ATOMERA INCORPORATED AtMarch 31, 2023 , the Company had cash, cash equivalents and short-term investments of approximately$17.1 million and working capital of approximately$14.9 million . The Company has generated only limited revenues since inception and has incurred recurring operating losses. Accordingly, it is subject to all the risks inherent in the initial organization, financing, expenditures, and scaling of a new business that is not generating positive cashflow. The Company has primarily financed operations through private placements of equity and debt securities, the Company's Initial Public Offering (the "IPO") which was consummated onAugust 10, 2016 , and subsequent public offerings of its common stock. OnMay 31, 2022 ,Atomera entered into an Equity Distribution Agreement withOppenheimer & Co. Inc. andCraig-Hallum Capital Group LLC , as agents, under which the Company may offer and sell, from time to time at its sole discretion, shares of its$0.001 par value common stock, in "at the market" offerings, ("ATM"), to or through the agent as its sales agent, having an aggregate offering price of up to$50.0 million . During the three months endedMarch 31, 2023 , the Company sold approximately 50,000 shares pursuant to our ATM at an average price per share of approximately$6.40 , resulting in approximately$274,000 of net proceeds to us after deducting commissions and other offering expenses. Based on the funds it has available as of the date of the filing of this report, the Company believes that it has sufficient capital to fund its current business plans and obligations over, at least, 12 months from the date that these financial statements have been issued. The Company's future capital requirements and the adequacy of its available funds will depend on many factors, including the Company's ability to successfully commercialize its technology, competing technological and market developments, and the need to enter into collaborations with other companies or acquire technologies to enhance or complement its current offerings. If the Company is not able to generate sufficient revenue from license fees and royalties in a timeframe that satisfies its cash needs, it will need to raise more capital. In the event it requires additional capital, it will endeavor to acquire additional funds through various financing sources, including the ATM Facility, follow-on equity offerings, debt financing and joint ventures with industry partners. In addition to use of the ATM Facility and other capital raising alternatives, the Company will consider alternatives to our current business plan that may enable it to achieve revenue-producing operations and meaningful commercial success with a smaller amount of capital. If the Company is unable to secure sufficient additional capital, it may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve cash. 8
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies
There have been no material changes in the Company's significant accounting policies to those previously disclosed in the Company's Annual Report on Form 10-K filed with theSecurities and Exchange Commission ("SEC") on February
15, 2023.
Basis of presentation of unaudited condensed financial information
The unaudited condensed financial statements of the Company for the three months endedMarch 31, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP") for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the Company's financial position and its results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as ofDecember 31, 2022 was derived from the audited financial statements included in the Company's financial statements as of and for the year endedDecember 31, 2022 , included in the Company's Annual Report on Form 10-K filed with theSEC onFebruary 15, 2023 . These unaudited condensed financial statements should be read in conjunction with that report.
Cash, cash equivalents, and short-term investments
The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Cash equivalents may be invested in money market funds orU.S. agency bonds. Cash and cash equivalents are carried at cost, which approximates their fair value. The Company's portfolio of short-term investments is comprised solely ofU.S. treasury bills and agency bonds with maturities of more than three months, but less than one year. The Company classifies these as available-for-sale at purchase date and will reevaluate such designation at each period end date. The Company may sell these marketable debt securities prior to their stated maturities depending upon changing liquidity requirements.
These debt securities are classified as current assets in the consolidated balance sheet and recorded at fair value, with unrealized gains or losses included in accumulated other comprehensive income (loss).
Gains and losses are recognized when realized. Gains and losses are determined using the specific identification method and are reported in other income (expense), net in the consolidated statements of operations.
Adoption of recent accounting standards
From time to time, new accounting standards are issued by the FASB that are adopted by the Company as of the specified effective date. No new accounting standards, issued or effective during the period endedMarch 31, 2023 , have had or are expected to have a significant impact on the Company's financial statements. 9 4. FAIR VALUE MEASUREMENTS ASC 820, Fair Value Measurements("ASC 820") states that fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company's cash equivalents and short-term investments that were measured at fair value on a recurring basis as Level 1 assets.
