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What changed in Atomera Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Atomera Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+175 added−156 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-15)

Top changes in Atomera Inc's 2023 10-K

175 paragraphs added · 156 removed · 118 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeStarting in 2019, we began to develop deeper relationships with several potential large scale customers who were evaluating MST across multiple manufacturing processes and product lines. Accordingly, we have begun engaging with certain customers under an engagement format called a joint development agreement, or JDA, to certain customers.
Biggest changeUpon the grant of a distribution license our licensees would also be required to make royalty payments to us based on the number and sales price of MST-enabled products they sell to their customers. Starting in 2019, we began to develop deeper relationships with several potential large-scale customers who were evaluating MST across multiple manufacturing processes and product lines.
In April 2022, we entered into a JDA with a major semiconductor foundry which contains technical targets which, if achieved, should result in a paid licenses and engineering services revenue. Although this JDA does not confer commercial distribution rights, we believe that achievement of the JDA’s technical objectives would be a significant step toward commercialization.
In April 2022, we entered into a JDA with a major semiconductor foundry which contains technical targets which, if achieved, should result in paid licenses and engineering services revenue. Although this JDA does not confer commercial distribution rights, we believe that achievement of the JDA’s technical objectives would be a significant step toward commercialization.
In addition, we believe that MST has the potential to deliver these benefits through a single technology that requires relatively minor modifications to the industry standard CMOS manufacturing flow. Consequently, we believe that by incorporating MST, designers can make transistors with increased speed, reliability and energy efficiency, without significantly altering the current fabrication process or cost of production.
In addition, we believe that MST has the potential to deliver these benefits through a single technology that requires relatively minor modifications to the industry standard CMOS manufacturing flow. Consequently, we believe that by incorporating MST, designers can make transistors with increased speed, reliability and energy efficiency, without significantly altering the current fabrication process or cost of production.
In the case of fabless semiconductor licensees, our strategy is to charge a royalty for each device they sell that incorporates our MST technology. The primary beneficiaries of our commercialization activities are the IDMs and fabless semiconductor manufacturers, as they produce and distribute the integrated circuit devices which are enhanced when they incorporate MST technology.
In the case of fabless semiconductor licensees, our strategy is to charge a royalty for each device they sell that incorporates our MST technology. The primary beneficiaries of our commercialization activities are the IDMs and fabless semiconductor manufacturers, as they produce and distribute integrated circuit devices which are enhanced when they incorporate MST technology.
Nevertheless, in some cases the engineering teams in our customers, who are developing their own process improvements, may view MST as competition to their internally-developed solutions. 8 Research and Development The principal focus of our research and development efforts is on enabling existing and prospective customers to integrate MST into their manufacturing processes and enable them to commercialize MST-enabled semiconductor products.
Nevertheless, in some cases the engineering teams in our customers, who are developing their own process improvements, may view MST as competition to their internally-developed solutions. Research and Development The principal focus of our research and development efforts is on enabling existing and prospective customers to integrate MST into their manufacturing processes and enable them to commercialize MST-enabled semiconductor products.
We believe our core patents adequately block competitors from using our MST technology without our approval and our patent activity over the past five years has focused on extending the scope of our portfolio through a variety of means, including but not limited to patenting new structures, materials and methods uniquely enabled by MST technology.
We believe our patents adequately block competitors from using our MST technology without our approval and our patent activity over the past five years has focused on extending the scope of our portfolio through a variety of means, including but not limited to patenting new structures, materials and methods uniquely enabled by MST technology.
Some customers work together with us to develop a TCAD model showing possible results of MST integration with their particular manufacturing process. 6 3. MST Integration. Typically, this phase includes several rounds of tests that involve building test devices on a semiconductor wafer using our MST technology within the customer’s manufacturing process flow.
Some customers work together with us to develop a TCAD model showing possible results of MST integration with their particular manufacturing process. 3. MST Integration. Typically, this phase includes several rounds of tests that involve building test devices on a semiconductor wafer using our MST technology within the customer’s manufacturing process flow.
In December 2020, we announced availability of our MSTcad TM software which runs on Synopsys’ Sentaurus TCAD software and enables semiconductor engineers to simulate the benefits of integrating MST in a variety of devices. We continually refine our MSTcad software by calibrating our models against measured silicon results and we regularly release updates to that software.
In December 2020, we announced availability of our MSTcad software which runs on Synopsys’ Sentaurus TCAD software and enables semiconductor engineers to simulate the benefits of integrating MST in a variety of devices. We continually refine our MSTcad software by calibrating our models against measured silicon results and we regularly release updates to that software.
Transistors are the building blocks of integrated circuits and the most complex semiconductor chips today contain more than a billion transistors, each of which may have features that are much less than 1/1,000 th the diameter of a human hair. 2 The most widely used transistors in semiconductor chips today are based on CMOS technology.
Transistors are the building blocks of integrated circuits and the most complex semiconductor chips today contain more than a billion transistors, each of which may have features that are much less than 1/1,000 th the diameter of a human hair. The most widely used transistors in semiconductor chips today are based on CMOS technology.
However, our ability to enter into royalty-based manufacturing and distribution agreements with our licensees under our integration license agreements will depend, in large part, on the performance of devices they build using MST and the successful integration of our MST technology on a high-volume production scale.
However, our ability to enter into royalty-based manufacturing and distribution agreements with licensees under our integration license agreements and JDAs will depend, in large part, on the performance of devices they build using MST and the successful integration of our MST technology on a high-volume production scale.
In September and October 2018, respectively, we entered into separate integration license agreements with Asahi Kasei Microdevices, or AKM, and STMicroelectronics, or ST, both of which are leading IDMs. In October 2019, we entered into an integration license agreement with a leading fabless RF semiconductor provider. In February 2022, we entered into an integration license agreement with a semiconductor foundry.
In September and October 2018, respectively, we entered into separate integration license agreements with Asahi Kasei Microdevices, or AKM, and ST, both of which are leading IDMs. In October 2019, we entered into an integration license agreement with a leading fabless RF semiconductor provider. In February 2022, we entered into an integration license agreement with a semiconductor foundry.
In order to progress beyond this phase, we must demonstrate benefits at a commercially significant level. It is difficult for both customers and for Atomera to estimate the amount of time a customer will be in the integration phase. 4. Process Installation .
In order to progress beyond this phase, we must demonstrate benefits at a commercially significant level. It is difficult for both customers and for Atomera to estimate the amount of time a customer will be in the integration phase. 6 4. Process Installation .
Item 1. Business Company 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.
Item 1. Business Company Overview We are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $530+ 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.
We believe that our success is dependent upon the adoption of our MST technology through to commercial production by at least one IDM, foundry, or fabless semiconductor manufacturer. As of the date of this Annual Report, MST was in the integration phase (Phase Three as described above) on 14 different engagements and one engagement in Phase Four (process installation).
We believe that our success is dependent upon the adoption of our MST technology through to commercial production by at least one IDM, foundry, or fabless semiconductor manufacturer. As of the date of this Annual Report, MST was in the integration phase (Phase Three as described above) on 14 different engagements and two engagements in Phase Four (process installation).
Historically, smaller nodes enables more densely packed designs that produced less costly products on a per-transistor basis. Frequently, smaller nodes also correspond to an improvement in chip performance, making them the mile markers of Moore’s Law, with each node marking a new generation of chip-manufacturing technology.
Historically, smaller nodes enable more densely packed designs that produced less costly products on a per-transistor basis. Frequently, smaller nodes also correspond to an improvement in chip performance, making them the mile markers of Moore’s Law, with each node marking a new generation of chip-manufacturing technology.
We offer MST-SP, which is a type of MST-enabled power device that offers what we believe to be industry-leading on-resistance (also referred to as Rsp) and reduced footprint (enabling smaller devices). We believe that the MST-SP devices will have immediate application in power management integrated circuits (or PMICs) which are pervasive in hand-held, battery-powered devices and elsewhere.
We offer MST-SP and MST-SPX, which are types of MST-enabled power devices that offer what we believe to be industry-leading on-resistance (also referred to as Rsp) and reduced footprint (enabling smaller devices). We believe that the MST-SP and MST-SPX devices will have immediate application in power management integrated circuits (or PMICs) which are pervasive in hand-held, battery-powered devices and elsewhere.
We utilize this tool under a five-year lease and perform deposition on both customer and internal R&D wafers. The terms of our tool lease include the lessor’s maintenance and support as well as access to a clean-room with advanced cleaning and inspection tools. MST Commercialization We do not intend to design or manufacture integrated circuits directly.
