Atomera Inc 10-Q

Item 1. Financial Statements Atomera Incorporated Condensed Balance Sheets (in thousands, except per share data) March 31, December 31, 2026 2025 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 14,160 $ 19,210 Short-term investments 26,930 – Accounts receivable 41 – Interest receivable 139 54 Prepaid expenses and other current assets 788 338 Total current assets 42,058 19,602 Property and equipment, net 51 60 Security deposit 14 14 Operating lease right-of-use asset 1,176 884 Financing lease right-of-use-asset 322 533 Total assets $ 43,621 $ 21,093 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 677 $ 608 Accrued expenses 213 168 Accrued payroll-related expenses 782 650 Current operating lease liability 301 147 Current financing lease liability 106 420 Deferred revenue 96 7 Total current liabilities 2,175 2,000 Long-term operating lease liability 896 712 Total liabilities 3,071 2,712 Commitments and contingencies (see Note 9) – – Stockholders’ equity: Preferred stock $ 0.001 par value, authorized 2,500 shares; none issued and outstanding as of March 31, 2026 and December 31, 2025 – – Common stock: $ 0.001 par value, authorized 47,500 shares; 38,723 shares issued and 38,716 outstanding as of March 31, 2026; and 32,354 shares issued and outstanding as of December 31, 2025 39 32 Additional paid in capital 288,301 260,043 Other comprehensive income ( 23 ) – Accumulated deficit ( 247,767 ) ( 241,694 ) Total stockholders’ equity 40,550 18,381 Total liabilities and stockholders’ equity $ 43,621 $ 21,093 The accompanying notes are an integral part of these condensed financial statements. 3 Atomera Incorporated Condensed Statements of Operations (Unaudited) (in thousands, except per share data) Three Months Ended March 31, 2026 2025 Revenue $ 11 $ 4 Cost of revenue ( 126 ) – Gross profit (loss) ( 115 ) 4 Operating expenses Research and development 3,457 3,255 General and administrative 2,333 2,088 Selling and marketing 419 124 Total operating expenses 6,209 5,467 Loss from operations ( 6,324 ) ( 5,463 ) Other income (expense) Interest income 197 270 Accretion income 57 6 Interest expense ( 4 ) ( 21 ) Other income (expense), net 1 ( 1 ) Total other income (expense), net 251 254 Net loss $ ( 6,073 ) $ ( 5,209 ) Net loss per common share, basic $ ( 0.17 ) $ ( 0.17 ) Net loss per common share, diluted $ ( 0.17 ) $ ( 0.17 ) Weighted average number of common shares outstanding, basic 35,256 30,243 Weighted average number of common shares outstanding, diluted 35,256 30,243 The accompanying notes are an integral part of these condensed financial statements. 4 Atomera Incorporated Condensed Statements of Comprehensive Loss (Unaudited) (in thousands, except per share data) Three Months Ended March 31, 2026 2025 Net loss $ ( 6,073 ) $ ( 5,209 ) Unrealized gain (loss) on available-for-sale securities ( 23 ) ( 1 ) Net loss $ ( 6,096 ) $ ( 5,210 ) The accompanying notes are an integral part of these condensed financial statements. 5 Atomera Incorporated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2026 and 2025 (Unaudited) (in thousands) Common Stock Additional Paid-in Other Comprehensive Accumulated Total Stockholders’ Shares Amount Capital Loss Deficit Equity Balance January 1, 2026 32,354 $ 32 $ 260,043 $ – $ ( 241,694 ) $ 18,381 Stock-based compensation 27 – 1,406 – – 1,406 Stock option exercises 22 – 124 – – 124 Forfeiture of restricted stock award ( 7 ) – – – – – Registered direct offering of common stock, net of commissions, expenses and other offering costs 5,000 5 23,591 – – 23,596 At-the-market sale of stock, net of commissions and expenses 1,320 2 3,137 – – 3,139 Net loss – – – – ( 6,073 ) ( 6,073 ) Unrealized gain (loss) on available-for-sale securities – – – ( 23 ) – ( 23 ) Balance March 31, 2026 38,716 $ 39 $ 288,301 $ ( 23 ) $ ( 247,767 ) $ 40,550 Common Stock Additional Paid-in Other Comprehensive Accumulated Total Stockholders’ Shares Amount Capital Loss Deficit Equity Balance January 1, 2025 30,540 $ 31 $ 246,565 $ 1 $ ( 221,520 ) $ 25,077 Stock-based compensation – – 1,009 – – 1,009 At-the-market sale of stock, net of commissions and expenses 164 – 2,407 – – 2,407 Net loss – – – – ( 5,209 ) ( 5,209 ) Unrealized gain (loss) on available-for-sale securities – – – ( 1 ) – ( 1 ) Balance March 31, 2025 30,704 $ 31 $ 249,981 $ – $ ( 226,729 ) $ 23,283 The accompanying notes are an integral part of these condensed financial statements. 