Ascent Solar Technologies, Inc 10-Q for FY2020 Q3
Ascent Solar Technologies, Inc. (ASTI)
About this 10-Q
Ascent Solar Technologies, Inc filed this 10-Q on April 9, 2021, covering the quarter ended September 30, 2020 (FY2020 Q3).
Headline figures
Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $6293
- down 98.1% from $338.37K a year earlier
- Net income
- $2.59M
- compared with a net loss of $1.28M a year earlier
- Diluted EPS
- $0.00
- compared with -$0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
|
|
|
|
|
|
|
|
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
|
|
|
|
|
|
|
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File No.
(Exact name of registrant as specified in its charter)
|
|
||
|
|
|
|
|
|
|
|
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
|
|
|
|
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number including area code:
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of exchange on which registered |
|
|
|
OTC |
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐ Yes ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
|
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
☒ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 9, 2021, there were
ASCENT SOLAR TECHNOLOGIES, INC.
Quarterly Report on Form 10-Q
Quarterly Period Ended September 30, 2020
Table of Contents
|
|
||
|
Item 1. |
1 |
|
|
|
Condensed Consolidated Balance Sheets - as of September 30, 2020 (unaudited) and December 31, 2019 |
1 |
|
|
2 |
|
|
|
3 |
|
|
|
5 |
|
|
|
6 |
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 |
|
Item 3. |
35 |
|
|
Item 4. |
35 |
|
|
38 |
||
|
Item 1. |
38 |
|
|
Item 1A. |
38 |
|
|
Item 2. |
38 |
|
|
Item 3. |
38 |
|
|
Item 4. |
38 |
|
|
Item 5. |
38 |
|
|
Item 6. |
39 |
|
|
41 |
||
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” that involve risks and uncertainties. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future net sales or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information and, in particular, appear under headings including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” When used in this Annual Report, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “foresees,” “likely,” “may,” “should,” “goal,” “target,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this Annual Report.
These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things, the matters discussed in this Annual Report in the sections captioned “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Factors you should consider that could cause these differences are:
|
|
• |
Our limited operating history and lack of profitability; |
|
|
• |
Our ability to develop demand for, and sales of, our products; |
|
|
• |
Our ability to attract and retain qualified personnel to implement our business plan and corporate growth strategies; |
|
|
• |
Our ability to develop sales, marketing and distribution capabilities; |
|
|
• |
Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets; |
|
|
• |
The accuracy of our estimates and projections; |
|
|
• |
Our ability to secure additional financing to fund our short-term and long-term financial needs; |
|
|
• |
Our ability to maintain the listing of our common stock on the OTCBB Market; |
|
|
• |
The commencement, or outcome, of legal proceedings against us, or by us, including ongoing ligation proceedings; |
|
|
• |
Changes in our business plan or corporate strategies; |
|
|
• |
The extent to which we are able to manage the growth of our operations effectively, both domestically and abroad, whether directly owned or indirectly through licenses; |
|
|
• |
The supply, availability and price of equipment, components and raw materials, including the elements needed to produce our photovoltaic modules; |
|
|
• |
Our ability to expand and protect the intellectual property portfolio that relates to our consumer electronics, photovoltaic modules and processes; |
|
|
• |
Our ability to implement remediation measures to address material weaknesses in internal control; |
|
|
• |
General economic and business conditions, and in particular, conditions specific to consumer electronics and the solar power industry; and |
|
|
• |
Other risks and uncertainties discussed in greater detail in the section captioned "Risk Factors." |
There may be other factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent events or circumstances after the date made, or to reflect the occurrence of unanticipated events, except as required by law.
References to “we,” “us,” “our,” “Ascent,” “Ascent Solar” or the “Company” in this Report mean Ascent Solar Technologies, Inc.
ASCENT SOLAR TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
2020 |
|
|
2019 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
- |
|
|
Trade receivables, net of allowance of $ |
|
|
|
|
|
|
- |
|
|
Inventories, net |
|
|
|
|
|
|
|
|
|
Prepaid and other current assets |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment: |
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Other Assets: |
|
|
|
|
|
|
|
|
|
Operating lease assets, net |
|
|
|
|
|
|
- |
|
|
Patents, net of accumulated amortization of $ respectively |
|
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
|
|
|
$ |
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
|
Related party payables |
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
|
|
|
Accrued Interest |
|
|
|
|
|
|
|
|
|
Notes Payable |
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
|
- |
|
|
|
|
|
|
Current portion of operating lease liability |
|
|
|
|
|
|
- |
|
|
Secured promissory notes, net of discount of $ respectively |
|
|
|
|
|
|
|
|
|
Promissory notes, net of discount of $ |
|
|
|
|
|
|
|
|
|
Convertible notes, net of discount of $ |
|
|
|
|
|
|
|
|
|
Embedded Derivative Liability |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
Long-Term Liabilities: |
|
|
|
|
|
|
|
|
|
Noncurrent operating lease liabilities |
|
|
|
|
|
|
- |
|
|
Accrued warranty liability |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit: |
|
|
|
|
|
|
|
|
|
Series A preferred stock, $ and $ |
|
|
|
|
|
|
|
|
|
Common stock, $ and |
|
|
|
|
|
|
|
|
|
Additional paid in capital |
|
|
|
|
|
|
|
|
|
Accumulated Deficit |
|
|
( |
) |
|
|
( |
) |
|
Total stockholders’ deficit |
|
|
( |
) |
|
|
( |
) |
|
Total Liabilities and Stockholders’ Deficit |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ASCENT SOLAR TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||
|
|
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|
||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
Total Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and manufacturing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
( |
) |
|
( |
) |
|
|
( |
) |
|
( |
) |
|
Other Income/(Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
( |
) |
|
|
( |
) |
|
( |
) |
|
Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/(Expense) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Net Income/(Loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Net Income/(Loss) Per Share (Basic) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Net Income/(Loss) Per Share (Diluted) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Weighted Average Common Shares Outstanding (Basic) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding (Diluted) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ASCENT SOLAR TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(unaudited)
For the Three Months Ended September 30, 2020
|
|
|
Series A Preferred Stock |
|
|
Series 1A Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-In |
|
|
Accumulated |
|
|
Total Stockholders’ Equity |
|
||||||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
|||||||||
|
Balance at June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Proceeds from issuance of Series 1A Preferred Stock |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
For the Three Months Ended September 30, 2019
|
|
|
Series A Preferred Stock |
|
|
Series 1A Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-In |
|
|
Accumulated |
|
|
Total Stockholders’ Equity |
|
||||||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
|||||||||
|
Balance, June 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Interest and Dividend Expense paid with Common Stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of St.George Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of BayBridge Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of Bellridge Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of PowerUp Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
Conversion of GS Capital Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Stock issued for fees |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Loss on Extinguishment of Liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance at September 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ASCENT SOLAR TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(unaudited)
For the Nine Months Ended September 30, 2020
|
|
|
Series A Preferred Stock |
|
|
