What changed in this filing

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Item 1A. Risk Factors

2021-02-19 compared with 2020-03-13 · 396 added, 324 removed, 110 unchanged (87% of the section changed)

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Risks Related to Our Business

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:

● 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 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 ability to protect our intellectual property rights;

● our ability to raise additional capital as and when needed.

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 only recently

commenced limited revenue producing operations, so it is difficult for potential investors to evaluate our business.

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:

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

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;

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.

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.&emsp;

For the years

ended December 31, 2019 and 2018, we have incurred net losses of approximately $13.3 million and $12.9 million, respectively,

and our operations have used approximately $10.4 million and $9.8 million of cash, respectively.

As of December 31, 2019,

we had an accumulated deficit of approximately $135.3 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.

We may need additional

financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms

As of December 31, 2019, we had total assets of approximately $15.2 million, cash and cash-equivalents

of approximately $14.9 million and working capital of approximately $13.5 million.

As of the date of this Annual Report,

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.

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, 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, there can be no assurance that any of these relationships will lead to a royalty-based

manufacturing or distribution license agreement .

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.

We intend that each 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.

Future licenses

with our RF licensee are likely to involve their foundry partner as that licensee is a fabless supplier of RF products.

those manufacturing and distribution license agreements will 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.

our ability to enter into royalty-based manufacturing and distribution agreements with our current 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.

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.

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 either customer

to manufacturing or distribution licenses and we expect both customers 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.

While we believe that licensing of MST 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 .

business may be adversely affected by the recent coronavirus outbreak.

In December 2019, a novel strain of coronavirus

was reported to have surfaced in Wuhan, China.

In January 2020, this coronavirus spread to other countries, including the United

States, and efforts to contain the spread of this coronavirus intensified.

At this time, we have restricted travel to Asia and

certain of our customers have limited operations and restricted internal and external meetings.

The outbreak and any preventative

or protective actions that we or our customers may take in respect of this coronavirus may result in a period of disruption to

work in progress.

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 .

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

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’

businesses could be disrupted, and our ongoing and future revenues and technology evaluations,

license negotiations and revenues could be negatively affected.

Any resulting financial impact cannot be reasonably estimated at

this time but may materially affect our business and financial condition.

The extent to which the coronavirus impacts our results

will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge

concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others .

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.

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.

impacts of the COVID-19 pandemic on our business operations and workforce, and the duration of such impacts, are uncertain, constantly

and difficult to quantify, but have thus

far included, or in the future may include, the following:

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

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using their tools.

Despite a contraction from a record level in 2018, the semiconductor industry in 2019 exceeded $400 billion

in sales, and in recent months sales have begun to trend upward again, resulting in continuing tight capacity among our potential

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.

long-term success of our business is dependent on a royalty-based business model, which is inherently risky.

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’

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 future royalties paid to us by licensee-customers, whose business requires them to market

products to their end customers.

Royalty payments under our licenses may be based, among other things, upon the number of wafers

onto which our MST is deposited or a percentage of the net sales of MST-enabled products.

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’

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:

the rate of adoption and incorporation of our technology by semiconductor designers and manufacturers

and the manufacturers of semiconductor fabrication equipment;

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:

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 customer’s ability to successfully market MST-enabled products to their end 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;

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the impact of economic downturns;

the timing of receipt of royalty reports and the applicable revenue recognition criteria, which

may result in fluctuation in our results of operations.

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.&emsp;

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.

the timing of receipt of royalty reports and the applicable revenue recognition criteria, which may result in fluctuation in our results of operations.

We may need additional

financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms

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.

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.

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.&emsp;

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

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could be materially adversely affected.

may be difficult for us to verify royalty amounts owed to us under our licensing agreements, and this may cause us to lose revenues.&emsp;

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.&emsp;

will endeavor to provide that the terms of our license agreements require our licensees to document their use of our technology

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give assurances that such audits will be effective to that end.

business operations could suffer in the event of information technology systems’

operations could suffer in the event of information technology systems’

failures or security breaches .&emsp;While

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costs to remedy the damages caused by these disruptions or security breaches.

we fail to protect and enforce our intellectual property rights and our confidential information, our business will suffer.&emsp;

If we fail to

protect and enforce our intellectual property rights and our confidential information, our business will suffer.&emsp;

rely primarily on a combination of nondisclosure agreements and other contractual provisions and patent, trade secret and copyright

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others could use portions of our technology and intellectual property without the payment of license fees and royalties.

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

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.

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.

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.

may become involved in material legal proceedings in the future to enforce or protect our intellectual property rights, which could

harm our business.

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

The misappropriation of our trade secrets or other proprietary information could seriously harm our business.

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

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.

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

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challenge the validity and enforceability of our patents or the scope of our license agreements.

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.

In addition, the costs

associated with legal proceedings are typically high, relatively unpredictable and not completely within our control.

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

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business and financial position, results of operations and cash flows.

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.

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

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.

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.

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.

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

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.

integrated circuits incorporating our technologies are used in defective products, we may be subject to product liability or other

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.

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.

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.

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 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

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Risks Related to Owning Our Common Stock

stock price has been volatile and thinly traded.

Our common stock has traded on the Nasdaq Capital Market since August

Our common stock has been relatively thinly traded, with an average daily trading volume of approximately 66,000 shares

during 2019 and prices ranging from a low of $2.33 to a high of $10.25 in the period from August 5, 2016 through December 31, 2019.

There can be no assurance that the market for our common shares will become more liquid.

The stock market in general, and early

stage public companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate

to the operating performance of such companies.

If we are unable to increase the trading volume for our common shares, you may

not be able to sell your common shares at prices you consider to be fair or at times that are convenient for you, or at all.

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 .

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.

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;

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.

We are an “emerging

growth company”

as defined in the Jumpstart Our Business Startups Act of 2012 (“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”

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:

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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;

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments;

extended transition periods available for complying with new or revised accounting standards.

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.

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

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“emerging growth company”

until December 31, 2021, although we will lose that status sooner if our revenues exceed

$1.07 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if the market value of our common

stock that is held by non-affiliates exceeds $700 million as of any June 30.

status as an “emerging growth company”

under the JOBS Act may make it more difficult to raise capital as and when we

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,”

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is not as transparent as other companies in our industry.

If we are unable to raise additional capital as and when we need it,

our financial condition and results of operations may be materially and adversely affected.

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.

eligible for future sale may adversely affect the market for our common stock .

Of the 17,116,654 shares of our common

stock outstanding as of December 31, 2019, approximately 15,631,761 shares are held by “non-affiliates”

and are freely

tradable without restriction pursuant to Rule 144.

Any substantial sale of our common stock pursuant to Rule 144 or pursuant to

any resale prospectus may have a material adverse effect on the market price of our common stock.

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 .

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.

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.

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

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.

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.

provisions in our certificate of incorporation and bylaws:

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:

limit who may call stockholder meetings;

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do not provide for cumulative voting rights;

● provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than

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.

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’

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

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.

forum selection provision in our bylaws may 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

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.

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

with us or any our directors, officers or other employees.

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.

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.

Unresolved Staff Comments

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 1A. Risk Factors