We utilize this tool to perform deposition on both customer and internal R&D wafers. The terms of our tool lease include the lessor’s maintenance and support as well as access to a cleanroom with advanced cleaning and inspection tools. 5 MST Commercialization We do not intend to design or manufacture integrated circuits directly.
We believe MST has the potential to overcome the key challenges found in the implementation of next generation nano-scale semiconductor devices incorporating CMOS type transistors, namely enhancing drive current, reducing gate leakage and reducing variability.
As applied to CMOS-type transistors, MST functions as a transistor channel enhancement. We believe MST has the potential to overcome the key challenges found in the implementation of next generation nano-scale semiconductor devices incorporating CMOS type transistors, namely enhancing drive current, reducing gate leakage and reducing variability.
Production . We expect that our license agreements will provide that upon commencement of sales of wafers or devices built using MST, our customer will pay us a royalty that will be a percentage of the selling price of the wafer or device, depending on the type of customer.
Upon commencement of sales of wafers or devices built using MST, our customer will pay us a royalty that will be a percentage of the selling price of the wafer or device, depending on the type of customer.
MSTcad has been increasingly used by existing and potential customers to identify applications where MST can have the greatest benefit, without requiring access to customer fabs. Epi Tool Lease. In August 2021 we completed the acceptance process of an Applied Materials Centura epitaxial deposition reactor which handles both 200mm and 300mm wafers.
MSTcad has been increasingly used by existing and potential customers to identify applications where MST can have the greatest benefit, without requiring access to customer fabs. Epi Tool Lease. In August 2021 we entered into a five-year lease for an Applied Materials Centura epitaxial deposition reactor which handles both 200mm and 300mm wafers.
During the years ended December 31, 2022 and 2021, we incurred research and development expenses of approximately $10.0 million and $8.8 million, respectively.
During the years ended December 31, 2023 and 2022, we incurred research and development expenses of approximately $12.5 million and $10.0 million, respectively.
The Pursuit of Increased Semiconductor Performance For years, the semiconductor industry was able to almost double the number of transistors it could pack into a single microchip about every two years, a rate of improvement commonly known as “Moore’s Law.” The semiconductor industry uses the term “node” to describe the minimum line width or geometry on a semiconductor chip, expressed in nanometers, or nm, for today’s technologies.
Among its many attributes, CMOS allows for a higher density of transistors on a chip and lower power usage than non-CMOS technologies. 2 The Pursuit of Increased Semiconductor Performance For years, the semiconductor industry was able to almost double the number of transistors it could pack into a single microchip about every two years, a rate of improvement commonly known as “Moore’s Law.” The semiconductor industry uses the term “node” to describe the minimum line width or geometry on a semiconductor chip, expressed in nanometers, or nm, for today’s technologies.
The information on or accessible through our website is not part of this Annual Report on Form 10-K.
Available Information Our website is located at www.atomera.com. The information on or accessible through our website is not part of this Annual Report on Form 10-K.
Under this JDA, we granted our customer a paid manufacturing license pursuant to which the customer installed the recipe for our MST film into a tool in their fab and was authorized to fabricate semiconductor wafers incorporating MST for internal use. This JDA also includes development milestones that we achieved in February 2022, resulting in additional revenue to us.
Under this JDA, we granted our customer a paid manufacturing license pursuant to which the customer installed the recipe for our MST film into a tool in their fab and was authorized to fabricate semiconductor wafers incorporating MST for internal use, resulting in this customer entering Phase Four.
We have also simulated devices with leading industry research facilities and built and electrically verified test chips using MST in customer manufacturing facilities which have produced results that demonstrate many of the benefits described above. Development Partnerships TSI Semiconductors. Since 2016 we have worked under a Master R&D Services Agreement with TSI Technology Development & Commercialization Services LLC (or TSI).
We have also simulated devices with leading industry research facilities and built and electrically verified test chips using MST in customer manufacturing facilities which have produced results that demonstrate many of the benefits described above. Development Partnerships Synopsys .
We currently generate revenue through licensing arrangements whereby our customers initially pay us a fee for an integration license that provides them the right to use MST technology (with MST film deposited for the customer by Atomera) in the manufacture of silicon wafers for internal testing and sampling.
An integration license that provides our customer the right to use MST technology (with MST film deposited for the customer by Atomera) in the manufacture of silicon wafers for internal testing and sampling; 2.
However, there can be no assurance that one or more of our patents would survive a legal challenge to their scope, validity, or enforceability, or provide significant protection for us.
However, there can be no assurance that one or more of our patents would survive a legal challenge to their scope, validity, or enforceability, or provide significant protection for us. Protection of our film know-how depends on our licensee’s compliance with the terms of their contracts including non-disclosure provisions thereof.
As a result of our collaboration, Synopsys’ software now supports modeling of MST, which enables semiconductor manufacturers and designers to model the interaction of MST with other process steps.
Since 2017 we have worked in collaboration with Synopsys, Inc., a provider of the most broadly used TCAD simulation software in the semiconductor industry. As a result of our collaboration, Synopsys’ software now supports modeling of MST, which enables semiconductor manufacturers and designers to model the interaction of MST with other process steps.
We deposit MST onto the customers’ wafers and the customer has the right under the license agreement to complete the manufacturing process which enables them to evaluate our technology.
We deposit MST onto the customers’ wafers and the customer has the right under the license agreement to complete the manufacturing process, which enables them to evaluate our technology and to provide limited samples to their customers. AKM, our fabless licensee and our foundry licensee are in our Phase Three (MST Integration).
In the case of our employees and consultants, the agreements provide that all of the technology that is conceived by the individual during the course of employment is our exclusive property. The development of our technology and many of our processes are dependent upon the knowledge, experience, and skills of key scientific and technical personnel.
In the case of our employees and consultants, the agreements provide that all of the technology that is conceived by the individual during the course of employment is our exclusive property.
In addition, even if our MST technology meets our customers’ technical objectives one or more of our licensees may decide, for reasons unrelated to the price or performance of our MST technology, not to enter into manufacturing and distribution license agreements.
In addition, even if our MST technology meets our customers’ technical objectives one or more of our licensees may decide, for reasons unrelated to the price or performance of our MST technology, not to enter into manufacturing and distribution license agreements. 8 Competition Our lead product, MST, is a proprietary and patent-protected performance enhancement technology that we believe addresses a number of key engineering challenges facing the semiconductor industry.
After installation of MST in the fab, the customer will conduct additional testing to ensure manufacturing reliability under accelerated test conditions that simulate volume production. Upon successfully completing the qualification phase, products can be built and shipped using this manufacturing process. We have not had any customer move into Phase Five as of the date of this Annual Report. 6.
The customer will conduct additional testing to ensure that the new products developed with the new PDK achieve manufacturing reliability under accelerated test conditions that simulate volume production. Upon successfully completing the qualification phase, products can be built and shipped using this manufacturing process. 6. Production .
These developments depend, in large part, on integrated circuits, or microchips, which are sets of electronic circuits on a single chip of semiconductor material, normally silicon. It is common for a single semiconductor chip to combine many components (processor, communications, memory, custom logic, input/output) resulting in highly complex chip designs.
It is common for a single semiconductor chip to combine many components (processor, communications, memory, custom logic, input/output) resulting in highly complex chip designs.
The principal purposes of our equity incentive plans are to attract, retain and reward personnel through the granting of stock-based compensation awards that align their compensation with our business objectives and with creation of shareholder value. Available Information Our website is located at www.atomera.com.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees. The principal purposes of our equity incentive plans are to attract, retain and reward personnel through the granting of stock-based compensation awards that align their compensation with our business objectives and with creation of shareholder value.
Atomera’s MST technology has followed a similar trajectory, from early patents, publications and presentations to the industry to early evaluations and installation at customers. We compete with IDMs, OEMs, foundries, fabless manufacturers of semiconductors and semiconductor IP licensing companies for the development and commercialization of technologies that improve the performance of semiconductors.
We compete with IDMs, OEMs, foundries, fabless manufacturers of semiconductors and semiconductor IP licensing companies for the development and commercialization of technologies that improve the performance of semiconductors.
Agreements granting manufacturing and distribution licenses provide for substantially larger upfront license fee payments than the integration licenses, and distribution agreements will require licensees to make royalty payments to us based on the number and sales price of MST-enabled products they sell to their customers.