The Company's cash, cash equivalents and short-term investments classified by
security type as of
Fair value
measurements March 31, 2023 December 31, 2022
Unrealized
Cost Gain/(Loss) Fair Value Cost Unrealized Gain/Loss Fair Value
Cash $ 167 $ - $ 167 $ 1 $ - $ 1
Money market
funds 10,957 - 10,957 21,183 - 21,183
US treasury bills 1,963 - 1,963 - - -
US agency bonds 3,967 (2 ) 3,965 - - -
Total $ 17,054 $ (2 ) $ 17,052 $ 21,184 $ - $ 21,184
Interest receivable of approximately $46,000 as of March 31, 2023 is recorded in
prepaids and other current assets in the condensed consolidated balance sheets.
This includes approximately $14,000 of purchased accrued interest. For the
period ended December 31, 2022 , there was $0 interest receivable recorded in the
condensed consolidated balance sheets.
10
5. REVENUE
The Company recognizes revenue in accordance with Accounting Standards
Codification ("ASC") No. 606. The Company generates revenues from engineering
service contracts, license agreements and joint development agreements. The
amount of revenue that the Company recognizes reflects the consideration it
expects to receive in exchange for goods or services and such revenue is
recognized when the Company satisfies a performance obligation by transferring
the product or service to the customer. When the Company's performance
obligation is the promise to grant a license, revenue is recognized either at a
point in time (such as a right to use licensed technology that is under the
customer's control), or over time (typically a right to access technology
without obtaining control).
The following table provides information about disaggregated revenue by primary geographical markets and timing of revenue recognition (in thousands):
Schedule of disaggregated revenue and timing of revenue
Three Months Ended
March 31,
2023 2022
Primary geographic markets
North America $ - $ 75
Asia Pacific - 300
Total $ - $ 375
Timing of revenue recognitionProducts and services transferred at a point in time $ -$ 375 Products and services transferred over time -
-
Total $ - $ 375 Unbilled contracts receivable and deferred revenue
Timing of revenue recognition may differ from the timing of invoicing customers. Accounts receivable includes amounts billed and currently due from customers. Unbilled contracts receivable represents unbilled amounts expected to be received from customers in future periods, where the revenue recognized to date exceeds the amount billed, and the right to receive payment is subject to the underlying contractual terms. Unbilled contracts receivable amounts may not exceed their net realizable value and are classified as long-term assets if the payments are expected to be received more than one year from the reporting
date. 11
6. BASIC AND DILUTED LOSS PER SHARE
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the sum of the weighted average number of shares of common stock outstanding and the dilutive common stock equivalent shares outstanding during the period. The Company's potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and warrants and (ii) vesting of restricted stock units and restricted stock awards, are only included in the calculation of diluted net loss per share when their effect is dilutive. Since the Company has had net losses for all periods presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net loss per share are equal.
The following potential common stock equivalents were not included in the calculation of diluted net loss per common share because the inclusion thereof would be anti-dilutive (in thousands):
Schedule of anti dilutive shares
Three Months Ended
March 31,
2023 2022
Stock Options 3,374 3,008
Unvested restricted stock 582 493
Warrants - 1
Total 3,956 3,502
7. LEASES
The Company accounts for leases over one year under ASC 842. Lease expense for the Company's operating leases consists of the lease payments recognized on a straight-line basis over the lease term. Expenses for the Company's financing leases consists of the amortization expenses recognized on a straight-line basis over the lease term, variable lease costs and interest expense. The Company's lease agreement for a tool used in the development and marketing of the Company's technology contains a provision for an annual adjustment of lease payments based on tool availability and usage. The potential lease payment adjustment is determined onAugust 1 of each year of the lease and is calculated based on the tool availability and usage for the preceding 12 months. EffectiveAugust 1, 2022 , the lease payments for this tool were reduced to$100,824 per month for the periodAugust 1, 2022 throughJuly 31, 2023 . This adjustment to the variable lease payments resulted in a reduction in ROU and corresponding lease liability. The components of lease costs were as follows (in thousands): Components of lease costs Three Months EndedMarch 31, 2023 2022
Financing lease costs:
Amortization of ROU assets
71
Total financing lease costs $ 344 $ 390
Operating lease costs:
Fixed lease costs $ 62 $ 62
Short-term lease costs 297 11
Total operating lease costs $ 359 $ 73
12
Future minimum payments under non-cancellable leases as of
Schedule of future minimum lease payments For the Year EndedDecember 31 , Financing leases
Operating leases Remaining 2023 $ 839 $ 198 2024 1,436 278 2025 1,436 284 2026 478 21 2027 & thereafter - -
Total future minimum lease payments $ 4,189
$ 781 Less imputed interest (266 ) (59 ) Total lease liability $ 3,923 $ 722
The table above does not include our short-term leases that are one-year or less.