6 Atomera Incorporated Condensed Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended March 31, 2026 2025 Cash flows from operating activities Net loss $ ( 6,073 ) $ ( 5,209 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 9 12 Operating lease right of use asset amortization 50 61 Financing lease right of use asset amortization 211 251 Stock-based compensation 1,406 1,009 Net accretion of discounts on available-for-sale securities ( 40 ) ( 6 ) Changes in operating assets and liabilities: Accounts receivable ( 41 ) 6 Interest receivable ( 10 ) ( 8 ) Prepaid and other current assets ( 450 ) ( 95 ) Accounts payable 69 269 Accrued expenses 45 ( 44 ) Accrued payroll expenses 132 ( 926 ) Operating lease liability ( 4 ) ( 98 ) Deferred revenue 89 ( 4 ) Net cash used in operating activities ( 4,607 ) ( 4,782 ) Cash flows from investing activities Acquisition of property and equipment – ( 4 ) Purchase of available-for-sale securities ( 26,988 ) – Maturity of available-for-sale securities – 1,000 Net cash provided by/(used in) investing activities ( 26,988 ) 996 Cash flows from financing activities Proceeds from registered direct offering of common stock net of commissions and expenses 23,596 – Proceeds from at-the-market sale of stock, net of commissions and expenses 3,139 2,407 Proceeds from exercise of stock options 124 – Payments on principal of financing lease ( 314 ) ( 276 ) Net cash provided by financing activities 26,545 2,131 Net (decrease) in cash and cash equivalents ( 5,050 ) ( 1,655 ) Cash and cash equivalents at beginning of period 19,210 25,778 Cash and cash equivalents at end of period $ 14,160 $ 24,123 Supplemental information: Cash paid for interest $ 4 $ 21 Cash paid for taxes $ – $ – The accompanying notes are an integral part of these condensed financial statements. 7 ATOMERA INCORPORATED NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS For the Three Months Ended March 31, 2026 and 2025 1. NATURE OF OPERATIONS Atomera Incorporated (“Atomera” or the “Company”) was incorporated in the state of Delaware in March 2007 under the name MEARS Technologies, Inc. and is engaged in the development, commercialization and licensing of proprietary processes and technologies for the semiconductor industry. On January 12, 2016, the Company changed its name to Atomera Incorporated. Atomera is an early-stage company, having only 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. 2. LIQUIDITY AND MANAGEMENT PLANS At March 31, 2026, the Company had cash, cash equivalents and short-term investments of approximately $ 41.1 million and working capital of approximately $ 39.9 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. On May 31, 2022, Atomera entered into an Equity Distribution Agreement with Oppenheimer & Co. Inc. and Craig-Hallum Capital Group LLC (“Craig-Hallum”), as agents, under which the Company offered and sold, from time to time at its sole discretion, shares of its $0.001 par value common stock in an at the market offering to or through the agents, having aggregate offering proceeds of approximately $44.8 million (the “2022 ATM”). The 2022 ATM Facility expired on March 18, 2025. On May 27, 2025, Atomera entered into an Equity Distribution Agreement with Craig-Hallum as agent, 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 an at-the-market offering to or through the agent, having aggregate offering proceeds of up to $50.0 million (the “2025 ATM”). During the three months ended March 31, 2026, the Company sold approximately 1.3 million shares of common stock pursuant to 2025 ATM at an average price per share of approximately $ 2.47 resulting in approximately $ 3.1 million in net proceeds to the Company after deducting commissions and other offering expenses. On February 24, 2026, the Company completed a registered direct offering (the “Offering”) of 5,000,000 shares of its $ 0.001 par value 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. 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, 24 months from the date that these financial statements have been issued. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its technology, competing technological and market developments, and the need to enter into collaborations with other companies or acquire technologies to enhance or complement its current offerings. 8 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant Accounting Policies There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 24, 2026. Basis of Presentation of Unaudited Condensed Financial Information The unaudited condensed financial statements of the Company for the three months ended March 31, 2026 and 2025 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and its results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2025 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2026. These unaudited condensed financial statements should be read in conjunction with that report. Cash, Cash Equivalents, and Short-Term Investments The Company considers all highly-liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Cash equivalents may be invested in money market funds, treasury bills or U.S. government agency bonds. Cash and cash equivalents are carried at cost, which approximates their fair value. The Company may also purchase short-term investments comprised of U.S. treasury bills and U.S. government agency bonds with maturities of more than three months, but less than one year. The Company classifies these as available-for-sale at their purchase date and will reevaluate such