Atomera Inc (ATOM) Risk Factors

Item 1A. Risk Factors

We are subject to various risks that may harm
our business, prospects, financial condition and results of operation or prevent us from achieving our goals. If any of these risks occur,
our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our
common stock could decline and investors could lose all or part of their investment.

Risks Related to Our Business

We have generated limited
revenue to date, so it is difficult for potential investors to evaluate our business. To date, our operations have consisted of
technology research and development, testing, and joint development work with customers, potential customers and strategic partners. Our
business model is to derive our revenue primarily from license fees and royalties, but to date we have only recognized minimal revenues.
Our limited operating history makes it difficult to evaluate the commercial value of our technology, the viability of our licensing model
or our prospective operations. As an early-stage company, we are subject to all the risks inherent in the initial organization, financing,
expenditures, complications and delays in a new business, including, without limitation:

Investors should evaluate
an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. There can be no assurance
that our efforts will be successful or that we will ultimately be able to attain profitability.

We have a history of
significant operating losses and anticipate continued operating losses for at least the near term. For the years ended December
31, 2025 and 2024, we have incurred net losses of approximately $20.2 million and $18.4 million, respectively, and our operations have
used approximately $14.9 million and $13.2 million of cash, respectively. As of December 31, 2025, we had an accumulated deficit of approximately
$241.7 million. We will continue to experience negative cash flows from operations until at least such time as we are able to secure R&D
and HVM license agreements with one or more foundries, IDMs or fabless semiconductor manufacturers and such customers ship sufficient
volumes of royalty-bearing products and pay upfront license fees to support our cash requirements. While management will endeavor to generate
positive cash flows from the commercialization of our MST technology, there can be no assurance that we will be successful in doing so.
If we are unable to generate positive cash flow within a reasonable period of time, we may be unable to further pursue our business plan
or continue operations.

While we have entered
into one commercial license agreement, four integration license agreements and two joint development agreements, there can be no assurance
that any of these relationships will advance to further licensing stages or to royalty-based distribution license agreements.
Neither of our JDAs commits the customers to take MST to production. ST has successfully installed our MST film recipe and accepted our
film under a commercial license agreement executed in April 2023, resulting in the grant of an R&D license to them enabling them to
manufacture MST wafers for internal use. However, in October 2025 ST informed us that they would not complete the qualification of MST
into their process after deciding to migrate their development of their targeted process to 300mm wafers. There can be no assurance whether
or when ST will re-commence qualification of MST technology or that, in the event they do proceed, that MST will deliver the performance,
power or other requirements that ST or our other customers seek for their products or that the integration of our technology with our
customers’ manufacturing process will be successful in high volume. In addition, even if our MST technology is successfully integrated
into the licensees’ products, any or all of our licensees may decide, for reasons unrelated to the price or performance of our MST
technology, not to enter the subsequent license phases or execute the additional license agreements required to take MST to commercial
production.

We expect that our product
qualification and licensing cycle will be lengthy and costly, and our marketing, engineering and sales efforts may be unsuccessful. We
have incurred significant engineering, marketing and sales expenses during customer engagements without entering into license agreements,
generating a license fee or establishing a royalty stream from the customer and we expect that such investments ahead of license revenue
will continue to be necessary in the future. The introduction of any new process technology into semiconductor manufacturing is a lengthy
process and we cannot forecast with any degree of assurance the length of time it takes to establish a new licensing relationship. However,
based on our engagements with potential customers to date, we believe the time from initial engagement until our customers incorporate
our technologies in their semiconductor products can take 18 to 36 months or longer. Our integration license agreements with our current
licensees do not commit them to R&D or HVM licenses and we expect those licensees to perform additional tests on evaluation wafers
under their respective integration licenses before deciding whether to enter the next stages of licensing MST. As such, we will incur
additional expenses in our engagements with our licensees before we receive license fees, if any, for manufacturing and distribution and
before any subsequent royalty stream begins.. While we believe our JDAs and our integration license agreements should accelerate licensing
decisions by other customers, the evaluation process for new technologies in the semiconductor industry is inherently long and complex
and there can be no assurance that we will successfully convert other customer prospects into paying customers or that any of these customers
will generate sufficient revenue to cover our expenses.