The below table provides supplemental information and non-cash activity related to the Company's operating and financing leases are as follows (in thousands):
Supplemental non-cash activity related to operating
and financing leases
Three Months Ended
March 31,
2023 2022Operating cash flow information: Cash paid for amounts included in the measurement of operating lease liabilities
$ 56 $ 54 Cash paid for amounts included in the measurement of financing liabilities
$ 241 $ 359
Non-cash activity:
Right-of-use assets obtained in exchange for
operating lease obligations $ - $ -
Right-of-use assets obtained in exchange for
financing lease obligations $ - $ -
The weighted average remaining discount rate is 5.25% for the Company's operating and financing leases. The weighted average remaining lease term is 2.9 years for operating leases and 3.3 years for the financing lease.
EffectiveMay 1, 2023 , the Company will lease an additional 404 square feet at itsTempe office location under an amendment to its current lease. The monthly rent payment will increase from$1,277 per month to$2,365 per month and will be accounted for as a modification to the lease under ASC 842 at the time of commencement. The Company recently terminated its office lease inCambridge, Massachusetts as ofMarch 31, 2023 . The cost of the lease was$2,942 per month. InDecember 2022 , the Company entered into a lease agreement for a tool inTempe, Arizona . The term of this lease is for six months beginning onJanuary 1, 2023 with an option to extend the lease for an additional six months. The initial lease terms were$96,000 per month. InMarch 2023 , the Company elected to extend the lease throughDecember 31, 2023 , the remaining lease payments will be reduced to$84,000 over the remainder of the lease. Since the lease and extension are not for more than one year, the future lease payments are not included in the lease obligations on the Company's condensed balance sheets. 13 8. STOCK BASED COMPENSATION InMay 2017 , the Company's shareholders approved its 2017 Stock Incentive Plan ("2017 Plan") after its 2007 Stock Incentive Plan ("2007 Plan") had expired inMarch 2017 . The 2017 Plan provides for the grant of non-qualified stock options and incentive stock options to purchase shares of the Company's common stock and for the grant of restricted and unrestricted shares. The 2017 Plan provides for the issuance of 3,750,000 shares of common stock. All of the Company's employees and any subsidiary employees (including officers and directors who are also employees), as well as all of the Company's nonemployee directors and other consultants, advisors and other persons who provide services to the Company are eligible to receive incentive awards under the 2017 Plan. Generally, stock options and restricted stock issued under the 2017 Plan vest over a period of one to four years from the date of grant. The following table summarizes the stock-based compensation expense recorded in the Company's results of operations during the three months endedMarch 31, 2023 and 2022 for stock options and restricted stock granted under the Company's incentive plans (in thousands):
Schedule of stock-based compensation expense
Three Months Ended
March 31,
2023 2022
Research and development $ 328 $ 244
General and administrative 525 429
Selling and Marketing 74 53
Total $ 927 $ 726
As of March 31, 2023 , there was approximately $9.2 million of total unrecognized
compensation expense related to unvested share-based compensation arrangements.
This cost is expected to be recognized over a weighted-average period of 2.9
years.
The weighted average grant date fair value per share of the options granted
under the Company's 2017 Plan was
The following table summarizes stock option activity during the three months
ended
Schedule of stock option activity
Weighted-
Weighted- Average
Average Remaining
Number of Exercise Contractual Intrinsic
Shares Prices per Share Term (In Years) Value
Outstanding at January 1, 2023 3,009 $ 7.07
Granted 375 $ 6.56
Exercised (10 ) $ 3.90
Outstanding at March 31, 2023 3,374 $ 7.02 5.38 $ 2,430
Exercisable at March 31, 2023 2,649 $ 6.49
4.40 $ 2,121
14
During the three months ended March 31, 2023 , the Company granted options under
the 2017 Plan to purchase approximately 375,000 shares of its common stock to
its employees. The fair value of these options was approximately $1.9 million at
the time of grant.
