Atomera Inc

Previous wording

In April 2023, we entered into a license agreement with ST Microelectronics (“ST”) that authorizes ST to manufacture and distribute MST-enabled products to its customers. This agreement provides for payment of license fees payable upon reaching milestones consistent with Atomera’s standard business model. Our standard model is based around two major milestones, namely the installation of MST in a customer’s fab and qualification of an MST-enabled process. After process qualification is completed, ST will have the right to commercially distribute MST-enabled products and, assuming ST brings such products to market, we will receive royalties on all MST-enabled products manufactured for commercial purposes. This license agreement with ST is our first grant of commercial manufacturing and distribution rights. In the fourth quarter of 2023, we completed the first major milestone under the ST license agreement by delivering our MST film recipe and ST accepting the film, resulting in our recognizing license revenue associated with that milestone. We expect that ST will now proceed to completing process qualification with MST which would result in additional license fees for the distribution license upon completion of qualification, at which time ST would commence paying royalties on MST-enabled products they sell. There can be no assurance, however, that ST will complete its process qualification and pursue the licensed rights through development to the manufacture and commercial sale of MST-enabled products.

Current wording

In April 2023, we entered into a license agreement with ST Microelectronics (“ST”) that authorizes ST to manufacture and distribute MST-enabled products to its customers. This agreement provides for payment of license fees payable upon reaching milestones consistent with Atomera’s standard business model. Our standard model is based around two major milestones, namely the installation of MST in a customer’s fab and qualification of an MST-enabled process. After process qualification is completed, ST will have the right to commercially distribute MST-enabled products and, assuming ST brings such products to market, we will receive royalties on all MST-enabled products manufactured for commercial purposes. This license agreement with ST is our first grant of commercial manufacturing and distribution rights. In the fourth quarter of 2023, we completed the first major milestone under the ST license agreement by delivering our MST film recipe and ST accepting the film, resulting in our recognizing license revenue associated with that milestone. ST is currently performing testing to optimize their integration of MST as part of their qualification process. Upon qualification, we will earn additional license fees for the distribution license, after which ST will be entitled to MST-enabled products and royalties will be payable to us for every product sold. There can be no assurance, however, that ST will complete its process qualification and pursue the licensed rights through development to the manufacture and commercial sale of MST-enabled products.

Previous wording

On May 31, 2022, we entered into an Equity Distribution Agreement with Oppenheimer & Co. Inc and Craig-Hallum Capital Group LLC, as agents, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million in an “at-the-market” offering or “ATM”, to or through the agents. During the three months ended March 31, 2024, we sold approximately 510,000 shares pursuant to our ATM at an average price per share of approximately $8.06, resulting in approximately $4.0 million of net proceeds to us after deducting commissions and other offering expenses.

Current wording

On May 31, 2022, we entered into an Equity Distribution Agreement with Oppenheimer & Co. Inc and Craig-Hallum Capital Group LLC, as agents, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million in an “at-the-market” offering or “ATM”, to or through the agents. During the three-month period ended June 30, 2024, we sold approximately 669,000 shares pursuant to the ATM at an average price per share of approximately $3.82, resulting in approximately $2.4 million of net proceeds to the Company after deducting commissions and other offering expenses. During the six-month period ended June 30, 2024, we sold approximately 1.2 million shares pursuant to the ATM at an average price per share of approximately $5.66, resulting in approximately $6.4 million of net proceeds to the Company after deducting commissions and other offering expenses.

Previous wording

Revenue for the three months ended March 31, 2024 and 2023 was approximately $18,000 and $0, respectively. Our revenue in 2024 consisted of MSTcad License revenue and consulting services related to MSTcad.

Current wording

Revenue for the three and six months ended June 30, 2024 was approximately $72,000 and $90,000 respectively. Our revenue in 2024 consisted of MSTcad license revenue, consulting services related to MSTcad and the delivery of MST wafers. Revenue was not recorded during the three and six months ended June 30, 2023.

Previous wording

Cost of revenue. Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide deliverables that result in payment of success fees, delivery of wafers delivered as part of integration license agreements and consulting services provided for our MSTcad License. Cost of revenue is expensed when incurred and may not correspond with revenue earned. Cost of revenue for the three months ended March 31, 2024 and 2023 was approximately $33,000 and $0, respectively. We anticipate that our cost of revenue 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.

