Atomera Incorporated — Q3 2023 Form 10-Q Summary
Business context and reporting period
Atomera develops, commercializes and licenses semiconductor processes and technologies, principally Mears Silicon Technology (MST), a thin-film transistor enhancement technology intended to improve semiconductor performance, speed, reliability and power efficiency. The company is an early-stage business with limited revenue and recurring operating losses. This report covers the three and nine months ended September 30, 2023, compared with the corresponding 2022 periods.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $0.0 million | $0.002 million | $0.0 million | $0.377 million |
| Operating expenses | $5.353 million | $4.657 million | $15.880 million | $13.416 million |
| Loss from operations | $5.353 million | $4.655 million | $15.880 million | $13.120 million |
| Net loss | $5.039 million | $4.602 million | $15.210 million | $13.169 million |
| Net loss per share | $0.20 | $0.20 | $0.62 | $0.57 |
| Cash used in operating activities | Not separately provided | Not separately provided | $11.649 million | $9.581 million |
Gross margin was effectively 0% in Q3 2023 and the nine-month period because no revenue was recorded. Operating expenses increased 15% in Q3 and 18% for the first nine months, primarily reflecting higher research and development spending, outsourced foundry services, wafer processing, employee costs, consulting and stock-based compensation.
At September 30, 2023, cash and cash equivalents were $12.642 million, short-term investments were $7.747 million and total cash, cash equivalents and short-term investments were approximately $20.4 million. Working capital was approximately $17.9 million. Total assets were $24.829 million and total liabilities were $5.365 million.
Financing obligations consisted primarily of lease liabilities, including $3.365 million of financing lease liabilities and $0.610 million of operating lease liabilities. The filing does not identify conventional funded debt.
Net cash used in investing activities was $7.626 million for the first nine months of 2023, primarily reflecting purchases of short-term investments of $16.595 million, partly offset by $9.000 million of maturities. Net cash provided by financing activities was $10.733 million, including $11.248 million of net proceeds from the at-the-market equity facility, partly offset by $0.632 million of financing lease principal payments.
Material changes versus the prior comparable period
- Revenue declined to zero from $2,000 in Q3 2022 and to zero from $377,000 for the first nine months of 2022.
- Research and development expense increased 20% in Q3 to $3.305 million and 27% for the first nine months to $9.533 million.
- General and administrative expense increased 7% in both the quarter and nine-month period, while selling and marketing expense increased 5% and 13%, respectively.
- Q3 net loss increased 9% year over year; nine-month net loss increased 16%.
- Interest income increased to $177,000 in Q3 and $528,000 for the first nine months, reflecting higher cash and investment balances and yields. The company also recorded $221,000 of accretion income on available-for-sale securities for the nine-month period.
- Shares sold under the ATM facility generated approximately $11.2 million of net proceeds during the first nine months, increasing common shares outstanding from 23.973 million at December 31, 2022 to 25.784 million at September 30, 2023.
Outlook, commentary, risks and unusual items
In April 2023, Atomera entered into a license agreement with STMicroelectronics authorizing the manufacture and distribution of MST-enabled products. Payments depend on contractual milestones, including MST installation and process qualification. Royalties would arise only if ST commercializes MST-enabled products. No assurance is provided that ST will complete development or commercialize the technology.
Management believes available capital is sufficient to fund current plans and obligations for at least 12 months from the financial statement issuance date. However, the company expects to require additional capital if license fees and royalties do not develop quickly enough. Potential funding sources include the ATM facility, follow-on equity offerings, debt financing and joint ventures. Failure to obtain financing could require reductions in research and development and other cost-cutting measures.
A significant newly disclosed risk is the loss of access to TSI Technology Development & Commercialization Services. Following Bosch’s acquisition of TSI, Bosch advised Atomera that it would cease third-party engineering and manufacturing services on January 31, 2024. Atomera is seeking a replacement foundry, but comparable providers may be limited. The transition could interrupt access to services, increase startup costs and delay or increase the cost of R&D. The filing states that no customer wafers sold or licensed have been fabricated at TSI, so ongoing client engagements are not expected to be materially affected.
Subsequent to September 30, 2023, Atomera sold approximately 15,000 additional shares under the ATM facility for approximately $104,000 of net proceeds. The company reported no material litigation as of the financial statement issuance date, and management concluded that disclosure controls were effective as of September 30, 2023.
Investor verification points
- Verify progress, milestone payments and commercialization status under the STMicroelectronics license agreement.
- Assess the replacement of TSI/Bosch foundry services and any resulting R&D delays, costs or capacity constraints.
- Monitor quarterly cash burn, remaining ATM capacity, equity issuance and potential dilution.
- Reconcile available liquidity with the company’s stated expectation of funding operations for at least 12 months.
- Track whether recurring license, engineering or royalty revenue begins to offset the company’s substantial operating expenses.
- Review financing and operating lease commitments, including approximately $3.365 million of financing lease liabilities and $0.610 million of operating lease liabilities at quarter end.