designation at each period end date. The Company may sell these marketable debt securities prior to their stated maturities depending upon changing liquidity requirements. These debt securities are classified as current assets in the condensed balance sheets and recorded at fair value, with unrealized gains or losses included in accumulated other comprehensive income (loss). Gains and losses are recognized when realized. Gains and losses are determined using the specific identification method and are reported in other income, net in the condensed statements of operations when incurred. Unrealized gains and losses are included in other comprehensive income (loss) on the condensed balance sheets. Recent Accounting Standards In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03 (as clarified by ASU 2025-01 in January 2025), Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ) (“ASU 2023-03”), requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company does not believe ASU 2024-03 will have a material impact on its financial position, results of operations or financial statement disclosure. 9 In May 2025, the FASB issued ASU 2025-04 Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer which clarifies the guidance on the accounting for share-based payment awards that are granted by an entity as consideration payable to its customer, with the intent to reduce diversity in practice and improve existing guidance by revising the definition of a “performance condition” and eliminating a forfeiture policy election for service conditions associated with share-based consideration payable to a customer. It also clarifies the guidance in Topic 606 on the variable consideration constraint does not apply to share-based consideration payable to a customer “regardless of whether an award’s grant date has occurred”. ASU 2025-04 will be effective for the annual periods beginning after December 15, 2026 with early adoption permitted. The Company does not believe ASU 2025-04 will have a material impact on its financial position, results of operations or financial statement disclosure. In September 2025, the FASB issued ASU 2025-06 Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments require that an entity capitalize software costs when both: management has authorized and committed to funding the software project; and it is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”). In evaluating the probable-to-complete recognition threshold, an entity is required to consider whether there is significant uncertainty associated with the development activities of the software. ASU 2025-06 will be effective for the annual periods beginning after December 15, 2027. The Company does not believe ASU 2025-06 will have a material impact on its financial position, results of operations or financial statement disclosure. 4. FAIR VALUE MEASUREMENTS Accounting Standards Codification (“ASC”) 820, Fair Value Measurements states that fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, consists of: Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s cash equivalents and short-term investments were measured at fair value on a recurring basis as Level 1 assets. The Company’s cash, cash equivalents and short-term investments classified by security type as of March 31, 2026 and December 31, 2025 consisted of the following (in thousands): Schedule of fair value measurements March 31, 2026 Cost Unrealized Gain/(Loss) Accretion of Discount Fair Value Cash $ 302 $ – $ – $ 302 Money Market Funds 6,134 – – 6,134 US Treasury Bills 23,124 ( 7 ) 49 23,166 US Agency Bonds 11,496 ( 16 ) 8 11,488 Total $ 41,056 $ ( 23 ) $ 57 $ 41,090 10 December 31, 2025 Cost Unrealized Gain/(Loss) Accretion of Discount Fair Value Cash $ 279 $ – $ – $ 279 Money Market Funds 18,931 – – 18,931 Total $ 19,210 $ – $ – $ 19,210 5. REVENUE The Company recognizes revenue in accordance with ASC 606. The amount of revenue that the Company recognizes reflects the consideration it expects to receive in exchange for goods or services and such revenue is recognized at the time when goods or services are transferred and/or delivered to its customers. Revenue is recognized when the Company satisfies a performance obligation by transferring the product or service to the customer, either at a point in time or over time. Revenue from MSTcad licenses is recognized over a period of time. The following table provides information about disaggregated revenue by primary geographical markets and timing of revenue recognition (in thousands): Schedule of disaggregated revenue by primary geographical markets and timing of revenue recognition Three Months Ended March 31 2026 2025 Primary geographic markets North America $ 11 $ 4 Asia Pacific – – Total $ 11 $ 4 Timing of revenue recognition Products and services transferred at a point in time $ 11 $ – Products and services transferred over time – 4 Total $ 11 $ 4 Unbilled contracts receivable Timing of revenue recognition may differ from