2020 Annual Report
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Fellow Shareholders,
2020 got off to a strong start with promising technical results on MST-SP, RF-SOI, matching and other
key initiatives, until March, when we were hit with the pandemic induced slowdown. Our engineers had
to vacate the office, but they certainly did not stop generating breakthrough results that planted seeds for
the successes we will reap going forward – the first and most important of which is our JDA with a
market leader in the semiconductor space. Across a wide variety of technical areas, we made strong
progress, but we also took the pandemic as an opportunity to build company infrastructure to position
ourselves for long term success.
First, we agreed to lease a 300mm Epi deposition facility which will finally provide reliable access to a
resource considered necessary since founding the company. Our engineering team delivered on
MSTcad™, a powerful tool that allows prospective customers to simulate the benefits they may get from
MST and narrows integration engineering decisions to accelerating our time to market. We dramatically
improved access and information on the company through a new website, which both potential customers
and investors appreciate.
Growth of our IP portfolio is a critical gauge of innovation, and here we also excelled in 2020. Our patent
count is now up to 269 granted and pending, a 17% increase year over year and up 46% over the last two
years, demonstrating that we are continuing to build the value of our core MST IP and broadening our
portfolio to cover next generation MST-enabled architectures. The bedrock of any great licensing
business is its patent portfolio, and Atomera has taken strong steps to solidify that foundation.
Finally, I would point to the success of our funding efforts in 2020, which have given us the healthiest
balance sheet in the history of our company, enabling us to grow our business more aggressively.
All these pieces have come together at an advantageous time. Our customers are growing rapidly, have
money to invest, and are looking for competitive advantage, and we have the technology to help. With
hard work, continued innovation, and a strong focus on execution, we can create an amazing future for
Atomera.
Thank you for your continued trust and support,
Scott A. Bibaud
President and Chief Executive Officer
Atomera Incorporated
March 2021
750 University Avenue, Suite 280 | Los Gatos, CA 95032
408-442-5248
| fx. 408-560-9556 | www.atomera.com
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-37850
ATOMERA INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or Other jurisdiction of Incorporation or Organization)
30-0509586
(I.R.S. Employer Identification Number)
750 University Avenue, Suite 280
Los Gatos, California 95032
(Address, including zip code, of registrant’s principal executive offices)
(408) 442-5248
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock: Par value $0.001
Trading Symbol(s)
ATOM
Name of each exchange on which registered
Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act):
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. Yes No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes No
State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most
recently completed second fiscal quarter: $162,598,698. Shares of the registrant’s common stock held by each executive officer, director and
holder of 10% or more of the outstanding common stock (as determined based on public filings) have been excluded in that such persons may be
deemed to be affiliates. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.
As of February 10, 2021, there were 22,622,670 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days after the end of the fiscal year ended
December 31, 2020. Portions of such proxy statement are incorporated by reference into Part III of this Form 10-K.
ATOMERA INCORPORATED
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business ....................................................................................................................................................
Risk Factors ...............................................................................................................................................
Unresolved Staff Comments .....................................................................................................................
Properties ..................................................................................................................................................
Legal Proceedings .....................................................................................................................................
Mine Safety Disclosures ............................................................................................................................
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Securities ..............................................................................................................................................
Selected Financial Data .............................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations ....................
Quantitative and Qualitative Disclosures About Market Risk ...................................................................
Financial Statements and Supplementary Data .........................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....................
Controls and Procedures ............................................................................................................................
Other Information ......................................................................................................................................
PART III
Directors, Executive Officers and Corporate Governance ........................................................................
Executive Compensation ...........................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters .............................................................................................................................
Certain Relationships and Related Transactions and Director Independence ............................................
Principal Accountant Fees and Services ....................................................................................................
PART IV
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Item 15.
Exhibits, Financial Statement Schedules ...................................................................................................
39
Signatures ..................................................................................................................................................
41
i
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act,
that are intended to be covered by the “safe harbor” created by those sections. The words “believe,” “may,” “will,” “potentially,”
“estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “should,” “ongoing,” “project,” “plan,” “expect” and similar
expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. These
forward-looking statements include, but are not limited to, statements concerning the following:
•
•
•
•
•
•
•
•
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•
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•
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our future financial and operating results;
our intentions, expectations and beliefs regarding anticipated growth, market penetration and trends in our business;
the timing and success of our plan of commercialization;
our ability to operate our license and royalty-based business model;
the effects of market conditions on our stock price and operating results;
our ability to maintain our competitive technological advantages against competitors in our industry;
the impact of the ongoing COVID-19 pandemic on our and our customers’ operations and financial condition;
our ability to have our technology solutions gain market acceptance;
our ability to maintain, protect and enhance our intellectual property;
the effects of increased competition in our market and our ability to compete effectively;
costs associated with initiating and defending intellectual property infringement and other claims;
our expectations concerning our relationships with potential customers, partners and other third parties;
the attraction and retention of qualified employees and key personnel;
future acquisitions of or investments in complementary companies or technologies; and
our ability to comply with evolving legal standards and regulations, particularly concerning requirements for being a
public company.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those
described in “Risk Factors” and elsewhere in this Annual Report and our subsequently filed Quarterly Reports on Form 10-Q.
Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not
possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we
may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this
Annual Report may not occur and actual results could differ materially and adversely from those anticipated or implied in our
forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the
expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of
activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur.
Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking
statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this
Annual Report to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the
Securities and Exchange Commission as exhibits with the understanding that our actual future results, levels of activity,
performance and events and circumstances may be materially different from what we expect.
ii
Item 1.
Business
Company Overview
PART I
We are engaged in the business of developing, commercializing and licensing proprietary materials, processes and
technologies for the $450+ billion semiconductor industry. Our lead technology, named Mears Silicon TechnologyTM, or MST®,
is a thin film of reengineered silicon, typically 100 to 300 angstroms (or approximately 20 to 60 silicon atomic unit cells) thick.
MST can be applied as a transistor channel enhancement to CMOS-type transistors, the most widely used transistor type in the
semiconductor industry. MST is our proprietary and patent-protected performance enhancement technology that we believe
addresses a number of key engineering challenges facing the semiconductor industry. We believe that by incorporating MST,
transistors can be smaller, with increased speed, reliability and energy efficiency. In addition, since MST is an additive and low-
cost technology, we believe it can be deployed on an industrial scale, with equipment commonly used in semiconductor
manufacturing. We believe that MST can improve existing products due to the physical properties of the film and can also enable
customers to design products with performance, power and scaling characteristics that are not possible using their current process
technologies. 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 manufacture of
their chips to foundries;
• original equipment manufacturers, or OEMs, which manufacture the epitaxial, or EPI, deposition machines used to
deposit semiconductor layers, such as the MST film onto the base silicon wafer; and
•
electronic design automation companies, which make tools used throughout the industry to simulate the performance
of semiconductor products using different materials, design structures and process technologies.
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 in the manufacture of silicon wafers for internal testing and
sampling. Our goal is for each integration license agreement 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
(the second and third stages, respectively). We expect that agreements granting manufacturing and distribution licenses will 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
also generate revenue through engineering services provided to customers during their evaluation of MST technology.
Starting in 2019, we began to develop deeper relationships with several large potential customers who were evaluating
MST across multiple manufacturing processes and product lines. Accordingly, we have begun proposing an engagement format
called a joint development agreement, or JDA, to certain customers. We expect that JDAs will be customized to a particular
customer’s goals but that generally they will include development, manufacturing and licensing components.
In January 2021 we entered into a JDA with a leading semiconductor provider for integration of our MST technology into
their manufacturing process. The JDA includes the grant of an upfront, paid manufacturing license allowing the customer to install
the recipe for our MST film into a tool in their fab and to fabricate semiconductor wafers incorporating MST for use in their
products, as well as development milestones that, if achieved, could result in additional revenue to Atomera. Although this JDA
does not confer commercial distribution rights, we believe that successful execution would be a significant step toward
commercialization and provide opportunities for additional license revenues and potential royalty streams from one or more of our
customer’s multiple production lines.
1
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. 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. 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. These agreements do not grant the customer the right to
deposit MST at their site or to sell products incorporating MST.
We believe the initial application of our MST will be for CMOS integrated circuits, 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.
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. 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.
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. Shares of our common stock are listed on the NASDAQ Capital Market under the
symbol “ATOM”.
Industry Overview
Semiconductors, Generally
Recent years have seen a remarkable proliferation of consumer and commercial products, especially in wireless,
automotive and mobile electronic devices. The growth of the Internet and cloud computing has provided people with new ways to
create, store and share information. At the same time, the increasing use of electronics in cars, buildings, appliances and other
consumer products is creating a broad landscape of “smart” devices and the evolution of wearable technologies and The Internet
of Things. Due to the popularity of mobile devices and other electronic products, there is increasing demand for integrated circuits
and systems with greater functionality and performance, reduced size, and much less power consumption as key requirements.
During 2020, the global COVID-19 pandemic accelerated trends toward remote work, cloud computing and mobile devices. These
trends coincided with the rollout of 5G cellular networks and 5G-enable devices.
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.
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 1/1,000th the diameter of a human hair.
The most widely used transistors in semiconductor chips today are based on CMOS technology. Among its many
attributes, CMOS allows for a higher density of transistors on a chip and lower power usage than non-CMOS technologies.
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. Historically, the smaller the node, the smaller the transistors and the more closely they are packed together,
producing chips that are denser and thus less costly 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.
Until recently, the industry succeeded at maintaining the rate of improvement predicted by Moore’s Law by scaling the
key transistor parameters, such as shrinking feature sizes and reducing operating voltages, thereby allowing more transistors to be
packed onto a single microchip. This trend was facilitated in large part by the development of CMOS technologies. However, a
discontinuity in the rate of improvement delivered by scaling appeared when transistor technology reached feature sizes below 100
nanometers. The industry responded with advanced materials to supplement the ongoing geometry shrinks. Some of those materials
advances included strained silicon, Silicon-on-Insulator and High-K/Metal Gate.
2
The designers and manufacturers of integrated circuits and systems — our targeted customers — are facing intense
pressure to deliver innovative products at ever shorter times-to-market, as well as at lower prices. In other words, innovation in
chip and system design today often hinges on “better, sooner and cheaper.” We believe that the semiconductor industry has
accepted that moving forward in the nano-era will require adoption of new innovations that extend the scaling formula, including
those based on the use of new engineered materials, a market opportunity our MST technology seeks to address. Because shrinking
geometries at the smaller nodes incurs higher capital and manufacturing costs, only a limited number of companies can afford to
continue investing in those nodes. We believe these constraints will cause semiconductor designers and manufacturers to turn to
engineered materials, like MST, to solve this problem.
Vertical Disaggregation of the Industry
In trying to keep research and development costs manageable, while attempting to satisfy the demand for increasingly
complex semiconductors, certain designers and manufacturers of integrated circuits have transitioned to a more open innovation
model in which competing companies and third-party providers actively collaborate to address performance issues through various
alliances, joint ventures, and licensing of externally developed technology.
Historically, most semiconductor companies were vertically integrated. They designed, fabricated, packaged and tested
their semiconductors using internally developed software design tools and manufacturing processes and equipment. As the cost
and skills required for designing and manufacturing complex semiconductors have increased, the semiconductor industry has
become disaggregated, with companies concentrating on one or more individual stages of the semiconductor development and
production process. This disaggregation has fueled the growth of fabless semiconductor companies, design tool vendors,
semiconductor equipment manufacturers, third-party semiconductor manufacturers (or foundries), semiconductor assembly,
package and test companies, and intellectual property companies that develop and license technology to others.
