What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-10-29 · 183 added, 153 removed, 67 unchanged (83% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discussion

and analysis of the financial condition and results of operations of Atomera Incorporated should be read in conjunction with our financial

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

The following discussion and

analysis of the financial condition and results of operations of Atomera Incorporated should be read in conjunction with our financial

statements and the accompanying notes that appear elsewhere in this Quarterly Report on Form 10-Q.

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changes in condition, significance, value and effect, including those risk factors set forth in our Annual Report on Form 10-K for the

year ended December 31, 2024 filed with the SEC on March 4, 2025.

Such risks, uncertainties and changes in condition, significance, value

and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable.

are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report and

are based on information currently and reasonably known to us.

We undertake no obligation to revise or update any forward-looking statements

in order to reflect any event or circumstance that may arise after the date of this Quarterly Report.

Readers are urged to carefully review

and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors

that may affect our business, financial condition, results of operations and prospects.

year ended December 31, 2025 filed with the SEC on February 24, 2026.

Such risks, uncertainties and changes in condition, significance,

value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report

and are based on information currently and reasonably known to us.

We undertake no obligation to revise or update any forward-looking

statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report.

Readers are urged to

carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the

risks and factors that may affect our business, financial condition, results of operations and prospects.

We are engaged in the business

of developing, commercializing and licensing proprietary processes and technologies for the $700+ billion semiconductor industry.

lead technology, named Mears Silicon Technology™, or MST ® , is a thin film of reengineered silicon, typically 100

to 300 angstroms (or approximately 20 to 60 silicon atomic unit cells) thick.

MST is our proprietary and patent-protected performance

enhancement technology that we believe addresses a number of key engineering challenges facing the semiconductor industry.

that by incorporating MST, transistors can be made smaller, with increased speed, reliability and power efficiency.

In addition, since

MST is an additive and low-cost technology, we believe it can be deployed on an industrial scale, with machines commonly used in semiconductor

manufacturing.

We believe that MST can be widely incorporated into the most common types of semiconductor products, including analog,

logic, optical and memory integrated circuits.

lead technology, named Mears Silicon Technology™, or MST ® , is a thin film of reengineered silicon.

MST is our proprietary

and patent-protected performance enhancement technology that we believe addresses a number of key engineering challenges facing the semiconductor

MST provides multiple benefits to the semiconductor manufacturing process, enabling transistors to be made smaller, with increased

speed, reliability and power efficiency.

In addition, since MST is an additive and low-cost technology, we believe it can be deployed

on an industrial scale, with machines commonly used in semiconductor manufacturing.

We believe that MST can be widely incorporated into

the most common types of semiconductor products, including analog, logic, optical and memory integrated circuits.

We do not design or manufacture

integrated circuits directly.

Instead, we develop and license technologies and processes that we believe offer the designers and manufacturers

of integrated circuits a low-cost solution to the industry’s need for greater performance and lower power consumption.

Our customers

and partners include:

wafers or integrated circuits directly.

Instead, we develop and license technologies and processes that we believe offer the designers

and manufacturers of wafers and integrated circuits a low-cost solution to the industry’s need for greater performance and lower

power consumption.

Our customers and partners include:

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

integrated device manufacturers, or IDMs, which are the fully-integrated designers and manufacturers of integrated circuits;

fabless semiconductor manufacturers, which are designers of integrated circuits that outsource the manufacturing of their chips to foundries;

fabless semiconductor manufacturers, which are designers

of integrated circuits that outsource the manufacturing of their chips to foundries;

manufacturers of semiconductor wafers, which provide the substrates upon which integrated circuits are fabricated;

original equipment manufacturers, or OEMs, that manufacture the epitaxial, or epi, machines used to deposit semiconductor layers, such as the MST film, onto silicon wafers;

manufacturers of semiconductor materials, principally wafers;

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

commercialization strategy is to generate revenue through licensing arrangements whereby foundries, IDMs and fabless semiconductor manufacturers

pay us a license fee for their right to use MST technology in the manufacture of silicon wafers as well as a royalty for each silicon

wafer or device that incorporates our MST technology.

