UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2017.

 

or

 

¨ Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

 

Commission file number: 001-37850

 

ATOMERA INCORPORATED

(Exact name of registrant as specified in its charter)

 

Delaware	30-0509586
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

 

750 University Avenue, Suite 280

Los Gatos, California 95032

(Address, including zip code, of registrant’s principal executive offices)

 

(408) 442-5248

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one)

 

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
	Emerging Growth Company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by checkmark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act: Yes ¨ No x

 

The number of outstanding shares of the Registrant’s Common Stock, par value $.001 per share, as of May 1, 2017 was 12,104,737.

 

 

 

Atomera Incorporated

Index

 

		Page
PART I. Financial Information
Item 1.	Financial Statements	3
	Condensed Balance Sheets – March 31, 2017 (unaudited) and December 31, 2016	3
	Unaudited Condensed Statements of Operations - For the Three Months Ended March 31, 2017 and 2016	4
	Unaudited Condensed Statements of Cash Flows - For the Three Months Ended March 31, 2017 and 2016	5
	Notes to the Unaudited Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	12
Item 4.	Controls and Procedures	12
PART II. Other Information
Item 1A.	Risk Factors	13
Item 6.	Exhibits	13
Signatures		14

 

 

 

 

 

 

 

 

PART I. Financial Information

Item 1. Financial Statements

 

Atomera Incorporated

Condensed Balance Sheets

(in thousands, except per share data)

 

		March 31,				December 31,
		2017				2016
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	23,812			$	26,718
Prepaid expenses and other current assets			308				96
Total current assets			24,120				26,814
Property and equipment, net			31				28
Security Deposit			37				37
Total assets		$	24,188			$	26,879
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	295			$	353
Accrued expenses			200				168
Accrued payroll related expenses			179				510
Total liabilities			674				1,031
Commitments and contingencies (see Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value, authorized 2,500 shares; none issued and outstanding at March 31, 2017 and December 31, 2016			–				–
Common stock, $0.001 par value, authorized 47,500 shares; 12,105 shares issued and outstanding at March 31, 2017 and 12,025 issued and outstanding as of December 31, 2016			12				12
Additional paid-in capital			123,043				121,833
Accumulated deficit			(99,541	)			(95,997	)
Total stockholders’ equity			23,514				25,848
Total liabilities and stockholders’ equity		$	24,188			$	26,879

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

 

Atomera Incorporated

Condensed Statements of Operations

(Unaudited)

(in thousands, except per share data)

 

		Three Months ended March 31,
		2017				2016
Operating Expenses:
Research and development		$	1,456			$	949
General and administrative			1,603				861
Selling and marketing			509				119
Total operating expenses			3,568				1,929
Loss from operations			(3,568	)			(1,929	)
Other income/(expense):
Interest income			28				–
Interest expense			–				(562	)
Other expense			(4	)			–
Total other expense, net			24				(562	)
Net loss		$	(3,544	)		$	(2,491	)
Net loss per common share, basic and diluted		$	(0.29	)		$	(1.54	)
Weighted average number of common shares outstanding, basic and diluted			12,034				1,617

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

 

Atomera Incorporated

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

 

		Three Months Ended March 31,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(3,544	)		$	(2,491	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			5				3
Debt issuance cost amortization			–				194
Stock-based compensation			1,210				60
Non-cash interest expense			–				368
Compensation in exchange for settlement of subscription receivable			–				188
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			(212	)			4
Security deposit			–				(37	)
Accounts payable			(58	)			106
Accrued expenses			32				(83	)
Accrued payroll expenses			(331	)			37
Net cash used in operating activities			(2,898	)			(1,651	)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment			(8	)			(9	)
Net cash used in investing activities			(8	)			(9	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of offering costs			–				(36	)
Net cash used in financing activities			–				(36	)
Net decrease in cash and cash equivalents			(2,906	)			(1,696	)
Cash and cash equivalents at beginning of period			26,718				3,197
Cash and cash equivalents at end of period		$	23,812			$	1,501

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

 

ATOMERA INCORPORATED

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

Periods Ended March 31, 2017 and 2016

 

1.	NATURE OF OPERATIONS

 

Atomera Incorporated (“Atomera” or the “Company”) was incorporated in the state of Delaware in March 2007 under the name MEARS Technologies, Inc. and is engaged in the development, commercialization and licensing of proprietary processes and technologies for the semiconductor industry. On January 12, 2016, the Company changed its name to Atomera Incorporated.