We intend that each of our integration license agreements and JDAs will result in full commercial licenses like our April 2023 agreement with ST which provides for substantially larger upfront license fee payments for grants of manufacturing and distribution rights than the integration licenses and will require royalty payments to us based on sales of MST-enabled products they sell to their customers.
In addition, patents may not issue from any of our current or future applications. We also hold registered trademarks in the United States for the marks “Atomera” and “MST” and in China for the mark “Mears”. We have applied with the U.S.
In addition, patents may not issue from any of our current or future applications. We also hold registered trademarks in the United States for the marks “Atomera,” “MST” and “MSTcad” and in China for the mark “Mears”. Employees and Human Capital Management As of the date of this Annual Report, we employ 21 people on a full-time basis.
To date, initial application of our MST technology has been for power devices, RFSOI devices and advanced CMOS integrated circuits. CMOS integrated circuits are the most widely used type of integrated circuits in the semiconductor industry. As applied to CMOS-type transistors, MST functions as a transistor channel enhancement.
Accordingly, we have engaged with certain customers under joint development agreements, or JDAs. Our JDAs include development, technology transfer, manufacturing and licensing components. To date, application of our MST technology has been for power devices, RFSOI devices and advanced CMOS integrated circuits. CMOS integrated circuits are the most widely used type of integrated circuits in the semiconductor industry.
Our manufacturing license grants our customer rights to manufacture MST-enabled products for internal use only and the grant typically occurs when we deliver our MST film recipe to the customer. A distribution license grants the customer the rights to manufacture MST-enabled products for sale to their customers.
A manufacturing license, granting our customer the rights to install MST on a tool in their fab and to manufacture MST-enabled products for internal use only; and 3.
These trends coincided with the rollout of 5G cellular networks and 5G-enabled devices, growing popularity of augmented and virtual reality technologies and the growth in popularity of cryptocurrencies, all of which require high levels of processing power.
These trends coincided with the rollout of 5G cellular networks and associated devices, augmented and virtual reality technologies, cryptocurrencies, and especially artificial intelligence technology, all of which require high levels of processing power. These developments depend, in large part, on integrated circuits, or microchips, which are sets of electronic circuits on a single chip of semiconductor material, normally silicon.
Our JDAs are customized to each customer’s goals and they include development, technology transfer, manufacturing and licensing components. 1 In January 2021, we entered into a JDA with a leading semiconductor provider for integration of our MST technology into their manufacturing process.
There can be no assurance, however, that ST will complete their qualification and proceed to commercial sale of MST-enabled products. In January 2021, we entered into a JDA with a leading semiconductor provider for integration of our MST technology into their manufacturing process.
Competition Our lead product, MST, is a proprietary and patent-protected performance enhancement technology that we believe addresses a number of key engineering challenges facing the semiconductor industry. Historically, development of a new material technology for the semiconductor industry has taken 10-20 years from conceptualization to volume production.
Historically, development of a new material technology for the semiconductor industry has taken 10-20 years from conceptualization to volume production. Atomera’s MST technology has followed a similar trajectory, from early patents, publications and presentations to the industry to early evaluations and installation at customers.
In certain foreign jurisdictions, we engage sales representatives to assist us in establishing relationships with local customers. 7 Customers In January 2021, we entered into a JDA with a leading semiconductor provider for integration of our MST technology into their manufacturing process.
In certain foreign jurisdictions, we engage sales representatives to assist us in establishing relationships with local customers. 7 Customers In April 2023, we entered into a full commercial license agreement with STMicroelectronics, or ST, that authorizes ST to manufacture and distribute MST-enabled products to its customers.
We also generate revenue through engineering services provided to customers during their evaluation of MST technology. Starting in late 2020, we have been providing our MSTcad software which enables customers to simulate the effects of MST on their products using Synopsys, Inc.’s technology computer-aided design, or TCAD, software.
Our principal business objective is to enter into commercial license agreements that enable our customers to manufacture and sell MST-enabled products, generating license revenues and ongoing royalties. We also license our MSTcad ® software to customers, enabling them to simulate the effects of MST on their products using Synopsys, Inc.’s technology computer-aided design, or TCAD, software.
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Our goal is for each integration license to be the first of a three-stage licensing process with the customer, with the first integration stage to be followed by one or more agreements granting them manufacturing and distribution licenses.
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In addition, we offer fee-based engineering services to customers evaluating MST. Our goal is that MSTcad licensing and engineering service arrangements will be tools that demonstrate the benefits of MST and will lead customers to enter into full commercial licenses. A “full commercial license” involves a three-stage approach consisting of: 1.
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We deposit MST onto the customers’ wafers and the customer has the right under the license agreement to complete the manufacturing process, which enables them to evaluate our technology and to provide limited samples to their customers. These agreements do not grant our customers the right to deposit MST at their site or to sell products incorporating MST.
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A distribution license which grants the rights to manufacture and sell MST-enabled products to their customers. 1 Depending on our customers’ business needs and how we initially engaged with them, we may make these license grants in one or more separate contracts. The upfront license fee becomes larger at each stage.
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Among its many attributes, CMOS allows for a higher density of transistors on a chip and lower power usage than non-CMOS technologies.
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After installation of MST into the fab, the customer will continue development work to perfect the integration of MST technology into their transistor manufacturing process flow. Upon completion the customer will typically release a new Process Design Kit (PDK) which incorporates MST. Circuit designers will use the new PDK when developing new microchips for production. 5. Technology qualification .
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Under this agreement, TSI provides us with engineering services in their semiconductor manufacturing facility in California. By running tests in TSI's facility, which we utilize to run tests on a contract basis, we are able to build and test devices that incorporate MST much more quickly than when we test in our potential customers' facilities.
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This agreement provides for payment of license fees payable upon reaching milestones consistent with our standard business model. Under an integration license agreement that we entered into with ST in 2018, we granted them an integration license pursuant to which they performed extensive evaluation of our MST technology.
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We believe this arrangement enables faster product development, test, and integration, and should accelerate our time to market. 5 Synopsys . Since 2017 we have worked in collaboration with Synopsys, Inc., a provider of the most broadly used TCAD simulation software in the semiconductor industry.
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The April 2023 license agreement is based around two major milestones, namely the grant of a manufacturing license upon installation of MST in ST’s fab and qualification of an MST-enabled process.
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The JDA that we announced in January 2021 granted a manufacturing license to our customer enabling the customer to install the MST film recipe in an epi tool in their fab for its internal use, at which point this customer entered Phase Four. 5. Technology qualification .
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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.
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Under this JDA we granted our customer a paid manufacturing license pursuant to which the customer installed the recipe for our MST film into a tool in their fab and was authorized to fabricate semiconductor wafers incorporating MST for internal use. This JDA also includes development milestones that we achieved in February 2022, resulting in additional revenue to us.
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This license agreement with ST is our first grant of commercial manufacturing and distribution rights and, assuming the successful installation of MST and related process qualification, would result in our first revenue from commercial use of MST-enabled products.
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Although this JDA does not confer commercial distribution rights, we believe that successful achievement of the JDA milestones is a significant step toward commercialization as it should facilitate progress toward integrating MST into one or more of our customer’s multiple production lines and thus provide opportunities for additional license revenues and potential royalty streams.
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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. At that time, ST became our second customer to enter into Phase Four.
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In April 2022, we entered into a JDA with a major semiconductor foundry. In September and October 2018, respectively, we entered into separate integration license agreements with AKM and ST, both of which are leading IDMs. In October 2019 we entered into an integration license agreement with a leading fabless RF semiconductor provider.
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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.
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In February 2022 we entered into an integration license agreement with a semiconductor foundry. Under the integration license agreements, these customers have each agreed to pay us for the right to evaluate MST technology which is integrated onto their semiconductor wafers.
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This JDA also included development milestones that we achieved in February 2022, resulting in additional revenue to us.
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These agreements do not grant the customer the right to deposit MST at their site or to sell products incorporating MST and all of our licensees are in our Phase Three (MST Integration).
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The development of our technology and many of our processes are dependent upon the knowledge, experience, and skills of key scientific and technical personnel. 9 As of December 31, 2023, we have been granted 103 patents in the U.S. and 113 abroad and we have 35 pending patent applications in the U.S. and 71 abroad.
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We intend that each integration license agreement will be the first of a three-stage licensing process with each of AKM, ST, our RF licensee and our foundry licensee, to be followed by manufacturing and distribution license agreements with each of them.
