Atomera Inc Debt Disclosure

On March 17, 2015, the Company issued Senior Secured Convertible Notes (the “Secured Notes”) to certain investors under which the Company borrowed approximately $7.4 million and it exchanged all of its previously outstanding unsecured convertible promissory notes for Secured Notes with an aggregate principal balance of approximately $7.35 million. The total closing represented $14.75 million. National Securities Corporation (“NSC”) acted as placement agent and the Company paid a brokerage commission to NSC and also issued a warrant (the “2015 NSC Warrant”) to purchase 10% of the common stock issuable upon conversion of Secured Notes in the principal amount of approximately $7.4 million at an exercise price of $7.362 per share, subject to adjustment of the exercise price to the conversion price of the Secured Notes when such conversion price became determinable. The number of shares issuable upon exercise of the 2015 NSC Warrant was initially set at 100,144 shares of the Company’s common stock, subject to later adjustment to a number of shares equal to 10% of the shares issuable upon conversion of the Secured Notes. The Secured Notes were due on May 31, 2016 and accrued interest at a rate of 10% per annum. During March 2016, the maturity date for the Secured Notes was extended to May 31, 2017 and in April 2016 the Company sold an additional $5.96 million of Secured Notes

During the year ended December 31, 2016, the interest expense on the Secured Notes was approximately $2.6 million. On August 10, 2016, upon consummation of the IPO, and in accordance with the terms of the Secured Notes, all principal and accrued interest due under the Secured Notes, totaling approximately $23.5 million converted into 6,264,659 shares of common stock of the Company, based on a conversion price equal to 50% of the price of shares sold in to the public in the IPO, or $3.75 per share. There is no interest expense for the year ended December 31, 2017. The determination of the conversion price and number of shares issuable upon conversion of the Secured Notes triggered an adjustment to the 2015 NSC Warrant, increasing the number of shares issuable by 96,458 (to a total of 196,502 shares) and setting the exercise price at $3.75 per share. The modification of the number of shares issuable and exercise price of the 2015 NSC Warrant increased its fair value resulting in addition interest expense recognized in August, 2016 (See Note 10).