Qualification of our
MST technology requires access to our potential customers’ manufacturing tools and facilities, as well as to leased tools and facilities,
which may not be available on a timely basis or at all. The qualification of a new process technology like MST entails the integration
of our MST film into the complex manufacturing processes employed by our potential customers. In order to validate the benefits of MST,
our customer engagement process involves fabrication of wafers that incorporate MST deposited by us using our epitaxial deposition tools
and then completing the manufacturing of the wafers in our customers’ facilities using their tools. The semiconductor industry in
2025 exceeded $700 billion in sales. The combination of recovery from COVID-era supply-chain disruptions and the rapid growth in demand
driven by AI, some segments of the industry have been characterized by product shortages as strong demand has outstripped supply, resulting
in tight capacity among our potential customers, while other segments have experienced softness and excess supply. We have experienced
delays in completing the processing of evaluation wafers by our customers as those customers prioritize utilization of their equipment
for production use. If our customers do not dedicate their equipment and facilities to testing our products in a timely fashion, we may
experience delays that will increase our expenses and delay our customers’ decisions on entering into commercial licenses with us.
Additionally, we conduct our ongoing research and development and portions of our customer evaluation activities using leased epitaxial
(epi) deposition tools that we believe will accelerate internal development work and customer engagements. However, epi tools require
ongoing, complex maintenance and they have been and will continue to be subject to both planned and unplanned downtime. Any interruption
in our epi tool availability may negatively impact the progress of customer work as well as our internal research and development and
accordingly could delay or prevent customers from entering into commercial licenses.

The long-term success
of our business is dependent on a royalty-based business model, which is inherently risky. The long-term success of our business
is dependent on future royalties paid to us by licensee-customers, whose business require them to market products to their end customers.
Royalty payments under our licenses are generally expected to be based on a percentage of the selling price of wafers made using MST or
the selling price of MST-enabled semiconductor die sold, depending on the customer type and the negotiation of our full commercial license
agreements. We will depend upon our ability to structure, negotiate and enforce agreements for the determination and payment of royalties,
as well as upon our licensees’ compliance with their agreements. We face risks inherent in a royalty-based business model, many
of which are outside of our control, such as the following:

We may need additional
financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at
all. As of December 31, 2025, we had total assets of approximately $21.1 million, cash and cash-equivalents of approximately
$19.2 million and working capital of approximately $17.6 million. On February 24, 2026, we completed a registered direct offering
of shares of our common stock to institutional investors that resulted in net proceeds to us of approximately $23.6 million after commissions
and offering expenses. We believe that we have sufficient capital as of the date of this report to fund our current business plans and
obligations over, at least, the 24 months following the date of this Annual Report. However, even after installation of MST in a customer’s
fab under a manufacturing license, the full production qualification of a new technology like MST can take more than an additional year,
and we have limited ability to influence our customers’ testing and qualification processes. Accordingly, we may require additional
capital prior to obtaining a royalty-based license or prior to such a license generating sufficient royalty income to cover our ongoing
operating expenses. In the event we require additional capital over and above the amount of our presently available working capital, we
will endeavor to seek additional funds through various financing sources, including the sale of our equity and debt securities, licensing
fees for our technology and joint ventures with industry partners. In addition, we will consider alternatives to our current business
plan that may enable us to achieve material revenue with a smaller amount of capital. However, there can be no guarantees that such funds
will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable
to further pursue our business plan and we may be unable to continue operations.

Unfavorable geopolitical
and macroeconomic developments could adversely affect our business, financial condition or results of operations. Our business
could be adversely affected by conditions in the U.S. and global economies, the United States and global financial markets, potential
imposition of tariffs, increased export controls and adverse geopolitical and macroeconomic developments, including inflation rates, the
Ukrainian/Russian and Israeli/Palestinian conflicts and related sanctions, bank failures, and economic uncertainties related to these
conditions.

Recent efforts to create national
self-sufficiency of the semiconductor supply chain by various countries around the world creates new competitive and economic dynamics
that are difficult to predict and may lead to semiconductor industry instability. For example, the U.S. government has been imposing increasingly
strict export controls, particularly on exports to China, which have already impacted the financial performance and business outlook of
certain semiconductor vendors and vendors of semiconductor manufacturing equipment. Increased restrictions on the availability and use
of critical semiconductor IP and equipment by various foreign entities may limit Atomera’s ability to license our IP in some parts
of the world.