 

The Company has not yet generated revenue from planned principal operations, and is devoting substantially all of its efforts toward technology research and development and to securing customers for its technology. The Company has primarily financed operations through private placements of equity and debt securities and the Company’s Initial Public Offering (the “IPO”) which was consummated on August 10, 2016.

 

2.	LIQUIDITY AND MANAGEMENT PLANS

 

At March 31, 2017, the Company had cash and cash equivalents of approximately $23.8 million and working capital of approximately $23.4 million. For the three months ended March 17, 2017, the Company had a net loss of approximately $3.5 million with $2.9 million of cash used in operations. The Company has not generated revenues since inception and has incurred recurring operating losses. At March 31, 2017, the Company had an accumulated deficit of approximately $99.5 million.

 

During 2017, the Company’s operating plans include increased headcount in research and development and sales and business development. Based on the funds it has available as of the date of the filing of this report, the Company believes that it has sufficient capital to fund its current business plans and obligations over, at least, 12 months from the date that these financial statements have been issued, and to enable one or more customers to license and qualify its technology and start full-scale industrial production of devices that incorporate the Company’s technology. However, as the Company has not yet generated revenue from planned principal operations, it is subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays in a new business. Accordingly, the Company may require additional capital, the receipt of which cannot be assured. In the event the Company requires additional capital, there can be no guarantee that funds will be available on commercially reasonable terms, if at all.

 

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Significant accounting policies

 

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Form 10-K for the year ended December 31, 2016.

 

Basis of presentation of unaudited condensed financial information

 

The unaudited condensed financial statements of the Company for the three months ended March 31, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2017. These financial statements should be read in conjunction with that report.

 

 

 

 

Adoption of recent accounting pronouncements

 

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. The Company has adopted ASU 2016-06 as of January 1, 2017. The ASU did not have an impact on the Company’s financial condition or results of operations.

 

4.	BASIC AND DILUTED LOSS PER SHARE

 

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares and dilutive share equivalents outstanding for the period, determined using the treasury-stock and if-converted methods. Since the Company has had net losses for all periods presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net loss per share are equal.

 

The following potential common stock equivalents were not included in the calculation of diluted net loss per common share because the inclusion thereof would be anti-dilutive (in thousands):

 

		March 31,
		2017				2016
Stock Options			2,107				538
Warrants			765				303
Conversion of Notes Payable			–				2,280
			2,872				3,121

 

5.	NOTES PAYABLE

 

On March 17, 2015, the Company issued Senior Secured Convertible Notes (the “Secured Notes”) to certain investors under which the Company borrowed approximately $7.4 million and it exchanged all of its previously outstanding unsecured convertible promissory notes for Secured Notes with an aggregate principal balance of approximately $7.35 million. The total closing represented $14.75 million. The Secured Notes were due on May 31, 2016 and accrued interest at a rate of 10% per annum.  During the three months ended March 31, 2016, the interest expense on the Secured Notes was approximately $562,000. On August 31, 2016, all principal and accrued interest were converted into shares of common stock. There is no interest expense for the three months ended March 31, 2017.

 

6.	RELATED PARTY TRANSACTIONS

 

On January 14, 2005, the Company executed a Secured Promissory Note (the “Promissory Note”) with an officer of the Company. Under the Promissory Note, the officer borrowed $187,500 from the Company. The Promissory Note bore interest at a fixed rate of 3.76% per annum, with interest-only payments due annually through the maturity date of January 14, 2014. In December 2015, the Company agreed to extend the term of the note to January 14, 2019, subject to acceleration in the event of the sale or liquidation of the Company, bankruptcy or like event. Effective January 2016, the Company cancelled the outstanding principal of the note in the amount of $187,500. The cancellation of this note was recognized as a bonus to the officer and included in general and administrative expenses in the accompanying statement of operations for the three months ended March 31, 2016. As of the date of the cancellation of the Promissory Note, there was accrued and unpaid interest under the note in the amount of approximately $7,000, which amount has been repaid by the officer. In return for the cancellation of the note, the officer was required to reimburse the Company for withholding taxes payable by the Company, in the amount of approximately $14,000.

 

During the three months ended March 31, 2016, a director, who is also a shareholder of the Company, was paid $3,000 for his work as a consultant for the Company. The director is no longer paid for consulting work.

 

7.

