Financial Data and Key Metrics Changes - The GAAP net loss for Q2 2020 was $3.8 million or $0.21 per share, compared to a net loss of $3.6 million or $0.24 per share in Q2 2019, reflecting a larger net loss due to a $70,000 difference in revenue and lower interest income [23][24] - Non-GAAP adjusted EBITDA in Q2 2020 was a loss of $3 million, compared to a loss of $2.9 million in Q2 2019 [24] - Cash balance at June 30, 2020, was $18 million, up from $11.4 million on March 31, 2020, due to a public offering that netted approximately $9.4 million [27] Business Line Data and Key Metrics Changes - The company has 26 engagements with 19 customers, with 17 customers in the critical Phase 3 stage [9][30] - Non-GAAP research and development expenses were $1.8 million in both Q2 2020 and Q2 2019, indicating stable R&D spending despite the pandemic [25] Market Data and Key Metrics Changes - The analogue semiconductor segment accounts for 15% to 20% of the total revenue in the $400 billion semiconductor market, representing a significant opportunity for the company [44] Company Strategy and Development Direction - The company is focusing on developing joint development agreements (JDAs) with larger customers to enhance strategic relationships and accelerate technology adoption [11][12] - The installation of a new 300 millimeter EPI Deposition Tool is expected to enhance capabilities and accelerate time to revenue [19][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about ongoing customer engagements and technical progress, despite minor delays caused by the pandemic [30] - The company is prioritizing existing customer engagements over new customer acquisition due to high demand from current clients [10][40] Other Important Information - The company has grown its patent portfolio to 244, which is seen as a strong asset for protecting its technology [18] - The company is taking a conservative approach to growing operating expenses, reiterating guidance for 2020 non-GAAP operating expenses in the range of $12.75 million to $13.25 million [28] Q&A Session Summary Question: Implementation of the 300 millimeter tool and its impact on customer licenses - Management explained that the new tool will allow for faster experimentation and results for customers, which is expected to lead to earlier licenses [33][34] Question: Timeline for using the new tool after acceptance - It was indicated that once the tool is accepted, it would take about three to four weeks to qualify and calibrate it for customer wafers [37] Question: Conditions for prioritizing new customer acquisition - Management noted that the current focus is on existing customers due to high workload, but additional engineers have been hired to eventually allow for new customer acquisition [40][41] Question: Market opportunities for MST SP technology - The analogue semiconductor segment is highlighted as a significant market opportunity, with many customers in the pipeline working on related technologies [44] Question: Impact of JDAs on typical engagement phases - Management clarified that JDAs do not significantly alter the phased approach but may expedite the licensing process for subsequent engagements [46][48]

[Filing Information](index=1&type=section&id=Filing%20Information) This section provides essential filing details for Atomera Incorporated's Form 10-Q, including registrant information, trading symbol, and outstanding shares Filing Details | Detail | Value | | :----- | :---- | | Filing Type | Form 10-Q | | Period Ended | June 30, 2020 | | Registrant | ATOMERA INCORPORATED | | Trading Symbol | ATOM | | Exchange | Nasdaq Capital Market | | Outstanding Common Shares (July 31, 2020) | 19,825,845 | [PART I. Financial Information](index=2&type=section&id=PART%20I.%20Financial%20Information) This part encompasses the unaudited condensed financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reporting period [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Atomera Incorporated's unaudited condensed financial statements for the three and six months ended June 30, 2020 and 2019, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with accompanying notes detailing significant accounting policies, revenue recognition, liquidity, and other financial disclosures [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Data (in thousands) | Metric | June 30, 2020 (Unaudited) | December 31, 2019 | | :-------------------------------- | :------------------------ | :---------------- | | Cash and cash equivalents | $17,965 | $14,871 | | Prepaid expenses and other current assets | $255 | $132 | | Total current assets | $18,220 | $15,003 | | Property and equipment, net | $53 | $63 | | Operating lease right-of-use asset | $89 | $161 | | Long-term prepaid rent | $450 | – | | Security deposit | $13 | $13 | | Total assets | $18,825 | $15,240 | | Accounts payable | $586 | $315 | | Accrued expenses | $178 | $145 | | Accrued payroll related expenses | $405 | $819 | | Current operating lease liability | $78 | $152 | | Deferred revenue | – | $37 | | Total liabilities | $1,247 | $1,468 | | Common stock, $0.001 par value | $20 | $17 | | Additional paid-in capital | $160,244 | $149,017 | | Accumulated deficit | $(142,686) | $(135,262) | | Total stockholders' equity | $17,578 | $13,772 | | Total liabilities and stockholders' equity | $18,825 | $15,240 | [Unaudited Condensed Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Statements%20of%20Operations) Condensed Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $0 | $70 | $62 | $141 | | Cost of revenue | $0 | $(20) | $(13) | $(20) | | Gross margin | $0 | $50 | $49 | $121 | | Research and development | $2,086 | $2,057 | $4,148 | $4,184 | | General and administrative | $1,480 | $1,488 | $2,925 | $2,809 | | Selling and marketing | $215 | $225 | $440 | $472 | | Total operating expenses | $3,781 | $3,770 | $7,513 | $7,465 | | Loss from operations | $(3,781) | $(3,720) | $(7,464) | $(7,344) | | Interest income | $2 | $86 | $40 | $176 | | Total other income | $2 | $86 | $40 | $176 | | Net loss | $(3,779) | $(3,634) | $(7,424) | $(7,168) | | Net loss per common share, basic and diluted | $(0.21) | $(0.24) | $(0.43) | $(0.47) | | Weighted average number of common shares outstanding, basic and diluted | 17,975 | 15,423 | 17,367 | 15,104 | [Unaudited Condensed Statements of Stockholders' Equity](index=4&type=section&id=Unaudited%20Condensed%20Statements%20of%20Stockholders'%20Equity) Stockholders' Equity Changes (in thousands) | Item | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Balance January 1 | $13,772 | $17,746 | | Stock-based compensation | $1,395 (total for 6 months) | $1,482 (total for 6 months) | | Warrant exercise | $164 | – | | Warrant modification | $139 | – | | Underwritten public offering, net | $9,395 | $6,397 (Registered direct offering) | | Stock option exercise | $137 | – | | Net loss | $(7,424) | $(7,168) | | Balance June 30 | $17,578 | $18,457 | [Unaudited Condensed Statements of Cash Flows](index=5&type=section&id=Unaudited%20Condensed%20Statements%20of%20Cash%20Flows) Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(7,424) | $(7,168) | | Depreciation and amortization | $21 | $21 | | Right of use asset amortization | $72 | $65 | | Stock-based compensation | $1,395 | $1,482 | | Warrant modification expense | $139 | – | | Changes in operating assets and liabilities (net) | $(884) | $(483) | | Net cash used in operating activities | $(6,591) | $(6,161) | | Acquisition of property and equipment | $(11) | $(51) | | Net cash used in investing activities | $(11) | $(51) | | Proceeds from underwritten public offering, net | $9,395 | – | | Proceeds from registered direct offering, net | – | $6,397 | | Proceeds from exercise of warrant | $164 | – | | Proceeds from exercise of stock options | $137 | – | | Net cash provided by financing activities | $9,696 | $6,397 | | Net increase in cash and cash equivalents | $3,094 | $185 | | Cash and cash equivalents at beginning of period | $14,871 | $18,933 | | Cash and cash equivalents at end of period | $17,965 | $19,118 | [Notes to the Unaudited Condensed Financial Statements](index=7&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Financial%20Statements) This section provides detailed disclosures and explanations for the unaudited condensed financial statements, covering the company's nature of operations, liquidity, significant accounting policies, revenue recognition, loss per share calculations, lease obligations, warrant activity, stock-based compensation, and commitments [1. Nature of Operations](index=7&type=section&id=1.%20Nature%20of%20Operations) This note describes Atomera Incorporated's business, focus on semiconductor technology, and financing activities - Atomera Incorporated, formerly MEARS Technologies, Inc., incorporated in Delaware in March 2007, focuses on developing, commercializing, and licensing proprietary processes and technologies for the semiconductor industry[13](index=13&type=chunk) - The company is in the development stage with limited revenue-generating activities, primarily financing operations through equity and debt securities placements and public offerings[14](index=14&type=chunk) [2. Liquidity and Management Plans](index=7&type=section&id=2.%20Liquidity%20and%20Management%20Plans) This note addresses the company's financial liquidity, operating losses, and plans for future capital management - As of June 30, 2020, the Company had **$18.0 million in cash and cash equivalents** and **$17.0 million in working capital**[15](index=15&type=chunk) - Despite recurring operating losses and limited revenue, management believes current capital is sufficient for at least 12 months, but slow adoption of new semiconductor technologies and COVID-19 impacts pose risks, potentially requiring additional capital[16](index=16&type=chunk) [3. Summary of Significant Accounting Policies](index=7&type=section&id=3.