While specialization has enabled greater development and manufacturing efficiency, it has also created an opportunity
for licensing companies, such as Atomera, that develop and license technology to meet fundamental, industry-wide challenges.
These intellectual property companies have been able to gain broad adoption of their technology throughout the industry by
working with companies within the semiconductor supply chain to evaluate and integrate their technology. Manufacturers and
designers of semiconductors increasingly find it more cost-effective to license technologies from IP-based companies than to
develop processes internally that are not their core competence. We believe this collaboration and integration of externally
developed IP benefits semiconductor companies by enabling them to bring new technology to market faster and more cost-
effectively.
Our Initial Application of Mears Silicon Technology
The initial application of our MST will be for CMOS integrated circuits, 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. 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. 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.
As illustrated by the accompanying diagram, MST is a “silicon-on-silicon” solution that provides multiple potential
benefits through a relatively simple modification to the standard CMOS manufacturing flow. MST improvements are delivered
through our proprietary and patent-protected silicon band engineering approach that is based on the quantum mechanics of modern
deep sub-micron devices. The MST film creates channels that allow electrons to flow more freely in the plane of the transistor,
thereby enhancing drive current, while reducing electron flow or “leakage” in the transverse direction. Our MST film can also
create more controlled doping profiles, which allow dopants to be held in the desired locations, thereby enabling optimized device
designs, reducing variability and improving production yield.
We believe the enhancements enabled by MST, as demonstrated in simulations and on our own and our customers’ test
chips, are approximately equivalent to the enhancements enabled by one-half to a full node of improvement and, therefore, can
extend the productive life of capital equipment and wafer fabrication facilities. The extent of MST-enabled enhancement depends
on the device technology and application. We believe that MST compares favorably to other alternatives for enhancing
performance of CMOS-type transistors as follows:
3
•
Strained Silicon and Silicon-on-Insulator, or SOI: Unlike strained silicon or SOI, we believe that MST delivers
multiple benefits in a single film in a cost-effective manner, including enhanced transistor drive current, reduced
leakage, and reduced variability. Also, strained silicon tends to lose much of its effectiveness below 45nm,
constraining its scalability, while the MST thin-film approach is expected to be scalable below 22nm. Based on our
own research and development and third-party evaluations, we believe that MST can deliver improved cost-benefit
performance, in most cases in an additive manner, compared to already successful strain technologies, such as dual
stress liners and SiGe. Work with our foundry partners and fabless licensee shows potential for additive
improvements on specialized SOI wafers used by radio frequency, or RF, providers, which are also referred to as
RFSOI wafers.
• High-K/Metal Gate, or HKMG: Unlike HKMG, MST is silicon-based. As a “silicon-on-silicon” solution, MST does
not require new materials or equipment, which in our opinion makes it much easier and less costly to adopt than
HKMG for devices not requiring ultrathin gate dielectrics. For devices with HKMG, lab tests and simulations indicate
that MST benefits transistor performance and variability in a similar manner to that observed in non-HKMG devices.
Testing conducted with our university research partners indicates that MST has the potential to provide additive
performance benefits in devices using HKMG.
Because of its physical characteristics in the channel region of the transistor, we believe MST has the further benefit of
being complementary and additive to the performance-enhancing technologies noted above, making MST broadly applicable
across multiple devices and process flows to meet a wide variety of customer design objectives. Given the costs of moving to more
advanced technologies, we believe one of the most compelling aspects of MST is its cost/benefit profile. We believe that MST will
provide a lower cost of production due to our technology’s potential to reduce die size while leveraging existing manufacturing
tools, thereby providing chip makers with increased performance at all process nodes with significantly fewer disruptions to
manufacturing processes and less incremental cost than other advanced technologies.
We believe MST can improve transistor performance in a variety of device types including microprocessors; logic
products; analog, RF, and mixed-signal devices; as well as DRAM, SRAM, and other memory integrated circuits. We have
therefore developed different MST product options that can be applied to the critical industry segments and technology nodes. As
of the date of this Annual Report, we have done technology simulation work with universities and leading industry players at nodes
from 180nm to 5nm. 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. In January 2017, we announced an agreement with TSI Semiconductors America LLC to provide us
with engineering services in their semiconductor manufacturing facility in California. By running tests in TSI Semiconductor'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. We believe this arrangement enables faster product development,
test, and integration, and should accelerate our time to market.
Synopsys. In March 2017, we announced our collaboration with Synopsys, Inc., provider of the most broadly used
technology computer-aided design, or TCAD, simulation software in the semiconductor industry. Synopsys’ software now supports
modeling of MST, which enables semiconductor manufacturers and designers to model the interaction of MST with other process
steps. In December 2020, we announced availability of our MSTcadTM V1.0 software tool which runs on Synopsys’ Sentaurus
TCAD software and enables semiconductor engineers to simulate the benefits of integrating MST in a variety of devices. We
believe these capabilities are helping us focus integration efforts for potential customers more quickly on those areas most likely
to deliver benefits, thus shortening test cycles and, we believe, accelerating the time to a license decision.
MST Commercialization
We do not intend to design or manufacture integrated circuits directly. Instead, we develop and license technologies and
processes that offer the designers and manufacturers of integrated circuits a low-cost solution to the industry need for increased
performance. Our customers and partners include foundries, integrated device manufacturers, or IDMs, fabless semiconductor
manufacturers, OEMs that manufacture epitaxial deposition, or EPI, machines, and electronic design automation software
companies, such as Synopsys.
Our strategy is to enter into licensing arrangements whereby foundries and IDMs pay us a license fee for their use of MST
technology in the manufacture of silicon wafers as well as a royalty for each silicon wafer (in the case of foundries) or device (in
the case of IDMs) sold that incorporates MST. In the case of fabless semiconductor licensees, our strategy is to charge a royalty
4
for each device they sell that incorporates our MST technology. The IDMs and fabless semiconductor manufacturers are the
primary beneficiaries of our commercialization activities, as they are producers and distributors of the integrated circuits onto
which we will endeavor to incorporate our MST technology. The foundries and OEMs also play an important role in our
commercialization strategy in that these parties have traditionally sought to provide new technologies to their customers, which in
the case of the foundries are the fabless semiconductor manufacturers and in the case of the OEMs are the IDMs and foundries that
purchase EPI machines.
In the semiconductor industry, new technologies are vetted thoroughly and carefully by early adopters but, once proven,
tend to be adopted broadly by the industry and, wherever possible, exploited for several generations until their full potential is
reached. Before introducing a new technology into its fabrication process, the customer will conduct a formal and rigorous multi-
phase testing process, which can range from 18 to 36 months.
Our engagements with IDMs, foundries and fabless semiconductor manufacturers who are potential customers typically
consists of the following phases:
1. Engineering Planning: In this phase we engage in a technical exchange of information under a non-disclosure
agreement to understand the customer’s manufacturing process and to determine how best to integrate the deposition
of MST film onto the customer’s semiconductor wafers.
2. Set-up for MST Integration: We agree upon the technical evaluation details, including the expected rounds of
evaluation testing, the parameters to be tested and allocation of costs. Customers provide us with wafers for our
internal processing and physical characterization. Some customers work together with us to develop a TCAD model
showing possible results of MST integration with their particular manufacturing process.
3.
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. We have not had
any customers move beyond phase three as of the date of this Annual Report. We believe that this phase will continue
to be the longest in our customer engagement process due to the fact that integrating MST into a customer’s
manufacturing flow frequently requires us to conduct subsequent tests based on the result of earlier test runs. This
phase also requires investment of time and resources by customers. In order to progress beyond this, 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. Prior to enabling a customer to install and use MST technology on epitaxial deposition machines
in their own fab, we intend to require execution of a license for use of our patents and proprietary know-how.
Requiring a license at this stage is a customary and accepted practice in the semiconductor industry. Our recently
announced JDA grants a manufacturing license to our customer and upon delivery of our IP transfer package and
issuance of our invoice, this customer will enter phase four.
5. Technology qualification. 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.
6. 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.
While the above steps describe a model customer engagement, we have engaged with some customers in ways that do not
follow this precise order. JDAs are an example of an engagement format that may combine engineering service, development,
manufacturing, process optimization and other joint activities that do not follow the order described above. In addition, we may
from time to time enter into evaluation license agreements with certain customers under which they may install MST in their fabs
to run internal tests only and not for commercial use or distribution. Other potential customers may run tests on MST-treated wafers
prior to further engagement with us on integration into their manufacturing process.
Our customer engagement process is refined on an ongoing basis to meet the needs of both Atomera and our customers.
In order to address customers’ concern about the requirement to pay for a full license prior to being sure they will enter into volume
production with MST based products, Atomera has introduced a three-staged licensing approach. The first two stages represent a
minority of the total license fee structure, thus lowering a customer’s risk until they have internalized the process and generated
enough data to justify the larger licensing stages. Atomera’s three stages of licenses are: (i) the Integration stage which grants the
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right to integrate MST onto their products, (ii) the Manufacturing stage, which grants them the rights to manufacture in their own
facilities, and (iii) the Distribution stage which grants them the right to sell products using MST.
We believe that our success is dependent upon the adoption of our MST technology through the Distribution stage 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 16 different engagements. Upon delivery of our IP transfer package and issuance of
our invoice, our JDA customer will move from phase three into phase four. Subject to process and subsequent product qualifications
that demonstrate, in commercial scale production, the enhancements we believe our MST technology offers, including increased
speed, reliability and energy efficiency, we expect to license our MST technology to one or more of these companies.
We are also working with OEMs on process development and equipment optimization to ensure that MST can be reliably
and predictably deposited using their manufacturing tools. We have successfully deposited MST using tools made by each of the
leading epitaxial deposition equipment suppliers and we believe that if we are successful in our commercialization efforts, these
tool OEMs will promote the incorporation of our MST technology as an option to their standard offering. By doing so, we believe
they will simultaneously stimulate additional sales of their capital equipment and encourage more customers to adopt MST.
Through our collaboration with Synopsys, we enable potential customers of MST to more quickly assess the potential
benefits of MST to their semiconductor devices. By creating TCAD software models, we can work with manufacturers to assess
which of their product types would most benefit from MST. We believe this modeling capability has shortened the time required
for us to engage with new potential customers and should ultimately lead to a faster decision process by the customer regarding
licensing MST.
We market our MST technology directly to the semiconductor industry through our significant industry contacts and
relationships. We also sponsor academic research and participate in industry conferences and associations. In certain foreign
jurisdictions, we engage sales representatives to assist us in establishing relationships with local customers.
Customers
In January 2021, we entered into a JDA with a leading semiconductor provider for integration of our MST technology
into their manufacturing process. The JDA includes the grant of an upfront, paid manufacturing license allowing the customer to
install the recipe for our MST film into a tool in their fab and to fabricate semiconductor wafers incorporating MST for use in their
products, as well as development milestones that, if achieved, could result in additional revenue to Atomera. Although this JDA
does not confer commercial distribution rights, we believe that successful execution would be a significant step toward
commercialization and provide opportunities for additional license revenues and potential royalty streams from one or more of our
customer’s multiple production lines.
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. 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. 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. These agreements do not grant the customer the right to deposit MST at their site or to sell products incorporating
MST.