Our
internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which
could result in a material disruption of our development programs. Our internal computer systems and those of our current and
any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural
disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such material system failure,
accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a disruption
of our development programs and our business operations, whether due to a loss of our or our customers’ trade secrets or other proprietary
information or other similar disruptions. To the extent that any disruption or security breach were to result in a loss of, or damage
to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive
position could be harmed and the further development and commercialization of our technology could be delayed.

We
could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information
maintained in the information systems and networks of our company and our vendors, including personal or confidential information of our
employees, customers and vendors. In addition, outside parties may attempt to penetrate our systems or those of our customers or vendors
or fraudulently induce our personnel or the personnel of our customers or vendors to disclose sensitive information in order to gain access
to our data and/or systems. We may experience threats to our data and systems, including malicious codes and viruses, phishing and other
cyberattacks. The number and complexity of these threats continue to increase over time. If a material breach of, or accidental or intentional
loss of data from, our information technology systems or those of our customers or vendors occurs, the market perception of the effectiveness
of our security measures could be harmed and our reputation and credibility could be damaged. We could be required to expend significant
amounts of money and other resources to repair or replace information systems or networks. In addition, we could be subject to regulatory
actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use
practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair
or deceptive practices.

Although we develop and maintain
systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development
and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change
and efforts to overcome security measures become increasingly sophisticated. Moreover, despite our efforts, the possibility of these events
occurring cannot be eliminated entirely. As we outsource more of our information systems to vendors, engage in more electronic transactions
with customers and vendors, and rely more on cloud-based information systems, the related security risks will increase and we will need
to expend additional resources to protect our technology and information systems. In addition, there can be no assurance that our internal
information technology systems or those of our third-party contractors, or our consultants’ efforts to implement adequate security
and control measures, will be sufficient to protect us against breakdowns, service disruption, data deterioration or loss in the event
of a system malfunction, or prevent data from being stolen or corrupted in the event of a cyberattack, security breach, industrial espionage
attacks or insider threat attacks which could result in financial, legal, business or reputational harm.

Our revenues may be
concentrated in a few customers and if we lose any of these customers, or these customers do not pay us, our revenues could be materially
adversely affected. If we are able to secure the adoption of our MST by one or more foundries, IDMs or fabless semiconductor
manufacturers, we expect that for at least the first few years substantially all of our revenue will be generated from license fees and
engineering services before customers commence royalty-bearing shipments. Due to the concentration and ongoing consolidation within the
semiconductor industry, we may also find that over the longer term our royalty-based revenues are dependent on a relatively few customers.
If we lose any of these customers, or these customers do not pay us, our revenues could be materially adversely affected.

If we are unable to
manage future expansion effectively, our business, operations and financial condition may suffer significantly, resulting in decreased
productivity. If our MST proves to be commercially valuable, it is likely that we will experience a rapid growth phase that could
place a significant strain on our managerial, administrative, technical, operational and financial resources. Our organization, procedures
and management may not be adequate to fully support the expansion of our operations or the efficient execution of our business strategy.
If we are unable to manage future expansion effectively, our business, operations and financial condition may suffer significantly, resulting
in decreased productivity.

It may be difficult
for us to verify royalty amounts owed to us under our licensing agreements, and this may cause us to lose revenues.  We will
endeavor to provide that the terms of our license agreements require our licensees to document their use of our technology and report
related data to us on a regular basis. We will endeavor to provide that the terms of our license agreements give us the right to audit
books and records of our licensees to verify this information, however audits can be expensive, time consuming, and may not be cost justified
based on our understanding of our licensees’ businesses. We will endeavor to audit certain licensees to review the accuracy of the
information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to
which we are entitled under the terms of our license agreements, but we cannot give assurances that such audits will be effective to that
end.

Our business operations
could suffer in the event of information technology systems’ failures or security breaches. While we believe that we have
implemented adequate security measures within our internal information technology and networking systems, our information technology systems
may be subject to security breaches, damages from computer viruses, natural disasters, terrorism, and telecommunication failures. Any
system failure or security breach could cause interruptions in our operations, including but not limited to our technology computer-aided
design, or TCAD, modeling using Synopsys software, in addition to the possibility of losing proprietary information and trade secrets.
To the extent that any disruption or security breach results in inappropriate disclosure of our confidential information, our competitive
position may be adversely affected, and we may incur liability or additional costs to remedy the damages caused by these disruptions or
security breaches.

