Atomera Inc 10-Q

Item 2. 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 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, 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, 2024 filed with the SEC on March 4, 2025. 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 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 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. 16 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 MSTcad 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 ST Microelectonics (ST) and Asahi Kasei Microdevices (AKM), both of which are 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 aggregate offering proceeds 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, 2025, we sold approximately 164,000 shares pursuant to the ATM at an average price per share of approximately $15.19, resulting in approximately $2.4 million of net proceeds after deducting commissions and other offering expenses. Results of Operations Revenues . To date, we have only generated limited revenue from customer engagements for engineering services, integration license agreements, a manufacturing 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. Our MSTcad 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 months ended March 31, 2025 and 2024 was approximately $4,000 and $18,000 respectively. Our revenue consisted of MSTcad licensing and related consulting services revenue. Cost of revenue . Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide deliverables that result in payment of success fees, delivery of wafers in connection with integration license agreements and consulting services provided for our MSTcad licenses. Cost of revenue is expensed when incurred and may not correspond with revenue earned in the same period. Cost of revenue was not recorded during the three months ended March 31, 2025. Cost of revenue for the three months ended March 31, 2025 and 2024 was $0 and approximately $3,000, 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. Operating expenses. Operating expenses consist of research and development, general and administrative, and selling and marketing expenses. For the three months ended March 31, 2025 and 2024, our operating expenses totaled approximately $5.5 million and $5.0 million, respectively. Research and development expense . To date, our operations have focused on 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 benefits 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 March 31, 2025 and 2024, we incurred approximately $3.3 million and $2.9 million, respectively, of research and development expenses, an increase of approximately $397,000, or 14%. This increase was primarily due to increases in device fabrication costs of approximately $182,000, employee costs of approximately $90,000 and outside metrology increases of approximately $84,000. 17 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 $2.1 million and $1.8 million for the three months ended March 31, 2025 and 2024, respectively, representing an increase of approximately $277,000, or 15%. The increase is primarily related to increases of approximately $174,000 in legal costs and fees related to our patent portfolio and approximately $56,000 in corporate legal 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 March 31, 2025 and 2024 were approximately $124,000 and $350,000, respectively, representing a decrease of approximately $226,000, or 65%. The decrease in costs is primarily due to a reduction in headcount. Interest income. Interest income for three months ended March 31, 2025 and 2024 was approximately $270,000 and $205,000, respectively. Interest income for the periods presented reflected interest earned on our cash, cash equivalents and short-term investments. Accretion income. Accretion income for the three months ended March 31, 2025 and 2024 was approximately $6,000 and $46,000, 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. Interest expense for the three months ended March 31, 2025 and 2024 was approximately $21,000 and $39,000, respectively. Interest expense is related to the tool financing lease entered into in August 2021. Other income (expense), net. Other expense for the three months ended March 31, 2025 and 2024 was approximately $1,000 and $0, respectively, and consisted of losses on foreign currency between the date of receipt of goods or services and the date the payment was made. Cash Flows from Operating, Investing and Financing Activities Net cash used in operating activities of approximately $4.8 million for the three months ended March 31, 2025 resulted primarily from our net loss of approximately $5.2 million and a decrease in our accrued payroll expenses of approximately $926,000, offset by approximately $1.0 million of stock-based compensation and an increase of approximately $269,000 in accounts payable. Net cash used in operating activities of approximately $4.1 million for the three months ended March 31, 2024 resulted primarily from our net loss of approximately $4.8 million and payment of accrued payroll expenses of approximately $928,000, offset by approximately $1.0 million of stock-based compensation and approximately $550,000 of collected contracts receivable. Net cash provided by investing activities of approximately $996,000 for the three months ended March 31, 2025 consisted primarily of the maturity of short-term available-for-sale investments. Net cash provided by investing activities of approximately $2.5 million for the three months ended March 31, 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 provided by financing activities of approximately $2.1 million for the three months ended March 31, 2025 primarily related to the net proceeds from sales under our ATM, offset by the principal payments on our financing lease. Net cash provided by financing activities of approximately $3.8 million for the three months ended March 31, 2024 primarily related to the net proceeds from sales under our ATM, offset by the principal payments on our financing lease. Liquidity and Capital Resources As of March 31, 2025, we had cash and cash equivalents of approximately $24.1 million and working capital of approximately $21.7 million. For the three months ended March 31, 2025 we had a net loss of approximately $5.2 million and used approximately $4.8 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses. During the three months ended March 31, 2025, we sold approximately 164,000 shares of common stock pursuant to the ATM at an average price per share of approximately $15.19, resulting in approximately $2.4 million of net proceeds to the Company after deducting commissions and other offering expenses. 18 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, 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. 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 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, 2024 filed with the SEC on March 4, 2025. Item 3. Quantitative and Qualitative Disclosure about Market Risk. Not applicable.