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In addition, our MST film recipe is confidential know-how, which is only disclosed to customers who have been, at a minimum, a manufacturing licensee and who have executed the appropriate legal agreements. Unlike patents, know-how has no expiration and our film recipe is necessary in order to utilize MST technology.
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Those manufacturing and distribution license agreements, if executed, will allow each licensee to manufacture – or in the case of our RF licensee, to have its foundry partner manufacture – MST-enabled products and to sell them to their customers.
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We expect that the manufacturing and distribution agreements will provide for substantially larger upfront license fee payments than the integration license fees and will require the respective licensees to make royalty payments to us based on the number and sales price of MST-enabled products they sell to their customers.
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As of December 31, 2022, we have been granted 126 patents in the U.S. and 107 abroad. Our core patents relating to MST cover materials, physical structures and manufacturing processes. Our core patents relating to MST were filed beginning on August 22, 2003 and have grant dates beginning on December 14, 2004.
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Our MST patent portfolio begins to expire commencing August 22, 2023. Our patent portfolio has grown significantly over the last five years and during 2022 we were issued 20 new patents worldwide, an annual increase of 9%.
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Patent and Trademark Office for the registration of the mark “MSTcad” in the United States. 9 Employees and Human Capital Management As of the date of this Annual Report, we employ 21 people on a full-time basis. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

32 edited+31 added−6 removed69 unchanged
Biggest changeAs an early-stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays in a new business, including, without limitation: · the timing and success of our plan of commercialization and the fact that we have not entered into a royalty-based manufacturing or distribution license with a potential customer; · our ability to replicate on a large commercial scale the benefits of our MST technology that we have demonstrated in preliminary testing; · our ability to execute joint development agreements with potential customers; · our ability to structure, negotiate and enforce license agreements that will allow us to operate profitably; · our ability to advance the licensing arrangements with our initial integration licensees, Asahi Kasei Microdevices, STMicroelectronics, our foundry licensee and our RF licensee, to royalty-based manufacturing and distribution licenses; · our success in capitalizing on the achievement of the technical milestones in our first JDA in order to enter into one or more distribution and royalty agreements with business units of that JDA customer as well as our success in meeting technical milestones in the JDA with our second JDA customer; 10 · our ability to successfully operate, the epitaxial deposition reactor for processing 300mm wafers, together with supporting equipment, that we recently began using for internal research and development and to support customer activities; · our ability to protect our intellectual property rights; and · our ability to raise additional capital as and when needed.
Biggest changeAs an early-stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays in a new business, including, without limitation: · the timing and success of our plan of commercialization and the fact that we have entered into only one full commercial license with a customer, ST; · our ability to replicate on a large commercial scale the benefits of our MST technology that we have demonstrated in preliminary testing; · our ability to execute joint development agreements with potential customers; · our ability to structure, negotiate and enforce license agreements that will allow us to operate profitably; · our ability to advance our license agreement with ST through the qualification phase, complete the distribution license milestone with ST and earn the corresponding license fee and subsequently reach the phase in which ST ships royalty-bearing products, which is core to our business model; · our ability to advance the licensing arrangements Asahi Kasei Microdevices, our foundry licensee and our RF licensee, to manufacturing and distribution licenses and to shipment of royalty-bearing products; · our success in capitalizing on the achievement of the technical milestones in our first JDA in order to enter into one or more distribution and royalty agreements with business units of that JDA customer as well as our success in meeting technical milestones in the JDA with our second JDA customer; · our ability to convert licensees of our MSTcad software to licenses of our MST technology under commercial license agreements and to successfully utilize MSTcad in both internal development and customer evaluations; · our ability to protect our intellectual property rights; and · our ability to raise additional capital as and when needed.
In addition, we will consider alternatives to our current business plan that may enable to us to achieve material revenue with a smaller amount of capital. However, there can be no guarantees that such funds will be available on commercially reasonable terms, if at all.
In addition, we will consider alternatives to our current business plan that may enable us to achieve material revenue with a smaller amount of capital. However, there can be no guarantees that such funds will be available on commercially reasonable terms, if at all.
The market price of our shares on the NASDAQ Capital Market may fluctuate as a result of a number of factors, some of which are beyond our control, including, but not limited to: · actual or anticipated variations in our results of operations and financial condition; · market acceptance of our MST technology; 15 · success or failure of our research and development projects; · announcements of technological innovations by us; · failure by us to achieve a publicly announced milestone; · failure by us to meet expectations of investors, some of which may not be within our control or related to our public announcements; · delays between our expenditures to develop and market new or enhanced technological innovations and the generation of licensing revenue from those innovations; · developments concerning intellectual property rights, including our involvement in litigation brought by or against us; · changes in the amounts that we spend to develop, acquire or license new technologies or businesses; · our sale or proposed sale, or the sale by our significant stockholders, of our shares or other securities in the future; · changes in our key personnel; · changes in earnings estimates or recommendations by securities analysts, if we continue to be covered by analysts; · the trading volume of our shares; and · general economic and financial market conditions and other factors, including factors unrelated to our operating performance.
The market price of our shares on the NASDAQ Capital Market may fluctuate as a result of a number of factors, some of which are beyond our control, including, but not limited to: · actual or anticipated variations in our results of operations and financial condition; · market acceptance of our MST technology; · success or failure of our research and development projects; · announcements of technological innovations by us; · failure by us to achieve a publicly announced milestone; · failure by us to meet expectations of investors, some of which may not be within our control or be related to our public announcements; · delays between our expenditures to develop and market new or enhanced technological innovations and the generation of licensing revenue from those innovations; 18 · developments concerning intellectual property rights, including our involvement in litigation brought by or against us; · changes in the amounts that we spend to develop, acquire or license new technologies or businesses; · our sale or proposed sale, or the sale by our significant stockholders, of our shares or other securities in the future; · changes in our key personnel; · changes in earnings estimates or recommendations by securities analysts, if we continue to be covered by analysts; · the trading volume of our shares; and · general economic and financial market conditions and other factors, including factors unrelated to our operating performance.
Such litigation may also harm our relationships with existing licensees, who may, because of such litigation, cease making royalty or other payments to us or challenge the validity and enforceability of our patents or the scope of our license agreements. In addition, the costs associated with legal proceedings are typically high, relatively unpredictable and not completely within our control.
Such litigation may also harm our relationships with existing licensees, who may, because of such litigation, cease making royalty or other payments to us or challenge the validity and enforceability of our patents or the scope of our license agreements. 17 In addition, the costs associated with legal proceedings are typically high, relatively unpredictable and not completely within our control.
While management will endeavor to generate positive cash flows from the commercialization of our MST technology, there can be no assurance that we will be successful doing so. If we are unable to generate positive cash flow within a reasonable period of time, we may be unable to further pursue our business plan or continue operations.
While management will endeavor to generate positive cash flows from the commercialization of our MST technology, there can be no assurance that we will be successful in doing so. If we are unable to generate positive cash flow within a reasonable period of time, we may be unable to further pursue our business plan or continue operations.
From time to time, we may identify products that we believe infringe our patents. In that event, we expect to initially seek to license the manufacturer of the infringing products, however if the manufacturer is unwilling to enter into a license agreement, we may have to initiate litigation to enforce our patent rights against those products.
From time to time, we may identify products that we believe infringe on our patents. In that event, we expect to initially seek to license the manufacturer of the infringing products, however if the manufacturer is unwilling to enter into a license agreement, we may have to initiate litigation to enforce our patent rights against those products.
We will endeavor to audit certain licensees to review the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we cannot give assurances that such audits will be effective to that end. 13 Our business operations could suffer in the event of information technology systems’ failures or security breaches .
We will endeavor to audit certain licensees to review the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we cannot give assurances that such audits will be effective to that end. 15 Our business operations could suffer in the event of information technology systems’ failures or security breaches .
This forum selection provision in our bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or any our directors, officers or other employees.
This forum selection provision in our bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or any of our directors, officers or other employees.
Additionally, we conduct our ongoing research and development and portions of our customer evaluation activities using a leased epitaxial (epi) deposition tool that we believe will accelerate internal development work and customer engagements. However, epi tools require ongoing, complex maintenance and they have been and will continue to be subject to both planned and unplanned downtime.
Additionally, we conduct our ongoing research and development and portions of our customer evaluation activities using leased epitaxial (epi) deposition tools that we believe will accelerate internal development work and customer engagements. However, epi tools require ongoing, complex maintenance and they have been and will continue to be subject to both planned and unplanned downtime.
If our customers do not dedicate their equipment and facilities to testing our products in a timely fashion, we may experience delays that will increase our expenses and delay our customers’ decisions on entering into a commercial license with us.
