Military initiative
"Puntland is a very weak administration and if it loses the military initiative, there is a strong fear that it will have a southern-like scenario," said Rashid Abdi, a Somali expert with the International Crisis Group.
"Its forces are better organised than those of the Transitional Federal Government in Mogadishu. But they can't withstand alone a determined insurgency for a long time."
Clashes between Atom's fighters and government forces began in late July, when the militants attacked Puntland forces near Atom's home base, a rugged and mountainous area about 30km outside of the region's commercial capital, Bossaso.
Puntland's security minister said his forces had killed more than 30 militants since the fighting started, a claim denied by Atom.
The March report by the UN's Monitoring Group said Atom was importing arms from Yemen and receiving consignments from Eritrea, including mortars, for delivery to southern Somalia.
Atom's "activities pose a growing threat to peace and security in both Puntland and Somaliland," said the report, noting that "Atom appears to be preparing to confront both the Puntland and the Somaliland authorities more directly."
Abdi says Atom "is hijacking a long-running local feeling of marginalisation," a situation where some clans feel locked out of the running of the state's affairs.
Atom's Warsengali clan cited that lack of consultation between government and clans when they took arms up against security forces in 2006 to object to a plan to conduct surveys in the mineral-rich area of Gal Gala.