The following discussion and analysis of the financial condition and results of
operations of
financial statements and the accompanying notes that appear elsewhere in this
Annual Report. Statements in this Annual Report on Form 10-K include
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations and intentions.
We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and
similar expressions to identify forward-looking statements. Although
forward-looking statements in this Annual Report reflect the good faith judgment
of our management, such statements can only be based on facts and factors
currently known by us. Consequently, forward-looking statements are inherently
subject to risks, uncertainties, and changes in condition, significance, value
and effect, including those risk factors set forth in this Annual Report. Such
risks, uncertainties and changes in condition, significance, value and effect
could cause our actual results to differ materially from those expressed herein
and in ways not readily foreseeable. Readers are urged not to place undue
reliance on these forward-looking statements, which speak only as of the date of
this Annual Report and are based on information currently and reasonably known
to us. We undertake no obligation to revise or update any forward-looking
statements in order to reflect any event or circumstance that may arise after
the date of this Annual Report. Readers are urged to carefully review and
consider the various disclosures made in this Annual Report, which attempt to
advise interested parties of the risks and factors that may affect our business,
financial condition, results of operations and prospects.
Overview
We are engaged in the business of developing, commercializing and licensing
proprietary processes and technologies for the $550+ billion semiconductor
industry. Our lead technology, named Mears Silicon Technology™, or MST®, is a
thin film of reengineered silicon, typically 100 to 300 angstroms (or
approximately 20 to 60 silicon atomic unit cells) thick. MST can be applied as a
transistor channel enhancement to CMOS-type transistors, the most widely used
transistor type in the semiconductor industry. MST is our proprietary and
patent-protected performance enhancement technology that we believe addresses a
number of key engineering challenges facing the semiconductor industry. We
believe that by incorporating MST, transistors can be made smaller, with
increased speed, reliability and power efficiency. In addition, since MST is an
additive and low-cost technology, we believe it can be deployed on an industrial
scale, with machines commonly used in semiconductor manufacturing. We believe
that MST can be widely incorporated into the most common types of semiconductor
products, including analog, logic, optical and memory integrated circuits.
We do not intend to design or manufacture integrated circuits directly. Instead,
we develop and license technologies and processes that we believe offer the
designers and manufacturers of integrated circuits a low-cost solution to the
industry’s need for greater performance and lower power consumption. Our
customers and partners include:
· foundries, which manufacture integrated circuits on behalf of fabless
manufacturers;
· integrated device manufacturers, or IDMs, which are the
fully-integrated designers and manufacturers of integrated circuits;
· fabless semiconductor manufacturers, which are designers of integrated
circuits that outsource the manufacturing of their chips to foundries;
· original equipment manufacturers, or OEMs, that manufacture the
epitaxial, or epi, machines used to deposit semiconductor layers, such
as the MST film, onto silicon wafers; and
· electronic design automation companies, which make tools used
throughout the industry to simulate performance of semiconductor
products using different materials, design structures and process
technologies.
20
Our commercialization strategy is to generate revenue through licensing
arrangements whereby foundries, IDMs and fabless semiconductor manufacturers pay
us a license fee for their right to use MST technology in the manufacture of
silicon wafers as well as a royalty for each silicon wafer or device that
incorporates our MST technology. We also license our MSTcadTM software to our
customers for use in simulating the effects of using MST technology on their
wafers and/or devices. To date, we have generated revenue from (i) licensing
agreements with two IDMs, one fabless manufacturer and one foundry, (ii) a joint
development agreement, or JDA, with a leading semiconductor provider, (iii)
engineering services provided to foundries, IDMs and fabless companies and (iv)
licensing MSTcad.
We were organized as a
LLC
corporation under the name
changed our name to
Between
of our common shares through
to which we sold 2,221,575 shares at an average price per share of approximately
deducting commissions and other offering expenses.
On
we may offer and sell, from time to time at our sole discretion, shares of our
common stock having aggregate offering proceeds of up to
“at-the-market” or ATM offering, to or through the agents. During the year ended
per share of approximately
net proceeds to us after deducting commissions and other offering expenses.
Results of Operations for the Years Ended
Revenues. To date, we have only generated limited revenue from customer
engagements for integration engineering services, integration license
agreements, a manufacturing license granted under a JDA, a success fee for
achievement of milestones under that JDA and licensing our MSTcad software. In
the future, we expect to collect increased fees from license agreements and JDAs
as well as royalties from customer sales of products that incorporate our MST
technology, subject to our ability to enter into manufacturing and distribution
license agreements with our current and future licensees. Our integration
services consist of depositing our MST film on semiconductor wafers, delivering
such wafers to customers to finalize building devices, and performing tests for
customers evaluating MST. The integration license agreements we have entered
into to date grant the licensees the right to build products that integrate our
MST technology deposited by us onto their semiconductor wafers, but the
agreements do not grant the licensees the rights to manufacture on their site or
to sell products incorporating MST. Our first JDA included the grant of a
manufacturing license to our customer and we were paid for such license upon
delivery of our IP transfer package which enabled our customer to install MST in
a tool in their facility and to use it to manufacture wafers for internal use.