If integrated circuits
incorporating our technologies are used in defective products, we may be subject to product liability or other claims. If our
MST technology is used in defective or malfunctioning products, we could be sued for damages, especially if the defect or malfunction
causes physical harm to people. While we will endeavor to carry product liability insurance, contractually limit our liability and obtain
indemnities from our customers, there can be no assurance that we will be able to obtain insurance at satisfactory rates or in adequate
amounts or that any insurance and customer indemnities will be adequate to defend against or satisfy any claims made against us. The costs
associated with legal proceedings are typically high, relatively unpredictable and not completely within our control. Even if we consider
any such claim to be without merit, significant contingencies may exist, similar to those summarized in the above risk factor concerning
intellectual property litigation, which could lead us to settle the claim rather than incur the cost of defense and the possibility of
an adverse judgment. Product liability claims in the future, regardless of their ultimate outcome, could have a material adverse effect
on our business, financial condition and reputation, and on our ability to attract and retain licensees and customers.

Risks Related to Intellectual Property

If we fail to protect
and enforce our intellectual property rights and our confidential information, our business will suffer. We rely primarily
on a combination of nondisclosure agreements and other contractual provisions and patent, trade secret and copyright laws to protect our
technology and intellectual property. If we fail to protect our technology and intellectual property, our licensees and others may seek
to use our technology and intellectual property without the payment of license fees and royalties, which could weaken our competitive
position, reduce our operating results and increase the likelihood of costly litigation. The growth of our business depends in large part
on our ability to secure intellectual property rights in a timely manner, our ability to convince third parties of the applicability of
our intellectual property rights to their products, and our ability to enforce our intellectual property rights. In certain instances,
we attempt to obtain patent protection for portions of our technology, and our license agreements typically include both issued patents
and pending patent applications as well as our proprietary know-how. If we fail to obtain patents in a timely manner or if the patents
issued to us do not cover all of the inventions disclosed in our patent applications, others could use portions of our technology and
intellectual property without the payment of license fees and royalties.

We also rely on trade secret
laws rather than patent laws to protect other portions of our proprietary technology. However, trade secrets can be difficult to protect.
The misappropriation of our trade secrets or other proprietary information could seriously harm our business. We protect our proprietary
technology and processes, in part, through confidentiality agreements with our employees, consultants, suppliers and customers. We cannot
be certain that these contracts have not been and will not be breached, that we will be able to timely detect unauthorized use or transfer
of our technology and intellectual property, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise
become known or be independently discovered by competitors. If we fail to use these mechanisms to protect our technology and intellectual
property, or if a court fails to enforce our intellectual property rights, our business will suffer. We cannot be certain that these protection
mechanisms can be successfully asserted in the future or will not be invalidated or challenged.

Further, the laws and enforcement
regimes of certain countries do not protect our technology and intellectual property to the same extent as do the laws and enforcement
regimes of the U.S. In certain jurisdictions, we may be unable to protect our technology and intellectual property adequately against
unauthorized use, which could adversely affect our business.

A court invalidation
or limitation of our key patents could significantly harm our business. Our patent portfolio contains some patents that are particularly
significant to our MST technology. If any of these key patents are invalidated, or if a court limits the scope of the claims in any of
these key patents, the likelihood that companies will take new licenses and that any current licensees will continue to agree to pay under
their existing licenses could be significantly reduced. The resulting loss in license fees and royalties could significantly harm our
business. Moreover, our stock price may fluctuate based on developments in the course of ongoing litigation.

We may become involved
in material legal proceedings in the future to enforce or protect our intellectual property rights, which could harm our business. From
time to time, we may identify products that we believe infringe on our patents. In that event, we expect to initially seek to license
the manufacturer of the infringing products, however if the manufacturer is unwilling to enter into a license agreement, we may have to
initiate litigation to enforce our patent rights against those products. Litigation stemming from such disputes could harm our ability
to gain new customers, who may postpone licensing decisions pending the outcome of the litigation or who may, as a result of such litigation,
choose not to adopt our technologies. Such litigation may also harm our relationships with existing licensees, who may, because of such
litigation, cease making royalty or other payments to us or challenge the validity and enforceability of our patents or the scope of our
license agreements.

