Ascent Solar Technologies, Inc S-1/A, filed Apr 5, 2024
Ascent Solar Technologies, Inc. (ASTI)
As filed with the Securities and Exchange Commission on April 5, 2024
Registration No. 333-277070
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
To
FORM
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter)
| 36741 | ||||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
(
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Jin Jo
Ascent Solar Technologies, Inc.
12300 Grant Street
Thornton, Colorado 80241
(720) 872-5000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
| James H. Carroll, Esq. | Ralph V. Martino, Esq. | |
| Marc E. Rivera, Esq. | ||
| Carroll Legal LLC | ArentFox Schiff L.L.P. | |
| 1449 Wynkoop Street, Suite 507 | 1717 K Street NW | |
| Denver, CO 80202 | Washington, DC 20006 | |
| (303) 888-4859 | (202) 857-6000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the 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 to Section 7(a)(2)(B) of the Securities Act. ☐
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
Preliminary Prospectus,
Subject to Completion, dated April 5, 2024
ASCENT SOLAR TECHNOLOGIES, INC.
$6,000,000
UP TO [***] SHARES OF COMMON STOCK
OR ONE PRE-FUNDED WARRANT TO PURCHASE ONE SHARE OF COMMON STOCK
We are offering on a best efforts basis up to [***] shares of common stock, which is equal to the closing price of our common stock on the Nasdaq Capital Market on March 27, 2024. We intend to raise gross proceeds of approximately $6.0 million in this offering.
We are also offering to each purchaser of shares of common stock that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding common stock immediately following the consummation of this offering the opportunity to purchase one pre-funded warrant (in lieu of one share of common stock) (“Pre-Funded Warrant”). A holder of pre-funded warrants will not have the right to exercise any portion of its pre-funded warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise. Each pre-funded warrant will be exercisable for one share of common stock. The purchase price of each Pre-Funded Warrant will be equal to the price per one share of common stock, minus $0.0001, and the remaining exercise price of each Pre-Funded Warrant will equal $0.0001 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. For each Pre-Funded Warrant we sell (without regard to any limitation on exercise set forth therein), the number of shares of common stock we are offering will be decreased on a one-for-one basis.
The shares of our common stock and Pre-Funded Warrants, if any, can only be purchased in this offering. We are also registering the shares of common stock issuable from time to time upon exercise of the Pre-Funded Warrants offered hereby.
Our common stock is traded on the Nasdaq Capital Market under the symbol “ASTI.” On March 27, 2024, the closing price for our common stock, as reported on the Nasdaq Capital Market, was $0.391 per share. The public offering price per share will be determined at the time of pricing and may be at a discount to the then current market price. The recent market price used throughout this prospectus may not be indicative of the final offering price. The final public offering price will be determined through negotiation between us and investors based upon a number of factors, including our history and our prospects, the industry in which we operate, our past and present operating results, the previous experience of our executive officers and the general condition of the securities markets at the time of this offering.
There is no established public trading market for the Pre-Funded Warrants, and we do not expect a market to develop. Without an active trading market, the liquidity of the Pre-Funded Warrants will be limited. In addition, we do not intend to list the Pre-Funded Warrants on the Nasdaq Capital Market, any other national securities exchange or any other trading system.
We have engaged Dawson James Securities Inc. as our exclusive placement agent (“Dawson” or the “placement agent”) to use its reasonable best efforts to solicit offers to purchase our securities in this offering. The placement agent is not purchasing or selling any of the securities we are offering and is not required to arrange for the purchase or sale of any specific number or dollar amount of the securities. Because there is no minimum offering amount required as a condition to closing in this offering the actual public offering amount, placement agent’s fee, and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above and throughout this prospectus. We have agreed to pay the placement agent the placement agent fees set forth in the table below. See “Plan of Distribution” in this prospectus for more information.
Except as otherwise indicated, all share and per share information in this prospectus gives effect to the reverse stock split of the Company’s outstanding common stock, which was effected at a ratio of 1-for-200 shares as of 5:00 pm Eastern Time on September 11, 2023, trading for which began as of 9:30 am Eastern Time on September 12, 2023.
We are a “smaller reporting company” as defined under the federal securities laws and, as such, have elected to be subject to reduced public company reporting requirements.
| Per Share(1) | Total | |||||||
| Public offering price | $ | $ | ||||||
| Placement Agent Fees (2) | $ | $ | ||||||
| Proceeds, before expenses, to us | $ | $ | ||||||
(1) Shares consist of one share of common stock or one Pre-Funded Warrant to purchase one share of common stock.
(2) In connection with this Offering, we have agreed to pay to Dawson as placement agent a cash fee equal to 8% of the gross proceeds received by us in the Offering; provided, however, that the placement agent fee shall equal 4% for investors that the Company directs to the Offering. We have also agreed to reimburse certain expenses of Dawson which are not included in the table above and to issue Dawson a warrant to purchase 3% of the shares of common stock underlying the shares of common stock issued in this offering (including any shares underlying the Pre-Funded Warrants). See “Plan of Distribution” for a description of the compensation payable to the placement agent.
We anticipate that delivery of the securities against payment will be made on or about April [***], 2024.
Investing in our securities involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our securities in “Risk Factors” beginning on page 8 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Dawson James Securities Inc.
The date of this prospectus is April 5, 2024
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TABLE OF CONTENTS
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Neither we nor the placement agent has authorized anyone to provide any information or to make any representations other than those contained in or incorporated by reference in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the placement agent take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in or incorporated by reference in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our shares of common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
To the extent there is a conflict between the information contained in this prospectus, on the one hand, and the information contained in any document incorporated by reference filed with the Securities and Exchange Commission, or the SEC, before the date of this prospectus, on the other hand, you should rely on the information in this prospectus. If any statement in a document incorporated by reference is inconsistent with a statement in another document incorporated by reference having a later date, the statement in the document having the late date modifies or supersedes the earlier statement.
No action is being taken in any jurisdiction outside the United States to permit a public offering of our shares of common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this public offering and the distribution of this prospectus applicable to that jurisdiction.
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third-parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Our management estimates have not been verified by any independent source, and we have not independently verified any third-party information. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Risk Factors” and “Information Regarding Forward-Looking Statements.”
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to the registration statement of which this prospectus is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”
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PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this prospectus and in documents incorporated by reference. This summary is not complete and may not contain all the information you should consider before investing in our securities. You should read this entire prospectus and the documents incorporated by reference in this prospectus carefully, especially the risks of investing in our securities discussed under the heading “Risk Factors,” and our financial statements and related notes incorporated by reference in this prospectus before making an investment decision. Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus and the documents incorporated by reference in this prospectus to “Ascent”, “Ascent Solar”, “the Company,” “we,” “us” and “our” refer to Ascent Solar Technologies, Inc. This prospectus includes forward-looking statements that involve risks and uncertainties. See “Information Regarding Forward-Looking Statements.”
This prospectus includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this prospectus are the property of their respective owners.
Except as otherwise noted, all information in this prospectus reflects and assumes no sale of Pre-Funded Warrants in this offering, which, if sold, would reduce the number of shares of common stock that we are offering on a one-for-one basis.
Except as otherwise indicated, all share and per share information in this prospectus gives effect to the reverse stock split of the Company’s outstanding common stock, which was effected at a ratio of 1-for-200 shares as of 5:00 pm Eastern Time on September 11, 2023, trading for which began as of 9:30 am Eastern Time on September 12, 2023.
Overview
We were incorporated in 2005 from the separation by ITN Energy Systems, Inc. (“ITN”) of its Advanced Photovoltaic Division and all of that division’s key personnel, core technologies, and certain trade secrets and royalty free licenses to use in connection with the manufacturing, developing marketing, and commercializing Copper-Indium-Gallium-diSelenide (“CIGS”) photovoltaic (“PV”) products.
We are a solar technology company that manufactures and sells PV solar modules that are flexible, durable, and possess attractive power to weight and power to area performance. Our technology provides renewable power solutions to high-value production and specialty solar markets where traditional rigid solar panels are not suitable, including aerospace, agrivoltaics, and niche manufacturing/construction sectors. We operate in these target markets because they have highly specialized needs for power generation and offer attractive pricing due to the significant technological requirements.
We believe the value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in our target markets, but also overcomes many of the obstacles other solar technologies face in space, aerospace and other markets. Ascent designs and develops finished products for end users in these areas and collaborates with strategic partners to design and develop integrated solutions for products like satellites, spacecraft, airships and fixed-wing UAVs. Ascent sees significant overlap in the needs of end users across some of these markets and believes it can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
The integration of Ascent's solar modules into space, near space, and aeronautic vehicles with ultra-lightweight and flexible solar modules is an important market opportunity for the Company. Customers in this market have historically required a high level of durability, high voltage and conversion efficiency from solar module suppliers, and we believe our products are well suited to compete in this premium market and will fill a void in the satellite market with a lower cost, lighter module and a product that, if struck by an object in space, will create limited space debris.
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.
Advantages of CIGS on a Flexible Plastic Substrate
Thin film PV solutions differ based on the type of semiconductor material chosen to act as a sunlight absorbing layer, and also on the type of substrate on which the sunlight absorbing layer is affixed. To the best of our knowledge, we believe we are the only company in the world currently focused on commercial scale production of PV modules using CIGS on a flexible, plastic substrate with monolithic integration. We utilize CIGS as a semiconductor material because, at the laboratory level, it has a higher demonstrated cell conversion efficiency than amorphous silicon (“a-Si”) and cadmium telluride (“CdTe”). We also believe CIGS offers other compelling advantages over both a-Si and CdTe, including:
| · | CIGS versus a-Si: Although a-Si, like CIGS, can be deposited on a flexible substrate, its conversion efficiency, which already is generally much lower than that of CIGS, measurably degrades when it is exposed to ultraviolet light, including natural sunlight. To mitigate such degradation, manufacturers of a-Si solar cells are required to implement measures that add cost and complexity to their manufacturing processes. |
| · | CIGS versus CdTe: Although CdTe modules have achieved conversion efficiencies that are generally comparable to CIGS in production, we believe CdTe has never been successfully applied to a flexible substrate on a commercial scale. We believe the use of CdTe on a rigid, transparent substrate, such as glass, is unsuitable for a number of our applications. We also believe CIGS can achieve higher conversion efficiencies than CdTe in production. |
We believe our choice of substrate material further differentiates us from other thin-film PV manufacturers. We believe the use of a flexible, lightweight, insulating substrate that is easier to install provides clear advantages for our target markets, especially where rigid substrates are unsuitable. We also believe our use of a flexible, plastic substrate provides us significant cost advantages because it enables us to employ monolithic integration techniques on larger components, which we believe are unavailable to manufacturers who use flexible, metal substrates. Accordingly, we are able to significantly reduce part count, thereby reducing the need for costly back-end assembly of inter cell connections. As the only company, to our knowledge, focused on the commercial production of PV modules using CIGS on a flexible, plastic substrate with monolithic integration, we believe we have the opportunity to address the aerospace, agrivoltaic and other weight-sensitive markets with transformational high-quality, value-added product applications. It is these same unique features and our overall manufacturing process that enable us to produce extremely robust, light, and flexible products.
Competitive Strengths
We believe we possess a number of competitive strengths that provide us with an advantage over our competitors.
| · | We are a pioneer in CIGS technology with a proprietary, flexible, lightweight, high power PV thin film product that positions us to penetrate a wide range of attractive high value-added markets such as aerospace and agrivoltaics. In addition, we have provided renewable power solutions for off grid, portable power, transportation, defense, and other markets. By applying CIGS to a flexible plastic substrate, we have developed a PV module that is efficient, lightweight and flexible; with the highest power-to-weight ratio in at-scale commercially available solar. The market for space and near-space solar power application solutions, agrivoltaics, portable power systems, and transportation integrated applications represent a significant premium market for the Company. Relative to our thin film competitors, we believe our advantage in thin film CIGS on plastic technology provides us with a superior product offering for these strategic market segments. |
| · | We have the ability to manufacture PV modules for different markets and for customized applications without altering our production processes. Our ability to produce PV modules in customized shapes and sizes, or in a variety of shapes and sizes simultaneously, without interrupting production flow, provides us with flexibility in addressing target markets and product applications, and allows us to respond quickly to changing market conditions. Many of our competitors are limited by their technology and/or their manufacturing processes to a more restricted set of product opportunities. |
| · | Our integrated, roll-to-roll manufacturing process and proprietary monolithic integration techniques provide us a potential cost advantage over our competitors. Historically, manufacturers have formed PV modules by manufacturing individual solar cells and then interconnecting them. Our large format, roll-to-roll manufacturing process allows for integrated continuous production. In addition, our proprietary monolithic integration techniques allow us to utilize laser patterning to create interconnects, thereby creating PV modules at the same time we create PV cells. In so doing, we are able to reduce or eliminate an entire back end processing step, saving time as well as labor and manufacturing costs relative to our competitors. |
| · | Our lightweight, powerful, and durable solar panels provide a performance advantage over our competitors. For applications where a premium is placed on the weight and profile of the product, our ability to integrate our PV modules into portable packages offers the customer a lightweight and durable solution. |
| · | Our proven research and development capabilities position us to continue the development of next generation PV modules and technologies. Our ability to produce CIGS based PV modules on a flexible plastic substrate is the result of a concerted research and development effort that began more than 20 years ago. We continue to pursue research and development in an effort to drive efficiency improvements in our current PV modules and to work toward next generation technologies and additional applications. |
| · | Our manufacturing process can be differentiated into two distinct functions; a front-end module manufacturing process and a back-end packaging process. Our ability to produce finished unpackaged rolls of CIGS material for shipment worldwide to customers for encapsulation and integration into various products enhances our ability to work with partners internationally and domestically. |
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Markets and Marketing Strategy
We target high-value specialty solar markets including satellites, spacecraft, aerospace and agrivoltaic applications. This strategy enables us to fully leverage the unique advantages of our technology, including flexibility, durability and attractive power to weight and power to area performance. It further enables us to offer unique, differentiated solutions in large markets with less competition, and more attractive pricing.
We believe the value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in our target markets, but also overcomes many of the obstacles other solar technologies face in space, aerospace and other markets. Ascent designs and develops finished products for end users in these areas and collaborates with strategic partners to design and develop integrated solutions for products like satellites, spacecraft, airships and fixed-wing UAVs. Ascent sees significant overlap in the needs of end users across some of these markets and believes it can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
ASTI is in early discussions with several major satellite companies, which could realize significant revenue. There is no assurance that these early discussions will ultimately lead to significant new revenue. These opportunities would require us to make further efficiency improvements to our PV cells.
Recent Developments
Federal Funding Opportunities
In December 2023, the Company announced that the Company is pursuing several opportunities for federal funding through the Department of Energy (“DOE”) and the Small Business Administration, with determination and allocation scheduled for 2024. With applications and concept papers submitted and well-received in Q4 2023, Ascent is prepared to lead groundbreaking research primarily in agrivoltaics and in the development and manufacturing of advanced solar cells should the proposals be selected for funding. The Company plans to do this both individually as well as in partnership with like-minded industry players whose technologies and manufacturing processes complement Ascent’s own unique capabilities.
As encouraged by the DOE, Ascent applied for Silicon Solar Manufacturing and Dual-Use Photovoltaics Incubator program funding on November 14, 2023, for the development of its innovative agrivoltaic technology that would bring solar power to more remote areas around the world and optimize dual land use. The Company has also been encouraged by the DOE to further submit for a Solar Energy Technologies Office Funding Notice: Advancing U.S. Thin-Film Solar Photovoltaics, as part of a team, for advanced PV research and development that would enable future commercialization.
Improvements to CIGS-Based Solar Cells
The Company continues to improve its CIGS-based solar cells. Specifically, the Company is developing a zinc oxysulfide process. Zinc oxysulfide is used as a cadmium -free window layer to improve the efficiency of CIGS-based solar cells. The newly enhanced process will eliminate the usage of Cadmium Sulfide making it a more environmentally friendly process and product. These newly developed cells have been tested at Intellivation, LLC using our CIGS rolls and achieved 10.8% efficiency.
Perovskite Manufacturing Facility
In addition to the improvements in our CIGs-based solar cells, the Company continues to pursue Perovskite manufacturing development with partners at its Thornton facility by developing a hybrid CIGS/Perovskite PV module. Perovskites are a novel class of materials that have been recognized for their potential to increase PV power conversion efficiencies. As both films absorb and convert sunlight in their respective parts of the spectrum, the resulting single hybrid module could be tailored by using a similar approach as tandem devices but with higher efficiency and simpler construction and manufacturing process. While notable efficiency breakthroughs have been recorded in laboratories, the solar industry has been challenged to transform them into stable, high-efficiency products at industrial scale.
H.C. Wainright Lawsuit
On August 15, 2023, H.C. Wainwright & Co., LLC (“Wainwright”) filed an action against the Company in the New York State Supreme Court in New York County. The complaint alleges a breach by the Company of an investment banking engagement letter entered into in October 2021. The Wainwright engagement letter expired in April 2022 without any financing transaction having been completed. The complaint claims that Wainright is entitled, under a “tail provision”, to an 8% fee and 7% warrant coverage on the Company’s $15 million secured convertible note financing. The complaint seeks damages of $1.2 million, 2,169.5 common stock warrants with a per share exercise price of $605, and attorney fees.
While it is too early to predict the outcome of this legal proceeding or whether an adverse result would have a material adverse impact on our operations or financial position, we believe we have meritorious defenses and intend to defend this legal matter vigorously.
Warrant Repurchase Agreements
As previously disclosed, on December 19, 2022, we entered into a Securities Purchase Contract (the “Purchase Contract”) with two institutional investors (the “Investors”). Pursuant to the Purchase Contract, the Company issued to the Investors certain common stock warrants.
These warrants have certain “full ratchet” anti-dilution adjustments that are triggered when the Company issues securities with a purchase or conversion, exercise or exchange price that is less than the exercise price of the warrants then in effect at any time. Under the full ratchet anti-dilution adjustments, if the Company issues new securities at a price lower than the then applicable exercise price, (i) the exercise price is reduced to the lower new issue price and (ii) the number of warrant shares is proportionately increased. The warrants have been previously adjusted following past issuances of Company securities. Currently there are 5,596,232 Warrants exercisable at an exercise price of $1.76.
On March 6, 2024 and March 7, 2024, the Company entered into Warrant Repurchase Agreements (the “Repurchase Agreements”), with each of the Investors. Pursuant to the Repurchase Agreements, if the Company closes a new capital raising transaction with gross proceeds in excess of $5 million (“Qualified Financing”), the Company will repurchase the warrants from the Investors for an aggregate purchase price of $3.6 million. Following the delivery of the purchase price to the Investors, the Investors will relinquish all rights, title and interest in the Warrants and assign the same to the Company, and the Warrants will be cancelled.
The Company intends to use $3.6 million of the proceeds of this offering to purchase and cancel these 5,596,232 warrants with a current exercise price of $1.76. If these warrants are not purchased and cancelled in connection with this offering, these warrants would adjust to 25,190,914 warrants with an exercise price of $0.391 (at an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital market on March 27, 2024).
The Company believes that repurchasing these warrants, and thereby avoiding potential future full ratchet adjustments of these warrants, will bring more certainty to the Company’s capital structure. The Company believes this certainty will assist the Company in raising additional capital in the future.
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Risks associated with our business
Investing in our securities involves a high degree of risk. You should carefully consider the risks described in “Risk Factors” beginning on page 8 before making a decision to invest in our securities. If any of these risks actually occurs, our business, financial condition, results of operations and prospects would likely be materially, adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.
Going Concern Opinion
Our working capital deficiency, stockholders’ deficit, and recurring losses from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the year ended December 31, 2023 with respect to this uncertainty. Our ability to continue as a going concern will require us to obtain additional funding.
Smaller Reporting Company Status
We are a “smaller reporting company” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and smaller reporting companies have reduced disclosure obligations regarding executive compensation.
We have taken advantage of these reduced reporting requirements in this prospectus and in the documents incorporated by reference into this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies that are not smaller reporting companies.
Our corporate information
We were incorporated under the laws of Delaware in October 2005. Our principal business office is located at 12300 Grant Street, Thornton, Colorado 80241, and our telephone number is (720) 872-5000. Our website address is www.AscentSolar.com. Information contained on our website or any other website does not constitute, and should not be considered, part of this prospectus.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this prospectus include forward-looking statements, which involve risks and uncertainties. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believe,” “estimate,” “project,” “anticipate,” “expect,” “seek,” “predict,” “continue,” “possible,” “intend,” “may,” “might,” “will,” “could,” would” or “should” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and the documents incorporated by reference in this prospectus, and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our product candidates, research and development, commercialization objectives, prospects, strategies, the industry in which we operate and potential collaborations. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
Forward-looking statements speak only as of the date of this prospectus. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
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You should read this prospectus, the documents incorporated by reference in this prospectus, and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. All forward-looking statements are based upon information available to us on the date of this prospectus.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, business and prospects may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition, business and prospects are consistent with the forward-looking statements contained (or incorporated by reference) in this prospectus, those results may not be indicative of results in subsequent periods.
Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated in the forward-looking statements due to several factors, including those set forth below under “Risk Factors” and elsewhere in this prospectus. The factors set forth below under “Risk Factors” and other cautionary statements made in this prospectus should be read and understood as being applicable to all related forward-looking statements wherever they appear in this prospectus. The forward-looking statements contained in this prospectus represent our judgment as of the date of this prospectus. We caution readers not to place undue reliance on such statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this prospectus.
You should read this prospectus, the documents incorporated by reference in this prospectus, and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
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THE OFFERING
| Units offered | Up to 15,345,268 shares of common stock on a best efforts basis, based on an assumed offering price of $0.391 per share, which is equal to the closing price of our common stock on the Nasdaq Capital Market on March 27, 2024. We are seeking to raise gross proceeds of approximately $6.0 million in this offering.
We are also offering to each purchaser, with respect to the purchase of shares of common stock that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding shares of common stock immediately following the consummation of this offering, the opportunity to purchase one Pre-Funded Warrant in lieu of one share of common stock. A holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise. Each Pre-Funded Warrant will be exercisable for one share of common stock. The purchase price per Pre-Funded Warrant will be equal to the price per share of common stock, minus $0.0001, and the exercise price of each Pre-Funded Warrant will equal $0.0001 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time in perpetuity until all of the Pre-Funded Warrants are exercised in full. |
| Common stock to be outstanding prior to this offering | 6,710,745 shares |
| Common stock to be outstanding after this offering | 22,056,014 shares |
| Assumed public offering price per unit | $0.391 per unit |
| Placement Agent’s Warrants | Upon the closing of this offering, we have agreed to issue to the placement agent warrants exercisable for a period of five years from the commencement of sales in this offering entitling the placement agent to purchase 3% of the number of shares of common stock sold in this offering (including the shares of common stock underlying the Pre-Funded Warrants), at an exercise price equal to 125% of the public offering price per share of common stock. The warrants will not be exercisable for a period of six months from the date of effectiveness of the registration statement. For additional information regarding our arrangement with the placement agent, please see “Plan of Distribution.” |
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| Use of Proceeds | Assuming the maximum number of shares of common stock are sold in this offering, we expect to receive net proceeds from this offering of approximately $5.5 million, based upon an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024, after deducting the placement agent discounts and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds from this offering, together with our existing cash, to (i) pay approximately $200,000 to retire an outstanding cash payable related to our secured notes issued in December 2022, (ii) pay $3.6 million to purchase and cancel 5,596,232 warrants with a current exercise price of $1.76 per share that were issued with our secured notes issued in December 2022 that would adjust to 25,197,357 warrants with an exercise price of $0.391 (at an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital market on March 27, 2024), if not purchased and (iii) for general and administration expenses and other general corporate purposes. See “Use of Proceeds.” |
| Nasdaq Capital Market Symbol | Common Stock “ASTI”. |
| Risk Factors | Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 7 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our securities. |
| Best Efforts Offering | We have agreed to offer and sell the securities offered hereby to the purchasers through the placement agent. The placement agent is not required to buy or sell any specific number or dollar amount of the securities offered hereby, but it will use its reasonable best efforts to solicit offers to purchase the securities offered by this prospectus. See “Plan of Distribution” on page 52 of this prospectus. |
| Lock-up | We, each of our officers, directors, and certain of our stockholders of our common stock have agreed, subject to certain exceptions, not to sell, offer, agree to sell, contract to sell, hypothecate, pledge, grant any option to purchase, make any short sale of, or otherwise dispose of or hedge, directly or indirectly, any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of capital stock, for a period of six months after the date of this prospectus, without the prior written consent of Dawson James Securities Inc. See “Shares Eligible for Future Sale” and “Plan of Distribution” for additional information. |
The number of shares outstanding after this offering is based on 6,710,745 shares of our common stock outstanding as of March 27, 2024, and excludes:
| · | 9,784 shares of our common stock reserved for issuance under outstanding restricted stock units (“RSUs”) granted as employment inducement award to our CEO, | |
| · | 5,596,232 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, which warrants would increase (if not purchased and cancelled in connection with this offering) to 25,197,357 shares following a full ratchet adjustment to such warrants upon the consummation of this offering (based upon an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024), | |
| · | 3,572,635 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $2.88 per share, | |
| · | 107,179 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $3.60 per share, | |
| · | 7,076 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $1,060 per share, | |
| · | 10,769 shares reserved for issuance upon the conversion of our outstanding senior secured convertible notes, | |
| · | 525,000 shares of common stock reserved for issuance under our new 2023 Equity Incentive Plan, and | |
| · | 460,358 shares of common stock reserved for issuance upon the exercise of the placement agent’s warrants issued in connection with this offering. |
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RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the other information contained in this prospectus, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risks included here are not exhaustive or exclusive. Other sections of this prospectus may include additional factors which could adversely affect our business, results of operations and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Risks Relating to Our Business
Our continuing operations will require additional capital which we may not be able to obtain on favorable terms, if at all, or without dilution to our stockholders. Since inception, we have incurred significant losses. We expect to continue to incur net losses in the near term. For the year ended December 31, 2023, our cash used in operations was approximately $9.5 million. At December 31, 2023, we had cash and equivalents on hand of approximately $1.0 million.
Although we have commenced production at our manufacturing facility, we do not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until we have fully implemented our new strategy of focusing on high value PV products. Product revenues did not result in a positive cash flow for the 2023 year, and are not anticipated to result in a positive cash flow for the next twelve months.
During 2023, we entered into multiple financing agreements to fund operations, raising approximately $11.2 million in gross proceeds, of which $7.1 million was used to pay down debt and the Company’s Series 1B preferred stock. We do not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements for the foreseeable future, and we will depend on raising additional capital to maintain operations until we become profitable. There is no assurance that we will be able to raise additional capital on acceptable terms or at all. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our existing stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we raise additional funds through debt financing, which may involve restrictive covenants, our ability to operate our business may be restricted. If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our products, expand capacity or otherwise respond to competitive pressures could be significantly limited, and our business, results of operations and financial condition could be materially and adversely affected.
We currently have limited committed sources of capital and we have limited liquidity. Our cash and cash equivalents as of December 31, 2023 was $1.0 million. We expect our current cash and cash equivalents will be sufficient to fund our operations into March 2024. Therefore, we will require substantial future capital in order to continue operations.
Following the receipt of $5.5 million in net proceeds from this offering, we believe our cash resources would be sufficient to fund our current operating plans into the third quarter of 2024. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect and need to raise additional funds sooner than we anticipate. If we are unable to raise additional capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.
Our auditors have expressed substantial doubt about our ability to continue as a going concern. Our auditors’ report on our December 31, 2023 financial statements expresses an opinion that our capital resources as of the date of their audit report were not sufficient to sustain operations or complete our planned activities for the year 2024 unless we raised additional funds. Additionally, 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 doubt as to the Company’s ability to continue as a going concern. Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. Our December 31, 2023 financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
We have a limited history of operations, have not generated significant revenue from operations and have had limited production of our products. We have a limited operating history and have generated limited revenue from operations. Currently we are producing products in quantities necessary to meet current demand. Under our current business plan, we expect losses to continue until annual revenues and gross margins reach a high enough level to cover operating expenses. Our ability to achieve our business, commercialization and expansion objectives will depend on a number of factors, including whether:
| · | We can generate customer acceptance of and demand for our products; |
| · | We successfully ramp up commercial production on the equipment installed; |
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| · | Our products are successfully and timely certified for use in our target markets; |
| · | We successfully operate 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; |
| · | We raise sufficient capital to enable us to reach a level of sales sufficient to achieve profitability on terms favorable to us; |
| · | We are able to successfully design, manufacture, market, distribute and sell our products; |
| · | We effectively manage the planned ramp up of our operations; |
| · | We successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators and distributors, who deal directly with end users in our target markets; |
| · | Our ability to maintain the listing of our common stock on the Nasdaq Capital Market; |
| · | 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 |
| · | The availability of raw materials. |
Each of these factors is critical to our success and accomplishing each of these tasks may take longer or cost more than expected or may never be accomplished. It also is likely that problems we cannot now anticipate will arise. If we cannot overcome these problems, our business, results of operations and financial condition could be materially and adversely affected.
We have to date incurred net losses and may be unable to generate sufficient sales in the future to become profitable. We incurred a net loss of approximately $17.1 million for the year ended December 31, 2023 and reported an accumulated deficit of approximately $482.5 million as of December 31, 2023. We expect to incur net losses in the near term. Our ability to achieve profitability depends on a number of factors, including market acceptance of our specialty PV products at competitive prices. If we are unable to raise additional capital and generate sufficient revenue to achieve profitability and positive cash flows, we may be unable to satisfy our commitments and may have to discontinue operations.
Our business is based on a new technology, and if our PV modules or processes fail to achieve the performance and cost metrics that we expect, then we may be unable to develop demand for our PV modules and generate sufficient revenue to support our operations. Our CIGS on flexible plastic substrate technology is a relatively new technology. Our business plan and strategies assume that we will be able to achieve certain milestones and metrics in terms of throughput, uniformity of cell efficiencies, yield, encapsulation, packaging, cost and other production parameters. We cannot assure you that our technology will prove to be commercially viable in accordance with our plan and strategies. Further, we or our strategic partners and licensees may experience operational problems with such technology after its commercial introduction that could delay or defeat the ability of such technology to generate revenue or operating profits. If we are unable to achieve our targets on time and within our planned budget, then we may not be able to develop adequate demand for our PV modules, and our business, results of operations and financial condition could be materially and adversely affected.
Our failure to further refine our technology and develop and introduce improved PV products could render our PV modules uncompetitive or obsolete and reduce our net sales and market share. Our success requires us to invest significant financial resources in research and development to keep pace with technological advances in the solar energy industry. However, research and development activities are inherently uncertain, and we could encounter practical difficulties in commercializing our research results. Our expenditures on research and development may not be sufficient to produce the desired technological advances, or they may not produce corresponding benefits. Our PV modules may be rendered obsolete by the technological advances of our competitors, which could harm our results of operations and adversely impact our net sales and market share.
Failure to expand our manufacturing capability successfully at our facilities would adversely impact our ability to sell our products into our target markets and would materially and adversely affect our business, results of operations and financial condition. Our growth plan calls for production and operations at our facility. Successful operations will require substantial engineering and manufacturing resources and are subject to significant risks, including risks of cost overruns, delays and other risks, such as geopolitical unrest that may cause us not to be able to successfully operate in other countries. Furthermore, we may never be able to operate our production processes in high volume or at the volumes projected, make planned process and equipment improvements, attain projected manufacturing yields or desired annual capacity, obtain timely delivery of components, or hire and train the additional employees and management needed to scale our operations. Failure to meet these objectives on time and within our planned budget could materially and adversely affect our business, results of operations and financial condition.
We may be unable to manage the expansion of our operations and strategic alliances effectively. We will need to significantly expand our operations and form beneficial strategic alliances in order to reduce manufacturing costs through economies of scale and partnerships, secure contracts of commercially material amounts with reputable customers and capture a meaningful share of our target markets. To date, we have not successfully formed such strategic alliances and can give no assurances that we will be able to do so. To manage the expansion of our operations and alliances, we will be required to improve our operational and financial systems, oversight, procedures and controls and expand, train and manage our growing employee base. Our management team will also be required to maintain and cultivate our relationships with partners, customers, suppliers and other third parties and attract new partners, customers and suppliers. In addition, our current and planned operations, personnel, facility size and configuration, systems and internal procedures and controls, even when augmented through strategic alliances, might be inadequate or insufficient to support our future growth. If we cannot manage our growth effectively, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures, resulting in a material and adverse effect to our business, results of operations and financial condition.
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We depend on a limited number of third-party suppliers for key raw materials, and their failure to perform could cause manufacturing delays and impair our ability to deliver PV modules to customers in the required quality and quantity and at a price that is profitable to us. Our failure to obtain raw materials and components that meet our quality, quantity and cost requirements in a timely manner could interrupt or impair our ability to manufacture our products or increase our manufacturing cost. Most of our key raw materials are either sole sourced or sourced by a limited number of third-party suppliers. As a result, the failure of any of our suppliers to perform could disrupt our supply chain and impair our operations. Many of our suppliers are small companies that may be unable to supply our increasing demand for raw materials as we implement our planned expansion. We may be unable to identify new suppliers in a timely manner or on commercially reasonable terms. Raw materials from new suppliers may also be less suited for our technology and yield PV modules with lower conversion efficiencies, higher failure rates and higher rates of degradation than PV modules manufactured with the raw materials from our current suppliers.
Our products may never gain sufficient market acceptance, in which case we would be unable to sell our products or achieve profitability. Demand for our products may never develop sufficiently, and our products may never gain market acceptance, if we fail to produce products that compare favorably against competing products on the basis of cost, quality, weight, efficiency and performance. Demand for our products also will depend on our ability to develop and maintain successful relationships with key partners, including distributors, retailers, OEMs, system integrators and value-added resellers. If our products fail to gain market acceptance as quickly as we envision or at all, our business, results of operations and financial condition could be materially and adversely affected.
We are targeting emerging markets for a significant portion of our planned product sales. These markets are new and may not develop as rapidly as we expect or may not develop at all. Our target markets include agrivoltaics, space and near space markets. Although certain areas of these markets have started to develop, some of them are in their infancy. We believe these markets have significant long-term potential; however, some or all of these markets may not develop and emerge as we expect. If the markets do develop as expected, there may be other products that could provide a superior product or a comparable product at lower prices than our products. If these markets do not develop as we expect, or if competitors are better able to capitalize on these markets our revenues and product margins may be negatively affected.
Failure to consummate strategic relationships with key partners in our various target market segments, such as space and near space and agrivoltaics, and the respective implementations of the right strategic partnerships to enter these various specified markets, could adversely affect our projected sales, growth and revenues. We intend to sell thin-film PV modules for use in agrivoltaics, space and near space solar panel applications. Our marketing and distribution strategy is to form strategic relationships with distributors, value added resellers and e-commerce to provide a foothold in these target markets. If we are unable to successfully establish working relationships with such market participants or if, due to cost, technical or other factors, our products prove unsuitable for use in such applications; our projected revenues and operating results could be adversely affected.
If sufficient demand for our products does not develop or takes longer to develop than we anticipate, we may be unable to grow our business, generate sufficient revenue to attain profitability or continue operations. The solar energy industry is currently dominated by the rigid crystalline silicon based technology. The extent to which our flexible thin film PV modules will be widely adopted is uncertain. Many factors, of which several are outside of our control, may affect the viability of widespread adoption and demand for our flexible PV modules.
We face intense competition from other manufacturers of thin-film PV modules and other companies in the solar energy industry. The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with the larger electric power industry. We believe our main sources of competition are other thin film PV manufacturers and companies developing other solar solutions, such as solar thermal and concentrated PV technologies.
Many of our existing and potential competitors have substantially greater financial, technical, manufacturing and other resources than we do. A competitor’s greater size provides them with a competitive advantage because they often can realize economies of scale and purchase certain raw materials at lower prices. Many of our competitors also have greater brand name recognition, established distribution networks and large customer bases. In addition, many of our competitors have well-established relationships with our current and potential partners and distributors and have extensive knowledge of our target markets. As a result of their greater size, these competitors may be able to devote more resources to the research, development, promotion and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Our failure to adapt to changing market conditions and to compete successfully with existing or future competitors could materially and adversely affect our business, results of operations and financial condition.
Problems with product quality or performance may cause us to incur warranty expenses, damage our market reputation and prevent us from maintaining or increasing our market share. If our products fail to perform as expected while under warranty, or if we are unable to support the warranties, sales of our products may be adversely affected or our costs may increase, and our business, results of operations and financial condition could be materially and adversely affected.
We may also be subject to warranty or product liability claims against us that are not covered by insurance or are in excess of our available insurance limits. In addition, quality issues can have various other ramifications, including delays in the recognition of revenue, loss of revenue, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and reputation. The possibility of future product failures could cause us to incur substantial expenses to repair or replace defective products. Furthermore, widespread product failures may damage our market reputation and reduce our market share causing sales to decline.
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Currency translation risk may negatively affect our net sales, cost of equipment, cost of sales, gross margin or profitability and could result in exchange losses. 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 operate, make sales or buy equipment or materials. As a result, we are subject to currency translation risk. Our future contracts and obligations may be exposed to fluctuations in currency exchange rates, and, as a result, our capital expenditures or other costs may exceed what we have budgeted. Further, changes in exchange rates between foreign currencies and the U.S. dollar could affect our net sales and cost of sales and could result in exchange losses. We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition.
A significant increase in the price of our raw materials could lead to higher overall costs of production, which would negatively affect our planned product margins, or make our products uncompetitive in the PV market. Our raw materials include high temperature plastics and various metals. Significant increases in the costs of these raw materials may impact our ability to compete in our target markets at a price sufficient to produce a profit.
Our intellectual property rights or our means of enforcing those rights may be inadequate to protect our business, which may result in the unauthorized use of our products or reduced sales or otherwise reduce our ability to compete. Our business and competitive position depends upon our ability to protect our intellectual property rights and proprietary technology, including any PV modules that we develop. We attempt to protect our intellectual property rights, primarily in the United States, through a combination of patent, trade secret and other intellectual property laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign patent and other laws concerning intellectual property rights, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States. Our failure to obtain or maintain adequate protection of our intellectual property rights, for any reason, could have a materially adverse effect on our business, results of operations and financial condition. Further, any patents issued in connection with our efforts to develop new technology for PV modules may not be broad enough to protect all of the potential uses of our technology.
We also rely on unpatented proprietary technology. It is possible others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require our employees, consultants and advisors to execute proprietary information and invention assignment agreements when they begin working for us. We cannot assure these agreements will provide meaningful protection of our trade secrets, unauthorized use, misappropriation or disclosure of trade secrets, know how or other proprietary information. Despite our efforts to protect this information, unauthorized parties may attempt to obtain and use information that we regard as proprietary. If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected.
In addition, when others control the prosecution, maintenance and enforcement of certain important intellectual property, such as technology licensed to us, the protection and enforcement of the intellectual property rights may be outside of our control. If the entity that controls intellectual property rights that are licensed to us does not adequately protect those rights, our rights may be impaired, which may impact our ability to develop, market and commercialize our products. Further, if we breach the terms of any license agreement pursuant to which a third party licenses us intellectual property rights, our rights under that license may be affected and we may not be able to continue to use the licensed intellectual property rights, which could adversely affect our ability to develop, market and commercialize our products.
Third-party claims of intellectual property infringement may negatively impact the Company and the Company’s future financial results. The Company’s commercial success depends in part on its ability to develop, manufacture, market and sell its products and use its proprietary technology without infringing the patent rights of third parties. Numerous third-party U.S. and non-U.S. issued patents and pending applications exist in the area of the Company’s products. The Company may in the future pursue available proceedings in the U.S. and foreign patent offices to challenge the validity of patents and patent applications. In addition, or alternatively, the Company may consider whether to seek to negotiate a license of rights to technology covered by one or more of such patents and patent applications. If any patents or patent applications cover the Company’s products or technologies, the Company may not be free to manufacture or market its products as planned, absent such a license, which may not be available to the Company on commercially reasonable terms, or at all.
It is also possible that the Company has failed to identify relevant third-party patents or applications. For example, some applications may be held under government secrecy and US patent applications that will not be filed outside the United States remain confidential unless and until patents issue. Moreover, it is difficult for industry participants, including the Company, to identify all third-party patent rights that may be relevant to its product candidates and technologies because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. The Company may fail to identify relevant patents or patent applications or may identify pending patent applications of potential interest but incorrectly predict the likelihood that such patents may issue with claims of relevance to its technology. In addition, the Company may be unaware of one or more issued patents that would be infringed by the manufacture, sale or use of a current or future products, or the Company may incorrectly conclude that a third-party patent is invalid, unenforceable or not infringed by its activities. Additionally, pending patent applications that have been published can, subject to specified limitations, be later amended in a manner that could cover the Company’s technologies, its products or the use of its products.
There have been many lawsuits and other proceedings filed by third parties involving patent and other intellectual property rights, including patent infringement lawsuits, interferences, oppositions, and reexamination, post-grant review and equivalent proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which the Company is developing products or has existing products. As the industries the Company is involved in expand and more patents are issued, the risk increases that its product candidates may be subject to claims of infringement of the patent rights of third parties.
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Parties making claims against the Company may obtain injunctive or other equitable relief, which could effectively block its ability to further develop and commercialize the Company’s products. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from the Company’s business. In the event of a successful claim of infringement against the Company, the Company may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign its infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Our future success depends on retaining our Chief Executive Officer and existing management team and hiring and assimilating new key employees, and our inability to attract or retain key personnel would materially harm our business and results of operations. Our success depends on the continuing efforts and abilities of our executive officers, including Mr. Paul Warley, our President and Chief Executive Officer, our other executive officers, and key technical personnel. Our future success also will depend on our ability to attract and retain highly skilled employees, including management, technical and sales personnel. The loss of any of our key personnel, the inability to attract, retain or assimilate key personnel in the future, or delays in hiring required personnel could materially harm our business, results of operations and financial condition.
Our PV modules contain limited amounts of cadmium and claims of human exposure or future regulations could have a material adverse effect on our business, results of operations and financial condition. Our PV modules contain limited amounts of cadmium, which is regulated as a hazardous material due to the adverse health effects that may arise from human exposure and is banned in certain countries. We cannot assure you that human or environmental exposure to cadmium used in our PV modules will not occur. Any such exposure could result in third party claims against us, damage to our reputation and heightened regulatory scrutiny of our PV modules. Future regulation relating to the use of cadmium in various products could force us to seek regulatory exemptions or impact the manufacture and sale of our PV modules and could require us to incur unforeseen environmental related costs. The occurrence of future events such as these could limit our ability to sell and distribute our PV modules, and could have a material adverse effect on our business, results of operations and financial condition.
Environmental obligations and liabilities could have a substantial negative impact on our financial condition, cash flows and profitability. We are subject to a variety of federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing the use, handling, generation, processing, storage, transportation and disposal of, or human exposure to, hazardous and toxic materials (such as the cadmium used in our products), the discharge of pollutants into the air and water, and occupational health and safety. We are also subject to environmental laws which allow regulatory authorities to compel, or seek reimbursement for, cleanup of environmental contamination at sites now or formerly owned or operated by us and at facilities where our waste is or has been disposed. We may incur significant costs and capital expenditures in complying with these laws and regulations. In addition, violations of, or liabilities under, environmental laws or permits may result in restrictions being imposed on our operating activities or in our being subjected to substantial fines, penalties, criminal proceedings, third party property damage or personal injury claims, cleanup costs or other costs. Also, future developments such as more aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery of presently unknown environmental conditions or noncompliance may require expenditures that could have a material adverse effect on our business, results of operations and financial condition. Further, greenhouse gas emissions have increasingly become the subject of international, national, state and local attention. Although future regulations could potentially lead to an increased use of alternative energy, there can be no guarantee that such future regulations will encourage solar technology. Given our limited history of operations, it is difficult to predict future environmental expenses.
We have agreements with international parties that subject us to a number of risks, including potential unfavorable political, regulatory, labor, legal and tax conditions in foreign countries. We purchased manufacturing equipment in Switzerland and, in the future, may look to expand our operations abroad and, as a result, we may be subject to the legal, political, social, and regulatory requirements and economic conditions of foreign jurisdictions. Risks inherent to international operations, include, but are not limited to, the following:
| · | Difficulty in enforcing agreements in foreign legal systems; |
| · | Difficulty in procuring supplies and supply contracts abroad; |
| · | Foreign countries imposing additional withholding taxes or otherwise taxing our foreign income, imposing tariffs or adopting other restrictions on foreign trade and investment, including currency exchange controls; | |
| · | Inability to obtain, maintain or enforce intellectual property rights; |
| · | Risk of nationalization; |
| · | Changes in general economic and political conditions in the countries in which we may operate, including changes in the government incentives we might rely on; |
| · | Unexpected adverse changes in foreign laws or regulatory requirements, including those with respect to environmental protection, export duties and quotas; |
| · | Difficulty with staffing and managing widespread operations; |
| · | Trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries; and |
| · | Difficulty of, and costs relating to, compliance with the different commercial and legal requirements of the international markets in which we plan to offer and sell our PV products. |
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Our business in foreign markets will require us to respond to rapid changes in market conditions in these countries. Our overall success as an international business depends, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions. If we are not able to develop and implement policies and strategies that are effective in each location where we will do business, then our business, results of operations and financial condition could be materially and adversely affected.
Existing regulations and policies and changes to these regulations and policies may present technical, regulatory and economic barriers to the purchase and use of PV products, which may significantly reduce demand for our PV products. The market for electricity generation products is heavily influenced by foreign, U.S., state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer owned electricity generation. In the United States and in a number of other countries, these regulations and policies have been modified in the past and may be modified again in the future. These regulations and policies could deter end user purchases of PV products and investment in the research and development of PV technology. For example, without a mandated regulatory exception for PV systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. These fees could increase the cost to our end users of using PV systems and make them less desirable, thereby harming our business, prospects, results of operations and financial condition. In addition, electricity generated by PV systems mostly competes with expensive peak hour electricity, rather than the less expensive average price of electricity. Modifications to the peak hour pricing policies of utilities, such as to a flat rate, would require PV systems to achieve lower prices in order to compete with the price of electricity from other sources. We anticipate that our PV modules and their use in installations will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. It is difficult to track the requirements of individual states and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to PV modules may result in significant additional expenses to us, our business partners and their customers and, as a result, could cause a significant reduction in demand for our PV modules.
We may be subject to risks related to our information technology systems, including the risk that we may be the subject of a cyber-attack and the risk that we may be in non-compliance with applicable privacy laws. Our operations depend, in part, on how well we and our vendors protect networks, equipment, information technology (IT) systems, and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism, theft, malware, ransomware and phishing attacks. Any of these and other events could result in IT system failures, delays, or increases in capital expenses. Our operations also depend on the timely maintenance, upgrade, and replacement of networks, equipment, and IT systems and software, as well as preemptive expenses to mitigate the risks of failures. The failure of IT systems or a component of IT systems could, depending on the nature of any such failure, adversely impact our reputation and results of operations.
Risks Relating to our Securities and an Investment in our Company
Our stockholders may experience significant dilution as a result of shares of our common stock that may be issued (i) upon the exercise of our outstanding common stock warrants, (ii) upon the conversion of our outstanding senior secured convertible notes and conversions payable, and (iii) pursuant to new securities that we may issue in the future. We may issue substantial amounts of additional common stock in connection with the exercise or conversion of our outstanding common stock warrants, senior secured convertible notes, and conversions payable. See “Description of Capital Stock.”
Certain of these financing agreements contain variable pricing mechanisms. The number of shares that we will issue pursuant to these agreements, therefore, will fluctuate based on the price of our common stock.
We currently have 5,596,232 outstanding common stock warrants issued in connection with our December 2022 senior secured convertible note financing with a per share exercise price of $1.76. These warrants have a “full ratchet” adjustment feature that will be triggered by the consummation of this offering if the Company does not purchase them from the warrant holders. Based upon an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024, the number of these common stock warrants would increase to 25,197,357, and the per share exercise price would be reduced to $0.391 per share. The actual full ratchet adjustment would be calculated following the completion of this offering.
Also, if we obtain additional financing involving the issuance of equity securities or securities convertible into equity securities, our existing stockholders’ investment would be further diluted. Such dilution could cause the market price of our common stock to decline, which could impair our ability to raise additional financing. Depending on market liquidity at the time, sales of such newly issued additional shares into the market may cause the trading price of our common stock to fall.
The price of our common stock may continue to be volatile. Our common stock is currently traded on the Nasdaq Capital Market. The trading price of our common stock from time to time has fluctuated widely and may be subject to similar volatility in the future. For example, during the period from January 1, 2023 through December 31, 2023, our common stock ranged from $0.755 to $286.00, and in 2022, our common stock ranged from $300 to $6,600. The trading price of our common stock in the future may be affected by a number of factors, including events described in these Risk Factors. In recent years, broad stock market indices, in general, and smaller capitalization and PV companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock. These fluctuations may have a negative effect on the market price of our common stock regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management’s attention and resources and could have a material adverse effect on our financial condition.
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As a public company we are subject to complex legal and accounting requirements that require us to incur substantial expenses, and our financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm our stock price and listing on Nasdaq Capital Market. As a public company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is substantial, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence, delisting of our securities and/or governmental or private actions against us. We cannot assure you we will be able to comply with all of these requirements or the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.
The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of Sarbanes-Oxley. Our compliance with Section 404 of Sarbanes-Oxley will require we incur substantial accounting expense and expend significant management efforts. The effectiveness of our controls and procedures may, in the future, be limited by a variety of factors, including:
| · | Faulty human judgment and simple errors, omissions or mistakes; |
| · | Fraudulent action of an individual or collusion of two or more people; |
| · | Inappropriate management override of procedures; and |
| · | The possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial information. |
If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm, identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we may be subject to Nasdaq Capital market delisting, investigations by the SEC and civil or criminal sanctions.
Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect we will need to continue to improve existing, and implement new operational, financial and accounting systems, procedures and controls to manage our business effectively.
Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls may cause our operations to suffer, and we may be unable to conclude that our internal control over financial reporting is effective as required under Section 404 of Sarbanes-Oxley. If we are unable to complete the required Section 404 assessment as to the adequacy of our internal control over financial reporting, if we fail to maintain or implement adequate controls, our ability to obtain additional financing could be impaired. In addition, investors could lose confidence in the reliability of our internal control over financial reporting and in the accuracy of our periodic reports filed under the Securities Exchange Act of 1934, as amended (“Exchange Act”). A lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline.
Sales of a significant number of shares of our common stock in the public markets or significant short sales of our stock, or the perception that such sales could occur, could depress the market price of our common stock and impair our ability to raise capital. Sales of a substantial number of shares of our common stock or other equity-related securities in the public markets could depress the market price of our common stock. If there are significant short sales of our stock, the price decline that could result from this activity may cause the share price to decline more so, which, in turn, may cause long holders of the stock to sell their shares, thereby contributing to sales of stock in the market. Such sales also may impair our ability to raise capital through the sale of additional equity securities in the future at a time and price that our management deems acceptable, if at all. In addition, a large number of our outstanding shares are not registered under the Securities Act. If and when these shares are registered or become eligible for sale to the public market, the market price of our common stock could also decline.
We may fail to continue to meet the listing standards of The Nasdaq Capital Market whether or not this offering occurs. Even if this offering occurs, this offering could cause our stock price to fall, which could result in us being delisted from The Nasdaq Capital Market. Failure to maintain the listing of our common stock with a U.S. national securities exchange could adversely affect the liquidity off our common stock. Our common stock is currently listed on The Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards.
Nasdaq $1.00 Bid Price Requirement
On December 11, 2023, the Company received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that the Company is not in compliance with the $1.00 Minimum Bid Price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market (the “Bid Price Requirement”).
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The Notice does not result in the immediate delisting of the Company’s common stock from The Nasdaq Capital Market.
The Nasdaq Listing Rules require listed securities to maintain a minimum bid price of $1.00 per share and, based upon the closing bid price of the Company’s common stock for the 30 consecutive business days for the period October 27 through December 8, 2023, the Company no longer meets this requirement.
The Notice indicated that the Company will be provided 180 calendar days (or June 10, 2024) in which to regain compliance. If at any time during this 180 calendar day period the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of ten consecutive business days, the Nasdaq staff (the “Staff”) will provide the Company with a written confirmation of compliance and the matter will be closed.
Alternatively, if the Company fails to regain compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, the Company may be eligible for an additional 180 calendar day compliance period, provided (i) it meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market (except for the Bid Price Requirement) and (ii) it provides written notice to Nasdaq of its intention to cure this deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event the Company does not regain compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, and if it appears to the Staff that the Company will not be able to cure the deficiency, or if the Company is not otherwise eligible, the Staff will provide the Company with written notification that its securities are subject to delisting from The Nasdaq Capital Market. At that time, the Company may appeal the delisting determination to a Hearings Panel.
The Company intends to monitor the closing bid price of its common stock and is considering its options to regain compliance with the Bid Price Requirement. The Company’s receipt of the Notice does not affect the Company’s reporting requirements with the Securities and Exchange Commission.
Nasdaq Stockholder Equity Requirement
As previously disclosed, on May 25, 2023, the Staff notified the Company that it did not comply with the minimum $2,500,000 stockholders’ equity requirement for continued listing set forth in Listing Rule 5550(b) (the “Equity Rule”). On July 28, 2023, Staff notified the Company that the Equity Rule served as an additional and separate basis for delisting. The Company requested a hearing, which was scheduled for October 12, 2023 (the “October Hearing”). On October 2, 2023, the Company completed a public offering of units for gross proceeds of $10.3 million and regained compliance with the Equity Rule. As a result, on October 11, 2023, the Company did not have to attend the October Hearing.
On March 5, 2024, the Company received notice (the “Second Notice”) from the Staff stating that the Company is not in compliance with the Equity Rule, as, the Company reported stockholders’ equity of $(1,526,611) in its Form 10-K for the year ended December 31, 2023.
As a result, the Staff determined to delist the Company’s Common Stock from Nasdaq, unless the Company timely requests an appeal of the Staff’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.
The Company has requested a hearing before the Panel to appeal the Second Notice and to address compliance with the Equity Rule. We expect the hearing to occur in early May 2024.
While the appeal process is pending, the suspension of trading of the Company’s common stock will be stayed and the common stock will continue to trade on Nasdaq through the hearing and the expiration of any additional extension period granted by the Panel following the hearing.
There are no assurances however, that a favorable decision will be obtained from the Panel.
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Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management. Provisions in our Certificate of Incorporation and Bylaws, each as amended, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, or for a change in the composition of our Board of Directors (our “Board”) or management to occur, even if doing so would benefit our stockholders. These provisions include:
| · | Authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; | |
| · | Dividing our Board into three classes; |
| · | Limiting the removal of directors by the stockholders; and |
| · | Limiting the ability of stockholders to call a special meeting of stockholders. |
In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our Board. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by, or beneficial to, our stockholders.
Risks Relating to this Offering
You will experience immediate dilution as a result of this offering and may experience additional dilution in the future. The public offering price for the shares offered hereby will be substantially higher than the net tangible book value per share of our common stock immediately after this offering. If you purchase shares in this offering, you will incur substantial and immediate dilution in the net tangible book value of your investment. Net tangible book value per share represents the amount of total tangible assets less total liabilities less lease liabilities, divided by the number of shares of our common stock then outstanding. To the extent that warrants that are currently outstanding or that are issued in this offering are exercised, there will be further dilution to your investment. We may also issue additional common stock, warrants, options and other securities in the future that may result in further dilution of your shares of our common stock.
Future sales of our common stock, or the perception that such sales may occur, could depress the trading price of our common stock. After the completion of this offering (and assuming no Pre-Funded Warrants), we expect to have [***] shares of our common stock outstanding, which may be resold in the public market immediately after this offering. We and all of our directors and executive officers, and certain of our stockholders, have signed lock-up agreements for a period of six months following the date of this prospectus, subject to specified exceptions. See “Plan of Distribution.”
The placement agent may, in its sole discretion and without notice, release all or any portion of the shares of our common stock subject to lock-up agreements. As restrictions on resale end, the market price of our common stock could drop significantly if the holders of these shares of our common stock sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our common stock or other securities.
The best efforts structure of this offering may have an adverse effect on our business plan. The placement agent is offering the securities in this offering on a best efforts basis. The placement agent is not required to purchase any securities, but will use its best efforts to sell the securities offered. As a “best efforts” offering, there can be no assurance that the offering contemplated hereby will ultimately be consummated or will result in any proceeds being made available to us. The success of this offering will impact our ability to use the proceeds to execute our business plan. We may have insufficient capital to implement our business plan, potentially resulting in greater operating losses unless we are able to raise the required capital from alternative sources. There is no assurance that alternative capital, if needed, would be available on terms acceptable to us, or at all.
We have broad discretion in the use of the net proceeds we receive from this offering and may not use them effectively. Our management will have broad discretion in the application of the net proceeds we receive in this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether our management is using the net proceeds appropriately. Because of the number and variability of factors that will determine our use of our net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our common stock to decline. Pending their use, we may invest our net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders.
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MARKET AND INDUSTRY DATA
Unless otherwise indicated, information contained (or incorporated by reference) in this prospectus concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets which we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently verified any third-party information. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk Factors" and “Information Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
USE OF PROCEEDS
We expect to receive net proceeds from this offering of approximately $5.5 million, assuming a public offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024, after deducting the estimated placement agent discounts and commissions and estimated offering expenses payable by us.
Each $0.10 increase (decrease) in the assumed public offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024, would increase (decrease) the net proceeds to us by approximately $1.5 million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated placement agent fees and estimated offering expenses payable by us. We may also increase or decrease the number of shares of common stock we are offering. Each increase (decrease) of 1,000,000 share in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us by approximately $0.4 million, assuming that the assumed public offering price remains the same, and after deducting the estimated placement agent discounts and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds from this offering, together with our existing cash, to (i) pay approximately $200,000 to retire and outstanding cash payable related to our secured notes issued in December 2022, (ii) pay $3.6 million to purchase 5,596,232 warrants issued with our secured notes issued in December 2022 (which warrants, if not purchased and cancelled in connection with this offering, would adjust to 25,197,357 warrants at an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital market on March 27, 2024), and (iii) for general and administration expenses and other general corporate purposes.
Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with complete certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the actual amounts that we will spend on the uses set forth above. We believe opportunities may exist from time to time to expand our current business through the acquisition or in-license of complementary product candidates. While we have no current agreements for any specific acquisitions or in-licenses at this time, we may use a portion of the net proceeds for these purposes.
Pending the uses described above, we plan to invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
On August 24, 2022, our common stock began trading on the Nasdaq Capital Market. Our trading symbol is “ASTI.”
Holders
As of March 27, 2024, the number of record holders of our common stock was 35. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividends
The holders of common stock are entitled to receive such dividends as may be declared by our Board of Directors. During the years ended December 31, 2023 and 2022, we did not pay any common stock dividends, and we do not expect to declare or pay any dividends in the foreseeable future. Payment of future dividends will be within the discretion of our Board of Directors and will depend on, among other factors, our retained earnings, capital requirements, and operating and financial condition.
CAPITALIZATION
Except as otherwise noted, all information in this prospectus reflects and assumes no sale of Pre-Funded Warrants in this offering, which, if sold, would reduce the number of shares of common stock that we are offering on a one-for-one basis.
The following table describes our cash and capitalization as of December 31, 2023, on a pro forma basis, and on a pro forma as adjusted basis, to give effect to the sale of our securities and the application of the estimated net proceeds derived from the sale of such securities.
| • | On an actual basis; | |
| • | On a pro forma basis, to reflect conversions of conversions payable and convertible notes of approximately $1.7 million into 2,411,788 shares of common stock subsequent to December 31, 2023; | |
| • | On a pro forma basis, to pay $3.6 million to purchase 5,596,232 warrants issued with our secured notes issued in December 2022 (which warrants, if not purchased and cancelled in connection with this offering, would adjust to 25,197,357 warrants at an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital market on March 27, 2024); | |
| • | On a pro forma basis, to reflect the exercise of 715,111 pre-funded warrants into 715,111 shares of common stock subsequent to December 31, 2023; and | |
| • | On an as adjusted basis to give effect to (i) the sale of 15,345,268 shares of common stock in this offering, assuming a public offering price of $0.391 per share (the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024) and after deducting the placement agent fees and estimated offering expenses payable by us. |
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The as adjusted information below is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms determined at pricing. You should read this information together with our financial statements and related notes set forth elsewhere in this prospectus and the information set forth under the headings “Use of Proceeds” in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth elsewhere in this prospectus.
| As of December 31, 2023 | ||||||||
| Actual | As Adjusted | |||||||
| Cash and cash equivalents | $ | 1,048,733 | $ | 2,702,733 | ||||
| Shareholders' equity: | ||||||||
| Preferred stock - $0.00001 par value, 750,000 authorized; and 48,100 shares issued and outstanding, respectively | 5 | 5 | ||||||
| Common stock - $0.00001 par value, 500,000,000 authorized; 3,583,846 shares issued and outstanding, respectively | 358 | 2,206 | ||||||
| Additional paid-in capital | 480,942,526 | 484,222,464 | ||||||
| Accumulated deficit | (482,478,436 | ) | (482,478,436 | ) | ||||
| Accumulated other comprehensive loss | 8,936 | 8,936 | ||||||
| Total shareholders’ equity (deficit) | (1,526,611 | ) | 1,755,174 | |||||
| Total liabilities and shareholders’ equity | $ | 6,298,706 | $ | 8,152,706 | ||||
Each $0.10 increase (decrease) in the assumed public offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024, would increase (decrease) the as adjusted amount of additional paid-in capital, total stockholders’ equity and total capitalization by approximately $1.5 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated placement agent discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) the as adjusted amount of each of additional paid-in capital, total stockholders’ equity and total capitalization by approximately $0.6 million, assuming that the assumed price to the public remains the same, and after deducting the estimated placement agent discounts and commissions and estimated expenses payable by us.