Series 1A Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-In |
|
|
Accumulated |
|
|
Total Stockholders’ Equity |
|
||||||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
|||||||||
|
Balance, December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Interest and Dividend Expense paid with Common Stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Proceeds from issuance of Series 1A Preferred Stock |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of Bellridge Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
For the Nine Months Ended September 30, 2019
|
|
|
Series A Preferred Stock |
|
|
Series 1A Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-In |
|
|
Accumulated |
|
|
Total Stockholders’ Equity |
|
||||||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
|||||||||
|
Balance, December 31, 2018 |
|
|
|
|
|
$ |
|
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Interest and Dividend Expense paid with Common Stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of St.George Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of Global Ichiban Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of BayBridge Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of Bellridge Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of PowerUp Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of GS Capital Note into Common Shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Stock issued for fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Conversion of Series A Preferred Stock into Common Shares |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
Loss on Extinguishment of Liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Stock based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance at September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
4
ASCENT SOLAR TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
For the Nine Months Ended |
|
|||||
|
|
|
September 30, |
|
|||||
|
|
|
2020 |
|
|
2019 |
|
||
|
Operating Activities: |
|
|
|
|
|
|
|
|
|
Net income/(loss) |
|
$ |
|
|
|
$ |
( |
) |
|
Adjustments to reconcile net income/(loss) to cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Operating lease asset amortization |
|
|
|
|
|
|
— |
|
|
Stock based compensation |
|
|
- |
|
|
|
|
|
|
Realized (gain) on sale and foreclosure of assets |
|
|
( |
) |
|
|
( |
) |
|
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
|
Non-cash interest expense |
|
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
Bad debt expense |
|
|
( |
) |
|
|
( |
) |
|
Warranty reserve |
|
|
( |
) |
|
|
( |
) |
|
Change in fair value of derivatives and (gain) on extinguishment of liabilities, net |
|
|
( |
) |
|
|
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
|
|
|
Inventories |
|
|
|
|
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
|
Accounts payable |
|
|
( |
) |
|
|
( |
) |
|
Related party payable |
|
|
— |
|
|
|
|
|
|
Operating lease liabilities |
|
|
( |
) |
|
|
— |
|
|
Accrued interest |
|
|
|
|
|
|
( |
) |
|
Accrued expenses |
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
— |
|
|
|
( |
) |
|
Proceeds on sale of Assets |
|
|
|
|
|
|
|
|
|
Patent activity costs |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by investing activities |
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
Proceeds from debt issuance |
|
|
|
|
|
|
|
|
|
Repayment of debt |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from issuance of stock |
|
|
|
|
|
|
— |
|
|
Payment of debt financing costs |
|
|
— |
|
|
|
( |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
- |
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
— |
|
|
$ |
|
|
|
Non-Cash Transactions: |
|
|
|
|
|
|
|
|
|
Non-cash conversions of preferred stock and convertible notes to equity |
|
$ |
|
|
|
$ |
|
|
|
Non-cash financing costs |
|
$ |
— |
|
|
$ |
|
|
|
Operating lease assets obtained in exchange for operating lease liabilities |
|
$ |
( |
) |
|
$ |
— |
|
|
Non-cash mortgage derecognition |
|
$ |
( |
) |
|
$ |
— |
|
|
Non-cash property foreclosure |
|
$ |
|
|
|
$ |
— |
|
|
Interest converted to principal |
|
$ |
— |
|
|
$ |
|
|
|
Common shares issued for fees |
|
$ |
— |
|
|
$ |
|
|
|
Initial embedded derivative liabilities |
|
$ |
— |
|
|
$ |
|
|
|
Promissory notes exchanged for convertible notes |
|
$ |
— |
|
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
The Company is focusing on integrating its PV products into high value markets such as aerospace, satellites, near earth orbiting vehicles, and fixed wing unmanned aerial vehicles (UAV). The value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these industries, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent has the capability to design and develop finished products for end users in these areas as well as collaborate with strategic partners to design and develop custom integrated solutions for products like fixed-wing UAVs. Ascent sees significant overlap of the needs of end users across some of these industries and can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
NOTE 2. BASIS OF PRESENTATION
The accompanying, unaudited, condensed consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of September 30, 2020 and December 31, 2019, and the results of operations for the three and nine months ended September 30, 2020 and 2019. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.
The accompanying, unaudited, condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and footnotes typically found in U.S. GAAP audited annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. The Condensed Consolidated Balance Sheet at December 31, 2019 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. These condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes to our accounting policies as of September 30, 2020.
Derivatives: The Company evaluates its financial instruments under FASB ASC 815, "Derivatives and Hedging" to determine whether the instruments contain an embedded derivative. When an embedded derivative is present, the instrument is evaluated for a fair value adjustment upon issuance and at the end of every reporting period. Any adjustments to fair value are treated as gains and losses in fair values of derivatives and are recorded in the Condensed Consolidated Statements of Operations.
Refer to Notes 9 and 11 for further discussion on the embedded derivatives of each instrument.
Paycheck Protection Program Loan: The Company has elected to account for the forgivable loan received under the Paycheck Protection Program (“PPP”) provisions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act as a debt instrument and to accrue interest on the outstanding loan balance. Additional interest at a market rate (due to the stated interest rate of the PPP loan being below market) is not imputed, as the transactions where interest rates prescribed by governmental agencies are excluded from the scope of accounting guidance on imputing interest. The proceeds from the loan will remain recorded as a liability until either (1) the loan is, in part of wholly, forgiven and the Company has been legally released or (2) the Company repays the loan to the lender.
6
Refer to Note 15 for further discussion.
Recently Adopted or to be Adopted Accounting Policies
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting , which simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with specified exceptions. This standard is effective for the Company beginning in the first quarter of 2020, and early adoption is permitted. The implementation of ASU 2018-07 did not have a material effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. This standard is effective for the Company in the first quarter of 2020, and early adoption is permitted. The implementation of ASU 2018-13 did not have a material effect on the Company's consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Management has not yet evaluated the impact that the adoption of ASU 2020-06 will have on the Company’s consolidated financial statement presentation or disclosures.
Other new pronouncements issued but not effective as of September 30, 2020 are not expected to have a material impact on the Company’s consolidated financial statements.
NOTE 4. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN
During the nine months ended September 30, 2020 and the year ended December 31, 2019, the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 9 through 11, and Note 16 of the financial statements presented as of, and for, the nine months ended September 30, 2020, and in Notes 8, 9, 10, 11, 12, and 14 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the nine months ended September 30, 2020 the Company used $
Additional projected product revenues are not anticipated to result in a positive cash flow position for the next twelve months overall and, as of September 30, 2020, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.
As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern. The Company has scaled down its operations, due to cash flow issues, and does not expect to ramp up until significant financing is obtained.
