Atomera Incorporated — Q2 2022 Form 10-Q Summary
Business context and reporting period
Atomera develops and seeks to commercialize and license Mears Silicon Technology (MST), a proprietary semiconductor process intended to improve transistor performance, reliability, and power efficiency. The company does not manufacture integrated circuits directly and remains an early-stage business with limited revenue and recurring operating losses.
The filing covers the three and six months ended June 30, 2022. The financial statements are unaudited and prepared under U.S. GAAP.
Key financial metrics
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | $0 | $375,000 | $0 for Q2; $400,000 for six months |
| Cost of revenue | $0 | $81,000 | $0 for Q2; $0 for six months |
| Gross profit | $0 | $294,000 | $0 for Q2; $400,000 for six months |
| Gross margin | Not meaningful because revenue was zero | 78.4% | Not meaningful for Q2; 100.0% for six months |
| Operating expenses | $4.447 million | $8.759 million | $3.712 million for Q2; $7.720 million for six months |
| Operating loss | $4.447 million | $8.465 million | $3.712 million for Q2; $7.320 million for six months |
| Net loss | $4.481 million | $8.567 million | $3.726 million for Q2; $7.346 million for six months |
| Net loss per share | $0.20 | $0.37 | $0.17 for Q2; $0.33 for six months |
| Net cash used in operating activities | Not separately disclosed | $6.615 million | $6.634 million for six months |
- Research and development expense increased 18% year over year in Q2 to $2.433 million and 11% for the six months to $4.772 million, primarily due to tool lease expense.
- General and administrative expense increased 11% in Q2 to $1.667 million and 10% for the six months to $3.315 million, driven mainly by employee, legal, patent, and insurance costs.
- Selling and marketing expense increased 153% in Q2 to $347,000 and 67% for the six months to $672,000.
- Stock-based compensation was $859,000 in Q2 and $1.585 million for the six months, compared with $847,000 and $1.578 million, respectively, in 2021.
Liquidity, cash flow, and obligations
- Cash and cash equivalents were $21.838 million at June 30, 2022, down from $28.699 million at December 31, 2021. Working capital was approximately $19.7 million.
- Operating cash use was $6.615 million for the first six months, broadly comparable with $6.634 million in the prior-year period.
- Investing cash use was $19,000, primarily for property and equipment.
- Financing activities used $227,000, including $578,000 of financing lease principal payments, partly offset by $185,000 of ATM proceeds and $166,000 from option exercises.
- Total liabilities were $7.032 million, including $4.974 million of financing lease liabilities and $901,000 of operating lease liabilities. The filing does not identify conventional funded debt separate from lease obligations.
- Future minimum lease payments were $5.504 million for financing leases and $994,000 for operating leases, before imputed interest.
Material changes versus the prior comparable period
- Six-month revenue declined to $375,000 from $400,000, and gross profit declined to $294,000 from $400,000 because the 2022 revenue included $81,000 of associated costs.
- Q2 revenue was zero in both years, while the net loss increased to $4.481 million from $3.726 million.
- Six-month net loss increased to $8.567 million from $7.346 million, primarily reflecting higher operating expenses and $140,000 of financing lease interest expense.
- The company entered into a new ATM facility on May 31, 2022, permitting sales of up to $50.0 million of common stock. By June 30, it had sold 31,652 shares for approximately $185,000 of net proceeds.
- Shares outstanding increased to 23.457 million at June 30, 2022 from 23.207 million at December 31, 2021. The company also had 3.008 million outstanding stock options and 456,000 unvested restricted shares.
- In August 2021, the company began incurring expenses associated with a tool financing lease, including $778,000 of financing lease costs during the first six months of 2022.
Guidance, outlook, commentary, and risks
- Management expects increased research and development headcount over the next 12 months and believes available capital is sufficient to fund current plans and obligations for at least 12 months from the financial statement issuance date.
- Beyond the next 12 months, management expects to rely primarily on the ATM facility and other potential financing sources. Future funding needs depend on commercialization of MST, competitive and market developments, and potential collaborations or technology acquisitions.
- Management stated that additional capital may be required if license fees and royalties do not develop sufficiently. If financing cannot be obtained, the company may need to curtail research and development and reduce costs.
- Future revenue is expected to come from license fees, joint development agreements, engineering services, and royalties on products incorporating MST, but the filing provides no specific revenue or profitability guidance.
- Revenue remains irregular and dependent on customer engagements, license arrangements, technical milestones, and commercialization. The company has generated only limited revenue since inception and has not achieved positive operating cash flow.
- The company reported no material litigation as of June 30, 2022, and stated that its previously disclosed risk factors had not materially changed.
- As a subsequent event, through August 1, 2022, the company sold an additional 235,050 ATM shares at an average price of $11.33, generating approximately $2.6 million of net proceeds.
Important facts for investors to verify
- Whether MST commercialization produces recurring license revenue and royalties rather than sporadic milestone or engineering revenue.
- The company’s cash-burn rate and the duration of its cash runway as research and development headcount increases.
- The pace, pricing, and potential dilution associated with further ATM or other equity financings.
- Customer adoption, technical milestones, and the status of existing licensing, joint development, and engineering relationships.
- The economic impact and remaining payment schedule of the financing lease and other lease commitments.
- Whether operating expenses, particularly research and development and selling and marketing costs, translate into measurable revenue growth.