We also license our MSTcad software to our customers for use in simulating the effects

of using MST technology on their wafers and/or devices.

To date, we have generated revenue from (i) licensing agreements with ST Microelectonics

(ST) and Asahi Kasei Microdevices (AKM), both of which are IDMs, one fabless manufacturer and one foundry, (ii) a joint development agreement,

or JDA, with a leading semiconductor provider, (iii) engineering services provided to foundries, IDMs and fabless companies and (iv) licensing

Our principal business objective

is to enter into commercial license agreements that enable our customers to manufacture and sell MST-enabled products, generating license

revenues and ongoing royalties.

We also license our MSTcad ® software to customers, enabling them to simulate the effects

of MST on their products using Synopsys, Inc.’s technology computer-aided design, or TCAD, software.

In addition, we offer fee-based

integration engineering services to customers to evaluate the effects of MST as integrated into their manufacturing flow.

Typically, we

offer these services through paid evaluation arrangement, joint development agreements (“JDAs”) or integration license agreements.

Our goal is that MSTcad licensing

and engineering service arrangements will be tools that demonstrate the benefits of MST when integrated into customers’ manufacturing

processes and will lead customers to enter into commercial license agreements.

A “commercial license” consists of (i) an R&D

license, which grants our customer the rights to install MST on a tool in their fab and to manufacture MST-enabled products, but only

for internal use and limited customer sampling and (ii) a high-volume manufacturing, or HVM, license which grants the rights to manufacture

and sell MST-enabled products to their customers.

Depending upon our customers’

business needs and how we initially engaged with them, we may make these license grants in one or more separate contracts.

Our preferred

model is to charge our customers upfront license fees for each license grant.

Under our licensing model, the R&D license fee is due

upon installation of MST in a tool at our customer’s fab and a larger HVM license fee will be due when our customer completes qualification

of MST in their process and before they can sell MST -enabled products to their customers.

Upon the grant of an HVM license, our licensees

are also required to make royalty payments to us based on the number and/or sales price of MST-enabled products they sell.

We have engaged

with certain customers under joint development agreements, or JDAs.

Our JDAs include development, technology transfer, manufacturing and

licensing components.

To date, applications of our MST

technology have primarily been for power devices, RFSOI devices and advanced CMOS integrated circuits including logic and memory.

integrated circuits are the most widely used type of integrated circuits in the semiconductor industry.

We believe MST has the potential

to overcome the key challenges found in the implementation of next-generation nano-scale semiconductor devices incorporating CMOS type

transistors, namely enhancing drive current, reducing leakage and reducing variability.

In addition, we believe that MST has the potential

to deliver these benefits through a single technology that requires relatively minor modifications to the industry-standard CMOS manufacturing

Consequently, we believe that by incorporating MST, designers can make transistors with increased speed, reliability and energy

efficiency, without significantly altering the current fabrication process or cost of production.

Starting in 2024, we began applying

our technology to wafers used for fabrication of “compound semiconductors” which are devices built using materials other than

silicon, such as gallium nitride (GaN), which have properties especially attractive to the power and radio frequency markets.

materials such as GaN suffer from a tradeoff between high-cost specialized wafers and defective, low-yielding wafers resulting from the

crystal lattice mismatch between heterogeneous materials.

We believe MST can offer a cost-effective solution to these tradeoffs by serving

as a buffer layer between different materials, such as between GaN and a silicon wafer substrate.

We were organized as a Delaware

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On January 12, 2016, we changed our name to Atomera Incorporated.