7
Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
The following table summarizes property, plant and equipment as of September 30, 2020 and December 31, 2019:
|
|
|
As of September 30, |
|
|
As of December 31, |
|
||
|
|
|
2020 |
|
|
2019 |
|
||
|
Building |
|
$ |
- |
|
|
$ |
|
|
|
Furniture, fixtures, computer hardware and computer software |
|
|
|
|
|
|
|
|
|
Manufacturing machinery and equipment |
|
|
|
|
|
|
|
|
|
Depreciable property, plant and equipment |
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
Net property, plant and equipment |
|
$ |
|
|
|
$ |
|
|
The Company analyzes its long-lived assets for impairment, both individually and as a group, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
During the nine months ended September 30, 2020, the Company disposed of certain redundant machinery and equipment. This machinery and equipment was fully depreciated and the Company realized a gain of $
Depreciation expense for the three months ended September 30, 2020 and 2019 was $
On July 29, 2020 the Company’s owned facility at 12300 Grant Street, Thornton, CO 80241 (the “Building”) was foreclosed by the Building’s first lien holder (“Mortgage Holder”) and sold at public auction. The successful bidder for the Building was the Mortgage Holder, at the price of $
On September 21, 2020, the Company entered into a lease agreement with 12300 Grant LLC (“Landlord”), an affiliated company of the Mortgage Holder, for approximately
At September 30, 2020, the Company recorded an operating lease asset and liability totaling $
8
Future maturities of the operating lease liability are as follows:
|
Remainder of 2020 |
|
$ |
|
|
|
2021 |
|
|
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total lease payments |
|
$ |
|
|
|
Less amounts representing interest |
|
|
( |
) |
|
Present value of lease liability |
|
$ |
|
|
The remaining lease term and discount rate of the operating lease is
NOTE 6. INVENTORIES
Inventories, net of reserves, consisted of the following at September 30, 2020 and December 31, 2019:
|
|
|
As of September 30, |
|
|
As of December 31, |
|
||
|
|
|
2020 |
|
|
2019 |
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Work in process |
|
|
- |
|
|
|
|
|
|
Finished goods |
|
|
- |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
NOTE 7. NOTES PAYABLE
On February 24, 2017, the Company entered into an agreement with a vendor (“Vendor 1”) to convert the balance of their account into
On June 30, 2017, the Company entered into an agreement with another vendor (“Vendor 2”) to convert the balance of their account into a note payable in the amount of $
On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $
NOTE 8. DEBT
On August 2, 2019, CHFA entered into an agreement to assign the mortgage note to Iliad Research and Trading, L.P., a Utah limited liability partnership ("IRT"). This agreement closed on September 11, 2019, and IRT paid a total of $
9
to CHFA to assume the note. The payment amount consisted of $
On July 29, 2020, the Company’s owned facility at 12300 Grant Street, Thornton, CO 80241 (the “Building”) was foreclosed by IRT and sold at public auction. The successful bidder for the Building was IRT, at the price of $
NOTE 9. SECURED PROMISSORY NOTES
The following table provides a summary of the activity of the Company's secured notes:
|
|
|
Global Ichiban |
|
|
St. George |
|
|
BD 1 |
|
|
Total |
|
||||
|
Secured Notes Principal Balance at December 31, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
New notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note conversions |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Interest converted to principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note assignments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Notes Principal Balance at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: remaining discount |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Secured Notes, net of discount, at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes exchanged |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Secured Notes Principal Balance at September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: remaining discount |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Secured Notes, net of discount, at September 30, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Global Ichiban Secured Promissory Notes
During 2018, the company issued to Global Ichiban Limited (“Global”) $
On October 22, 2018, Global sold one of its notes to another investor. As a result of this sale, $
The following table summarizes the conversion activity of this note:
|
Conversion Period |
|
Principal Converted |
|
|
Interest Converted |
|
|
Common Shares Issued |
|
|||
|
Q1 2018 |
|
$ |
|
|
|
$ |
- |
|
|
|
|
|
|
Q2 2018 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
Q1 2019 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
- |
|
|
|
|
|
10
Since conversions began in the first quarter of 2018, the interest associated with conversions has been added back into the principal of the notes. The following table summarizes the activity of adding the interest to principal:
|
Period |
|
Interest converted to Principal |
|
|
|
Q1 2018 |
|
$ |
|
|
|
Q2 2018 |
|
|
|
|
|
Q1 2019 |
|
|
|
|
|
|
|
$ |
|
|
All the notes issued in accordance with the note purchase and exchange agreement dated November 30, 2017 are secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of
On
Subsequent to the period of this report, the amounts owed to Global were fully settled. Refer to the Global Ichiban Settlement Agreement section of Note 16. Subsequent Events for further details.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
The aggregate derivative value of the notes was $
11
During the first quarter of 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivative associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. As a result of the fair value assessments, the Company recorded an aggregate net gain of
The conversion option in the GI Exchange Note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of
The derivative liability associated with the note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. Management assessed the fair value of this embedded derivative, as of September 30, 2020, using the following assumptions: annual volatility of
St. George Secured Convertible Notes
On May 8, 2018, the Company, entered into a note purchase agreement with St. George Investments LLC ("St. George"), for the private placement of a $
On November 5, 2018, the Company entered into a second securities purchase agreement with St. George, for the private placement of a $
|
Closing Date |
Closing Amount |
|
Proceeds |
|
||
|
11/7/2018 |
$ |
|
|
$ |
|
|
|
11/19/2018 |
$ |
|
|
$ |
|
|
|
11/30/2018 |
$ |
|
|
$ |
|
|
|
12/7/2018 |
$ |
|
|
$ |
|
|
|
12/17/2018 |
$ |
|
|
$ |
|
|
|
1/3/2019 |
$ |
|
|
$ |
|
|
|
1/17/2019 |
$ |
|
|
$ |
|
|
|
1/30/2019 |
$ |
|
|
$ |
|
|
|
2/8/2019 |
$ |
|
|
$ |
|
|
12
On March 13, 2019, the Company entered into a third securities purchase agreement with St. George, for the private placement of a $
|
Closing Date |
Closing Amount |
|
Proceeds |
|
||
|
3/15/2019 |
$ |
|
|
$ |
|
|
|
3/22/2019 |
$ |
|
|
$ |
|
|
|
4/4/2019 |
$ |
|
|
$ |
|
|
As of September 30, 2020, no principal or interest had been paid or converted, and the aggregate principal and interest balance of the Notes were $
On September 9, 2020, all debts with St. George were assigned to another investor, BD 1 Investment Holding, LLC (“BD 1”). The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
The aggregate derivative value of the notes was $
13
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
NOTE 10. PROMISSORY NOTES
The following table provides a summary of the activity of the Company's non-convertible, unsecured, promissory notes:
|
|
|
Investor 1 |
|
|
Investor 2 |
|
|
BD 1 |
|
|
SBA |
|
|
Total |
|
|||||
|
Promissory Notes Principal Balance at December 31, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
|
New principal |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Notes exchanged |
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
|
( |
) |
|
Promissory Notes Principal Balance at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Less: remaining discount |
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
|
( |
) |
|
Promissory Notes, net of discount, at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
New principal |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Notes assigned or exchanged |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory Notes Principal Balance at September 30, 2020 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: remaining discount |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Promissory Notes, net of discount, at September 30, 2020 |
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Offering of Unsecured, Non-Convertible Notes to Investor 1