The Company issues restricted stock to employees, directors and consultants and estimates the fair value based on the closing price on the day of grant. The following table summarizes all restricted stock activity during the three months endedMarch 31, 2023 (in thousands except per share data):
Schedule of restricted stock option activity
Weighted-Average
Number of Grant Date Fair Value
Shares per ShareOutstanding atJanuary 1, 2023 340
$ 10.78 Granted 297 $ 6.56 Vested (55 ) $ 7.62
Outstanding non-vested shares atMarch 31, 2023 582
$ 8.93 During the three months endedMarch 31, 2023 , the Company granted approximately 297,000 restricted stock awards under the 2017 Plan to its employees and directors. The fair value of these awards was approximately$2.0 million at
the time of grant.
OnFebruary 23, 2023 , the Company's Board of Directors approved theAtomera Incorporated 2023 Stock Incentive Plan ("2023 Plan"). The 2023 Plan provides for the grant of non-qualified stock options and incentive stock options to purchase shares of the Company's common stock and for the grant of restricted and unrestricted shares. The 2023 Plan, as amended inApril 2023 , provides for the issuance of 2,000,000 shares of common stock. All of the Company's employees and any subsidiary employees (including officers and directors who are also employees), as well as all of the Company's nonemployee directors and other consultants, advisors and other persons who provide services to the Company will be eligible to receive incentive awards under the 2023 Plan. The 2023 Plan has been submitted to the stockholders for approval at the Company's 2023 annual meeting of stockholders to be held onMay 4, 2023 .
9. COMMITMENTS AND CONTINGENCIES
Litigation, Claims and Assessments
The Company may be subject to periodic lawsuits, investigations and claims that arise in the ordinary course of business. The Company is not party to any material litigation as ofMarch 31, 2023 , or through the date these financial statements have been issued. 15 10. SUBSEQUENT EVENTS
Management has evaluated subsequent events and transactions through the date these financial statements were issued.
SinceMarch 31, 2023 the Company has issued an additional 82,322 shares through its ATM offering at an average price per share of$5.73 resulting in additional net proceeds of approximately$458,000 . OnApril 17, 2023 the Company amended the lease agreement related to its office space inTempe, Arizona to add 404 square feet to its existing office lease effective onMay 1, 2023 throughFebruary 28, 2026 (coterminous with the currentTempe lease) and will bring the total leased office space inTempe to 878 square feet. License Agreement. OnApril 26, 2023 , the Company announced the execution of a commercial license agreement with STMicroelectronics ("ST"). This agreement enables ST to install the Company's Mears Silicon Technology™, or MST®, in its facilities and authorizes ST to manufacture and distribute MST-enabled products to its customers. The license agreement with ST provides for license fees payable upon reaching milestones consistent withAtomera's standard business model. After those milestones are reached, ST will pay a royalty toAtomera based on the number of MST-enabled products manufactured for commercial purposes. 16
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations ofAtomera Incorporated should be read in conjunction with our financial statements and the accompanying notes that appear elsewhere in this Quarterly Report. Statements in this Quarterly Report on Form 10-Q include forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions to identify forward-looking statements. Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks, uncertainties, and changes in condition, significance, value and effect, including those risk factors set forth in our Annual Report on Form 10-K for the year endedDecember 31, 2022 filed with theSEC onFebruary 15, 2023 . Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report and are based on information currently and reasonably known to us. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Overview
We are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $550+ billion semiconductor industry. Our lead technology, named Mears Silicon Technology™, or MST®, is a thin film of reengineered silicon, typically 100 to 300 angstroms (or approximately 20 to 60 silicon atomic unit cells) thick. MST can be applied as a transistor channel enhancement to CMOS-type transistors, the most widely used transistor type in the semiconductor industry. MST is our proprietary and patent-protected performance enhancement technology that we believe addresses a number of key engineering challenges facing the semiconductor industry. We believe that by incorporating MST, transistors can be made smaller, with increased speed, reliability and power efficiency. In addition, since MST is an additive and low-cost technology, we believe it can be deployed on an industrial scale, with machines commonly used in semiconductor manufacturing. We believe that MST can be widely incorporated into the most common types of semiconductor products, including analog, logic, optical and memory integrated circuits. We do not intend to design or manufacture integrated circuits directly. Instead, we develop and license technologies and processes that we believe offer the designers and manufacturers of integrated circuits a low-cost solution to the industry's need for greater performance and lower power consumption. Our customers and partners include:
· foundries, which manufacture integrated circuits on behalf of fabless
manufacturers;
· integrated device manufacturers, or IDMs, which are the fully-integrated
designers and manufacturers of integrated circuits;
· fabless semiconductor manufacturers, which are designers of integrated
circuits that outsource the manufacturing of their chips to foundries;
· original equipment manufacturers, or OEMs, that manufacture the epitaxial,
or epi, machines used to deposit semiconductor layers, such as the MST
film, onto silicon wafers; and
· electronic design automation companies, which make tools used throughout
the industry to simulate performance of semiconductor products using
different materials, design structures and process technologies.