On May 31, 2022, we entered

into an Equity Distribution Agreement with Oppenheimer & Co.

and Craig-Hallum Capital Group LLC (“Craig-Hallum”),

as agents, under which we offered and sold, from time to time at our sole discretion, shares of our common stock in an at the market offering

to or through the agents, having aggregate offering proceeds of up to $50.0 million (the “2022 ATM”).

The 2022 ATM expired

on March 18, 2025.

On May 27, 2025, we entered

into an Equity Distribution Agreement Craig-Hallum as agent, under which we may offer and sell, from time to time at our sole discretion,

shares of our common stock in an “at-the-market” offering, (“2025 ATM”) to or through the agent, having aggregate

Shares of our common stock are listed

on the NASDAQ Capital Market under the symbol “ATOM”.

On May 31, 2022, we entered into

an Equity Distribution Agreement with Oppenheimer & Co.

and Craig-Hallum Capital Group LLC (“Craig-Hallum”), as agents,

under which we offered and sold, from time to time at our sole discretion, shares of our common stock in an at the market offering to

or through the agents, having aggregate offering proceeds of up to $50.0 million (the “2022 ATM”).

The 2022 ATM expired on

March 18, 2025.

On May 27, 2025, we entered into

an Equity Distribution Agreement Craig-Hallum as agent, under which we may offer and sell, from time to time at our sole discretion, shares

of our common stock in an “at-the-market” offering, (the “2025 ATM”) to or through the agent, having aggregate

offering proceeds of up to $50.0 million.

During the three months ended September 30, 2025, we sold approximately 393,000 shares pursuant

During the three months ended March 31, 2026, we sold approximately 1.3 million shares pursuant

to the 2025 ATM at an average price per share of approximately $2.47 resulting in approximately $3.1 million of net proceeds to us after

deducting commissions and other offering expenses.

During the nine months ended

September 30, 2025, we sold approximately 742,000 shares pursuant to the 2022 ATM and the 2025 ATM at an average price per share of approximately

$7.42, resulting in approximately $5.2 million of net proceeds to us after deducting commissions and other offering expenses.

On February 24, 2026, we completed

a registered direct offering (the “Offering”) of 5,000,000 shares of our common stock at a purchase price of $5.00 per share

pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors.

In connection

with the Offering, the Company entered into a placement agent agreement with Craig-Hallum, pursuant to which Craig-Hallum served as the

exclusive placement agent for the issuance and sale of securities of the Company pursuant to the Purchase Agreement.

As compensation for

such placement agent services, the Company paid Craig-Hallum an aggregate cash fee equal to 5.0% of the gross proceeds received by the

Company from the Offering and agreed to reimburse up to $75,000 of legal and other expenses actually incurred.

Net proceeds to the

Company after deducting the placement agent fee and expenses were approximately $23.6 million.

Results of Operations

we have only generated limited revenue from customer engagements for engineering services, integration license agreements, a manufacturing

license granted under a JDA, our license agreement with ST and licensing of MSTcad.

Our MSTcad licenses grant customers the right to use

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

MSTcad licenses

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

Revenue for the three and

nine months ended September 30, 2025 was approximately $11,000 and $15,000, respectively, and our revenue for the three and nine months

ended September 30, 2024 was approximately $22,000 and $112,000, respectively.

Our revenue for all periods consisted of MSTcad licensing

and related consulting services revenue and engineering services revenue from the delivery of MST wafers.

To date, we have

only generated limited revenue from customer engagements for engineering services, integration license agreements, R&D licenses granted

under a JDA and under our license agreement with ST Microelectronics and licensing of MSTcad.

Our 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 or yearly basis and revenue is recognized over time.

Revenue for the three months ended

March 31, 2026 and 2025 was approximately $11,000 and $4,000, respectively.

Our revenue for the period ended March 31, 2026, consisted

of engineering services revenue from the delivery of MST wafers.

Revenue for the period ended March 31, 2025 consisted of MSTcad licensing

and related consulting services revenue.

Cost of revenue .

Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to deliver wafers and perform services,

and consulting services provided for our MSTcad licenses.