the timing of invoicing customers. Accounts receivable includes amounts billed and currently due from customers. Unbilled contracts receivable represents unbilled amounts expected to be received from customers in future periods, where the revenue recognized to date exceeds the amount billed, and the right to receive payment is subject to the underlying contractual terms. Unbilled contracts receivable amounts may not exceed their net realizable value and are classified as long-term assets if the payments are expected to be received more than one year from the reporting date. The Company had no unbilled contracts receivable as of March 31, 2026. Deferred Revenue The Company records deferred revenue for customers that were issued invoices, but from which the Company has not yet recognized the revenue based on its revenue recognition policy. As of March 31, 2026, the Company has approximately $ 96,000 in deferred revenue that is expected to be recognized in the next 12 months. 11 6. 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 (ii) vesting of restricted stock units and (iii) 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 stock equivalents were not included in the calculation of diluted net loss per common share because the inclusion thereof would be anti-dilutive (in thousands): Schedule of anti-dilutive shares Three Months Ended March 31, 2026 2025 Stock Options 3,586 3,582 Unvested restricted stock awards 185 423 Unvested restricted stock units 1,191 583 Total 4,962 4,588 7. LEASES The Company accounts for leases over one year under ASC 842. Lease expense for the Company’s operating leases consists of the lease payments recognized on a straight-line basis over the lease term. Expenses for the Company’s financing leases consists of the amortization expenses recognized on a straight-line basis over the lease term and interest expense. The Company’s lease agreement for an epitaxial deposition tool used in the development and marketing of the Company’s technology 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. Effective August 1, 2024, the lease payments for this tool were adjusted to $124,071 per month for the period August 1, 2024 through July 31, 2025. This adjustment to the lease payments also resulted in a reduction in the right-of-use (“ROU”) asset and corresponding lease liability. Effective August 1, 2025, the lease payments for this tool were adjusted to $133,125 per month for the period August 1, 2025 through April 30, 2026. The final three months of the lease were prepaid at the commencement of the lease. This adjustment to the lease payments also resulted in a reduction in the ROU asset and corresponding lease liability. In December 2025, the Company and its landlord amended the lease of the corporate headquarters in Los Gatos, California. The amendment extends the expiration date of the lease from January 2026 to March 2031. An additional ROU asset and lease liability of approximately $ 856,000 was recorded during the year ended December 31, 2025. The lease liability is based on the present value of the minimum lease payments, discounted using an estimated incremental borrowing rate of 8.75 %. The lease contains escalating payments on the anniversary of the original commencement of the lease which are included in the measurement of the 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. 12 In February 2026, the Company and its landlord amended the lease of its Tempe office location. The lease also contains a performance standard for research collaboration with Arizona State University. The agreement requires a minimum value of collaboration 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. The lease is for three years with an option to extend the lease for an additional two years. The lease liability is based on the present value of the minimum lease payments, discounted using an estimated incremental borrowing rate of 8.75 %. An ROU asset and lease liability of approximately $ 342,000 was recorded during the three months ended March 31, 2026. In December 2025, the Company entered into a lease agreement for an epitaxial deposition tool in Tempe, Arizona, distinct from the tool previously mentioned. The term of this lease is for 12 months beginning on January 1, 2025 for $95,000 per month. Since the lease term is not for more than one year and there are no extension provisions in the lease, the future lease payments are not included in the lease obligations on the Company’s condensed balance sheets. 