17
Our commercialization strategy is to generate revenue through licensing
arrangements whereby foundries, IDMs and fabless semiconductor manufacturers pay
us a license fee for their right to use MST technology in the manufacture of
silicon wafers as well as a royalty for each silicon wafer or device that
incorporates our MST technology. We also license our MSTcadTM software to our
customers for use in simulating the effects of using MST technology on their
wafers and/or devices. To date, we have generated revenue from (i) licensing
agreements with two IDMs, one fabless manufacturer and one foundry, (ii) a joint
development agreement, or JDA, with a leading semiconductor provider, (iii)
engineering services provided to foundries, IDMs and fabless companies and(iv) licensing MSTcad.
InApril 2023 we entered into a license agreement with ST Microelectronics ("ST"), that authorizes ST to manufacture and distribute MST-enabled products to its customers. This agreement provides for payment of license fee payable upon reaching milestones consistent withAtomera's standard business model. Our standard model is based around the two major milestones, namely the installation of MST in a customer's fab and qualification of an MST-enabled process. After process qualification is completed, ST will have the right to commercially distribute MST-enabled products and, assuming ST brings such products to market, we will receive royalties on all MST-enabled products manufactured for commercial purposes. This ST license agreement 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. There can be no assurance, however, that ST will pursue the licensed rights through development and to the manufacture and commercial sale of MST-enabled wafers.
We were organized as a
OnMay 31, 2022 , we entered into an Equity Distribution Agreement withOppenheimer & Co. Inc andCraig-Hallum Capital Group LLC , as agents, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to$50.0 million in an "at-the-market" or ATM offering, to or through the agents. During the three months endedMarch 31, 2023 , approximately 50,000 shares were sold at an average price per share of approximately$6.40 , resulting in approximately$274,000 of net proceeds to us after deducting commissions and other offering expenses.
Results of Operations Revenues. To date, we have only generated limited revenue from customer engagements for integration engineering services, integration license agreements, a manufacturing license granted under a JDA and licensing of MSTcad. Our license agreement with ST, which was executed inApril 2023 , is our first commercial manufacturing and distribution agreement and, assuming successful completion of contractual milestones and payments of associated fees, will entitle us to royalties on all MST-enabled products manufactured for commercial purposes. Our integration services consist of depositing our MST film on semiconductor wafers, delivering such wafers to customers to finalize building devices, and performing tests for customers evaluating MST. The integration license agreements we have entered into 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 MST-enabled wafers in their facilities or to sell products incorporating MST. Our JDA included the grant of a manufacturing license to our customer and we were paid for such license upon delivery of our IP transfer package which enabled our customer to install MST in a tool in their facility and to use it to manufacture wafers for internal use. This JDA also contained targeted technical specifications that, if met, would result in payment of a success fee to us. Those technical objectives were met and we have collected the success fee. 18 For revenue recognition purposes, we have determined that the grant of rights in integration licenses is not distinct from the delivery of integration services, and therefore revenue from both integration licenses and integration services is recognized as the services are provided to the customer. In general, this is proportionate to the delivery of MST processed wafers to the customer, but if the agreements do not specify a time and quantity of wafer delivery, we will record revenue over the period of time in which we anticipate delivering an estimated quantity of wafers. We have also determined that the grant of our manufacturing license under the JDA confers a right to use our technology and accordingly revenue was recognized at the point in time when we delivered our IP transfer package. The success fee under our JDA was treated as engineering services revenue and recognized upon our customer's confirmation that the JDA's technical objectives had been met. Our licensing of MSTcad grants customers the right to use MSTcad software to simulate the effects of incorporating MST technology into their semiconductor manufacturing process. MSTcad licenses are granted on a monthly basis and revenue is recognized over time.
