Atomera Incorporated — Form 10-Q Summary
Business Context and Reporting Period
Atomera develops, commercializes and licenses proprietary semiconductor process technologies, principally Mears Silicon Technology (MST). The company does not manufacture integrated circuits and remains an early-stage business with limited revenue and recurring operating losses.
This filing covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021. The financial statements are unaudited. Atomera had 23.4 million common shares outstanding as of April 22, 2022.
Financial Highlights
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $375,000 | $400,000 | Down 6% |
| Gross profit | $294,000 | $400,000 | Down 27% |
| Gross margin | 78.4% | 100.0% | Down 21.6 percentage points |
| Operating expenses | $4.312 million | $4.008 million | Up 8% |
| Loss from operations | $4.018 million | $3.608 million | Loss increased 11% |
| Net loss | $4.086 million | $3.620 million | Loss increased 13% |
| Net loss per share | $0.18 | $0.16 | Loss per share increased |
| Net cash used in operating activities | $4.111 million | $3.938 million | Use increased 4% |
| Cash and cash equivalents at period end | $24.451 million | $36.738 million | Down 33% year over year |
Revenue consisted of a $300,000 Asia-Pacific amount and $75,000 from North America, with all revenue recognized at a point in time. Q1 2022 revenue comprised a joint development agreement success fee and an integration license fee; Q1 2021 revenue comprised a manufacturing license fee.
Research and development expense was $2.339 million, general and administrative expense was $1.648 million, and selling and marketing expense was $325,000. Stock-based compensation totaled $726,000. The company incurred $71,000 of interest expense related to its tool financing lease.
At March 31, 2022, total assets were $32.276 million, total liabilities were $7.089 million, and stockholders’ equity was $25.187 million. Working capital was approximately $23.1 million. Financing lease liabilities totaled $5.266 million, and operating lease liabilities totaled $942,000.
Material Changes Versus the Prior Comparable Period
- Revenue declined by $25,000, while cost of revenue increased from zero to $81,000, reducing gross margin to 78.4%.
- Operating expenses increased by $304,000, driven by higher research and development, general and administrative, and selling and marketing costs.
- Research and development expense increased 5%, primarily because of approximately $400,000 of tool lease expense, partly offset by lower payroll and outsourced research and development costs.
- General and administrative expense increased 9%, primarily from higher professional fees and insurance expense.
- Selling and marketing expense increased 22% due principally to new marketing initiatives, including a new public relations firm.
- Cash used in operations increased to $4.111 million from $3.938 million. Financing activities used $121,000 in Q1 2022, compared with $2.758 million of financing inflows in Q1 2021 from stock option exercises and the prior at-the-market offering.
- Cash declined by $4.248 million during Q1 2022, ending at $24.451 million.
Outlook, Risks and Unusual Items
Management expects increased research and development headcount and higher spending on outsourced fabrication and testing. Based on available funds at the filing date, management believes capital is sufficient to fund current plans and obligations for at least 12 months from issuance of the financial statements.
Atomera has generated only limited revenue and has incurred recurring losses and negative operating cash flow since inception. If licensing and royalty revenue do not develop sufficiently, the company may need additional equity or debt financing, strategic collaborations, or other funding. Additional capital may not be available on acceptable terms, and failure to obtain financing could require reductions in research and development and other cost-cutting measures.
Commercial success depends on licensing and adoption of MST, customer product development and sales, competing technologies, market conditions, and potential collaborations or technology acquisitions. The company reported no material litigation as of March 31, 2022, and stated that its previously disclosed risk factors had not materially changed.
The company adopted ASU 2020-06 on January 1, 2022, with no material impact. Management concluded that disclosure controls and procedures were effective as of March 31, 2022, and reported no material changes in internal control over financial reporting.
Most Important Facts to Verify
- Whether Atomera converts current license, engineering and joint development engagements into recurring manufacturing licenses and royalties.
- The remaining duration of the company’s cash runway given approximately $4.1 million of quarterly operating cash use and planned spending increases.
- Potential future financing requirements and the impact of any equity issuance on existing shareholders.
- Progress toward customer adoption, commercialization and revenue generation for MST.
- The terms, payment obligations and operational importance of the approximately $5.3 million financing lease liability.
- Whether the reported joint development agreement success fee and integration license revenue are nonrecurring.