Atomera Inc Income Taxes Disclosure

  

14.	INCOME TAXES

 

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

 

Schedule of provision for income taxes
		Year Ended December 31,
		2025				2024
Domestic		$	(20,174	)		$	(18,435	)
International			–				–
Total		$	(20,174	)		$	18,435	)

 

The Company had $0 current income tax expense for the years ended December 31, 2025 and 2024, respectively. The Company accounts for income taxes in accordance with ASC 740, which requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance. The valuation allowance increased by approximately $4.0 million and $3.6 million during the years ended December 31, 2025 and 2024, respectively.

 

The Company’s deferred tax assets are as follows (in thousands):

Schedule of deferred tax assets
		Year Ended December 31,
		2025				2024
Deferred tax assets:
Net operating loss carryforwards		$	33,206			$	29,678
Tax credit			3,123				2,742
Fixed assets and intangibles			345				427
Stock compensation			1,556				1,471
Accruals and other			136				284
Lease liability			273				428
Capitalized research and development			4,964				4,714
Total deferred tax assets			43,603				39,744
Deferred tax liabilities:
Right of use asset			(303	)			(403	)
Total deferred tax assets			(303	)			(403	)
Valuation allowance			(43,300	)			(39,341	)
Net deferred tax asset		$	–			$	–

 

Net operating losses and tax credit carryforwards as of December 31, 2025, are as follows (in thousands):

Schedule of net operating losses and tax credit carryforwards
		Amount				Expiration in years
Net operating losses, federal		$	112,763			No expiration
Net operating losses, federal		$	34,791			2027-2037
Net operating losses, state		$	40,653			2030-2044
Tax credits, federal		$	2,709			2036-2044
Tax credits, state		$	1,204			No expiration
Tax credits, state		$	974			2031-2040

 

The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate after adoption of ASU 2023-09 as follows (dollars in thousands):

Schedule of effective tax rate
		Year Ending December 31, 2025
		$				%
Statutory rate		$	(4,237	)			21.00%
State and local income taxes, net of federal income tax			(68	)			0.34%
Enactment of new tax laws			–				–%
Enactment of cross-border tax laws			–				–%
Tax Credits			(335	)			1.66%
Change in valuation allowance			3,843				(19.05)%
Stock based compensation			625				(3.10)%
Officer’s compensation			33				(0.16)%
Other			5				(0.03)%
Worldwide changes in unrecognized tax benefits			134				(0.66)%
Total		$	–				–%

 

The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate before the adoption of ASU 2023-09 as follows:

 

		Year Ending December 31, 2024
Statutory rate			21.00%
State rate			(0.37)%
Change in valuation allowance			(19.55)%
Other non-deductible items			0.04%
Change in tax credits			0.95%
Section 162(m) limitation			–%
Stock based compensation excess windfall			(2.07)%
Total			–%

 

Utilization of U.S. net operating losses and tax credit carryforwards may be limited by “ownership change” rules, as defined in Section 382 and Section 383 of the Internal Revenue Code. Similar rules may apply under state tax laws. Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited. In general, an “ownership change” will occur if there is a cumulative change in ownership by “5% stockholders” that exceeds 50 percentage points over a rolling three-year period. The Company rolled forward its Section 382 study through the period ended December 31, 2024. The Company did not trigger an ownership change through this period. Although the Company has not rolled its Section 382 through December 31, 2025, an ownership change during the 2025 is not expected as there have been limited amounts of equity activity.

  

The Company establishes reserves for uncertain tax positions based on the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, respectively, the Company has no accrued interest or penalties related to uncertain tax positions.

 

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In the normal course of business, the Company is subject to examination by their respective taxing authorities. The Company is not currently under audit by the Internal Revenue Service or other similar state or local authority. The statute of limitations remains effectively open for all tax years since inception (2007). Tax years outside the normal statute of limitations remain open to examination by tax authorities due to tax attributes generated in earlier years which have been carried forward and may be examined and adjusted in subsequent years when utilized.

 

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits for the years ended December 31, 2025 and 2024 (in thousands):

Schedule of unrecognized tax benefits
		2025				2024
Balance at beginning of year		$	1,298			$	1,219
Increases (decreases) – prior year tax positions			(29	)			(72	)
Increases – current year tax positions			177				151
Balance at end of year		$	1,446			$	1,298

 

 

The following table summarizes the activity in the Company’s Valuation Allowance and Qualifying Accounts for the years ended December 31, 2025 and 2024 (in thousands):

Schedule of valuation allowance
		2025				2024
Balance at beginning of year		$	39,341			$	35,738
Additions			4,496				3,816
Deductions			(537	)			(213	)
Balance at end of year		$	43,300			$	39,341