During October 2016, the Company received $
On June 30, 2017, the Company and Investor 1 agreed to a
As of September 30, 2020, $
On September 11, the debt with Investor 1 was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
Offering of Unsecured, Non-Convertible Notes to Investor 2
On June 6, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
On July 24, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
14
On September 10, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
On December 31, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
On March 11, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
On May 14, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
On July 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
On August 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
On September 9, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
15
On May 1, 2020, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $
As of September 30, 2020, the aggregate outstanding principal and interest for Investor 2 was $
On September 11, 2020, the debt with Investor 2 was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
SBA PPP
On April 17, 2020, the Company obtained a PPP Loan from Vectra Bank Colorado (“Vectra”) in the aggregate amount of $
NOTE 11. CONVERTIBLE NOTES
The following table provides a summary of the activity of the Company's unsecured, convertible, promissory notes:
|
|
Principal Balance 12/31/2018 |
|
New Notes |
|
Notes assigned or exchanged |
|
Notes converted |
|
Principal Balance 12/31/2019 |
|
Less: Discount Balance |
|
Net Principal Balance 12/31/2019 |
|
|||||||
|
October 2016 Notes |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
St. George Notes |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
BayBridge Notes |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
Bellridge Notes |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
Power Up Notes |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
EMA Note |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Widjaja Note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
GS Capital Notes |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
$ |
|
|
$ |
( |
) |
$ |
|
|
16
|
|
Principal Balance 12/31/2019 |
|
New Notes/Adjustments |
|
Notes assigned or exchanged |
|
Notes converted |
|
Principal Balance 9/30/2020 |
|
Less: Discount Balance |
|
Net Principal Balance 9/30/2020 |
|
|||||||
|
October 2016 Notes |
$ |
|
|
$ |
|
|
$ |
( |
) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
St. George Notes |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BayBridge Notes |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bellridge Notes |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
Power Up Notes |
|
|
|
|
|
|
|
( |
) |
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
Widjaja Note |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Notes |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Penumbra Note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BD 1 Notes |
|
- |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|
$ |
|
|
$ |
|
|
October 2016 Convertible Notes
On October 5, 2016, the Company entered into a securities purchase agreement with a private investor for the private placement of convertible notes with a principal value of $
The convertible notes matured on December 31, 2017 and bear interest at a rate of
Outstanding principal and accrued interest on the convertible notes were $
On September 11, 2020, the October 2016 Convertible Notes were assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
The aggregate derivative value of the notes was $
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
17
St. George Convertible Note
On September 11, 2017, the Company sold and issued a $
This note matured on
As of September 30, 2020, cash payments of $
|
Conversion Period |
Principal Converted |
|
Interest Converted |
|
Common Shares Issued |
|
|||
|
Q1 2018 |
$ |
|
|
$ |
- |
|
|
|
|
|
Q2 2018 |
|
|
|
|
- |
|
|
|
|
|
Q3 2018 |
|
|
|
|
- |
|
|
|
|
|
Q4 2018 |
|
|
|
|
- |
|
|
|
|
|
Q1 2019 |
|
|
|
|
- |
|
|
|
|
|
Q2 2019 |
|
|
|
|
- |
|
|
|
|
|
Q3 2019 |
|
|
|
|
- |
|
|
|
|
|
Q4 2019 |
|
|
|
|
- |
|
|
|
|
|
|
$ |
|
|
$ |
- |
|
|
|
|
On September 9, 2020, the debt with St. George was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
The aggregate derivative value of the notes was $
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
18
BayBridge Convertible Note
Between September 7, 2018 and August 22, 2019, the Company, entered into several securities exchange agreements with BayBridge Capital Fund LP ("BayBridge).
Pursuant to the terms of the exchange agreements, BayBridge agreed to surrender and exchange an several outstanding promissory notes with an aggregate principal balance of $
As of September 30, 2020, aggregate principal of $
The following table summarizes the conversion activity of these notes:
|
Conversion Period |
Principal Converted |
|
Interest Converted |
|
Common Shares Issued |
|
|||
|
Q4 2018 |
$ |
|
|
$ |
|
|
|
|
|
|
Q1 2019 |
|
|
|
|
|
|
|
|
|
|
Q2 2019 |
|
|
|
|
|
|
|
|
|
|
Q3 2019 |
|
|
|
|
|
|
|
|
|
|
Q4 2019 |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
On September 11, 2020, the debt with Baybridge was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
At December 31, 2019, the aggregate derivative liability associated with was $
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
19
Bellridge Convertible Notes
On October 22, 2019, the Company and Bellridge entered into an exchange agreement to exchange the outstanding Bellridge notes with principal and interest of $
On October 22, 2019, the Company and Bellridge entered into a new convertible promissory note with a principal balance of $
As of September 30, 2020, an aggregate principal of $
The following table summarizes the conversion activity of these notes:
|
Conversion Period |
Principal Converted |
|
Interest Converted |
|
Common Shares Issued |
|
|||
|
Q3 2018 |
$ |
|
|
$ |
|
|
|
|
|
|
Q4 2018 |
|
|
|
|
|
|
|
|
|
|
Q1 2019 |
|
|
|
|
|
|
|
|
|
|
Q2 2019 |
|
|
|
|
|
|
|
|
|
|
Q3 2019 |
|
|
|
|
|
|
|
|
|
|
Q4 2019 |
|
|
|
|
|
|
|
|
|
|
Q2 2020 |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
On September 11, 2020, all outstanding debt with Bellridge was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
20
At December 31, 2019, the aggregate derivative liability associated with these notes was $
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of afirm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
PowerUp Convertible Notes
During 2018 and 2019, the Company entered into six securities purchase agreements with Power Up Lending Group, LTD ("Power Up"), for the private placement of three convertible notes with an aggregate principal amount of $
Beginning in six months after issuance, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
As of September 30, 2020, three of the notes had been converted in full. The aggregate principal and interest converted was $
The following table summarizes the conversion activity of these notes:
|
Conversion Period |
Principal Converted |
|
Interest Converted |
|
Common Shares Issued |
|
|||
|
Q1 2019 |
$ |
|
|
$ |
|
|
|
|
|
|
Q2 2019 |
|
|
|
|
|
|
|
|
|
|
Q3 2019 |
|
|
|
|
- |
|
|
|
|
|
Q4 2019 |
|
|
|
|
- |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
On September 11, 2020, the debt with Power Up was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
21
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
At December 31, 2019, the aggregate derivative liability associated with these notes was $
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
Widjaja Convertible Note
On January 11, 2019, the Company entered into a note purchase with Jason Widjaja (“Widjaja”), for the private placement of a $
At any time after inception of the note, until fully paid, Widjaja shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
As of September 30, 2020,
On September 11, 2020, the debt with Widjaja was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
22
The derivative value of the notes was $
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
GS Capital Convertible Note
On February 22, 2019, the Company sold and issued to GS Capital Partners, LLC (“GS”) a $
These notes are unsecured, bear interest at
At any time after inception of the note until fully paid, GS shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
As of September 30, 2020, principal of $
The following table summarizes the conversion activity of these notes:
|
Conversion Period |
Principal Converted |
|
Interest Converted |
|
Common Shares Issued |
|
|||
|
Q2 2019 |
$ |
|
|
$ |
|
|
|
|
|
|
Q3 2019 |
|
|
|
|
|
|
|
|
|
|
Q4 2019 |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
On September 11, 2020, the debt with GS was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.