In addition, the costs associated
with legal proceedings are typically high, relatively unpredictable and not completely within our control. These costs may be materially
higher than expected, which could adversely impair our working capital, affect our operating results and lead to volatility in the price
of our common stock. Whether or not determined in our favor or ultimately settled, litigation would divert our managerial, technical,
legal and financial resources from our business operations. Furthermore, an adverse decision in any of these legal actions could result
in a loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from others, limit the value of
our licensed technology or otherwise negatively impact our stock price or our business and financial position, results of operations and
cash flows.

Even if we prevail in our
legal actions, significant contingencies may exist to their settlement and final resolution, including the scope of the liability of each
party, our ability to enforce judgments against the parties, the ability and willingness of the parties to make any payments owed or agreed
upon and the dismissal of the legal action by the relevant court, none of which are completely within our control. Parties that may be
obligated to pay us royalties could be insolvent or decide to alter their business activities or corporate structure, which could affect
our ability to collect royalties from such parties.

Our technologies may
infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions. The semiconductor
industry is characterized by frequent allegations of intellectual property infringement. Any allegation of infringement could be time
consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause suspension of operations
or force us to enter into royalty, license, or other agreements rather than dispute the merits of such allegation. Furthermore, third
parties making such claims may be able to obtain injunctive or other equitable relief that could block our ability to further develop
or commercialize some or all of our technologies, and the ability of our customers to develop or commercialize their products incorporating
our technologies, in the U.S. and abroad. If patent holders or other holders of intellectual property initiate legal proceedings, we may
be forced into protracted and costly litigation. We may not be successful in defending such litigation and may not be able to procure
any required royalty or license agreements on acceptable terms or at all.

Risks Related to Owning Our Common Stock

The market price of
our shares may be subject to fluctuation and volatility. You could lose all or part of your investment. The market price of our
common stock is subject to wide fluctuations in response to various factors, some of which are beyond our control. Between January 1,
2025 and February 20, 2026, the reported high and low sales prices of our common stock have ranged from $1.89 to $17.55. The market price
of our shares on the NASDAQ Capital Market may fluctuate as a result of a number of factors, some of which are beyond our control, including,
but not limited to:

These factors and any corresponding
price fluctuations may materially and adversely affect the market price of our shares and result in substantial losses being incurred
by our investors. In the past, following periods of market volatility, public company stockholders have often instituted securities class
action litigation. If we were involved in securities litigation, it could impose a substantial cost upon us and divert the resources and
attention of our management from our business.

We have not paid dividends
in the past and have no immediate plans to pay dividends. We plan to reinvest all of our earnings, to the extent we have earnings,
to cover operating costs and otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities
in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for
distribution to the holders of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on our common
stock.

Our charter documents
and Delaware law may inhibit a takeover that stockholders consider favorable. Provisions of our certificate of incorporation
and bylaws and applicable provisions of Delaware law may delay or discourage transactions involving an actual or potential change in control
or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions
that our stockholders might otherwise deem to be in their best interests. The provisions in our certificate of incorporation and bylaws:

In addition, Section 203 of
the Delaware General Corporation Law may limit our ability to engage in any business combination with a person who beneficially owns 15%
or more of our outstanding voting stock unless certain conditions are satisfied. This restriction lasts for a period of three years following
the share acquisition. These provisions may have the effect of entrenching our management team and may deprive you of the opportunity
to sell your shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could
reduce the price of our common stock.

Our bylaws designate
the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may be initiated by our stockholders,
which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with the Company. Our
bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware
shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim
of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting
a claim against us or any our directors, officers or other employees arising pursuant to any provision of the Delaware General Corporation
Law or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us or any our directors, officers or other
employees governed by the internal affairs doctrine. This forum selection provision in our bylaws may limit our stockholders’ ability
to obtain a favorable judicial forum for disputes with us or any of our directors, officers or other employees.

Our board of directors
may issue blank check preferred stock, which may affect the voting rights of our holders and could deter or delay an attempt to obtain
control of us. Our board of directors is authorized, without stockholder approval, to issue preferred stock in series and to fix
and state the voting rights and powers, designation, preferences and relative, participating, optional or other special rights of the
shares of each such series and the qualifications, limitations and restrictions thereof. Preferred stock may rank prior to our common
stock with respect to dividends rights, liquidation preferences, or both, and may have full or limited voting rights. If issued, such
preferred stock would increase the number of outstanding shares of our capital stock, adversely affect the voting power of holders of
our common stock and could have the effect of deterring or delaying an attempt to obtain control of us.