Revenue for the three months
Cost of revenue. Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide deliverables that resulted in payment of our success fee and wafers delivered as part of the integration license agreement. Cost of revenue for the three months endedMarch 31, 2023 and 2022 was$0 and approximately$81,000 , respectively. We anticipate that our cost of revenue will vary substantially depending on the mix of license and engineering services revenues we receive and the nature of products and/or services delivered in each customer engagement.
Operating expenses.Operating expenses consist of research and development,
general and administrative, and selling and marketing expenses. For the three
months ended
Research and development expense. To date, our operations have focused on the research, development, patent prosecution, and commercialization of our MST technology and related technologies such as MSTcad. Our research and development costs primarily consist of payroll and benefit costs for our engineering staff and costs of outsourced fabrication (including epi tool leases) and metrology of semiconductor wafers incorporating our MST technology. For the three months endedMarch 31, 2023 and 2022, we incurred approximately$3.0 million and$2.3 million , respectively, of research and development expense, an increase of approximately$697,000 , or 30%. This increase was primarily due to increases of approximately$330,000 in outsourced research and development mainly related to the purchase of a greater quantity of wafers and a more expensive mix of wafer types, along with associated outside metrology costs in research and development. Research and development expenses also increased by approximately$204,000 in employee-related expenses resulting from new hires, approximately$84,000 in stock-based compensation costs, and travel costs increased by approximately$53,000 over the prior year. General and administrative expense. General and administrative expenses consist primarily of payroll and benefit costs for administrative personnel, office-related costs and professional fees. General and administrative costs were approximately$1.7 million and$1.6 million for the three months endedMarch 31, 2023 and 2022, respectively, representing an increase of approximately$94,000 , or 6%. The increase is primarily related to higher stock-based compensation costs. 19 Selling and marketing expense.Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel and business development consulting services. Selling and marketing expenses for the three months endedMarch 31, 2023 and 2022 were approximately$389,000 and$325,000 , respectively, representing an increase of approximately$64,000 , or 20%. The increase in costs is primarily related to increased travel and stock-based compensation costs. Interest income. Interest income for three months endedMarch 31, 2023 and 2022 was approximately$199,000 and$3,000 , respectively. Interest income for the three months endedMarch 31, 2023 related to interest earned on our cash, cash equivalents and short-term investments. Interest income for the three months endedMarch 31, 2022 related to interest earned on our cash and cash equivalents. Interest expense. Interest expense for the three months endedMarch 31, 2023 and 2022 was approximately$53,000 and$71,000 , respectively. Interest expense is related to the tool financing lease entered into inAugust 2021 .
Cash Flows from Operating, Investing and Financing Activities
Net cash used in operating activities of approximately
Net cash used in operating activities of approximately
Net cash used in investing activities of approximately$5.0 million and for the three monthsMarch 31, 2023 consisted primarily of the purchase of short-term investments. Net cash used in investing activities of approximately$16,000 for the three months endedMarch 31, 2022 consisted of the purchase of computers and lab tools inTempe, AZ.
Net cash provided by financing activities of approximately
Net cash used in financing activities of approximately$121,000 for the three months endedMarch 31, 2022 related to principal payments on our financing lease offset by proceeds from the exercise of stock options.
Liquidity and Capital Resources
As ofMarch 31, 2023 , we had cash and cash equivalents of approximately$12.1 million , short-term investments of approximately$5.0 million and working capital of approximately$14.9 million . For three months endedMarch 31, 2023 , we had a net loss of approximately$5.0 million and used approximately$4.2 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating losses. 20
During the three months ended
We believe that our available working capital is sufficient to fund our presently forecasted working capital requirements for, at least, the next 12 months following the date of the filing of this report. However, our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our MST technology, competing technological and market developments, and the need to enter into collaborations with other companies or acquire technologies to enhance or complement our current offerings. If we are not able to generate sufficient revenue from license fees and royalties in a timeframe that satisfies our cash needs, we will need to raise more capital. In the event we require additional capital, we will endeavor to acquire additional funds through various financing sources, including our ATM Facility, follow-on equity offerings, debt financing and joint ventures with industry partners. In addition, we will consider alternatives to our current business plan that may enable us to achieve revenue-producing operations and meaningful commercial success with a smaller amount of capital. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve cash.
Critical Accounting Estimates
There have been no changes to our critical accounting estimates from those
included in our Annual Report on Form 10-K for the year ended
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