23
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
The aggregate derivative value of these notes was $
At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $
Penumbra Convertible Note
On June 9, 2020, the Company issued to Penumbra Solar Technologies, Inc. (“Penumbra”) a $
Subsequent to the date of this report, this debt with Penumbra was assigned to Crowdex Investment, LLC (“Crowdex”).
NOTE 12. SERIES A PREFERRED STOCK
In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of $
Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of
24
The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $
On October 6, 2016, the Series A Holder entered into an exchange agreement with a private investor. Pursuant to the exchange agreement, beginning December 5, 2016, the investor has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 11) for outstanding shares of Series A Preferred Stock from the Series A Holder.
Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to $8.00 per share of Series A Preferred Stock plus any accrued and unpaid dividends.
As of September 30, 2020, there were
Series 1A Preferred Stock – Tranche 1 Closing
On
The Company sold
In November 2020, Crowdex converted
NOTE 13. STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock
At September 30, 2020, the Company had
Preferred Stock
At September 30, 2020, the Company had
25
The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
|
Preferred Stock Series Designation |
|
Shares Authorized |
|
|
Shares Outstanding |
|
||
|
Series A |
|
|
|
|
|
|
|
|
|
Series 1A |
|
|
|
|
|
|
|
|
|
Series B-1 |
|
|
|
|
|
|
|
|
|
Series B-2 |
|
|
|
|
|
|
|
|
|
Series C |
|
|
|
|
|
|
|
|
|
Series D |
|
|
|
|
|
|
|
|
|
Series D-1 |
|
|
|
|
|
|
|
|
|
Series E |
|
|
|
|
|
|
|
|
|
Series F |
|
|
|
|
|
|
|
|
|
Series G |
|
|
|
|
|
|
|
|
|
Series H |
|
|
|
|
|
|
|
|
|
Series I |
|
|
|
|
|
|
|
|
|
Series J |
|
|
|
|
|
|
|
|
|
Series J-1 |
|
|
|
|
|
|
|
|
|
Series K |
|
|
|
|
|
|
|
|
Series A Preferred Stock
Refer to Note 12 for Series A Preferred Stock activity.
Series B-1, B-2, C, D, D-1, E, F, G, H, I, J, J-1, and K Preferred Stock
There were no transactions involving the Series B-1, B-2, C, D, D-1, H, I, J, J-1, or K during the three and nine months ended September 30, 2020 and 2019.
NOTE 14. EQUITY PLANS AND SHARE-BASED COMPENSATION
Share-Based Compensation: The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes this cost as an expense over the grant recipients’ requisite service periods for all awards made to employees, officers, directors and consultants.
The share-based compensation expense recognized in the Condensed Consolidated Statements of Operations was as follows:
|
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
|
|
2020 |
|
|
|
2019 |
|
|
Research and development |
|
$ |
— |
|
|
$ |
— |
|
|
Selling, general and administrative |
|
|
— |
|
|
|
|
|
|
Total share-based compensation cost |
|
$ |
— |
|
|
$ |
|
|
Stock Options: There was
As of September 30, 2020, there were
26
The following table summarizes stock option activity within the Stock Option Plan
|
|
|
Stock Option Shares |
|
|
Weighted Average Remaining Contractual Life in Years |
|
|
Outstanding at December 31, 2018 |
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
Canceled |
|
|
( |
) |
|
|
|
Outstanding at December 31, 2019 |
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
Canceled |
|
|
— |
|
|
|
|
Outstanding and Exercisable at September 30, 2020 |
|
|
|
|
|
|
Restricted Stock: The Company did
As of September 30, 2020, there was
NOTE 15. PAYCHECK PROTECTION PROGRAM LOAN
On April 17, 2020, the Company obtained a PPP Loan from Vectra Bank Colorado (“Vectra”) in the aggregate amount of $
The terms of the PPP loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events.
The Company plans to apply for forgiveness of the PPP Loan in the second quarter of 2021.
The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury.
At September 30, 2020 the total outstanding balance of the PPP Loan was $
27
NOTE 16. SUBSEQUENT EVENTS
The Company was in a dormant status for most of 2020 due to financial constraints as well as delays in reorganization and fund-raising efforts due to the impact of COVID-19. Below is the sequence of events subsequent to September 30, 2020:
Crowdex Note
On November 27, 2020, the Company issued to Crowdex a $
BD 1 Exchange Agreement
During September 2020, a number of the Company’s investors entered into assignment agreements to sell their existing debt to BD 1. Refer to Notes 9, 10, and 11, for more information. The assignments transferred ownership of the following debts:
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal of $ |
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal and interest of $ |
|
|
• |
The outstanding principal and interest of $ |
On
Pursuant to the terms of the BD1 Exchange Agreement, BD 1 agreed to surrender and exchange all of its outstanding promissory notes with principal balances of approximately $
28
Series 1A Preferred Stock – Tranche 2 Closing
On December 31, 2020 the Company sold
On January 4, 2021, the Company entered into a securities purchase agreement (“Series 1ATranche 2 SPA”) with TubeSolar AG, a developer of photovoltaic thin-film tubes to enable additional application opportunities in solar power generation compared to conventional solar modules (“TubeSolar”). Pursuant to the Series 1A Tranche 2 SPA, the Company sold
Common Stock Purchase Agreement
On
Global Ichiban Settlement Agreement
On
29
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes to those financial statements appearing elsewhere in this Form 10-Q. This discussion and analysis contains statements of a forward-looking nature relating to future events or our future financial performance. As a result of many factors, our actual results may differ materially from those anticipated in these forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Overview
We are a company formed to commercialize flexible PV modules using our proprietary technology. For the three and nine months ended September 30, 2020, we generated $6,293 and $60,445 of revenue from product sales, respectively. As of September 30, 2020, we had an accumulated deficit of $415,774,376.