Cost of revenue is expensed when incurred and may not correspond with revenue

earned in the same period.

Cost of revenue for the three and nine months ended September 30, 2025 was $128,000 and $190,000, respectively.

Cost of revenue for the three and nine months ended September 30, 2024 was $3,000 and $110,000, respectively.

We anticipate that our cost

of revenue will vary substantially depending on the mix of license and engineering services revenues we receive and the nature of products

and/or services delivered in each customer engagement.

revenue consists of costs of materials, as well as direct compensation and expenses incurred to deliver wafers and perform services, and

consulting services provided for our MSTcad licenses.

Cost of revenue for the three months ended March 31, 2026 was approximately $126,000.

No cost of revenue was recorded for the three months ended March 31, 2025.

We anticipate that our cost of revenue will vary substantially

depending on the mix of license and engineering services revenues we receive and the nature of products and/or services delivered in each

customer engagement.

Cost of revenue is expensed when incurred and may not correspond with revenue earned in the same period.

of revenue in the three months ended March 31, 2026 is an example of this timing mismatch because our labor, wafer processing and metrology

costs were incurred in advance of anticipated wafer shipments that will result in recognizing engineering services revenue in future periods.

Operating expenses.

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For the three

months ended September 30, 2025 and 2024, our operating expenses totaled approximately $5.7 million and $4.8 million, respectively.

the nine months ended September 30, 2025 and 2024, our operating expenses totaled approximately $16.3 million and $14.5 million, respectively.

Research and development

To date, our operations have focused on research, development, patent prosecution, and commercialization of our MST technology

and related technologies such as MSTcad.

Our research and development costs primarily consist of payroll and benefits costs for our engineering

staff and costs of outsourced fabrication (including epi tool leases) and metrology of semiconductor wafers incorporating our MST technology.

For the three months ended

September 30, 2025 and 2024, we incurred approximately $3.3 million and $2.8 million, respectively, of research and development expenses,

an increase of approximately $545,000, or 20%.

This increase was primarily due to increases in outsourced engineering costs of approximately

$212,000, payroll and benefits costs of approximately $119,000 and stock-based compensation expenses of approximately $163,000.

For the nine months ended

September 30, 2025 and 2024, we incurred approximately $9.6 million and $8.2 million, respectively, of research and development expenses,

an increase of approximately $1.4 million, or 17%.

This increase was primarily due to increases in outsourced engineering costs of approximately

$627,000, payroll and benefits costs of approximately $335,000 and stock-based compensation expenses of approximately $381,000.

months ended March 31, 2026 and 2025, our operating expenses totaled approximately $6.2 million and $5.5 million, respectively.

Research and development expense .

To date, our operations have focused on research, development, patent prosecution, and commercialization of our MST technology and related

technologies such as MSTcad.

Our research and development costs primarily consist of payroll and benefits costs for our engineering staff

and costs of outsourced fabrication (including epi tool leases) and metrology of semiconductor wafers incorporating our MST technology.

For the three months ended March

31, 2026 and 2025, we incurred approximately $3.5 million and $3.3 million, respectively, of research and development expenses, an increase

of approximately $202,000, or 6%.

This increase was primarily due to increases in payroll and benefits costs of approximately $79,000

and stock-based compensation expenses of approximately $75,000.

General and administrative

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General and administrative costs were approximately $2.3 million and $2.1 million for the three months ended

September 30, 2025 and 2024, respectively, representing an increase of approximately $353,000, or 19%.

The increase is primarily related

to increases of approximately $289,000 in stock-based compensation expenses and payroll and benefits costs of approximately $101,000.

General and administrative

costs were approximately $6.3 million and $5.5 million for the nine months ended September 30, 2025 and 2024, respectively, representing

an increase of approximately $846,000, or 16%.

The increase is primarily related to increases of approximately $521,000 in stock-based

compensation expenses, approximately $162,000 in legal fees and payroll and benefits costs of approximately $167,000.