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 lease costs Three Months Ended March 31, 2026 2025 Financing lease costs: Amortization of ROU assets $ 211 $ 251 Interest on lease liabilities 4 21 Total financing lease costs $ 215 $ 272 Operating lease costs: Fixed lease costs $ 71 $ 65 Variable lease costs – 1 Short-term lease costs 285 285 Total operating lease costs $ 356 $ 351 Future minimum payments under non-cancellable leases as of March 31, 2026 were as follows (in thousands): Schedule of future minimum payments For the Year Ended December 31, Financing leases Operating leases Remaining 2026 $ 106 $ 207 2027 – 292 2028 – 299 2029 – 306 2030 – 314 2031 – 64 Total future minimum lease payments 106 1,482 Less imputed interest – ( 285 ) Total lease liability $ 106 $ 1,197 13 The table below provides supplemental information and non-cash activity related to the Company’s operating and financing leases (in thousands): Schedule of supplemental information and non-cash activity Three Months Ended March 31, 2026 2025 Operating cash flow information: Cash paid for amounts included in the measurement of operating lease liabilities $ 25 $ 102 Cash paid for amounts included in the measurement of financing liabilities $ 319 $ 297 Non-cash activity: Right-of-use assets obtained in exchange for operating lease obligations $ 342 $ – 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 8.75 % for the Company’s operating leases. The weighted average remaining lease term is 0.3 years for the financing lease and 5.0 years for operating leases as of March 31, 2026. 8. STOCK BASED COMPENSATION In May 2017, the Company’s shareholders approved its 2017 Stock Incentive Plan (“2017 Plan”) after its 2007 Stock Incentive Plan (“2007 Plan”) had expired in March 2017. 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 shares of common stock and restricted stock units. The 2017 Plan provides for the issuance of 3,750,000 shares of common stock. In May 2023, the Company’s shareholders approved its 2023 Stock Incentive Plan (“2023 Plan”). The 2023 plan provides for the issuance of 2,000,000 shares of common stock. In May 2025, Company’s shareholders approved an amendment to the 2023 Plan, adding an additional 1,750,000 shares to this plan. All employees (including officers and directors who are also employees), as well as all of the nonemployee directors and other consultants, advisors and other persons who provide services to the Company are eligible to receive incentive awards under the 2017 Plan and 2023 Plan. Generally, stock options, restricted stock and restricted stock units issued under the 2017 Plan and 2023 Plan vest over a period of one to four years from the date of grant. As of March 31, 2026, a total of approximately 777,000 shares remain available for issuance under the plans. The following table summarizes the stock-based compensation expense recorded in the Company’s results of operations for stock options, restricted stock awards and restricted stock units granted under the Company’s incentive plans (in thousands): Schedule of stock-based compensation expense Three Months Ended March 31, 2026 2025 Research and development $ 534 $ 459 General and administrative 829 599 Selling and marketing 43 ( 49 ) Total $ 1,406 $ 1,009 As of March 31, 2026, there was approximately $ 13.2 million of total unrecognized compensation expense related to unvested share-based compensation. This cost is expected to be recognized over a weighted-average period of 2.3 years. 14 Time-Based Stock Options: The Company records compensation expense for time-based stock options over the vesting term using the straight-line method. The fair value of employee stock options issued was estimated using the Black-Scholes method and the average grant date fair value was estimated to be $ 4.39 for three months ended March 31, 2026. There were no time-based stock options issued in the three months ended March 31, 2025. The following table summarizes time-based stock option activity during the three months ended March 31, 2026 (in thousands except exercise prices and contractual terms): Schedule of time based stock option activity Number of Shares Weighted- Average Exercise Prices per Share Weighted- Average Remaining Contractual Term (In Years) Intrinsic Value Outstanding at January 1, 2026 2,907 $ 6.53 Granted 109 $ 5.24 Exercised ( 22 ) $ 5.70 Forfeited ( 1 ) $ 9.91 Expired ( 143 ) $ 7.66 Outstanding at March 31, 2026 2,850 $ 6.43 4.75 $ 149 Exercisable at March 31, 2026 2,276 $ 6.75 3.76 $ 25 The intrinsic value is based on the Company’s closing stock price of $ 3.81 on March 31, 2026. Performance-based Stock Options: In March 2026, the Company began issuing performance-based stock options (“PSOs”) to certain employees. The PSOs include both time-based and stock-price-based vesting thresholds, with 25% of the PSO time-vesting one year after the grant date and the remaining PSOs time-vesting over the next three years, but the PSOs only vest and become exercisable if the volume-weighted average price of the Company’s common stock as quoted on the Nasdaq Stock Market over any 30 consecutive trading days during the five-year period from the date of grant exceeds the stock-price hurdles specified in the PSO awards. The stock-price hurdles for PSOs granted during the three months ended March 31, 2026 were $ 7.50 , $ 12.50 and $ 20.00 . The fair value of these PSOs was estimated using a Monte Carlo simulation and