In January 2017, Ascent was awarded a contract to supply high-voltage SuperLight thin-film CIGS PV blankets. These 50W, fully laminated, flexible blankets were manufactured using a new process that was optimized for high performance in near-space conditions at elevated temperatures, and are custom designed for easy modular integration into series and parallel configurations to achieve the desired voltage and current required for such application.
In February 2017 Ascent announced the discontinuation of our EnerPlex consumer business by disposing of the EnerPlex brand, and related intellectual properties and trademarks, to our battery product supplier, Sun Pleasure Co. Limited (“SPCL”). This transaction was completed in an effort to better allocate our resources and to continue to focus on our core strength in the high-value specialty PV market. Following the transfer, Ascent no longer produces or sells Enerplex-branded consumer products. In November 2017, Ascent introduced the next generation of our USB-based portable power systems with the XD™ series. The first product introduced was the XD-12 which, like previous products, is a folding, lightweight, easily stowable, PV system with USB power regulation. Unique to this generation of PV portable power is more PV power (12 Watts) and a 2.0 Amp smart USB output to enable the XD-12 to charge most smartphones, tablets, and USB-enabled devices as fast as a wall outlet. The enhanced smart USB circuit works with the device to be charged so that the device can determine the maximum power it is able to receive from the XD-12 and ensures the best possible charging performance directly from the sun.
Also, in 2017, for a space customer, Ascent manufactured a new micro-module, approximately 12.8mm x 50mm (0.5in x 2.0in) in size that is ideal for both laboratory-scale environmental testing, and for subsequent integration into flight experiments.
In February 2018, the Company introduced the second product in our XD series. Delivering up to 48 Watts of solar power, the durable and compact Ascent XD-48 Solar Charger is the ideal solution for charging many portable electronics and off-grid power systems. The XD-48’s versatility allows it to charge both military and consumer electronics directly from the sun wherever needed. Like the XD-12, the XD-48 has a compact and portable design, and its rugged, weather-resistant construction withstands shocks, drops, damage and even minor punctures to power through the harshest conditions.
In March 2018, Ascent successfully shipped to a European based customer for a lighter-than-air, helium-filled airship project based on our newly developed ultra-light modules with substrate material than half of the thickness of our standard modules. In 2019, Ascent completed a repeat order from the same customer who had since established its airship development operation in the US. In 2020, Ascent received a third and enlarged order from the same customer and is scheduled to complete the order in March 2021.
We continue to design and manufacture PV integrated portable power applications for commercial and military users. Due to the high durability enabled by the monolithic integration employed by our technology, the capability to customize modules into different form factors and the industry leading light weight and flexibility provided by our modules, we believe that the potential applications for our products are extensive.
30
Commercialization and Manufacturing Strategy
We manufacture our products by affixing a thin CIGS layer to a flexible, plastic substrate using a large format, roll-to-roll process that permits us to fabricate our flexible PV modules in an integrated sequential operation. We use proprietary monolithic integration techniques which enable us to form complete PV modules with little to no costly back end assembly of inter cell connections. Traditional PV manufacturers assemble PV modules by bonding or soldering discrete PV cells together. This manufacturing step typically increases manufacturing costs and at times proves detrimental to the overall yield and reliability of the finished product. By reducing or eliminating this added step using our proprietary monolithic integration techniques, we believe we can achieve cost savings in, and increase the reliability of, our PV modules. All tooling necessary for us to meet our near-term production requirements is installed in our Thornton, Colorado plant. In 2012, we further revised our strategy to focus on applications for emerging and high-value specialty PV markets, including off grid, aerospace, military and defense and consumer-oriented products.
We plan to continue the development of our current PV technology to increase module efficiency, improve our manufacturing tooling and process capabilities and reduce manufacturing costs. We also plan to continue to take advantage of research and development contracts to fund a portion of this development.
Significant Trends, Uncertainties and Challenges
We believe the significant trends, uncertainties and challenges that directly or indirectly affect our financial performance and results of operations include:
|
|
• |
Our ability to generate customer acceptance of and demand for our products; |
|
|
• |
Successful ramping up of commercial production on the equipment installed; |
|
|
• |
Our products are successfully and timely certified for use in our target markets; |
|
|
• |
Successful operating of production tools to achieve the efficiencies, throughput and yield necessary to reach our cost targets; |
|
|
• |
The products we design are saleable at a price sufficient to generate profits; |
|
|
• |
Our ability to raise sufficient capital to enable us to reach a level of sales sufficient to achieve profitability on terms favorable to us; |
|
|
• |
Effective management of the planned ramp up of our domestic and international operations; |
|
|
• |
Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets; |
|
|
• |
Our ability to maintain the listing of our common stock on the OTCBB Market; |
|
|
• |
Our ability to implement remediation measures to address material weaknesses in internal control; |
|
|
• |
Our ability to achieve projected operational performance and cost metrics; |
|
|
• |
Our ability to enter into commercially viable licensing, joint venture, or other commercial arrangements; and |
|
|
• |
Availability of raw materials. |
Basis of Presentation: The accompanying condensed consolidated financial statements (unaudited) have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of September 30, 2020 and December 31, 2019, and the results of operations for the three and nine months ended September 30, 2020 and 2019. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.
31
Critical Accounting Policies and Estimates
Critical accounting policies used in reporting our financial results are reviewed by management on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Processes used to develop these estimates are evaluated on an ongoing basis. Estimates are based on historical experience and various other assumptions that are believed to be reasonable for making judgments about the carrying value of assets and liabilities. Actual results may differ as outcomes from assumptions may change.
The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes to our accounting policies as of September 30, 2020.
Results of Operations
Comparison of the Three Months Ended September 30, 2020 and 2019
Revenues. Our revenues were $6,293 for the three months ended September 30, 2020 compared to $338,373 for the three months ended September 30, 2019, a decrease of $332,080, due primarily to reduced operations in the current period.
Cost of revenues. Our Cost of revenues for the three months ended September 30, 2020 was $5,528 compared to $74,271 for the three months ended September 30, 2019, a decrease of $68,743. The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the three months ended September 30, 2020 compared to 2019. Cost of revenues for the three months ended September 30, 2020 is comprised primarily of direct labor and overhead. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.
Research, development and manufacturing operations. Research, development and manufacturing operations costs were $150,060 for the three months ended September 30, 2020, compared to $460,775 for the three months ended September 30, 2019, a decrease of $310,715. The decrease in cost is due primarily to reduced operations in the current period. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts.
Selling, general and administrative. Selling, general and administrative expenses were $315,660 for the three months ended September 30, 2020, compared to $663,566 for the three months ended September 30, 2019, a decrease of $317,906. The decrease in costs is due primarily to reduced operations in the current period.
Other Income/Expense, net. Other income was $3,081,901 for the three months ended September 30, 2020, compared to other expense of $391,012 for the three months ended September 30, 2019, an improvement of $3,472,913. The improvement is due primarily to the gain on the sale of our facility and settlement of liabilities.
Net Income/Loss. Our Net Income was $2,590,621 for the three months ended September 30, 2020, compared to a Net Loss of $1,279,405 for the three months ended September 30, 2019, an improvement of $3,870,026. The improvement is due primarily to the gain on the sale of our facility and settlement of liabilities.
32
The improvement of $3,870,026 in Net Income/Loss for the three months ended September 30, 2020 can be summarized in variances in significant account activity as follows:
|
|
|
Decrease (Increase) to Net Loss For the Three Months Ended September 30, 2020 Compared to the Three Months Ended September, 2019 |
|
|
|
Revenues |
|
$ |
(332,080 |
) |
|
Cost of Revenue |
|
|
68,743 |
|
|
Research, development and manufacturing operations |
|
|
310,715 |
|
|
Selling, general and administrative expenses |
|
|
317,906 |
|
|
Depreciation and Amortization Expense |
|
|
31,829 |
|
|
Other Income / Expense |
|
|
|
|
|
Other income/(expense), net |
|
|
3,049,366 |
|
|
Interest Expense |
|
|
944,247 |
|
|
Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net |
|
|
(520,700 |
) |
|
Increase to Net Income |
|
$ |
3,870,026 |
|
Comparison of the Nine Months Ended September 30, 2020 and 2019
Revenues. Our revenues were $60,445 for the nine months ended September 30, 2020 compared to $628,124 for the nine months ended September 30, 2019, a decrease of $567,679, due primarily to reduced operations in the current period.
Cost of revenues. Our Cost of revenues for the nine months ended September 30, 2020 was $101,156 compared to $282,825 for the nine months ended September 30, 2019, a decrease of $181,669. The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the nine months ended September 30, 2020 compared to 2019. Cost of revenues for the nine months ended September 30, 2020 is comprised primarily of direct labor and overhead. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.
Research, development and manufacturing operations. Research, development and manufacturing operations costs were $485,592 for the nine months ended September 30, 2020, compared to $1,078,842 for the nine months ended September 30, 2019, a decrease of $593,250. The decrease in costs is due primarily to reduced operations in the current period. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts.
Selling, general and administrative. Selling, general and administrative expenses were $505,052 for the nine months ended September 30, 2020, compared to $1,545,852 for the nine months ended September 30, 2019, a decrease of $1,040,800. The decrease in costs is due primarily to reduced operations in the current period.
Other Income/Expense, net. Other income was $8,795,187 for the nine months ended September 30, 2020, compared to other income of $532,208 for the nine months ended September 30, 2019, an increase of $8,262,979. The increase is due primarily to the change in fair value of derivative liabilities and the gain on sale of our facility and settlement of liabilities.
Net Income. Our Net Income was $7,625,853 for the nine months ended September 30, 2020, compared to a Net Loss of $1,932,350 for the nine months ended September 30, 2019, an improvement of $9,558,203. The improvement is due primarily to the change in fair value of the derivative liabilities and the gain on sale of our facility and settlement of liabilities.
33
The improvement of $9,558,204 for the nine months ended September 30, 2020 can be summarized in variances in significant account activity as follows:
|
|
|
Decrease (Increase) to Net Loss For the Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September, 2019 |
|
|
|
Revenues |
|
$ |
(567,679 |
) |
|
Cost of Revenue |
|
|
181,669 |
|
|
Research, development and manufacturing operations |
|
|
593,250 |
|
|
Selling, general and administrative expenses |
|
|
1,040,799 |
|
|
Depreciation and Amortization Expense |
|
|
47,185 |
|
|
Other Income / Expense |
|
|
|
|
|
Other income/(expense), net |
|
|
2,472,466 |
|
|
Interest Expense |
|
|
3,513,228 |
|
|
Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net |
|
|
2,277,285 |
|
|
Increase to Net Income |
|
$ |
9,558,203 |
|
Liquidity and Capital Resources
The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the nine months ended September 30, 2020 the Company used $1,473,988 in cash for operations.
Additional projected product revenues are not anticipated to result in a positive cash flow position for the years 2020 and 2021 overall and, as of September 30, 2020, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.
The Company continues to accelerate sales and marketing efforts related to its military solar products and specialty PV application strategies through expansion of its sales and distribution channels. The Company has begun activities related to securing additional financing through strategic or financial investors, but there is no assurance the Company will be able to raise additional capital on acceptable terms or at all. If the Company's revenues do not increase rapidly, and/or additional financing is not obtained, the Company will be required to significantly curtail operations to reduce costs and/or sell assets. Such actions would likely have an adverse impact on the Company's future operations.
As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern. The Company has scaled down its operations, due to cash flow issues, and does not expect to ramp up until significant financing is obtained.
Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
34
Statements of Cash Flows Comparison of the Nine Months Ended September 30, 2020 and 2019
For the nine months ended September 30, 2020, our cash used in operations was $1,473,988 compared to $2,565,168 for the nine months ended September 30, 2020, a decrease of $1,091,180. The decrease is primarily the result of reduced operations during the current period. For the nine months ended September 30, 2020, cash provided by investing activities was $254,444 compared to $826,746 for the nine months ended September 30, 2019, a decrease of $572,302. This change was primarily the result of a decrease in proceeds from the sale of assets. During the nine months ended September 30, 2020, negative operating cash flows of $1,473,988 were primarily funded through $2,000,000 in proceeds from stock issuance and $443,200 in proceeds from debt issuance.
Off Balance Sheet Transactions
As of September 30, 2020, we did not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk
We hold no significant funds and have no future obligations denominated in foreign currencies as of September 30, 2020.
Although our reporting currency is the U.S. Dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials. As a result, we are subject to currency translation risk. Further, changes in exchange rates between foreign currencies and the U.S. Dollar could affect our future net sales and cost of sales and could result in exchange losses.
Interest Rate Risk
Our exposure to market risks for changes in interest rates relates primarily to our cash equivalents and investment portfolio. As of September 30, 2020, our cash equivalents consisted only of operating accounts held with financial institutions. From time to time, we hold restricted funds, money market funds, investments in U.S. government securities and high quality corporate securities. The primary objective of our investment activities is to preserve principal and provide liquidity on demand, while at the same time maximizing the income we receive from our investments without significantly increasing risk. The direct risk to us associated with fluctuating interest rates is limited to our investment portfolio, and we do not believe a change in interest rates will have a significant impact on our financial position, results of operations, or cash flows.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. Our management conducted an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act as of September 30, 2020. Based on this evaluation, our management concluded the design and operation of our disclosure controls and procedures were not effective as of September 30, 2020.