If our customers do not dedicate their equipment and facilities to testing our products in a timely fashion, we may experience delays that will increase our expenses and delay our customers’ decisions on entering into commercial licenses with us.
Our management and other personnel devote a substantial amount of time to these compliance initiatives. 16 Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable .
Our management and other personnel devote a substantial amount of time to these compliance initiatives. 19 Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable .
In addition, even if our MST technology is successfully integrated into the licensees’ products, any or all of our licensees may decide, for reasons unrelated to the price or performance of our MST technology, not to enter the subsequent license agreements required to take MST to commercial production.
In addition, even if our MST technology is successfully integrated into the licensees’ products, any or all of our licensees may decide, for reasons unrelated to the price or performance of our MST technology, not to enter the subsequent license phases or execute the additional license agreements required to take MST to commercial production.
To date, our operations have consisted of technology research and development, testing, and joint development work with customers, potential customers and strategic partners. Our business model is to derive our revenue primarily from license fees and royalties, but to date we have only recognized minimal engineering services and licensing revenues.
To date, our operations have consisted of technology research and development, testing, and joint development work with customers, potential customers and strategic partners. Our business model is to derive our revenue primarily from license fees and royalties, but to date we have only recognized minimal revenues.
Although these supply/demand imbalances and tight capacity conditions have eased in recent months, we have experienced delays in completing the processing of evaluation wafers by our customers as those customers prioritize utilization of their equipment for production use.
Although these supply/demand imbalances and tight capacity conditions have eased throughout 2023, we have experienced delays in completing the processing of evaluation wafers by our customers as those customers prioritize utilization of their equipment for production use.
The semiconductor industry in 2022 exceeded $550 billion in sales, and over the past three years the industry has been characterized by product shortages as strong demand has outstripped supply, resulting in tight capacity among our potential customers.
The semiconductor industry in 2023 exceeded $530 billion in sales, and over the past three years the industry has been characterized by product shortages as strong demand has outstripped supply, resulting in tight capacity among our potential customers.
Our limited operating history makes it difficult to evaluate the commercial value of our technology or our prospective operations.
Our limited operating history makes it difficult to evaluate the commercial value of our technology, the viability of our licensing model or our prospective operations.
We face risks inherent in a royalty-based business model, many of which are outside of our control, such as the following: · the rate of adoption and incorporation of our technology by semiconductor designers and manufacturers and the manufacturers of semiconductor fabrication equipment; · customers’ willingness to agree to an ongoing royalty model, which may impact their wafer or chip costs and margins; · our licensee customers’ ability to successfully market MST-enabled products to their end customers; · the length of the design cycle and the ability to successfully integrate our MST technology into integrated circuits; 12 · the demand for products incorporating semiconductors that use our licensed technology; · the cyclicality of supply and demand for products using our licensed technology; · the impact of economic downturns; and · the timing of receipt of royalty reports and the applicable revenue recognition criteria, which may result in fluctuation in our results of operations.
We face risks inherent in a royalty-based business model, many of which are outside of our control, such as the following: · the rate of adoption and incorporation of our technology by semiconductor designers and manufacturers and the manufacturers of semiconductor fabrication equipment; · customers’ willingness to agree to an ongoing royalty model, which may impact their wafer or chip costs and margins; · our licensee customers’ ability to successfully market MST-enabled products to their end customers; · the length of the design cycle and the ability to successfully integrate our MST technology into integrated circuits; · the demand for products incorporating semiconductors that use our licensed technology; · the cyclicality of supply and demand for products using our licensed technology; · the impact of economic downturns; and · the timing of receipt of royalty reports and the applicable revenue recognition criteria, which may result in fluctuation in our results of operations. 13 We may need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.
In such case, the trading price of our common stock could decline and investors could lose all or part of their investment. Risks Related to Our Business We only recently commenced limited revenue producing operations, so it is difficult for potential investors to evaluate our business.
In such case, the trading price of our common stock could decline and investors could lose all or part of their investment. 10 Risks Related to Our Business We have generated limited revenue to date, so it is difficult for potential investors to evaluate our business.
We expect that the manufacturing and distribution agreements will provide for substantially larger upfront license fee payments than integration license fees and that the agreements will require the respective licensees to make royalty payments to us based the number and sales price of MST-enabled products they sell to their customers.
Manufacturing and distribution agreements such as our license agreement with ST provide for substantially larger upfront license fee payments than integration license fees and such agreements require licensees to make royalty payments to us based the number and sales price of MST-enabled products they sell to their customers.
For the years ended December 31, 2022 and 2021, we have incurred net losses of approximately $17.4 million and $15.7 million, respectively, and our operations have used approximately $12.5 million and $12.4 million of cash, respectively. As of December 31, 2022, we had an accumulated deficit of approximately $183.3 million.
For the years ended December 31, 2023 and 2022, we have incurred net losses of approximately $19.8 million and $17.4 million, respectively, and our operations have used approximately $14.6 million and $12.5 million of cash, respectively. As of December 31, 2023, we had an accumulated deficit of approximately $203.1 million.
We will continue to experience negative cash flows from operations until at least such time as we are able to secure manufacturing and distribution license agreements with one or more foundries, IDMs or fabless semiconductor manufacturers.
We will continue to experience negative cash flows from operations until at least such time as we are able to secure manufacturing and distribution license agreements with one or more foundries, IDMs or fabless semiconductor manufacturers and such customers ship sufficient volumes of royalty-bearing products and pay upfront license fees to support our cash requirements.
While we believe our JDAs and our integration license agreements should accelerate licensing decisions by other customers, the evaluation process for new technologies in the semiconductor industry is inherently long and complex and there can be no assurance that we will successfully convert other customer prospects into paying customers or that any of these customers will generate sufficient revenue to cover our expenses.
While we believe our JDAs and our integration license agreements should accelerate licensing decisions by other customers, the evaluation process for new technologies in the semiconductor industry is inherently long and complex and there can be no assurance that we will successfully convert other customer prospects into paying customers or that any of these customers will generate sufficient revenue to cover our expenses. 12 Qualification of our MST technology requires access to our potential customers’ manufacturing tools and facilities, as well as to leased tools and facilities, which may not be available on a timely basis or at all.
In October 2019, we entered into a license agreement with a leading RF semiconductor supplier. In December 2021, we entered into a JDA with a leading semiconductor manufacturer. In February 2022, we entered into an integration license agreement with a semiconductor foundry. In April 2022 we entered into a JDA with a major semiconductor foundry.
In February 2022, we entered into an integration license agreement with a semiconductor foundry. In April 2022 we entered into a JDA with a major semiconductor foundry.
Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability. We have a history of significant operating losses and anticipate continued operating losses for at least the near term.
There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability. 11 We have a history of significant operating losses and anticipate continued operating losses for at least the near term.
While we have entered into four integration license agreements and two joint development agreements, there can be no assurance that any of these relationships will advance to further licensing stages or to royalty-based distribution license agreements . In September and October 2018, respectively, we entered into separate license agreements with AKM and ST, both of which are leading IDMs.
While we have entered into one commercial license agreement, four integration license agreements and two joint development agreements, there can be no assurance that any of these relationships will advance to further licensing stages or to royalty-based distribution license agreements .
Between January 1, 2022 and February 8, 2023, the reported high and low sales prices of our common stock have ranged from $5.75 to $21.28.
Between January 1, 2023 and February 1, 2024, the reported high and low sales prices of our common stock have ranged from $4.96 to $10.72.
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. Our revenues may be concentrated in a few customers and if we lose any of these customers, or these customers do not pay us, our revenues could be materially adversely affected.
Our revenues may be concentrated in a few customers and if we lose any of these customers, or these customers do not pay us, our revenues could be materially adversely affected.
Further, the laws and enforcement regimes of certain countries do not protect our technology and intellectual property to the same extent as do the laws and enforcement regimes of the U.S.
Further, the laws and enforcement regimes of certain countries do not protect our technology and intellectual property to the same extent as do the laws and enforcement regimes of the U.S. In certain jurisdictions, we may be unable to protect our technology and intellectual property adequately against unauthorized use, which could adversely affect our business.
There can be no assurance that our MST technology will deliver the performance, power or other requirements our customers seek for their products or that the integration of our technology with our customers’ manufacturing process will be successful in high volume.