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's key accounting principles and recent accounting standard adoptions - No material changes to significant accounting policies were reported, except for the adoption of ASU No. 2016-13 (Credit Losses) on January 1, 2020, which did not materially impact the financial statements[17](index=17&type=chunk)[19](index=19&type=chunk) - The unaudited condensed financial statements adhere to GAAP for interim reporting and Regulation S-X[19](index=19&type=chunk) [4. Revenue](index=8&type=section&id=4.%20Revenue) This note details the company's revenue recognition policies and disaggregated revenue by geographic market - Revenue is recognized when performance obligations are satisfied, either at a point in time (integration service agreements) or over time (integration license agreements)[20](index=20&type=chunk)[53](index=53&type=chunk) - Revenue from integration licenses and services is recognized proportionally to the delivery of MST processed wafers[20](index=20&type=chunk) Disaggregated Revenue by Geographic Market (in thousands) | Geographic Market | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $0 | $0 | $62 | $0 | | Europe | $0 | $33 | $0 | $83 | | Asia Pacific | $0 | $37 | $0 | $58 | | Total | $0 | $70 | $62 | $141 | - The Company recognized approximately **$37,000 of revenue** during the six months ended June 30, 2020, which was previously included in deferred revenue as of December 31, 2019[24](index=24&type=chunk) [5. Basic and Diluted Loss Per Share](index=9&type=section&id=5.%20Basic%20and%20Diluted%20Loss%20Per%20Share) This note explains the calculation of loss per share and the impact of anti-dilutive securities - Due to recurring net losses, all potentially dilutive securities (stock options, unvested restricted stock, and warrants) are anti-dilutive, resulting in basic and diluted net loss per share being equal for all periods presented[25](index=25&type=chunk) Anti-Dilutive Common Stock Equivalents (in thousands) | Item | June 30, 2020 | June 30, 2019 | | :-------------------- | :------------ | :------------ | | Stock Options | 3,560 | 2,935 | | Unvested restricted stock | 782 | 521 | | Warrants | 566 | 765 | | Total | 4,908 | 4,221 | [6. Leases](index=9&type=section&id=6.%20Leases) This note describes the company's lease obligations and related costs - The Company leases corporate office space, accounted for under ASC Topic 842, with a remaining term of seven months as of June 30, 2020[27](index=27&type=chunk) - A new five-year lease for a development tool, with payments of **$150,000 per month**, is anticipated to commence in August 2020, with a **$450,000 prepayment** made in the first half of 2020[31](index=31&type=chunk) Operating Lease Costs (in thousands) | Lease Cost Type | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fixed lease costs | $26 | $27 | $53 | $54 | | Variable lease costs | $14 | $13 | $27 | $26 | | Short term lease costs | $7 | $8 | $17 | $16 | | Total operating lease costs | $47 | $48 | $97 | $96 | [7. Warrants](index=10&type=section&id=7.%20Warrants) This note provides details on warrant activity, including exercises, expirations, and modifications Warrant Activity (in thousands, except per share amounts and contractual term) | Metric | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (In Years) | | :----------------------- | :--------------- | :------------------------------ | :----------------------------------------------------- | | Outstanding at January 1, 2020 | 765 | $5.75 | | | Exercised | (189) | $0.87 | | | Expired | (10) | $0.15 | | | Outstanding at June 30, 2020 | 566 | $7.48 | 0.8 | - Warrants outstanding at June 30, 2020, had an intrinsic value of **$1.0 million**[32](index=32&type=chunk) - A modification of **196,602 warrants** in March 2020 extended their expiration date to September 17, 2020, in exchange for removing a cashless exercise provision, resulting in a **$139,000 modification expense**[32](index=32&type=chunk)[33](index=33&type=chunk) [8. Stock Based Compensation](index=11&type=section&id=8.%20Stock%20Based%20Compensation) This note outlines the company's stock incentive plan, compensation expense, and option/restricted stock activity - The 2017 Stock Incentive Plan, approved in May 2017, allows for the grant of stock options and restricted shares, generally vesting over one to four years[34](index=34&type=chunk) - As of June 30, 2020, approximately **$6.5 million of unrecognized compensation expense** related to unvested share-based awards is expected to be recognized over a weighted-average period of **2.9 years**[35](index=35&type=chunk) Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $297 | $221 | $524 | $399 | | General and administrative | $430 | $534 | $799 | $1,016 | | Selling and Marketing | $39 | $33 | $72 | $67 | | Total | $766 | $788 | $1,395 | $1,482 | Stock Option Activity (in thousands, except exercise prices and contractual terms) | Metric | Number of Shares | Weighted Average Exercise Prices | Weighted Average Remaining Contractual Term (In Years) | Intrinsic Value | | :----------------------- | :--------------- | :------------------------------- | :----------------------------------------------------- | :-------------- | | Outstanding at January 1, 2020 | 2,935 | $6.36 | | | | Granted | 658 | $4.13 | | | | Exercised | (33) | $4.18 | | | | Outstanding at June 30, 2020 | 3,560 | $5.97 | 7.02 | $10,956 | | Exercisable at June 30, 2020 | 2,370 | $6.74 | 6.09 | $5,647 | Restricted Stock Activity (in thousands, except per share data) | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :--------------------------------------- | :--------------- | :------------------------------------- | | Outstanding at January 1, 2020 | 486 | $4.50 | | Granted | 463 | $4.43 | | Vested | (167) | $4.46 | | Outstanding non-vested shares at June 30, 2020 | 782 | $4.47 | [9. Commitments and Contingencies](index=12&type=section&id=9.%20Commitments%20and%20Contingencies) This note confirms the absence of material litigation or claims against the company - As of June 30, 2020, and through the date of financial statement issuance, the Company is not party to any material litigation, claims, or assessments[39](index=39&type=chunk) [10. Subsequent Events](index=12&type=section&id=10.%20Subsequent%20Events) This note states that no material subsequent events were identified through the financial statement issuance date - Management has evaluated subsequent events and transactions through the date the financial statements were issued and found no material events requiring disclosure[40](index=40&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Atomera's financial condition and operational results for the three and six months ended June 30, 2020, discussing business overview, revenue generation, operating expenses, cash flows, and liquidity, while also highlighting the impact of the COVID-19 pandemic and future capital requirements [Overview](index=13&type=section&id=Overview) This section provides a business overview, commercialization strategy, capital raising efforts, and the impact of COVID-19 - Atomera develops, commercializes, and licenses proprietary processes and technologies for the semiconductor industry, with its lead technology, Mears Silicon Technology (MST), designed to enhance CMOS-type transistors for increased speed, reliability, and energy efficiency[43](index=43&type=chunk) - The company's commercialization strategy involves licensing MST technology to foundries, IDMs, and fabless semiconductor manufacturers for license fees and royalties, and it has generated limited revenue from integration service agreements and integration license agreements[44](index=44&type=chunk)[46](index=46&type=chunk)[53](index=53&type=chunk) - Atomera has raised capital through several public offerings, including an IPO in August 2016 (**$24.7M net proceeds**), an underwritten public offering in October 2018 (**$11.4M net proceeds**), a registered direct offering in May 2019 (**$6.4M net proceeds**), and another underwritten public offering in May 2020 (**$9.4M net proceeds**)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The COVID-19 pandemic has caused some slowdowns in customer engagements, contract negotiations, and engineering work, potentially affecting future technology evaluations, contract negotiations, and revenues, though no engagements have stopped entirely[52](index=52&type=chunk) [Results of Operations](index=14&type=section&id=Results%20of%20Operations) This section analyzes the company's revenue, cost of revenue, operating expenses, and interest income for the reporting periods [Revenues](index=14&type=section&id=Revenues) This section details revenue sources and future expectations for license fees and royalties Revenue (in thousands) | Period | Revenue | | :------------------------------- | :------ | | Three months ended June 30, 2020 | $0 | | Three months ended June 30, 2019 | $70 | | Six months ended June 30, 2020 | $62 | | Six months ended June 30, 2019 | $141 | - Revenue in all periods was generated from integration license agreements and integration engineering services[54](index=54&type=chunk) - The company expects increased fees from license agreements and royalties in the future, contingent on securing manufacturing and distribution license agreements[53](index=53&type=chunk)[54](index=54&type=chunk) [Cost of Revenue](index=15&type=section&id=Cost%20of%20Revenue) This section explains the components of cost of revenue and its expected variability Cost of Revenue (in thousands) | Period | Cost of Revenue | | :------------------------------- | :-------------- | | Three months ended June 30, 2020 | $0 | | Three months ended June 30, 2019 | $20 | | Six months ended June 30, 2020 | $13 | | Six months ended June 30, 2019 | $20 | - Cost of revenue, comprising materials, direct compensation, and expenses for integration engineering services, is expected to vary significantly based on the mix of integration license and engineering services provided[55](index=55&type=chunk) [Operating Expenses](index=15&type=section&id=Operating%20Expenses) This section provides an overview of total operating expenses and their drivers Total Operating Expenses (in thousands) | Period | Total Operating Expenses | | :------------------------------- | :----------------------- | | Three months ended June 30, 2020 | $3,781 | | Three months ended June 30, 2019 | $3,770 | | Six months ended June 30, 2020 | $7,513 | | Six months ended June 30, 2019 | $7,465 | [Research and development expense](index=15&type=section&id=Research%20and%20development%20expense) This section analyzes changes in research and development expenses, including headcount and outsourced costs Research and Development Expense (in thousands) | Period | R&D Expense | Change YoY | | :------------------------------- | :---------- | :--------- | | Three months ended June 30, 2020 | $2,086 | +1% | | Three months ended June 30, 2019 | $2,057 | | | Six months ended June 30, 2020 | $4,148 | -1% | | Six months ended June 30, 2019 | $4,184 | | - The **1% increase in Q2 2020 R&D expense** was due to adding two engineers, partially offset by reduced travel and outsourced R&D costs[58](index=58&type=chunk) - The **1% decrease for the six months ended June 30, 2020**, was primarily due to a **$328,000 decrease in outsourced R&D**, offset by a **$188,000 increase in payroll** (headcount) and a **$125,000 increase in stock-based compensation**[59](index=59&type=chunk) [General and administrative expense](index=15&type=section&id=General%20and%20administrative%20expense) This section details the factors influencing general and administrative expenses, such as professional fees and warrant modification General and Administrative Expense (in thousands) | Period | G&A Expense | Change YoY | | :------------------------------- | :---------- | :--------- | | Three months ended June 30, 2020 | $1,480 | -1% | | Three months ended June 30, 2019 | $1,488 | | | Six months ended June 30, 2020 | $2,925 | +4% | | Six months ended June 30, 2019 | $2,809 | | - The **4% increase in G&A for the six months ended June 30, 2020**, was driven by a **$196,000 rise in professional fees** and a **$139,000 warrant modification expense**, partially offset by a **$216,000 decrease in stock-based compensation**[61](index=61&type=chunk) [Selling and marketing expense](index=15&type=section&id=Selling%20and%20marketing%20expense) This section explains the changes in selling and marketing expenses, primarily due to travel reductions Selling and Marketing Expense (in thousands) | Period | S&M Expense | Change YoY | | :------------------------------- | :---------- | :--------- | | Three months ended June 30, 2020 | $215 | -4% | | Three months ended June 30, 2019 | $225 | | | Six months ended June 30, 2020 | $440 | -7% | | Six months ended June 30, 2019 | $472 | | - The decrease in selling and marketing expenses for both periods was primarily due to a reduction of approximately **$33,000 in travel expenses** for the six months ended June 30, 2020[63](index=63&type=chunk) [Interest income](index=15&type=section&id=Interest%20income) This section discusses the decline in interest income due to lower cash balances and interest rates Interest Income (in thousands) | Period | Interest Income | | :------------------------------- | :-------------- | | Three months ended June 30, 2020 | $2 | | Three months ended June 30, 2019 | $86 | | Six months ended June 30, 2020 | $40 | | Six months ended June 30, 2019 | $176 | - Interest income decreased significantly due to declining average cash balances and falling interest rates during 2020[64](index=64&type=chunk) [Cash Flows from Operating, Investing and Financing Activities](index=16&type=section&id=Cash%20Flows%20from%20Operating,%20Investing%20and%20Financing%20Activities) This section summarizes cash flows from operating, investing, and financing activities for the reporting periods Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(6,591) | $(6,161) | | Net cash used in investing activities | $(11) | $(51) | | Net cash provided by financing activities | $9,696 | $6,397 | - Operating cash outflow for H1 2020 was primarily due to a **net loss of $7.4 million**, partially offset by **$1.4 million in stock-based compensation**[65](index=65&type=chunk) - Financing activities in H1 2020 were significantly boosted by **$9.4 million from a public offering** and proceeds from warrant and stock option exercises[67](index=67&type=chunk) [Liquidity and Capital Resources](index=16&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's liquidity position, capital sufficiency, and potential future funding needs Liquidity Position (in thousands) | Metric | As of June 30, 2020 | | :----------------------- | :------------------ | | Cash and cash equivalents | $18,000 | | Working capital | $17,000 | | Net loss (six months) | $(7,500) | | Cash used in operations (six months) | $(6,600) | - Management believes current working capital is sufficient for at least the next 12 months, but acknowledges risks from slow technology adoption, long qualification processes, and the COVID-19 pandemic's impact on revenue generation[70](index=70&type=chunk) - Additional capital may be required, potentially through equity offerings, debt financing, or joint ventures, or by curtailing R&D and reducing costs[71](index=71&type=chunk) [Off-Balance Sheet Arrangements](index=16&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of off-balance sheet arrangements or third-party guarantees - The Company has not entered into any off-balance sheet arrangements or issued guarantees to third parties[72](index=72&type=chunk) [Recent Accounting Standards](index=16&type=section&id=Recent%20Accounting%20Standards) This section refers to disclosures regarding the adoption of new accounting standards - The Company is required to adopt certain new accounting standards, as detailed in Note 3 to the condensed financial statements[73](index=73&type=chunk) [Critical Accounting Policies](index=17&type=section&id=Critical%20Accounting%20Policies) This section states that no changes have occurred in the company's critical accounting policies - There have been no changes to the Company's critical accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2019[75](index=75&type=chunk) [Item 3. Quantitative and Qualitative Disclosure about Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) This section states that the information regarding quantitative and qualitative disclosures about market risk is not applicable to the Company for the reporting period - This item is marked as "Not applicable"[75](index=75&type=chunk) [Item 4. Controls and Procedures](index=17&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the Company's disclosure controls and procedures, concluding their effectiveness as of June 30, 2020, and reports no material changes to internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=17&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports management's conclusion on the effectiveness of disclosure controls and procedures - Management, including the CEO and principal financial and accounting officer, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2020[76](index=76&type=chunk) [Changes in Internal Control over Financial Reporting](index=17&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms no material changes to internal control over financial reporting during the quarter - There were no changes to internal control over financial reporting during the three-month period ended June 30, 2020, that materially affected, or are reasonably likely to materially affect, the Company's internal controls[77](index=77&type=chunk) [PART II. Other Information](index=18&type=section&id=PART%20II.%20Other%20Information) This part includes disclosures on risk factors and a comprehensive list of exhibits filed with the report [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the Company's primary risk factors since those disclosed in its Prospectus Supplement filed on May 13, 2020, or its Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to the primary risk factors were reported compared to previous filings (Prospectus Supplement May 13, 2020, and Annual Report on Form 10-K for December 31, 2020)[79](index=79&type=chunk) [Item 6. Exhibits](index=18&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q report, including certifications under the Sarbanes-Oxley Act and various XBRL taxonomy documents List of Exhibits | Exhibit No. | Description | Method of Filing | | :---------- | :---------- | :--------------- | | 31.1 | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed electronically herewith | | 31.2 | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed electronically herewith | | 32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). | Filed electronically herewith | | 101.INS | XBRL Instance Document | Filed electronically herewith | | 101.SCH | XBRL Taxonomy Extension Schema Document | Filed electronically herewith | | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed electronically herewith | | 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed electronically herewith | | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed electronically herewith | | 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed electronically herewith | [Signatures](index=19&type=section&id=SIGNATURES) This section provides the official signatures and date of filing for the report - The report was signed by Scott A. Bibaud (Chief Executive Officer) and Francis B. Laurencio (Chief Financial Officer) on August 7, 2020[83](index=83&type=chunk)

Table of Contents Delaware 30-0509586 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock: Par value $0.001 ATOM Nasdaq Capital Market UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2020. or ¨ Transition ...

Financial Data and Key Metrics Changes - The GAAP net loss for Q1 2020 was $3.6 million or $0.22 per share, compared to a net loss of $3.5 million or $0.24 per share in Q1 2019 [21] - Revenue in Q1 2020 was $62,000, down from $71,000 in Q1 2019, with both periods deriving revenue from integration license agreements [21][24] - The cash balance at March 31, 2020, was $11.4 million, a decline of approximately $3.5 million from $14.9 million at year-end [25] Business Line Data and Key Metrics Changes - The company reported 26 engagements with 19 customers, with 16 engagements in Phase 3, indicating growth in customer pipeline [10] - Non-GAAP research and development expense was $1.8 million in Q1 2020, a decrease from $1.9 million in Q1 2019, attributed to lower outsourced fabrication and testing expenses [22] Market Data and Key Metrics Changes - The semiconductor industry has shown some caution in spending, particularly on CapEx, due to uncertainties related to the coronavirus [10] - The company has seen delays in customer R&D engineering for new programs, impacting the initiation of new R&D lots [11] Company Strategy and Development Direction - The company is focusing on developing deeper and more strategic relationships with customers through joint development agreements (JDAs) [12] - The new 300-millimeter epitaxial deposition tool is expected to enhance R&D capabilities and customer integration runs, allowing for more efficient experimentation [16][19] Management's Comments on Operating Environment and Future Outlook - Management noted that while there have been minor delays due to the coronavirus, business has continued to grow stronger, with increasing customer engagement [28] - The company remains optimistic about the potential of JDAs to accelerate customer adoption of technology [12][28] Other Important Information - The company has cut discretionary spending in response to the economic environment and is closely monitoring hiring and expense increases [27] - The company expects no revenue in Q2 2020 due to delays caused by the coronavirus, but customer work on MST has not ceased [26] Q&A Session Summary Question: Can you discuss the expenses associated with the 300-millimeter tool? - The expenses for the 300-millimeter tool will eventually replace those of the 200-millimeter tool, with timing dependent on acceptance of the new tool [31][32] Question: What does the potential pipeline for JDAs look like? - Discussions on multiple JDAs are ongoing, with some negotiations slowed due to the coronavirus, but management remains hopeful for near-term closures [34][35] Question: What is the minimum cash level the company is comfortable operating with? - The company is closely monitoring cash levels and has no immediate plans to raise additional capital [36] Question: Which technology nodes have the best near-term opportunities for licensing? - RF SOI is seen as having the best near-term opportunity for production ramp-up, while power management also presents a lucrative market [40] Question: Is the new 300-millimeter tool expected to provide cash burn benefits? - The new tool will lead to more predictable expenses and increased productivity, although it will be at a slightly higher cost than previous outsourced runs [46]

Financial Performance - Revenue for the year ended December 31, 2019 was approximately $533,000, an increase from $246,000 in 2018, representing a growth of 116.3%[120] - Cost of revenue for 2019 was approximately $253,000, up from $148,000 in 2018, indicating a rise of 70.3%[121] - Operating expenses totaled approximately $13.9 million for 2019, compared to $13.2 million in 2018, reflecting an increase of 5.3%[122] - The net loss for the year ended December 31, 2019 was approximately $13.3 million, compared to a net loss of approximately $12.9 million in 2018[131] Expenses Breakdown - Research and development expenses for 2019 were approximately $7.7 million, an increase of 6% from $7.3 million in 2018[124] - General and administrative expenses rose to approximately $5.2 million in 2019, up 5% from $5.0 million in 2018[125] Cash Position - As of December 31, 2019, cash and cash equivalents were approximately $14.9 million, with working capital of approximately $13.5 million[131] - Net cash used in operating activities for 2019 was approximately $10.4 million, primarily due to the net loss adjusted for stock-based compensation[134] Future Outlook - The company anticipates increased fees from license agreements and royalties as it enters into manufacturing and distribution license agreements[118] - Future capital requirements will depend on the successful commercialization of technology and potential collaborations or acquisitions[133]

Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $13.3 million for the year ended December 31, 2019, compared to a net loss of $12.9 million in 2018, primarily due to higher operating expenses [19] - Revenue for 2019 was $533,000, an increase from $246,000 in 2018, with $259,000 from license agreements and $274,000 from engineering services [19][20] - The GAAP net loss for Q4 2019 was $3 million, an improvement from a loss of $3.2 million in Q4 2018, attributed to lower operating expenses [22] Business Line Data and Key Metrics Changes - In Q4 2019, revenue consisted of $113,000 from a license agreement and $25,000 from engineering services, compared to $150,000 in Q4 2018 [22] - The company delivered more than three times the amount of MST wafers to customers in late 2019, indicating a record level of customer engagement [9][10] Market Data and Key Metrics Changes - The company is focusing on three key areas: RF SOI for 5G devices, BCD for advanced power chips, and next-generation devices, with a significant increase in customer integration runs [10][12] - The company is working with customers whose RF SOI manufacturing capacity represents more than half of the entire installed base in the industry [16] Company Strategy and Development Direction - Atomera is evolving its contract structures to accommodate longer engagement periods and deeper relationships with customers, moving towards joint development agreements [12][13] - The company aims to leverage its technology across multiple production lines and processes, enhancing customer penetration and adoption [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning for growth in 2020, citing increased customer engagement and a record number of MST wafers delivered [27] - The company anticipates a cash use of approximately $13 million to $13.5 million for 2020, reflecting an increase due to planned headcount additions and delayed tool lease expenses [24][25] Other Important Information - The company reported a cash balance of $14.9 million at the end of 2019, a decline from $18.9 million at the end of 2018 [23] - The company is experiencing a bottleneck in personnel, which is impacting its ability to engage with new customers [45] Q&A Session Summary Question: Discussion on the EPI tool and its opportunities - Management confirmed that the EPI tool installation was delayed but is expected to enhance both internal R&D and customer deposition capabilities once operational [30] Question: Joint development agreements and customer eligibility - Joint development agreements are being discussed with multiple customers, primarily larger and newer ones, to prequalify Atomera's technology across multiple product lines [32][34] Question: Prioritization of resources across technology areas - The company is prioritizing customers based on their likelihood to reach production sooner, with RF SOI and BCD being the primary focus areas due to a larger customer base [36] Question: Impact of new technologies on customer engagement - There is a pent-up demand from customers interested in working with Atomera, but the company has been too busy to fully engage with them [43] Question: Cash use expectations for 2020 - The expected cash use for 2020 is in the range of $13 million to $13.5 million, reflecting increased operational expenses and headcount [46] Question: Phase 3 engagements and transition to Phase 4 - Some customers in Phase 3 are close to completing their work, but delays may occur due to external factors unrelated to Atomera's technology [51][56] Question: Impact of the coronavirus on customer engagement - The company is adapting to virtual meetings due to travel restrictions but does not foresee significant long-term impacts on existing customer relationships [60]

Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock: Par value $0.001 ATOM Nasdaq Capital Market Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2019. or ¨ Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from ______ ...