10-K: Atomera Inc. Files 2023 Annual Report, Highlights First Commercial License and Ongoing Development

Atomera Incorporated's 2023 annual report details the company's progress in commercializing its MST technology, including its first full commercial license agreement and ongoing joint development efforts.

Summary

• Atomera Incorporated, a semiconductor technology company, has filed its annual report for the fiscal year ended December 31, 2023.
• The company is focused on developing and licensing its Mears Silicon Technology (MST), a thin film designed to enhance transistor performance.
• Atomera's business model involves licensing its technology to foundries, integrated device manufacturers (IDMs), and fabless semiconductor companies, generating revenue through license fees and royalties.
• The company achieved a significant milestone by entering into its first full commercial license agreement with STMicroelectronics in April 2023.
• Atomera's revenue for 2023 was approximately $550,000, primarily from a manufacturing license, compared to $382,000 in 2022.
• The company incurred a net loss of approximately $19.8 million in 2023, compared to a net loss of $17.4 million in 2022.
• Research and development expenses increased to approximately $12.5 million in 2023 from $10.0 million in 2022.
• As of December 31, 2023, Atomera had approximately $19.5 million in cash, cash equivalents, and short-term investments.
• The company believes it has sufficient capital to fund its operations for at least the next 12 months.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there are positive developments like the first commercial license and ongoing development efforts, the company's significant losses, reliance on future royalties, and potential need for additional capital raise concerns. The loss of a key supplier is also a negative factor. The sentiment is neutral to slightly negative.

Positives

• The full commercial license agreement with STMicroelectronics is a major achievement and a validation of Atomera's technology.
• The company has made progress in advancing its technology with multiple customer engagements in various stages of integration.
• Atomera has a strong intellectual property portfolio with numerous patents granted and pending.
• The company has a collaboration with Synopsys, a leading provider of TCAD software, which enhances the adoption of MST.
• Atomera has secured an epitaxial deposition tool, which is critical for its research and development efforts.
• The company has raised approximately $13.5 million in net proceeds through its at-the-market offering in 2023.

Negatives

• Atomera continues to incur significant operating losses, with a net loss of approximately $19.8 million in 2023.
• The company has a limited operating history and has generated minimal revenue to date.
• The commercialization of MST technology is a lengthy and costly process, with no guarantee of success.
• The company is dependent on a royalty-based business model, which is inherently risky.
• Atomera's qualification of its technology requires access to customer manufacturing tools and facilities, which may not always be available.
• The company lost access to certain semiconductor manufacturing and engineering services in January 2024, which may be difficult and costly to replace.

Risks

• The company's success depends on the adoption of its MST technology by at least one major semiconductor manufacturer.
• There is no guarantee that Atomera's technology will meet the performance, power, or cost requirements of its customers.
• The company may need additional financing to execute its business plan and fund operations.
• Unfavorable geopolitical and macroeconomic developments could adversely affect Atomera's business.
• The company's internal computer systems and those of its collaborators are vulnerable to security breaches.
• Atomera's revenues may be concentrated in a few customers, and the loss of any of these customers could materially affect its business.
• The company may face challenges in verifying royalty amounts owed to it under its licensing agreements.
• Atomera could be subject to product liability claims if its technology is used in defective products.
• The company may become involved in material legal proceedings to enforce or protect its intellectual property rights.

Future Outlook

Atomera expects to collect increased fees from license agreements and JDAs, as well as royalties from customer sales of products that incorporate its MST technology, subject to its ability to enter into manufacturing and distribution license agreements and advance licensees through licensing phases to royalty-bearing product shipments. The company believes it has sufficient capital to fund its operations for at least the next 12 months.

Management Comments

• Management will endeavor to generate positive cash flows from the commercialization of our MST technology.
• Management believes that the financial institution which holds the Company’s cash is financially sound and, accordingly, that minimal credit risk exists.
• Management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance.

Industry Context

The semiconductor industry is experiencing a shift towards engineered materials to enhance performance, and Atomera's MST technology is positioned to address this trend. The industry is also becoming more disaggregated, creating opportunities for licensing companies like Atomera. The company's technology is aimed at addressing the challenges of scaling down transistors and improving their performance, which are key issues in the semiconductor industry.

Comparison to Industry Standards

• The document mentions that historically, development of a new material technology for the semiconductor industry has taken 10-20 years from conceptualization to volume production, suggesting that Atomera's timeline is within industry norms.
• The report compares MST to other performance-enhancing technologies like strained silicon, Silicon-on-Insulator (SOI), and High-K/Metal Gate (HKMG), highlighting MST's potential advantages in terms of cost-effectiveness and scalability.
• The document notes that the semiconductor industry has been characterized by product shortages and tight capacity, which has impacted Atomera's ability to run wafers through customer fabrication lines, indicating a common challenge faced by companies in the industry.
• The report states that the semiconductor industry in 2023 exceeded $530 billion in sales, providing a context for the market size that Atomera is targeting.

Corporate Governance

Stakeholder Impact

• Shareholders: The company's ongoing losses and potential need for additional capital may negatively impact shareholder value.
• Employees: The company's success is dependent on the efforts of its employees, and the company's equity incentive plans are designed to align their compensation with business objectives.
• Customers: The company's technology is aimed at providing customers with improved performance and lower costs, which could benefit their businesses.
• Suppliers: The company's loss of access to certain semiconductor manufacturing and engineering services may impact its relationships with suppliers.
• Creditors: The company's ability to repay its debts is dependent on its ability to generate revenue and secure additional financing.

Next Steps

• Atomera expects STMicroelectronics to complete process qualification with MST, which would result in additional license fees and the commencement of royalty payments.
• The company will continue to work with its other licensees to advance them through the licensing process.
• Atomera will continue to work with OEMs on process development and equipment optimization.
• The company will continue to refine its MSTcad software and release updates.
• Atomera will continue to market its MST technology directly to the semiconductor industry.
• The company will continue to seek additional funds through various financing sources, including its ATM Facility, follow-on equity offerings, debt financing and joint ventures with industry partners.

Key Dates

Keywords

Mears Silicon Technology, MST, semiconductor, licensing, transistor, CMOS, foundry, IDM, fabless, epitaxial, TCAD, Synopsys, royalty, intellectual property, patents