ST has successfully installed our MST film recipe and they have accepted our film under the license agreement, resulting in the grant of a manufacturing license to them for internal use, but they will now enter a qualification phase and there can be no assurance that our MST technology will deliver the performance, power or other requirements that ST or our other customers seek for their products or that the integration of our technology with our customers’ manufacturing process will be successful in high volume.
In certain jurisdictions, we may be unable to protect our technology and intellectual property adequately against unauthorized use, which could adversely affect our business. 14 A court invalidation or limitation of our key patents could significantly harm our business . Our patent portfolio contains some patents that are particularly significant to our MST technology.
A court invalidation or limitation of our key patents could significantly harm our business . Our patent portfolio contains some patents that are particularly significant to our MST technology.
We believe that we have sufficient capital to fund our current business plans and obligations over, at least, the 12 months following the date of this Annual Report.
As of December 31, 2023, we had total assets of approximately $24.0 million, cash, cash-equivalents and short-term investments of approximately $19.5 million and working capital of approximately $16.6 million. We believe that we have sufficient capital to fund our current business plans and obligations over, at least, the 12 months following the date of this Annual Report.
Product liability claims in the future, regardless of their ultimate outcome, could have a material adverse effect on our business, financial condition and reputation, and on our ability to attract and retain licensees and customers. Risks Related to Intellectual Property If we fail to protect and enforce our intellectual property rights and our confidential information, our business will suffer.
Product liability claims in the future, regardless of their ultimate outcome, could have a material adverse effect on our business, financial condition and reputation, and on our ability to attract and retain licensees and customers. Effective as of January 31, 2024, we lost access to certain semiconductor manufacturing and engineering services which may be difficult and/or costly to replace.
Removed
However, our ability to enter into royalty-based manufacturing and distribution agreements with our current integration licensees or with new customers will depend, in large part, on the performance of devices they build using MST and the successful integration of our MST technology on a high-volume production scale.
Added
Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment.
Removed
AKM, one of our licensees, suffered a total loss of one of its fabs due to a fire, impacting their production capability and delaying their work with us. On October 20, 2020, a fire broke out in AKM’s factory in Nobeoka, Japan which lasted three days, causing substantial damage to the building and equipment.
Added
In September and October 2018, respectively, we entered into separate license agreements with AKM and ST, both of which are leading IDMs. In October 2019, we entered into a license agreement with a leading RF semiconductor supplier. In December 2021, we entered into a JDA with a leading semiconductor manufacturer.
Removed
AKM subsequently decided not to resume manufacturing at that site. Although Atomera’s work under our integration license agreement with AKM did not involve wafers in commercial production in this fab, the fire substantially disrupted AKM’s business and interrupted their integration and testing of MST.
Added
We expect that our product qualification and licensing cycle will be lengthy and costly, and our marketing, engineering and sales efforts may be unsuccessful.
Removed
We expect that cooperation on integrating MST into AKM’s products will continue, but the fire has cast doubt on the timing for moving toward a manufacturing license or commercial distribution as AKM has moved production previously carried out in the Nobeoka fab to an external foundry. 11 We expect that our product qualification and licensing cycle will be lengthy and costly, and our marketing, engineering and sales efforts may be unsuccessful.
Added
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. Unfavorable geopolitical and macroeconomic developments could adversely affect our business, financial condition or results of operations.
Removed
Qualification of our MST technology requires access to our potential customers’ manufacturing tools and facilities, as well as to leased tools and facilities, which may not be available on a timely basis or at all.
Added
Our business could be adversely affected by conditions in the U.S. and global economies, the United States and global financial markets and adverse geopolitical and macroeconomic developments, including inflation rates, the COVID-19 pandemic, the Ukrainian/Russian and Israeli/Palestinian conflicts and related sanctions, bank failures, and economic uncertainties related to these conditions.
Removed
We may need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all. As of December 31, 2022, we had total assets of approximately $26.7 million, cash and cash-equivalents of approximately $21.2 million and working capital of approximately $18.7 million.
Added
For example, increased inflation may result in increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital on acceptable terms, if at all. In response to rising inflation, the U.S.
Added
Federal Reserve has raised interest rates, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.
Added
Additionally, financial markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022 and the eruption of the Israeli/Palestinian conflict in October 2023, including as a result of economic sanctions and export controls against Russia and countermeasures taken by Russia.
Added
The full economic and social impact of these sanctions and countermeasures, in addition to the ongoing military conflicts in Ukraine and Gaza, which could conceivably expand, remains uncertain; however, both the conflicts and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, and/or supply chain continuity, in both Europe and globally, and has introduced significant uncertainty into global markets.
Added
While we do not currently operate in Russia, Ukraine or the Middle East, as the adverse effects of these conflicts continue to develop our business and results of operations may be adversely affected.
Added
Recent efforts to create national self-sufficiency of the semiconductor supply chain by various countries around the world creates new competitive and economic dynamics that are difficult to predict and may lead to semiconductor industry instability.
Added
Increased restrictions on the availability and use of critical semiconductor IP and equipment by various foreign entities may limit Atomera’s ability to license our IP in some parts of the world.
Added
Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our development programs.
Added
Our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.
Added
While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a disruption of our development programs and our business operations, whether due to a loss of our or our customers’ trade secrets or other proprietary information or other similar disruptions.
Added
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our technology could be delayed. 14 We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company and our vendors, including personal or confidential information of our employees, customers and vendors.
Added
In addition, outside parties may attempt to penetrate our systems or those of our customers or vendors or fraudulently induce our personnel or the personnel of our customers or vendors to disclose sensitive information in order to gain access to our data and/or systems.
Added
We may experience threats to our data and systems, including malicious codes and viruses, phishing and other cyberattacks. The number and complexity of these threats continue to increase over time.
Added
If a material breach of, or accidental or intentional loss of data from, our information technology systems or those of our customers or vendors occurs, the market perception of the effectiveness of our security measures could be harmed and our reputation and credibility could be damaged.
Added
We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks.
Added
In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices.
Added
Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated.
Added
Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.
Added
As we outsource more of our information systems to vendors, engage in more electronic transactions with customers and vendors, and rely more on cloud-based information systems, the related security risks will increase and we will need to expend additional resources to protect our technology and information systems.
Added
In addition, there can be no assurance that our internal information technology systems or those of our third-party contractors, or our consultants’ efforts to implement adequate security and control measures, will be sufficient to protect us against breakdowns, service disruption, data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a cyberattack, security breach, industrial espionage attacks or insider threat attacks which could result in financial, legal, business or reputational harm.
Added
From April 2016 through January 2024, we worked with TSI Technology Development & Commercialization Services LLC, or TSI under a Master R&D Services Agreement and a Manufacturing Agreement. Under these agreements, TSI provided us with foundry services, consisting of engineering and manufacturing services. In August 2023, TSI was acquired by Robert Bosch Semiconductor LLC, or Bosch.
Added
In October 2023, Bosch advised us that on January 31, 2024 it would cease providing engineering and manufacturing services to third parties, including Atomera, in order to commence the conversion of the TSI fab to production of Silicon Carbide semiconductor products, As of the date of this Annual Report we are no longer working with TSI.
Added
We are in active discussions with potential replacement providers of foundry services. However, there are few foundries that offer R&D services that are comparable to those provided by TSI, so we may face difficulty in replacing the services that TSI had provided. We have utilized TSI’s services for a portion of our internal R&D which required complete semiconductor device fabrication.
Added
No wafers sold or licensed to any customer have been fabricated at TSI. Accordingly, we do not believe that the loss of TSI’s services will have a meaningful impact on any of our ongoing client engagements.
Added
However, our access to foundry services was interrupted while we were working to reach an agreement with a replacement foundry and adapt our R&D processes to those used at our replacement foundry. This transition may cause us to incur meaningful startup costs, may divert engineering resources from ongoing R&D activities and may increase our ongoing spending on outsourced engineering services.
Added
The potential inability to replace the TSI services in a timely manner may have a material adverse effect on the timing and cost of continuing to develop example applications and devices which exhibit the advantages of our MST technology. 16 Risks Related to Intellectual Property If we fail to protect and enforce our intellectual property rights and our confidential information, our business will suffer.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed0 unchanged
Biggest changeThis lease has a two-year term, with an option to extend for an additional three years. The renewal option was exercised in January 2023. Our current monthly lease payment is $1,239 and will increase to $1,277 in March 2023.
Biggest changeBeginning in March 2021, we began leasing 474 square feet of office space in Tempe, Arizona. The original lease had a two-year term, with an option to extend for an additional three years. The renewal option was exercised in January 2023.
