 30, 2024 and 2023 was approximately $47,000 and $107,000, respectively.

Accretion income for the

six months ended June 30, 2024 and 2023 was approximately $93,000 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.

income for the three months ended September 30, 2024 and 2023 was approximately $59,000 and $112,000, respectively.

Accretion income for

the nine months ended September 30, 2024 and 2023 was approximately $152,000 and $221,000, respectively.

Accretion income relates to the

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

Interest expense.

expense for the three months ended June 30, 2024 and 2023 was approximately $35,000 and $51,000, respectively.

Interest expense for the

six months ended June 30, 2024 and 2023 was approximately $74,000 and $104,000, respectively.

Interest expense is related to the tool

financing lease entered into in August 2021.

expense for the three months ended September 30, 2024 and 2023 was approximately $30,000 and $47,000, respectively.

Interest expense for

the nine months ended September 30, 2024 and 2023 was approximately $104,000 and $151,000, respectively.

Interest expense is related to

the tool financing lease entered into in August 2021.

Other income, net.

income for the three and six months ended June 30, 2024 of approximately $72,000, consisted primarily of a refundable state research and

development tax credit, net of filing costs and tax consulting services.

income for the three and nine months ended September 30, 2024 of approximately $0 and $72,000, consisted of a refundable state research

and development tax credit, net of filing costs and tax consulting services received in the second quarter of 2024.

Other income for the

three and nine months ended September 30, 2023 of approximately $72,000 also consisted of a refundable state research and development

tax credit, net of filing costs and tax consulting services received in the third quarter of 2023.

Cash Flows from Operating, Investing and Financing

Net cash used in operating

activities of approximately $7.3 million for the six months ended June 30, 2024 resulted primarily from our net loss of approximately

$9.2 million offset by approximately $2.0 million of stock-based compensation.

activities of approximately $10.2 million for the nine months ended September 30, 2024 resulted primarily from our net loss of approximately

$13.8 million offset by approximately $2.9 million of stock-based compensation and the amortization of our right of use assets of approximately

$1.0 million offset by increases in our payroll-related accruals.

Net cash used in operating

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.

activities of approximately $11.6 million for the nine months ended September 30, 2023 resulted primarily from our net loss of approximately

$15.2 million offset by approximately $3.0 million of stock-based compensation and approximately $1.0 million of amortization of right-of-use

Net cash provided by investing

activities of approximately $3.2 million and for the six months ended June 30, 2024 consisted primarily of the maturity of short-term

activities of approximately $3.5 million and for the nine months ended September 30, 2024 consisted primarily of the maturity of short-term

available-for-sale investments, offset by the purchase of short-term available-for-sale investments.

Net cash used in investing

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

activities of approximately $7.6 million and for the nine months ended September 30, 2023 consisted primarily of the purchase of short-term

available-for-sale investments, offset by the maturity of short-term available-for-sale investments

Net cash provided by financing

activities of approximately $6.0 million for the six months ended June 30, 2024 primarily related to the net proceeds from our ATM offering,

offset by the principal payments on our financing lease.

activities of approximately $7.9 million for the nine months ended September 30, 2024 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 $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.

activities of approximately $10.7 million for the nine months ended September 30, 2023 primarily related to the net proceeds from our

ATM offering, offset by the principal payments on our financing lease.

Liquidity and Capital Resources

As of June 30, 2024, we had

cash and cash equivalents of approximately $14.5 million, short-term investments of approximately $3.8 million and working capital of

approximately $15.8 million.

For six months ended June 30, 2024, we had a net loss of approximately $9.2 million and used approximately

$7.3 million of cash and cash equivalents in operations.

As of September 30, 2024,

we had cash and cash equivalents of approximately $13.8 million, short-term investments of approximately $3.6 million and working capital

of approximately $14.4 million.

For the nine months ended September 30, 2024, we had a net loss of approximately $13.8 million and used

approximately $10.2 million of cash and cash equivalents in operations.

Since inception, we have incurred recurring operating losses.

During the six months ended

June 30, 2024, we sold approximately 1.2 million shares pursuant to our ATM at an average price per share of approximately $5.66, resulting

in approximately $6.4 million of net proceeds to us after deducting commissions and other offering expenses.

During the nine-month period

ended September 30, 2024, we sold approximately 1.9 million shares of common stock pursuant to the ATM at an average price per share of

approximately $4.74, resulting in approximately $8.5 million of net proceeds to the Company after deducting commissions and other offering

Since September 30, 2024, we sold approximately 489,000 additional shares through the ATM offering at an average price

per share of $3.27 resulting in additional net proceeds of approximately $1.6 million.

We believe that our available

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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.

we will consider alternatives to our current business plan that may enable us to achieve revenue-producing operations and meaningful commercial

sources, including our ATM, 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 us to achieve revenue-producing operations and meaningful commercial

success with a smaller amount of capital.

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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