We intend that each integration license agreement will be the first of a three-stage licensing process with each of AKM,
ST and our RF licensee, to be followed by manufacturing and distribution license agreements with each of them. 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. 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. However, our ability to enter into royalty-based manufacturing and distribution
agreements with AKM, ST and our RF licensee 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. 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. In addition, even if our MST
technology is successfully integrated into the licensees’ products, either or both of the licensees may decide, for reasons unrelated
to the price or performance of our MST technology, not to enter into manufacturing and distribution license agreements.
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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. 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. Historically, when a new fabrication process proves to be a low-
cost improvement to the standard fabrication process, and is additive, rather than in place of other performance technologies, it has
been successfully adopted industry-wide. Good examples of such advances have been strained silicon and High-K/Metal-Gate. We
believe that MST has the potential to be one of these low-cost additive technologies, in which case MST would not be subject to
significant direct competition from other technologies.
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 also
dedicate research and development resources to evolving and expanding our technology to address new process technologies in
the semiconductor industry roadmap. Our research and development is conducted internally, but we work closely with third parties
in the semiconductor industry to evaluate and qualify our technology for incorporation into semiconductor products and fabrication
equipment. During the years ended December 31, 2020 and 2019, we incurred research and development expenses of
approximately $8.4 million and $7.7 million, respectively.
We believe that our success depends in part on our ability to achieve the following in a cost-effective and timely manner:
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enable customers to integrate MST into their products;
develop new technologies that meet the changing needs of the semiconductor industry;
improve our existing technologies to enable growth into new application areas; and
expand our intellectual property portfolio
Intellectual Property Rights
We regard the protection of our technologies and intellectual property rights as an important element of our business
operations and crucial to our success. We rely primarily on a combination of patent laws, trade secret laws, confidentiality
procedures, and contractual provisions to protect our proprietary technology. We require our employees, consultants, and advisors
to enter into confidentiality agreements. These agreements provide that all confidential information developed or made known to
the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties
except under specific circumstances. In the case of our employees and certain 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.
As of December 31, 2020, we have been granted 112 patents in the U.S. and 75 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. Our MST patent portfolio begins to expire commencing
August 22, 2023. While we believe our core patents adequately block competitors from using our MST technology without our
approval, there can be no assurance that one or more of our core patents would survive a legal challenge to their scope, validity, or
enforceability, or provide significant protection for us. The failure of our patents, or the failure of trade secret laws, to adequately
protect our technology, might make it easier for our competitors to offer similar products or technologies or for our potential
customers to build products with methods and materials similar to MST without paying us a license fee. 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. Patent and Trademark Office for the registration of the mark “MSTcad” in the United
States.
Employees
As of the date of this Annual Report, we employ 21 people on a full-time basis.
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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. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available
free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or
furnish it to the Securities and Exchange Commission, or the SEC. A copy of this Annual Report on Form 10-K is also located at
the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public
Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains
reports and other information regarding our filings at www.sec.gov.
Item 1A. Risk Factors
We are subject to various risks that may harm our business, prospects, financial condition and results of operation or prevent us
from achieving our goals. If any of these risks occur, our business, financial condition or results of operation may be materially
adversely affected. 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. 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. Our limited operating
history makes it difficult to evaluate the commercial value of our technology or our prospective operations. As 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:
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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 and our RF licensee, to royalty-based manufacturing and distribution
licenses;
our success in achieving the milestones included in the JDA and our success at negotiating distribution and
royalty agreements, which are not committed, with our JDA customer;
our ability to reach final acceptance of, and to successfully operate, a new epitaxial deposition reactor for
processing 300mm wafers that we plan to use 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.
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.
For the years ended December 31, 2020 and 2019, we have incurred net losses of approximately $14.9 million and $13.3 million,
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respectively, and our operations have used approximately $12.1 million and $10.4 million of cash, respectively. As of
December 31, 2020, we had an accumulated deficit of approximately $150.1 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. 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 we have entered into three integration license agreements and a joint development agreement, 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. In October 2019, we entered into a license agreement with a leading RF semiconductor supplier. Our
licensees have paid us licensing fees for the right to build products that integrate MST technology deposited by us onto their
semiconductor wafers, but the agreements do not grant the licensees the right to sell products incorporating MST. Such rights
require our integration licensees to enter into additional manufacturing and distribution agreements that, if executed, would allow
each licensee or their foundry to manufacture MST-enabled products and to sell them to their customers. 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. 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. Our JDA provides that, upon our delivery of our IP transfer package, our customer will pay for a manufacturing license and
continue work on MST testing and integration using a tool in their own fab, but the JDA does not commit the customer to take
MST to production. 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. 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 into
manufacturing and distribution license agreements.
AKM, one of our licensees, suffered substantial damage to one of its fabs from a fire, impacting their production
capability and potentially 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. As of the date of this Annual Report, the
Nobeoka fab remains closed and it is unclear whether or when it will re-open. 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. 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. The
timing of additional wafer runs with AKM will depend upon, among other things, the timing of either re-opening the Nobeoka fab,
moving production to another fab or external foundry, and AKM’s ability to devote personnel and equipment to MST integration.
We expect that our product qualification and licensing cycle will be lengthy and costly, and our marketing, engineering
and sales efforts may be unsuccessful. We expect to incur significant engineering, marketing and sales expenses prior to entering
into any license agreements, generating a license fee and establishing a royalty stream from each licensee. The introduction of any
new process technology into semiconductor manufacturing is a lengthy process and we cannot forecast the length of time it takes
to establish a new licensing relationship. Based on our engagements with potential customers to date, we believe the time from
initial engagement until our customers execute a license and subsequently incorporate our technologies in their integrated circuits,
can take 18 to 36 months or longer. Our integration license agreements with our current licensees do not commit them to
manufacturing or distribution licenses and we expect those licensees to perform additional tests on evaluation wafers under their
respective integration licenses before deciding whether to enter the next stages of licensing MST. As such, we will incur additional
expenses in our engagements with our licensees before we receive license fees, if any, for manufacturing and distribution and
before any subsequent royalty stream begins. Our JDA does grant a manufacturing license but the agreement does not commit our
customer to a distribution license. While we believe our JDA and our license agreements with AKM, ST and our RF licensee could
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.
Our business may be adversely affected by the recent coronavirus outbreak. The ongoing global COVID-19 pandemic—
including both the resulting public health crisis as well as the measures being taken by governments, businesses, and individuals
in an effort to limit COVID-19’s spread—has adversely affected, and continues to adversely affect, our business operations. The
impacts of the COVID-19 pandemic on our business operations and workforce, and the duration of such impacts, are uncertain,
constantly evolving,
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and difficult to quantify, but have thus far included, or in the future may include, the following:
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We have implemented certain measures at our facilities in an effort to protect our employees’ health and well-
being (including social distancing, allowing many employees to work remotely, limiting the number of
employees attending meetings, screening employees and visitors when entering facilities, educating employees
about the virus and preventative measures, enhancing cleaning protocols, and suspending employee travel), some
of which have reduced the overall efficiency of our operations and increased costs. The expected duration of
such protective measures remains uncertain, and we may be required to implement additional measures in the
future, further impacting our business operations.
Restrictions on travel imposed by us, our customers and countries to which we would otherwise travel, have
required that contract negotiations and customer presentations be conducted by video or phone conferences,
which have inherent limitations as compared to in-person meetings. Accordingly, new customer acquisition and
completion of contracts have taken longer than we believe would be possible if we were able to meet with
customers in the manner we had prior to the pandemic outbreak.
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. The qualification of a new process
technology like MST entails the integration of our MST film into the complex manufacturing processes employed by our potential
customers. In order to validate the benefits of MST, our customer engagement process involves fabrication of wafers that
incorporate MST deposited by us using our epitaxial deposition tools and then completing the manufacturing of the wafers in our
customers’ facilities using their tools. The semiconductor industry in 2020 exceeded $450 billion in sales, and in recent months
the industry has been characterized by product shortages as strong demand has outstripped supply, resulting in tight capacity among
our potential customers. Accordingly, 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. 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. Additionally, we conduct our ongoing research and
development and portions of our customer evaluation activities using a leased epitaxial (epi) deposition tool. We recently entered
into a lease for a new epi 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. Any interruption in our epi tool availability may negatively impact the progress of customer work as well as our internal
research and development and accordingly could delay or prevent customers from entering into commercial licenses.
The long-term success of our business is dependent on a royalty-based business model, which is inherently risky. The
long-term success of our business is dependent on future royalties paid to us by licensee-customers, whose business requires them
to market products to their end customers. Royalty payments under our licenses are generally expected to be based on a percentage
(i) in the case of foundries, the selling price of wafers made using MST and (ii) in the case of IDMs and fabless vendors, the selling
price of MST-enabled semiconductor die sold. We will depend upon our ability to structure, negotiate and enforce agreements for
the determination and payment of royalties, as well as upon our licensees’ compliance with their agreements. We face risks inherent
in a royalty-based business model, many of which are outside of our control, such as the following:
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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.
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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, 2020, we had total assets of approximately $39.4 million, cash
and cash-equivalents of approximately $37.9 million and working capital of approximately $36.6 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. However, the full qualification of a new technology like MST can take up to a year or more, and we have limited ability
to influence our customers’ testing and qualification processes. Accordingly, we may require additional capital prior to obtaining
a royalty-based license or prior to such a license generating sufficient royalty income to cover our ongoing operating expenses. In
the event we require additional capital over and above the amount of our presently available working capital, we will endeavor to
seek additional funds through various financing sources, including the sale of our equity and debt securities, licensing fees for our
technology and joint ventures with industry partners. In addition, we will consider alternatives to our current business plan that
may enable to us to achieve material revenue producing operations and meaningful commercial success 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. 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.
If we are able to secure the adoption of our MST by one or more
foundries, IDMs or fabless semiconductor manufacturers, we expect that for at least the first few years substantially all of our
revenue will be generated from license fees and engineering services before customers commence royalty-bearing shipments. Due
to the concentration and ongoing consolidation within the semiconductor industry, we may also find that over the longer term our
royalty-based revenues are dependent on a relatively few customers. If we lose any of these customers, or these customers do not
pay us, our revenues could be materially adversely affected.
If we are unable to manage future expansion effectively, our business, operations and financial condition may suffer
significantly, resulting in decreased productivity. If our MST proves to be commercially valuable, it is likely that we will
experience a rapid growth phase that could place a significant strain on our managerial, administrative, technical, operational and
financial resources. Our organization, procedures and management may not be adequate to fully support the expansion of our
operations or the efficient execution of our business strategy. If we are unable to manage future expansion effectively, our business,
operations and financial condition may suffer significantly, resulting in decreased productivity.
It may be difficult for us to verify royalty amounts owed to us under our licensing agreements, and this may cause us
to lose revenues. We will endeavor to provide that the terms of our license agreements require our licensees to document their
use of our technology and report related data to us on a regular basis. We will endeavor to provide that the terms of our license
agreements give us the right to audit books and records of our licensees to verify this information, however audits can be expensive,
time consuming, and may not be cost justified based on our understanding of our licensees’ businesses. 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.
Our business operations could suffer in the event of information technology systems’ failures or security breaches.