Item 2. Properties Our executive offices are presently located in a 4,101 square foot facility in Los Gatos, California pursuant to a five-year lease, expiring on January 31, 2026. As part of the amended lease entered into in August 2020, our current lease payment is $17,185.
Item 2. Properties Our executive offices are presently located in a 4,101 square foot facility in Los Gatos, California pursuant to a five-year lease, expiring on January 31, 2026. As part of the amended lease entered into in August 2020, our current lease payment is $17,701.
Removed
We lease shared office space in Cambridge Massachusetts from which we conduct certain research activities. The Cambridge facilities are occupied pursuant to a month-to-month lease at a rate of $2,942 per month which has been effective since January 1, 2020. Beginning in March 2021, we began leasing 474 square feet of office space in Tempe, Arizona.
Added
Effective May 1, 2023, we leased an additional 404 square feet at this location under an amendment to the current lease. Our current monthly lease payment is now $2,365 and will increase to $2,435 in March 2024. The lease ends in February 2026.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+4 added−1 removed1 unchanged
Biggest changePlan Category Number of Securities to be Issued Upon Exercise of Outstanding Options (a) Weighted-Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) Equity compensation plans approved by security holders 3,009 $ 7.07 677 Equity compensation plans not approved by security holders – – – Total 3,009 $ 7.07 677 19
Biggest changeThe following table sets forth certain information as of December 31, 2023 about our stock plans under which our equity securities are authorized for issuance (in thousands, except exercise price). 22 Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options (a) Weighted-Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) Equity compensation plans approved by security holders 3,369,641 $ 7.04 1,946,395 Equity compensation plans not approved by security holders – – – Total 3,369,641 $ 7.04 1,946,395
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NASDAQ Capital Market under the symbol “ATOM”. Holders of Record As of February 1, 2023, there were 151 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NASDAQ Capital Market under the symbol “ATOM”. Holders of Record As of February 6, 2024, there were 138 holders of record of our common stock.
Equity Compensation Plan Information Our 2007 Equity Incentive Plan, or 2007 Plan, expired in March 2017, however all options and warrants outstanding at the time of the expiration remained outstanding and exercisable by their term. As of December 31, 2022, options to purchase [•] shares of common stock were outstanding.
Equity Compensation Plan Information Our 2007 Equity Incentive Plan, or 2007 Plan, expired in March 2017, however all options and warrants outstanding at the time of the expiration remained outstanding and exercisable by their term. In May 2017, we established our 2017 Stock Incentive Plan, or 2017 Plan.
We have reserved a total of 3,750,000 shares of common stock for issuance under the 2017 Plan. All employees, officers, directors, consultants, advisors and other persons who provide services to us or any of our subsidiaries are eligible to receive incentive awards under the 2017 Plan.
All employees, officers, directors, consultants, advisors and other persons who provide services to us or any of our subsidiaries are eligible to receive incentive awards under the 2017 Plan.
As of December 31, 2022, awards of 3,072,791 shares of common stock had been granted under the 2017 Plan, net of forfeited restricted stock and option awards and a total of 677,209 shares of common stock are reserved for issuance.
As of December 31, 2023, awards of 78,336 shares of common stock had been granted under the 2023 Plan, net of forfeited restricted stock and option awards and a total of 1,921,664 shares of common stock are reserved for issuance.
In May 2017, we established our 2017 Stock Incentive Plan, or 2017 Plan. The 2017 Plan provides for the grant of non-qualified stock options and incentive stock options to purchase shares of our common stock and for the grant of restricted and unrestricted share grants.
The 2017 Plan provides for the grant of non-qualified stock options and incentive stock options to purchase shares of our common stock and for the grant of restricted and unrestricted share grants. We have reserved a total of 3,750,000 shares of common stock for issuance under the 2017 Plan.
Removed
The following table sets forth certain information as of December 31, 2022 about our stock plans under which our equity securities are authorized for issuance (in thousands, except exercise price).
Added
As of December 31, 2023, awards of 3,725,269 shares of common stock had been granted under the 2017 Plan, net of forfeited restricted stock and option awards and a total of 24,731 shares of common stock are reserved for issuance. In May 2023, we established our 2023 Stock Incentive Plan, or 2023 Plan.
Added
The 2023 Plan provides for the grant of non-qualified stock options and incentive stock options to purchase shares of our common stock and for the grant of restricted and unrestricted share grants. We have reserved a total of 2,000,000 shares of common stock for issuance under the 2023 Plan.
Added
All employees, officers, directors, consultants, advisors and other persons who provide services to us or any of our subsidiaries are eligible to receive incentive awards under the 2023 Plan.
Added
As of December 31, 2023, options to purchase 3,369,641 shares of common stock were outstanding under the 2007 Plan, the 2017 Plan and the 2023 Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

34 edited+9 added−13 removed25 unchanged
Biggest changeIf 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.
Biggest changeIf 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. 26 Cash Flows from Operating, Investing and Financing Activities: Net cash used in operating activities of approximately $14.6 million for year ended December 31, 2023 resulted primarily from our net loss of approximately $19.8 million, adjusted by approximately $4.0 million of stock-based compensation expense and amortization of right-of-use assets of approximately $1.4 million.
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.
In addition, we will consider alternatives to our current business plan that may enable us to achieve revenue-producing operations and meaningful commercial success with a smaller amount of capital.
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.
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 these agreements do not grant the licensees the rights to manufacture on their site or to sell products incorporating MST.
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.
Integration license agreements contain a technology grant as well as a performance obligation to deliver wafers with our technology deposited on them. We have historically 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.
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.
Lease expenses for financing leases is amortization of the 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 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.
We believe that MST can be widely incorporated into the most common types of semiconductor products, including analog, logic, optical and memory integrated circuits. 23 We do not intend to design or manufacture integrated circuits directly.
We also license our MSTcad TM software to our customers for use in simulating the effects of using MST technology on their wafers and/or devices.
We also license our MSTcad software to our customers for use in simulating the effects of using MST technology on their wafers and/or devices.
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.
Overview We are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $530+ 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.
Net cash provided by financing activities of approximately $5.0 million for the year ended December 31, 2022. related primarily to net proceeds from our at-the-market offering during the year ended December 31, 2022 offset in part by approximately $984,000 in principal payments on our financing lease.
Net cash provided by financing activities of approximately $5.0 million for the year ended December 31, 2022 related primarily to net proceeds from our ATM Facility during the year ended December 31, 2022, offset in part by approximately $984,000 in principal payments on our financing lease.
During the year ended December 31, 2022, approximately 527,000 shares were sold at an average price per share of approximately $11.68, resulting in approximately $5.8 million of net proceeds to us after deducting commissions and other offering expenses. Results of Operations for the Years Ended December 31, 2022 and 2021 Revenues.
During the year ended December 31, 2022, approximately 527,000 shares were sold at an average price per share of approximately $11.68, resulting in approximately $5.8 million of net proceeds to us after deducting commissions and other offering expenses.
Cash Flows from Operating, Investing and Financing Activities: Net cash used in operating activities of approximately $12.5 million for year ended December 31, 2022 resulted primarily from our net loss of approximately $17.4 million adjusted by approximately $3.4 million of stock-based compensation expense and amortization of right-of-use assets of approximately $1.4 million Net cash used in operating activities of approximately $12.4 million for year ended December 31, 2021 resulted primarily from our net loss of approximately $15.7 million adjusted by approximately $3.0 million of stock-based compensation expense.
Net cash used in operating activities of approximately $12.5 million for year ended December 31, 2022 resulted primarily from our net loss of approximately $17.4 million, adjusted by approximately $3.4 million of stock-based compensation expense and amortization of right-of-use assets of approximately $1.4 million.
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.
To date, we have generated revenue from (i) licensing agreements with ST and AKM, both of which are 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.
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.
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. 27 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 historical information to develop expectations about future exercise patterns and behavior after employment termination. · 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.
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 December 31, 2022 and 2021 were approximately $1.3 million and $986,000, respectively, representing an increase of approximately $362,000, or 37%.
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 December 31, 2023 and 2022 were approximately $1.6 million and $1.3 million, respectively, representing an increase of approximately $251,000, or 19%.
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 December 31, 2022 and 2021 were approximately $6.4 million and $6.2 million, respectively, representing an increase of approximately $277,000, or 4%.
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 December 31, 2023 and 2022 were approximately $7.1 million and $6.4 million, respectively, representing an increase of approximately $634,000, or 10%.
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.
