What changed in this filing

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Item 1. Business

2021-02-19 compared with 2020-03-13 · 192 added, 130 removed, 281 unchanged (53% of the section changed)

Company Overview

We are engaged in the

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scale, with equipment 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 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 intend to develop and license technologies and processes that will

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 or are expected to include:

Our customers and partners include:

foundries, which manufacture integrated circuits on behalf of fabless manufacturers;

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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;

electronic design automation companies, which make software tools used throughout the industry to simulate the effects of using different materials, design structures and process technologies on the performance of semiconductor products.

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 pay us a fee for their right to use MST technology in the manufacture

of silicon wafers for internal testing and sampling.

We intend to enter into agreements in the future that will provide for customers

to pay us (i) an upfront fee for the license to manufacture and sell MST-based silicon wafers or devices and (ii) a per-wafer (or

per-device) royalty for each product sold..

We also generate revenue through engineering services provided to customers during

their evaluation of MST technology.

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.

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’

the customer has the right under the license agreement to complete the manufacturing process which enables them to evaluate our

These agreements do not grant the customer the right to deposit MST at their site or to sell products incorporating

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

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

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Semiconductors, Generally

Recent years have seen

a remarkable proliferation of consumer and commercial products, especially in wireless, automotive and mobile electronic devices.

Recent years have

seen a remarkable proliferation of consumer and commercial products, especially in wireless, automotive and mobile electronic

The growth of the Internet and cloud computing has provided people with new ways to create, store and share information.

same time, the increasing use of electronics in cars, buildings, appliances and other consumer products is creating a broad landscape

of “smart”

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

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advanced materials to supplement the ongoing geometry shrinks.

Some of those materials advances included strained silicon, Silicon

on Insulator and High-K/Metal Gate.

In addition, 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.

Some of those materials advances included strained silicon, Silicon-on-Insulator

and High-K/Metal Gate.

The designers and manufacturers

of integrated circuits and systems —

our potential customers —

our targeted customers —

are facing intense pressure to deliver innovative products

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Because shrinking geometries at the smaller nodes incurs higher

capital and manufacturing costs, only limited products can take on the increased cost burden and still be economically viable.

We believe these cost constraints will cause semiconductor designers and manufacturers to turn to engineered materials, like MST,

to solve this problem.

capital and manufacturing costs, only a limited number of companies can afford to continue investing in those nodes.

these constraints will cause semiconductor designers and manufacturers to turn to engineered materials, like MST, to solve this

Vertical Disaggregation of the Industry

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and development costs manageable, while attempting to satisfy the demand for increasingly complex semiconductors, certain designers

and manufacturers of integrated circuits have transitioned to an open innovation model in which competing companies and third-party

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

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While specialization

has enabled greater development and manufacturing efficiency, it has also created an opportunity for IP-based companies, such as

Atomera, that develop and license technology to meet fundamental, industry-wide challenges.

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

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Manufacturers and designers of semiconductors increasingly find it more

cost-effective to license technologies from IP-based companies than internally developing processes 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.

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

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accompanying diagram, MST is a “silicon-on-silicon”

solution that provides multiple benefits through a relatively simple

modification to the standard CMOS manufacturing flow.

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

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test chips, are approximately equivalent

to the enhancements enabled by one-half to a full node of improvement and, therefore, extend the productive life of capital equipment

and wafer fabrication facilities.

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.

that MST compares favorably to other alternatives for enhancing performance of CMOS-type transistors as follows:

We believe that MST compares favorably to other alternatives for enhancing performance of CMOS-type transistors as follows:

Strained Silicon and Silicon-on-Insulator, or SOI :

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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 RF providers, which are also referred to as RFSOI.

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 :

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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 ultra-thin gate dielectrics.

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.

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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.

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

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logic products;

DRAM, SRAM, and other memory

integrated circuits;

as well as analog, radio frequency, and mixed-signal devices.

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.

analog, RF, and mixed-signal

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

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semiconductor manufacturers and designers to model the interaction of MST with other process steps.

We have begun to use our modeling

capabilities to demonstrate to potential customers the likely benefits of MST on the performance of a completed semiconductor device.

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.

In December 2020, we announced

availability of our MSTcad TM 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

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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 or device sold that incorporates MST.

In the case of fabless semiconductor

licensees, our strategy is to charge a royalty for each device they sell that incorporates our MST technology.

The 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.

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 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

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

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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.

Technology qualification .

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describe a model customer engagement, we have engaged with some customers in ways that do not follow this precise order.

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.

Additionally, as part of some customer

engagements we may enter into a joint development agreement to set forth objectives and mutual obligations for particular activities

that occur during the evaluation, productization and commercialization of MST-based wafers.

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

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semiconductor manufacturer.

As of the date of this Annual Report, MST was in the integration phase on 15 different engagements.

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 engaged at different stages of customer development with other potential customers.

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

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their manufacturing tools.

If their tools can successfully deposit MST, we believe they will promote the incorporation of our MST

technology in the OEMs’

EPI machines 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.

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

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assist us in establishing relationships with local 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 Asahi Kasei Microdevices, (“AKM”),

and STMicroelectronics, (“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

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

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’

2018, respectively, we entered into separate integration license agreements with AKM and ST, both of which are leading IDMs.

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

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.

Our lead product, MST,

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upon the knowledge, experience, and skills of key scientific and technical personnel.

We have been granted

84 patents in the U.S.

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.

MST patent portfolio begins to expire commencing August 22, 2023.

While we believe our core patents adequately block competitors

from using our MST 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

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.

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 mark “MST”

trademarks in the United States for the marks “Atomera”

and “MST”

and in China for the mark “Mears”.

We have applied with

Patent and Trademark Office for the registration of the mark “Atomera”

We have applied with the U.S.

Patent and Trademark Office for the registration of the mark “MSTcad”

in the United States.

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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 o the Securities and Exchange

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business