WARRANTS

 

A summary of warrant activity for the three months ended March 31, 2017 is as follows (shares in thousands except per share and contractual term):

 

		Number of Shares				Weighted- Average Exercise Prices				Weighted-Average Remaining Contractual Term (In Years)
Outstanding at January 1, 2017			765			$	5.75
Outstanding at March 31, 2017			765			$	5.75				3.6

 

The warrants outstanding at March 31, 2017 had an intrinsic value of approximately $1.9 million based on a per-share stock price of $7.08 as of March 31, 2017.

 

 

 

 

 

8.	STOCK BASED COMPENSATION

 

The following table summarizes the stock-based compensation expense recorded in the Company’s results of operations during the three months ended March 31, 2017 and 2016 for stock options and restricted stock (in thousands):

 

		Three Months Ended March 31,
		2017				2016
Research and development		$	88			$	48
General and administrative			852				12
Selling and Marketing			270				–
		$	1,210			$	60

 

As of March 31, 2017, there was approximately $6.6 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements that are expected to vest. This cost is expected to be recognized over a weighted-average period of 2.5 years.

 

The Company records compensation expense for employee awards with graded vesting using the straight-line method. The Company records compensation expense for nonemployee awards with graded vesting using the accelerated expense attribution method. The Company recognizes compensation expense over the requisite service period applicable to each individual award, which generally equals the vesting term. The Company estimates the fair value of each option award using the Black-Scholes-Merton option pricing model. Forfeitures are recognized when realized. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service periods of the respective awards. The fair value of employee stock options issued was estimated using the following weighted-average assumptions:

 

		Three Months Ended March 31,
		2017				2016
Weighted average exercise price:		$	6.89			$	5.70
Weighted average grant date fair value:		$	3.01			$	2.64
Assumptions:
Expected volatility			42.6%				46.5%
Weighted average expected term (in years)			6.0				6.1
Risk-free interest rate			2.2%				1.6%
Expected dividend yield			0.0%				0.0%

 

The risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility was based upon the historical volatility for industry peers and used an average of those volatilities. The expected life of the Company’s options was determined using the simplified method as a result of limited historical data regarding the Company’s activity. The dividend yield considers that the Company has not historically paid dividends, and does not expect to pay dividends in the foreseeable future. 

 

Prior to the Company’s IPO in August 2016, the fair value of the common stock was determined by the board of directors based on a variety of factors, including valuations prepared by third parties, the Company’s financial position, the status of development efforts within the Company, the current climate in the marketplace and the prospects of a liquidity event, among others. 

 

The following table summarizes stock option activity during the three months ended March 31, 2017 (in thousands except exercise prices and contractual terms):

 

		Number of Shares				Weighted- Average Exercise Prices				Weighted-Average Remaining Contractual Term (In Years)				Intrinsic Value
Outstanding at January 1, 2017			1,515			$	7.21
Granted			593			$	6.89
Exercised			–			$	–
Expired			(1	)		$	29.94
Outstanding at March 31, 2017			2,107			$	7.11				9.0			$	670
Exercisable at March 31, 2017			600			$	7.36				8.3			$	251

 

During the three months ended March 31, 2017, the Company granted options under its Employee Stock Option Plan to purchase 593,292 shares of its common stock to its employees. The fair value of these options was approximately $1.8 million.

 

 

 

 

 

The company issues restricted stock to employees and estimates the fair value based on the closing price on the day of grant. The following table summarizes all restricted stock activity during the three months ended March 31, 2017 (in thousands except per share data):

 

		Number of Shares				Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017			462			$	8.07
Granted			80			$	7.01
Released			(24	)		$	7.99
Cancelled			–			$	–
Outstanding non-vested shares at March 31, 2017			518			$	7.91

 

9.	COMMITMENTS AND CONTINGENCIES

 

Operating Leases

  

On January 19, 2016, the Company entered into a real estate lease agreement for a 3,396 square foot office facility in Los Gatos, California as its new corporate headquarters. The lease commenced on February 1, 2016 and expires on January 31, 2018. The lease rate is $13,074 per month.