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. On May 31, 2022, we entered into an Equity Distribution Agreement with Oppenheimer & Co.
Interest income for each 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 December 31, 2022 and 2021 was approximately $255,000 and $128,000, respectively.
Interest income for each 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. Accretion income. Accretion income for the year ended December 31, 2023 was approximately $283,000.
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.
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.
Net cash used by investing activities of approximately $39,000 and approximately $109,000 for the years ended December 31, 2022 and 2021, respectively, consisted 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 used by investing activities of approximately $39,000 for the year ended December 31, 2022, consisted of the purchase of computers and lab tools for our Tempe office space.
The increase in costs is primarily related to increased spending in employee-related costs of approximately $104,000, an increase in outsourced marketing expenses of approximately $83,000 and an increase in stock-based compensation of approximately $77,000. Interest income. Interest income for the years ended December 31, 2022 and 2021 was approximately $340,000 and $9,000, respectively.
The increase in costs is primarily related to increased spending on employee-related costs of approximately $72,000, an increase in stock-based compensation of approximately $91,000 and an increase of approximately $62,000 in travel-related expenses. Interest income. Interest income for the years ended December 31, 2023 and 2022 was approximately $723,000 and $340,000, respectively.
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 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.
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.
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 increase in costs was primarily due to an increase of approximately $103,000 in patent fees and legal fees associated with our patents, an increase of approximately $95,000 in insurance costs and increase of approximately $86,000 in payroll related expenses. Selling and marketing expense.
The increase in costs was primarily due to an increase in employee-related costs of approximately $166,000, an increase of approximately $116,000 in patent fees and legal fees associated with our patents, an increase of approximately $100,000 in other legal fees and an increase of approximately $301,000 in stock-based compensation expense. Selling and marketing expenses.
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.
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.
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. Operating Expenses. Operating expenses consist of research and development, general and administrative, and selling and marketing expenses.
Cost of revenue was approximately $28,000 and $81,000 for the years ended December 31, 2023 and 2022, 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. Operating Expenses.
Net cash provided by financing activities of approximately $3.3 million for the year ended December 31, 2021 related to the exercise of approximately 571,000 stock options and net proceeds from our at-the-market offering in January 2021. These amounts were offset in part by approximately $470,000 in principal payments on our financing lease.
Net cash provided by financing activities of approximately $12.7 million for the year ended December 31, 2023 related primarily to net proceeds from our ATM Facility during the year ended December 31, 2023, offset in part by approximately $918,000 in principal payments on our financing lease.
For the year ended December 31, 2022, we had a net loss of approximately $17.4 million and used approximately $12.5 million of cash and cash equivalents in operations.
For the year ended December 31, 2023, we had a net loss of approximately $19.8 million and used approximately $14.6 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses.
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.
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 (i) to enter into manufacturing and distribution license agreements with our current and future licensees and (ii) to advance such licensees, including ST, through licensing phases to royalty-bearing product shipments. 24 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.
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 $81,000 and $0 for the years ended December 31, 2022 and 2021, respectively.
Our revenue for 2022 consisted of a success fee pursuant to our JDA, a license fee paid under an integration license agreement and MSTcad license revenue. Cost of Revenue. Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide integration engineering services, support for customer installation and qualification and MSTcad support.
Since inception, we have incurred recurring operating losses. 22 During the year ended December 31, 2022, we sold approximately 527,000 shares pursuant to our ATM at an average price per share of approximately $11.68, resulting in approximately $5.8 million of net proceeds to us after deducting 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.
During the year ended December 31, 2023, we sold approximately 1.8 million shares pursuant to our ATM at an average price per share of approximately $7.97, resulting in approximately $13.5 million of net proceeds to us after deducting commissions and other offering expenses.
For the years ended December 31, 2022 and 2021, we incurred approximately $10.0 million and $8.8 million, respectively, of research and development expense, an increase of approximately $1.3 million, or 14%.
For the years ended December 31, 2023 and 2022, we incurred approximately $12.5 million and $10.0 million, respectively, of research and development expense, an increase of approximately $2.5 million, or 25%. The increase was primarily due to outsourced research and development costs, which increased by approximately $1.1 million due to price increases and a higher number of wafers processed.
For the years ended December 31, 2022 and 2021 our operating expenses totaled approximately $17.8 million and $15.9 million, respectively. 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.
Operating expenses consist of research and development, general and administrative, and selling and marketing expenses. For the years ended December 31, 2023 and 2022 our operating expenses totaled approximately $21.2 million and $17.8 million, respectively. Research and development expenses.
Such MSTcad licenses are granted on a monthly basis and revenue is recognized over time. Revenue for the years ended December 31, 2022 and 2021 was approximately $382,000 and $400,000, respectively. Our revenue for 2022 consisted of a success fee pursuant to our JDA, a license fee paid under an integration license agreement and MSTcad license revenue.
However, in cases where our manufacturing license grants include a customer acceptance requirement, revenue is recognized over time. Revenue for the years ended December 31, 2023 and 2022 was approximately $550,000 and $382,000, respectively. Our revenue for 2023 consisted of revenue from a manufacturing license.
There was no provision for income tax recorded for the year ended December 31, 2022. Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of approximately $21.2 million and working capital of approximately $18.7 million.
Interest expense for the years ended December 31, 2023 and 2022 was approximately $194,000 and $255,000, respectively. Interest expense is related to the tool financing lease entered into in August 2021. Liquidity and Capital Resources As of December 31, 2023, we had cash, cash equivalents and short-term investments of approximately $19.5 million and working capital of approximately $16.6 million.
Removed
Between September 2020 and January 2021,we conducted an at-the-market offering of our common shares through Craig-Hallum Capital Group LLC, as agent, pursuant to which we sold 2,221,575 shares at an average price per share of approximately $11.25, resulting in approximately $24.2 million of net proceeds to us after deducting commissions and other offering expenses.
Added
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.
Removed
On May 31, 2022, we entered into an Equity Distribution Agreement with Oppenheimer & Co.
Added
During the year ended December 31, 2023, approximately 1.8 million shares were sold at an average price per share of approximately $7.97, resulting in approximately $13.5 million of net proceeds to us after deducting commissions and other offering expenses. Results of Operations for the Years Ended December 31, 2023 and 2022 Revenues. To date, we have only generated limited revenue.
Removed
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.
Added
Our license agreement with ST, which we executed in April 2023, was our first full commercial license agreement and provided for grants of a manufacturing license enabling ST to install MST in a tool in their fab and to manufacture wafers for internal development use only as well as a distribution license granted upon completion of process qualification.
Removed
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.
Added
The ST license agreement provides for payments of license fees, payable upon reaching milestones for MST installation and acceptance, in the case of the manufacturing license, and upon reaching process qualification milestones. After process qualification is complete and associated payments are made, ST will be required to pay royalties for all products they sell that utilize MST.
Removed
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.
Added
The other main factors that drove the increase in research and development expenses were increases of approximately $739,000 in employee costs reflecting new hires and an increase in the annual bonus accrual, an approximately $255,000 increase in stock-based compensation expense and an increase of approximately $266,000 in technical consulting expenses. 25 General and administrative expenses.
Removed
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.
Added
Accretion income relates to the increase in value of our available-for-sale securities from the purchase date through the maturity date. There was no income from accretion for the year ended December 31, 2022 because our active cash management program, which involves investment of a portion of our cash in short-term fixed-income securities commenced in the first quarter of 2023.
Removed
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.
Added
Other income/expense, net. Other income for the year December 31, 2023 of approximately $75,000, consisted primarily of a refundable state research and development tax credit, net of filing costs and tax consulting services. There was no other income/expenses for the year ended December 31, 2022. Interest expense.
Removed
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.
Added
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.
Removed
The increase was primarily due to approximately $850,000 of increased tool lease related expenses as the tool lease commenced in August 2021, and increase of approximately $246,000 in stock-based compensation and an increase of approximately $180,000 in technical consulting expenses. General and administrative expense.
Added
Net cash used in investing activities of approximately $6.8 million and for year ended December 31, 2023 consisted primarily of the purchase of short-term available-for-sale investments, offset by the maturity of short-term available-for-sale investments.
Removed
Interest expense is related to the new tool financing lease entered into in August 2021. Provision for income taxes . The provision for income tax for the year ended December 31, 2021 was $66,000 and related to income taxes due to a foreign country arising from withholding taxes imposed on payments received for revenue.
Removed
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.
Removed
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.
Removed
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).

Other ATOM 10-K year-over-year comparisons