While we believe that we have implemented adequate security measures within our internal information technology and networking
systems, our information technology systems may be subject to security breaches, damages from computer viruses, natural
disasters, terrorism, and telecommunication failures. Any system failure or security breach could cause interruptions in our
operations, including but not limited to our technology computer-aided design, or TCAD, modeling using Synopsys software, in
addition to the possibility of losing proprietary information and trade secrets. To the extent that any disruption or security breach
results in inappropriate disclosure of our confidential information, our competitive position may be adversely affected, and we may
incur liability or additional costs to remedy the damages caused by these disruptions or security breaches.
If we fail to protect and enforce our intellectual property rights and our confidential information, our business will
suffer. We rely primarily on a combination of nondisclosure agreements and other contractual provisions and patent, trade secret
and copyright laws to protect our technology and intellectual property. If we fail to protect our technology and intellectual property,
our licensees and others may seek to use our technology and intellectual property without the payment of license fees and royalties,
which could weaken our competitive position, reduce our operating results and increase the likelihood of costly litigation. The
growth of our business depends in large part on our ability to secure intellectual property rights in a timely manner, our ability to
convince third parties of the applicability of our intellectual property rights to their products, and our ability to enforce our
intellectual property rights. In certain instances, we attempt to obtain patent protection for portions of our technology, and our
license agreements typically include both issued patents and pending patent applications as well as our proprietary know-how. If
we fail to obtain patents in a timely manner or if the patents issued to us do not cover all of the inventions disclosed in our patent
applications, others could use portions of our technology and intellectual property without the payment of license fees and royalties.
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We also rely on trade secret laws rather than patent laws to protect other portions of our proprietary technology. However,
trade secrets can be difficult to protect. The misappropriation of our trade secrets or other proprietary information could seriously
harm our business. We protect our proprietary technology and processes, in part, through confidentiality agreements with our
employees, consultants, suppliers and customers. We cannot be certain that these contracts have not been and will not be breached,
that we will be able to timely detect unauthorized use or transfer of our technology and intellectual property, that we will have
adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by
competitors. If we fail to use these mechanisms to protect our technology and intellectual property, or if a court fails to enforce our
intellectual property rights, our business will suffer. We cannot be certain that these protection mechanisms can be successfully
asserted in the future or will not be invalidated or challenged.
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.
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. If any of these key patents are invalidated, or if a court limits
the scope of the claims in any of these key patents, the likelihood that companies will take new licenses and that any current
licensees will continue to agree to pay under their existing licenses could be significantly reduced. The resulting loss in license
fees and royalties could significantly harm our business. Moreover, our stock price may fluctuate based on developments in the
course of ongoing litigation.
We may become involved in material legal proceedings in the future to enforce or protect our intellectual property
rights, which could harm our business. 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. Litigation
stemming from such disputes could harm our ability to gain new customers, who may postpone licensing decisions pending the
outcome of the litigation or who may, as a result of such litigation, choose not to adopt our technologies. Such litigation may also
harm our relationships with existing licensees, who may, as a result 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. These costs may be materially higher than expected, which could adversely impair our working capital, affect
our operating results and lead to volatility in the price of our common stock. Whether or not determined in our favor or ultimately
settled, litigation would divert our managerial, technical, legal and financial resources from our business operations. Furthermore,
an adverse decision in any of these legal actions could result in a loss of our proprietary rights, subject us to significant liabilities,
require us to seek licenses from others, limit the value of our licensed technology or otherwise negatively impact our stock price
or our business and financial position, results of operations and cash flows.
Even if we prevail in our legal actions, significant contingencies may exist to their settlement and final resolution,
including the scope of the liability of each party, our ability to enforce judgments against the parties, the ability and willingness of
the parties to make any payments owed or agreed upon and the dismissal of the legal action by the relevant court, none of which
are completely within our control. Parties that may be obligated to pay us royalties could be insolvent or decide to alter their
business activities or corporate structure, which could affect our ability to collect royalties from such parties.
Our technologies may infringe on the intellectual property rights of others, which could lead to costly disputes or
disruptions. The semiconductor industry is characterized by frequent allegations of intellectual property infringement. Any
allegation of infringement could be time consuming and expensive to defend or resolve, result in substantial diversion of
management resources, cause suspension of operations or force us to enter into royalty, license, or other agreements rather than
dispute the merits of such allegation. Furthermore, third parties making such claims may be able to obtain injunctive or other
equitable relief that could block our ability to further develop or commercialize some or all of our technologies, and the ability of
our customers to develop or commercialize their products incorporating our technologies, in the U.S. and abroad. If patent holders
or other holders of intellectual property initiate legal proceedings, we may be forced into protracted and costly litigation. We may
not be successful in defending such litigation and may not be able to procure any required royalty or license agreements on
acceptable terms or at all.
If we are unable to manage future expansion effectively, our business, operations and financial condition may suffer
significantly, resulting in decreased productivity. If our MST proves to be commercially valuable, it is likely that we will
experience a rapid growth phase that could place a significant strain on our managerial, administrative, technical, operational and
financial resources. Our organization, procedures and management may not be adequate to fully support the expansion of our
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operations or the efficient execution of our business strategy. If we are unable to manage future expansion effectively, our business,
operations and financial condition may suffer significantly, resulting in decreased productivity.
If integrated circuits incorporating our technologies are used in defective products, we may be subject to product
liability or other claims. If our MST technology is used in defective or malfunctioning products, we could be sued for damages,
especially if the defect or malfunction causes physical harm to people. While we will endeavor to carry product liability insurance,
contractually limit our liability and obtain indemnities from our customers, there can be no assurance that we will be able to obtain
insurance at satisfactory rates or in adequate amounts or that any insurance and customer indemnities will be adequate to defend
against or satisfy any claims made against us. The costs associated with legal proceedings are typically high, relatively
unpredictable and not completely within our control. Even if we consider any such claim to be without merit, significant
contingencies may exist, similar to those summarized in the above risk factor concerning intellectual property litigation, which
could lead us to settle the claim rather than incur the cost of defense and the possibility of an adverse judgment. 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 Owning Our Common Stock
The market price of our shares may be subject to fluctuation and volatility. You could lose all or part of your
investment. The market price of our common stock is subject to wide fluctuations in response to various factors, some of which
are beyond our control. Between January 1, 2020 and February 5, 2021, the reported high and low sales prices of our common
stock have ranged from $2.53 to $43.80. 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 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 market conditions and other factors, including factors unrelated to our operating performance.
These factors and any corresponding price fluctuations may materially and adversely affect the market price of our shares
and result in substantial losses being incurred by our investors. In the past, following periods of market volatility, public company
stockholders have often instituted securities class action litigation. If we were involved in securities litigation, it could impose a
substantial cost upon us and divert the resources and attention of our management from our business.
13
We are an “emerging growth company” under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure
requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are an
“emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 or the JOBS Act, and we may take
advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not
“emerging growth companies” including, but not limited to:
•
•
•
•
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements;
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments; and
extended transition periods available for complying with new or revised accounting standards.
We have chosen to “opt out” of the extended transition periods available for complying with new or revised accounting
standards, but we intend to take advantage of all of the other benefits available under the JOBS Act, including the exemptions
discussed above. If some investors find our common stock less attractive as a result of our reliance on these exemptions, there may
be a less active trading market for our common stock and our stock price may be more volatile.
We will remain an “emerging growth company” until December 31, 2021.
Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and
when we need it. Because of the exemptions from various reporting requirements provided to us as an “emerging growth company,”
we may be less attractive to investors and it may be difficult for us to raise additional capital when we need it or on favorable
terms. Investors may be unable to compare our business with other companies in our industry if they believe that our reporting is
not as transparent as other companies in our industry.
We have not paid dividends in the past and have no immediate plans to pay dividends. We plan to reinvest all of our
earnings, to the extent we have earnings, to cover operating costs and otherwise become and remain competitive. We do not plan
to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time,
generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.
Therefore, you should not expect to receive cash dividends on our common stock.
We expect to continue to incur significant increased costs as a result of being a public company that reports to the
Securities and Exchange Commission and our management will be required to devote substantial time to meet compliance
obligations. As a public company reporting to the Securities and Exchange Commission, we incur significant legal, accounting
and other expenses that we did not incur as a private company. We are subject to reporting requirements of the Exchange Act and
the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission that
impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure
and financial controls and changes in corporate governance practices. In addition, on July 21, 2010, the Dodd-Frank Wall Street
Reform and Protection Act was enacted. There are significant corporate governance and executive compensation-related provisions
in the Dodd-Frank Act that increased our legal and financial compliance costs, make some activities more difficult, time-consuming
or costly and may also place undue strain on our personnel, systems and resources. Our management and other personnel devote a
substantial amount of time to these compliance initiatives. In addition, we expect these rules and regulations to make it more
difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more
difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive
officers. We will lose our status as an “emerging growth company” on December 31, 2021 and as a result we will be subject to
more extensive financial and executive compensation disclosures, external auditor attestation of internal controls and additional
shareholder voting requirements. These increased disclosure and audit requirements will increase the burdens on our limited
personnel and systems, which we expect will increase our general and administrative expenses and require additional time to be
devoted to legal and financial compliance efforts.
Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable. Provisions of
our certificate of incorporation and bylaws and applicable provisions of Delaware law may delay or discourage transactions
involving an actual or potential change in control or change in our management, including transactions in which stockholders
might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best
interests. The provisions in our certificate of incorporation and bylaws:
14
•
•
•
•
•
limit who may call stockholder meetings;
do not permit stockholders to act by written consent;
allow us to issue blank check preferred stock without stockholder approval;
do not provide for cumulative voting rights; and
provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less
than a quorum.
In addition, Section 203 of the Delaware General Corporation Law may limit our ability to engage in any business
combination with a person who beneficially owns 15% or more of our outstanding voting stock unless certain conditions are
satisfied. This restriction lasts for a period of three years following the share acquisition. These provisions may have the effect of
entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium
over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.
Our bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain
litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with the Company. Our bylaws provide that, unless we consent in writing to the selection of an alternative
forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or
proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers
or other employees to us or our stockholders, (iii) any action asserting a claim against us or any our directors, officers or other
employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws,
or (iv) any action asserting a claim against us or any our directors, officers or other employees governed by the internal affairs
doctrine. 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.
Our board of directors may issue blank check preferred stock, which may affect the voting rights of our holders and
could deter or delay an attempt to obtain control of us. Our board of directors is authorized, without stockholder approval, to
issue preferred stock in series and to fix and state the voting rights and powers, designation, preferences and relative, participating,
optional or other special rights of the shares of each such series and the qualifications, limitations and restrictions thereof. Preferred
stock may rank prior to our common stock with respect to dividends rights, liquidation preferences, or both, and may have full or
limited voting rights. If issued, such preferred stock would increase the number of outstanding shares of our capital stock, adversely
affect the voting power of holders of our common stock and could have the effect of deterring or delaying an attempt to obtain
control of us.
Item 1B. Unresolved Staff Comments
None.
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. This space includes 705 square feet of additional space the Company moved into in January
2021. As part of the amended lease entered into in August 2020, we will not owe a lease payment until June 2021, at which time
the lease payment will be $16,199 per month.
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.
Item 3.
Legal Proceedings
To our knowledge, as of the date of this Annual Report, there are no pending legal proceedings to which we or our
properties are subject.
Item 4. Mine Safety Disclosures
Inapplicable.
15
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities Market Information
PART II
Our common stock trades on the NASDAQ Capital Market under the symbol “ATOM”.