 

Approximate future minimum lease payments required under the operating leases are as follows (in thousands):

 

Years ending December 31,		Amount
Remaining period in 2017		$	118
2018			13
Total		$	131

 

Licensing agreement

 

In December 2006, the Company entered into licensing agreement with ASM International, NV, a semiconductor OEM located in Almere, The Netherlands, pursuant to which ASM has granted to the Company a non-exclusive, worldwide license to make, and sublicense others to make, semiconductor devices using certain ASM patents. The ASM license restricts the Company and its sublicensees from using the ASM licensed rights in the manufacture of EPI machines or any other machines used to manufacture semiconductors. The ASM license is coterminous with patents licensed by ASM, which expires on January 8, 2019, and requires the Company to pay ASM a royalty of 5% of net royalty revenue, generally defined as gross royalty revenue less certain customer offsets and credits, from the sale of any product incorporating the ASM licensed patents not manufactured on ASM equipment and a royalty of 2.5% of net revenue from the sale of any product incorporating ASM licensed patents manufactured on ASM equipment. All semiconductor devices incorporating the Company’s MST^® technology manufactured prior to January 8, 2019 will be subject to the ASM license royalty. The Company has not incurred any royalty obligation under license agreement as of March 31, 2017.

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of the financial condition and results of operations of Atomera Incorporated should be read in conjunction with our unaudited condensed financial statements and the accompanying notes that appear elsewhere in this filing. Statements in this Quarterly Report on Form 10-Q include forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Business” section and elsewhere in this report. 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. All forward-looking statements included in this report are based on information available to us on the date hereof and, except as required by law, we assume no obligation to update any such forward-looking statements. 

 

Overview

 

We are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $350+ billion semiconductor industry. Our lead technology, named Mears Silicon Technology^TM, 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 smaller, with increased speed, reliability and energy efficiency. In addition, since MST^® is an additive and low cost technology, 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 intend to develop and license technologies and processes that will 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 are expected to 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 manufacture of their chips to foundries;
	·	original equipment manufacturers, or OEMs, which manufacture the epitaxial, or EPI, machines used to deposit semiconductor layers, such as the MST® onto the base silicon wafer; and
	·	electronic design automation companies, which make tools used throughout the industry to simulate the effects of using different materials, design structures and process technologies on the performance of semiconductor products.

 

We intend to generate revenue through licensing arrangements whereby foundries and IDMs pay us a license fee for their use of 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 intend to enter into licensing arrangements with fabless semiconductor manufacturers pursuant to which we will charge them a royalty for each device they sell that incorporates our MST^® technology.

 

We were organized as a Delaware limited liability company under the name Nanovis LLC on November 26, 2001. On March 13, 2007, we converted to a Delaware corporation under the name Mears Technologies, Inc. On January 12, 2016, we changed our name to Atomera Incorporated.

 

Results of Operations

 

Revenues

 

We have not commenced revenue-producing operations.

 

Research and development expense. To date, our operations have focused on the research, development, patent protection, and commercialization of our processes and technologies, including our proprietary and patent-protected MST® performance enhancement technology. Our research and development costs primarily consist of payroll and benefit costs for our engineering staff and costs of outsourced fabrication and metrology of semiconductor wafers incorporating our MST^® technology.

 

 

 

 

The timing and amount of our outsourced fabrication and metrology is highly dependent on evaluations by our prospective customers and partners. As a result, the level of our research and development costs can vary significantly among accounting periods.

 

For the three months ended March 31, 2017 and 2016, we incurred approximately $1.5 million and $949,000, respectively, of research and development expense, an increase of $507,000 or 53%. The increase in research and development expense is primarily due to an increase of approximately $243,000 in compensation expense which includes an increase of approximately $167,000 in payroll related expenses due to increased engineering headcount and a bonus accrual based on a new compensation plan and an approximately $76,000 increase in stock-based compensation expense. The rest of the increase in research and development expense is due to an increase of approximately $199,000 in outsourced testing and materials.

 

General and administrative expenses. 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 three months ended March 31, 2017 and 2016 were approximately $1.6 million and $861,000, respectively, representing an increase of approximately $742,000 or 86%. Approximately $810,000 of the increase in general and administrative costs is due to increased compensation expense, of which approximately $805,000 was due to additional stock-based compensation expense related to restricted stock and options issued to certain officers and directors in connection with our IPO. The remaining increase can be attributed to board of directors’ fees of approximately $57,000 that were not incurred in the three months ended March 31, 2016. We commenced compensating our non-employee directors effective September 1, 2016 in connection with becoming a publicly-traded company.

 

Selling and marketing expenses.  Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel and business development consulting services. For the three months ended March 31, 2017 and 2016 selling and marketing expenses were approximately $509,000 and $119,000, respectively, representing an increase of approximately $390,000 or 328%. Approximately $270,000 of the increase is due to stock based compensation expense and $96,000 in payroll related expenses due to the hiring of a new Vice President of Business Development and Sales.