The number of shares of common stock issued and outstanding, actual and as adjusted, in the table above is based on 3,583,846 shares of our common stock outstanding as of December 31, 2023, and excludes:
| · | 9,784 shares of our common stock reserved for issuance under outstanding restricted stock units (“RSUs”) granted as employment inducement award to our CEO, | |
| · | 5,596,232 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants issued with our secured notes issued in December 2022 (which warrants, if not purchased and cancelled in connection with this offering, would adjust to 25,197,357 warrants at an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital market on March 27, 2024), | |
| · | 3,572,635 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $2.88 per share, | |
| · | 715,111 shares of common stock reserved for issuance upon the exercise of outstanding prefunded warrants, at an exercise price of $0.0001 per share, | |
| · | 107,179 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $3.60 per share, | |
| · | 7,076 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $1,060 per share, | |
| · | 2,419,557 shares reserved for issuance upon the conversion of our outstanding senior secured convertible notes related to the senior secured convertible notes, | |
| · | 525,000 shares of common stock reserved for future issuance under our new 2023 Equity Incentive Plan, which our board intends to adopt following the completion of this offering, and | |
| · | 460,358 shares of common stock reserved for issuance upon the exercise of the placement agent’s warrants issued in connection with this offering. |
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DILUTION
Except as otherwise noted, all information in this prospectus reflects and assumes no sale of Pre-Funded warrants in this offering, which, if sold, would reduce the number of shares of common stock that we are offering on a one-for-one basis.
If you invest in our shares of common stock in this offering, your ownership interest will be diluted to the extent of the difference between the assumed public offering price per unit and the as adjusted net tangible book value per share of our common stock immediately after this offering.
Historical net tangible book value (deficit) per share is determined by dividing our total tangible assets less our total liabilities less lease liabilities by the total number of shares of common stock outstanding. Our historical net tangible book value (deficit) as of December 31, 2023, was approximately $(1,410,796), or $(0.39) per share, based on 3,583,846 shares of common stock outstanding as of that date.
After giving effect to receipt of the net proceeds from our sale of 15,345,268 shares of common stock in this offering at an assumed public offering price of $0.391 per unit, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024, after deducting the estimated placement agent discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of December 31, 2023 would have been approximately $443,204, or $0.02 per share. This represents an immediate increase in as adjusted net tangible book value of $0.41 per share to our existing stockholders and an immediate dilution of $0.37 per share to new investors participating in this offering.
The following table illustrates this dilution per share:
| Assumed public offering price per unit | ||||||||
| Historical net tangible book value per share as of December 31, 2023 | $ | (0.39) | ||||||
| Increase in net tangible book value per share attributable to new investors participating in this offering | $ | 0.41 | ||||||
| As adjusted net tangible book value per share after this offering | $ | 0.02 | ||||||
| Dilution per share to new investors participating in this offering | $ | 0.37 | ||||||
Each $0.10 increase (decrease) in the assumed public offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2024, would increase (decrease) the as adjusted net tangible book value by $0.08 per share and the dilution per share to new investors by $0.02 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated placement agent discounts and commissions and estimated offering expenses payable by us.
We may also increase or decrease the number of shares of common stock we are offering. Each increase (decrease) of 1,000,000 shares of common stock in the number of shares of common stock we are offering would increase (decrease) our as adjusted net tangible book value by approximately $0.4 million, ($0.02) per share, and decrease (increase) the dilution per share to new investors participating in this offering by $0.02 per share, assuming that the assumed public offering price remains the same, and after deducting the estimated placement agent discounts and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will change based on the actual public offering price, number of shares and other terms determined at pricing.
The foregoing table and calculations (other than the historical net tangible book value calculation) are based on 3,583,846 shares of common stock outstanding as of December 31, 2023, and excludes:
| · | 9,784 shares of our common stock reserved for issuance under outstanding restricted stock units (“RSUs”) granted as employment inducement award to our CEO, | |
| · | 5,596,232 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants (which warrants, if not purchased and cancelled in connection with this offering, would ratchet to 25,197,357 warrants at an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital market on March 27, 2024), | |
| · | 3,572,635 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $2.88 per share, | |
| · | 715,111 shares of common stock reserved for issuance upon the exercise of outstanding prefunded warrants, at an exercise price of $0.0001 per share, | |
| · | 107,179 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $3.60 per share, | |
| · | 7,076 shares of common stock reserved for issuance upon the exercise of outstanding common stock warrants, at an exercise price of $1,060 per share, | |
| · | 2,419,557 shares reserved for issuance upon the conversion of our outstanding senior secured convertible notes and conversions payable related to the senior secured convertible notes, | |
| · | 525,000 shares of common stock reserved for future issuance under our new 2023 Equity Incentive Plan, which our board intends to adopt following the completion of this offering, and | |
| · | 460,358 shares of common stock reserved for issuance upon the exercise of the placement agent’s warrants issued in connection with this offering. |
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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 consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this prospectus. 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 year ended December 31, 2023 we generated $458,260 of total revenue, of which, product sales accounted for $397,886 and milestone and engineering revenue accounted for $60,374. As of December 31, 2023, we had an accumulated deficit of approximately $482,478,436.
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; |
| · | The substantial doubt about our ability to continue as a going concern due to our history of operating losses; |
| · | 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, and distributors, who deal directly with end users in our target markets; |
| · | Our ability to maintain the listing of our common stock on the Nasdaq Capital Market; |
| · | Our ability to maintain effective internal controls over financial reporting; |
| · | 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 discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”). 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. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the policies below as critical to our business operations and to the understanding of our financial results:
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Significant Accounting Policies
Inventories: All inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average method. Inventory balances are frequently evaluated to ensure they do not exceed net realizable value. The computation for net realizable value takes into account many factors, including expected demand, product life cycle and development plans, module efficiency, quality issues, obsolescence and others. Management's judgment is required to determine reserves for obsolete or excess inventory. If actual demand and market conditions are less favorable than those estimated by management, additional inventory write downs may be required.
Impairment of Long-lived assets: We analyze our long-lived assets (property, plant and equipment) and definitive-lived intangible assets (patents) for impairment, both individually and as a group, whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Events that might cause impairment would include significant current period operating or cash flow losses associated with the use of a long-lived asset or group of assets combined with a history of such losses, significant changes in the manner of use of assets and significant negative industry or economic trends. An undiscounted cash flow analysis is calculated to determine if an impairment exists. If an impairment is determined to exist, any related loss is calculated using the difference between the fair value and the carrying value of the assets.
Convertible Debt: The Company evaluates its convertible debt instruments to determine if there is an embedded derivative or other feature that requires bifurcation from the host contract. Please refer to Note 10 for further discussion on each convertible debt.
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 period. Any adjustments to fair value are treated as gains and losses in fair values of derivatives and are recorded on the Statement of Operations.
Revenue Recognition:
Product revenue. We recognize revenue for the sale of PV modules and other equipment sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For module and other equipment sales contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer.
Milestone and engineering revenue. Each milestone and engineering arrangement is a separate performance obligation. The transaction price is estimated using the most likely amount method and revenue is recognized as the performance obligation is satisfied through achieving manufacturing or cost targets and engineering targets.
Government contract revenue. Revenue from government research and development contracts is generated under terms that are cost plus fee or firm fixed price. We generally recognize this revenue over time using cost-based input methods, which recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract. In applying cost-based input methods of revenue recognition, we use the actual costs incurred relative to the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.
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Cost based input methods of revenue recognition are considered a faithful depiction of our efforts to satisfy long-term government research and development contracts and therefore reflect the performance obligations under such contracts. Costs incurred that do not contribute to satisfying our performance obligations are excluded from our input methods of revenue recognition as the amounts are not reflective of our transferring control under the contract. Costs incurred towards contract completion may include direct costs plus allowable indirect costs and an allocable portion of the fixed fee. If actual and estimated costs to complete a contract indicate a loss, provision is made currently for the loss anticipated on the contract.
Share-Based Compensation: The Company measures and recognizes compensation expense for all share-based payment awards made to employees, officers, directors, and consultants based on estimated fair values. The value of the portion of the award that is ultimately expected to vest, net of estimated forfeitures, is recognized as expense on a straight-line basis, over the requisite service period in the Company’s Statements of Operations. Share-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates the fair value of its restricted stock awards as its stock price on the grant date.
Research, Development and Manufacturing Operations Costs: Research, development and manufacturing operations expenses include: 1) technology development costs, which include expenses incurred in researching new technology, improving existing technology and performing federal government research and development contracts, 2) product development costs, which include expenses incurred in developing new products and lowering product design costs, and 3) pre-production and production costs, which include engineering efforts to improve production processes, material yields and equipment utilization, and manufacturing efforts to produce saleable product. Research, development and manufacturing operations costs are expensed as incurred, with the exception of costs related to inventoried raw materials, work-in-process and finished goods, which are expensed as Cost of revenue as products are sold.
Recently Issued Accounting Standards
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 that are smaller reporting 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 adopted ASU 2020-06 on January 1, 2023.
Management is evaluating the impact of other new pronouncements issued but not effective as of December 31, 2023. See footnote 2 for additional information.
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Results of Operations
Comparison of the Years Ended December 31, 2023 and 2022
| Year Ended December 31, | ||||||||||||
| 2023 | 2022 | $ Change | ||||||||||
| Revenues | ||||||||||||
| Product Revenue | 397,886 | 694,286 | (296,400 | ) | ||||||||
| Milestone and engineering | 60,374 | 528,500 | (468,126 | ) | ||||||||
| Total Revenues | 458,260 | 1,222,786 | (764,526 | ) | ||||||||
| Costs and Expenses | ||||||||||||
| Cost of Revenue | 1,892,341 | 2,011,459 | (119,118 | ) | ||||||||
| Research, development and manufacturing operations | 3,222,283 | 5,975,921 | (2,753,638 | ) | ||||||||
| Selling, general and administrative | 5,364,523 | 4,736,562 | 627,961 | |||||||||
| Share-based compensation | 2,243,445 | 5,478,734 | (3,235,289 | ) | ||||||||
| Depreciation and amortization | 95,238 | 75,645 | 19,593 | |||||||||
| Impairment loss | 3,283,715 | — | 3,283,715 | |||||||||
| Total Costs and Expenses | 16,101,545 | 18,278,321 | (2,176,776 | ) | ||||||||
| Loss From Operations | (15,643,285 | ) | (17,055,535 | ) | 1,412,250 | |||||||
| Other Income/(Expense) | ||||||||||||
| Other Income/(Expense), net | 747,739 | 33,100 | 714,639 | |||||||||
| Interest Expense | (2,174,118 | ) | (2,704,909 | ) | 530,791 | |||||||
| Total Other Income/(Expense) | (1,426,379 | ) | (2,671,809 | ) | 1,245,430 | |||||||
| Income/(Loss) on Equity Method Investment | (232 | ) | (27,361 | ) | 27,129 | |||||||
| Net Income/(Loss) | (17,069,896 | ) | (19,754,705 | ) | 2,684,809 | |||||||
Revenues. Total revenues decreased by $764,526, or by 63%, for the year ended December 31, 2023 when compared to the same period in 2022. The decrease in sales is due primarily to Milestone and engineering revenue from TubeSolar in 2022 which was not repeated in the current year. Additionally, in 2022, the Company had a large order from one customer that was not repeated in 2023. This is partially offset with revenue recognized from fulfilling a supply agreement under the Asset Purchase Agreement executed in April 2023.
Cost of revenues. Cost of revenues is comprised primarily of repair and maintenance, direct labor and overhead expenses. Our cost of revenues decreased by $119,118, or 6% for the year ended December 31, 2023 when compared to the same period in 2022. The decrease in cost of revenues is primarily due to the decrease in manufacturing costs as the Company redeployed it manufacturing facilities to a research facility in March 2023 and restarted limited manufacturing in late 2023. This is partially offset by increased expenses from our asset acquisition of Flisom's manufacturing equipment and employee contract. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to indirect labor and overhead included in the cost of revenues.
Research, development and manufacturing operations. 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. Research, development and manufacturing operations costs decreased by $2,753,638 or 46%, for the year ended December 31, 2023 when compared to the same period in 2022. This is primarily due to a decrease in preproduction and manufacturing activities, as the Company redeployed its Thornton manufacturing facility as a perovskite research facility in March 2023 and restarted limited manufacturing in late 2023.
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Selling, general and administrative. Selling, general and administrative expenses increased by $627,961, or 13%, for the year ended December 31, 2023 when compared to the same period in 2022. The increase in costs is due primarily to increased professional services and other administrative expenses. This increase is partially offset by one-time termination expense of approximately $500,000 and $157,000 recognized with the departure of our former CEO and CFO, respectively, in 2022.
Share-based compensation. Share-based compensation expense decreased by $3,235,289 or 59%, for the year ended December 31, 2023 when compared to the same period in 2022. The decrease is primarily due to the employment termination of former CEO in April 2023. The year ended 2022 expense also includes the immediate vesting of 20% of the former CEO's restricted stock units.
Impairment loss. The Company recognized an impairment loss of $3,283,715 primarily on the manufacturing assets purchased from Flisom during the year ended December 31, 2023. The Company did not recognize an impairment loss during the year ended December 31, 2022.
Other Income/(Expense). Other expense decreased by $1,245,430 or 47%, for the year ended December 31, 2023 when compared to the same period in 2022. The decline is due primarily to a one-time employment retention credit received and a gain on lease modification. Additionally, the Company recorded accelerating debt discount as interest expense in the prior year. With the adoption of ASU 2020-06, the accelerated debt discount is now recorded in stockholders' equity.
Net Income/(Loss). Our Net Loss was $17,069,896 for the year ended December 31, 2023, compared to Net Loss of $19,754,705 for the year ended December 31, 2022, a decrease of $2,684,809. The decrease is due to the reasons described above.
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 year ended December 31, 2023 the Company used $9,536,879 in cash for operations.
Additional projected revenues are not anticipated to result in a positive cash flow position for the year 2024 overall and, as of December 31, 2023, the Company has working capital deficit of $4,225,559. As such, additional financing will be required for the Company to reach a level of sufficient sales to achieve profitability.
The Company continues to accelerate sales and marketing efforts related to its specialty PV application strategies through expansion of its sales and distribution channels. The Company continues activities to secure 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.
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Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Following the receipt of $5.5 million in net proceeds from this offering, we believe our cash resources would be sufficient to fund our current operating plans into the third quarter of 2024. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect and need to raise additional funds sooner than we anticipate. If we are unable to raise additional capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.
Statements of Cash Flows Comparison of the Years Ended December 31, 2023 and 2022
For the year ended December 31, 2023, our cash used in operations was $9,536,879 compared to $10,506,575 for the year ended December 31, 2022, a decrease of $969,696. The decrease is primarily the result of the decrease in manufacturing, the redeployment of the Thornton manufacturing facility as a Perovskite research facility, and the restart of limited manufacturing. For the year ended December 31, 2023, cash used in investing activities was $3,877,366 compared to cash used in investing activities of $265,472 for the year ended December 31, 2022. This change was primarily the result of the purchase of Flisom's manufacturing equipment in Switzerland. During the year ended December 31, 2023, cash used in operations of $9,536,879 were primarily funded through $11,200,000 in proceeds from issuances of preferred and common stock during 2023 and $13,500,000 in proceeds from the issuance of convertible debt in 2022.
Off Balance Sheet Transactions
As of December 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Smaller Reporting Company Status
We are a “smaller reporting company” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirement that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
Although our reporting currency is the U.S. Dollar, we conduct business and incur costs in the local currencies of other countries in which we 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.
We currently do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates, although, we may do so in the future.
We hold no significant funds and have no future obligations denominated in foreign currencies as of the date of this prospectus.
Interest Rate Risk
Our exposure to market risks for changes in interest rates relates primarily to our cash equivalents and investment portfolio. As of the date of this prospectus, our cash equivalents consisted only of operating accounts held with financial institutions. From time to time, we may 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.
BUSINESS
Business Overview
We were incorporated on October 18, 2005 from the separation by ITN Energy Systems, Inc. (“ITN”) of its Advanced Photovoltaic Division and all of that division’s key personnel, core technologies, and certain trade secrets and royalty free licenses to use in connection with the manufacturing, developing marketing, and commercializing Copper-Indium-Gallium-diSelenide (“CIGS”) photovoltaic (“PV”) products.
We are an American solar technology company that manufactures and sells PV solar modules that are flexible, durable, and possess attractive power to weight and power to area performance. Our technology provides renewable power solutions to high-value production and specialty solar markets where traditional rigid solar panels are not suitable, including aerospace, agrivoltaics, and niche manufacturing/construction sectors. We operate in these target markets because they have highly specialized needs for power generation and offer attractive pricing due to the significant technological requirements.
We believe the value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in our target markets, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent designs and develops finished products for end users in these areas and collaborates with strategic partners to design and develop custom integrated solutions for products like airships and fixed-wing UAVs. Ascent sees significant overlap in the needs of end users across some of these markets and believes it can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
The integration of Ascent's solar modules into space, near space, and aeronautic vehicles with ultra-lightweight and flexible solar modules is an important market opportunity for the Company. Customers in this market have historically required a high level of durability, high voltage and conversion efficiency from solar module suppliers, and we believe our products are well suited to compete in this premium market.
Product Update
During 2023, the Company continued developing its zinc oxysulfide process. Zinc oxysulfide is used as a cadmium-free window layer to improve the efficiency of CIGS-based solar cells. The newly developed process will eliminate the usage of Cadmium Sulfide making it a more environmentally friendly process and product. Company continued to advance its CIGS-based solar cells resulting in more powerful solar cells. Specifically, the Company's Titan module, which the Company is planning to ship as early as Q2 2024, has 16.5W beginning of life output in AM0 conditions. Using an estimated degradation rate of 0.5% per year (crystalline degrades at an estimated rate of 1% per year), the Titan module has an expected end of life power density of 165w/m2 output. During 2023, the Company also achieved spaceflight heritage for its space PV array products. Beyond establishment of NASA Technology Readiness Level 9 (TRL9) for the Company’s products, this achievement also validates Ascent’s CIGS material, manufacturing, integration, and quality processes, representing a significant milestone for its space solutions.
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Due to the high durability enabled by the monolithic integration employed by our technology, the capability to customize modules into different form factors and what we believe is the industry leading light weight and flexibility provided by our modules, we believe that the potential applications for our products are extensive, including integrated solutions anywhere that may need power generation such as portable power solutions, vehicles in space or in flight or dual-use installations on agricultural land.
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.
Advantages of CIGS on a Flexible Plastic Substrate
Thin film PV solutions differ based on the type of semiconductor material chosen to act as a sunlight absorbing layer, and also on the type of substrate on which the sunlight absorbing layer is affixed. To the best of our knowledge, we believe we are the only company in the world currently focused on commercial scale production of PV modules using CIGS on a flexible, plastic substrate with monolithic integration. We utilize CIGS as a semiconductor material because, at the laboratory level, it has a higher demonstrated cell conversion efficiency than amorphous silicon (“a-Si”) and cadmium telluride (“CdTe”). We also believe CIGS offers other compelling advantages over both a-Si and CdTe, including:
| · | CIGS versus a-Si: Although a-Si, like CIGS, can be deposited on a flexible substrate, its conversion efficiency, which already is generally much lower than that of CIGS, measurably degrades when it is exposed to ultraviolet light, including natural sunlight. To mitigate such degradation, manufacturers of a-Si solar cells are required to implement measures that add cost and complexity to their manufacturing processes. |
| · | CIGS versus CdTe: Although CdTe modules have achieved conversion efficiencies that are generally comparable to CIGS in production, we believe CdTe has never been successfully applied to a flexible substrate on a commercial scale. We believe the use of CdTe on a rigid, transparent substrate, such as glass, is unsuitable for a number of our applications. We also believe CIGS can achieve higher conversion efficiencies than CdTe in production. |
We believe our choice of substrate material further differentiates us from other thin-film PV manufacturers. We believe the use of a flexible, lightweight, insulating substrate that is easier to install provides clear advantages for our target markets, especially where rigid substrates are unsuitable. We also believe our use of a flexible, plastic substrate provides us significant cost advantages because it enables us to employ monolithic integration techniques on larger components, which we believe are unavailable to manufacturers who use flexible, metal substrates. Accordingly, we are able to significantly reduce part count, thereby reducing the need for costly back end assembly of inter cell connections. As the only company, to our knowledge, focused on the commercial production of PV modules using CIGS on a flexible, plastic substrate with monolithic integration, we believe we have the opportunity to address the aerospace, agrivoltaics and other weight-sensitive markets with transformational high quality, value added product applications. It is these same unique features and our overall manufacturing process that enable us to produce extremely robust, light and flexible products.
Competitive Strengths
We believe we possess a number of competitive strengths that provide us with an advantage over our competitors.
| · | We are a pioneer in CIGS technology with a proprietary, flexible, lightweight, high efficiency PV thin film product that positions us to penetrate a wide range of attractive high value added markets such as aerospace and agrivoltaics. In addition, we have provided renewable power solutions for off grid, portable power, transportation, defense, and other markets. By applying CIGS to a flexible plastic substrate, we have developed a PV module that is efficient, lightweight and flexible; with the highest power-to-weight ratio in at-scale commercially available solar. The market for space and near-space solar power application solutions, agrivoltaics, portable power systems, and transportation integrated applications represent a significant premium market for the Company. Relative to our thin film competitors, we believe our advantage in thin film CIGS on plastic technology provides us with a superior product offering for these strategic market segments. |
| · | We have the ability to manufacture PV modules for different markets and for customized applications without altering our production processes. Our ability to produce PV modules in customized shapes and sizes, or in a variety of shapes and sizes simultaneously, without interrupting production flow, provides us with flexibility in addressing target markets and product applications, and allows us to respond quickly to changing market conditions. Many of our competitors are limited by their technology and/or their manufacturing processes to a more restricted set of product opportunities. |
| · | Our integrated, roll-to-roll manufacturing process and proprietary monolithic integration techniques provide us a potential cost advantage over our competitors. Historically, manufacturers have formed PV modules by manufacturing individual solar cells and then interconnecting them. Our large format, roll-to-roll manufacturing process allows for integrated continuous production. In addition, our proprietary monolithic integration techniques allow us to utilize laser patterning to create interconnects, thereby creating PV modules at the same time we create PV cells. In so doing, we are able to reduce or eliminate an entire back end processing step, saving time as well as labor and manufacturing costs relative to our competitors. |
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| · | Our lightweight, powerful, and durable solar panels provide a performance advantage over our competitors. For applications where a premium is placed on the weight and profile of the product, our ability to integrate our PV modules into portable packages offers the customer a lightweight and durable solution. |
| · | Our proven research and development capabilities position us to continue the development of next generation PV modules and technologies. Our ability to produce CIGS based PV modules on a flexible plastic substrate is the result of a concerted research and development effort that began more than 20 years ago. We continue to pursue research and development in an effort to drive efficiency improvements in our current PV modules and to work toward next generation technologies and additional applications. |
| · | Our manufacturing process can be differentiated into two distinct functions; a front-end module manufacturing process and a back-end packaging process. Our ability to produce finished unpackaged rolls of CIGS material for shipment worldwide to customers for encapsulation and integration into various products enhances our ability to work with partners internationally and domestically. |
Markets and Marketing Strategy
We target high-value specialty solar markets including aerospace and agrivoltaics applications. This strategy enables us to fully leverage the unique advantages of our technology, including flexibility, durability and attractive power to weight and power to area performance. It further enables us to offer unique, differentiated solutions in large markets with less competition, and more attractive pricing.
We believe the value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these markets, 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 airships and fixed-wing UAVs. Ascent sees significant overlap in the needs of end users across some of these verticals and believes it can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
Competition
We believe our thin film, monolithically integrated CIGS technology enables us to deliver sleek, lightweight, rugged, high performance solutions to serve these markets as competitors from other thin film and c-Si companies emerge. The landscape of thin film manufacturers encompasses a broad mix of technology platforms at various stages of development and consists of a number of medium and small companies.
The market for traditional, grid connected PV products is dominated by large manufacturers of c-Si technology, although thin film technology on glass has begun to emerge among the major players. We anticipate that while these large manufacturers may continue to dominate the market with their silicon-based products, thin film manufacturers will likely capture an increasingly larger share of the market, as is evident from the success of First Solar (CdTe).
We believe that our modules offer unique advantages. Their flexibility, low areal density (mass per unit area), and high specific power (power per unit mass) enable use on weight-sensitive applications, such as portable power, conformal aircraft surfaces, high altitude long endurance (HALE) fixed wing and lighter than air (LTA) vehicles, and space applications that are unsuitable for glass-based modules. Innovative product design, customer focused development, and our rapid prototyping capability yield modules that could be integrated into virtually any product to create a source of renewable energy. Whether compared to glass based or other flexible modules, our products offer competitive advantages making them unique in comparison to competing products. We consider PowerFilm Solar, Global Solar, and MiaSolé, to be our closest competitors in terms of technology in the specialty PV market.
Research and Development and Intellectual Property
Our technology was initially developed at ITN beginning in 1994. In early 2006, ITN assigned to us certain CIGS PV-specific technologies, and granted to us a perpetual, exclusive, royalty free, worldwide license to use these technologies in connection with the manufacture, development, marketing and commercialization of CIGS PV to produce solar power. In addition, certain of ITN’s existing and future proprietary process and control technologies, although nonspecific to CIGS PV, were assigned to us. ITN retained the right to conduct research and development activities in connection with PV materials, and we agreed to grant a license back to ITN for improvements to the licensed technologies and intellectual property outside of the CIGS PV field.
We intend to continue to invest in research and development in order to provide near term improvements to our manufacturing process (including to reduce costs) and products (including improve technology to increase power), as well as to identify next generation technologies relevant to both our existing and potential new markets. During the years ended December 31, 2023 and 2022 we incurred approximately $3,222,283 and $5,975,921, respectively, in research, development and manufacturing operations costs, which include research and development incurred in customizing products for customers, as well as manufacturing costs incurred while developing our product lines and manufacturing process. We also plan to continue to take advantage of research and development contracts to fund a portion of this development.
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We protect our intellectual property through a combination of trade secrets and patent protections. We own the following patents:
Issued Patents
| 1 | US Patent No. 9,640,692 entitled "Flexible Photovoltaic Array with Integrated Wiring and Control Circuitry, and Associated Methods" (issued October 12, 2010) (co-owned with PermaCity Corporation) | |
| 2 | US Patent No. 8,426,725 entitled “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (issued April 23, 2013) | |
| 3 | US Patent No. 8,465,589 entitled “Machine and Process for Sequential Multi-Sublayer Deposition of Copper Indium Gallium Diselenide Compound Semiconductors” (issued June 18, 2013) | |
| 4 | US Patent No. D697,502 entitled "Mobile Electronic Device Case” (issued January 14, 2014) | |
| 5 | US Patent No. 8,648,253 entitled “Machine and Process for Continuous, Sequential, Deposition of Semiconductor Solar Absorbers Having Variable Semiconductor Composition Deposited in Multiple Sublayers” (issued February 11, 2014) | |
| 6 | US Patent No. 9,538,671 entitled "System For Housing And Powering A Battery-Operated Device And Associated Methods" (issued January 3, 2017) | |
| 7 | US Patent No. D781,228 entitled "Pocket-Sized Photovoltaic Based Fully Integrated Portable Power System" (issued March 14, 2017) | |
| 8 | US Patent No. 9,601,650 entitled "Machine and Process for Continuous, Sequential, Deposition of Semiconductor Solar Absorbers Having Variable Semiconductor Composition Deposited in Multiple Sublayers" (issued March 21, 2017) | |
| 9 | US Patent No. 9,634,175 entitled "Systems and Methods for Thermally Managing High-Temperature Processes on Temperature Sensitive Substrates" (issued April 25, 2017) | |
| 10 | US Patent No. 9,640,706 entitled "Hybrid Multi-Junction Photovoltaic Cells and Associated Methods" (issued May 2, 2017) | |
| 11 | US Patent No. 9,640,692 entitled "Flexible Photovoltaic Array with Integrated Wiring and Control Circuitry, and Associated Methods" (issued May 2, 2017) | |
| 12 | US Patent No. 9,653,635 entitled Flexible High-Voltage Adaptable Current Photovoltaic Modules and Associated Methods (issued May 16, 2017) | |
| 13 | US Patent No. 9,780,242 entitled “Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates” (issued October 3, 2017) | |
| 14 | US Patent No. 9,929,306 entitled "Array of Monolithically Integrated Thin Film Photovoltaic Cells and Associated Methods" (issued March 27, 2018) |
Suppliers
We rely on several unaffiliated companies to supply certain raw materials used during the fabrication of our PV modules and PV integrated electronics. We acquire these materials on a purchase order basis and do not have long term purchase quantity commitments with the suppliers, although we may enter into such contracts in the future. We currently acquire all of our high temperature plastic from one supplier, although alternative suppliers of similar materials exist. We purchase component molybdenum, copper, indium, gallium, selenium and indium tin oxides from a variety of suppliers. We also currently are in the process of identifying and negotiating arrangements with alternative suppliers of materials in the United States and Asia.
The manufacturing equipment and tools used in our production process have been purchased from various suppliers in Europe, the United States and Asia. Although we have had good relations with our existing equipment and tools suppliers, we monitor and explore opportunities for developing alternative sources to drive our manufacturing costs down.
Employees
As of March 27, 2024, we had 16 full-time and 2 part-time employees.
Company History
We were formed in October 2005 from the separation by ITN of its Advanced Photovoltaic Division and all of that division’s key personnel and core technologies. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin film, PV, battery, fuel cell and nanotechnologies. Through its work on research and development contracts for private and government entities, ITN developed proprietary processing and manufacturing know-how applicable to PV products generally, and to CIGS PV products in particular. Our Company was established by ITN to commercialize its investment in CIGS PV technologies. In January 2006, ITN assigned to us all its CIGS PV technologies and trade secrets and granted to us a perpetual, exclusive, royalty free worldwide license to use certain of ITN’s proprietary process, control and design technologies in the production of CIGS PV modules. Upon receipt of the necessary government approvals in January 2007, ITN assigned government funded research and development contracts to us and also transferred the key personnel working on the contracts to us.
PROPERTY
Our principal business office and manufacturing facility is located in a leased space at 12300 Grant Street, Thornton, Colorado 80241. We have approximately 25,000 square feet of fully equipped office space and 50,000 square feet of fully equipped manufacturing space. We consider our office space adequate for our current operations.
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LEGAL PROCEEDINGS
On August 15, 2023, H.C. Wainwright & Co., LLC (“Wainwright”) filed an action against the Company in the New York State Supreme Court in New York County. The complaint alleges a breach by the Company of an investment banking engagement letter entered into in October 2021. The Wainwright engagement letter expired in April 2022 without any financing transaction having been completed. The complaint claims that Wainright is entitled, under a “tail provision” to an 8% fee and 7% warrant coverage on the Company’s $15 million secured convertible note financing. The complaint seeks damages of $1.2 million, 2,169.5 common stock warrants with a per share exercise price of $605, plus attorney fees.