Holders of Record
As of February 10, 2021, there were 206 holders of record of our common stock.
Dividend Policy
We have never declared or paid cash dividends on our common stock. We presently intend to retain earnings, if any, to
finance the operation and expansion of our business.
Item 6.
Selected Financial Data
As a “smaller reporting company” under Item 10 of Regulation S-K, we are not required to provide the information under
this item.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations of Atomera Incorporated should
be read in conjunction with our financial statements and the accompanying notes that appear elsewhere in this Annual Report.
Statements in this Annual Report on Form 10-K 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 Annual 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 this Annual Report. 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 Annual
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 Annual Report.
Readers are urged to carefully review and consider the various disclosures made in this Annual 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 $450+ billion semiconductor industry. Our lead technology, named Mears Silicon TechnologyTM, 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;
16
•
•
•
fabless semiconductor manufacturers, which are designers of integrated circuits that outsource the manufacture 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 the silicon wafer; 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.
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. To date we have generated revenue
from (i) licensing agreements with two IDMs and one fabless manufacturer and (ii) engineering services provided to foundries,
IDMs and fabless companies.
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 30, 2019, we closed a registered direct offering of 1,675,000 shares of common stock at a price of $4.00 per
share, resulting in approximately $6.4 million of net proceeds to us after deducting placement agent fees and other offering
expenses.
On May 15, 2020, we closed an underwritten public offering of 2,024,000 shares of common stock at a public offering
price of $5.00 per share, resulting in approximately $9.4 million of net proceeds to us after deducting underwriting commission
and other offering expenses.
On September 2, 2020, we entered into an Equity Distribution Agreement with Craig-Hallum Capital Group LLC, as
agent, 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 $25.0 million in an “at-the-market” or ATM offering, to or through the agent. As of December 31, 2020,
2,206,895 shares had been sold at an average price per share of approximately $11.22, resulting in approximately $24.0 million of
net proceeds to us after deducting commissions and other offering expenses.
Results of Operations for the Years Ended December 31, 2020 and 2019
Revenues. To date, we have only generated limited revenue from customer engagements for integration engineering
services and integration license agreements. In the future, we expect to collect increased fees from license agreements and 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. 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 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. 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 of which we anticipate delivering an estimated quantity of wafers.
Revenue for the years ended December 31, 2020 and 2019 was approximately $62,000 and $533,000, respectively. Our
revenue in 2020 and 2019 was generated from integration services engagements and integration license agreements.
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 $13,000 and $253,000 for the years ended
December 31, 2020 and 2019, respectively. We anticipate that our cost of revenue will vary substantially depending on the mix of
integration license and integration engineering services and the nature of products and/or services delivered in each customer
engagement.
17
Operating Expenses. Operating expenses consist of research and development, general and administrative, and selling
and marketing expenses. For the years ended December 31, 2020 and 2019 our operating expenses totaled approximately $15.0
million and $13.9 million, respectively.
Research and development expense. To date, our operations have focused on the research, development, patent
protection, and commercialization of our processes and technologies related to our MST technology. Our research and development
costs primarily consist of payroll and benefit costs for our engineering staff and costs of outsourced fabrication and metrology of
semiconductor wafers incorporating our MST technology.
For the years ended December 31, 2020 and 2019, we incurred approximately $8.4 million and $7.7 million, respectively,
of research and development expense, an increase of approximately $676,000 or 9%. The increase in research and development
expense is primarily due to an increase of approximately $309,000 stock-based compensation expense and approximately $510,000
in payroll related costs due to headcount growth. These increases in expenses were offset by an approximately $216,000 decrease
in travel costs as a result of halting travel due to the COVID-19 pandemic.
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 for the years ended
December 31, 2020 and 2019 were approximately $5.6 million and $5.2 million, respectively, representing an increase of
approximately $421,000 or 8%. The increase is costs was primarily due to an increase in professional fees related to legal and
patent fees.
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 years ended
December 31, 2020 and 2019 were approximately $921,000 and $954,000, respectively, representing a decrease of approximately
$33,000 or 4%. The decrease in primarily due to a decrease in travel offset by increase in consulting fees.
Interest income. Interest income for the years ended December 31, 2020 and 2019 was approximately $42,000 and
$325,000, respectively. Interest income for each period related to interest earned on our cash and cash equivalents. Interest income
for each period related to interest earned on our cash and cash equivalents. Interest rates continued to fall during 2020 and while
our cash balance grew substantially in 2020, this was heavily weighted to the end of the year due to the timing of our at-the-market
equity financing.
Liquidity and Capital Resources
In May 2019, we closed a registered direct offering of 1,675,000 shares of common stock at a price of $4.00 per share.
We received approximately $6.4 million of net proceeds after deducting commissions and other offering expenses.
As of December 31, 2020, we had cash and cash equivalents of approximately $37.9 million and working capital of
approximately $36.6 million. For the year ended December 31, 2020, we had a net loss of approximately $14.9 million and used
approximately $12.1 million of cash and cash equivalents in operations. Since inception, we have incurred recurring operating
losses.
On May 15, 2020, we closed an underwritten public offering of 2,024,000 shares of common stock at a public offering
price of $5.00 per share, resulting in approximately $9.4 million of net proceeds to us after deducting underwriting commission
and other offering expenses.
On September 2, 2020, we entered into an Equity Distribution Agreement with Craig-Hallum Capital Group LLC, as
agent, 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 $25.0 million in an “at-the-market” or ATM offering, to or through the agent. As of December 31, 2020,
2,206,895 shares have been sold at an average price per share of approximately $11.22, resulting in approximately $24.0 million
of net proceeds to us after deducting commissions and other offering expenses. On January 5, 2021 we announced the completion
of this offering after an additional 14,680 shares were sold for an average price per share of $16.97, in January 2021 resulting in
additional net proceeds of approximately $243,000.
We believe that our available working capital is sufficient to fund our presently forecasted working capital requirements
for, at least, the next 12 months following the date of the filing of this report. However, the semiconductor industry is generally
slow to adopt new manufacturing process technologies and conducts long testing and qualification processes which we have limited
ability to control, and there can be no assurance of the timing of our receipt of meaningful amounts of revenue.
18
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 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 to 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 its cash.
Cash Flows from Operating, Investing and Financing Activities:
Net cash used in operating activities of approximately $12.1 million for year ended December 31, 2020 resulted primarily
from our net loss of approximately $14.9 million adjusted by approximately $3.0 million for stock-based compensation expense.
Net cash used in operating activities of approximately $10.4 million for year ended December 31, 2019 resulted primarily
from our net loss of approximately $13.3 million adjusted by approximately $2.9 million for stock-based compensation expense.
Net cash used by investing activities of approximately $131,000 and approximately $51,000 for the years ended
December 31, 2020 and 2019, respectively, consisted of the purchase of property and equipment. In 2020, we refurnished our
offices in Los Gatos, California and also purchased lab equipment to be used in connection with an epi tool that we plan to lease
in Tempe, Arizona.
Net cash provided by financing activities of approximately $35.3 million for the year ended December 31, 2020 related
to the net proceeds from our underwritten public offering of common stock in May 2020 and our at-the-market offering beginning
in September 2020 and continuing through the end of 2020.
Net cash provided by financing activities of approximately $6.4 million for the year ended December 31, 2019 related to
the net proceeds from our registered direct offering in May 2019.
Off-Balance Sheet Arrangements
We have not entered into off-balance sheet arrangements or issued guarantees to third parties.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
19
Item 8.
Financial Statements and Supplementary Data
Index to Financial Statements
Report of Independent Registered Public Accounting Firm ...........................................................................................
Balance Sheets at December 31, 2020 and 2019 ............................................................................................................
Statements of Operations for the years ended December 31, 2020 and 2019 ................................................................
Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2019 ................................................
Statements of Cash Flows for the years ended December 31, 2020 and 2019 ...............................................................
Notes to the Financial Statements ..................................................................................................................................
Page
21
22
23
24
25
26
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Atomera Incorporated
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Atomera Incorporated (the “Company”) as of December 31, 2020 and 2019,
the related statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31,
2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly,
we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2015.
Los Angeles, CA
February 19, 2021
21
Atomera Incorporated
Balance Sheets
(in thousands, except per share data)
ASSETS
Current Assets:
Cash and cash equivalents
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right of use asset
Long-term prepaid rent
Security deposit
December 31,
2020
2019
$
37,942 $
132
38,074
153
705
450
13
14,871
132
15,003
63
161
–
13
Total assets
$
39,395 $
15,240
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Accrued payroll related expenses
Current operating lease liability
Deferred revenue
Total current liabilities
Long term operating lease liability
Total liabilities
Commitments and contingencies (see Note 8)
Stockholders’ equity:
$
442 $
211
705
90
–
1,448
602
2,050
315
145
819
152
37
1,468
–
1,468
Preferred stock, $0.001 par value, authorized 2,500 shares: none issued and
outstanding at December 31, 2020 and 2019
Common stock, $0.001 par value, authorized 47,500 shares; 22,375 shares issued
and outstanding at December 31, 2020 and 17,117 issued and outstanding as of
December 31, 2019
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
–
–
22
187,463
(150,140 )
37,345
17
149,017
(135,262 )
13,772
Total liabilities and stockholders’ equity
$
39,395 $
15,240
The accompanying notes are an integral part of these financial statements.
22
Atomera Incorporated
Statements of Operations
(in thousands, except per share data)
Revenue:
Cost of revenue
Gross margin
Operating Expenses:
Research and development
General and administrative
Selling and marketing
Total operating expenses
Loss from operations
Other income:
Interest income
Total other income
Net loss
Net loss per common share, basic and diluted
Years Ended December 31,
2019
2020
$
62 $
13
49
8,424
5,624
921
14,969
533
253
280
7,748
5,203
954
13,905
(14,920 )
(13,625 )
42
42
325
325
$
$
(14,878 ) $
(13,300 )
(0.79 ) $
(0.84 )
Weighted average number of common shares outstanding, basic and diluted
18,752
15,852
The accompanying notes are an integral part of these financial statements.
23
Atomera Incorporated
Statements of Stockholders’ Equity
(in thousands)
Common Stock
Additional
Paid-in
Amount Capital
Shares
Accumulated
Deficit
Total
Stockholders’
Equity
Balance January 1, 2019
Stock-based compensation
Registered direct offering of common stock, net of commissions and other
offering expenses
Net loss
Balance December 31, 2019
Stock-based compensation
Warrant modification
Warrant exercises
Stock option exercises
Underwritten public offering of common stock, net of commissions
At-the-market sale of stock, net of commissions and expenses
Net loss
Balance December 31, 2020
15,034 $
15 $ 139,693 $
(121,962 ) $
17,746
408
–
2,929
–
2,929
1,675
–
2
–
6,395
–
6,397
–
(13,300 )
(13,300 )
17,117 $
17 $ 149,017 $
(135,262 ) $
13,772
463
–
411
153
2,024
2,207
1
–
–
–
2
3,040
141
994
889
9,393
2
23,989
–
–
–
–
–
–
3,041
141
994
889
9,395
23,991
–
–
–
(14,878 )
(14,878 )
22,375 $
22 $ 187,463 $
(150,140 ) $
37,345
The accompanying notes are an integral part of these financial statements.
24
Atomera Incorporated
Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss
Adjustments to reconcile net loss to net cash used in operating activities:
Years Ended December 31,
2019
2020
$
(14,878 ) $
(13,300 )
Depreciation and amortization
Right of use asset amortization
Stock-based compensation
Warrant modification expense
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Long-term prepaid rent
Accounts payable
Accrued expenses
Accrued payroll expenses
Lease liability
Deferred revenue
Net cash used in operating activities
CASH FROM INVESTING ACTIVITIES
Acquisition of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from at-the-market sale of stock, net of commissions and expenses
Proceeds from underwritten public offering, net of commission and expenses
Proceeds from registered direct offering of common stock, net of commissions and
expenses
Proceeds from exercise of stock options
Proceeds from exercise of warrants
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
41
138
3,041
141
–
–
(450 )
127
66
(114 )
(142 )
(37 )
(12,067 )
(131 )
(131 )
23,991
9,395
–
889
994
35,269
23,071
14,871
44
134
2,929
–
185
25
–
(33 )
(75 )
(165 )
(134 )
(18 )
(10,408 )
(51 )
(51 )
–
–
6,397
–
–
6,397
(4,062 )
18,933
Cash and cash equivalents at end of year
$
37,942 $
14,871
Supplemental information:
Cash paid for interest
Cash paid for taxes
$
$
– $
– $
–
–
The accompanying notes are an integral part of these financial statements.
25
1. NATURE OF OPERATIONS
Atomera Incorporated
Notes to the Financial Statements
Atomera Incorporated (“Atomera” or the “Company”) was incorporated in the state of Delaware in March 2007 under the
name MEARS Technologies, Inc. and is engaged in the development, commercialization and licensing of proprietary processes
and technologies for the semiconductor industry. On January 12, 2016, the Company changed its name to Atomera Incorporated.
Atomera is an early stage company, having only recently begun limited revenue-generating activities, and is devoting
substantially all of its efforts toward technology research and development and to commercially licensing its technology to
designers and manufacturers of integrated circuits. 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 on August 10, 2016, and
subsequent public offerings of its common stock.
2. LIQUIDITY AND MANAGEMENT PLANS
At December 31, 2020, the Company had cash and cash equivalents of approximately $37.9 million and working capital
of approximately $36.6 million. The Company has generated only limited revenues since inception and has incurred recurring
operating losses.
The Company’s operating plans for the next 12 months include increased research and development headcount and
increased spending on outsourced fabrication and testing. 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. However, as the Company has generated only limited revenue from
its principal operations, it is subject to all the risks inherent in the initial organization, financing, expenditures, complications and
delays in a new business. Accordingly, the Company may require additional capital, the receipt of which cannot be assured. In the
event the Company requires additional capital, there can be no guarantee that funds will be available on commercially reasonable
terms, if at all. 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 unable to secure additional capital, it may be required to curtail its research and development initiatives
and take additional measures to reduce costs in order to conserve its cash.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The financial statements are presented in accordance with accounting principles generally accepted in the United States
of America (“GAAP”) and reflect the financial position, results of operations and cash flows for all periods presented.
Fair Value of Financial Instruments
Authoritative guidance requires disclosure of the fair value of financial instruments. The Company’s financial instruments
consist of cash and cash equivalents, accounts receivable and accounts payable, the carrying amounts of which approximate their
estimated fair values primarily due to the short-term nature of the instruments or based on information obtained from market
sources and management estimates. The Company measures the fair value of certain of its financial assets and liabilities on a
recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values.
Financial assets and liabilities carried at fair value which is not equivalent to cost will be classified and disclosed in one of the
following three categories:
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.
26
Cash and cash equivalents
The Company maintains its operating accounts in a single reputable financial institution. The balances are insured by the
U.S. Federal Deposit Insurance Corporation (“FDIC”) up to specified limits. The Company’s cash and cash equivalents are
maintained in checking accounts and money market funds with maturities of less than three months when purchased, which are
readily convertible to known amounts of cash.
Concentration of Credit Risk and Major Customers
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash,
cash equivalents and accounts receivable. During the year ended December 31, 2020, one customer represented 100% of revenue
and, no customer represented a balance of accounts receivable at December 31, 2020. During the year ended December 31, 2019,
six customers each represented approximately 26%, 19%, 16%, 16%, 13% and 9% of revenues. No customers represented a balance
of accounts receivable at December 31, 2019.
At times, the amounts on deposit at the financial institution exceed the federally insured limits. Management believes that
the financial institutions which hold the Company’s cash is financially sound and, accordingly, minimal credit risk exists. As of
December 31, 2020 and 2019, the Company’s cash balances were in excess of insured limits maintained at the financial institution.
Accounts Receivable
The Company grants credit to its business customers. Collateral is generally not required for trade receivables. The
Company maintains allowances for potential credit losses when necessary. Trade accounts receivable are recorded net of
allowances for cash discounts for prompt payment, doubtful accounts, and sales returns.
The Company’s policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit
losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an
allowance for doubtful accounts is necessary based on an analysis of past due accounts and other factors that may indicate that the
realization of an account may be in doubt. Other factors that the Company considers include its existing contractual obligations,
historical payment patterns of its customers and individual customer circumstances, and an analysis of days sales outstanding by
customer. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. At December 31, 2020 and 2019, there were no allowances for
doubtful accounts since the balances were either collected during the year or subsequently collected. Any allowances recorded are
included in Accounts Receivable, net in the accompanying balance sheets.
Impairment of long-lived assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that it is
more likely than not that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset
impairment analyses in accordance with authoritative guidance which requires the Company to group assets and liabilities at the
lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate
the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying
amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset
group exceeds its fair value based on discounted cash flow analysis or appraisals. During the years ended December 31, 2020 and
2019, the Company had noted no indicators of impairment.
Property and equipment
Items capitalized as property and equipment are stated at cost. Maintenance and routine repairs are charged to operations
when incurred, while betterments and renewals are capitalized. Depreciation and amortization are computed using he straight-line
method over the estimated useful lives of the respective assets starting when the asset is placed in service.
Common stock warrants
The Company classifies as equity any warrants that (i) require physical settlement or net-share settlement or (ii) provide
the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The
Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash
settle the contract if an event occurs and if that event is outside the Company’s control), (ii) gives the counterparty a choice of net-
cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions that do not
27
qualify for the scope exception. The Company assesses classification of its common stock warrants and other freestanding
derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The
Company’s freestanding derivatives consist of warrants to purchase common stock. The Company evaluated these warrants to
assess their proper classification and determined that the common stock warrants meet the criteria for equity classification in the
balance sheet. Such warrants are measured at fair value, which the Company determines using the Black-Scholes-Merton option-
pricing model.
Revenue
The Company generates revenue from integration services which it delivers either pursuant to integration license
agreements or delivery of engineering services. 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, the Company satisfies a performance obligation. The Company’s integration services generally consist of
depositing its 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).
For recognizing integration service revenue from integration license agreements, the Company assesses (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 licenses that are not distinct, but combined with other goods or
services, the revenue is recognized at a point in time or over time as the obligations to perform the combined services and/or deliver
the combined goods are satisfied. The Company’s integration license agreements contain a technology grant as well as a
performance obligation to deliver wafers with its technology deposited on them. The Company has 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.
Deferred revenues consist of unearned amounts that have been billed to the customer in advance of the Company’s
performance obligations. These amounts have not yet been recognized as revenue. Revenue for these items will be recognized in
accordance with the Company’s revenue policy.
Research and development expenses
In accordance with authoritative guidance, the Company charges research and development costs to operations as
incurred. Research and development expenses consist of personnel costs for the design, development, testing and enhancement of
the Company’s technology, and certain other allocated costs, such as depreciation and other facilities related expenditures.
Leases
The Company accounts for leases in accordance with the authoritative guidance. On January 1, 2019, the Company
adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No 2016-02, Leases
(Topic 842).
Stock-based compensation
The Company computes stock-based compensation in accordance with authoritative guidance. The Company uses the
Black-Scholes-Merton option-pricing model to determine the fair value of its stock options. The Black-Scholes-Merton option-
pricing model includes various assumptions, including the fair market value of the common stock of the Company, expected life
of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect the
Company’s best estimates, but they involve inherent uncertainties based on market conditions generally outside the control of the
Company. Forfeitures are recorded when they occur.
As a result, if other assumptions had been used, stock-based compensation cost, as determined in accordance with
authoritative guidance, could have been materially impacted. Furthermore, if the Company uses different assumptions on future
grants, stock-based compensation cost could be materially affected in future periods.
Income Taxes
In accordance with authoritative guidance, deferred tax assets and liabilities are recorded for temporary differences
between the financial reporting and tax bases of assets and liabilities using the current enacted tax rate expected to be in effect
28
when the differences are expected to reverse. A valuation allowance is recorded on deferred tax assets unless realization is
considered more likely than not.
The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax
returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax
positions not deemed to meet the “more-likely-than-not” threshold are not recorded as a tax benefit or expense in the current year.
The Company recognizes interest and penalties, if any, related to uncertain tax positions in interest expense. No interest and
penalties related to uncertain tax positions were accrued at either December 31, 2020 or 2019.
The Company follows authoritative guidance which requires the evaluation of existing tax positions. Management has
analyzed all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes both federal and
states where the Company has operations. Open tax years are those that are open for examination by taxing authorities.
Use of estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates
are used when accounting for revenue recognition, fair value of stock-based compensation and warrants, borrowing rates used for
lease accounting and valuation allowance against deferred tax assets. Actual results could differ from those estimates.
Subsequent events
Management has evaluated subsequent events and transactions occurring through the date these financial statements were
issued. See Note 14.
Adoption of recent accounting standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The
standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and
other financial assets in scope. The new guidance represents significant changes to accounting for credit losses: (i) full lifetime
expected credit losses will be recognized upon initial recognition of an asset in scope; (ii) the current incurred loss impairment
model that recognizes losses when a probable threshold is met will be replaced with the expected credit loss impairment method
without recognition threshold; and (iii) the estimate of expected credit losses will be based upon historical information, current
conditions, and reasonable and supportable forecasts. ASU No. 2016-13 introduces two distinctive credit loss impairment models:
(i) current expected credit losses (“CECL”) impairment model (Subtopic 326-20) applicable to financial assets measured at
amortized cost; and (ii) available-for-sale debt securities impairment model (Subtopic 326-30). ASU No. 2016-13 is effective for
public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The
Company adopted this standard on January 1, 2020 and it did not have a material impact on its financial position, results of
operations or financial statement disclosure.
Recent accounting standards
The Company has evaluated all issued but not yet effective accounting pronouncements and determined that they are
either immaterial or not relevant to the Company except as noted below.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying Accounting for Income Taxes. This is part of the
FASB’s overall initiative to reduce complexity in accounting standards. Amendments include removal of certain exceptions to the
general principles of Accounting Standard Codification (“ASC”) 740, Income taxes, and simplification in several other areas such
as accounting for a franchise tax (or similar tax) that is partially based on income. While not required to be adopted until 2021 for
most calendar year public business entities, early adoption is permitted for any financial statements not yet issued to take advantage
of the simplifications. The Company is still evaluating the impact of the ASU but does not expect the ASU to have a significant
impact on its tax provision when adopted.
In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and other Options (Subtopic 470-20) and
Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The new guidance eliminates the beneficial
conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts
in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the
new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact
29
the diluted EPS computation. This guidance is effective as of January 1, 2022 (Early adoption is permitted effective January 1,
2021). The Company is currently evaluating the effect the updated standard will have on its financial position, results of operations
or financial statement disclosure.
4.
REVENUE
The Company recognizes revenue in accordance with ASC 606. 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 at the time when
goods or services are transferred and/or delivered to its customers. Revenue is recognized when the Company satisfies a
performance obligation by transferring the product or service to the customer, either at a point in time or over time. The Company
usually recognizes revenue from integration service agreements at a point in time and integration license agreements over a period
of time.
The following table provides information about disaggregated revenue by primary geographical markets and timing of
revenue recognition for the years ended December 31, 2020 and 2019 (in thousands):
Primary geographic markets
North America
Europe
Asia Pacific
Total
Timing of revenue recognition
Products and services transferred at a point in time
Products and services transferred over time
Total
Unbilled contracts receivable and deferred revenue:
Year Ended December 31,
2019
2020
$
$
$
$
62 $
–
–
62 $
62 $
–
62 $
188
187
158
533
378
155
533
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.
The Company records deferred revenue when revenue will be recognized after invoicing. During the year ended
December 31, 2020, the Company recognized approximately $37,000 of revenue that was included in deferred revenue as of
December 31, 2019.
5. BASIC AND DILUTED LOSS PER SHARE`
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares outstanding for
the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares and dilutive
share equivalents outstanding for the period, determined using the treasury-stock and if-converted methods. Since the Company
has had net losses for all periods presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net
loss per share are equal.
The following potential common stock equivalents were not included in the calculation of diluted net loss per common
share because the inclusion thereof would be anti-dilutive (in thousands):
Stock Options
Unvested restricted stock
Warrants
Year Ended December 31,
2019
2020
3,446
642
320
4,408
2,934
486
765
4,185
30
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
Laboratory equipment
Computer equipment
Furniture and fixtures
Software
Leasehold improvements
Office equipment
Less: Accumulated depreciation and amortization
December 31,
2020
2019
$
$
163 $
111
64
6
6
4
354
(201 )
153 $
123
91
1
6
–
4
225
(162 )
63
Depreciation and amortization expense relating to property and equipment was approximately $41,000 and $44,000 for
the years ended December 31, 2020 and 2019, respectively. The Company depreciates computer equipment, laboratory equipment
and office equipment on straight-line basis over three years. Furniture and fixtures are depreciated on a straight-line basis over five
years. The Company amortizes software on straight-line basis over three years. Leasehold improvements are amortized over the
remaining life of the lease.
7.
LEASES
The Company leases corporate office space in Los Gatos, California. In August 2020, the Company and its landlord
amended the lease of this office. This amendment extends the expiration date of the lease from January 2021 to January 2026 and
increases the space from 3,396 square feet to 4,101 square feet. Under ASC 842, the lease amendment was treated as a separate
lease for the new space and a modification of the lease for the original space. An additional right-of-use (“ROU”) asset and lease
liability of approximately $681,000 were recorded during the year ended December 31, 2020. The lease liability is based on the
present value of the minimum lease payments, discounted using an estimated incremental borrowing rate of 5.5%. The lease
contains escalating payments on the anniversary of the original commencement which are included in the measurement of the
initial lease liability. Additional payments based on a change in the Company’s share of the operating expenses, including property
taxes and insurance, are recorded as a period expense when incurred. Lease expense for operating leases consists of the lease
payments recognized on a straight-line basis over the lease term. In January 2021, the Company recorded an additional ROU asset
and corresponding liability of approximately $144,000 when the additional space became available for use.
The components of operating lease costs were as follows (in thousands):
Fixed lease costs
Variable lease costs
Short term lease costs
Total operating costs
Year Ended December 31,
2019
2020
$
$
123 $
36
39
198 $
108
53
31
192
Future minimum payments under non-cancellable leases as of December 31, 2020 were as follows (in thousands) and do
not include the additional space that the Company took use of in January 2021:
For the Year Ended December 31,
2021
2022
2023
2024 & thereafter
Total future minimum lease payments
Less imputed interest
31
Amount
108
166
170
371
815
(123 )
692
$
$
The below table provides supplemental information and non-cash activity related to the Company’s operating leases are
as follows (in thousands):
Year Ended
December 31,
2020
2019
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Non-cash activity:
Right-of-use assets obtained in exchange for the lease obligations
$
$
164 $
681 $
161
295
In October 2016, the Company entered into lease agreement for approximately 200 square feet of office space in
Cambridge, Massachusetts. The lease, with current monthly payments of $2,942 per month, commenced on October 24, 2016.
Because the lease is month to month and can be cancelled with a 30-day notice, the future lease payments are not included in the
Company’s lease accounting under ASC Topic 842.
In October 2019, the Company entered into an agreement to lease a tool for use in the development of the Company’s
technology. The lease is for five years at $150,000 per month. A prepayment of $450,000 was made in the year ended December 31,
2020, this payment represents the final three payments under the lease and is recorded as a long-term prepaid until the lease
commencement, at which time it will be record in accordance with ASC 842.
8. COMMITMENTS AND CONTINGENCIES
Legal
The Company may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of its
business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. While management
believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company is
or could become involved in litigation may have a material adverse effect on its business and financial condition. The Company is
not party to any material litigation as of December 31, 2020 or through the date these financial statements have been issued.
9.
STOCKHOLDERS’ EQUITY
The Company is authorized to issue to up 2,500,000 shares of preferred stock, $.001 par value. As of December 31, 2020,
and 2019, no shares have been designated and no shares are issued and outstanding. Preferred stock may rank prior to common
stock with respect to dividends rights, liquidation preferences, or both, and may have full or limited voting rights.
On May 29, 2019, the Company closed a registered direct offering of 1,675,000 shares of common stock at a price of
$4.00 per share. The Company received approximately $6.4 million of net proceeds after deducting commissions and other offering
expenses.
On May 15, 2020, the Company closed an underwritten public offering of 2,024,000 shares of common stock at a public
offering price of $5.00 per share, resulting in approximately $9.4 million of net proceeds after deducting underwriting commission
and other offering expenses.
On September 2, 2020, Atomera entered into an Equity Distribution Agreement with Craig-Hallum Capital Group LLC,
as agent, under which the Company offered and sold, from time to time at its sole discretion, shares of its common stock having
an aggregate offering price of up to $25.0 million in an “at-the-market” or ATM offering, to or through the agent. As of December
31, 2020, 2,206,895 shares had been sold at an average price of approximately $11.22, resulting in approximately $24.0 million of
net proceeds to the Company after deducting commissions and other offering expenses.
As of December 31, 2020, the Company has reserved approximately 3.8 million shares of common stock for issuance
pursuant to outstanding stock options and warrants.
10. WARRANTS
The Company estimated the fair value of warrants using the Black-Scholes option pricing model. There were no warrants
issued in the year ending December 31, 2020 or 2019. A summary of warrant activity for the year ended December 31, 2020 is as
follows (shares in thousands except per share and contractual term):
32
Outstanding at January 1, 2020
Exercised
Expired
Outstanding and exercisable at December 31, 2020
Number of
Shares
Weighted-
Average
Exercise
Prices
765 $
(435 ) $
(10 ) $
320 $
5.75
3.09
0.15
9.47
Weighted-
Average
Remaining
Contractual
Term (In
Years)
0.6
The warrants outstanding at December 31, 2020 had an intrinsic value of approximately $2.1 million based on a per-share
stock price of $16.09 as of December 31, 2020.
On March 17, 2020, 196,602 warrants with an exercise price of $3.75 were set to expire. Prior to the expiration, the
Company entered into an agreement with the warrant holders, whereby it modified the terms of the warrants to extend the expiration
date until September 17, 2020 in exchange for the removal of a cashless exercise provision. No other terms were modified. Due to
this modification, the Company incurred a modification expense of approximately $139,000 that is included in general and
administrative expenses on the Statement of Operations for the year ended December 31, 2020. All of the modified warrants were
exercised on August 6, 2020. On December 3, 2020, the Company modified 12,200 warrants with an original exercise price of
$9.375 and an expiration date August 4, 2021. The warrants were modified to decrease the exercise price to $7.50 and change the
expiration date to December 31, 2020. The warrants were then exercised December 4, 2020. Due to the modification, the Company
incurred a modification expense of approximately $2,000 that is included in general and administrative expenses on the Statement
of Operations for the year ended December 31, 2020. In December 2020, a warrant for 37,562 shares was presented for cashless
exercise resulting in the issuance of 13,165 shares of common stock.
11. STOCK BASED COMPENSATION
On March 14, 2007, the Company’s stockholders approved the 2007 Equity Incentive Plan (the “2007 Plan”). The 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. At the time of the expiration of the 2007 plan, options to purchase 2,106,637 shares of common stock
were outstanding.
In May 2017, the Company’s shareholders approved its 2017 Stock Incentive Plan (“2017 Plan”). 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 share grants. The Company 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
the Company or any subsidiaries of the Company are eligible to receive incentive awards under the 2017 Plan. As of December 31,
2020, awards aggregate of 2,669,760 shares of common stock had been granted under the 2017 Plan and total of 1,080,240 shares
of common stock are reserved for issuance.
The following table summarizes the stock-based compensation expense recorded in the Company’s results of operations
during the years ended December 31, 2020 and 2019 for stock options and restricted stock (in thousands):
Research and development
General and administrative
Selling and Marketing
Year Ended December 31,
2019
2020
$
$
1,148 $
1,741
152
3,041 $
839
1,956
134
2,929
As of December 31, 2020, there was approximately $4.9 million of total unrecognized compensation expense related to
non-vested share-based compensation arrangements that are expected to vest. This cost is expected to be recognized over a
weighted-average period of 2.5 years.
The Company records compensation expense for employee awards with graded vesting using the straight-line method.
The Company records compensation expense for nonemployee awards with graded vesting using the accelerated expense
attribution method. The Company recognizes compensation expense over the requisite service period applicable to each individual
33
award, which generally equals the vesting term. The Company estimates the fair value of each option award using the Black-
Scholes-Merton option pricing model. Forfeitures are recognized when realized.
The fair value of employee stock options issued was estimated using the following weighted-average assumptions:
Weighted average exercise price:
Weighted average grant date fair value per share:
Assumptions:
Expected volatility
Weighted average expected term (in years)
Risk-free interest rate
Expected dividend yield
Year Ended December 31,
2019
2020
$
$
4.20 $
2.80 $
77.8%
6.0
0.71%
0.0%
3.90
2.50
70.6%
6.0
2.54%
0.0%
The risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected
volatility was based upon the historical volatility of the Company. The expected life of the Company’s options was determined
using the simplified method as a result of limited historical data regarding the Company’s activity. The dividend yield considers
that the Company has not historically paid dividends and does not expect to pay dividends in the foreseeable future.
The following table summarizes stock option activity during the year ended December 31, 2020 (in thousands except
exercise prices and contractual terms):
Outstanding at January 1, 2020
Granted
Exercised
Expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Number of
Shares
Weighted-
Average
Exercise
Prices
Weighted-
Average
Remaining
Contractual
Term (In
Years)
Intrinsic
Value
2,934 $
664 $
(152 ) $
– $
3,446 $
2,518 $
6.36
4.20
5.83
–
5.97
6.55
–
–
–
–
6.5 $
5.8 $
–
–
–
–
35,001
24,155
During the year ended December 31, 2020, the Company granted options under its 2017 Plan purchase 664,128 shares of
its common stock to its employees. The fair value of these options was approximately $1.9 million.
