Atomera Incorporated — Q2 2023 Form 10-Q Summary
Business context and reporting period
Atomera develops, commercializes, and licenses semiconductor process technologies, principally Mears Silicon Technology (MST), a thin-film transistor enhancement technology intended to improve performance, reliability, and power efficiency. The company does not manufacture integrated circuits. This report covers the three and six months ended June 30, 2023; financial statements are unaudited and presented in thousands except per-share data.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $375 |
| Gross margin | Not meaningful | Not meaningful | Not meaningful | $294 |
| Operating expenses | $5,360 | $4,447 | $10,527 | $8,759 |
| Loss from operations | $(5,360) | $(4,447) | $(10,527) | $(8,465) |
| Net loss | $(5,152) | $(4,481) | $(10,171) | $(8,567) |
| Net loss per diluted share | $(0.21) | $(0.20) | $(0.42) | $(0.37) |
| Cash used in operations | Not provided quarterly | Not provided quarterly | $(8,172) | $(6,615) |
At June 30, 2023, cash and cash equivalents were $12.9 million, short-term investments were $10.9 million, and total cash, cash equivalents, and short-term investments were approximately $23.8 million. Working capital was approximately $21.6 million. Total assets were $29.0 million and total liabilities were $5.8 million.
Debt consists primarily of financing lease liabilities totaling $3.7 million, including $1.4 million current and $2.4 million long term. Operating lease liabilities totaled $0.7 million. The company had no material litigation as of June 30, 2023 or through the financial statement issuance date.
Investing activities used $10.9 million in the first six months, primarily for purchases of U.S. Treasury bills and agency bonds. Financing activities provided $10.8 million, primarily from the at-the-market equity offering. Cash declined by $8.3 million during the period to $12.9 million.
Material changes versus the prior comparable period
- Six-month revenue declined to zero from $375,000, and cost of revenue declined to zero from $81,000.
- Q2 operating expenses increased 21% to $5.4 million; six-month operating expenses increased 20% to $10.5 million.
- Research and development expense increased 31% to $3.2 million in Q2 and 31% to $6.2 million for the first six months, driven mainly by higher outsourced foundry costs, increased wafer processing, and employee-related costs.
- General and administrative expense increased 6% to $1.8 million in Q2 and 6% to $3.5 million year to date. Selling and marketing expense increased 13% in Q2 and 16% year to date.
- Net loss increased to $5.2 million in Q2 from $4.5 million and to $10.2 million year to date from $8.6 million.
- Interest and accretion income improved because of higher cash and short-term investment balances and higher interest rates. Six-month interest income was $351,000 versus $38,000 in the prior year, and accretion income was $109,000 versus none.
- During Q2, Atomera sold approximately 1.4 million shares through its ATM facility at approximately $8.15 per share, generating approximately $10.8 million in net proceeds. Approximately 24,000 additional shares were issued after quarter-end for approximately $214,000 in net proceeds.
- Shares outstanding increased to approximately 25.8 million at July 28, 2023 from approximately 24.0 million at December 31, 2022, reflecting dilution from equity issuance and equity compensation.
Guidance, outlook, commentary, and risks
Management stated that available capital is sufficient to fund current business plans and obligations for at least 12 months from the financial statement issuance date. The company remains dependent on external financing because it has generated limited revenue, incurred recurring losses, and has not generated positive cash flow.
In April 2023, Atomera entered into a license agreement with STMicroelectronics. The agreement provides for milestone-based license fees tied to MST installation and process qualification. If ST successfully commercializes MST-enabled products, Atomera expects to receive royalties; however, the filing states there is no assurance that ST will proceed to development, manufacturing, or commercial sales.
Management expects research and development costs to remain affected by higher outsourced foundry pricing, although the magnitude of the first-half increase may not recur in the second half because wafer-lot cycle times improved. No quantitative revenue or earnings guidance was provided.
Key risks include failure to commercialize MST, delays or failure in customer process qualification, dependence on license fees and royalties that may not materialize, competition and technological change, continued operating losses, potential need for additional equity or debt financing, and possible reductions in research and development if sufficient capital cannot be raised. Management reported no material change in the risk factors from the 2022 Form 10-K.
Important facts for investors to verify
- Progress of the STMicroelectronics agreement, including MST installation, qualification milestones, license-fee payments, and potential commercial royalties.
- Cash runway relative to the approximately $8.2 million first-half operating cash burn and the timing of any additional financing.
- Remaining availability under the $50 million ATM facility and the effect of future equity issuance on dilution.
- Whether revenue generation resumes after no revenue was recorded in the first half of 2023.
- Trends in outsourced foundry costs, wafer processing volumes, research and development spending, and lease-related obligations.
- The company’s continuing accumulated deficit of $193.5 million and ability to transition to positive operating cash flow.