 

Interest income and expense. Interest income and interest expense for the three months ended March 31, 2017 and 2016 consisted of the following (dollars in thousands):

 

		Three Months Ended March 31,
		2017				2016
Interest income		$	28			$	–
Interest expense			–				(562	)
		$	28			$	(562	)

 

Interest income for the three months ended March 31, 2017 related to interest earned on our cash and cash equivalents. Interest expense for the three months ended March 31, 2016 related to accrued interest on our Secured Notes. These notes were converted into shares of common stock upon the completion of our IPO in August of 2016.

 

Other expense. Other expense for the three months ended March 31, 2017 consisted of currency exchange losses related to our accounts payable of approximately $4,000. We did not have any currency exchange losses for the three months ended March 31, 2016.

 

Liquidity and Capital Resources

 

At March 31, 2017, we had cash and cash equivalents of approximately $23.8 million and working capital of approximately $23.4 million. For the three months ended March 17, 2017, we had a net loss of approximately $3.5 million with $2.9 million used in operations. We have not generated revenues since inception and has incurred recurring operating losses. At March 31, 2017, we had an accumulated deficit of approximately $99.5 million.

 

Cash Flows from Operating, Investing and Financing Activities

 

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, the semiconductor industry is generally slow to adopt new manufacturing process technologies and conducts long testing and qualification processes which we have limited ability to control. Accordingly, we may require additional capital in order to get to full-scale industrial production of a device that incorporates our MST^®. In the event we require additional capital over and above the amount raised and on hand, we will endeavor to acquire additional funds through various financing sources, including follow-on equity offerings, debt financing, licensing fees for our technology 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. However, there can be no guarantees that additional capital will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations.

 

 

 

 

Net cash used in operating activities of approximately $2.9 million for the three months ended March 31, 2017 resulted primarily from our net loss of approximately $3.5 million, a decrease of approximately $331,000 in accrued payroll expenses and an increase of approximately $212,000 in prepaid expenses, adjusted by approximately $1.2 million for stock-based compensation expense.  

 

Net cash used in operating activities of approximately $1.7 million for the three months ended March 31, 2016 resulted primarily from our net loss of approximately $2.5 million, adjusted by approximately $368,000 in non-cash interest expense, approximately $194,000 for non-cash amortization of debt issuance costs, and approximately $188,000 for non-cash settlement of subscription receivable.

 

Net cash used in investing activities of approximately $8,000 for the three months ended March 31, 2017 and approximately $9,000 for the three months ended March 31, 2016 consisted of the purchase of property and equipment.

 

No cash was used in or provided by financing activities in the three months ended March 31, 2017. Net cash used in financing activities of approximately $36,000 for the three months ended March 31, 2016 consisted primarily of debt issuance costs paid.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements or issued guarantees to third parties.

 

Recent Accounting Pronouncements

 

We are required to adopt certain new accounting pronouncements. See note 2 to the condensed financial statements included in Item 1 of this Form 10-Q.

 

Critical Accounting Policies

 

There have been no changes to our critical accounting policies from those included in our Annual Report on Form 10-K for the year ended December 31, 2016.

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive officer and principal financial and accounting officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of March 31, 2017.

 

Changes in Internal Control over Financial Reporting

 

There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the three-month period ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 

 

 

 

 

 

 

PART II. Other Information

 

Item 1A. Risk Factors

 

The primary risk factors affecting our business have not changed materially from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016. 

 

Item 6. Exhibits

 

The following is a list of exhibits files as part of this Report on Form 10-Q

 

Exhibit No.		Description		Method of Filing
31.1		Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed electronically herewith
31.2		Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed electronically herewith
32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).		Filed electronically herewith
101.INS		XBRL Instance Document		Filed electronically herewith
101.SCH		XBRL Taxonomy Extension Schema Document		Filed electronically herewith
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document		Filed electronically herewith
101.LAB		XBRL Taxonomy Extension Label Linkbase Document		Filed electronically herewith
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document		Filed electronically herewith
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document		Filed electronically herewith

 

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and the on the date indicated.

 

	ATOMERA INCORPORATED.
Date: May 5, 2017	By:	/s/ Scott A. Bibaud
		Scott A. Bibaud Chief Executive Officer,
		(Principal Executive Officer)
		and Director
Date: May 5, 2017		By: /s/ Francis B. Laurencio
		Francis B. Laurencio
		Chief Financial Officer
		(Principal Financial and
		Accounting Officer)