This JDA also contained targeted technical specifications that, if met, would
result in payment of a success fee to us. Those technical objectives were met
and we have collected the success fee.
For revenue recognition purposes, we have determined that the grant of rights in
integration licenses is not distinct from the delivery of integration services,
and therefore revenue from both integration licenses and integration services is
recognized as the services are provided to the customer. In general, this is
proportionate to the delivery of MST processed wafers to the customer, but if
the agreements do not specify a time and quantity of wafer delivery, we will
record revenue over the period of time of which we anticipate delivering an
estimated quantity of wafers. We have also determined that the grant of our
manufacturing license under the JDA confers a right to use our technology and
accordingly revenue was recognized at the point in time when we delivered our IP
transfer package. The success fee under our JDA was treated as engineering
services revenue and recognized upon our customer’s confirmation that the JDA’s
technical objectives had been met. Our licensing of MSTcad grants customers the
right to use MSTcad software to simulate the effects of incorporating MST
technology into their semiconductor manufacturing process. Such MSTcad licenses
are granted on a monthly basis and revenue is recognized over time.
Revenue for the years ended
fee pursuant to our JDA, a license fee paid under an integration license
agreement and MSTcad license revenue. Our revenue for 2021 consisted of a
manufacturing license fee pursuant to our JDA.
21
Cost of Revenue. Cost of revenue consists of costs of materials, as well as
direct compensation and expenses incurred to provide integration engineering
services. Cost of revenue was approximately
will vary substantially depending on the mix of license and engineering services
revenues we receive and the nature of products and/or services delivered in each
customer engagement.
Operating Expenses. Operating expenses consist of research and development,
general and administrative, and selling and marketing expenses. For the years
ended
Research and development expense. To date, our operations have focused on the
research, development, patent prosecution, and commercialization of our MST
technology and related technologies such as MSTcad. Our research and development
costs primarily consist of payroll and benefit costs for our engineering staff
and costs of outsourced fabrication (including epi tool leases) and metrology of
semiconductor wafers incorporating our MST technology.
For the years ended
million
increase of approximately
to approximately
lease commenced in
stock-based compensation and an increase of approximately
consulting expenses.
General and administrative expense. General and administrative expenses consist
primarily of payroll and benefit costs for administrative personnel,
office-related costs and professional fees. General and administrative costs for
the years ended
or 4%. The increase in costs was primarily due to an increase of approximately
of approximately
Selling and marketing expense. Selling and marketing expenses consist primarily
of salary and benefits for our sales and marketing personnel and business
development consulting services. Selling and marketing expenses for the years
ended
respectively, representing an increase of approximately
increase in costs is primarily related to increased spending in employee-related
costs of approximately
approximately
approximately
Interest income. Interest income for the years ended
was approximately
period related to interest earned on our cash and cash equivalents and the
increase was primarily due to progressively higher interest rates during these
periods.
Interest expense. Interest expense for the years ended
2021 was approximately
related to the new tool financing lease entered into in
Provision for income taxes. The provision for income tax for the year ended
country arising from withholding taxes imposed on payments received for revenue.
There was no provision for income tax recorded for the year ended
2022
Liquidity and Capital Resources
As of
million
approximately
inception, we have incurred recurring operating losses.
22
During the year ended
pursuant to our ATM at an average price per share of approximately
resulting in approximately
commissions and other offering expenses
We believe that our available working capital is sufficient to fund our
presently forecasted working capital requirements for, at least, the next 12
months following the date of the filing of this report. However, our future
capital requirements and the adequacy of our available funds will depend on many
factors, including our ability to successfully commercialize our MST technology,
competing technological and market developments, and the need to enter into
collaborations with other companies or acquire technologies to enhance or
complement our current offerings. If we are not able to generate sufficient
revenue from license fees and royalties in a time frame that satisfies our cash
needs, we will need to raise more capital. In the event we require additional
capital, we will endeavor to acquire additional funds through various financing
sources, including our ATM Facility, follow-on equity offerings, debt financing
and joint ventures with industry partners. In addition, we will consider
alternatives to our current business plan that may enable to us to achieve
revenue-producing operations and meaningful commercial success with a smaller
amount of capital. If we are unable to secure additional capital, we may be
required to curtail our research and development initiatives and take additional
measures to reduce costs in order to conserve its cash.
Cash Flows from Operating, Investing and Financing Activities:
Net cash used in operating activities of approximately
ended
expense and amortization of right-of-use assets of approximately
Net cash used in operating activities of approximately
ended
expense.
Net cash used by investing activities of approximately
of the purchase of computers, lab tools and leasehold improvements for the
remodeled Los
Gatos office space and our new Tempe office space.