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 year ended December 31,
2020 (in thousands except per share data):
Outstanding at January 1, 2020
Granted
Vested
Outstanding non-vested shares at December 31, 2020
12. 401(k) PLAN
Number of
Shares
Weighted-
Average Grant
Date Fair Value
4.50
4.43
4.53
4.43
486 $
463 $
(307 ) $
642 $
During 2002, the Company established a plan under Section 401(k) of the Internal Revenue Code (the 401(k) Plan). The
401(k) Plan covers substantially all of its employees who have attained 18 years of age. Employees may elect to contribute part of
their annual compensation to the 401(k) Plan, up to the maximum deferral allowance for individuals by the Internal Revenue
Service under Code Section 401(k), and the Company may make a matching contribution. During the years ended December 31,
2020 and 2019, there were no matching contributions made by the Company.
34
13. INCOME TAXES
The loss before provision for income taxes consisted of the following (in thousands):
Domestic
International
Total
Year Ended December 31,
2019
2020
$
$
(14,878 ) $
–
(14,878 ) $
(13,300 )
–
(13,300 )
The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2020 and
2019. The Company accounts for income taxes in accordance with ASC 740, which requires that the tax benefit of net operating
losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that
realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate
sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management
believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to
be realized and, accordingly, has provided a full valuation allowance. The valuation allowance increased by approximately $3.8
million during the year ended December 31, 2020 and increased by approximately $2.6 million during the year ended December
31, 2019.
The Company’s deferred tax assets are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Tax credit
Fixed assets and intangibles
Stock compensation
Accruals and other
Lease liability
Total deferred tax assets
Deferred tax liabilities:
Right of use asset
Total deferred tax assets
Valuation allowance
Net deferred tax asset
Year Ended December 31,
2019
2020
$
24,125 $
1,889
1,144
1,321
151
148
28,778
(151 )
(151 )
(28,627 )
$
– $
20,583
1,462
1,312
1,304
218
33
24,912
(35 )
(35 )
(24,877 )
–
Net operating losses and tax credit carryforwards as of December 31, 2020, are as follows (in thousands):
Net operating losses, federal
Net operating losses, federal
Net operating losses, state
Tax credits, federal
Tax credits, state
Tax credits, state
Amount
Expiration in
years
40,419 No expiration
65,802
30,216
1,731
2027-2037
2030-2039
2027-2039
425 No expiration
1,000
2022-2035
$
$
$
$
$
$
The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as
follows:
Statutory rate
State rate
Non-deductible items
Change in valuation allowance
Change in tax credits
Year ending December 31,
2019
2020
21.00 %
2.17 %
0.84 %
(25.29 )%
1.28 %
21.00 %
1.90 %
(1.34 )%
(22.10 )%
0.54 %
35
Total
–
–
Utilization of U.S. net operating losses and tax credit carryforwards may be limited by “ownership change” rules, as
defined in Section 382 of the Internal Revenue Code. Similar rules may apply under state tax laws. The Company has not conducted
a study to-date to assess whether a limitation would apply under Section 382 of the Internal Revenue Code as and when it starts
utilizing its net operating losses and tax credits. The Company will continue to monitor activities in the future. In the event the
Company previously experienced an ownership change, or should experience an ownership change in the future, the amount of net
operating losses and research and development credit carryovers available in any taxable year could be limited and may expire
unutilized.
The Company establishes reserves for uncertain tax positions based on the largest amount that is more-likely-than-not to
be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. It is
the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense. As of December 31,
2020 and 2019, respectively, the Company has no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In the normal course
of business, the Company is subject to examination by their respective taxing authorities. The Company is not currently under
audit by the Internal Revenue Service or other similar state or local authority. The statute of limitations remains effectively open
for all tax years since inception (2007). Tax years outside the normal statute of limitations remain open to examination by tax
authorities due to tax attributes generated in earlier years which have been carried forward and may be examined and adjusted in
subsequent years when utilized.
The following table summarizes the activity related to the Company’s gross unrecognized tax benefits for the years ended
December 31, 2020 and 2019 (in thousands):
January 1 – unrecognized tax benefits
Increases (decreases) – prior year tax positions
Increases – current year tax positions
December 31 - unrecognized tax benefits
2020
2019
$
$
865 $
–
205
1,070 $
732
–
133
865
The following table summarizes the activity in the Company’s Valuation Allowance and Qualifying Accounts for the
years ended December 31, 2020 and 2019 (in thousands):
Deferred tax assets valuation allowance
Year ended December 31, 2020
Year ended December 31, 2019
14. SUBSEQUENT EVENTS
Balance at
Beginning
of Year
Additions Deductions
Balance
at End of
Year
$
$
24,877 $
22,276 $
3,951 $
3,123 $
201 $
522 $
28,627
24,877
On January 5, 2021 the Company announced the completion of its ATM offering after an additional 14,680 shares were
sold for an average price per share of $16.97 in January 2021 resulting in additional net proceeds of approximately $243,000.
In January 2021, warrants for 317,488 shares were presented for cashless exercises resulting in the issuance of 223,487
shares of common stock.
36
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our chief executive officer and chief financial officer evaluated the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based
upon that evaluation, our management, including our chief executive officer and chief financial officer, concluded that our
disclosure controls and procedures were effective as of December 31, 2020 in ensuring all material information required to be filed
has been made known in a timely manner.
(b) Changes in internal control over financial reporting.
There were no changes to our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
(c) Management’s report on internal controls over financial reporting.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as
defined under Rule 15a-15(f) under the Exchange Act. Our management has assessed the effectiveness of our internal controls
over financial reporting as of December 31, 2020 based on the framework established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Our internal
control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation
and fair presentation of published financial statements. An internal control material weakness is a significant deficiency, or
aggregation of deficiencies, that does not reduce to a relatively low level the risk that material misstatements in financial statements
will be prevented or detected on a timely basis by employees in the normal course of their work. Our management assessed the
effectiveness of our internal control over financial reporting as of December 31, 2020, and based on that evaluation, management
concluded that our internal control over financial reporting was effective as of December 31, 2020.
This report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the
rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.
Item 9B. Other Information
Not applicable.
37
PART III
The information required by Part III is omitted from this report because we will file a definitive proxy statement within
120 days after the end of our 2020 fiscal year pursuant to Regulation 14A for our 2021 Annual Meeting of Stockholders, or the
2021 Proxy Statement, and the information to be included in the 2021 Proxy Statement is incorporated herein by reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required under this item will be contained in the 2021 Proxy Statement and is hereby incorporated by
reference.
Item 11.
Executive Compensation
The information required under this item will be contained in the 2021 Proxy Statement and is hereby incorporated by
reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
The information required under this item will be contained in the 2021 Proxy Statement and is hereby incorporated by
reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item will be contained in the 2021 Proxy Statement and is hereby incorporated by
reference.
Item 14.
Principal Accountant Fees and Services
The information required under this item will be contained in the 2021 Proxy Statement and is hereby incorporated by
reference.
38
Item 15.
Exhibits and Financial Statement Schedules
(a) Financial Statements
PART IV
(1) Financial statements for our company are listed in the index under Item 8 of this document
(2) All financial statement schedules are omitted because they are not applicable, not material or the required
information is shown in the financial statements or notes thereto.
Exhibit
No.
Description
Method of Filing
3.1
Amended and Restated Certificate of Incorporation of the
Registrant
3.2
Amended and Restated Bylaws of the Registrant
3.3
Certificate of Amendment to Amended and Restated Certificate
of Incorporation of the Registrant
3.4
Certificate of Amendment to Amended and Restated Certificate
of Incorporation of the Registrant
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
4.1
Warrant dated August 10, 2016 issued to National Securities
Incorporated by reference from the Registrant’s
Corporation
Quarterly Report on Form 10-Q filed on
September 19, 2016.
4.2
Description of Capital Stock
Filed electronically herewith
10.1
Assignment of Patent Rights dated April 3, 2009 between Dr.
Robert Mears and the Registrant
10.2+
2007 Stock Incentive Plan
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
10.3
Exclusive License and Collaboration Agreement dated March 3,
2010 between K2 Energy Limited and the Registrant
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
10.4
Letter Agreement dated June 6, 2014 between K2 Energy
Limited and the Registrant
10.5
Lease Agreement dated January 19, 2016 between 750
University, LLC and the Registrant
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
39
10.6+
Form of Restricted Stock Agreement
10.7+
Atomera Incorporated 2017 Stock Incentive Plan
Incorporated by reference from the Registrant’s
Amendment No. 1 to Registration Statement on
Form S-1 filed on July 29, 2016
Incorporated by reference from the Registrant’s
Definitive Proxy Statement filed on April 10, 2017.
10.8
First Amendment to Lease Agreement dated January 19, 2016
between 750 University, LLC and the Registrant
Incorporated by reference from the Registrant’s
Form 10-K filed on March 6, 2018.
10.9+
Employment Agreement dated January 26, 2021 between Scott
Bibaud and the Registrant
Filed electronically herewith
10.10+
Employment Agreement dated January 26, 2021 between Frank
Laurencio and the Registrant
Filed electronically herewith.
10.11+
Employment Agreement dated January 26, 2021 between Dr.
Robert Mears and the Registrant
Filed electronically herewith
10.12+
Employment Agreement dated January 26, 2021 between Erwin
Trautmann and the Registrant
Filed electronically herewith.
10.13
Second Amendment to Lease Agreement dated January 19,
2016 between 750 University, LLC and the Registrant
Filed electronically herewith.
21.1
List of Subsidiaries
Incorporated by reference from the Registrant’s
Registration Statement on Form S-1 filed on
June 30, 2016.
23.1
31.1
31.2
32.1
Consent of Marcum LLP, Independent Registered Public
Accounting Firm
Filed electronically herewith
Certifications Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Filed electronically herewith
Certifications Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Filed electronically herewith
Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).
Filed electronically herewith
101.INS XBRL Instance Document
Filed electronically herewith
101.SCH XBRL Taxonomy Extension Schema Document
Filed electronically herewith
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
Filed electronically herewith
101.LAB XBRL Taxonomy Extension Label Linkbase Document
Filed electronically herewith
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed electronically herewith
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
Filed electronically herewith
+ Indicated management compensatory plan, contract or arrangement.
40
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 19, 2021
Date: February 19, 2021
ATOMERA INCORPORATED.
By:
/s/ Scott A. Bibaud
Scott A. Bibaud
Chief Executive Officer,
(Principal Executive Officer)
and Director
By: /s/ Francis B. Laurencio
Francis B. Laurencio
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/Scott A. Bibaud
Scott A. Bibaud
/s/John D. Gerber
John Gerber
/s/ Erwin Trautmann
Erwin Trautmann
/s/Rolf Stadheim
Rolf Stadheim
/s/C. Rinn Cleavelin
C. Rinn Cleavelin, Ph.D.
/s/ Steven K. Shevick
Steven K. Shevick
/s/ Duy-Loan Le
Duy-Loan Le
Title
Date
Chief Executive Officer and Director
(Principal Executive Officer)
February 19, 2021
Director and Chairman
February 19, 2021
February 19, 2021
February 19, 2021
February 19, 2021
February 19, 2021
February 19, 2021
Executive Vice President of Strategic
Business Development and Director
Director
Director
Director
Director
41