Atomera Incorporated 2022 Form 10-K Summary
Business context and reporting period
Atomera develops and licenses Mears Silicon Technology (MST), a patented thin-film silicon process intended to improve semiconductor transistor performance, power efficiency, reliability and scalability. The company does not manufacture integrated circuits; its business model is based on integration, manufacturing and distribution licenses, engineering services, MSTcad software licenses and anticipated royalties.
This Form 10-K covers the fiscal year ended December 31, 2022, with comparison to the year ended December 31, 2021. The filing is an annual report rather than a standalone fourth-quarter filing. Atomera remained an early-stage company with limited revenue and no commercial royalty stream.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $0.382 million | $0.400 million | Down 5% |
| Gross profit | $0.301 million | $0.400 million | Down 25% |
| Gross margin | 79% | 100% | Lower due to $0.081 million of cost of revenue |
| Research and development | $10.038 million | $8.779 million | Up 14% |
| Total operating expenses | $17.827 million | $15.929 million | Up 12% |
| Loss from operations | $(17.526) million | $(15.529) million | Worsened |
| Net loss | $(17.441) million | $(15.714) million | Worsened 11% |
| Basic and diluted loss per share | $(0.75) | $(0.70) | Worsened |
| Cash used in operations | $(12.499) million | $(12.441) million | Approximately flat |
| Cash and cash equivalents | $21.184 million | $28.699 million | Down $7.515 million |
2022 revenue consisted of a JDA success fee, an integration-license fee and MSTcad license revenue. In 2021, revenue consisted of a manufacturing-license fee under the first JDA. Two customers represented 79% and 20% of 2022 revenue; one customer represented 100% of 2021 revenue.
Cash provided by financing activities was $5.023 million in 2022, including $5.763 million of net proceeds from the ATM equity offering, partially offset by $0.984 million of financing-lease principal payments. The company sold approximately 527,000 shares at an average price of approximately $11.68. Capital expenditures were $0.039 million.
At December 31, 2022, total assets were $26.729 million, working capital was approximately $18.7 million and total liabilities were $6.415 million. Financing lease liabilities totaled $4.112 million, including $1.126 million current and $2.986 million long term. Accumulated deficit was $183.295 million.
Material changes versus the prior comparable period
- Revenue declined modestly, but revenue composition changed from a 2021 manufacturing-license fee to a 2022 mix of a JDA success fee, integration-license revenue and MSTcad revenue.
- Operating expenses increased by $1.898 million, led by a $1.259 million increase in research and development, a $0.362 million increase in selling and marketing and a $0.277 million increase in general and administrative expense.
- Research and development costs increased primarily from higher epitaxial-tool lease costs, stock-based compensation and technical consulting.
- Interest income increased to $0.340 million from $0.009 million because of higher interest rates, while interest expense increased to $0.255 million from $0.128 million because of the financing lease.
- Cash declined by $7.515 million despite the ATM proceeds, reflecting continued operating cash burn and lease payments.
- In February 2022, Atomera achieved development milestones under its first JDA, generating additional revenue. In April 2022, it entered a second JDA with a major semiconductor foundry.
- As of the filing date, MST was in the integration phase for 14 engagements and in the process-installation phase for one engagement. No customer had reached the qualification phase required for commercial production.
Guidance, outlook, risks and unusual items
Management stated that available capital was sufficient to fund current business plans and obligations for at least the 12 months following the filing date. The company expects increased research and development spending and may require additional capital before a royalty-bearing license generates sufficient cash flow. Potential sources include the remaining ATM facility, additional equity or debt financing, licensing fees and joint ventures.
The company has not provided quantitative revenue, earnings or commercialization guidance. Management expects customer qualification and licensing cycles to remain lengthy, typically 18 to 36 months or longer, and expects continued negative operating cash flow until it secures manufacturing and distribution licenses with one or more customers.
- Neither JDA commits the customer to commercial production or a distribution license, and the four integration licenses do not provide commercial manufacturing or sales rights.
- Commercial success depends on demonstrating MST benefits at high-volume production scale and converting evaluations into manufacturing, distribution and royalty agreements.
- Customer fab capacity constraints delayed evaluation-wafer processing; equipment availability and downtime could further delay qualification.
- Revenue is highly concentrated, and future royalties would depend on a limited number of semiconductor customers and their product demand.
- Atomera has significant recurring losses, an accumulated deficit and substantial reliance on equity financing.
- AKM’s prior fab fire disrupted its production and delayed work toward potential manufacturing or commercial distribution licensing.
- Core MST patents begin expiring on August 22, 2023, creating intellectual-property protection and renewal risks, although the broader portfolio included 126 U.S. and 107 foreign patents at year-end.
- The company had no material litigation as of December 31, 2022 and no critical audit matters were identified. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation because it was not required.
Most important facts for investors to verify
- Whether any customer advances from integration or manufacturing evaluation to qualification and commercial distribution, particularly the first JDA customer and the 14 integration-stage engagements.
- The timing and probability of the first royalty-bearing manufacturing or distribution agreement.
- Remaining cash runway relative to the approximately $12.5 million annual operating cash burn and planned higher research and development spending.
- Future use of the $50 million ATM facility and potential dilution from additional equity issuance.
- Patent expiration, continuation and enforceability of key MST patents beginning in 2023.
- Customer concentration, contract terms, milestone payments and the absence of commercial sales rights under current integration licenses.
- Financing-lease obligations and the effect of the leased epitaxial tool on research and development costs and liquidity.