While it is too early to predict the outcome of this legal proceeding or whether an adverse result would have a material adverse impact on our operations or financial position, we believe we have meritorious defenses and intend to defend this legal matter vigorously.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers, directors, their ages and positions with us as of March 27, 2024, are as follows:
| Name | Age | Position | ||
| Paul Warley | 62 | President and Chief Executive Officer, Director | ||
| Jin Jo | 46 | Chief Financial Officer | ||
| Bobby Gulati | 59 | Chief Operating Officer | ||
| David Peterson | 54 | Chairman of the Board, Director | ||
| Forrest Reynolds | 53 | Director | ||
| Louis Berezovsky | 58 | Director | ||
| Gregory Thompson | 68 | Director |
Paul Warley has been Chief Executive Officer of the Company since May 2, 2023. Prior to then, Mr. Warley served as our Chief Financial Officer from December 2022 to May 2023. Mr. Warley was elected to our Board in December 2023. Mr. Warley has significant experience in corporate turnarounds, restructuring, cross-border trade and capital advisory work. From 2015 to 2022, Mr. Warley was president of Warley & Company LLC, a strategic advisory firm providing executive management, capital advisory and M&A services to middle-market companies in the service, construction, technology, oil & gas, clean energy, food, retail and green-building sectors. While at Warley & Company, from 2018 to 2019 Mr. Warley was engaged as Chief Executive Officer and CFO of 360Imaging, a provider of products and services for implant surgery and digital dentistry. From 2011 to 2015, Mr. Warley served clients in the alternative energy industry as a managing director and additionally was Chief Compliance Officer with Deloitte Corporate Finance. From 1997 to 2011, Mr. Warley was Managing Director and Region Manager for GE Capital. From 1984 to 1997, Mr. Warley was with Bank of America and Bankers Trust as a Senior Vice President. Mr. Warley holds the Financial Industry Regulatory Authority Series 7, 24 and 63 licenses. He earned his B.S. degree in Business Administration from The Citadel (The Military College of South Carolina) and served in the U.S. Army, attaining the rank of Captain. While at Warley & Company LLC, Mr. Warley provided corporate finance consulting services to BD1 Investment Holding LLC, one of the Company’s largest stockholder. We believe Mr. Warley is well-qualified to serve as our CEO due to his business experience.
Jin Jo has been Chief Financial Officer of the Company since May 2023. Ms. Jo joined the Company in June 2021 as Financial Controller. Ms. Jo has over 20 years in accounting. From 2015 to 2021, Ms. Jo was the head of technical accounting of Empower Retirement, a financial services company, where her primary focus was accounting research for complex new products, investments and transactions, and new accounting standards implementation on International Financial Reporting Standards, US GAAP and insurance Statutory Accounting Principles. From 2011 to 2015, Ms. Jo was an Inspection Specialist at the Public Company Accounting Oversight Board where she assessed auditor compliance with audit professional standards. Ms. Jo started her career in public accounting, spending 11years in the audit and assurance practice serving both public and private companies.
Ms. Jo is a certified public accountant in the state of Colorado and earned her B.S. degree in Business Administration from the University of Colorado, Boulder. We believe Ms. Jo is well-qualified to serve as our CFO due to her business experience.
Bobby Gulati has been Chief Operating Officer since May 2023. He has over 30 years of executive leadership experience in engineering and manufacturing roles. Mr. Gulati joined Ascent in February 2012 as Head Equipment Engineer. In March 2014, he was promoted to Director of Equipment Engineering with emphasis on International Business Development. In 2020, Mr. Gulati was promoted to Chief Information Officer.
From 2010 to 2012 Mr. Gulati was the Director of Equipment Engineering for Twin Creeks Technologies, an amorphous silicon solar manufacturing company, and was responsible for the operations of the 5MW solar cell manufacturing facility in Senatobia, Mississippi. From 2001 to 2010, Mr. Gulati was the co-founder and President of TriStar Systems, a manufacturer of automated manufacturing and assembly equipment for the solar, aerospace and disk drive industries. From 1992 to 2000, Mr. Gulati was the co-founder and Chief Operating Officer of the publicly traded company NexStar Automation, whose focus was designing and building automated production equipment for the semiconductor and medical disposable industries. Mr. Gulati earned his B.S. degree in Electrical Engineering with a minor in Computer Science and Robotics from the University of Colorado, Denver.
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David Peterson has served on our Board since December 2020. Mr. Peterson has over 25 years of business management experience, including 9 years as a private equity investor, 6 years as a manager at an engineering consulting firm, and over 20 years of board experience. From April 2015 to present, Mr. Peterson has worked for EPD Consultants, Inc., a privately held engineering firm headquartered in Carson, California, where he serves as Senior Project Manager. From 2010 to 2015, Mr. Peterson was President and Co-Founder of Great Circle Industries, Inc., a water recycling company in southern California. His past experience includes being a board member at AIR-serv, LLC, a tire inflation vending machine manufacturer, where Mr. Peterson managed the acquisition process, including obtaining expansion of the company’s credit facility, as that company completed 10 acquisitions and grew from $10 million of EBITDA to $20 million of EBITDA in the year prior to its sale for $151 million to WindPoint Partners. Mr. Peterson has an MBA degree from the Marshall School of Business at the University of Southern California, and a B.A. from the University of California, Santa Cruz. Mr. Peterson and Michael Gilbreth, our former CFO, are cousins. We believe Mr. Peterson is well-qualified to serve as a director due to his extensive management and board experience.
Forrest Reynolds has served on our Board since September 2022. He has over 28 years of business and management experience and is currently the Managing Partner of CalTex Capital, LLC, a privately held investment firm, as well as a Managing Director of The Vortex Group Family Office, LLC, a private family office, both of which are based in Texas. Previously, Mr. Reynolds served as the Chief Restructuring Officer for Centaur Gaming, LLC, a gaming development company located in Indianapolis, Indiana. In this capacity, Mr. Reynolds managed a $1.0 billion Chapter 11 bankruptcy reorganization for the company. Prior to that, Mr. Reynolds worked in the investment banking industry for over 14 years holding various positions with several multinational investment banks including Credit Suisse, BT Alex Brown (later Deutsche Bank) and UBS. Mr. Reynolds sits on the board of several private companies and is actively involved with several charitable organizations. Mr. Reynolds graduated from The University of Texas at Austin where he received a B.B.A. in Finance and a B.A. in Economics. We believe Mr. Reynolds is well-qualified to serve as a director due to his knowledge and business experience.
Louis Berezovsky has served on our Board since September 2022. He joined Eagle Infrastructure Services in July 2013 and leads the Finance and Accounting, M&A, Human Resources, Legal and IT functions. He has more than 30 years of experience in senior financial management positions across a variety of industries including 25 years of working in private equity sponsored portfolio companies. His accomplishments include the completion more than 60 acquisitions as well as multiple recapitalizations and successful sale processes. Prior to joining Eagle, Mr. Berezovsky previously served as Executive Vice President and Chief Financial Officer of ABRA Auto Body and Glass, Chief Financial Officer of ConvergeOne, and Chief Financial Officer of AIR-serv.
After receiving his B.S. in Accounting from the University of Minnesota, Carlson School of Management, he began his career at a Minneapolis based CPA firm. He is a Certified Management Accountant (CMA). He has also served as a member of the Board of Directors and as the Chairman of the Finance Committee for the Better Business Bureau of Minnesota and North Dakota since 2012. We believe Mr. Berezovsky is well-qualified to serve as a director due to his knowledge and business experience.
Gregory Thompson has served on our Board since April 2023. He is a four-time public company CFO with extensive global experience across several industries including technology, manufacturing, chemicals, building products, medical equipment, software and services, and public accounting. From December 2016 through June 2021, Mr. Thompson was EVP and CFO of KEMET Corporation (NYSE: KEM), a manufacturer of a broad selection of capacitor technologies, and a variety of other passive electronic components. In June 2020, KEMET was acquired by Yageo Corporation for approximately $1.8 billion. From 2008 to 2016, Mr. Thompson was EVP and CFO of Axiall Corporation (NYSE: AXLL), a manufacturer and marketer of chlorovinyls and aromatics (acetone, cumene, phenol). Axiall was sold to Westlake Chemical Corporation in late 2016. Prior to Axiall, Mr. Thompson was CFO of medical equipment manufacturer Invacare Corporation (NYSE: IVC) from 2002 to 2008, CFO of Sensormatic Electronics Corporation from 2000 to 2002, and Corporate Controller of Sensormatic from 1997 to 2000. Previously at Wang Laboratories, Inc. Mr. Thompson served as Vice President and Corporate Controller from 1994 to 1997 and Assistant controller from 1990 to 1994. He began his career at Price Waterhouse and Coopers & Lybrand where he spent 13 years serving international clients in industries including chemicals, construction, distribution, manufacturing, metals, retail, and technology.
Mr. Thompson earned a Bachelor of Science, Accounting from Virginia Tech in 1977. He is a Certified Public Accountant, and a Member of the American Institute of Certified Public Accountants. We believe Mr. Thompson is well-qualified to serve as a director due to his knowledge and business experience.
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CORPORATE GOVERNANCE
Overview
Our Bylaws provide that the size of our Board of Directors is to be determined from time to time by resolution of the Board of Directors, but shall consist of at least two and no more than nine members. Our Board of Directors currently consists of four members. The Board has determined that the following directors are “independent” as required by the listing standards of the Nasdaq Capital Market and by our corporate governance guidelines: Mr. Peterson, Mr. Reynolds, Mr. Berezovsky and Mr. Thompson.
Our Certificate of Incorporation provides that the Board of Directors will be divided into three classes. Our Class 1 directors are Forrest Reynolds and Louis Berezovsky. Our Class 2 directors are Paul Warley and Gregory Thompson. Our Class 3 director is David Peterson.
Board Leadership Structure and Role in Risk Oversight
Our corporate governance guidelines provide that unless the board chair is an independent director, the board shall appoint a Lead Independent Director. The Lead Independent Director chairs the executive sessions of the independent directors, coordinates the activities of the other independent directors and performs such other duties as deemed necessary by the board from time to time. Our Chairman is independent and as such, no Lead Independent Director has been appointed.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of risks we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this, the Chairman of the Board meets regularly with management to discuss strategy and the risks we face. In addition, the Audit Committee regularly monitors our enterprise risk, including financial risks, through reports from management. Senior management attends the Board meetings and is available to address any questions or concerns raised by the Board on risk management and any other matters. The Chairman of the Board and independent members of the Board work together to provide strong, independent oversight of our management and affairs through the Board’s standing committees and, when necessary, executive sessions of the independent directors.
Committees of the Board of Directors
Our Board has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. Each committee operates pursuant to a charter. The charters of the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee can be found on our website www.ascentsolar.com.
Audit Committee. Our Audit Committee oversees our accounting and financial reporting processes, internal systems of accounting and financial controls, relationships with independent auditors, and audits of financial statements. Specific responsibilities include the following:
| · | selecting, hiring and terminating our independent auditors; |
| · | evaluating the qualifications, independence and performance of our independent auditors; |
| · | approving the audit and non-audit services to be performed by our independent auditors; |
| · | reviewing the design, implementation, adequacy and effectiveness of our internal controls and critical accounting policies; |
| · | reviewing and monitoring the enterprise risk management process; |
| · | overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; |
| · | reviewing, with management and our independent auditors, any earnings announcements and other public announcements regarding our results of operations; and |
| · | preparing the report that the SEC requires in our annual proxy statement. |
Our Audit Committee is comprised of Mr. Berezovsky, Mr. Thompson and Mr. Reynolds. Mr. Berezovsky serves as Chairman of the Audit Committee. The Board has determined that all members of the Audit Committee are independent under the rules of the Nasdaq Capital Market, and that Mr. Berezovsky qualifies as an “audit committee financial expert,” as defined by the rules of the SEC.
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Compensation Committee. Our Compensation Committee assists our Board in determining the development plans and compensation of our officers, directors and employees. Specific responsibilities include the following:
| · | approving the compensation and benefits of our executive officers; |
| · | reviewing the performance objectives and actual performance of our officers; and |
| · | administering our stock option and other equity compensation plans. |
The Compensation Committee reviews all components of compensation including base salary, bonus, equity compensation, benefits and other perquisites. In addition to reviewing competitive market values, the Compensation Committee also examines the total compensation mix, pay-for-performance relationship and how all elements, in the aggregate, comprise the executives’ total compensation package. The CEO makes recommendations to the Compensation Committee from time to time regarding the appropriate mix and level of compensation for other officers. Those recommendations consider the objectives of our compensation philosophy and the range of compensation programs authorized by the Compensation Committee. The Compensation Committee may determine director compensation by reviewing peer group data. Although the Compensation Committee has the authority to retain outside third parties, it does not currently utilize any outside consultants. The Compensation Committee may delegate certain of its responsibilities, as it deems appropriate, to other committees or officers.
Our Compensation Committee is comprised of Mr. Berezovsky, Mr. Thompson and Mr. Reynolds. Mr. Reynolds serves as Chairman of the Compensation Committee.
Our Board has determined that all members of the Compensation Committee are independent under the rules of the Nasdaq Capital Market.
Nominating and Governance Committee. Our Nominating and Governance Committee assists our Board by identifying and recommending individuals qualified to become members of our Board, reviewing correspondence from our stockholders, and establishing, evaluating and overseeing our corporate governance guidelines. Specific responsibilities include the following:
| · | evaluating the composition, size and governance of our Board and its committees and making recommendations regarding future planning and the appointment of directors to our committees; |
| · | establishing a policy for considering stockholder nominees for election to our Board; and |
| · | evaluating and recommending candidates for election to our Board. |
Our Nominating and Governance Committee is comprised of Mr. Berezovsky, Mr. Thompson and Mr. Reynolds. Mr. Thompson serves as Chairman of our Nominating and Governance Committee. Our Board has determined that all members of the Nominating and Governance Committee are independent under the rules of Nasdaq Capital Market.
When considering potential director candidates for nomination or election, the following characteristics are considered in accordance with our Nominating and Governance Committee Charter:
| · | high standard of personal and professional ethics, integrity and values; |
| · | training, experience and ability at making and overseeing policy in business, government and/or education sectors; |
| · | willingness and ability to keep an open mind when considering matters affecting interests of us and our constituents; |
| · | willingness and ability to devote the time and effort required to effectively fulfill the duties and responsibilities related to the Board and its committees; |
| · | willingness and ability to serve on the Board for multiple terms, if nominated and elected, to enable development of a deeper understanding of our business affairs; |
| · | willingness not to engage in activities or interests that may create a conflict of interest with a director’s responsibilities and duties to us and our constituents; and |
| · | willingness to act in the best interests of us and our constituents, and objectively assess Board, committee and management performances. |
In addition, in order to maintain an effective mix of skills and backgrounds among the members of our Board, the following characteristics also may be considered when filling vacancies or identifying candidates:
| · | diversity (e.g., age, geography, professional, other); |
| · | professional experience; |
| · | industry knowledge (e.g., relevant industry or trade association participation); |
| · | skills and expertise (e.g., accounting or financial); |
| · | leadership qualities; |
| · | public company board and committee experience; |
| · | non-business-related activities and experience (e.g., academic, civic, public interest); |
| · | continuity (including succession planning); |
| · | size of the Board; |
| · | number and type of committees, and committee sizes; and |
| · | legal and other applicable requirements and recommendations, and other corporate governance-related guidance regarding Board and committee composition. |
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The Nominating and Governance Committee will consider candidates recommended by stockholders who follow the nomination procedures in our bylaws. The Nominating and Governance Committee does not have a formal policy with respect to diversity; however, as noted above, the Board and the Nominating and Governance Committee believe that it is essential that Board members represent diverse viewpoints.
Number of Meetings
The Board held a total of 18 meetings in 2023. Our Audit Committee held four meetings, our Compensation Committee held one meeting, and our Nominating and Governance Committee held one meeting in 2023. Each director attended at least 75% of the aggregate of the total number of meetings of the Board and the Board committees on which he served.
Board Member Attendance at Annual Stockholder Meetings
Although we do not have a formal policy regarding director attendance at annual stockholder meetings, directors are encouraged to attend these annual meetings absent extenuating circumstances.
Stockholder Nominations
In accordance with our Bylaws, a stockholder wishing to nominate a director for election at an annual or special meeting of stockholders must timely submit a written proposal of nomination to us at our executive offices. To be timely, a written proposal of nomination for an annual meeting of stockholders must be received at least 90 calendar days but no more than 120 calendar days before the first anniversary of the date on which we held our annual meeting of stockholders in the immediately preceding year; provided, however, that in the event that the date of the annual meeting is advanced or delayed more than 30 calendar days from the anniversary of the annual meeting of stockholders in the immediately preceding year, the written proposal must be received: (i) at least 90 calendar days but no more than 120 calendar days prior to the date of the annual meeting; or (ii) no more than 10 days after the date we first publicly announce the date of the annual meeting. A written proposal of nomination for a special meeting of stockholders must be received no earlier than 120 calendar days prior to the date of the special meeting nor any later than the later of: (i) 90 calendar days prior to the date of the special meeting; and (ii) 10 days after the date we first publicly announce the date of the special meeting.
Each written proposal for a nominee must contain: (i) the name, age, business address and telephone number, and residence address and telephone number of the nominee; (ii) the current principal occupation or employment of each nominee, and the principal occupation or employment of each nominee for the prior ten (10) years; (iii) a complete list of companies, whether publicly traded or privately held, on which the nominee serves (or, during any of the prior ten (10) years, has served) as a member of the board of directors; (iv) the number of shares of our common stock that are owned of record and beneficially by each nominee; (v) a statement whether the nominee, if elected, intends to tender, promptly following such person’s failure to receive the required vote for election or reelection at the next meeting at which the nominee would face election or reelection, an irrevocable resignation effective upon acceptance of such resignation by the Board; (vi) a completed and signed questionnaire, representation and agreement relating to voting agreements or commitments to which the nominee is a party; (vii) other information concerning the nominee that would be required in a proxy statement soliciting the nominee’s election; and (viii) information about, and representations from, the stockholder making the nomination.
A stockholder interested in submitting a nominee for election to the Board of Directors should refer to our Bylaws for additional requirements. Upon receipt of a written proposal of nomination meeting these requirements, the Nominating and Governance Committee of the Board will evaluate the nominee in accordance with its charter and the characteristics listed above.
Compensation Committee Interlocks and Insider Participation
None of the current members of our compensation committee has ever been an executive officer or employee of ours. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
Director Compensation
Currently, each of our non-executive directors, consisting of Mr. Berezovsky, Mr. Thompson, Mr. Peterson and Mr. Reynolds, receive an annual retainer of $55,000 in cash. Additionally, in 2023, Mr. Berezovsky, Mr. Michael French (resigned from the Board of Directors on March 18, 2023) and Mr. Reynolds were granted in 2022 and paid in 2023 a one-time cash fee of $20,000, $20,000 and $25,000, respectively. Mr. Berezovsky, Mr. Thompson, Mr. Peterson and Mr. Reynolds received an equity grant of 25,000, 25,000, 30,000, and 25,000 restricted stock units (“RSUs)”, respectively, in January, 2024. A third of these RSUs will vest on March 31, 2024, a third will vest on January 1, 2025 and the remaining third will vest on January 1, 2026. We do not provide any perquisites to directors but will reimburse all directors for expenses incurred in physically attending meetings or performing their duties as directors.
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The following Director Compensation Table summarizes the compensation of each of our non-employee directors for services rendered to us during the year ended December 31, 2023:
2023 Director Compensation Table
| Name | Fees
Earned or Paid in Cash ($) | Stock
Awards ($)(1) | Option
Awards ($)(1) | All
Other Compensation ($)(1) | Total ($) | |||||||||||||||
| Forrest Reynolds | 54,700 | — | — | — | 54,700 | |||||||||||||||
| Louis Berezovsky | 54,700 | — | — | — | 54,700 | |||||||||||||||
| Gregory Thompson (2) | 40,200 | — | — | — | 40,200 | |||||||||||||||
| David Peterson (3) | 26,400 | — | — | — | 26,400 | |||||||||||||||
| Michael French (4) | 12,700 | — | — | — | 12,700 | |||||||||||||||
| Paul Warley (5) | — | — | — | — | — | |||||||||||||||
| (1) | None. |
| (2) | In April, 2023, Gregory Thompson was appointed to the Company’s board of directors. | |
| (3) | In August, 2023, the Company’s board of directors concluded that David Peterson is an independent member in accordance with the Nasdaq listing rules and the Company commenced paying him an annual retainer of $55,000, including a catch up retainer payment for services performed in July. |
| (4) | In March, 2023, Michael French resigned from the Company’s board of directors. His resignation was not the result of any dispute or disagreement with the Company on any matter relating to the operations, policies or practices of the Company. |
| (5) | Paul Warley was elected to the Company’s board of directors in December, 2023. As a non-independent director, he will not receive compensation for his board service. |
In addition to the fees listed above, we reimburse the directors for travel expenses submitted to us related to their attendance at meetings of the Board or its committees. The directors did not receive any other compensation or personal benefits.
Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and other senior finance and accounting staff. The code is designed to, among other things, deter wrongdoing and to promote the honest and ethical conduct of our officers and employees. The text of our code of ethics can be found on our Internet website at www.ascentsolar.com. If we effect an amendment to, or waiver from, a provision of our code of ethics, we intend to satisfy our disclosure requirements by posting a description of such amendment or waiver on that Internet website or via a current report on Form 8-K.
Policy on Trading, Pledging and Hedging of Company Stock
Certain transactions in our securities (such as purchases and sales of publicly traded put and call options, and short sales) create a heightened compliance risk or could create the appearance of misalignment between management and stockholders. In addition, securities held in a margin account or pledged as collateral may be sold without consent if the owner fails to meet a margin call or defaults on the loan, thus creating the risk that a sale may occur at a time when an officer or director is aware of material, non-public information or otherwise is not permitted to trade in Company securities. Our insider trading policy expressly prohibits derivative transactions of our stock by our executive officers and directors.
Rule 10b5-1 Sales Plans
Our policy governing transactions in our securities by directors, officers, and employees permits our officers, directors, and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Exchange Act. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place and can only put such plans into place while the individual is not in possession of material non-public information. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company. During 2023, none of our directors or executive officers had a Rule 10b5-1 in effect.
Communication with the Board of Directors
Stockholders may communicate with the Board by sending correspondence to our Chairman, c/o the Corporate Secretary, at our corporate address, 12300 Grant Street, Suite 160, Thornton, CO 80241. It is our practice to forward all such correspondence to our Chairman, who is responsible for determining whether to relay the correspondence to the other members of the Board.
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EXECUTIVE COMPENSATION
We have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act.
This section provides an overview of the compensation awarded to, earned by, or paid to each individual who served as our principal executive officer during 2023, and up to two of our next most highly compensated executive officers in respect of their service to our Company for 2023. Our named executive officers, or the Named Executive Officers, for the year ended December 31, 2023, are:
| · | Paul Warley, our CEO at December 31, 2023; |
| · | Jeffrey Max, our former CEO; |
| · | Jin Jo, our CFO at December 31, 2023; and |
| · | Bobby Gulati, our COO at December 31, 2023 |
The following Summary Compensation Table sets forth certain information regarding the compensation of our Named Executive Officers for services rendered in all capacities to us during the years ended December 31, 2023 and 2022.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) |
Option
Awards ($) |
All
Other Comp ($) |
Total ($) | |||||||||||||||||||||
| Paul Warley - Chief Executive Officer (1) |
2023 | 384,600 | 100,000 | — | — | — | 484,600 | |||||||||||||||||||||
| 2022 | 17,300 | — | 2,086,000 | — | — | 2,103,300 | ||||||||||||||||||||||
| Jeffrey Max - Former Chief Executive Officer (2) |
2023 | 317,500 | — | — | — | 1,600 | (3) | 319,100 | ||||||||||||||||||||
| 2022 | 227,400 | — | 18,980,800 | — | 21,500 | (4) | 19,229,700 | |||||||||||||||||||||
| Jin Jo - Chief Financial Officer (5) |
2023 | 198,000 | 45,000 | — | — | — | 243,000 | |||||||||||||||||||||
| Bobby Gulati - Chief Operating Officer (6) |
2023 | 189,200 | 25,000 | — | — | — | 214,200 | |||||||||||||||||||||
| (1) | Mr. Warley joined the Company in December 2022 as the Company’s CFO and was appointed CEO in May 2023. Mr. Warley's original CFO employment agreement provided for annual base salary of $305,000, which increased to $350,000 in December 2022, after the Company raised a minimum $10 million of new capital. Mr.Warley’s May 2023 CEO employment agreement provides for an annual base salary of$400,000 and a one-time bonus of $100,000. In connection with Mr. Warley’s hiring in December 2022 as the Company’s CFO, Mr. Warley was granted an inducement grant of 3,500 RSUs for an aggregate of 3,500 shares of Ascent’s common stock valued at approximately $2,086,000 on grant date. 20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs vests in equal monthly increments over the next thirty-six months.
| |
| (2) | Mr. Max joined the Company in September 2022. Mr. Max's employment agreement provides an annual base salary of $850,000 of which, $500,000 was initially deferred and accrued interest at an annual rate of 4% until the Company raised a minimum $10 million of new capital. Upon completion of the capital raise, Mr. Max received his deferred compensation, including approximately $800 of interest resulting in salary of approximately $227,400 in 2022. Mr. Max was also granted an inducement grant of RSUs for an aggregate of 6,284 shares of Ascent’s common stock valued at approximately $18,980,000 on grant date. 20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs vests in equal monthly increments over the next thirty-six months. On April 26, 2023, the Company’s board terminated Mr. Max as the Company’s CEO.
| |
| (3) | The Company paid $1,600 as a car allowance to Mr. Max. |
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| (4) | The Company also paid $20,200 to Mr. Max's attorneys for fees incurred in connection with the drafting, negotiation and execution of his employment agreement and approximately $1,300 as a car allowance. |
| (5) | Ms. Jo joined the Company in June 2021 as the Company’s Financial Controller and was appointed CFO in May 2023. Ms. Jo's employment agreement provides an annual base salary of $225,000 and a one-time bonus of $45,000. |
| (6) | Mr. Gulati joined the Company in February 2012 and was appointed COO in May 2023. Mr. Gulati’s employment agreement provides an annual base salary of $225,000 and a one-time bonus of $25,000. |
Executive Employment Agreements
Paul Warley
On December 12, 2022, we entered into an CFO employment agreement with Mr. Warley. The CFO employment agreement provides for a term through December 31, 2025, subject to earlier termination by the Company and Mr. Warley as provided in the CFO employment agreement and provides Mr. Warley an annual base salary of $305,000, which increases to $350,000 once the Company raises a minimum $10 million of new capital. Mr. Warley will also be eligible for an annual incentive bonus of up to 75% of his Base Salary if the agreed bonus targets are achieved and a moving allowance of up to $30,000 if he relocates his primary residence to Colorado. Additionally, the Company granted Mr. Warley an inducement grant of RSUs for an aggregate of 3,500 shares of Ascent’s common stock. 20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs shall vest in equal monthly increments over the next thirty-six months. Any outstanding and unvested RSUs will accelerate and fully vest upon the earlier of (i) a change of control and (ii) the termination of Mr. Warley’s employment for any reason other than (x) by the Company for cause or (y) by Mr. Warley without good reason. Mr. Warley is also eligible to participate in the Company’s standard benefit plans and programs.
Under the CFO employment agreement, if the Company terminates Mr. Warley without cause or Mr. Warley terminates his employment for good reason or a change in control, Mr. Warley will be entitled to receive half of his Base Salary amount then in effect during the period from (i) the termination date through (ii) the end of the term of the CFO Employment Agreement. In addition, all RSUs and other equity awards will be immediately vested and settled. The CFO employment agreement also includes customary non-competition and non-solicitation provisions that Mr. Warley must comply with for a period of 12 months after termination of his employment with the Company.
On May 2, 2023, the Company entered into a CEO employment agreement with Mr. Warley. The CEO employment agreement replaces the prior CFO employment agreement with Mr. Warley from December 2022. The CEO employment agreement provides for a term through December 31, 2025, subject to earlier termination by the Company and Mr. Warley as provided in the employment agreement. The CEO employment agreement provides that Mr. Warley will receive an annual base salary (“Base Salary”) of $400,000. In addition, to the Base Salary, the Company will pay Mr. Warley a one-time bonus in the amount of $100,000. Mr. Warley will also be eligible for an annual incentive bonus of up to 75% of his Base Salary if the agreed bonus targets are achieved. The CEO employment agreement provides that Mr. Warley is eligible to participate in the Company’s standard benefit plans and programs.
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In connection with Mr. Warley’s hiring in December 2022 as the Company’s Chief Financial Officer, Mr. Warley received an inducement grant of RSUs for an aggregate of 3,500 shares of Ascent’s common stock. Mr. Warley retains such RSUs with the same terms as originally granted.
Under the CEO employment agreement, if the Company terminates Mr. Warley without cause or Mr. Warley terminates his employment for good reason or a change in control, Mr. Warley will be entitled to receive half of his Base Salary amount then in effect during the period from (i) the termination date through (ii) the end of the term of the employment agreement. In addition, all RSUs and other equity awards will be immediately vested and settled.
The CEO employment agreement requires Mr. Warley to maintain the confidentiality of the Company’s proprietary information. The employment agreement also includes customary non-competition and non-solicitation provisions that Mr. Warley must comply with for a period of 12 months after termination of his employment with the Company.
Jeff Max
On September 21, 2022, we entered into a three-year employment agreement with Mr. Max. The employment agreement provides that Mr. Max will receive an annual base salary of $850,000. A $500,000 portion of the base salary is initially deferred and bears interest at an annual rate of 4%. Once the Company raises a minimum $10 million of new capital, then (i) the deferred salary and accrued interest thereon will be paid in a lump sum and (ii) the Company will begin paying Mr. Max the full $850,000 base salary amount. Mr. Max will also be eligible for an annual incentive bonus of up to 100% of his base salary if agreed bonus targets are achieved. The bonus performance objectives may include corporate, business unit or division, financial, strategic, individual or other objectives established with respect to that particular fiscal year by the Company in consultation with Mr. Max. Mr. Max was also granted an inducement grant of RSUs for an aggregate of 6,284 shares of Ascent’s common stock. 20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs shall vest in equal monthly increments over the next thirty-six months. Any outstanding and unvested RSUs will accelerate and fully vest upon the earlier of (i) a change of control and (ii) the termination of Mr. Max’s employment for any reason other than (x) by the Company for cause or (y) by Mr. Max without good reason. Additionally, Mr. Max is reimbursed for his Medicare premiums paid and receives a $4,800 annual car allowance and is eligible to participate in the Company’s standard benefit plans and programs.
Under Mr. Max's Employment Agreement, if the Company terminates Mr. Max without cause or Mr. Max terminates his employment for good reason or a change in control, Mr. Max will be entitled to receive (i) 12 months of base salary, (ii) any incentive bonus amounts that have been earned but not yet paid, and (iii) 12 months of continued reimbursement for medical coverage under Medicare. In addition, all RSUs and other equity awards will be immediately vested and settled. The employment agreement also includes customary non-competition, non-solicitation and non-interference provisions that Mr. Max must comply with for a period of 6 months, 12 months and 12 months, respectively, after termination of his employment with the Company.
On April 26, 2023, the Company’s board terminated Mr. Max as the Company’s CEO.
Victor Lee
On April 4, 2014, we entered into an employment agreement with Mr. Lee. The employment agreement provides that Mr. Lee will receive an annual base salary of $300,000, subject to annual adjustments as determined by our board. Mr. Lee will also be eligible for an annual bonus of up to 100% of his base salary as determined at the sole discretion of our board or compensation committee. Under this agreement, if the Company terminates Mr. Lee without cause, then subject to his execution of a release of claims, (i) Mr. Lee is entitled to receive twelve months of base salary from the date of termination, and (ii) the initial stock option grant that Mr. Lee received upon commencing employment will remain exercisable for a year following the termination date. The initial stock option grant is currently fully vested, but Mr. Lee was historically entitled to an additional year of vesting under such initial stock option grant upon termination without cause prior to the full vesting of the option. In addition, the employment agreement provides that Mr. Lee is eligible to participate in the Company’s standard benefit plans and programs. Under the employment agreement, Mr. Lee is subject to a two year non-compete and non-solicit following termination of employment.
On September 21, 2022, we entered into a separation agreement with Mr. Lee. Under the separation agreement, Mr. Lee is entitled to the following separation benefits: (i) the Company will continue to pay to Mr. Lee his current base salary for the next 12 months; (ii) the Company will pay Mr. Lee’s $200,000 declared but unpaid cash bonus in two installments; and (iii) the Company shall pay COBRA premiums at the Company’s current contribution level for the next 12 months. Separation benefits are included in All Other Comp in the Compensation Table.
Jin Jo
On October 19, 2023, the Company entered into a CFO employment agreement with Ms. Jo. The employment agreement provides for a term through December 31, 2025, subject to earlier termination by the Company and the executive as provided in the employment agreements. The employment agreement is effective as of April 17, 2023. The employment agreement provides that Ms. Jo will receive an annual base salary of $225,000 and a one-time bonus in the amount of $45,000. Ms. Jo will also be eligible for an annual incentive bonus of up to 60% of Base Salary if the agreed bonus targets are achieved.
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Michael J. Gilbreth
On October 5, 2020, the Company appointed Michael J. Gilbreth to serve as the Chief Financial Officer of the Company. The Company hired Mr. Gilbreth pursuant to the terms of a letter agreement and a standard and customary confidentiality, non-competition, and no-solicitation agreement. The offer letter provides for at-will employment with an annual base salary of $165,000, and an annual bonus opportunity of up to 60% of base salary. An annual minimum bonus of 25% of base salary is guaranteed, and the additional 35% is discretionary.
On December 11, 2022, we entered into a separation agreement with Mr. Gilbreth. Under the separation agreement Mr. Gilbreth is entitled to the following separation benefits: (a) payment of ten (10) weeks’ salary equal to $35,577, 50% of which is payable on the first payroll period after effective date of the separation agreement, and the remaining 50% of which is payable on the next payroll period; and (b) payment of a bonus, which equals 60% of Mr. Gilbreth’s current salary, or $111,000, one-third (1/3) of which ($37,000) shall be payable with the December 28, 2022 payroll date, another one-third (1/3) of which ($37,000) shall be payable beginning the first payroll period after January 31, 2023, and the remaining one-third (1/3) of which ($37,000) shall be payable on the first payroll period after the filing by the Company of its Annual Report on Form 10-K for the year ending December 31, 2022. Separation benefits are included in All Other Comp in the Compensation Table.
Bobby Gulati
On October 19, 2023, the Company entered into a COO employment agreement with Mr. Gulati. The employment agreement provides for a term through December 31, 2025, subject to earlier termination by the Company and the executive as provided in the employment agreements. The employment agreement is effective as of April 17, 2023. The employment agreement provides that Mr. Gulati will receive an annual base salary of $225,000 and a one-time bonus in the amount of $25,000. Mr. Gulati will also be eligible for an annual incentive bonus of up to 60% of Base Salary if the agreed bonus targets are achieved.
The following table sets forth information concerning the outstanding equity awards granted to the named executive officers as of December 31, 2023.
Outstanding Equity Awards at Fiscal Year-End 2023
| Option Awards | Stock Awards | |||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exerciseable | Number of Securities Underlying Unexercised Options (#) Unexerciseable | Option Exercise Price ($/sh) | Option Expiration Date | Number
of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | ||||||||||||||||||
| Paul Warley (1) | — | — | — | — | 1,867 | $ | 1,625 | |||||||||||||||||
| Jeffrey Max (2) | — | — | — | — | — | — | ||||||||||||||||||
| Jin Jo | — | — | — | — | — | — | ||||||||||||||||||
| Bobby Gulati | — | — | — | — | — | — | ||||||||||||||||||
| (1) | In December 2022, Mr. Warley was granted an inducement grant of for an aggregate of 3,500 shares of Ascent’s common stock. 20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs vests in equal monthly increments over the next thirty-six months. |
| (2) | In September 2022, Mr. Max was granted an inducement grant of RSUs for an aggregate of 6,284 shares of Ascent’s common stock. 20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs vests in equal monthly increments over the next thirty-six months. Mr. Max’s remaining nonvested RSUs were forfeited upon termination. |
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PRINCIPAL STOCKHOLDERS
The table below sets forth, to our knowledge, information concerning the beneficial ownership of shares of our common stock as of March 27, 2024 by:
| • | each person known to us to be a beneficial owner of more than five percent of the outstanding shares of common stock; | |
| • | each of our directors and executive officers; and | |
| • | all of our directors and executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power and all shares issuable upon exercise of options or the vesting of restricted stock within 60 days.
Unless otherwise indicated, each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned.
The address for each director or named executive officer is c/o Ascent Solar Technologies, Inc., 12300 Grant Street, Thornton, Colorado 80241.
| Prior to Offering | After Offering | |||||||||||||||
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Approximate of Outstanding Common Stock |
Amount and Nature of Beneficial Ownership |
Approximate of Outstanding Common Stock |
||||||||||||
| Directors and Executive Officers | ||||||||||||||||
| Paul Warley | 133,411 | (1) | 2.0 | % | 133,411 | (1) | [***] | % | ||||||||
| Jin Jo | 14,167 | (2) | * | % | 14,167 | (2) | [***] | % | ||||||||
| Bobby Gulati | 14,167 | (3) | * | % | 14,167 | (3) | [***] | % | ||||||||
| Forrest Reynolds | 66,576 | (4) | * | % | 66,576 | (4) | [***] | % | ||||||||
| Louis Berezovsky | 25,694 | (5) | * | % | 25,694 | (5) | [***] | % | ||||||||
| Gregory Thompson | 25,694 | (6) | * | % | 25,694 | (6) | [***] | % | ||||||||
| David Peterson | 22,152 | (7) | * | % | 22,152 | (7) | [***] | % | ||||||||
| All officers and directors as a group (7 individuals) | 301,861 | 4.4 | % | 301,861 | [***] | % | ||||||||||
| * | Less than 1%. |
| (1) | Mr. Warley’s shares include 73,689 RSUs that have vested or will vest within 60 days. |
| (2) | Ms. Jo’s shares include 14,167 RSUs that will vest within 60 days. |
| (3) | Mr. Gulati’s shares include 14,167 RSUs that will vest within 60 days. |
| (4) | Mr. Reynolds’s shares include 8,333 RSUs that will vest within 60 days. |
| (5) | Mr. Berezovsky’s shares include 8,333 RSUs that will vest within 60 days. |
| (6) | Mr. Thompson’s shares include 8,333 RSUs that will vest within 60 days. |
| (7) | Mr. Peterson’s shares include 10,000 RSUs that will vest within 60 days. |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Relationship with Crowdex and TubeSolar
During 2023, Crowdex Investment, LLC (“Crowdex”) and TubeSolar beneficially owned more than 5% of the Company were both directly and indirectly beneficially owned and controlled by Bernd Förtsch.
On September 22, 2020, we entered into a securities purchase agreement (“Series 1A SPA”) with Crowdex for the private placement of the Company’s newly designated Series 1A Convertible Preferred Stock (“Series 1A Preferred Stock”). We sold 2,000 shares of Series 1A Preferred Stock to Crowdex in exchange for $2,000,000 of gross proceeds at an initial closing under the Series 1A SPA on September 22, 2020.
In November 2020, Crowdex converted 1,200 shares of outstanding Series 1A Preferred Stock into 12,000 shares of Common Stock.
On November 27, 2020, we issued to Crowdex a $500,000 unsecured convertible promissory note in a private placement and received $500,000 of gross proceeds from the offering. On December 31, 2020, we sold 500 shares of Series 1A Preferred Stock to Crowdex in exchange for the cancellation of the note issued on November 27, 2020. There were no additional cash proceeds from this closing.
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Crowdex acquired a $250,000 aggregate principal amount convertible promissory note of the Company from the original noteholder, Penumbra Solar, Inc., in September 2020. On December 9, 2021, Crowdex converted the note, together with accrued interest, into 2,726 shares of common stock.
On January 4, 2021, the Company entered into a securities purchase agreement with TubeSolar. Pursuant to this securities purchase agreement, the Company sold 2,500 shares of Series 1A Preferred Stock to TubeSolar and received $2,500,000 of gross proceeds on January 5, 2021. On July 19, 2021, we issued TubeSolar 600 shares of common stock upon the conversion by TubeSolar of 60 shares of Series 1A Preferred Stock. On September 3, 2021, we issued TubeSolar 400 shares of common stock upon the conversion by TubeSolar of 40 shares of Series 1A Preferred Stock.
On September 15, 2021, we entered into the JDA with TubeSolar to pursue the APV market. We also jointly established the JV. See “Business” for additional detail.
On February 1, 2022:
| · | Crowdex converted their remaining 1,300 shares of Series 1A Preferred Stock into 13,000 shares of common stock; and |
| · | TubeSolar converted their remaining 2,400 shares of Series 1A Preferred Stock into 24,000 shares of common stock. |
Relationship with BD1
During 2023, BD 1 Investment Holding, LLC (“BD1”) beneficially owned more than 5% of the Company. On December 18, 2020, the Company entered into a securities exchange agreement (“BD1 Exchange Agreement”) with BD1. BD1 had previously acquired all of the Company’s existing outstanding unsecured notes (other than notes held by Global Ichiban and Crowdex) from the original note holders. Pursuant to the terms of the BD1 Exchange Agreement, BD1 agreed to surrender and exchange all of its outstanding promissory notes with principal balances of approximately $10.4 million (including accrued interest and default penalties). In exchange and without the payment of any additional consideration, the Company issued to BD1 two unsecured convertible promissory notes with principal amounts of $10,340,000 (the “First Exchange Note”) and $160,000 (the “Second Exchange Note”). On August 16, 2021, BD1 sold and assigned a portion of the First Exchange Note equal to $600,000 in principal amount to Nanyang Investment Management Pte Ltd (“Nanyang”) on behalf of a client account for a purchase price of $600,000, and on January 21, 2022, further sold and assigned a portion of the First Exchange Note equal to $1,000,000 in principal amount to Nanyang on behalf of a client account for a purchase price of $1,000,000. On January 3, 2022, BD1 sold and assigned a portion of the First Exchange Note equal to $1,000,000 in principal amount to Fleur Capital Pte Ltd (“Fleur”) on behalf of a client account for a purchase price of $1,000,000. The Company has issued to BD1 an unsecured convertible promissory note with principal amount of $7,740,000 replacing the First Exchange Note (the “Replacement Note” and, together with the Second Exchange Note, the “BD1 Exchange Notes”).
On August 2, 2021, we entered into a securities purchase agreement with BD1 for the private placement of an aggregate of 667 shares of our common stock at a fixed price of $75 (as adjusted for the reverse stock split) per share in two tranches of 333 shares in exchange for $10,000,000 of aggregate gross proceeds. On September 2, 2021, we closed on the first tranche and, on November 5, 2021, we closed on the second tranche, receiving aggregate gross proceeds of $10,000,000.
On February 1, 2022, BD1 converted its $7,900,000 aggregate outstanding principal amount of BD1 Exchange Notes into 79,000 shares of common stock.
Johannes Kuhn is the indirect beneficial owner of BD1.
Flisom AG Asset Acquisition
Asset Purchase Agreement
On April 17, 2023, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Flisom AG, a leading developer and manufacturer of photovoltaic thin film solar cells (“Seller”), pursuant to which, among other things, the Company purchased certain assets relating to thin-film photovoltaic manufacture and production from Seller (collectively, the “Assets”), including (i) certain manufacturing equipment located at Seller’s Niederhasli, Switzerland facility (the “Manufacturing Facility”) and (ii) related inventory and raw materials at the Manufacturing Facility (collectively, the “Transaction”). In connection with the Transaction, the Company also received a license to certain intellectual property rights used in the operation of the Assets and will also acquire, by operation of Swiss law, the employment contracts of certain employees of Seller in Switzerland who are functionally predominantly working with the Assets, subject to such employees being offered the right to remain employed by Seller after the closing of the Transaction (the “Closing”). The total consideration paid by the Company to Seller in connection with the Transaction was an aggregate amount in cash equal to $2,800,000.
Ancillary Agreements
At the Closing, the Company and Seller also entered into (i) a Transition Services Agreement requiring that Seller provide transition support for the Company’s operation of the Assets, with fees to be due and payable by the Company for performance of such support services, (ii) a Sublease Agreement related to the Company’s use of the premises at the Manufacturing Facility where the Assets are located (the “Sublease Agreement”), and (iii) a Technology License Agreement, pursuant to which Seller granted the Company a revocable, non-exclusive license to certain intellectual property rights of the Seller used in the operation of the Assets (the “Licensed IP”), subject to certain encumbrances on the Licensed IP in favor of Seller’s lender.
The Company and Seller also intend to enter into, as promptly as practicable following the Closing, a Subcontractor Agreement (the “Subcontractor Agreement”), pursuant to which the Company will agree to manufacture the photovoltaic cells necessary to fulfill certain outstanding supply agreement obligations between the Seller and one of its significant customers, in exchange for the Company receiving the incoming proceeds from the fulfillment of the supply arrangement.
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Letter Agreement
On April 20, 2023, the Company entered into a letter agreement (the “Letter Agreement”) with FL1 Holding GmbH, a German company (“FL1”), BD1 and certain of their affiliated entities (collectively, the “Affiliates”). FL1 is controlled by Johannes Kuhn. Mr. Kuhn also controls BD1, one of the Company’s largest stockholders.
In connection with the prospective acquisition by FL1 of substantially all shares in Seller, FL1 and one or more of the Affiliates agreed, on behalf of itself and its affiliates (i) to certain noncompetition and nonsolicitation obligations with respect to the Company and the Assets, including certain prospective customers of the products produced using the Assets, for a period of five (5) years from the Closing, subject to certain exceptions, (ii) to cause Seller to use certain of its intellectual property rights for limited internal purposes until such time as a joint collaboration agreement is entered into after the Closing among Seller, the Company and certain other affiliates of FL1 related to the licensing and use of such intellectual property, and otherwise not to dispose of or fail to maintain such intellectual property, (iii) to reimburse the Company for certain pre-Closing liabilities of Seller to the extent incurred by the Company following the closing of the Transaction; and (iv) to indemnify the Company for breaches of certain representations, warranties and covenants relating to the Assets.
Pursuant to the Letter Agreement, BD1 and its parent company agreed that (1) it and its affiliates will not offer to acquire or acquire, by merger, tender offer or otherwise, all or substantially all of the outstanding shares of capital stock of the Company not beneficially owned by BD and its affiliates, without the approval of a committee comprised of disinterested and independent members of the Company’s Board of Directors and the affirmative vote of a majority of the voting power of outstanding shares of the Company not beneficially owned by BD and its affiliates; (2) BD and its affiliates will not transfer any shares of the Company’s capital stock beneficially owned by them unless the transferee agrees in writing to be bound by the foregoing restriction; and (3) each of them will stand behind the obligations of FL1 pursuant to the Letter Agreement.
The Letter Agreement also grants the Company the option, but not the obligation, (i) to purchase certain intellectual property rights of Seller relating to thin-film photovoltaic manufacture and production for $2,000,000 following the release of certain liens on such intellectual property rights in favor of Seller’s lender, and (ii) for a period of 12 months following the Closing, to resell the Assets to FL1 for an aggregate amount equal to $5,000,000, with such transaction to close within 90 days following the exercise of the Company’s resale right. On June 16, 2023, the Company exercised its option to resell the Assets to FL1.
Policies and Procedures with Respect to Transactions with Related Persons
The Board recognizes that related person transactions can present a heightened risk of potential or actual conflicts of interest. Accordingly, our Audit Committee charter requires that all such transactions will be reviewed and subject to approval by members of our Audit Committee, which will have access, at our expense, to our or independent legal counsel. Future transactions with our officers, directors or greater than five percent stockholders will be on terms no less favorable to us than could be obtained from independent third parties.
DESCRIPTION OF CAPITAL STOCK
The following summary describes our common stock and the material provisions of our certificate of incorporation and our bylaws, each of which is filed as an exhibit to the registration statement of which this prospectus forms a part, and of the Delaware General Corporation Law (the “DGCL”). Because the following is only a summary, it does not contain all of the information that may be important to you. For a complete description, you should refer to our certificate of incorporation and bylaws. We encourage you to read those documents and the DGCL carefully.
Authorized Capital Stock
Our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.0001 per share, and 25,000,000 shares of preferred stock, par value $0.0001 per share.
The authorized but unissued shares of common and preferred stock are available for future issuance without stockholder approval, unless otherwise required by law or applicable stock exchange rules. Additional authorized but unissued shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares could hinder or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Outstanding Capital Stock
As of March 27, 2024, the Company had issued and outstanding 6,710,745 shares of common stock and 48,100 shares of Series A preferred stock.
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Series A Preferred Stock
Rank
The Series A preferred stock ranks pari passu to the common stock with respect to dividends and rights upon liquidation.
Voting Rights
Except as otherwise required by law (or with respect to approval of certain actions), the Series A preferred stock shall have no voting rights.
Dividends
Holders of Series A preferred stock are entitled to cumulative dividends at a rate of 8% per annum when and if declared by the Board of Directors at its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment.
Conversion and Redemption Rights
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 $232 million, as adjusted, for twenty consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A preferred stock at a price of $8.00 per share, plus any accrued and unpaid dividends. At December 31, 2023, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time. After making adjustment for the Company’s prior reverse stock splits, all 48,100 outstanding Series A preferred shares are convertible into less than one common share. Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends.
Liquidation Value
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.
Common Stock
The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of our common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive ratably any dividends declared by our Board out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding preferred stock. Our common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions.
In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock. Each outstanding share of common stock is duly and validly issued, fully paid and non-assessable.
Preferred Stock
Our Board is authorized by our charter to establish classes or series of preferred stock and fix the designation, powers, preferences and rights of the shares of each such class or series and the qualifications, limitations or restrictions thereof without any further vote or action by our stockholders. Any shares of preferred stock so issued could have priority over our common stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in our control without further action by our stockholders and may adversely affect the voting and other rights of the holders of our common stock.
The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable a holder to block such a transaction. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of holders of our common stock. Although our Board is required to make any determination to issue preferred stock based on its judgment as to the best interests of our stockholders, our Board could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which such stockholders might receive a premium for their stock over the then market price of such stock.
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Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws
Our charter and bylaws contain a number of provisions that could make our acquisition by means of a tender or exchange offer, a proxy contest or otherwise more difficult. These provisions are summarized below.
Board Composition; Removal of Directors and Filling Board Vacancies
Our charter provides that stockholders may remove directors only for cause and only by the affirmative vote of the holders of at least a majority of the shares entitled to vote at an election of directors.
Our bylaws authorize only our Board to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our Board may only be set by a resolution adopted by a majority vote of our entire Board. These provisions would prevent a stockholder from increasing the size of our Board and then gaining control of our Board by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our Board but promotes continuity of management.
Staggered Board
Our Board is divided into three classes, with one class of directors elected at each year’s annual stockholders meeting. Staggered terms tend to protect against sudden changes in management and may have the effect of delaying, deferring or preventing a change in our control without further action by our stockholders.
Advance Notice Requirements
Our bylaws provide advance notice procedures for stockholders seeking to bring matters before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our Company.
Special Meetings
Our bylaws provide that special meetings of stockholders may only be called at the request of a majority of the Board, and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders.
Undesignated Preferred Stock
Our charter provides for 25,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable our Board to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our Board were to determine that a takeover proposal is not in the best interests of our stockholders, our Board could cause shares of convertible preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our charter grants our Board broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.
Delaware Anti-Takeover Statute
We are subject to the provisions of Section 203 of the DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
| · | before the stockholder became interested, our Board approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
| · | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or |
| · | at or after the time the stockholder became interested, the business combination was approved by our Board and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. |
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Section 203 defines a business combination to include:
| · | any merger or consolidation involving the corporation and the interested stockholder; |
| · | any sale, transfer, lease, pledge, exchange, mortgage or other disposition involving the interested stockholder of 10% or more of the assets of the corporation; |
| · | subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; or |
| · | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Transfer Agent and Registrar
The transfer agent and registrar of our common stock is Computershare Investor Services.
Outstanding Common Stock Warrants
In connection with our October 2023 securities offering (“Offering”), we issued certain prefunded warrants to certain investor of the Offering (“Prefunded Warrants”), common stock warrants to all investors of the Offering (“Common Stock Warrants”) and to our placement agent (“Placement Agent Warrants”). The following is a summary of the material terms and provisions of these warrants.
Prefunded Warrants and Common Stock Warrants
The Common Stock Warrants are currently exercisable for 3,572,635 shares of the Company’s common stock at an exercise price equal to $2.88 per share, in each case subject to adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of the Company common stock. The Common Stock Warrants are exercisable for five years from their date of issuance. The Prefunded Warrants are currently exercisable for 715,111 shares of the Company’s common stock at an exercise price equal to $0.0001 per share, in each case subject to adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of the Company common stock. The Prefunded Warrants do not have an expiration date and all 715,111 Prefunded Warrants have been exercised subsequent to issuance.
A holder will not have the right to exercise any portion of the Pre-Funded Warrants or Common Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election by a holder prior to the issuance of any Prefunded Warrant or Common Warrant, 9.99%) of the number of shares of our shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Prefunded Warrant or Common Warrant. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, upon at least 61 days’ prior notice from the holder to us with respect to any increase in such percentage.
Except as otherwise provided in the Common Warrants or the Prefunded Warrants or by virtue of such holder’s ownership of our shares of common stock, the holder of a Common Warrant or Pre-Funded Warrant does not have the rights or privileges of a holder of our shares of common stock, including any voting rights, until the holder exercises the Common Warrant or Prefunded Warrant.
The foregoing description of the Common Stock Warrants and the Prefunded Warrants does not purport to be complete and is qualified by the full text of the forms of warrants which are filed as exhibits to the registration statement of which this prospectus forms a part.
Placement Agent Warrants
The Placement Agent Warrants are currently exercisable for 107,179 shares of the Company’s common stock at an exercise price equal to $3.60 per share, in each case subject to adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of the Company common stock. The warrants are exercisable for five years from their date of issuance.
The Placement Agent Warrants are exercisable at any time, and from time to time, in whole or in part, commencing six months from the
closing of the offering and expiring five years from the commencement of sales in the Offering and will be exercisable for cash only
unless an effective registration statement is not available at the time of exercise, in which case the warrants could be exercised on
a cashless basis. The Placement Agent Warrants will also provide for customary anti-dilution provisions and are not redeemable by us.
The Placement Agent Warrants and the shares of common stock issuable upon exercise of the Placement Agent Warrants have been included
on the registration statement of which this prospectus forms a part.
In connection with our December 2022 issuance of our senior secured convertible notes, we issued certain common stock warrants to the investors in the December 2022 transaction. The following is a summary of the material terms and provisions of these warrants.
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These warrants are currently exercisable for 5,596,232 shares of the Company’s common stock, at an exercise price equal to $1.76 per share, in each case subject to adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of the Company’s common stock, as well as future issuance by the Company of securities with a purchase or conversion, exercise or exchange price that is less than the exercise price of the warrants in effect at any time. The warrants will be exercisable for five years from their date of issuance.
If these are not purchased and cancelled in connection with this offering, these 5,596,232 warrants would adjust to 25,197,357 warrants at an assumed offering price of $0.391 per share, the last reported sale price of our common stock on the Nasdaq Capital market on March 27, 2024), and the per share exercise price will be reduced to the VWAP on the next Trading Day following the completion announcement of this offering
A holder (together with its affiliates) may not exercise any portion of such holder’s warrants to the extent that the holder would beneficially own more than 4.99% of the Company’s outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the amount of its beneficial ownership of outstanding shares of common stock after exercising the holder’s warrants up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants.
Except as otherwise provided in the warrants or by virtue of the holders’ ownership of shares of common stock, the holders of warrants do not have the rights or privileges of holders of shares of common stock, including any voting rights, until such warrant holders exercise their warrant.
In connection with our August 2022 securities purchase agreement (“SPA”), we issued certain common stock warrants to the investors of the SPA. The following is a summary of the material terms and provisions of these warrants.
These warrants are currently exercisable for 7,076 shares of the Company’s common stock at an exercise price equal to $1,060 per share, in each case subject to adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of the Company common stock. The warrants are exercisable for five years from their date of issuance.
The holder may not exercise the Warrants to the extent that, after giving effect to such exercise, the holder would beneficially own in excess of 9.99% of the shares of Common Stock outstanding, or, at the holder’s election on not less than 61 days notice, 19.99%. The Warrants are exercisable for cash. If, at the time the holder exercises any Warrants, a registration statement registering the issuance of the shares of Common Stock underlying the Warrants is not then effective or available for the issuance of such shares, then the Warrants may be net exercised on a cashless basis according to a formula set forth in the Warrants.
Except as otherwise provided in the warrants or by virtue of the holders’ ownership of shares of common stock, the holders of warrants do not have the rights or privileges of holders of shares of common stock, including any voting rights, until such warrant holders exercise their warrant.
The foregoing description of these warrants does not purport to be complete and is qualified by the full text of the forms of warrants which are filed as exhibits to the registration statement of which this prospectus forms a part.
Outstanding Senior Secured Convertible Notes
In December 2022, we issued $15.0 million of our senior secured convertible notes. As of March 27, 2024, approximately $7,000 of our senior secured convertible notes remained outstanding. The following is a summary of the material terms and provisions of these senior secured convertible notes.
The senior secured convertible notes have a maturity of 18 months from date of issuance (June 19, 2024) and bear interest at a rate of 4.5% per annum, payable on a quarterly basis in arrears.
A holder may elect to receive repayment of all or any portion of the principal amount of the senior secured notes in shares of common stock, at a conversion price equal to the lower of (1) $1.76 (the “Fixed Conversion Price”) and (2) 80% of the three lowest VWAPs of the common stock on the 10 trading days preceding delivery of a conversion notice by a holder, provided that the conversion price may in no event be less than $0.65 (the “Floor Price”).
A holder (together with its affiliates) may not convert any portion of such holder’s senior secured convertible notes to the extent that the holder would beneficially own more than 4.99% of the Company’s outstanding shares of common stock after conversion, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the maximum amount of its beneficial ownership of the Company’s outstanding shares of common stock after converting the holder’s senior secured convertible notes to up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the senior secured convertible notes.
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At any time that the conversion price would otherwise be below the Floor Price, on conversion, the Company will pay to the holders, in cash, an amount equal to (y) the difference between the number of shares of common stock that would have been issued at the conversion price (without giving effect to the Floor Price) and the number of shares of common stock actually issued based on the Floor Price, multiplied by (z) the VWAP of the common stock on the date of conversion.
The Fixed Conversion Price of the senior secured convertible notes is subject to certain anti-dilution adjustments, including in the event of any stock splits or combinations, certain dividends and distributions, reclassification, exchange or substitution of the Company’s common stock or in the event that the Company issues shares of common stock, convertible securities, rights or options to acquire common stock or convertible securities or any combination thereof, including as units with other securities at a purchase or conversion, exercise or exchange price of less than the Fixed Conversion Price then in effect, in which case the Fixed Conversion Price shall be reduced to the lowest price paid for a share of common stock or unit (or the lowest conversion or exercise price at which purchasers of any convertible securities or options or rights to acquire the Company’s common stock or convertible securities may acquire a share of common stock pursuant to the terms of such convertible securities) in such transaction, with such lowest price per share being subject to calculation in accordance with the terms of the senior secured notes.
In addition, the holders have the option to require early prepayment of the principal amount of the senior secured convertible notes in cash from up to 30% of the gross proceeds of certain subsequent financings. The holders will also have pre-emptive rights to participate for up to 20% of the securities offered and sold in certain subsequent financing conducted by the Company during the 18-month term of the senior secured convertible notes.
The senior secured convertible notes are secured by a lien on substantially all of the Company’s assets.
Except as otherwise provided in the senior secured convertible notes, or by virtue of a holders’ ownership of shares of common stock, a holder of senior secured convertible notes does not have the rights or privileges of holders of shares of the Company’s common stock, including any voting rights, until such time that a holder’s senior secured convertible note is converted into shares of the Company’s common stock.
The foregoing description of the senior secured convertible notes does not purport to be complete and is qualified by the full text of the form of the senior secured convertible notes which is filed as an exhibit to the registration statement of which this prospectus forms a part.
Outstanding Conversions Payable
On May 25, 2023, the Company and each of the senior secured convertible notes holders entered into a Waiver and Amendment Agreement Pursuant to this agreement, the Company and each of the Holders agreed to amend the senior secured convertible notes to provide that if the Company receives a Notice of Conversion at a time that the Conversion Price (or, as applicable, the Alternative Conversion Price) then in effect Price, without regard to the Floor Price (the “Applicable Conversion Price”), is less than the Floor Price then in effect, the Company shall issue a number of shares equal to the Conversion Amount divided by such Floor Price and, at its election (x) pay the economic difference between the Applicable Conversion Price and such Floor Price (the “Outstanding Conversion Amount”) in cash or (y) pay the Outstanding Conversion Amount by issuing to the holder a number of shares of Common Stock with an aggregate value equal to the Outstanding Conversion Amount with the share valued at an issue price of 100% of the VWAP on the conversion date, but the conversion price may not be less than the floor price of $0.65.
As of March 27, 2024, no conversions payable remained outstanding.
The foregoing description of the conversions payable does not purport to be complete and is qualified by the full text of the form of the conversions payable which is filed as an exhibit to the registration statement of which this prospectus forms a part.
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DESCRIPTION OF SECURITIES WE ARE OFFERING
We are offering shares of common stock. We are also offering to each purchaser whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together with its affiliates, beneficially owning more than 4.99% (or, at the election of the holder, 9.99%) of our outstanding shares of common stock immediately following the consummation of this offering, the opportunity to purchase, if the purchaser so chooses, Pre-Funded Warrants in lieu of shares of common stock that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the holder, 9.99%) of our outstanding shares of common stock. For each Pre-Funded Warrant we sell (without regard to any limitation on exercise set forth therein), the number of shares of common stock we are offering will be decreased on a one-for-one basis.
We are also registering the shares of common stock issuable from time to time upon exercise of the Pre-Funded Warrants.
The following summary of certain terms and provisions of the Pre-Funded Warrants offered hereby is not complete and is subject to and qualified in its entirety by the provisions of the form of Pre- Funded Warrant, which are filed as exhibits to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions set forth in the form of Pre-Funded Warrant.
