Atomera Incorporated — Form 10-Q Summary
Business Context and Reporting Period
Quarterly report for the three months ended March 31, 2018, filed May 15, 2018. Atomera is a development-stage semiconductor technology company focused on developing, commercializing, and licensing its proprietary Mears Silicon Technology (MST). The company does not manufacture integrated circuits directly and had not commenced planned principal operations.
Financial Performance and Position
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.690 million | $1.456 million |
| General and administrative expense | $1.203 million | $1.603 million |
| Selling and marketing expense | $246,000 | $509,000 |
| Total operating expenses | $3.139 million | $3.568 million |
| Net loss | $3.092 million | $3.544 million |
| Basic and diluted loss per share | $0.26 | $0.31 |
| Cash used in operating activities | $2.812 million | $2.898 million |
| Cash and cash equivalents at period end | $14.547 million | $23.812 million |
At March 31, 2018, total assets were $15.029 million, total liabilities were $717,000, and stockholders’ equity was $14.312 million. Working capital was approximately $14.2 million and accumulated deficit was approximately $112.2 million. The filing does not disclose outstanding borrowings or long-term debt; liabilities consisted of current accounts payable and accrued expenses.
Net loss margin and other revenue-based margins are not meaningful because the company generated no revenue in the quarter. Stock-based compensation was $546,000, compared with $1.210 million in the prior-year quarter.
Material Changes Versus the Prior Comparable Period
- Operating expenses declined $429,000, or approximately 12%, primarily because of lower stock-based compensation.
- Research and development expense increased $234,000, or 16%, driven by higher outsourced fabrication and metrology costs, increased engineering headcount, and higher related stock compensation.
- General and administrative expense decreased $400,000, or 25%, mainly because of lower stock-based compensation, partly offset by higher patent-related professional fees.
- Selling and marketing expense decreased $263,000, or 52%, primarily due to lower stock-based compensation and consulting expense.
- Net loss improved by $452,000, or approximately 13%, while cash used in operations improved by $86,000.
- Cash declined $2.822 million from December 31, 2017, with no financing cash inflows during the quarter.
- Common shares outstanding increased to 12.361 million at March 31, 2018 from 12.161 million at December 31, 2017.
Outlook, Risks, Contingencies, and Unusual Items
Management expects increased spending on outsourced fabrication and testing and increased research and development headcount. Based on available funds, management believes capital is sufficient to fund current plans and obligations for at least 12 months from the financial statement issuance date. The company may nevertheless require additional capital because it has not generated recurring revenue; future equity, debt, or strategic financing may not be available on acceptable terms.
Management states that semiconductor process adoption involves lengthy testing and qualification cycles that the company has limited ability to control. Other material risks include continued operating losses, dependence on successful commercialization and licensing of MST, financing uncertainty, and the possibility that the company may be unable to continue operations if additional financing is unavailable.
The company adopted ASC Topic 606 using the full retrospective method effective January 1, 2018; the adoption had no impact on reported results or financial condition. The company had an operating lease commitment totaling approximately $447,000 through January 2021. Its ASM licensing agreement expires January 8, 2019 and requires royalties on qualifying revenue; approximately $3,000 had been incurred and paid through March 31, 2018.
Management reported effective disclosure controls as of March 31, 2018 and no material changes in internal control over financial reporting. The filing states that risk factors had not materially changed from the 2017 Form 10-K.
Important Facts for Investors to Verify
- Whether Atomera can convert MST evaluations and engagements into recurring licensing or royalty revenue.
- The pace and cost of outsourced fabrication, testing, qualification, and research and development expansion.
- Cash burn and whether the stated liquidity runway remains adequate as spending increases.
- The timing, terms, and potential dilution of any future equity, debt, or strategic financing.
- The status and commercial implications of the ASM license expiration in January 2019.
- The impact of outstanding options, warrants, and restricted stock, totaling approximately 3.557 million potentially dilutive securities excluded from diluted loss per share because they were anti-dilutive.