Atomera Incorporated — Q1 2023 Form 10-Q Summary
Business context and reporting period
Atomera develops and licenses Mears Silicon Technology (MST), a semiconductor process technology intended to improve transistor performance, speed, reliability, and power efficiency. The company does not manufacture integrated circuits. The filing covers the unaudited three months ended March 31, 2023, compared with the same period in 2022.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $375,000 |
| Gross margin | $0 | $294,000 |
| Operating expenses | $5.167 million | $4.312 million |
| Loss from operations | $(5.167) million | $(4.018) million |
| Net loss | $(5.019) million | $(4.086) million |
| Net loss per share | $(0.21) | $(0.18) |
| Cash used in operating activities | $(4.234) million | $(4.111) million |
| Cash and cash equivalents at period end | $12.118 million | $24.451 million |
- Research and development expense was $3.036 million, up 30% year over year, primarily due to higher wafer and metrology costs, employee-related costs, stock-based compensation, and travel.
- General and administrative expense increased 6% to $1.742 million, while selling and marketing expense increased 20% to $389,000.
- Interest income increased to $199,000 from $3,000, reflecting interest earned on cash and short-term investments. Interest expense declined to $53,000 from $71,000.
- Cash, cash equivalents, and short-term investments totaled approximately $17.1 million at March 31, 2023. Working capital was approximately $14.9 million.
- Short-term investments were $4.934 million, consisting of U.S. Treasury bills and agency bonds. Total liabilities were $5.602 million, including $3.923 million of financing lease liabilities and $722,000 of operating lease liabilities.
- Stock-based compensation expense was $927,000, compared with $726,000 in the prior-year quarter.
Material changes versus the prior comparable period
- Revenue declined from $375,000 to zero, eliminating gross profit and contributing to the increase in operating loss.
- Operating expenses increased $855,000, or approximately 20%, driven primarily by higher research and development spending.
- Net loss increased $933,000, or approximately 23%, and loss per share increased from $0.18 to $0.21 despite higher interest income.
- Operating cash use increased modestly by $123,000. Investing cash use increased substantially because the company purchased approximately $4.942 million of short-term investments.
- Cash and cash equivalents declined $9.066 million from December 31, 2022, partly because funds were shifted into short-term investments. Total cash, cash equivalents, and short-term investments declined from $21.184 million to $17.052 million.
- The company sold approximately 50,000 shares through its at-the-market facility at an average price of approximately $6.40, generating $274,000 of net proceeds.
Guidance, outlook, risks, and unusual items
- Management stated that available capital is sufficient to fund current plans and obligations for at least 12 months from issuance of the financial statements.
- The company continues to generate limited revenue and recurring operating losses. If license fees and royalties do not develop sufficiently, additional capital may be required through the ATM facility, equity or debt offerings, or strategic arrangements.
- Failure to obtain additional capital could require the company to reduce costs and curtail research and development activities.
- On April 26, 2023, Atomera announced a commercial license agreement with STMicroelectronics. The agreement provides for milestone-based license fees and royalties on qualifying MST-enabled products after installation and process qualification. No revenue from this agreement was recorded in Q1 2023, and commercial success is not assured.
- After March 31, 2023, the company issued 82,322 additional ATM shares at an average price of $5.73 for approximately $458,000 of net proceeds.
- The company terminated its Cambridge, Massachusetts office lease as of March 31, 2023, and extended a Tempe tool lease through December 31, 2023 at reduced remaining monthly payments. It also expanded its Tempe office lease effective May 1, 2023.
- Management reported no material litigation and no material change in previously disclosed risk factors. Disclosure controls and procedures were deemed effective as of March 31, 2023.
Important facts for investors to verify
- Progress toward STMicroelectronics’ MST installation and process-qualification milestones, including timing and collectability of license fees.
- Whether Atomera can convert its commercialization pipeline into recurring license and royalty revenue.
- Cash burn, the company’s approximately $17.1 million liquidity balance, and the timing and terms of any additional financing.
- Research and development spending trends, including wafer, metrology, employee, and tool-lease costs.
- Potential dilution from the $50 million ATM facility, subsequent equity issuances, outstanding options, and restricted stock awards.
- Future financing lease and operating lease payments, as well as the company’s ability to maintain research and development activities while operating at a loss.