Exercisability. The Pre-Funded Warrants are exercisable at any time after their original issuance until they are exercised in full. The Pre-Funded Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock underlying the Pre-Funded Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance of the shares of common stock underlying the Pre-Funded Warrants under the Securities Act is not effective or available, the holder may, in its sole discretion, elect to exercise the Pre-Funded Warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the Pre-Funded Warrant. No fractional shares of common stock will be issued in connection with the exercise of a Pre-Funded Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
Exercise Limitation. A holder will not have the right to exercise any portion of the Pre-Funded Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election by a holder prior to the issuance of any Pre-Funded Warrant, 9.99%) of the number of shares of our shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrant. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, upon at least 61 days’ prior notice from the holder to us with respect to any increase in such percentage.
Exercise Price. The exercise price for the Pre-Funded Warrants is $0.0001 per share. The exercise price and number of shares of common stock issuable upon exercise will adjust in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our shares of common stock.
Transferability. Subject to applicable laws, the Pre-Funded Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. We do not intend to apply for the listing of the Pre-Funded Warrants offered in this offering on any stock exchange. Without an active trading market, the liquidity of the Pre-Funded Warrants will be limited.
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Warrant Agent. The Pre-Funded Warrants are expected to be issued in registered form under a warrant agreement between Computershare Investor Services, as warrant agent, and us. The Pre-Funded Warrants shall initially be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Rights as a Stockholder. Except as otherwise provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of our shares of common stock, the holder of a Pre-Funded Warrant does not have the rights or privileges of a holder of our shares of common stock, including any voting rights, until the holder exercises the Pre-Funded Warrant.
Fundamental Transactions. In the event of a fundamental transaction, as described in the Pre-Funded Warrants and generally including, with certain exceptions, any reorganization, recapitalization or reclassification of our shares of common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding shares of common stock, the holders of the Pre-Funded Warrants will be entitled to receive upon exercise of the Pre-Funded Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such fundamental transaction.
Governing Law. The Pre-Funded Warrants and Warrant Agreement are governed by New York law.
The material terms and provisions of our common stock and each other class of our securities are described under the caption “Description of Capital Stock” in this prospectus.
Placement Agent’s Warrants
We have agreed to issue to the placement agent (or its permitted assignees) warrants to purchase up to a total of [***] shares of common stock (3% of the shares of common stock offered hereby, including the shares of common stock underlying any Pre-Funded Warrants) at an exercise price per share of Common Stock equal to 125% of the public offering price per share. The placement agent’s warrants will be exercisable at any time, and from time to time, in whole or in part, commencing six months from the closing of the offering and expiring five (5) years from the commencement of sales in the offering and will be exercisable for cash only unless an effective registration statement is not available at the time of exercise, in which case the warrants could be exercised on a cashless basis. The placement agent’s warrants are not exercisable or convertible for more than five years from the commencement of sales of the public offering. The placement agent’s warrants will also provide for customary anti-dilution provisions. The warrants are not redeemable by us. The placement agent’s warrants and the shares of common stock issuable upon exercise of the placement agent’s warrants have been included on the registration statement of which this prospectus forms a part.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of our common stock, including shares issued upon exercise of outstanding options and warrants, in the public market after this offering, or the perception that those sales may occur, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future. As described below, only a limited number of shares of our common stock will be available for sale in the public market after consummation of this offering due to contractual and legal restrictions on resale described below. Future sales of our common stock in the public market either before (to the extent permitted) or after restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of our common stock at such time and our ability to raise equity capital at a time and price we deem appropriate.
Sale of outstanding shares
Except as otherwise noted, all information in this prospectus reflects and assumes no sale of Pre-Funded Warrants in this offering, which, if sold, would reduce the number of shares of common stock that we are offering on a one-for-one basis.
Based on the number of shares of our common stock outstanding as of March 27, 2024, upon the closing of this offering we will have outstanding [***] shares of common stock.
Except for the outstanding shares that are held by our affiliates, substantially all of our outstanding shares may be resold in the public market immediately (i) without any restriction or (ii) with minimal restrictions in compliance with the SEC’s Rule 144 (as described below) as applied to sales by non-affiliates.
Unless purchased or held by our affiliates, the [***] shares sold in this offering may be resold in the public market immediately without any restriction.
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Lock-up agreements
In connection with this offering, we, and our officers and directors, agreed that, for a period of six months from [***], 2024 (the date of this prospectus), we and they will not, without the prior written consent of Dawson James Securities Inc., dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock, subject to certain exceptions.
Dawson James Securities Inc., in their sole discretion may release any of the securities subject to these lock-up agreements at any time. If the restrictions under the lock-up agreements are waived, shares of our common stock may become available for resale into the market, subject to applicable law, which could reduce the market price for our common stock. See “Plan of Distribution.”
Rule 144
In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act, for at least 90 days, a person (or persons whose shares are required to be aggregated) who is not deemed to have been one of our “affiliates” for purposes of Rule 144 at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our “affiliates,” is entitled to sell those shares in the public market (subject to the lock-up agreements referred to above, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144.
Rule 144(a)(1) defines an “affiliate” of an issuing company as a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer. Directors, officers and holders of ten percent or more of the Company’s voting securities (including securities which are issuable within the next sixty days) are deemed to be affiliates of the issuing company. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than “affiliates,” then such person is entitled to sell such shares in the public market without complying with any of the requirements of Rule 144 (subject to the lock-up agreements referred to above, if applicable).
In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our “affiliates,” as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than one of our “affiliates,” are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those shares of our common stock that does not exceed the greater of:
| · | 1% of the number of common shares then outstanding; or |
| · | the average weekly trading volume of our common stock on the Nasdaq during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Such sales under Rule 144 by our “affiliates” or persons selling shares on behalf of our “affiliates” are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us.
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PLAN OF DISTRIBUTION
We are offering up to a maximum of [***] shares of common stock. We are seeking to raise approximately $6.0 million in gross proceeds from this offering. At an assumed public offering price of $0.391 per share, which represents the closing price of our common stock on Nasdaq on March 27, 2024, we would sell [***] shares of common stock for gross proceeds of up to $6.0 million before deduction of placement agent commissions and offering expenses, in a best-efforts offering. There is no minimum amount of proceeds that is a condition to closing of this offering. The actual amount of gross proceeds, if any, in this offering could vary substantially from the gross proceeds from the sale of the maximum amount of securities being offered in this prospectus
Pursuant to a placement agency agreement, dated as of April [***], 2024, we have engaged Dawson James Securities, Inc. to act as our exclusive placement agent (the “Placement Agent” or “Dawson James”) to solicit offers to purchase the securities offered by this prospectus. The Placement Agent is not purchasing or selling any securities, nor is it required to arrange for the purchase and sale of any specific number or dollar amount of securities, other than to use its “reasonable best efforts” to arrange for the sale of the securities by us. Therefore, we may not sell the entire amount of securities being offered. Investors purchasing securities offered hereby will have the option to execute a securities purchase agreement with us. In addition to the rights and remedies available to all investors in this offering under federal and state securities laws, the investors which enter into a securities purchase agreement will also be able to bring claims of breach of contract against us. Investors who do not enter into a securities purchase agreement shall rely solely on this prospectus in connection with the purchase of our securities in this offering. The Placement Agent may engage one or more subagents or selected dealers in connection with this offering.
The placement agency agreement provides that the Placement Agent’s obligations are subject to conditions contained in the placement agency agreement.
We will deliver the securities being issued to the investors upon receipt of investor funds for the purchase of the securities offered pursuant to this prospectus. There is no arrangement for funds to be received in escrow, trust or similar arrangement and the shares will be offered at a fixed price and are expected to be issued in a single closing. We expect to deliver the securities being offered pursuant to this prospectus on or about [***], 2024.
Placement Agent Fees, Commissions and Expenses
Upon the closing of this offering, we will pay the placement agent a cash transaction fee equal to 8% of the aggregate gross cash proceeds to us from the sale of the securities in the offering; provided, however, that the cash transaction fee shall equal 4% for investors that the Company directs to the offering. In addition, we will reimburse the placement agent for its out-of-pocket expenses incurred in connection with this offering, including the fees and expenses of the counsel for the placement agent, up to $155,000.
The following table shows the public offering price, placement agent fees and proceeds, before expenses, to us.
| Per Share | Total | |||||||
| Public offering price | $ | $ | ||||||
| Placement agent fees (1) | $ | $ | ||||||
| Proceeds, before expenses, to us (2) | $ | $ | ||||||
| (1) | Does not include additional compensation the Placement Agent will receive and reimbursement for out-of-pocket expenses incurred in connection with this offering as described above. |
| (2) | The amount of offering proceeds to us presented in this table assumes no Pre-Funded Warrants are issued in lieu of shares of common stock. |
We estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the placement agent commission, will be approximately $286,000, all of which are payable by us. This figure includes, among other things, the placement agent’s fees and expenses (including the legal fees, costs and expenses for the placement agent’s legal counsel) up to $155,000.
No action has been taken by us or the Placement Agent that would permit a public offering of the shares of common stock or Pre-Funded Warrants in any jurisdiction outside the United States where action for that purpose is required. None of our securities included in this offering may be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sales of any of the securities offering hereby be distributed or published in any jurisdiction except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this prospectus are advised to inform themselves about and to observe any restrictions relating to this offering of securities and the distribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to buy the securities in any jurisdiction where that would not be permitted or legal.
The Placement Agent have advised us that they do not intend to confirm sales to any account over which they exercise discretionary authority.
| 50 |
Placement Agent’s Warrants
We have agreed to issue to the Placement Agent (or its permitted assignees) warrants to purchase up to a total of [***] shares of common stock (3% of the shares of common stock including shares of common stock underlying any Pre-funded Warrants) at an exercise price equal to 125% of the public offering price per common share, assuming an offering of up to [***] shares of common stock, based on an assumed public offering price of $0.391 per share. The Placement Agent’s Warrants will be exercisable at any time, and from time to time, in whole or in part, commencing six months from the closing of the offering and expiring five (5) years from the commencement of sales in the offering and will be exercisable for cash only unless an effective registration statement is not available at the time of exercise, in which case the warrants could be exercised on a cashless basis. The Placement Agent’s Warrants are not exercisable or convertible for more than five years from the commencement of sales of the public offering. The Placement Agent’s Warrants will also provide for customary anti-dilution provisions. The Placement Agent’s Warrants and the shares of common stock issuable upon exercise of the Placement Agent’s Warrants have been included on the registration statement of which this prospectus forms a part.
The Placement Agent’s Warrants and the underlying shares are deemed to be compensation by FINRA, and therefore will be subject to a 180-day lock-up period pursuant to FINRA Rule 5110(e)(1). In accordance with FINRA Rule 5110(e)(1), neither the Placement Agent’s Warrants nor any of our common stock issued upon exercise of the placement agent’s warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days immediately following commencement of sale of this offering subject to certain exceptions permitted by FINRA Rule 5110(e)(2).
Tail
We have also agreed to pay Dawson a tail fee equal to 8% of the aggregate gross cash proceeds to us, if any investor, who was introduced to us by Dawson during the term of its engagement, provides us with capital in any public or private offering or other financing or capital raising transaction during the nine-month period following the closing of this offering.
Determination of Offering Price
Our common stock is currently traded on The Nasdaq Capital Market under the symbol “ASTI.” On March 27, 2024, the closing price of our common stock was $0.391 per share.
The public offering price of the securities offered by this prospectus will be determined by negotiation between us and the placement agent. Among the factors that will be considered in determining the final public offering price of the shares:
| · | Our history and our prospects; | |
| · | The industry in which we operate; | |
| · | Our past and present operating results; and | |
| · | The general condition of the securities markets at this time of this offering. |
The public offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the shares of common stock sold in this offering. That price is subject to change as a result of market conditions and other factors and we cannot assure you that the shares of common stock sold in this offering can be resold at or above the public offering price.
Electronic Distribution
A prospectus in electronic format may be made available on a website maintained by the placement agents and the placement agents may distribute prospectuses electronically. Other than the prospectus in electronic format, the information on these websites is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the placement agents and should not be relied upon by investors.
Listing
Our shares of common stock are listed on the Nasdaq Capital Market under the symbol “ASTI.”
The last reported sales price of our shares of common stock on March 27, 2024 was $0.391 per share. The actual public offering price per unit will be determined between us, the placement agent and the investors in the offering, and may be at a discount to the current market price of our common stock. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final public offering price. There is no established public trading market for the Pre-Funded Warrants and we do not expect such a market to develop. In addition, we do not intend to apply for listing of the Pre-Funded Warrants on any securities exchange or other trading system.
| 51 |
Lock-Up Agreements
We, our officers and directors and certain stockholders have agreed, subject to limited exceptions, for a period of six months after the closing of this offering, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly any shares of common stock or any securities convertible into or exchangeable for our common stock either owned as of the date of the placement agent agreement or thereafter acquired without the prior written consent of Dawson James Securities Inc. Dawson James Securities, Inc. may, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without notice, release all or any portion of the securities subject to lock-up agreements.
Other Relationships
From time to time, the placement agent and its affiliates may provide in the future, various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which they will receive customary fees and commissions. The placement agent has received compensation for services previously provided to the Company.
On September 28, 2023, the Company issued an aggregate of 3,572,635 units in a registered public offering at a price of $2.88 per Unit, for gross proceeds of approximately $10.3 million, before deducting offering expenses. Dawson James acted as placement agent in connection with this registered public offering. As compensation for its services, Dawson James received (i) a placement agent fee in cash equal to 8.00% of the gross proceeds from the sale of the units sold in the offering. (ii) reimbursements of its reasonable travel and other out-of-pocket expenses, including the reasonable fees of legal counsel of $155,000, and (iii) five-year warrants to purchase up to a total of 107,179 shares of common stock (3% of the shares of common stock included in the units, including shares of common stock underlying any Pre-funded Warrants, but excluding the shares of common stock underlying the common warrants offered) at an exercise price of $3.60 (125% of the public offering price of $2.88 per unit).
The warrants and the underlying shares may be deemed to be compensation by FINRA, and therefore will be subject to FINRA Rule 5110(e)(1). In accordance with FINRA Rule 5110(e)(1), neither the warrants nor any of our shares of common stock issued upon exercise of the warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days immediately following the commencement date of sales in this offering, subject to certain exceptions. In addition, the foregoing warrants may not be exercised more than five years from the date of commencement of sales in this offering.
Transfer Agent, Warrant Agent and Registrar
The transfer agent, warrant agent and registrar for our common stock is Computershare Investor Services.
Regulation M
The placement agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of our securities by the placement agent acting as principal. Under these rules and regulations, the placement agent (i) may not engage in any stabilization activity in connection with our securities and (ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.
Indemnification
We have agreed to indemnify the placement agent against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the placement agent may be required to make for these liabilities.
LEGAL MATTERS
Carroll Legal LLC, Denver, CO will pass upon the validity of the securities offered hereby for us. The placement agent is represented by ArentFox Schiff LLP, Washington, DC.
EXPERTS
The financial statements of Ascent Solar Technologies, Inc. as of December 31, 2023 and 2022 and for each of the years ended December 31, 2023 and 2022 appearing in this prospectus have been audited by Haynie & Company, independent registered public accounting firm, as set forth in their report, thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of Ascent Solar Technologies, Inc. to continue as a going concern as described in Note 4 to the financial statements as of December 31, 2023 and 2022), appearing elsewhere in this prospectus, and are included in reliance on such report given on the authority of such firm as experts in auditing and accounting.
| 52 |
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock being offered by this prospectus. This prospectus, which constitutes part of that registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules that are part of the registration statement. Some items included in the registration statement are omitted from the prospectus in accordance with the rules and regulations of the SEC. For further information with respect to us and the common stock offered in this prospectus, we refer you to the registration statement and the accompanying exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address is www.sec.gov.
We also maintain a website at www.ascentsolar.com. The reference to our website address does not constitute incorporation by reference of the information contained on our website, and you should not consider information on our website to be part of this prospectus.
You may also request a copy of these filings, at no cost to you, by writing or telephoning us at the following address:
Ascent Solar Technologies, Inc.
Attn: Investor Relations
12300 Grant Street
Thornton, CO 80241
Telephone: (720) 872-5000
| 53 |
ASCENT SOLAR TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Ascent Solar Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Ascent Solar Technologies, Inc.(the Company) as of December 31, 2023 and 2022, and the related statements of operations and comprehensive income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has had limited production which has led to the Company having a working capital deficit resulting in the Company being dependent on outside financing to fund its operations. There is no assurance that the Company will be able to raise additional capital and cash on hand is not sufficient to sustain operations. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
| F-2 |
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Complex Financing Transactions
Description of the Matter:
The Company’s financing transactions include common stock and warrant issuances that require proper accounting for proceeds and transaction costs which include fair value estimates. Additionally, adjustments to note and warrant terms resulted in deemed dividends for the down round provision, which is based on a fair value estimate. The financing transactions are discussed in Note 10 and Note 14 to the financial statements.
How We Addressed the Matter in Our Audit:
Our audit procedures related to the following:
| • | Inspected and reviewed debt agreements, warrant agreements, conversion notices, and settlement agreements to evaluate the Company’s accounting classification for these transactions, including assessing and evaluating management’s application of relevant accounting standards to such transactions. |
| • | We evaluated the reasonableness and appropriateness of the choice of valuation model used for each specific transaction. |
| • | We tested the reasonableness of the assumptions used by the Company in the Black Scholes models, including exercise price, term, expected volatility, and risk-free interest rate. |
| • | We tested the accuracy and completeness of data used by the Company in developing the assumptions used in the valuation models. |
| • | We evaluated the accuracy and completeness of the Company’s presentation of these instruments in the financial statements and related disclosures in Note 10, and 14, including evaluating whether such disclosures were in accordance with relevant accounting standards. |
Impairment of Assets Acquired
Description of the Matter:
As discussed in Notes 2,and 5 to financial statements, the Company acquired manufacturing assets and inventory located in Switzerland, during the year-ended December 31, 2023, in an effort to expand operations. At year-end, operations had deteriorated to a point where management determined it necessary to perform an evaluation of these assets for impairment, concluding that certain assets were impaired. The Company recognized a $3.3 million impairment charge, which is the amount by which the carrying value exceeded the estimated fair value of these assets. The Company entered into a letter agreement with a former affiliate of the Company that, among other things, granted the Company the option to resell the acquired assets to the former affiliate for $5 million. The Company exercised its option to resell the assets but has not received payment on this option and, due to deteriorating conditions with this affiliate, payment is uncertain.
| F-3 |
How We Addressed the Matter in Our Audit:
Auditing the Company’s impairment measurement involved a high degree of judgment as estimates underlying the determination of fair value of the long-lived assets were based on assumptions affected by current market and economic conditions. To determine the fair value of the long-lived asset group, the Company utilized a cost and market approach, measuring fair value on the standalone basis value premise. Management used these data inputs to perform an undiscounted cash flow analysis.
Our audit procedures related to the following:
| • | Testing managements process for developing the fair value estimate. |
| • | Evaluating the appropriateness of the discounted cash flow model used by management. |
| • | Testing the completeness and accuracy of underlying data used in the fair value estimate. |
/s/ Haynie & Company
Haynie & Company
Salt Lake City, Utah
February 21, 2024
We have served as the Company’s auditor since 2017.
| F-4 |
ASCENT SOLAR TECHNOLOGIES, INC.
BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables, net of allowance of $ | ||||||||
| Inventories | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Property, Plant and Equipment: | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net property, plant and equipment | ||||||||
| Other Assets: | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Patents, net of accumulated amortization of $ | ||||||||
| Equity method investment | ||||||||
| Other non-current assets | ||||||||
| Total other assets | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party payables | ||||||||
| Accrued expenses | ||||||||
| Accrued payroll | ||||||||
| Severance payable | ||||||||
| Accrued professional services fees | ||||||||
| Accrued interest | ||||||||
| Current portion of operating lease liability | ||||||||
| Conversions payable (Note 10) | ||||||||
| Current portion of convertible notes, net | ||||||||
| Other payable | ||||||||
| Total current liabilities | ||||||||
| Long-Term Liabilities: | ||||||||
| Non-current operating lease liabilities | ||||||||
| Non-current convertible notes, net | ||||||||
| Accrued warranty liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 17) | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Series A preferred stock, $ par value; shares authorized; and shares issued and outstanding, respectively ($ | ||||||||
| Common stock, $par value, authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
ASCENT SOLAR TECHNOLOGIES, INC.
STATEMENTS
OF OPERATIONS AND COMPREHENSIVE INCOME
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Products | $ | $ | ||||||
| Milestone and engineering | ||||||||
| Total Revenues | ||||||||
| Costs and Expenses | ||||||||
| Costs of revenue | ||||||||
| Research, development and manufacturing operations | ||||||||
| Selling, general and administrative | ||||||||
| Share-based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Impairment loss | ||||||||
| Total Costs and Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income/(Expense) | ||||||||
| Other income/(expense), net | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total Other Income/(Expense) | ( | ) | ( | ) | ||||
| Income/(Loss) on Equity Method Investment | ( | ) | ( | ) | ||||
| Net Income/(Loss) | $ | ( | ) | $ | ( | ) | ||
| Less: Down round deemed dividend | ( | ) | ||||||
| Net Income Available to Common Shareholders | $ | ( | ) | $ | ( | ) | ||
| Net Income/(Loss) Per Share (Basic and Diluted) | $ | ) | $ | ) | ||||
| Weighted Average Common Shares Outstanding (Basic and Diluted) | ||||||||
| Other Comprehensive Income/(Loss) | ||||||||
| Foreign currency translation gain/(loss) | ( | ) | ||||||
| Net Comprehensive Income/(Loss) | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these financial statements.
| F-6 |
ASCENT SOLAR TECHNOLOGIES, INC.
STATEMENT
OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the year ended December 31, 2023
| Series
A Preferred Stock | Series
1B Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Other Accumulated Comprehensive | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | (Deficit) | |||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Impact of adopting ASU 2020-06 | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Conversion of L1 Note and Conversions Payable into Common Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Conversion of Sabby Note into Common Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | |||||||||||||||||||||||||||||||||||||
| Common stock issued for services | — | — | ||||||||||||||||||||||||||||||||||||||
| Proceeds from issuance of Series 1B Preferred Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Series 1B Preferred Stock issuance cost | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Down round deemed dividend | — | — | — | ( | ) | |||||||||||||||||||||||||||||||||||
| Proceeds from public offering: | — | |||||||||||||||||||||||||||||||||||||||
| Common Stock (10/2 @ $) | — | — | ||||||||||||||||||||||||||||||||||||||
| Prefunded warrants (10/2 @ $) | — | — | — | |||||||||||||||||||||||||||||||||||||
| Warrants (10/2 @ $) | — | — | — | |||||||||||||||||||||||||||||||||||||
| Public offering costs | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Repayment of Series 1B Preferred Stock | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Conversion of prefunded warrants | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign Currency Translation Loss | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-7 |
ASCENT SOLAR TECHNOLOGIES, INC.
STATEMENT
OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the year ended December 31, 2022
| Series
A Preferred Stock | Series
1A Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Other Accumulated Comprehensive | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | (Deficit) | |||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||
| Conversion of TubeSolar Series 1A Preferred Stock into Common Stock | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Conversion of Crowdex Series 1A Preferred Stock into Common Stock | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Conversion of Global Ichiban Note into Common Shares | — | — | ||||||||||||||||||||||||||||||||||||||
| Conversion of Nanyang Note into Common Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Conversion of Fleur Note into Common Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Conversion of Sabby Note into Common Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Private placement warrants | — | — | — | |||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature | — | — | — | |||||||||||||||||||||||||||||||||||||
| Proceeds from private placement: | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Common stock (8/19 @ $) | — | — | ||||||||||||||||||||||||||||||||||||||
| Warrants (8/19 @ $) | — | — | — | |||||||||||||||||||||||||||||||||||||
| Private placement costs | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||
| Net Loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign Currency Translation Gain/(Loss) | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-8 |
ASCENT SOLAR TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating Activities: | ||||||||
| Net income/(loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Share-based compensation | ||||||||
| Services paid in common stock | ||||||||
| Gain on lease modification | ( | ) | ||||||
| Loss on disposal of assets | ||||||||
| Operating lease asset amortization | ||||||||
| Loss on equity method investment | ||||||||
| Patent write off | ||||||||
| Impairment loss | ||||||||
| Amortization of debt discount | ||||||||
| Inventory write off and reserve expense | ||||||||
| Other | ||||||||
| 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 | ( | ) | ( | ) | ||||
| Contributions to equity method investment | ( | ) | ||||||
| Patent activity costs | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from issuance of convertible debt and warrants | ||||||||
| Proceeds from issuance of stock and warrants | ||||||||
| Proceeds from issuance of Series 1B Preferred Stock | ||||||||
| Payment of convertible debt and conversions payable | ( | ) | ||||||
| Payment of Series 1B Preferred Stock | ( | ) | ||||||
| Financing issuance costs | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ||||||||
| Effect of foreign exchange rate on cash | ||||||||
| 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: | ||||||||
| Conversions of preferred stock, convertible notes, and conversions payable to equity | $ | $ | ||||||
| Series 1A preferred stock conversion | $ | $ | ||||||
| Operating lease assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Purchase and return of equipment purchased on credit | $ | ( | ) | $ | ||||
| Conversion of bridge loan into common stock and warrants | $ | $ | ||||||
| Conversion of prefunded warrants | $ | $ | ||||||
| Down round deemed dividend | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-9 |
ASCENT SOLAR TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Ascent Solar Technologies, Inc. (“Ascent” or the "Company") was incorporated on October 18, 2005 from the separation by ITN Energy Systems, Inc. (“ITN”) of its Advanced Photovoltaic Division and all of that division’s key personnel, core technologies, and certain trade secrets and royalty free licenses to use in connection with the manufacturing, developing marketing, and commercializing Copper-Indium-Gallium-diSelenide (“CIGS”) photovoltaic (“PV”) products. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin film, PV, battery, fuel cell and nano technologies. Through its work on research and development contracts for private and governmental entities, ITN developed proprietary processing and manufacturing know how applicable to PV products generally, and CIGS PV products in particular. ITN formed Ascent to commercialize its investment in CIGS PV technologies.
The Company focus is on integrating its PV products into scalable and high value markets such as agrivoltaics, 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.
On March 13, 2023, the Company redeployed its Thornton manufacturing facility as a Perovskite Center of Excellence and dedicated the facility to the industrial commercialization of the Company's patent-pending Perovskite solar technologies. On April 18, 2023, the Company completed its acquisition of the manufacturing assets of Flisom AG ("Flisom"), a Zurich based thin-film solar manufacturer and on June 16, 2023, exercised a put option to sell the assets (see Note 5). The Company has restarted production at its Thornton facility.
On September 11,
2023, the Company effected a reverse stock split of the Company’s common stock at a ratio of one-for-two hundred
Although the Company is focused on various markets for its product, the Chief Executive Officer makes significant operating decisions and assesses the performance of the Company as a single business segment. Accordingly, the Company has one reportable segment.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates: The preparation of financial statements in conformity with US 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.
Cash Equivalents: The Company classifies all short-term investments in interest bearing bank accounts and highly liquid debt securities purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances which may exceed federally insured limits. The Company does not believe this results in significant credit risk.
Inventories:
All inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average method. Inventory
balances are frequently evaluated to ensure they do not exceed net realizable value. The computation for net realizable value takes into
account many factors, including expected demand, product life cycle and development plans, module efficiency, quality issues, obsolescence
and others. Management's judgment is required to determine reserves for obsolete or excess inventory. As of December 31, 2023, and
2022, the Company had inventory reserve balances of $
Property,
Plant and Equipment: Property, plant and equipment are recorded at the original cost to the Company. Assets are being
depreciated over estimated useful lives of three
| Property, plant and equipment | ||
| Useful Lives | ||
| in Years | ||
| Manufacturing machinery and equipment | ||
| Furniture, fixtures, computer hardware/software | ||
| Leasehold improvements |
| F-10 |
Patents:
At such time as the Company is awarded patents, patent costs are amortized on a straight-line basis over the legal life on the patents,
or over their estimated useful lives, whichever is shorter. As of December 31, 2023, and 2022, the Company had net patent costs of
$
As of December 31, 2023, future amortization of patents is expected as follows:
| Amortization of patents | ||||
| 2024 | $ | |||
| 2025 | ||||
| $ |
Impairment of
Long-lived Assets: The Company analyzes its long-lived assets (property, plant and equipment) and definitive-lived intangible assets
(patents) for impairment, both individually and as a group, whenever events or changes in circumstances indicate the carrying amount of
the assets may not be recoverable. Events that might cause impairment would include significant current period operating or cash flow
losses associated with the use of a long-lived asset or group of assets combined with a history of such losses, significant changes in
the manner of use of assets and significant negative industry or economic trends. An undiscounted cash flow analysis is calculated to
determine if impairment exists. If impairment is determined to exist, any related loss is calculated using the difference between the
fair value and the carrying value of the assets. During the years ended December 31, 2023 and 2022, the Company recognized an impairment
charge of $
Equity Method Investment: The Company accounts for its investments in stock of other entities over which the Company has significant influence, but not control, using the equity method of accounting. Under the equity method of accounting, the Company increases its investment for contributions made and records its proportionate share of net earnings, declared dividends and partnership distributions based on the most recently available financial statements of the investee. The Company re-evaluates the classification at each balance sheet date and when events or changes in circumstances indicate that there is a change in the Company’s ability to exercise significant influence. The Company evaluates its equity method investments for potential impairment whenever events or changes in circumstances indicate that there is an other-than-temporary decline in the value of the investment. Declines in fair value that are deemed to be other-than-temporary are charged to Other income (expense), net.
Other Assets: Other assets is comprised of the following:
| Other assets | ||||||||
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| Lease security deposit | $ | $ | ||||||
| Spare machine parts | ||||||||
| Total Other Assets | $ | $ | ||||||
Related Party Payables: The Company accounts for fees due to board members in the related party payables account on the Balance Sheets.
Convertible Notes: The Company issues, from time to time, convertible notes. Refer to Note 10 for further information.
Convertible Preferred Stock: The Company evaluates its preferred stock instruments under FASB ASC 480, "Distinguishing Liabilities from Equity" to determine the classification, and thereby the accounting treatment, of the instruments. Refer to Notes 11 and 12 for further discussion on the classification of each instrument.
Product Warranties: The Company provides a limited warranty to the original purchaser of products against defective materials and workmanship. Warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience. The Company assesses the adequacy of its liabilities and makes adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available.
Leases: The Company determines if an arrangement is a lease or contains a lease at the inception of the contract. The Company accounts for non-lease components, such as certain taxes, insurance and common area maintenance, separate from the lease arrangement. Operating lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, and corresponding Operating lease right-of-use assets, which represent the Company’s right to use an underlying asset for the lease term, are recognized at the commencement date of the lease based on the present value of fixed future payments over the lease term. The Company utilizes the lease term for which it is reasonably certain to use the underlying asset, including consideration of options to extend or terminate the lease. Incentives received from landlords are recorded as a reduction to the lease right-of-use assets. The Company does not recognize lease right-of-use assets and corresponding lease liabilities for leases with initial terms of 12 months or less.
| F-11 |
The Company calculates the present value of future payments using the discount rate implicit in the lease, if available, or its incremental borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. In determining the Company's operating lease right of use assets and operating lease liabilities, the Company applied these incremental borrowing rates to the minimum lease payments within the lease agreement.
Revenue Recognition:
Product revenue. The Company recognizes revenue for the sale of PV modules and other equipment sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For module and other equipment sales contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer.
During the years
ended December 31, 2023 and 2022, the Company recognized product revenue of $
Milestone and
engineering revenue. Each milestone and engineering arrangement is a separate performance obligation. The transaction price is estimated
using the most likely amount method and revenue is recognized as the performance obligation is satisfied through achieving manufacturing,
costs or engineering targets. During the years ended December 31, 2023 and 2022, the Company recognized total milestone revenue of
$
Government contracts revenue. Revenue from government research and development contracts is generated under terms that include cost plus fee, cost share, or firm fixed price. The Company generally recognizes this revenue over time using cost-based input methods, which recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract. In applying cost-based input methods of revenue recognition, we use the actual costs incurred relative to the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.
Cost based input methods of revenue recognition are considered a faithful depiction of our efforts to satisfy long-term government research and development contracts and therefore reflect the performance obligations under such contracts. Costs incurred that do not contribute to satisfying the Company's performance obligations are excluded from our input methods of revenue recognition as the amounts are not reflective of transferring control under the contract. Costs incurred towards contract completion may include direct costs plus allowable indirect costs and an allocable portion of the fixed fee. If actual and estimated costs to complete a contract indicate a loss, provision is made for the anticipated loss on the contract.
Receivables and Allowance for Doubtful Accounts: Trade accounts receivable are recorded at the invoiced amount as the result of transactions with customers. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company estimates the collectability of accounts receivable using analysis of historical bad debts, customer creditworthiness and current economic trends. Reserves are established on an account-by-account basis and are written off against the allowance in the period in which the Company determines that is it probable that the receivable will not be recovered.
The Company bills the government under cost-based research and development contracts at provisional billing rates which permit the recovery of indirect costs. These rates are subject to audit on an annual basis by the government agencies’ cognizant audit agency. The cost audit may result in the negotiation and determination of the final indirect cost rates. In the opinion of management, re-determination of any cost-based contracts will not have a material effect on the Company’s financial position or results of operations.
As of December 31,
2023 and 2022, the Company had an accounts receivable, net balance of $
| F-12 |
The payment terms and conditions in customer contracts vary. Customers required to prepay are represented by deferred revenues, included in Accrued Liabilities on the Balance Sheets, until the Company’s performance obligations are satisfied. Invoiced customers are typically required to pay within 30 days of invoicing. Deferred revenue was as follows:
| Deferred revenue | ||||||
| Balance as of January 1, 2022 | $ | |||||
| Additions | ||||||
| Recognized as revenue | ( | ) | ||||
| Balance as of December 31, 2022 | ||||||
| Additions | ||||||
| Recognized as revenue | ( | ) | ||||
| Balance as of December 31, 2023 | $ | |||||
Shipping and Handling Costs: The Company classifies shipping and handling costs for products shipped to customers as a component of “Cost of revenues” on the Company’s Statements of Operations. Customer payments of shipping and handling costs are recorded as a component of Revenues.
Research, Development
and Manufacturing Operations Costs: Research, development and manufacturing operations expenses were $
Marketing and
Advertising Costs: Marketing and advertising costs are expensed as incurred. Marketing and advertising expenses were $
Other Income
(Expense): For the year ended December 31, 2023, Other income (expense) includes the receipt of the employee retention tax credit
of $
Income Taxes: Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates as of the date of enactment. Interest and penalties, if applicable, would be recorded in income tax (benefit) / expense.
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years (2020-2023) in these jurisdictions. The Company believes its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded.
Approximately million dilutive shares and million dilutive warrants for the year ended December 31, 2023 and approximately dilutive shares and dilutive warrants for the year ended December 31, 2022 were omitted because they were anti-dilutive.
| F-13 |
Fair Value Estimates: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses fair value hierarchy based on three levels of inputs, of which, the first two are considered observable and the last unobservable, to measure fair value:
| · | Level 1 – Quoted prices in active markets for identical assets or liabilities. |
| · | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| · | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Certain long-lived assets and current liabilities have been measured at fair value on a recurring and non-recurring basis. The carrying amount of our debt outstanding approximates fair value because the Company's current borrowing rate does not materially differ from market rates for similar bank borrowings and are considered to be Level 2. The carrying value for cash and cash equivalents, accrued expenses and other assets and liabilities approximate their fair values due to their short maturities.
In addition to the items measured at fair value on a recurring basis, in conjunction with the significant impairment loss taken during the year ended December 31, 2023, the Company also measured certain property, plant and equipment at fair value on a nonrecurring basis. These fair value measurements rely primarily on our specific inputs and assumptions about the use of the assets, as observable inputs are not available. Accordingly, we determined that these fair value measurements reside primarily within Level 3 of the fair value hierarchy.
Recently Adopted Accounting Standards
On January 1, 2023, the Company adopted ASU 2020-06. The adoption resulted in the elimination of the beneficial conversion feature recognized on the Company’s convertible debt. The Company elected to apply the modified retrospective method to all open contracts as of January 1, 2023, and the cumulative effect of initially applying ASU 2020-06 was recognized as an adjustment to the Company’s retained earnings balance as of January 1, 2023. Comparative periods have not been restated and continue to be reported under the accounting standard in effect for those periods.
The cumulative effect of the changes made to the Company’s January 1, 2023, Balance Sheet for the adoption of ASU 2020-06 is as follows:
| Cumulative effect of changes in fianancial statement | ||||||||||||
| Balance at December 31, 2022 | Adjustments Due to Adoption | Balance at January 1, 2023 | ||||||||||
| Liabilities | ||||||||||||
| Non-current convertible notes, net | $ | $ | $ | |||||||||
| Shareholders' equity | ||||||||||||
| Additional paid in capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
The impact due to the change in accounting principle on net income and earnings per share for the year ended December 31, 2023 is as follows:
| Post ASU 2020-06 | Pre ASU 2020-06 | Difference | ||||||||||
| Year Ended December 31, 2023 | ||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | |||||
| Net Loss attributable to common shareholders | ( | ) | ( | ) | ||||||||
| Earnings Per Share (Basic and Diluted) | $ | ) | $ | ) | $ | ) | ||||||
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvement to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 improves segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Management is evaluating the impact of this ASU on the Company's financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 improves income tax disclosures by requiring public entities annually to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for public entities for annual periods beginning after December 15, 2024. Entities are permitted to early adopt the standard for annual financial statements that have not yet been issued or made available for issuance. Management is evaluating the impact of this ASU on the Company's financial statements.
| F-14 |
NOTE 3. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN
During March 2023, the Company redeployed its Thornton manufacturing facility to focus on industrial commercialization of the Company's patent-pending Perovskite solar technologies. In April 2023, the Company purchased manufacturing assets in Zurich, Switzerland with plans to commence manufacturing using this equipment; however, in June 2023, Management exercised its put option to sell the this equipment (see Note 5) and restarted production at its Thornton facility and currently has limited PV production.
The Company will
continue to focus on integrating its PV products into scalable and high value markets which includes agrivoltaics, aerospace, etc. 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 relaunch strategy. During the year ended December 31, 2023 the Company used $
Additionally, projected
product revenues are not anticipated to result in a positive cash flow position for the year 2024 overall and, as of December 31,
2023, the Company has a working capital deficit of $
The Company continues to seek additional funding 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.
Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 4. RELATED PARTY TRANSACTIONS
On September 15,
2021, the Company entered into a Long-Term Supply and Joint Development Agreement (“JDA”) with TubeSolar, a former significant
stakeholder in the Company. Under the terms of the JDA, the Company would produce, and TubeSolar will purchase, thin-film PV foils (“PV
Foils”) for use in TubeSolar’s solar modules for agricultural photovoltaic (“APV”) applications that require solar
foils for its production. Additionally, the Company will receive (i) up to $
The Company and
TubeSolar also established Ascent Solar Technologies Germany GmbH (“Ascent Germany”), in which TubeSolar holds of
In June, 2023, TubeSolar filed an application for insolvency proceedings with the competent insolvency court due to insolvency and Management continues to monitor this situation.
NOTE 5. ASSET ACQUISITION
On
| F-15 |
At the Closing, the Company and Seller also entered into (i) a Transition Services Agreement requiring the Seller to provide transition support for the Company’s operation of the Assets, with fees to be paid by the Company for performing defined support services, (ii) a Sublease Agreement allowing the Company’s to use the Manufacturing Facility where the Assets are located, and (iii) a Technology License Agreement, pursuant to which Seller granted the Company a revocable, non-exclusive license to certain intellectual property rights of the Seller used in the operation of the Assets (the “Licensed IP”), subject to certain encumbrances on the Licensed IP in favor of Seller’s lender. The Company will also receive proceeds from fulfilling a supply agreement obligation for one of the Seller’s customers.
The total purchase
price, including transaction costs of $
| Summary of asset price allocation | ||||
| Asset Price Allocation | ||||
| Inventory | ||||
| Raw Material | $ | |||
| Finished Goods | ||||
| Other Assets | ||||
| Fixed Assets | ||||
| Manufacturing machinery and equipment | ||||
| Furniture, fixtures, computer hardware and computer software | ||||
In addition to the
Asset Purchase Agreement, on
In September, 2023, Flisom filed for bankruptcy in Switzerland. These proceeding are in the initial phase and the Company's purchased Assets are located in the Manufacturing Facility. Management continues to be in discussion with the Facility landlord to resolve this matter.
As the purchased
Assets were no longer being utilized for its intended purpose and because the put option is in default, Management concluded that there
was a change in circumstance that could indicate that the carrying value of of the Assets may not be recoverable. Based on Management's
analysis, Management concluded the undiscounted cash flows were not sufficient to recover the Asset's carrying value and recorded an impairment
loss of $
As of December 31,
2023, the Company's remaining book value of the Assets was approximately $
| F-16 |
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
The following table summarizes property, plant and equipment as of December 31, 2023 and 2022:
| Property, plant and equipment | ||||||||
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| Furniture, fixtures, computer hardware and computer software | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Manufacturing machinery and equipment | ||||||||
| Manufacturing machinery and equipment, in progress | ||||||||
| Depreciable property, plant and equipment | ||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Net property, plant and equipment | $ | $ | ||||||
Depreciation expense
for the years ended December 31, 2023 and 2022 was $
NOTE 7. OPERATING LEASES
In September 2020,
the Company commenced a operating lease for approximately
As of December 31, 2023 and 2022, assets and liabilities related to the Company's lease were as follows:
| Schedule of assets and liabilities related to company's leases | ||||||||
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating lease right-of-use assets, net | $ | $ | ||||||
| Current portion of operating lease liability | ||||||||
| Non-current portion of operating lease liability | ||||||||
During the years
ended December 31, 2023 and 2022 the Company recorded operating lease costs included in Selling, general, and administrative expenses
on the Statement of Operations of $
Future maturities of the operating lease liability are as follows:
| Schedule future maturities of operating lease liability | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total lease payments | $ | |||
| Less amounts representing interest | $ | ( |
) | |
| Present value of lease liability | $ |
The remaining weighted
average lease term and discount rate of the operating lease is
| F-17 |
During the years ended
December 31, 2023 and 2022, the Company recorded short term lease expense of approximately $
NOTE 8. INVENTORIES
Inventories consisted of the following at December 31, 2023 and 2022:
| Schedule of inventory, net of reserves | ||||||||
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
NOTE 9. NOTES PAYABLE
Prior to 2020, the
Company entered into an agreement with A vendor (“Vendor”) to convert the balance of their account into a note payable in
the amount of $
NOTE 10. CONVERTIBLE NOTES
The following tables provide a summary of the activity of the Company's convertible notes:
| Schedule of convertible debt | ||||||||||||||||||||||||||||
Principal | New | Notes | Notes | Principal | Less: | Net | ||||||||||||||||||||||
| BD1 Notes (related party) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| Nanyang Note | ( | ) | ||||||||||||||||||||||||||
| Fleur | ( | ) | ||||||||||||||||||||||||||
| Sabby | ( | ) | ( | ) | ||||||||||||||||||||||||
| L1 | ( | ) | ||||||||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Principal Balance 12/31/2022 | Principal Settled | Principal Balance 12/31/203 | Less: Discount | Net Principal Balance 12/31/2023 | ||||||||||||||||||
| Sabby | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||
| L1 | ( | ) | ( | ) | ||||||||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
BD1 Convertible Note
Prior to January
1, 2022, the Company entered into a securities exchange agreement (“BD1 Exchange Agreement”) with BD1, who had
previously acquired $
| F-18 |
The Company accreted the discount on the remaining principal to interest expense, ratably, over the life of the note.
On January 3, 2022,
BD1 assigned $
Nanyang Convertible Note
Prior to January
1, 2022, Nanyang acquired $
In July 2022, the
Company and Nanyang agreed to waive the cap on securities beneficially owned by Nanyang and its affiliates. On July 11, 2022, Nanyang
converted all of their remaining $
Fleur Convertible Note
On January 21, 2022,
as discussed above, BD1 assigned $
In July 2022, the
Company and Fleur agreed to waive the cap on securities beneficially owned by Fleur. On July 11, 2022, Fleur converted all of their
remaining $
Sabby / L1 Convertible Note
On December 19,
2022, the Company entered into a Securities Purchase Contract (the “Purchase Contract”) with two institutional investors (each,
an “Investor” and collectively, the “Investors”) for the issuance of $
Under the Purchase
Contract, in a concurrent private placement (the “Private Placement”), the Company issued to the Investors an additional $
The Advanced Notes
are secured by a pledge of all assets of the Company pursuant to a Security Agreement, dated as of December 19, 2022. The Investors can
converted the Advanced Notes into shares of the Company’s Common Stock at a conversion price, which is equal to the lower of (1)
a
| F-19 |
Additionally, the
Investors have the option to require early prepayment of the principal amount of the Registered Advance Notes in cash from up to 30% of
the gross proceeds of any subsequent issuance by the Company, for cash, of shares of the Company’s Common Stock or convertible securities,
or any combination of units thereof. The Company, pursuant to the terms in the Purchase Contract, 210 days after the date of the Purchase
Contract, may request that one of the Investors (the “Additional Advance Notes Investor”) acquire from the Company for a purchase
price equal to 90% of the principal amounts thereof, additional Advance Notes (the “Additional Advance Notes”) to be issued
in a registered direct offering in an aggregate principal amount not to exceed $1,000,000 (or, with the consent of the Additional Advance
Notes Investor, $
The Company also
issued to the Investors warrants to purchase up to
On December 19,
2022, the Company received $
| Schedule of fair value of warrants | ||||
| Warrants | ||||
| Expected stock price volatility | % | |||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Expected life of the warrants (in years) | ||||
Additionally, the Company determined the conversion feature was beneficial to the Investors at the date of issuance. The Company allocated a portion of the proceeds to the beneficial conversion feature ("BCF") based on its intrinsic value. The Company then allocated transaction costs based on these allocations resulting in the following allocation of proceeds:
| Summary of allocation of proceeds | ||||||||||||||||||||
| Principal Amount | Allocation | Original Note Discount | Transaction Costs | Net Amount | ||||||||||||||||
| Convertible Debt | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Warrants | — | — | ( | ) | ||||||||||||||||
| BCF | — | — | ( | ) | ||||||||||||||||
| $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
On March 29, 2023 and
on April 12, 2023, the Company and each of the Investors amended the agreements (the “Amendment”), to waive the event of
default, provide a prepayment schedule for the Advance Notes held by each of the Investors, and reduce the floor price to $
| Summary of convertible notes prepayment | |||
| Prepayment Date | Aggregate | ||
| April 3, 2023 | $ | ||
| April 13, 2023 | |||
| May 18, 2023 | |||
| June 19, 2023 | |||
| $ | |||
On May 22, 2023,
the Investors and the Company agreed to defer for 90 days each of the two prepayments of $
On May 25, 2023,
the Company and each of the Investors entered into a Waiver and Amendment Agreement (the “Second Amendment”) relating to the
Securities Purchase Contract and the Advance Notes. Pursuant to the Second Amendment, the Company and each of the Investors agreed
to amend the Advance Notes to provide that if the Company receives a Notice of Conversion at a time that the Conversion Price (or, as
applicable, the Alternative Conversion Price) then in effect Price, without regard to the Floor Price (the “Applicable Conversion
Price”), is less than the Floor Price then in effect, the Company shall issue a number of shares equal to the Conversion Amount
divided by such Floor Price and, at its election (x) pay the economic difference between the Applicable Conversion Price and such Floor
Price (the “Outstanding Conversion Amount”) in cash at such time or (y) pay the Outstanding Conversion Amount following the
consummation of a reverse stock split by the Company (1) in cash or (2) by issuing to the Holder a number of shares of Common Stock with
an aggregate value equal to the Outstanding Conversion Amount, with the value per share of Common Stock for purposes of such calculation
equal to (i) if such shares are issued on or prior to August 23, 2023, the daily VWAP of the Common Stock on the Trading Day following
the date of the consummation of such reverse stock split or (ii) if such shares are issued after August 23, 2023,
| F-20 |
During
the year ended December 31, 2023, the Company settled $14.5 million
| Summary of settlement of debt | ||||
| Principal Settled | ||||
| Principal converted into stock | $ | |||
| Principal converted into conversions payable | ||||
| Cash Payments | ||||
| Total Principal Settled | $ | |||
On December 1, 2023,
the Company and each of the Investors agreed that future stock payments of existing conversion payable liabilities will be at an issue
price of
| Summary of conversion payable activity | ||||
| Conversions payable | ||||
| Balance at January 1, 2023 | $ | |||
| Additions to conversions payable | ||||
| Cash payments | ( | ) | ||
| Conversions payable settled in stock | ( | ) | ||
| Balance at December 31, 2023 | $ | |||
During the years
ended December 31, 2023 and 2022, the Company issued and shares of common stock, respectively, under the Securities Purchase
Contract. During the year ended December 31, 2023, the Company recognized $
The Securities Purchase
Contract also included certain warrants to purchase up to
On
| 1. | The
fixed conversion price of the remaining principal outstanding on the Advance Notes was lowered
to $ |
| 2. | The
exercise price of the outstanding Warrants was lowered to $ |
| 3. | The number of shares that the
Warrants are exercisable for increased from |
On
The terms of the Series 1B SPA triggered certain further adjustments to the Advance Notes and the Warrants in accordance with the existing terms of the outstanding Advance Notes and the outstanding Warrants. Following these further adjustments in June 2023:
| 1. | The
fixed conversion price of the remaining principal outstanding on the Advance Notes was lowered
to $ |
| 2. | The
exercise price of the outstanding Warrants was lowered to $ |
| 3. | The
number of shares that the Warrants are exercisable for increased from |
On
September 28, 2023, the Company entered into a placement agency agreement (the “Placement Agent Agreement”) with Dawson
James Securities Inc. (“Dawson James”) pursuant to which the Company engaged Dawson James as the placement agent for a registered
public offering by the Company (the “Offering”), of an aggregate of units (“Units”) at a price of $
per Unit, for gross proceeds of approximately $
| F-21 |
The terms of the Offering triggered certain further adjustments to the Advance Notes and the Warrants in accordance with the existing terms of the outstanding Advance Notes and the outstanding Warrants. Following these further adjustments in October 2023:
| 1. | The
fixed conversion price of the approximately then outstanding $ |
| 2. | The
exercise price of the outstanding Warrants has been lowered to $ |
| 3. | The
number of shares that the Warrants are exercisable for has been increased from |
Pursuant
to ASC 260, Earnings per Share, the Company recorded a deemed dividend for the down round adjustments of $
The discount
on the note is recorded as interest expense ratably over the term of the note. Interest payable on the Advance Notes, as of December 31,
2023 and 2022 was approximately $
NOTE 11. SERIES A PREFERRED STOCK
Holders of Series
A Preferred Stock are entitled to cumulative dividends at a rate of
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 $ million, as adjusted, for twenty consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $ per share, plus any accrued and unpaid dividends. At December 31, 2023, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time. After making adjustment for the Company’s prior reverse stock splits, all outstanding Series A preferred shares are convertible into less than one common share. Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends.
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 $ per share of Series A Preferred Stock plus any accrued and unpaid dividends.
As of December 31,
2023, there were shares of Series A Preferred Stock outstanding and accrued and unpaid dividends, included as Accrued Interest
on the Balance Sheet, of $
NOTE 12. SERIES 1A PREFERRED STOCK
Each share of Series
1A Preferred Stock has an original issue price of $ per share. Shares of the Series 1A Preferred Stock are convertible into common
stock at a fixed conversion price equal to $
Outstanding shares of Series 1A Preferred Stock are entitled to vote together with the holders of common stock as a single class (on an as-converted to common stock basis) on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stock holders (or written consent of stockholders in lieu of meeting).
Holders of the
Series 1A Preferred Stock are not entitled to any fixed rate of dividends. If the Company pays a dividend or otherwise makes a distribution
payable on shares of common stock, holders of the Series 1A Preferred Stock will receive such dividend or distribution on an as-converted
to common stock basis. There are no specified redemption rights for the Series 1A Preferred Stock. Upon liquidation, dissolution or winding
up, holders of Series 1A Preferred Stock will be entitled to be paid out of the Company’s assets, prior to the holders of our common
stock, an amount equal to $
| F-22 |
As of January 1, 2022, Crowdex Investment, LLC ("Crowdex") owned shares of Series 1A Preferred Stock and TubeSolar owned shares of Series 1A Preferred Stock. On February 1, 2022, Crowdex converted their shares of Series 1A Preferred Stock into shares of common stock and TubeSolar converted their shares of Series 1A Preferred Stock into shares of common stock.
NOTE 13. SERIES 1B PREFERRED STOCK
On
The Series 1B Preferred Stock ranks senior to the common stock with respect to dividends and rights upon liquidation. Holders of the Series 1B Preferred Stock do not have voting rights and are not entitled to any fixed rate of dividends; however, if the Company pays a dividend or otherwise makes a distribution or distributions payable on shares of common stock, then the Company will make a dividend or distribution to the holders of the Series 1B Preferred Stock in such amounts as each share of Series 1B Preferred Stock would have been entitled to receive if such share of Series 1B Preferred Stock was converted into shares of common stock at the time of payment of the stock dividend or distribution.
There is no scheduled or mandatory redemption for the Series 1B Preferred Stock and there is no redemption for the Series 1B Preferred Stock exercisable (i) at the option of the Investor, or (ii) at the option of the Company.
Upon our liquidation,
dissolution or winding up, holders of Series 1B Preferred Stock will be entitled to be paid out of the Company assets, prior to the holders
of our common stock, an amount equal to $
Shares of the Series
1B Preferred Stock are convertible at the option of the holder into common stock at an initial conversion price of equal to $
On the Reset Date,
the conversion price shall be equal to the lower of (i) $
Holders of the
Series 1B Preferred Stock (together with its affiliates) may not convert any portion of such Investor’s Series 1B Preferred Stock
to the extent that the holder would beneficially own more than of the Company’s outstanding shares of common stock after conversion,
except that upon at least
On October 2, 2023,
with the closing of the Public Offering (Note 14), the Company retired the $
NOTE 14. STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock
At, the Company had million shares of common stock, $ par value, authorized for issuance. Each share of common stock has the right to one vote . As of December 31, 2023, the Company had shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2023.
Private Placement Offering
On August 4, 2022,
the Company received $
On August 8, 2022,
the Company entered into a securities purchase agreement (“SPA”) with Lucro for the private placement (the “Common Stock
Private Placement”) of an aggregate of shares (the “Shares”) of the Company’s common stock and warrants
exercisable for up to an additional
| F-23 |
Each Warrant is
exercisable for five
On August 19, 2022,
the Company received $
| Schedule of fair value of warrants | ||||
| Warrants | ||||
| Expected stock price volatility | % | |||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Expected life of the warrants (in years) | ||||
Public Offering
On September 28,
2023, the Company entered into a placement agency agreement (the “Placement Agent Agreement”) with Dawson James Securities
Inc. (“Dawson James”) pursuant to which the Company engaged Dawson James as the placement agent for a registered public offering
by the Company (the “Offering”), of an aggregate of units (“Units”) at a price of $ per Unit, for
gross proceeds of approximately $
Each Unit is
comprised of (i) one share of common stock or, in lieu of common stock, one Prefunded warrant to purchase a share of common stock,
and (ii) one common warrant to purchase a share of common stock. The Prefunded warrants are immediately exercisable at a price of
$
The Company agreed
to pay Dawson James a placement agent fee in cash equal to
The Offering closed on October 2, 2023 and, in the Offering, the Company issued (i) common shares, (ii) Prefunded warrants, and (iii) common warrants.
The
$
| Schedule of fair value of warrants | ||||
| Warrants | ||||
| Expected stock price volatility | % | |||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Expected life of the warrants (in years) | ||||
The
Company used a portion of the proceeds from the Offering to retire approximately $
During the year
ended December 31, 2023,
| F-24 |
Warrants
As of December
31, 2023, there were
As of December
31, 2022, there were
Preferred Stock
December 31, 2023, the Company had shares of preferred stock, $ par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. The following table summarizes the designations, shares authorized, and shares outstanding for the Company’s Preferred Stock:
| Schedule of stock by class | ||||||||
| Preferred Stock Series Designation | Shares Authorized | Shares Outstanding | ||||||
| Series A | ||||||||
| Series 1A | ||||||||
| Series 1B | ||||||||
| 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 11 for Series A Preferred Stock activity.
Series 1A Preferred Stock
Refer to Note 12 for Series 1A 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, E, G, H, I, J, J-1, or K during the years ended December 31, 2023 and 2022.
On September 21, 2022, the Company’s Board of Directors appointed Jeffrey Max as the Company’s new Chief Executive Officer and granted an inducement grant of restricted stock units (“RSUs”) for an aggregate of shares of Ascent’s common stock. of the RSUs are fully vested upon grant. The remaining of the RSUs vests in equal monthly increments over the next months. The estimated fair value of the restricted stock unit is $, the closing price at grant date.
| F-25 |
On December 12, 2022, the Company’s Board of Directors appointed Paul Warley as the Company’s new Chief Financial Officer and granted him an inducement grant of RSUs for an aggregate of shares of Ascent’s common stock. of the RSUs are fully vested upon grant. The remaining of the RSUs vests in equal monthly increments over the next months. The estimated fair value of the restricted stock unit is $, the closing price at grant date.
On April 26, 2023, the Company terminated its employment contract with Mr. Max resulting in the forfeiture of restricted stock units. The remaining non-vested shares of units as of December 31, 2023 are expected to vest in the future. Total unrecognized share-based compensation expense from the remaining unvested restricted stock as of December 31, 2023 was approximately $ million and is expected to be recognized over months. The Company recognized share-based compensation expense related to restricted stock grants of $ and $ for the year ended December 31, 2023 and 2022, respectively. The following table summarizes non-vested restricted stock and the related activity as of and for the years ended December 31, 2023, and 2022:
| Summary of non-vested restricted stock and related activity | ||||||||||
| Shares | Weighted Average Grant Date Fair Value | |||||||||
| Non-vested at January 1, 2022 | $ | |||||||||
| Granted | ||||||||||
| Vested | ( | ) | ||||||||
| Forfeited | ||||||||||
| Non-vested at December 31, 2022 | $ | |||||||||
| Granted | ||||||||||
| Vested | ( | ) | ||||||||
| Forfeited | ( | ) | ||||||||
| Non-vested at December 31, 2023 | $ | |||||||||
The fair values of the respective vesting dates of RSUs was $ and $ for the years ended December 31, 2023 and 2022, respectively.
NOTE 16. INCOME TAXES
The Company records income taxes using the liability method. Under this method, deferred tax assets and are computed for the expected future impact of temporary differences between the financial statement and income tax bases of assets and liabilities using current income tax rates and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold before a benefit is recognized in the financial statements.
At December 31,
2023, the Company had $
| F-26 |
Deferred income taxes reflect an estimate of the cumulative temporary differences recognized for financial reporting purposes from that recognized for income tax reporting purposes. At December 31, 2023 and 2022, the components of these temporary differences and the deferred tax asset were as follows:
| Schedule of deferred tax assets and liabilities | ||||||||
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| Deferred Tax Asset | ||||||||
| Accrued expenses | $ | $ | ||||||
| Inventory allowance | ||||||||
| Other | ||||||||
| Operating lease liability | ||||||||
| Tax effect of NOL carryforward | ||||||||
| Share-based compensation | ||||||||
| Section 174 costs | ||||||||
| Warranty reserve | ||||||||
| Gross Deferred Tax Asset | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net Deferred Tax Asset | $ | $ | ||||||
| Operating lease right-of-use asset, net | ( | ) | ( | ) | ||||
| Depreciation | ( | ) | ( | ) | ||||
| Amortization | ( | ) | ( | ) | ||||
| Net Deferred Tax Liability | $ | ( | ) | $ | ( | ) | ||
| Total | ||||||||
In assessing the
realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based
upon the level of historical losses and projections of future taxable income over the periods in which the deferred tax assets are
deductible, management believes it is not more-likely-than-not that the Company will realize the benefits of these deductible
differences at December 31, 2023. The Company’s deferred tax valuation allowance of $81.1 million
As of December
31, 2023, the Company has not recorded a liability for uncertain tax positions.
The Company’s effective tax rate for the years ended December 31, 2023 and 2022 differs from the statutory rate due to the following (expressed as a percentage of pre-tax income):
| Schedule of effective income tax rate reconciliation | ||||||||
| 2023 | 2022 | |||||||
| Federal statutory rate | % | % | ||||||
| State statutory rate | % | % | ||||||
| Permanent tax differences | ( | )% | ( | )% | ||||
| Deferred true-ups | ( | )% | ( | )% | ||||
| Deferred rate change | % | ( | )% | |||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| Total | % | % | ||||||
| F-27 |
NOTE 17. COMMITMENTS AND CONTINGENCIES
On September 21,
2022, the Company and Victor Lee, our former CEO, entered into a Separation Agreement and Release of Claims September 21, 2022 (the “Separation
Agreement”). Under the Separation Agreement Mr. Lee is entitled, subject to his non-revocation of a general release of claims in
favor of the Company, to the following separation benefits: (i) payment of twelve (12) months salary equal to $
On April 26, 2023, the board of directors of the Company terminated Mr. Max as the Company’s President and Chief Executive Officer. Mr. Max claims that his termination was not for cause as defined in his employment agreement which could enable him to certain benefits, including severance and vesting of restricted stock units. Management believes Mr. Max was terminated for cause and any such claims, if asserted, would be without substantial merit. Although the outcome of any legal proceedings is uncertain, the Company will vigorously defend any future claims made by Mr. Max.
On August 15, 2023,
H.C. Wainwright & Co., LLC (“Wainwright”) filed an action against the Company in the New York State Supreme Court in New
York County. The complaint alleges a breach by the Company of an investment banking engagement letter entered into in October 2021. The
Wainwright engagement letter expired in April 2022 without any financing transaction having been completed. The complaint claims that
Wainright is entitled, under a “tail provision”, to an
The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its financial position or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company’s assessment of any claim will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s financial position or results of operations in particular quarterly or annual periods.