35
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles ("GAAP") in the United States of America and includes those policies and procedures that:
|
|
• |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
|
|
• |
provide reasonable assurance transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
|
|
• |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our management concluded our internal controls over financial reporting were not effective as of September 30, 2020. Our management reviewed the results of its assessment with the Audit Committee.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Material Weakness
Based on our assessment and the criteria used, management concluded that our internal control over financial reporting as of September 30, 2020 was not effective due to the material weaknesses described as follows:
|
|
• |
The Company was understaffed and did not have sufficiently trained resources with the technical expertise to ensure that all company transactions were accounted for in accordance with GAAP. This deficiency arose primarily from staff turnover and the inability of the Company to devote sufficient replacement resources in a timely manner, as a result of the Company's financial situation |
As a consequence, the Company did not have effective process level control activities over the following:
|
|
• |
Accounting for the Company's inventory and cost of revenue was lacking for the preparation of the September 30, 2020 financial statements. Miscalculations in these areas could impact the Company's current assets, revenues, operating results, and cash flows. |
|
|
• |
Accounting for the Company’s debt and equity securities was lacking for preparation of the September 30, 2020 financial statements. Miscalculations in this area could impact the Company’s liability, equity, and other expenses. |
The control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.
36
Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting
The Company’s financial challenges continued during the three months ended September 30, 2020, however, as discussed in Note 16. Subsequent Events, the Company received funding during the second half of 2020 and began to bring the Company back into operating status. The Company plans to execute the following steps, going forward, to remediate the aforementioned material weaknesses in its internal control over financial reporting:
|
|
• |
During the fourth quarter of 2020, the Company hired a new Chief Financial Officer |
|
|
• |
The Company significantly reduced the complexity of the debt structure through consolidation and simplifying of terms thereby lowering the associated administration and cost burden. |
|
|
• |
The Company plans to engage a resource, either as internal staff or an external contractor, with the technical expertise to track and report on inventory transactions and cost of revenue calculations. |
|
|
• |
The Company will design and implement additional procedures in order to assure that the resources mentioned above and other audit/accounting personnel are more involved with the Company’s inventory activities, cost of revenue allocations, and debt and equity securities to monitor and earlier identify accounting issues that may be raised by the Company’s ongoing activities. |
Changes in Internal Control Over Financial Reporting
Except for the identification and mitigation of the material weaknesses noted above, there were no other changes in internal control over financial reporting during the three months ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In May 2019, the Company’s former law firm filed suit against the Company in District Court in Adams County Colorado in an effort to collect approximately $1.2 million of unpaid fees (and related interest charges). On September 11, 2020, the Company entered into a settlement agreement (the “Settlement Agreement”) with its former law firm. Pursuant to the Settlement Agreement, the Company paid $120,000 on September 23, 2020 as the full and final settlement of all amounts owed between the parties. Following such payment, a satisfaction of an existing judgment in favor of such law firm was filed in Adams County Colorado.
On July 29, 2020, the Company’s owned facility at 12300 Grant Street, Thornton, CO 80241 (the “Building”) was foreclosed by the Building’s first lien holder (“Mortgage Holder”) and sold at public auction. The successful bidder for the Building was the Mortgage Holder, at the price of $7.193 million. As a result, the Company’s obligations to Mortgage Holder and all of the Company’s outstanding real property taxes on the Building were considered fully repaid.
Item 1A. Risk Factors
The COVID-19 pandemic in the United States and world-wide has caused business disruption which may negatively impact the Company’s operations and results. While the disruption is currently expected to be temporary, there is considerable uncertainty around the duration. It is therefore likely there will be an impact on the Company’s operating activities and results. However, the related financial impact and duration cannot be reasonably estimated at this time.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the updated risk factors in our 2019 Annual Report on Form 10-K filed on January 29, 2021, which could materially affect our business, financial condition or future results. The risks described in our 2019 Annual Report on Form 10-K filed on January 29, 2021 are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not required.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
38
Item 6. Exhibits
The exhibits listed on the accompanying Index to Exhibits on this Form 10-Q are filed or incorporated into this Form 10-Q by reference.
EXHIBIT INDEX
|
Exhibit No. |
|
Description |
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
3.3 |
|
|
|
|
|
|
|
3.4 |
|
|
|
|
|
|
|
3.5 |
|
|
|
|
|
|
|
3.6 |
|
|
|
|
|
|
|
3.7 |
|
|
|
|
|
|
|
3.8 |
|
|
|
|
|
|
|
3.9 |
|
|
|
|
|
|
|
3.10 |
|
|
|
|
|
|
|
3.11 |
|
|
|
|
|
|
|
3.12 |
|
|
|
|
|
|
|
3.13 |
|
|
|
|
|
|
|
3.14 |
|
|
|
|
|
|
|
3.15 |
|
|
|
|
|
|
|
4.1 |
|
|
|
|
|
|
|
4.2 |
|
|
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
10.2 |
|
|
|
|
|
|
|
10.3 |
|
|
|
|
|
|
|
10.4 |
|
|
|
|
|
|
|
31.1* |
|
Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
31.2* |
|
Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
32.1* |
|
Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
32.2* |
|
Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
39
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
* |
|
Filed herewith |
40
ASCENT SOLAR TECHNOLOGIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 9th day of April, 2021.
|
|
ASCENT SOLAR TECHNOLOGIES, INC. |
|
|
|
|
|
|
April 9, 2021 |
By: |
/s/ VICTOR LEE |
|
|
|
Lee Kong Hian (aka Victor Lee) President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
April 9, 2021 |
By: |
/s/ MICHAEL J. GILBRETH |
|
|
|
Michael J. Gilbreth Chief Financial Officer (Principal Financial and Accounting Officer) |
41
Exhibit 31.1
ASCENT SOLAR TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Victor Lee, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Ascent Solar Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
April 9, 2021 |
|
|
|
|
|
/s/ VICTOR LEE |
|
|
|
Victor Lee President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
ASCENT SOLAR TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Gilbreth, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Ascent Solar Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
April 9, 2021 |
|
|
|
|
By: |
/s/ MICHAEL J. GILBRETH |
|
|
|
Michael J. Gilbreth Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
ASCENT SOLAR TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ascent Solar Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date therein specified (the “Report”), I, Victor Lee, President, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
1 |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2 |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
April 9, 2021 |
|
|
|
|
|
/s/ VICTOR LEE |
|
|
|
Victor Lee President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
ASCENT SOLAR TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ascent Solar Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date therein specified (the “Report”), I, Michael Gilbreth, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
1 |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2 |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
April 9, 2021 |
|
|
|
|
By: |
/s/ MICHAEL J. GILBRETH |
|
|
|
Michael J. Gilbreth Chief Financial Officer (Principal Financial and Accounting Officer) |