Selling and marketing

Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel and business

development consulting services.

Selling and marketing expenses for the three months ended September 30, 2025 and 2024 were approximately

$207,000 and $248,000, respectively, representing a decrease of approximately $41,000, or 17%.

The decrease in costs is primarily due

to a reduction in headcount offset by recruiting fees for the open positions.

Selling and marketing expenses

for the nine months ended September 30, 2025 and 2024 were approximately $472,000 and $805,000, respectively, representing a decrease

of approximately $333,000, or 41%.

The decrease in costs is primarily due to a reduction in headcount offset by an increase in recruiting

March 31, 2026 and 2025, respectively, representing an increase of approximately $245,000, or 12%.

The increase is primarily related to

increases of approximately $229,000 in stock-based compensation expenses and payroll and benefits costs of approximately $168,000 offset

by a decrease of approximately $121,000 in intellectual property related expenses.

Selling and marketing expense.

Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel and business development

consulting services.

Selling and marketing expenses for the three months ended March 31, 2026 and 2025 were approximately $419,000 and

$124,000, respectively, representing an increase of approximately $295,000, or 238%.

The increase is primarily related to a $136,000 increase

in employee related expenses, approximately $92,000 increase in stock based compensation and recruiting fees all related to an increase

in headcount over the prior year.

Interest income.

Interest income for the three months ended September 30, 2025 and 2024 was approximately $232,000 and $176,000, respectively.

income for the nine months ended September 30, 2025 and 2024 was approximately $736,000 and $566,000, respectively.

income for the three months ended March 31, 2026 and 2025 was approximately $197,000 and $270,000, respectively.

Interest income reflects

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Accretion income.

Accretion income for the three and nine months ended September 30, 2025 was approximately $0 and $6,000, respectively.

Accretion income

for the three and nine months ended September 30, 2024 was approximately $59,000 and $152,000, respectively.

income for the three months ended March 31, 206 and 2025 was approximately $57,000 and $6,000, respectively.

Accretion income relates

to the increase in value of our available-for-sale securities from the purchase date through the maturity date.

As of and for the three

months ended September 30, 2025, our cash and cash equivalents were held as cash and mutual funds.

Interest expense.

Interest expense for the three months ended September 30, 2025 and 2024 was approximately $12,000 and $30,000, respectively.

expense for the nine months ended September 30, 2025 and 2024 was approximately $51,000 and $104,000, respectively.

Interest expense is

related to the tool financing lease entered into in August 2021.

Other income (expense),

Other income for the nine months ended September 30, 2025 and 2024 was approximately $71,000 and $72,000, respectively.

amounts consist primarily of a refundable state research and development tax credit, net of filing costs and tax consulting services.

There was no other income (expense), net for the three months ended September 30, 2025 or 2024.

expense for the three months ended March 31, 2026 and 2025, was approximately $4,000 and $21,000, respectively.

Interest expense is related

to the tool financing lease entered into in August 2021.

Other income (expense), net.

Other income for the three months ended March 31, 2026 and 2025 was approximately $1,000 and ($1,000), respectively.

Cash Flows from Operating, Investing and Financing

Net cash used in operating

activities of approximately $11.6 million for the nine months ended September 30, 2025 resulted primarily from our net loss of approximately

$15.7 million offset by approximately $3.6 million of stock-based compensation and approximately $914,000 in amortization of right-of-use

Net cash used in operating

activities of approximately $10.2 million for the nine months ended September 30, 2024 resulted primarily from our net loss of approximately

$13.8 million offset by approximately $2.9 million of stock-based compensation and the amortization of our right-of-use assets of approximately

$1.0 million offset by increases in our payroll-related accruals.