NOTE 18. RETIREMENT PLAN
The Company has a
qualified 401(k) plan which provides retirement benefits for all of its eligible employees. Under the plan, employees become
eligible to participate at the first entry date, provided they are at least
NOTE 19. SUBSEQUENT EVENTS
Subsequent to December
31, 2023, approximately $
| F-27 |
$6,000,000
UP TO [***]
SHARES OF COMMON STOCK
OR PRE-FUNDED WARRANTS TO PURCHASE SHARES
OF COMMON STOCK
ASCENT SOLAR TECHNOLOGIES, INC.
PROSPECTUS
____________, 2024
Dawson James Securities Inc.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| Item 13. | Other Expenses of Issuance and Distribution. |
The following table sets forth the costs and expenses, other than the placement agent discounts and commissions, payable in connection with the sale of common stock being registered. All amounts shown are estimates, except the Securities and Exchange Commission registration fee, the Financial Industry Regulatory Authority filing fee and the Exchange listing fee.
| Securities and Exchange Commission registration fee | $ | 918.81 | ||
| Financial Industry Regulatory Authority filing fee | 5,000 | |||
| Legal fees and expenses | 200,000 | |||
| Accountants’ fees and expenses | 15,000 | |||
| Transfer agent and registrar fees and expenses | 25,000 | |||
| Miscellaneous | 40,081.19 | |||
| Total | $ | 286,000.00 |
| Item 14. | Indemnification of Directors and Officers. |
We are incorporated under the laws of the state of Delaware. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation, or is or was serving at the request of such person as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses that such officer or director has actually and reasonably incurred. Our charter and bylaws provide for the indemnification of our directors and officers to the fullest extent permitted under the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for:
| · | any breach of the director’s duty of loyalty to the corporation or its stockholders; |
| · | any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| · | any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or |
| · | any transaction from which the director derived an improper personal benefit. |
These limitations of liability do not affect the availability of equitable remedies such as injunctive relief or rescission. Our charter also authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.
| II-1 |
As permitted by Section 145 of the Delaware General Corporation Law, our bylaws provide that:
| · | we may indemnify our directors, officers and employees to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; | |
| · | we may advance expenses to our directors, officers and employees in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and | |
| · | the rights provided in our bylaws are not exclusive. |
Section 174 of the Delaware General Corporation Law provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption may be held liable for such actions. A director who was either absent when the unlawful actions were approved, or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
As permitted by the Delaware General Corporation Law, we have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. Under the terms of our indemnification agreements, we are required to indemnify each of our directors and officers, to the fullest extent permitted by the laws of the state of Delaware, if the basis of the indemnitee’s involvement was by reason of the fact that the indemnitee is or was a director, or officer, of the company or any of its subsidiaries or was serving at the company’s request in an official capacity for another entity. We must indemnify our officers and directors against (1) attorneys’ fees and (2) all other costs of any type or nature whatsoever, including any and all expenses and obligations paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal) or preparing to defend, be a witness or participate in any completed, actual, pending or threatened action, suit, claim or proceeding, whether civil, criminal, administrative or investigative, or establishing or enforcing a right to indemnification under the indemnification agreement. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder. These indemnification provisions and the indemnification agreements may be sufficiently broad to permit indemnification of our officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
In addition, we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances.
The form of Placement Agent Agreement, to be filed as Exhibit 1.1 hereto, provides for indemnification by the placement agent of us and our officers who sign this Registration Statement and directors for specified liabilities, including matters arising under the Securities Act.
| Item 15. | Recent Sales of Unregistered Securities. |
During the three-year period preceding the date of filing of this registration statement, we have issued securities in the transactions described below without registration under the Securities Act.
| II-2 |
On January 4, 2021, the Company entered into a securities purchase agreement to issue 2,500 shares of the Company’s Series 1A Preferred Stock to TubeSolar AG at a price of $1,000 per share. On January 5, 2021, the Company received gross proceeds of $2,500,000 from this transaction.
On March 4, 2021, the Company entered into a securities purchase agreement to issue 75 shares of the Company’s Common Stock to Baybridge Capital Fund in a private placement at a per share price of $40,000. On March 9, 2021, the Company received gross proceeds of $3,000,000 from this transaction.
On August 2, 2021, the Company entered into a securities purchase agreement with BD 1 Investment Holding, LLC for the private placement of an aggregate of 667 shares of the Company’s common stock at a fixed price of $0.015 per share in two tranches of 333 shares in exchange for $5,000,000 of gross proceeds each. On September 2, 2021, the parties closed on the first tranche and, on November 5, 2021, the parties closed on the second tranche, receiving aggregate gross proceeds of $10,000,000
On August 16, 2021, the Company issued to each of BD 1 Investment Holding, LLC and Nanyang Investment Management Pte. Ltd. an unsecured convertible promissory note with principal amount of $9,740,000 and $600,000, respectively, replacing a convertible promissory note with principal amount of $10,340,000 previously issued to BD 1 Investment Holding, LLC.
On January 3, 2021, the Company issued to each of BD 1 Investment Holding, LLC and Fleur Capital Pte. Ltd an unsecured convertible promissory note with principal amount of $8,740,000 and $1,000,000, respectively, replacing a convertible promissory note with principal amount of $9,740,000 previously issued to BD 1 Investment Holding, LLC.
On January 21, 2021, the Company issued to each of BD 1 Investment Holding, LLC and Nanyang Investment Management Pte. Ltd an unsecured convertible promissory note with principal amount of $7,740,000 and $1,000,000, respectively, replacing a convertible promissory note with principal amount of $8,740,000 previously issued to BD 1 Investment Holding, LLC.
On February 1 and 2, 2022, holders of: (i) $9,200,000 aggregate principal amount of our outstanding convertible promissory notes converted such notes (in accordance with their existing, split-adjusted terms) into 92,000 shares of newly issued post-split common stock, and (ii) 3,700 outstanding shares of Series 1A convertible preferred stock converted such preferred shares (in accordance with their existing, split-adjusted terms) into 37,000 shares of newly issued post-split common stock.
On August 8, 2022, the Company entered a securities purchase agreement (“SPA”) with Lucro Investments VCC-ESG Opportunities Fund (“Lucro” or “Investor”), an affiliate of Fleur Capital (S) Pte Ltd (“Fleur”), for a $5 million private placement (the “Private Placement”) of an aggregate of 4,717 shares (the “Shares”) of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), and warrants exercisable for up to an additional 7,076 shares of Common Stock (the “Warrants”). The Private Placement closed on August 19, 2022. In connection with such closing, the Company (i) received $4 million of gross cash proceeds from Investor and (ii) the outstanding $1 million Bridge Promissory Note held by Investor was automatically cancelled and converted into Common Stock and Warrants in accordance with the terms of such Bridge Promissory Note. The proceeds of the Private Placement will be used for the Company’s general corporate purposes. The Shares and Warrants were sold in units (the “Units”) at a fixed price of $1,060 per Unit. Each Unit consists of (i) one Share and (ii) Warrants exercisable for 1.5 shares of Common Stock.
On December 19, 2022, the Company entered into a Securities Purchase Contract (the “Purchase Contract”) with two institutional investors for the issuance of $12,500,000 in aggregate principal amount of Senior Secured Original Issue 10% Discount Convertible Advance Notes, for a purchase price of $11,250,000 in cash, net of an original issuance discount of $1,250,000 (the “Registered Advance Notes”). The Registered Advance Notes were offered and sold pursuant to a shelf registration statement on Form S-3 and a related prospectus supplement, dated December 19, 2022.
Under the Purchase Contract, in a concurrent private placement (the “Private Placement”), the Company (i) issued to the Investors an additional $2,500,000 in aggregate principal amount of Senior Secured Original Issue 10% Discount Convertible Advance Notes, for a purchase price, together with the warrants described in (ii) below, of $2,250,000 in cash, net of an original issuance discount of $250,000 (the “Private Placement Advance Notes” and, together with the Registered Advance Notes, the “Advance Notes”).
In connection with the Purchase Contract, the Company also issued to the investors common stock warrants (“Warrants”) exercisable for 12,568 shares of the Company’s Common Stock, at an exercise price equal to $786.00 per share, in each case subject to adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of the Company’s Common Stock, as well as future issuance by the Company of securities with a purchase or conversion, exercise or exchange price that is less than the exercise price of the Warrants in effect at any time. The Warrants will be exercisable for five years from their date of issuance.
| II-3 |
On June 29, 2023, the Company issued to certain investors 900 shares of the Company’s newly designated Series 1B Convertible Preferred Stock (“Series 1B Preferred Stock”) in exchange for $900,000 of gross proceeds.
The securities described above were deemed exempt from registration under the Securities Act in reliance upon Section 3(a)(9), Section 4(a)(2) or Regulation D of the Securities Act. There were no underwriters employed in connection with any of the transactions set forth in this Item 15.
| Item 16. | Exhibits and Financial Statement Schedules. |
(a) Exhibits. The following exhibits are filed as part of this Registration Statement:
| II-4 |
| II-5 |
| II-6 |
| * | Filed herewith. | |
| ** | To be filed by amendment. | |
| *** | Previously filed | |
| CTR | Portions of this exhibit have been omitted pursuant to a request for confidential treatment. | |
| † | Denotes management contract or compensatory plan or arrangement. | |
| + | Certain portions of the exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. |
| II-7 |
| Item 17. | Undertakings. |
| (a) | The undersigned registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| i. | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; | ||
| ii. | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; | ||
| iii. | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. | ||
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | ||
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That for the purpose of determining any liability under the Securities Act of 1933 in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| i. | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; | |
| ii. | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| iii. | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and | |
| iv. | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (5) | That for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
| (b) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
| (c) | The undersigned registrant hereby undertakes that: |
| (1) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
| (2) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| II-8 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 2 to Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Thornton, in the State of Colorado, on this 5th day of April, 2024.
| ASCENT SOLAR TECHNOLOGIES, INC. | |||
| By: | /s/ Jin Jo | ||
| Jin Jo | |||
| Chief Financial Officer | |||
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Paul Warley | Chief Executive Officer, Director | April 3, 2024 | ||
| Paul Warley | (Principal Executive Officer) | |||
| /s/ Jin Jo | Chief Financial Officer | April 5, 2024 | ||
| Jin Jo | (Principal Financial and Accounting Officer) | |||
| * | Director | April 5, 2024 | ||
| David Peterson | ||||
| * | Director | April 5, 2024 | ||
| Louis Berezovsky | ||||
| * | Director | April 5, 2024 | ||
| Forrest Reynolds | ||||
| * | Director | April 5, 2024 | ||
| Gregory Thompson |
By: /s/ Jin Jo
Jin Jo
Attorney-in-Fact*
| II-9 |
Exhibit 1.1
PLACEMENT AGENCY AGREEMENT
Dawson James Securities, Inc.
1 North Federal Highway
Boca Raton, Florida 33432
April [__], 2024
Ladies and Gentlemen:
This letter (this “Agreement”) constitutes the agreement between Ascent Solar Technologies, Inc., a Delaware corporation (the “Company”) and Dawson James Securities, Inc. (“Dawson”) pursuant to which Dawson shall serve as the placement agent (the “Placement Agent”) (the “Services”), for the Company, on a reasonable “best efforts” basis, in connection with the proposed offer and placement (the “Offering”) by the Company of its Securities (as defined Section 3 of this Agreement). The Company expressly acknowledges and agrees that Dawson’s obligations hereunder are on a reasonable “best efforts” basis only and that the execution of this Agreement does not constitute a commitment by Dawson to purchase the Securities and does not ensure the successful placement of the Securities or any portion thereof or the success of Dawson placing the Securities.
| 1. | Appointment of Dawson James Securities, Inc. as Exclusive Placement Agent. |
On the basis of the representations, warranties, covenants and agreements of the Company herein contained, and subject to all the terms and conditions of this Agreement, the Company hereby appoints the Placement Agent as its exclusive placement agent in connection with a distribution of its Securities to be offered and sold by the Company pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”) on Form S-1 (File No. 333-277070), and Dawson agrees to act as the Company’s exclusive Placement Agent. Pursuant to this appointment, the Placement Agent will solicit offers for the purchase of or attempt to place all or part of the Securities of the Company in the proposed Offering. Until the final closing or earlier upon termination of this Agreement pursuant to Section 5 hereof, the Company shall not, without the prior written consent of the Placement Agent, solicit or accept offers to purchase the Securities other than through the Placement Agent. The Company acknowledges that the Placement Agent will act as an agent of the Company and use its reasonable “best efforts” to solicit offers to purchase the Securities from the Company on the terms, and subject to the conditions, set forth in the Prospectus (as defined below). The Placement Agent shall use commercially reasonable efforts to assist the Company in obtaining performance by each Purchaser whose offer to purchase Securities has been solicited by the Placement Agent, but the Placement Agent shall not, except as otherwise provided in this Agreement, be obligated to disclose the identity of any potential purchaser or have any liability to the Company in the event any such purchase is not consummated for any reason. Under no circumstances will the Placement Agent be obligated to underwrite or purchase any Securities for its own account and, in soliciting purchases of the Securities, the Placement Agent shall act solely as an agent of the Company. The Services provided pursuant to this Agreement shall be on an “agency” basis and not on a “principal” basis.
The Placement Agent will solicit offers for the purchase of the Securities in the Offering at such times and in such amounts as the Placement Agent deems advisable. The Company shall have the sole right to accept offers to purchase Securities and may reject any such offer, in whole or in part. The Placement Agent may retain other brokers or dealers to act as sub-agents on its behalf in connection with the Offering and may pay any sub-agent a solicitation fee with respect to any Securities placed by it. The Company and Placement Agent shall negotiate the timing and terms of the Offering and acknowledge that the Offering and the provision of Placement Agent services related to the Offering are subject to market conditions and the receipt of all required related clearances and approvals.
| 1 |
| 2. | Fees; Expenses; Other Arrangements. |
A. Placement Agent’s Fee. As compensation for services rendered, the Company shall pay to the Placement Agent in cash by wire transfer in immediately available funds to an account or accounts designated by the Placement Agent an amount (the “Placement Fee”) equal to eight percent (8.0%) of the aggregate gross proceeds received by the Company from the sale of the Securities (provided, that with respect to Securities sold to investors introduced to the Offering by the Company the Placement Fee shall be four percent (4.0%)), at the closing (the “Closing” and the date on which the Closing occurs, the “Closing Date”); and the Company shall issue to the Placement Agent or its designees at the Closing five-year warrants to purchase such number of Shares (as defined in Section 3) equal to 3.0% of the aggregate Shares and Pre-Funded Warrants sold in this Offering, at an exercise price of $[___] (125% of the price per Share), which warrants shall be exercisable at any time, during the period commencing six months from the date of the Offering (the “Placement Agent Warrant” and together with the shares of Common Stock underlying the Placement Agent Warrant, the “Placement Agent Securities”). The Placement Agent may deduct from the net proceeds of the Offering payable to the Company on the Closing Date the Placement Fee set forth herein to be paid by the Company to the Placement Agent.
B. Offering Expenses. The Company will be responsible for and will pay all expenses relating to the Offering, including, without limitation, (a) all filing fees and expenses relating to the registration of the Securities with the Commission; (b) all FINRA Public Offering filing fees; (c) all fees and expenses relating to the listing of the Company’s common stock on the NASDAQ Stock Market; (d) all fees, expenses and disbursements relating to the registration or qualification of the Securities under the “blue sky” securities laws of such states and other jurisdictions as Dawson may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of “blue sky” counsel); (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Securities under the securities laws of such foreign jurisdictions as Dawson may reasonably designate; (f) the costs of all mailing and printing of the Offering documents; (g) transfer and/or stamp taxes, if any, payable upon the transfer of Securities from the Company to Investors; (h) the fees and expenses of the Company’s accountants; (i) up to $5,000 of “road show” expenses, (j) diligence expenses, and (k) fees and expenses of Dawson’s counsel and other agents and representatives not to exceed in the aggregate $155,000. The Placement Agent may deduct from the net proceeds of the Offering payable to the Company on the Closing Date the expenses set forth herein to be paid by the Company to the Placement Agent, provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Placement Agent to the extent required by Section 5 hereof.
C. Tail Financing. The Placement Agent shall be entitled to fees per Section 2.A. of this Agreement with respect to any public or private offering or other financing or capital-raising transaction of any kind (“Tail Financing”) to the extent that such Tail Financing is provided to the Company by any investors that the Placement Agent has introduced by face to face meeting or video conference call to to participate in the Offering or anyone who participates in the Offering, if such Tail Financing is consummated at any time within the 9-month period following the Closing Date. Notwithstanding the foregoing, the parties agree that the provisions of this paragraph shall not be applicable to any financing provided by or solicited from any person or entity who is a current holder of the Company’s debt or equity, investors that the Company directs to the offering, or is listed in Exhibit A of this Agreement.
| 3. | Description of the Offering. |
The Securities to be offered directly to various investors (each, an “Investor” or “Purchaser” and, collectively, the “Investors” or the “Purchasers”) in the Offering shall consist of shares of the Company’s common stock (“Common Stock” or “Shares”) and pre-funded warrants (each, in lieu of one share of common stock) to purchase a share of Common Stock (“Pre-Funded Warrants”) (together, the “Securities”). The purchase price for one Share shall be $[___] per Share and the purchase price for one Pre-Funded Warrant shall be $[___] (each, the “Purchase Price”). If the Company shall default in its obligations to deliver Securities to a Purchaser whose offer it has accepted and who has tendered payment, the Company shall indemnify and hold the Placement Agent harmless against any loss, claim, damage or expense arising from or as a result of such default by the Company under this Agreement.
| 4. | Delivery and Payment; Closing. |
Settlement of the Securities purchased by an Investor shall be made by 5:00 p.m. on the Closing Date by wire transfer from the Placement Agent in federal (same day) funds, payable to the order of the Company after electronic delivery of the Shares via the DWAC system (or such other method agreed to by the parties) in accordance with the Placement Agent’s instructions as requested in writing prior to the Closing Date. The term “Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.
| 2 |
The Closing shall occur at such place as shall be agreed upon by the Placement Agent and the Company. In the absence of an agreement to the contrary, each Closing shall take place at the offices of ArentFox Schiff LLP, 1717 K Street NW, Washington, DC 20006. Deliveries of the documents with respect to the purchase of the Securities, if any, shall be made at the offices of ArentFox Schiff LLP, 1717 K Street NW, Washington, DC 20006 on the Closing Date. All actions taken at a Closing shall be deemed to have occurred simultaneously.
| 5. | Term and Termination of Agreement. |
The term of this Agreement will commence upon the execution of this Agreement and will terminate at the earlier of the Closing of the Offering or 11:59 p.m. (New York Time) on the fifth Business Day after the date hereof. Notwithstanding anything to the contrary contained herein, any provision in this Agreement concerning or relating to confidentiality, indemnification, contribution, advancement, the Company’s representations and warranties and the Company’s obligations to pay fees and reimburse expenses will survive any expiration or termination of this Agreement. If any condition specified in Section 8 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent by notice to the Company at any time on or prior to a Closing Date, which termination shall be without liability on the part of any party to any other party, except that those portions of this Agreement specified in Section 19 shall at all times be effective and shall survive such termination. Notwithstanding anything to the contrary in this Agreement, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Placement Agent the expenses provided for in Section 2.B. above and upon demand the Company shall pay the full amount thereof to the Placement Agent.
| 6. | Permitted Acts. |
Nothing in this Agreement shall be construed to limit the ability of the Placement Agent, its officers, directors, employees, agents, associated persons and any individual or entity “controlling,” controlled by,” or “under common control” with the Placement Agent (as those terms are defined in Rule 405 under the Securities Act) to conduct its business including without limitation the ability to pursue, investigate, analyze, invest in, or engage in investment banking, financial advisory or any other business relationship with any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
| 7. | Representations, Warranties and Covenants of the Company. |
As of the date and time of the execution of this Agreement, the Closing Date and the Initial Sale Time (as defined herein), the Company represents, warrants and covenants to the Placement Agent, other than as disclosed in any of its filings with the Securities and Exchange Commission (the “Commission”), that:
A. Registration Matters.
| i. | The Company has filed with the Commission a registration statement on Form S-1 (File No. 333-277070) including a related prospectus, for the registration of certain securities (the “Shelf Securities”), including the Shares, under the Securities Act and the rules and regulations thereunder (the “Securities Act Regulations”). The registration statement has been declared effective under the Securities Act by the Commission. The “Registration Statement,” as of any time, means such registration statement as amended by any post-effective amendments thereto to such time, including the exhibits and any schedules thereto at such time, the documents incorporated or deemed to be incorporated by reference therein at such time pursuant to Form S-1 under the Securities Act and the documents otherwise deemed to be a part thereof as of such time pursuant to Rule 430A (“Rule 430A”) or Rule 430B under the Securities Act Regulations (“Rule 430B”); provided, however, that the “Registration Statement” without reference to a time means such registration statement as amended by any post-effective amendments thereto as of the time of the first contract of sale for the Securities, which time shall be considered the “new effective date” of such registration statement with respect to the Securities within the meaning of paragraph (f)(2) of Rule 430B, including the exhibits and schedules thereto as of such time, the documents incorporated or deemed incorporated by reference therein at such time pursuant to Form S-1 under the Securities Act and the documents otherwise deemed to be a part thereof as of such time pursuant to Rule 430A or Rule 430B. Any registration statement filed pursuant to Rule 462(b) of the Securities Act Regulations is hereinafter called the “Rule 462(b) Registration Statement,” and after such filing the term “Registration Statement” shall include the Rule 462(b) Registration Statement. The term “Preliminary Prospectus” means any preliminary form of the Prospectus, including any preliminary prospectus supplement specifically related to the Securities filed with the Commission by the Company with the consent of the Placement Agent. |
| 3 |
| ii. | All references in this Agreement to financial statements and schedules and other information which is “contained,” “included” or “stated” (or other references of like import) in the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to include all such financial statements and schedules and other information incorporated or deemed incorporated by reference in the Registration Statement, such Preliminary Prospectus or the Prospectus, as the case may be, prior to the execution and delivery of this Agreement; and all references in this Agreement to amendments or supplements to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to include the filing of any document under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder (the “Exchange Act Regulations”), incorporated or deemed to be incorporated by reference in the Registration Statement, such Preliminary Prospectus or the Prospectus, as the case may be, at or after the execution and delivery of this Agreement. |
| iii. | The term “Disclosure Package” means (i) the Preliminary Prospectus, as most recently amended or supplemented immediately prior to the Initial Sale Time (as defined herein), and (ii) the Issuer Free Writing Prospectuses (as defined below), if any, identified in Schedule I hereto. For purposes of clarity, the Company is not eligible to use a Free Writing Prospectus. |
| iv. | The term “Issuer Free Writing Prospectus” means any issuer free writing prospectus, as defined in Rule 433 of the Securities Act Regulations. The term “Free Writing Prospectus” means any free writing prospectus, as defined in Rule 405 of the Securities Act Regulations. |
| v. | Any Preliminary Prospectus when filed with the Commission, and the Registration Statement as of each effective date and as of the date hereof, complied or will comply, and the Prospectus and any further amendments or supplements to the Registration Statement, any Preliminary Prospectus or the Prospectus will, when they become effective or are filed with the Commission, as the case may be, comply, in all material respects, with the requirements of the Securities Act and the Securities Act Regulations; and the documents incorporated by reference in the Registration Statement, any Preliminary Prospectus or the Prospectus complied, and any further documents so incorporated will comply, when filed with the Commission, in all material respects to the requirements of the Exchange Act and Exchange Act Regulations. |
| vi. | The issuance by the Company of the Securities has been registered under the Securities Act. The Securities will be issued pursuant to the Registration Statement and each of the Securities will be freely transferable and freely tradable by each of the Investors without restriction, unless otherwise restricted by applicable law or regulation. |
B. Stock Exchange Listing. The Common Stock is approved for listing on the NASDAQ Capital Market (the “Exchange”) and the Company has taken no action designed to, or likely to have the effect of, delisting the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing.
C. No Stop Orders, etc. Neither the Commission nor, to the Company's knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company's knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
D. Subsidiaries. The Company's subsidiaries have been duly incorporated and are validly existing as entities in good standing under the laws of jurisdictions of their respective organization, with power and authority to own, lease and operate their respective properties and conduct their respective businesses as described in the Preliminary Prospectus, and have been duly qualified as foreign corporations for the transaction of business and are in good standing under the laws of each other jurisdictions in which they own or lease properties or conduct any business so as to require such qualification, except where the failure so to qualify or be in good standing would not have a Material Adverse Change (as defined below); all of the issued and outstanding capital stock (or other ownership interests) of such subsidiaries has been duly and validly authorized and issued, is fully paid and non-assessable and is owned, directly and indirectly, by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. Unless otherwise set forth, all references in this Section 7 to the “Company” shall include references to all such subsidiaries.
E. Disclosures in Registration Statement.
| i. | Compliance with Securities Act and 10b-5 Representation. |
(a) Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. The Preliminary Prospectus and the Prospectus, at the time each was or will be filed with the Commission, complied or will comply in all material respects with the requirements of the Securities Act and the Securities Act Regulations. The Preliminary Prospectus delivered to the Placement Agent for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(b) None of the Registration Statement, any amendment thereto, or the Preliminary Prospectus, as of 4:00 p.m. (Eastern time) on [____], 2024 (the “Initial Sale Time”), and at the Closing Date, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Placement Agent by the Placement Agent expressly for use in the Registration Statement or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Placement Agent consists solely of the following disclosure contained in the following paragraphs in the “Plan of Distribution” section of the Prospectus: (i) the name of the Placement Agent, and (ii) the information under the subsection “Fees and Expenses” (the “Placement Agent’s Information”).
(c) The Disclosure Package, as of the Initial Sale Time and at the Closing Date, did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus does not conflict with the information contained in the Registration Statement, any Preliminary Prospectus, or the Prospectus, and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Preliminary Prospectus as of the Initial Sale Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Placement Agent by the Placement Agent expressly for use in the Registration Statement, the Preliminary Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Placement Agent consists solely of the Placement Agent’s Information; and
(d) Neither the Prospectus nor any amendment or supplement thereto, as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), or at the Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Placement Agent's Information.
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| ii. | Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the Disclosure Package and the Prospectus, and (ii) is material to the Company's business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company's knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company's knowledge, any other party is in default thereunder and, to the Company's knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder, except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus. To the Company's knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those relating to environmental laws and regulations. |
| iii. | Prior Securities Transactions. For the past three completed fiscal years through the date hereof, no securities of the Company have been sold by the Company or, to the Company’s knowledge, by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Disclosure Package and the Preliminary Prospectus or, with respect to parties other than the Company, other filings by such other persons with the Commission. |
| iv. | Regulations. The disclosures in the Registration Statement, the Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign regulation on the Offering and the Company's business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed in the Registration Statement, the Disclosure Package and the Prospectus which are not so disclosed. |
| v. | Changes After Dates in Registration Statement. |
(a) No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company, nor any change or development that, singularly or in the aggregate, would involve a material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company (a “Material Adverse Change”); (ii) there have been no material transactions entered into by the Company, other than as contemplated pursuant to this Agreement; and (iii) no officer or director of the Company has resigned from any position with the Company.
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(b) Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration Statement, the Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company has not: (i) issued any securities (other than (a) grants under any stock compensation plan and (b) shares of common stock issued upon exercise or conversion of option, warrants or convertible securities described in the Registration Statement, the Disclosure Package and the Prospectus) or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
F. Independent Accountants. To the knowledge of the Company, Haynie & Company, during such time as it was engaged by the Company (the “Auditors”), has been an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. During such time period in which the Auditors served as the Company's independent registered public accounting firm the Auditors did not or have not, during the periods covered by the financial statements included in the Registration Statement, the Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
G. SEC Reports; Financial Statements, etc. The Company has complied in all material respects with requirements to file all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments that are not expected to be material in the aggregate. The financial statements, including the notes thereto and supporting schedules included in the Registration Statement, the Disclosure Package and the Prospectus, fairly present in all material respects the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with GAAP, consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and the supporting schedules included in the Registration Statement present fairly in all material respects the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Disclosure Package and the Prospectus have been properly compiled and prepared in all material respects in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly in all material respects the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company's financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, (a) the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company (other than (i) grants under any stock compensation plan and (ii) shares of common stock issued upon exercise or conversion of option, warrants or convertible securities described in the Registration Statement, the Disclosure Package and the Prospectus), and (d) there has not been any Material Adverse Change in the Company's long-term or short-term debt.
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H. Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Disclosure Package and the Prospectus, on the Effective Date, as of the Initial Sale Time, on the Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued shares of Common Stock of the Company or any security convertible or exercisable into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities.
I. Valid Issuance of Securities, etc.
i. Outstanding Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock, Company preferred stock and other outstanding securities conform in all material respects to all statements relating thereto contained in the Registration Statement, the Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such shares, exempt from such registration requirements.
ii. Securities Sold Pursuant to this Agreement. The Common Stock and Placement Agent Securities have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Common Stock and Placement Agent Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. All corporate action required to be taken for the authorization, issuance and sale of the Common Stock and Placement Agent Securities has been duly and validly taken; the Common Stock underlying the Placement Agent Warrant has been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for, if applicable, and issued in accordance with the Placement Agent Warrants, such Common Stock will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such shares of Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Disclosure Package and the Prospectus.
J. Registration Rights of Third Parties. No existing holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company. For purposes of clarity, the Company will issue the Placement Agent Warrant with such registration rights.
K. Validity and Binding Effect of Agreements. This Agreement and the Placement Agent Warrant each has been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreement of the Company, enforceable against the Company in accordance with its respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
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L. No Conflicts, etc. The execution, delivery and performance by the Company of this Agreement and the Placement Agent Warrant and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach of, or conflict with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company's Certificate of Incorporation (as the same may be amended or restated from time to time, the “Charter”) or the by-laws of the Company (as the same may be amended or restated from time to time, the “Bylaws”); or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof.
M. Reserved.
N. No Defaults; Violations. No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not (i) in violation of any term or provision of its Charter or Bylaws, or (ii) in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity applicable to the Company.
O. Corporate Power; Licenses; Consents.
i. Except as described in the Registration Statement, the Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Disclosure Package and the Prospectus.
ii. The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Common Stock, Placement Agent Warrants and shares of Common Stock underlying the Placement Agent Warrants, and the consummation of the transactions and agreements contemplated by this Agreement and as contemplated by the Registration Statement, the Disclosure Package and the Prospectus, except with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
P. Litigation; Governmental Proceedings. There is no material action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company's knowledge, threatened against, or involving the Company or, to the Company's knowledge, any executive officer or director which has not been disclosed in the Registration Statement, the Disclosure Package and the Prospectus or in connection with the Company's listing application for the additional listing of the Common Stock (including the Common Stock underlying the Placement Agent Warrant) on the Exchange.
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Q. Good Standing. The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Delaware as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change.
R. Insurance. The Company carries or is entitled to the benefits of insurance, with, to the Company's knowledge, reputable insurers, and in such amounts and covering such risks which the Company believes are reasonably adequate, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change.
S. Transactions Affecting Disclosure to FINRA.
i. