What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-15 compared with 2022-02-15 · 334 added, 398 removed, 509 unchanged (59% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and Board of Directors of

To the Stockholders and Board of Directors of

Atomera Incorporated

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of Atomera Incorporated (the “Company”) as of December 31, 2021 and 2020, the related statements of operations, stockholders’

equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to

as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years

in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of

Atomera Incorporated (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations,

stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each

of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States

Basis for Opinion

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regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control

over financial reporting.

Accordingly, we express no such opinion.

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Critical Audit Matters

The critical audit matters communicated below

are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to

the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

Description of the Matter

As described in Note 7, during the year ended

December 31, 2021, the Company recorded a right-of-use (“ROU”) asset of approximately $6.4 million and a corresponding lease

liability of approximately $6 million related to the leasing of an equipment tool in accordance with provisions of Accounting Standards

Codification 842, Leases (“ASC 842”).

In connection with the application of ASC 842, the Company was required to (a) determine

the classification of the lease as an operating or finance lease and (b) develop an estimate pertaining to collateralized incremental

borrowing rates (“IBR”) in order to determine the present value of the lease payments when the discount rate is not implicit

in the lease.

The determination of an IBR required management to evaluate its credit rating, adjustments for the impact of collateral,

and the overall economic environment.

We identified the application of ASC 842 as a

critical audit matter because of the (a) overall material amount of the transaction, (b) significant impact of management’s assumptions

and estimates in determining the selected IBRs and their related impact on the ROU asset and liability recorded, (c) impact that the initial

classification of the lease has on the Company’s current and future results from operations and (d) the associated presentation

and disclosure requirements associated with new leases accounted for under ASC 842.

How We Addressed the Matter in Our Audit

Our audit procedures related to the application

of ASC 842 to address this critical audit matter included the following:

· We evaluated the classification of the lease in the financial statement and footnotes based on the terms

of the lease and guidance in ASC 842.

· We assessed the reasonableness of the methodology used by the Company to estimate the IBR based on the

definition and guidance in ASC 842.

· With the assistance of our internal valuation specialists, we assessed the reasonableness of the inputs

used to estimate the IBRs by comparing to Company specific benchmarks, comparable companies and other market information.

Such evaluation

involved the performing of a sensitivity analysis on the IBR and evaluation of the impact of such analysis on the financial statements

and disclosures.

· We evaluated the disclosures and financial statement presentation made by the Company to ensure they complied

with the guidance in ASC 842.

Critical audit matters are matters arising from the

current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective,

or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum llp

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Property and equipment, net

Long-term prepaid rent

Long-term prepaid maintenance and supplies

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Total liabilities and stockholders’ equity

The accompanying notes are an integral part of

these financial statements.

The accompanying notes are an integral part of these

financial statements.

Atomera Incorporated

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Provision for income taxes

Net loss per common share, basic and diluted

Weighted average number of common shares outstanding, basic and diluted

The accompanying notes are an integral part of

these financial statements.

Net loss per common share, basic

Net loss per common share, diluted

Weighted average number of common shares outstanding, basic

Weighted average number of common shares outstanding, diluted

The accompanying notes are an integral part of these

financial statements.

Atomera Incorporated

Statements of Stockholders’

Statements of Stockholders’ Equity

(in thousands)

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Stock-based compensation

Warrant modification

Warrant exercises

Stock option exercises

Underwritten public offering of common stock, net of commissions

Forfeited restricted stock awards

At-the-market sale of stock, net of commissions and expenses

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Stock-based compensation

Warrant exercises

Stock option exercises

Forfeited restricted stock awards

At-the-market sale of stock, net of commissions and expenses

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$ ( 183,295 )

The accompanying notes are an integral part of

these financial statements.

The accompanying notes are an integral part of these

financial statements.

Atomera Incorporated

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Stock-based compensation

Warrant modification expense

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Long-term prepaid rent

Accounts payable

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Operating lease liability

Deferred revenue

Net cash used in operating activities

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Proceeds from at-the-market sale of stock, net of commissions and expenses

Proceeds from underwritten public offering, net of commission and expenses

Proceeds from exercise of stock options

Proceeds from exercise of warrants

Payments of principal for financing lease

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Cash paid for taxes

The accompanying notes are an integral part of

these financial statements.

The accompanying notes are an integral part of these

financial statements.

Atomera Incorporated

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12, 2016, the Company changed its name to Atomera Incorporated.

Atomera is an early-stage

company, having only recently begun limited revenue-generating activities, and is devoting substantially all of its efforts toward technology

research and development and to commercially licensing its technology to designers and manufacturers of integrated circuits.

has primarily financed operations through private placements of equity and debt securities, the Company’s Initial Public Offering

(the “IPO”) which was consummated on August 10, 2016, and subsequent public offerings of its common stock.

Atomera is an early-stage company,

having only recently begun limited revenue-generating activities, and is devoting substantially all its efforts toward technology research

and development and to commercially licensing its technology to designers and manufacturers of integrated circuits.

LIQUIDITY AND MANAGEMENT PLANS

At December 31, 2021, the

Company had cash and cash equivalents of approximately $ 28.7 million and working capital of approximately $ 26.3 million.

The Company has

generated only limited revenues since inception and has incurred recurring operating losses.

The Company’s operating

plans for the next 12 months include increased research and development headcount and increased spending on outsourced fabrication and

Based on the funds it has available as of the date of the filing of this report, the Company believes that it has sufficient

capital to fund its current business plans and obligations over, at least, 12 months from the date that these financial statements have

However, as the Company has generated only limited revenue from its principal operations, it is subject to all the risks

inherent in the initial organization, financing, expenditures, complications and delays in a new business.

Accordingly, the Company may

require additional capital, the receipt of which cannot be assured.

In the event the Company requires additional capital, there can be

no guarantee that funds will be available on commercially reasonable terms, if at all.

The Company’s future capital requirements

and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize

its technology, competing technological and market developments, and the need to enter into collaborations with other companies or acquire

technologies to enhance or complement its current offerings.

If the Company is unable to secure additional capital, it may be required

to curtail its research and development initiatives and take additional measures to reduce costs in order to conserve its cash.

At December 31, 2022, the Company

had cash and cash equivalents of approximately $ 21.2 million and working capital of approximately $ 18.7 million .

The Company has generated

only limited revenues since inception and has incurred recurring operating losses.

Accordingly, it is subject to all the risks inherent

in the initial organization, financing, expenditures, and scaling of a new business that is not generating positive cashflow.

The Company has primarily financed

operations through private placements of equity and debt securities, the Company’s Initial Public Offering (the “IPO”)

which was consummated on August 10, 2016, and subsequent public offerings of its common stock.

On May 31, 2022, Atomera entered into an

Equity Distribution Agreement with Oppenheimer & Co.

and Craig-Hallum Capital Group LLC, as agents, under which the Company may

offer and sell, from time to time at its sole discretion, shares of its $0.001 par value common stock, in “at the market”

offerings to or through the agent as its sales agent, having aggregate offering proceeds of up to $ 50 .0 million (the “ATM Facility”).

Based on the funds it has available

as of the date of the filing of this report, the Company believes that it has sufficient capital to fund its current business plans and

obligations over, at least, 12 months from the date that these financial statements have been issued.

The Company’s future capital

requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully

commercialize its technology, competing technological and market developments, and the need to enter into collaborations with other companies

or acquire technologies to enhance or complement its current offerings.

The Company’s operating plans for the next 12 months include

increased research and development expenses.

For capital needs beyond the next 12 months, the Company currently expects to rely, in part,

on its ATM, but the terms on which any future stock sales will occur will depend on both market conditions and the Company’s business

performance, so there can be no guarantee that funds will be available on commercially reasonable terms.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The financial statements are

presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect

the financial position, results of operations and cash flows for all periods presented.

The financial statements are presented

in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the financial

position, results of operations and cash flows for all periods presented.

Fair Value of Financial Instruments

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for identical assets and liabilities.

Level 2 — Inputs other than Level 1 that are observable,

either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets

that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term

of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by

little or no market activity and that are significant to the fair value of the assets or liabilities.

Level 2 — Inputs other than Level

1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities,

unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by

observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little

or no market activity and that are significant to the fair value of the assets or liabilities.

Cash and cash equivalents

The Company maintains its

operating accounts in a single reputable financial institution.

The Company maintains its operating

accounts in a single reputable financial institution.

The balances are insured by the U.S.

Federal Deposit Insurance Corporation

(“FDIC”) up to specified limits.

The Company’s cash and cash equivalents are maintained in checking accounts and money

market funds with maturities of less than three months when purchased, which are readily convertible to known amounts of cash.

Federal Deposit Insurance Corporation (“FDIC”)

up to specified limits.

The Company’s cash and cash equivalents are maintained in checking accounts and money market funds with

maturities of less than three months when purchased, which are readily convertible to known amounts of cash.

Concentration of Credit Risk and Major Customers

Financial instruments, which

potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents and accounts receivable.

One customer represented 100% of revenue during the year ended December 31, 2021 and a separate single customer represented 100% of revenue

during the year ended December 31, 2020.

No customer represented a balance of accounts receivable at December 31, 2021 or 2020.

Financial instruments, which potentially

subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents and accounts receivable.

Two customers

each represented 79 % and 20 %,of revenue during the year ended December 31, 2022 and one customer represented 100 % of revenue during the

year ended December 31, 2021.

At times, the amounts on deposit

at the financial institution exceed the federally insured limits.

Management believes that the financial institutions which hold the Company’s

Management believes that the financial institution which holds the Company’s

cash is financially sound and, accordingly, minimal credit risk exists.

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Accounts Receivable

The Company grants credit

to its business customers.

The Company grants credit to its

business customers.

Collateral is generally not required for trade receivables.

The Company maintains allowances for potential

credit losses when necessary.

Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful

accounts, and sales returns.

The Company’s policy

is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable.

The Company maintains allowances for potential credit

losses when necessary.

Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts,

and sales returns.

The Company’s policy is

to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable.

The Company periodically reviews its accounts receivable to determine whether an allowance for doubtful accounts is necessary based on

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there were no allowances for doubtful accounts since the balances were collected during the year.

Any allowances recorded are included

in Accounts Receivable, net in the accompanying balance sheets.

Impairment of long-lived assets

The Company reviews

long-lived assets for impairment whenever events or changes in circumstances indicate that it is more likely than not that the

asset’s carrying amount may not be recoverable.

The Company conducts its long-lived asset impairment analyses in accordance

with authoritative guidance which requires the Company to group assets and liabilities at the lowest level for which identifiable

cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of

the undiscounted future cash flows.

If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable,

an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on

discounted cash flow analysis or appraisals.

During the years ended December 31, 2021 and 2020, the Company had noted no indicators

of impairment.

The Company reviews long-lived

assets for impairment whenever events or changes in circumstances indicate that it is more likely than not that the asset’s carrying

amount may not be recoverable.

The Company conducts its long-lived asset impairment analyses in accordance with authoritative guidance

which requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent

of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows.

If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the

amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.

the years ended December 31, 2022 and 2021, the Company had noted no indicators of impairment.

Property and equipment

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and equipment are stated at cost.

Maintenance and routine repairs are charged to operations when incurred, while betterments and

renewals are capitalized.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives

of the respective assets starting when the asset is placed in service.

Maintenance and routine repairs are charged to operations when incurred, while betterments and renewals

are capitalized.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective

assets starting when the asset is placed in service.

Common stock warrants

The Company classifies as

equity any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash

settlement or settlement in its own shares (physical settlement or net-share settlement).

The Company classifies as assets or liabilities

any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if

that event is outside the Company’s control), (ii) gives the counterparty a choice of net-cash settlement or settlement in shares

(physical settlement or net-share settlement) or (iii) that contain reset provisions that do not qualify for the scope exception.

Company assesses classification of its common stock warrants and other freestanding derivatives at each reporting date to determine whether

a change in classification between assets and liabilities is required.

The Company’s freestanding derivatives consist of warrants

to purchase common stock.

The Company evaluated these warrants to assess their proper classification and determined that the common stock

warrants meet the criteria for equity classification in the balance sheet.

Such warrants are measured at fair value, which the Company

determines using the Black-Scholes-Merton option-pricing model.

The Company classifies as equity

any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement

or settlement in its own shares (physical settlement or net-share settlement).

The Company classifies as assets or liabilities any contracts

that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is

outside the Company’s control), (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement

or net-share settlement) or (iii) that contain reset provisions that do not qualify for the scope exception.

The Company assesses classification

of its common stock warrants and other freestanding derivatives at each reporting date to determine whether a change in classification

between assets and liabilities is required.

The Company’s freestanding derivatives consist of warrants to purchase common stock.

The Company evaluated these warrants to assess their proper classification and determined that the common stock warrants meet the criteria

for equity classification in the balance sheet.

Such warrants are measured at fair value, which the Company determines using the Black-Scholes-Merton

option-pricing model.

The Company generates revenue

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of the Company’s MST recipe to the customer for the customer’s internal use.

For recognizing integration

service revenue from integration license agreements, the Company assesses (i) whether the license grant is distinct from or combined with

the transfer of goods or services and (ii) whether the license is a right to access intellectual property or a right to use the intellectual

For recognizing integration service

revenue from integration license agreements, the Company assesses (i) whether the license grant is distinct from or combined with the

transfer of goods or services and (ii) whether the license is a right to access intellectual property or a right to use the intellectual

For licenses that are not distinct, but combined with other goods or services, the revenue is recognized at a point in time

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technology and not a right to access the technology over time.

Deferred revenues consist

of unearned amounts that have been billed to the customer in advance of the Company’s performance obligations.

These amounts have

not yet been recognized as revenue.

The Company’s MSTcad licenses grant customers the right to use MSTcad

software to simulate the effects of incorporating MST technology into their semiconductor manufacturing process.

Such MSTcad licenses

are granted on a monthly basis and revenue is recognized over time.

Deferred revenues consist of unearned

amounts that have been billed to the customer in advance of the Company’s performance obligations.

These amounts have not yet been

recognized as revenue.

Revenue for these items will be recognized in accordance with the Company’s revenue policy.

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The Company accounts for leases

in accordance with the authoritative guidance.

On January 1, 2019, the Company adopted the Financial Accounting Standards Board (“FASB”)

issued Accounting Standards Update (“ASU”) No 2016-02, Leases (Topic 842).

The Company determines if a contract contains

a lease in whole or in part at the inception of the contract.

Right-of-use (“ROU”) assets represent its right to use an underlying

asset for the lease term while lease liabilities represent its obligation to make lease payments arising from the lease.

All leases greater

than 12 months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the

lease payments over the lease term.

Leases are accounted for as operating leases unless it meets one of the following criteria:

lease term accounts for most of the remaining economic life of the underlying asset;

(b) the present value of the lease payments is over

90% of the fair value of the underlying asset;

or (d) ownership of the underlying assets transfers to the Company at the end of the lease term.

If the lease meets one of these

criteria, then it would be accounted for as financing lease and the ROU assets would be amortized over the life of the lease and interest

expense is recognized on the liability.

in accordance Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No 2016-02,

Leases (Topic 842).

The Company determines if a contract contains a lease in whole or in part at the inception of the contract.

Right-of-use (“ROU”) assets represent its right to use an underlying asset for the lease term while lease liabilities represent

its obligation to make lease payments arising from the lease.

All leases greater than 12 months result in the recognition of a ROU asset

and a liability at the lease commencement date based on the present value of the lease payments over the lease term.

Leases are accounted

for as operating leases unless it meets one of the following criteria:

(a) the lease term accounts for most of the remaining economic

life of the underlying asset;

(b) the present value of the lease payments is over 90% of the fair value of the underlying asset;

underlying asset would have no alternative use for the lessor at the end of the lease;

or (d) ownership of the underlying assets transfers

to the Company at the end of the lease term.

If the lease meets one of these criteria, then it would be accounted for as financing lease

and the ROU assets would be amortized over the life of the lease and interest expense is recognized on the liability.

Stock-based compensation

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allowance is recorded on deferred tax assets unless realization is considered more likely than not.

The Company evaluates its

tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions

The Company evaluates its tax

positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions

are “more-likely-than-not” of being sustained by the applicable tax authority.

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Use of estimates

The preparation of financial

statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenue and expenses during the reporting period.

Significant estimates are used when accounting for revenue recognition,

fair value of stock-based compensation and warrants, borrowing rates used for lease accounting and valuation allowance against deferred

The preparation of financial statements

in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of

assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts

of revenue and expenses during the reporting period.

Significant estimates are used when accounting for revenue recognition, fair value

of stock-based compensation and warrants, borrowing rates used for lease accounting and valuation allowance against deferred tax assets.

Actual results could differ from those estimates.

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Adoption of recent accounting standards

In December 2019, the FASB

issued ASU No.

2019-12, Simplifying Accounting for Income Taxes .

This is part of the FASB’s overall initiative to reduce

complexity in accounting standards.

Amendments include removal of certain exceptions to the general principles of Accounting Standard

Codification (“ASC”) 740, Income taxes , and simplification in several other areas such as accounting for a franchise

tax (or similar tax) that is partially based on income.

The Company adopted this standard on January 1, 2021 and it did not have a material

impact on its financial position, results of operations or financial statement disclosure.

In August 2020, the FASB issued

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Recent accounting standards

The Company has evaluated

all issued but not yet effective accounting pronouncements and determined that they are either immaterial or not relevant to the Company.

The Company has evaluated all

issued but not yet effective accounting pronouncements and determined that they are either immaterial or not relevant to the Company.

The Company recognizes revenue

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The Company usually recognizes revenue from integration service agreements and from manufacturing licenses

at a point in time and integration license agreements over a period of time.

The following table provides information about

disaggregated revenue by primary geographical markets and timing of revenue recognition for the years ended December 31, 2021 and 2020

(in thousands):

at a point in time.

Revenue from integration license agreements and from MSTcad licenses are recognized over a period of time.

The following table provides information about disaggregated

revenue by primary geographical markets and timing of revenue recognition for the years ended December 31, 2022 and 2021 (in thousands):

Schedule of information about disaggregated revenue and timing of revenue

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received more than one year from the reporting date.

The Company records deferred

revenue when revenue will be recognized after invoicing.

During the year ended December 31, 2020, the Company recognized approximately

$ 37,000 of revenue that was included in deferred revenue as of December 31, 2019.

BASIC AND DILUTED LOSS PER SHARE `

Basic net loss per share is

calculated by dividing the net loss by the weighted-average number of shares outstanding for the period.

Diluted net loss per share is

computed by dividing the net loss by the weighted-average number of shares and dilutive share equivalents outstanding for the period,

determined using the treasury-stock and if-converted methods.

Since the Company has had net losses for all periods presented, all potentially

dilutive securities are anti-dilutive.

Accordingly, basic and diluted net loss per share are equal.

Basic net loss per share is calculated

by dividing the net loss by the weighted-average number of shares outstanding for the period.

Diluted net loss per share is computed by

dividing the net loss attributable to common stockholders by the sum of the weighted average number of shares of common stock outstanding

and the dilutive common stock equivalent shares outstanding during the period.

The Company’s potentially dilutive common stock equivalent

shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and warrants and (ii) vesting

of restricted stock units and restricted stock awards, are only included in the calculation of diluted net loss per share when their effect

Since the Company has had net losses for all periods presented, all potentially dilutive securities are anti-dilutive.

basic and diluted net loss per share are equal.

The following potential common

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Leasehold improvements are amortized over the remaining life of the lease.

The Company leases corporate

office space in Los Gatos, California.

The Company leases corporate office space in Los Gatos, California.

In August 2020, the Company and its landlord amended the lease for this office.

This amendment

extends the expiration date of the operating lease from January 2021 to January 2026 and increases the space from 3,396 square feet to

4,101 square feet.

Under ASC 842, the lease amendment was treated as a separate lease for the new space and a modification of the lease

for the original space.

An additional ROU asset and lease liability of approximately $681,000 were recorded at the time of the amendment.

In January 2021 the additional space became available for use, and the Company recorded an additional ROU asset and corresponding liability

The amendment extended the expiration date of the operating

lease to January 2026 and increased the space from 3,396 square feet to 4,101 square feet.

Under ASC 842, the lease amendment was treated

as a separate lease for the new space and a modification of the lease for the original space.

In January 2021 the additional space became available for use, and the Company

recorded an additional ROU asset and corresponding liability of approximately $144,000.

The lease liability is based on the present value

of the minimum lease payments, discounted using the Company’s estimated incremental borrowing rate of 5.25 %.

The lease contains escalating

payments on the anniversary of the original commencement which are included in the measurement of the initial lease liability.

payments based on a change in the Company’s share of the operating expenses, including property taxes and insurance, are recorded

as a period expense when incurred.

In March 2021, the Company began

leasing 474 square feet of office space in Tempe, Arizona.

The new lease is classified as an operating lease with an initial term of two

years and an option to extend for an additional three years through February 2026.

The renewal option was exercised in January 2023.

lease also contains a performance standard for research collaboration with Arizona State University.

The agreement requires a minimum

value of collaborative research in each year of the lease.

The lease is accounted for under ASC 842 and accordingly, the research payments

are included in the ROU and lease liability at the commencement.

In March 2021, the Company recorded an ROU and associated lease liability

of approximately $ 238,000 .

The lease liability is based on the present value of the minimum lease payments, discounted using the Company’s

estimated incremental borrowing rate of 5.5 %.

The lease contains escalating payments on the anniversary of the original commencement which

are included in the measurement of the initial lease liability.

Additional payments based on a change in the Company’s share of

the operating expenses, including property taxes and insurance, are recorded as a period expense when incurred.

In March 2021, the Company

began leasing 474 square feet of office space in Tempe, Arizona.

The new lease is classified as an operating lease with an initial term

of two years and an option to extend for an additional three years through February 2026.

The lease also contains a performance standard

for research collaboration with Arizona State University.

The agreement requires a minimum value of collaborative research in each year

of the lease.

The lease is accounted for under ASC 842 and accordingly, the research payments are included in the ROU and lease liability

at the commencement.

In March 2021, the Company recorded an ROU and associated lease liability of approximately $ 238,000 .

The lease liability

is based on the present value of the minimum lease payments, discounted using the Company’s estimated incremental borrowing rate

of 5.25 % over five years, as the Company expects to lease the space through the three-year extension.

The lease also contains escalating

payments on the anniversary of the original commencement which are included in the measurement of the initial lease liability.

estimated incremental borrowing rate of 5.25 % over five years, as the Company expects to lease the space through the three-year extension.

The lease also contains escalating payments on the anniversary of the original commencement which are included in the measurement of the

initial lease liability.

In October 2019, the Company

entered into an agreement to lease a tool for use in the development of the Company’s technology.

The lease is for five years at

$ 150,000 per month and commenced on August 1, 2021.

A prepayment of $ 450,000 was made in year ended December 31, 2020 which represents

the final three monthly payments under the lease and was recorded as a long-term prepaid until the lease commencement.

At commencement,

the Company recorded an ROU asset of approximately $ 6.4 million and a corresponding lease liability of approximately $ 6 .0 million.

lease was classified as a financing lease and accordingly, amortization is recorded as a research and development expense in the Company’s

statement of operations.

Interest expense is also recorded and included in other income or expense in the Company’s statement of

The lease liability is based on the present value of the minimum lease payments, discounted using the Company’s estimated

incremental borrowing rate of 5.25 % at the time of commencement.

The lease payment of $150,000 per month includes approximately $ 30,000

in supplies and maintenance that is recorded as an operating expense and is not included in the valuation of the lease liability.

The lease is for five years

at $150,000 per month and

commenced on August 1, 2021.

A prepayment of $ 450,000 was

made in year ended December 31, 2020 which represents the final three monthly payments under the lease and was recorded as a

long-term prepaid until the lease commencement.

At commencement, the Company recorded an ROU asset of approximately $ 6.4

million and a corresponding lease liability of approximately $ 6 .0

The lease was classified as a financing lease and accordingly, amortization is recorded as a research and development

expense in the Company’s statement of operations.

Interest expense is also recorded and included in other income or expense in

the Company’s statement of operations.

The lease liability is based on the present value of the minimum lease payments,

discounted using the Company’s estimated incremental borrowing rate of 5.25 %

at the time of commencement.

The lease payment of $150,000 per month includes approximately $ 30,000 in

supplies and maintenance that is recorded as an operating expense and is not included in the valuation of the lease liability.

Company elected to exclude these costs from the asset and related lease liability valuation for this class of assets.

These costs will

be expensed as operating expenses in the period incurred.

Lease expense for operating

leases consists of the lease payments recognized on a straight-line basis over the lease term.

Expenses for financing leases consists

of the amortization expenses recognized on a straight-line basis over the lease term and interest expense.

The components of lease costs

were as follows (in thousands):

will be expensed as operating expenses in the period incurred.

This lease contains a provision for an annual adjustment of lease

payments based on tool availability and usage.

The potential lease payment adjustment is determined on August 1 of each year of the

lease and is calculated based on the tool availability and usage for the preceding 12 months.

Effective August 1, 2022, the lease

payments for this tool were reduced to $100,824 per month for the period August 1, 2022 through July 31, 2023.

This adjustment to

the variable lease payments resulted in a reduction in ROU and corresponding lease liability.

Lease expense for operating leases

consists of the lease payments recognized on a straight-line basis over the lease term.

Expenses for financing leases consists of the

amortization expenses recognized on a straight-line basis over the lease term and interest expense.

The components of lease costs were

as follows (in thousands):

Schedule of components of lease costs

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Fixed lease costs

Variable lease costs

Short-term lease costs

Total operating lease costs

Future minimum payments under non-cancellable

leases as of December 31, 2021 were as follows (in thousands):

Future minimum payments under non-cancellable leases

as of December 31, 2022 were as follows (in thousands):

Schedule of future minimum lease payments

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Operating leases

2026 & thereafter

Total future minimum lease payments

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Right-of-use assets obtained in exchange for financing lease obligations

Remeasurement of right-of use asset and liability in financing lease obligations

The weighted average remaining

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The weighted average remaining lease term is 3.6 years

for operating leases and 4.6 years for financing lease.

In October 2016, the Company

entered into lease agreement for approximately 200 square feet of office space in Cambridge, Massachusetts.

The lease, with current monthly

payments of $2,942 per month, commenced on October 24, 2016.

Because the lease is month to month and can be cancelled with a 30-day notice,

the future lease payments are not included in the Company’s lease accounting under ASC Topic 842.

for financing lease and 3.1 years for operating leases.

In October 2016, the Company entered

into lease agreement for approximately 200 square feet of office space in Cambridge, Massachusetts.

The lease, with current monthly payments

of $2,942 per month, commenced on October 24, 2016.

Since the lease is month to month and can be cancelled with a 30-day notice, the future

lease payments are not included in the Company’s lease accounting under ASC Topic 842.

In December 2022, the Company

entered into a lease agreement for a tool in Tempe, Arizona.

The term of this lease is for six months beginning on January 1, 2023 with

an option to extend the lease for an additional six months.

The initial lease terms are for $96,000 per month.

If the option to extend

the lease is exercised prior to March 31, 2023, the remaining lease payments will be reduced to an average of $87,000 over the twelve

Since the lease and extension are not for more than one year, the future lease payments are not included in the Company’s

lease accounting under ASC Topic 842.

COMMITMENTS AND CONTINGENCIES

The Company may be involved,

from time to time, in legal proceedings and claims arising in the ordinary course of its business.

The Company may be involved, from

time to time, in legal proceedings and claims arising in the ordinary course of its business.

Such matters are subject to many uncertainties

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STOCKHOLDERS’ EQUITY

The Company is authorized

to issue to up 2,500,000 shares of preferred stock, $ .001 par value.

As of December 31, 2021, and 2020, no shares have been designated

and no shares are issued and outstanding.

Preferred stock may rank prior to common stock with respect to dividends rights, liquidation

preferences, or both, and may have full or limited voting rights.

On May 15, 2020, the Company

closed an underwritten public offering of 2,024,000 shares of common stock at a public offering price of $ 5.00 per share, resulting in

approximately $ 9.4 million of net proceeds after deducting underwriting commission and other offering expenses.

The Company is authorized to issue

to up 2,500 ,000 shares of preferred stock, $ .001 par value.

As of December 31, 2022, and 2021, no shares have been designated and no shares

are issued and outstanding.

Preferred stock may rank prior to common stock with respect to dividends rights, liquidation preferences,

or both, and may have full or limited voting rights.

On September 2, 2020, Atomera

entered into an Equity Distribution Agreement with Craig-Hallum Capital Group LLC, as agent, under which the Company offered and sold,

from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $25.0 million in an “at-the-market”

from time to time at its sole discretion, shares of its common stock having aggregate offering proceeds of up to $25.0 million in an “at-the-market”

or ATM offering, to or through the agent.

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and other offering expenses.

As of December

31, 2021, the Company has reserved approximately 2.9 million shares of common stock for issuance pursuant to outstanding stock options

and warrants.

The Company estimated the

fair value of warrants using the Black-Scholes option pricing model.

There were no warrants issued in the year ending December 31, 2021

On May 31, 2022, Atomera entered

into an Equity Distribution Agreement with Oppenheimer & Co.

Inc and Craig-Hallum Capital Group LLC, as agents, under which we may

offer and sell, from time to time at our sole discretion, shares of our common stock having aggregate offering proceeds of up to $ 50 .0

million in an “at-the-market” or ATM offering, to or through the agents.

During the year ended December 31, 2022, approximately

527,000 shares were sold at an average price per share of approximately $ 11.68 , resulting in approximately $ 5.8 million of net proceeds

to us after deducting commissions and other offering expenses.

As of December 31, 2022, the Company

has reserved approximately 3 .0 million shares of common stock for issuance pursuant to outstanding stock options.

The Company estimated the fair

value of warrants using the Black-Scholes option pricing model.

There were no warrants issued in the year ending December 31, 2022 or

A summary of warrant activity for the year ended December 31, 2021 is as follows (shares in thousands except per share and contractual

Schedule of warrant activity

Weighted-Average

Term (In Years)

Outstanding at January 1, 2022

Outstanding and exercisable at December 31, 2022

The warrants outstanding at

December 31, 2020 had an intrinsic value of $ 0 based on a per-share stock price of $ 20.12 as of December 31, 2020.

On March 17, 2020, 196,602

warrants with an exercise price of $3.75 were set to expire.

Prior to the expiration, the Company entered into an agreement with the

warrant holders, whereby it modified the terms of the warrants to extend the expiration date until September 17, 2020 in exchange for

the removal of a cashless exercise provision.

No other terms were modified.

Due to this modification, the Company incurred a modification

expense of approximately $ 139,000 that is included in general and administrative expenses on the Statement of Operations for the year

ended December 31, 2020.

All of the modified warrants were exercised on August 6, 2020.

On December 3, 2020, the Company modified 12,200

warrants with an original exercise price of $9.375 and an expiration date August 4, 2021.

The warrants were modified to decrease the

exercise price to $7.50 and change the expiration date to December 31, 2020.

The warrants were then exercised December 4, 2020.

the modification, the Company incurred a modification expense of approximately $ 2,000 that is included in general and administrative

expenses on the Statement of Operations for the year ended December 31, 2020.

In December 2020, a warrant for 37,562 shares was presented

for cashless exercise resulting in the issuance of 13,165 shares of common stock.

In January 2021, warrants for 317,488 shares were presented

for cashless exercises resulting in the issuance of 223,487 shares of common stock.

STOCK-BASED COMPENSATION

On March 14, 2007, the Company’s

stockholders approved the 2007 Equity Incentive Plan (the “2007 Plan”).

The 2007 Plan expired in March 2017, however all options

and warrants outstanding at the time of the expiration remained outstanding and exercisable by their term.

At the time of the expiration

of the 2007 plan, options to purchase 2,106,637 shares of common stock were outstanding.

The Company’s 2007 Equity

Incentive Plan (the “2007 Plan) expired in March 2017, however all options and warrants outstanding at the time of the expiration

remained outstanding and exercisable by their term.

At the time of the expiration of the 2007 plan, options to purchase 2,106,637 shares

of common stock were outstanding.

In May 2017, the Company’s

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As of December 31, 2022, awards of 3,072,791 shares of common stock had been granted

under the 2017 Plan, net of forfeited restricted stock and option awards and a total of 1,063,657 shares of common stock are reserved

for issuance.

under the 2017 Plan, net of forfeited restricted stock and option awards and a total of 677,209 shares of common stock are reserved for

The following table summarizes

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Forfeitures are recognized when realized.

The fair value of employee

stock options issued was estimated using the following weighted-average assumptions:

Schedule of employee

stock options

The fair value of employee stock

options issued was estimated using the following weighted-average assumptions:

Schedule of assumptions

Year Ended December 31,

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Expected dividend yield

The risk-free interest rate

was obtained from U.S.

The risk-free interest rate was

obtained from U.S.

Treasury rates for the applicable periods.

The Company’s expected volatility was based upon the historical

volatility of the Company.

The expected life of the Company’s options was determined using the simplified method as a result of

limited historical data regarding the Company’s activity.

The dividend yield considers that the Company has not historically paid

dividends and does not expect to pay dividends in the foreseeable future.

The Company’s expected volatility was based upon the historical volatility

of the Company.

The expected life of the Company’s options was determined using the simplified method as a result of limited historical

data regarding the Company’s activity.

The dividend yield considers that the Company has not historically paid dividends and does

not expect to pay dividends in the foreseeable future.

The following table summarizes

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Weighted-Average

Term (In Years)

Intrinsic Value

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During the year ended December

31, 2021, the Company granted options under its 2017 Plan purchase 158,352 shares of its common stock to its employees.

The fair value

of these options was approximately $ 2.5 million.

31, 2022, the Company granted options under its 2017 Plan purchase approximately 196,000 shares of its common stock to its employees.

The fair value of these options was approximately $ 2 .0 million.

The Company issues restricted

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deferral allowance for individuals by the Internal Revenue Service under Code Section 401(k), and the Company may make a matching contribution.

During the years ended December 31, 2021 and 2020, there were no matching contributions made by the Company.

The loss before provision

for income taxes consisted of the following (in thousands):

Schedule of provision

for income taxes

During the year ended December 31, 2022, there were matching contributions of approximately $ 78,000 .

During the year ended December 31,

2021, no matching contributions were made by the Company.

The loss before provision for

income taxes consisted of the following (in thousands):

Schedule of provision for income taxes

Year Ended December 31,

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of current income tax expense for the years ended December 31, 2022 and 2021, respectively.

The Company accounts for income taxes in

accordance with ASC 740, which requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be

recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future

tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period.

Because of the

Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned

future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance.

The valuation allowance

decreased by approximately $ 1.8 million during the year ended December 31, 2021 and increased by approximately $ 3.8 million during the

year ended December 31, 2020.

The Company’s deferred

tax assets are as follows (in thousands):

Schedule of deferred

The income tax expense for 2022 related to

taxes due to a foreign country arising from withholding taxes imposed on payments received for revenue.

The Company accounts for income

taxes in accordance with ASC 740, which requires that the tax benefit of net operating losses, temporary differences and credit carryforwards

be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of

the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period.

of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the

above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance.

The valuation allowance increased by approximately $ 4.5 million during the year ended December 31, 2022 and decreased by approximately

$ 1.8 million during the year ended December 31, 2021.

The Company’s deferred tax

assets are as follows (in thousands):

Schedule of deferred tax

Year Ended December 31,

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Lease liability

Capitalized research and development

Total deferred tax assets

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Net deferred tax asset

Net operating losses and

tax credit carryforwards as of December 31, 2021, are as follows (in thousands):

Net operating losses and tax credit

carryforwards as of December 31, 2022, are as follows (in thousands):

Schedule of operating losses

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Tax credits, state

The effective tax rate of

the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows:

The effective tax rate of the

Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows:

Schedule of effective tax rate

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Statutory rate

Non-deductible items

Change in valuation allowance

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three-year period.

During the fourth quarter

of 2021, the Company performed an analysis to assess whether an “ownership change,” as defined by Section 382 of the Code,

has occurred from its inception through December 31, 2021.

Based on this analysis, the Company has experienced “ownership changes,”

limiting the utilization of the net operating loss carryforwards or research and development tax credit carryforwards under Section 382

The limitation is calculated by first multiplying the value of the Company’s stock at the time of the ownership change

by the applicable long-term tax-exempt rate, and then applying additional adjustments, as required.

During the year ended 2021, the

Company performed an analysis to assess whether an “ownership change,” as defined by Section 382 of the Code, has occurred

from its inception through December 31, 2021.

Based on this analysis, the Company has experienced “ownership changes,” limiting

the utilization of the net operating loss carryforwards or research and development tax credit carryforwards under Section 382 of the

The limitation is calculated by first multiplying the value of the Company’s stock at the time of the ownership change by

the applicable long-term tax-exempt rate, and then applying additional adjustments, as required.

As a result of the analysis, the Company

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credits are also limited and will expire unutilized.

The Company’s tax disclosures as of December 31, 2021 reflect the impairment

of the above-mentioned tax attributes.

The Company’s tax disclosures as of December 31, 2022 and 2021 reflect the

impairment of the above-mentioned tax attributes.

The Company establishes reserves

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accrued interest or penalties related to uncertain tax positions.

The Company files income tax

returns in the U.S.

The Company files income tax returns

federal jurisdiction and various state jurisdictions.

In the normal course of business, the Company is subject to

examination by their respective taxing authorities.

The Company is not currently under audit by the Internal Revenue Service or other

similar state or local authority.

In the normal course of business, the Company is subject to examination

by their respective taxing authorities.

The Company is not currently under audit by the Internal Revenue Service or other similar state

or local authority.

The statute of limitations remains effectively open for all tax years since inception (2007).

outside the normal statute of limitations remain open to examination by tax authorities due to tax attributes generated in earlier years

which have been carried forward and may be examined and adjusted in subsequent years when utilized.

Tax years outside the

normal statute of limitations remain open to examination by tax authorities due to tax attributes generated in earlier years which have

been carried forward and may be examined and adjusted in subsequent years when utilized.

The following table summarizes

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events and transactions through the date these financial statements were issued.

Integration License Agreement.

On February 3, 2022 the Company entered into an Integration License Agreement granting its licensee the right to evaluate MST technology,

complete the manufacturing process and to provide limited samples to their customers.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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 8. Financial Statements and Supplementary Data