the stock compensation expense is amortized over the requisite service period for each tranche, which is the longer of the derived service period or the explicit service period. The average grant date fair value was determined to be $ 3.87 on the day of grant. The following table summarizes PSO activity during the three months ended March 31, 2026 (in thousands except exercise prices and contractual terms): Schedule of performance based stock option activity Number of Shares Weighted- Average Exercise Prices per Share Weighted- Average Remaining Contractual Term (In Years) Intrinsic Value Outstanding at January 1, 2026 – $ – Granted 736 $ 5.10 Outstanding at March 31, 2026 736 $ 5.10 4.95 $ – The intrinsic value is based on the Company’s closing stock price of $ 3.81 on March 31, 2026. 15 Restricted Stock Awards: The Company has issued restricted stock awards to employees, directors and consultants and estimates the fair value based on the closing price on the day of grant. The following table summarizes all restricted stock award activity during the three months ended March 31, 2026 (in thousands except per share data): Schedule of restricted stock activity Number of Shares Weighted-Average Grant Date Fair Value per Share Outstanding at January 1, 2026 234 $ 6.90 Vested ( 42 ) $ 8.74 Forfeited ( 7 ) $ 6.49 Outstanding non-vested shares at March 31, 2026 185 $ 6.49 Restricted Stock Units: The Company issues restricted stock units (“RSUs”) to employees, directors and consultants and a portion of the RSUs issued are subject to time-based vesting and a portion are subject to performance-based vesting criteria. The fair value of time-based RSUs is based on the closing price on the day of grant and they vest over zero to four years. Awards of performance-based restricted stock units by the Company have a performance period of one, two or three years with the vesting of each award tranche dependent on the Company’s Total Shareholder Return (“TSR”) relative to the TSR of companies in the Russell 2000 Index over that tranche’s performance period. The fair value for performance-based awards is fixed at the grant date using a Monte Carlo simulation and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of TSR achievement. The following table summarizes all restricted stock unit activity during the three months ended March 31, 2026 (in thousands except per share data): Schedule of restricted stock unit activity Time-Based Units Performance- Based Units Total Restricted Stock Units Weighted-Average Grant Date Fair Value per Share Outstanding at January 1, 2026 387 221 608 $ 7.62 Granted 454 277 731 $ 6.81 Vested ( 27 ) – ( 27 ) $ 6.34 Forfeited ( 47 ) ( 74 ) ( 121 ) $ 7.07 Outstanding at March 31, 2026 767 424 1,191 $ 7.21 9. COMMITMENTS AND CONTINGENCIES Litigation, Claims and Assessments The Company may be subject to periodic lawsuits, investigations and claims that arise in the ordinary course of business. The Company is not party to any material litigation as of March 31, 2026, or through the date these financial statements have been issued. 16 10. SEGMENT INFORMATION The Company operates as a single operating segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer and chief financial officer who review financial information. The CODM uses total operating expense, operating margin and related impact on cash consumption to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the determination of the overall headcount, allocation of headcount, research and development expenditures, licensing and royalty rates offered to customers and capital expenditure commitments. The measure of assets is reported on the accompanying condensed balance sheets as total assets. The following table presents selected financial information with respect to the Company’s single operating segment for the three months ended March 31, 2026 and 2025: Schedule of selected financial information Three Months Ended March 31, 2026 2025 Revenue $ 11 $ 4 Less expenses (1) : Employee related expenses 2,204 1,787 Stock-based compensation 1,406 1,009 Travel and entertainment 48 70 Tool related expenses 577 611 Consulting expenses 207 150 Metrology and other outsourced research expenses 559 461 Intellectual property related expenses 230 351 Other operating items (2) 1,104 1,028 Loss from operations ( 6,324 ) ( 5,463 ) Other income (expense), net 251 254 Net loss $ ( 6,073 ) $ ( 5,209 ) (1) Expenses classified as cost of revenue are included in the line items presented and not as a separate category. (2) Other operating expenses include items not listed above separately. These include travel and entertainment, professional development, information technology costs, office related costs, depreciation, other research and development costs, other sales and marketing costs and other general and administrative costs. 11. SUBSEQUENT EVENTS Management has evaluated subsequent events and transactions through the date these financial statements were issued. 17