Net cash provided by investing

activities of approximately $973,000 for the nine months ended September 30, 2025 consisted primarily of the maturity of short-term available-for-sale

Net cash used in operating activities

of approximately $4.6 million for the three months ended March 31, 2026 resulted primarily from our net loss of approximately $6.1 million

offset by approximately $1.4 million of stock-based compensation.

Net cash used in operating activities

of approximately $4.8 million for the three months ended March 31, 2025 resulted primarily from our net loss of approximately $5.2 million

and a decrease in our accrued payroll expenses of approximately $926,000, offset by approximately $1.0 million of stock-based compensation

and an increase of approximately $269,000 in accounts payable.

Net cash used in investing activities

of approximately $27.0 million for the three months ended March 31, 2026 consisted of the purchase of short-term available-for-sale investments.

Net cash provided by investing

activities of approximately $3.5 million and for the nine months ended September 30, 2024 consisted primarily of the maturity of short-term

available-for-sale investments, offset by the purchase of short-term available-for-sale investments.

activities of approximately $996,000 for the three months ended March 31, 2025 consisted primarily of the maturity of short-term available-for-sale

Net cash provided by financing

activities of approximately $5.2 million for the nine months ended September 30, 2025 primarily related to the net proceeds from sales

under our ATM and stock option exercises, offset by the principal payments on our financing lease.

activities of approximately $26.5 million for the three months ended March 31, 2026 primarily related to the net proceeds from sales under

our registered direct offering of common stock, sales under the 2025 ATM and stock option exercises, offset by the principal payments

on our financing lease.

Net cash provided by financing

activities of approximately $7.9 million for the nine months ended September 30, 2024 primarily related to the net proceeds from our ATM

offering, offset by the principal payments on our financing lease.

activities of approximately $2.1 million for the three months ended March 31, 2025 primarily related to the net proceeds from sales under

our 2022 ATM, offset by the principal payments on our financing lease.

Liquidity and Capital Resources

As of September 30, 2025,

we had cash and cash equivalents of approximately $20.3 million and working capital of approximately $18.1 million.

For the nine months

ended September 30, 2025 we had a net loss of approximately $15.7 million and used approximately $11.6 million of cash and cash equivalents

in operations.

As of March 31, 2026, we had cash,

cash equivalents and short-term investments of approximately $41.1 million and working capital of approximately $39.9 million.

three months ended March 31, 2026 we had a net loss of approximately $6.1 million and used approximately $4.6 million of cash and cash

equivalents in operations.

Since inception, we have incurred recurring operating losses.

During the three months

ended September 30, 2025, we sold approximately 393,000 shares of commons stock pursuant to the 2025 ATM at an average price per share

of approximately $5.23, resulting in approximately $2.0 million of net proceeds to the Company after deducting commissions and other offering

During the nine months ended

September 30, 2025, we sold approximately 742,000 shares pursuant to the 2022 ATM and the 2025 ATM at an average price per share of approximately

$7.42, resulting in approximately $5.2 million of net proceeds to us after deducting commissions and other offering expenses.

During the three months ended

March 31, 2026, we sold approximately 1.3 million shares of commons stock pursuant to the 2025 ATM at an average price per share of approximately

$2.47, resulting in approximately $3.1 million of net proceeds to the Company after deducting commissions and other offering expenses.

During the three months ended

March 31, 2026, we sold five million shares of common stock in a registered direct offering, at a purchase price of $5.00 per share.

compensation for such placement agent services, the Company paid Craig-Hallum an aggregate cash fee equal to 5.0% of the gross proceeds

received by the Company from the Offering and agreed to reimburse up to $75,000 of legal and other expenses as actually incurred.

proceeds to the Company after deducting the placement agent fee and expenses were approximately $23.6 million.

We believe that our available

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Critical Accounting Estimates

There have been no changes

to our critical accounting estimates from those included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed

with the SEC on March 4, 2025.

There have been no changes to

our critical accounting estimates from those included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with

the SEC on February 24, 2026.

Quantitative and Qualitative Disclosure about Market Risk.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis