What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-15 · 371 added, 379 removed, 464 unchanged (62% of the section changed)

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Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688 )

Balance Sheets at December 31, 2023 and 2022

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Opinion on the Financial Statements

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

We have audited the accompanying balance sheets

of Atomera Incorporated (the “Company”) as of December 31, 2023 and 2022, the related statements of operations, stockholders’

equity and cash flows for each of the two years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years

in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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

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.

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

(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.

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We have served as the Company’s auditor since 2015.

Los Angeles, CA

February 15, 2024

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Cash and cash equivalents

Short-term investments

Unbilled contracts receivable

Interest receivable

Prepaid expenses and other current assets

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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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Interest income

Accretion income

Other income (expense), net

Interest expense

Total other income (expense), net

Net loss before income taxes

Provision for income taxes

Net loss per common share, basic

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Weighted average number of common shares outstanding, diluted

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 exercises

Stock option exercises

Forfeited restricted stock awards

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

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Stock option exercises

Forfeited restricted stock awards

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

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$ ( 203,085 )

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

Accretion of discounts on available-for-sales securities

Gain on sale of assets

Changes in operating assets and liabilities:

Unbilled contracts receivable

Interest receivable

Prepaid expenses and other current assets

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Acquisition of property and equipment

Proceeds from sale of property and equipment

Purchase of available-for-sale securities

Maturity of available-for-sale securities

Net cash used in investing activities

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Net cash provided by financing activities

Net increase/(decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

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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 its efforts toward technology research

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

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.

operates as one business segment.

LIQUIDITY AND MANAGEMENT PLANS

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

At December 31, 2023, the

Company had cash, cash equivalents and short-term investments of approximately $ 19.5 million and working capital of approximately $ 16.6

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.

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”).

During the year ended December 31, 2023, the Company sold approximately 1.8

million shares pursuant to the ATM at an average price per share of approximately $ 7.97 ,

resulting in approximately $ 13.5

million of net proceeds to the Company after deducting commissions and other offering expenses.

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

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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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The Company’s financial instruments consist of cash and cash equivalents,

accounts receivable and accounts payable, the carrying amounts of which approximate their estimated fair values primarily due to the short-term

nature of the instruments or based on information obtained from market sources and management estimates.

The Company measures the fair

value of certain of its financial assets and liabilities on a recurring basis.

A fair value hierarchy is used to rank the quality and

reliability of the information used to determine fair values.

Financial assets and liabilities carried at fair value which is not equivalent

to cost will be classified and disclosed in one of the following three categories:

short-term investments, accounts receivable and accounts payable, the carrying amounts of which approximate their estimated fair values

primarily due to the short-term nature of the instruments or based on information obtained from market sources and management estimates.

The Company measures the fair value of certain of its financial assets and liabilities on a recurring basis.

A fair value hierarchy is

used to rank the quality and reliability of the information used to determine fair values.

Financial assets and liabilities carried at

fair value which is not equivalent to cost will be classified and disclosed in one of the following three categories:

Level 1 — Quoted prices (unadjusted) in active markets

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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.

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.

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.

Financial instruments, which

potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents, short-term investments

and accounts receivable.

One customer represented 100 % of revenue during the year ended December 31, 2023.

At times, the amounts on deposit

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

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

As of December 31, 2022 and 2021, the Company’s cash balances

were in excess of insured limits maintained at the financial institution.

Accounts Receivable

The Company grants credit to its

business customers.

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

As of December 31, 2023 and 2022, the Company’s cash

balances were in excess of insured limits maintained at the financial institution.

Accounts Receivable and Unbilled Contracts

The Company grants credit

to its business customers.

Collateral is generally not required for trade receivables.

The Company maintains allowances for potential credit

losses when necessary.

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

and sales returns.

The Company’s policy is

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

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

an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt.

Other factors

that the Company considers include its existing contractual obligations, historical payment patterns of its customers and individual customer

circumstances, and an analysis of days sales outstanding by customer.

Account balances deemed to be uncollectible are charged to the allowance

after all means of collection have been exhausted and the potential for recovery is considered remote.

At December 31, 2022 and 2021,

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

The Company maintains allowances for potential

credit losses when necessary.

Trade accounts receivable and unbilled contracts 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

and unbilled contracts receivable accounts under Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments

– Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The Company periodically reviews these receivables

to determine whether an allowance for doubtful accounts is necessary based on an analysis of past due accounts and other factors that

may indicate that the realization of an account may be in doubt.

Other factors that the Company considers include its existing contractual

obligations, historical payment patterns of its customers and individual customer circumstances, and an analysis of days sales outstanding

Due to the Company’s low volume of customers, management reviews the receivable balances on a customer by customer

Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and

the potential for recovery is considered remote.

At December 31, 2023 and 2022, there were no allowances for doubtful accounts since the

balances were collected during the year.

At December 31, 2023, there was no allowance against the unbilled contracts receivable account

as the Company deems the balance fully collectible.

Impairment of Long-lived Assets

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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.

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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upon shipment).

Revenue from manufacturing licenses is recognized as the performance obligations are satisfied, which is upon delivery

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

Revenue from manufacturing licenses is recognized as the performance obligations are satisfied, which is generally upon

delivery of the Company’s MST recipe to the customer but is recognized over time if the performance obligation related to the grant

of the license includes customer acceptance.

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.

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.

However, in cases where the Company’s grant of a manufacturing license

includes a customer acceptance requirement, revenue is recognized over time.

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.

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 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.

in accordance with 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;

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 tax assets.

Actual results could differ from those 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 the fair value of stock-based compensation,

borrowing rates used for lease accounting and valuation allowance against deferred tax assets.

Actual results could differ from those

Subsequent Events

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Adoption of Recent Accounting Standards

In August 2020, the FASB issued

2020-06, Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s

Own Equity (Subtopic 815-40).

The new guidance eliminates the beneficial conversion and cash conversion accounting models for

convertible instruments.

It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted

for as derivatives because of specific settlement provisions.

In addition, the new guidance modifies how particular convertible instruments

and certain contracts that may be settled in cash or shares impact the diluted EPS computation.

This guidance is effective as of

January 1, 2022 (early adoption is permitted effective January 1, 2021).

The Company adopted this standard on January 1, 2022 and

it did not have a material impact on its financial position, results of operations or financial statement disclosure.

In November 2023, the

FASB issued ASU, No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU

The new guidance requires the disclosure of significant segment expenses even if the entity is a single reportable

This guidance applies to all public entities and is effective for all annual periods beginning after December 15, 2023 and

for interim periods beginning after December 15, 2024.

The Company adopted this standard on January 1, 2024 and it did not have a

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

Recent Accounting Standards

The Company has evaluated all

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

In December 2023, the FASB

issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-08”).

This new guidance

requires entities on an annual basis disclose specific categories in the income tax rate reconciliation and provide additional information

for reconciling items that meet a quantitative threshold.

The guidance applies to annual periods beginning after December 15, 2024 on

a prospective basis, (early adoption is permitted).

The Company does not believe ASU 2023-09 will have a material impact on its financial

position, results of operations or financial statement disclosure.

CASH EQUIVALENTS AND INVESTMENTS

Company’s cash, cash equivalents and short-term investments that were measured at fair value on a recurring basis as Level 1 assets,

classified by security type as of December 31, 2023 and 2022 consisted of the following (in thousands):

Schedule of cash equivalents and investments

Money market funds

US treasury bills

US agency bonds

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.

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

at a point in time unless the agreements provide for customer acceptance in which case revenue is recognized over 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, 2023 and 2022

(in thousands):

Schedule of disaggregated revenue and timing of revenue

Year Ended December 31,

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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 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.

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 is dilutive.

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

anti-dilutive.

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

The following potential common

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Accumulated depreciation and amortization

Total net assets

Depreciation and amortization

expense relating to property and equipment was approximately $ 77,000 and $ 67,000 for the years ended December 31, 2022 and 2021, respectively.

The Company depreciates computer equipment, laboratory equipment and office equipment on straight-line basis over three years.

and fixtures are depreciated on a straight-line basis over five years.

The Company amortizes software on straight-line basis over three

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

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

expense relating to property and equipment was approximately $ 77,000 for each of the years ended December 31, 2023 and 2022.

depreciates computer equipment, laboratory equipment and office equipment on straight-line basis over three years.

Furniture and fixtures

are depreciated on a straight-line basis over five years.

The Company amortizes software on straight-line basis over three years.

improvements are amortized over the remaining life of the lease.

The Company leases corporate

office space in Los Gatos, California.

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

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

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.

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 % 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 at lease inception 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.

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 renewal option was exercised in January

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 commencement.

Effective May 1, 2023, the Company leased an additional 404 square

feet at its Tempe office location under an amendment to its current lease.

The monthly rent payment increased from $1,277 per month to

$2,365 per month and the increased rent under the amended lease is accounted for as a modification to the lease under ASC 842 at the time

of commencement.

At the effective date of the lease amendment, a right-of-use asset of approximately $ 33,000 was recorded along with a

short-term operating lease liability of approximately $ 12,000 and long-term operating lease liability of approximately $ 21,000 .

lease ends in February 2026.

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

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.

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):

The lease agreement established

a monthly lease payment of $150,000 per month.

The lease contains a provision for an annual adjustment of lease payments based on tool

availability and usage during the preceding 12 months and the adjusted payment is calculated on August 1 of each year of the lease.

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

Effective August 1, 2023,

the lease payments for this tool were adjusted to $137,650 per month for the period August 1, 2023 through July 31, 2024.

This adjustment

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

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 were $96,000 per month.

In March 2023, the Company

elected to extend the lease through December 31, 2023 and in consideration for this extension the remaining lease payments were reduced

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

on the Company’s condensed balance sheets.

The Company terminated its

office lease in Cambridge, Massachusetts as of March 31, 2023.

The cost of the lease was $2,942 per month.

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

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as of December 31, 2023 were as follows (in thousands):

Schedule of future minimum lease payments

Schedule of future minimum payments

For the Year Ended December 31,

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The below table provides supplemental

information and non-cash activity related to the Company’s operating and financing leases are as follows (in thousands):

Supplemental non-cash activity related to operating leases

information and non-cash activity related to the Company’s operating and financing leases (in thousands):

Schedule of supplemental

information and non-cash activity related to operating and financing leases

Year Ended December 31,

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

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

discount rate is 5.25 % for the Company’s operating and financing leases.

The weighted average remaining lease term is 3.6 years

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.

The table above does not include

short-term leases that are one-year or less.

The weighted average remaining discount rate is 5.25 % for the Company’s financing leases

and 5.48 % for the Company’s operating leases.

The weighted average remaining lease term is 2.6 years for the financing lease and

2.1 years for operating leases.

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, 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 aggregate offering proceeds of up to $25.0 million in an “at-the-market”

or ATM offering, to or through the agent.

On January 5, 2021 we announced the completion of this offering after 2,221,575 shares were

sold for an average price per share of $ 11.25 , resulting in approximately $ 24.2 million of net proceeds to us after deducting commissions

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, 2023, and 2022, 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 31, 2022, Atomera entered

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During the year ended December 31, 2023, 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

1.8 million shares were sold at an average price per share of approximately $ 7.97 , resulting in approximately $ 13.5 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

Outstanding at January 1, 2022

Outstanding and exercisable at December 31, 2022

As of December 31, 2023, the Company has remaining capacity on the ATM

of approximately $ 29.8 million .

As of December 31, 2023, the

Company has reserved approximately 3.4 million shares of common stock for issuance pursuant to outstanding stock options.

STOCK-BASED COMPENSATION

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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.

As of December 31,2023, options to purchase approximately 1.5 million shares of common

stock remain outstanding under the 2007 Plan.

In May 2017, the Company’s

shareholders approved its 2017 Stock Incentive Plan (“2017 Plan”).

The 2017 Plan provides for the grant of non-qualified stock

options and incentive stock options to purchase shares of the Company’s common stock and for the grant of restricted and unrestricted

shareholders approved its 2017 Stock Incentive Plan (the “2017 Plan”).

The 2017 Plan provides for the grant of non-qualified

stock options and incentive stock options to purchase shares of the Company’s common stock and for the grant of restricted and unrestricted

share grants.

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to receive incentive awards under the 2017 Plan.

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 677,209 shares of common stock are reserved for

As of December 31, 2023, awards of approximately 3.7 million shares of common stock had

been granted under the 2017 Plan, net of forfeited restricted stock and option awards and approximately 25,000 shares of common stock

are reserved for issuance.

In May 2023, the Company’s

shareholders approved its 2023 Stock Incentive Plan (the “2023 Plan”).

The 2017 Plan provides for the grant of non-qualified

stock options and incentive stock options to purchase shares of the Company’s common stock and for the grant of restricted and unrestricted

share grants.

The Company reserved a total of 2,000 ,000 shares of common stock for issuance under the 2023 Plan.

All employees, officers,

directors, consultants, advisors and other persons who provide services to the Company or any subsidiaries of the Company are eligible

to receive incentive awards under the 2023 Plan.

As of December 31, 2023, awards of approximately 78,000 shares of common stock had been

granted under the 2023 Plan, net of forfeited restricted stock and option awards and approximately 1.9 million shares of common stock

are reserved for issuance.

The following table summarizes

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expense for employee awards with graded vesting using the straight-line method.

The Company records compensation expense for nonemployee

The Company records compensation expense for non-employee

awards with graded vesting using the accelerated expense attribution method.

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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 assumptions

The fair value of employee

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

Schedule of weighted-average assumptions

Year Ended December 31,

Weighted average exercise price:

Weighted average grant date fair value per share:

Exercise price:

Grant date fair value per share:

Expected volatility

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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

stock option activity during the year ended December 31, 2022 (in thousands except exercise prices and contractual terms):

stock option activity (in thousands except exercise prices and contractual terms):

Schedule of stock option activity

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During the year ended December

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

31, 2023, the Company granted options under its 2017 Plan and 2023 Plan to purchase approximately 393 ,000 shares of its common stock to

its employees.

The fair value of these options was approximately $ 1.9 million .

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The following

table summarizes all restricted stock activity during the year ended December 31, 2022 (in thousands except per share data):

Schedule of restricted stock option activity

table summarizes restricted stock activity (in thousands except per share data):

Schedule of restricted

stock activity

Number of Shares

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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 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):

During the years ended December 31, 2023 and 2022, the Company made matching contributions of approximately $ 82,000 and $ 78,000 , respectively.

Schedule of provision for income taxes

The loss before provision for income taxes consisted of the following (in thousands):

Year Ended December 31,

International

The Company had $ 0 and $ 66,000

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

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

The Company had $ 0 current

income tax expense for the years ended December 31, 2023 and 2022, 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 increased

by approximately $ 4.4 million and $ 4.5 million during the years ended December 31, 2023 and 2022, respectively.

The Company’s deferred

tax assets are as follows (in thousands):

Schedule of deferred

Year Ended December 31,

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Net deferred tax asset

Net operating losses and tax credit

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

Schedule of operating losses

Net operating losses and tax

credit carryforwards as of December 31, 2023, are as follows (in thousands):

Schedule of net operating losses and tax credit carryforwards

Expiration in years

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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

2 unchanged sentences

Change in valuation allowance

Other non-deductible items

Change in tax credits

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three-year period.

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

has determined that approximately $ 31 million of federal net operating loss and $ 0.7 million of federal R&D credit carryforwards are

limited and will expire unutilized.

Additionally, approximately $ 2.6 million of state net operating loss and $ 0.5 million of state tax

credits are also limited and will expire unutilized.

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

The Company files income tax

returns in the U.S.

federal jurisdiction and various state jurisdictions.

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

by their respective taxing authorities.

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

or local authority.

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

examination by their respective taxing authorities.

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

similar state or local authority.

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

Tax years outside the

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

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

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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The following table summarizes

the activity in the Company’s Valuation Allowance and Qualifying Accounts for the years ended December 31, 2022 and 2021 (in thousands):

the activity in the Company’s Valuation Allowance and Qualifying Accounts (in thousands):

Schedule of valuation allowance

5 unchanged sentences

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

Since December 31, 2023, the

Company has issued approximately 500,000 additional shares through its ATM offering at an average price per share of $8.08 resulting in

additional net proceeds, after deduction of commissions and expenses of approximately $3.9 million.

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