Current wording

Cost of revenue. Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide deliverables that result in payment of success fees, delivery of wafers delivered as part of integration license agreements and consulting services provided for our MSTcad licenses. Cost of revenue is expensed when incurred and may not correspond with revenue earned. Cost of revenue for the three and six months ended June 30, 2024 was approximately $74,000 and $107,000, respectively. We anticipate that our cost of revenue 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. Cost of revenue was not recorded during the three and six months ended June 30, 2023.

Previous wording

Operating expenses. Operating expenses consist of research and development, general and administrative, and selling and marketing expenses. For the three months ended March 31, 2024 and 2023, our operating expenses totaled approximately $5.0 million and $5.2 million, respectively.

Current wording

Operating expenses. Operating expenses consist of research and development, general and administrative, and selling and marketing expenses. For the three months ended June 30, 2024 and 2023, our operating expenses totaled approximately $4.6 million and $5.4 million, respectively. For the six months ended June 30, 2024 and 2023, our operating expenses totaled approximately $9.6 million and $10.5 million, respectively.

Previous wording

For the three months ended March 31, 2024 and 2023, we incurred approximately $2.9 million and $3.0 million, respectively, of research and development expenses, a decrease of approximately $178,000, or 6%. This decrease was primarily due to decrease of approximately $241,000 in outsourced research as we discontinued working with our foundry services provider, TSI Semiconductor, as of January 31. 2024. We are currently seeking a replacement provider of foundry services. This decrease was offset by increases in both employee related expenses and stock-based compensation totaling approximately $92,000.

Current wording

For the three months ended June 30, 2024 and 2023, we incurred approximately $2.6 million and $3.2 million, respectively, of research and development expenses, a decrease of approximately $600,000, or 19%. This decrease was primarily due to decrease of approximately $535,000 in outsourced research and development as we discontinued working with our foundry services provider, TSI Semiconductor, as of January 31. 2024. We are currently seeking a replacement provider of foundry services. Additionally, there were decreases of approximately $101,000 in payroll and benefits costs for reduced headcount and bonus accrual.

Previous wording

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 were approximately $1.8 million and $1.7 million for the three months March 31, 2024 and 2023, respectively, representing an increase of approximately $69,000, or 4%. The increase is primarily related to increases of approximately $107,000 in payroll and benefits costs and approximately $57,000 in stock-based compensation. These increases were partly offset by a decrease of approximately $74,000 in corporate legal expenses.

Current wording

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 were approximately $1.8 million for each of the three-month periods ended June 30, 2024 and 2023, representing an increase of approximately $57,000, or 3%. The increase is primarily related to increases of approximately $101,000 in professional fees, related primarily to legal costs and fees related to our patent portfolio. These costs are partially offset by a decrease of approximately $44,000 in stock-based compensation costs.

Previous wording

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 three months ended March 31, 2024 and 2023 were approximately $350,000 and $389,000, respectively, representing a decrease of approximately $39,000, or 10%. The decrease in costs is primarily related to a reduction in head count.

Current wording

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 three months ended June 30, 2024 and 2023 were approximately $207,000 and $393,000, respectively, representing a decrease of approximately $186,000, or 47%. Selling and marketing expenses for the six months ended June 30, 2024 and 2023 were approximately $557,000 and $782,000, respectively, representing a decrease of approximately $225,000, or 29%. The decrease in costs for both the three and six-month periods is primarily due to a reduction in headcount.

Previous wording

Interest income. Interest income for three months ended March 31, 2024 and 2023 was approximately $205,000 and $199,000, respectively. Interest income for the periods presented related to interest earned on our cash, cash equivalents and short-term investments.

Current wording

Interest income. Interest income for three months ended June 30, 2024 and 2023 was approximately $185,000 and $152,000, respectively. Interest income for six months ended June 30, 2024 and 2023 was approximately $390,000 and $351,000, respectively. Interest income for the periods presented was due to interest earned on our cash, cash equivalents and short-term investments.

Previous wording

**Accretion income.**Accretion income for the three months ended March 31, 2024 and 2023 was approximately $46,000 and $2,000, respectively. Accretion income relates to the increase in value of our available-for-sale securities from the purchase date through the maturity date.

Current wording

**Accretion income.**Accretion income for the three months ended June 30, 2024 and 2023 was approximately $47,000 and $107,000, respectively. Accretion income for the six months ended June 30, 2024 and 2023 was approximately $93,000 and $109,000, respectively. Accretion income relates to the increase in value of our available-for-sale securities from the purchase date through the maturity date.

Previous wording

Interest expense. Interest expense for the three months ended March 31, 2024 and 2023 was approximately $39,000 and $53,000, respectively. Interest expense is related to the tool financing lease entered into in August 2021.

Current wording

Interest expense. Interest expense for the three months ended June 30, 2024 and 2023 was approximately $35,000 and $51,000, respectively. Interest expense for the six months ended June 30, 2024 and 2023 was approximately $74,000 and $104,000, respectively. Interest expense is related to the tool financing lease entered into in August 2021.

Previous wording

Net cash used in operating activities of approximately $4.2 million for the three months ended March 31, 2023 resulted primarily from our net loss of approximately $5.0 million offset by approximately $927,000 stock-based compensation.

Current wording

Net cash used in operating activities of approximately $7.3 million for the six months ended June 30, 2024 resulted primarily from our net loss of approximately $9.2 million offset by approximately $2.0 million of stock-based compensation.

Previous wording

Net cash used in operating activities of approximately $4.1 million for the three months ended March 31, 2024 resulted primarily from our net loss of approximately $4.8 million offset by approximately $1.0 million of stock-based compensation and approximately $550,000 of collected contracts receivable offset by the payment of accrued payroll expenses of approximately $928,000.

Current wording

Net cash used in operating activities of approximately $8.2 million for the six months ended June 30, 2023 resulted primarily from our net loss of approximately $10.2 million offset by approximately $2.0 million of stock-based compensation.

Previous wording

Net cash provided by investing activities of approximately $2.5 million and for the three months ended March 31, 2024 consisted primarily of the maturity of short-term available-for-sale investments, offset by the purchase of short-term available-for-sale investments.

Current wording

Net cash provided by investing activities of approximately $3.2 million and for the six months ended June 30, 2024 consisted primarily of the maturity of short-term available-for-sale investments, offset by the purchase of short-term available-for-sale investments.

Previous wording

Net cash used in investing activities of approximately $5.0 million and for the three months March 31, 2023 consisted primarily of the purchase of short-term investments.

Current wording

Net cash used in investing activities of approximately $10.9 million and for the six months ended June 30, 2023 consisted primarily of the purchase of short-term investments.

Previous wording

Net cash provided by financing activities of approximately $3.8 million for the three months ended March 31, 2024 primarily related to the net proceeds from our ATM offering, offset by the principal payments on our financing lease.

Current wording

Net cash provided by financing activities of approximately $6.0 million for the six months ended June 30, 2024 primarily related to the net proceeds from our ATM offering, offset by the principal payments on our financing lease.

Previous wording

Net cash provided by financing activities of approximately $125,000 for the three months ended March 31, 2023 primarily related to the net proceeds from our ATM offering, offset by the principal payments on our financing lease.

Current wording

Net cash provided by financing activities of approximately $10.8 million for the six months ended June 30, 2023 primarily related to the net proceeds from our ATM offering, offset by the principal payments on our financing lease.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of approximately $14.8 million, short-term investments of approximately $4.5 million and working capital of approximately $16.8 million. For three months ended March 31, 2024, we had a net loss of approximately $4.8 million and used approximately $4.1 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses.

Current wording

As of June 30, 2024, we had cash and cash equivalents of approximately $14.5 million, short-term investments of approximately $3.8 million and working capital of approximately $15.8 million. For six months ended June 30, 2024, we had a net loss of approximately $9.2 million and used approximately $7.3 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses.

Previous wording

During the three months ended March 31, 2024, we sold approximately 510,000 shares pursuant to our ATM at an average price per share of approximately $8.06, resulting in approximately $4.0 million of net proceeds to us after deducting commissions and other offering expenses.

Current wording

During the six months ended June 30, 2024, we sold approximately 1.2 million shares pursuant to our ATM at an average price per share of approximately $5.66, resulting in approximately $6.4 million of net proceeds to us after deducting commissions and other offering expenses.