Net cash provided by financing activities of approximately
year ended
at-the-market offering during the year ended
approximately
Net cash provided by financing activities of approximately
year ended
stock options and net proceeds from our at-the-market offering in
These amounts were offset in part by approximately
payments on our financing lease.
Critical Accounting Estimates
Our financial statements are prepared in accordance with accounting principles
generally accepted in
in conformity with those accounting principles requires us to use judgement in
making estimates and assumptions based on the relevant information available at
the end of each period. These estimates and assumptions have a significant
effect on reported amounts of assets, liabilities, sales and expenses as well as
the disclosure of contingent assets and liabilities because they result
primarily from the need to make estimates and assumptions on matters that are
inherently uncertain. Actual results could differ from our estimates.
Revenue
We generate revenue from integration engineering services, which we deliver
either pursuant to integration license agreements or delivery of engineering
services and from the grant of manufacturing licenses to customers to use its
technology in the manufacture of semiconductor wafers and/or devices for the
customer’s internal use. Revenue is recognized based on the following steps: (i)
identification of the contract, or contracts, with a customer, (ii)
identification of the performance obligations in the contract, (iii)
determination of the transaction price, (iv) allocation of the transaction price
to the performance obligations of the contract, and (v) recognition of revenue
when, or as, we satisfy a performance obligation. Integration services generally
consist of depositing our proprietary technology onto the customer’s
semiconductor wafers and delivering such wafers back to the customer. Revenue
from integration services is recognized as the performance obligations are
satisfied, which is upon transfer of control of the wafers to the customer
(generally upon shipment). Revenue from manufacturing licenses is recognized as
the performance obligations are satisfied, which is upon delivery of the
Company’s MST recipe to the customer.
23
For recognizing integration service revenue from integration license agreements,
we assess (i) whether the license grant is distinct from or combined with the
transfer of goods or services and (ii) whether the license is a right to access
intellectual property or a right to use the intellectual property. For licenses
that are not distinct, but combined with other goods or services, the revenue is
recognized at a point in time or over time as the obligations to perform the
combined services and/or deliver the combined goods are satisfied. Integration
license agreements contain a technology grant as well as a performance
obligation to deliver wafers with our technology deposited on them. We have
determined the grant of rights in these integration license agreements is not
distinct from the integration service. Accordingly, revenue from integration
license agreements is recognized as the service is provided to the customer. For
manufacturing licenses, revenue is recognized at the point in time when we
deliver our MST recipe as the license to manufacture using MST technology is a
right to use the Company’s technology and not a right to access the technology
over time.
Leases
We account for leases in accordance with
(“FASB”) issued Accounting Standards Update (“ASU”) No 2016-02, Leases (Topic
842). We determine if a contract contains a lease in whole or in part at the
inception of the contract. Right-of-use (“ROU”) assets represent its right to
use an underlying asset for the lease term while lease liabilities represent its
obligation to make lease payments arising from the lease. All leases greater
than 12 months result in the recognition of a ROU asset and a liability at the
lease commencement date based on the present value of the lease payments over
the lease term. Lease expenses for operating leases is recognized on a
straight-line-basis over the lease term. Lease expenses for financing leases is
amortization of the he ROU assets over the life of the lease and interest
expense is recognized on the liability.
Stock-based Compensation
We have stock-based compensation programs, which include restricted stock awards
(“RSAs”) and stock options and an employee stock purchase plan. We account for
stock-based compensation expense, including the expense for grants of RSAs and
stock options that may be settled in shares of our common stock, based on the
fair values of the equity instruments issued. The fair value is determined on
the measurement date, which is the date of grant. The fair value of our RSAs is
measured at the market price of our common stock on the measurement date
amortized over the vesting period of the award. The fair value for our stock
option awards is determined at the grant date using the Black-Scholes Option
Pricing Model and amortized over the vesting period of the option.
Assumptions for the Black-Scholes valuation model used for employee stock awards
include:
· Expected term - We derived the expected term for employee stock awards using
limited historical information to develop expectations about future exercise
patterns and post vesting employment termination behavior.
· Expected volatility - Volatility is estimated using Atomera's historical
volatility for similar terms.
· Expected dividend rate - We have not declared or paid dividends to our
stockholders and have no plans to pay dividends; therefore, we have assumed an
expected dividend yield of 0%.
· Risk-free interest rate - The risk-free interest rate is based on the yields
of U.S. Treasury securities with maturities similar to the expected terms of
the associated awards.
· The fair value of our common stock is measured at the market price on the
measurement date.
© Edgar Online, source
link
More Stories
Homerun Resources Inc. Cooperative Research and Development Agreement with U.S. Department of Energy’s National Renewable Energy Laboratory
Quantum Computing Inc. Federal Subsidiary, Qi Solutions, Signs Five-Year Overarching Cooperative Research and Development Agreement (OCRADA) with U.S. Special Operations Command (USSOCOM)
DVIDS – News – NUWC Division Newport signs Cooperative Research and Development Agreement with Flinders University in support of AUKUS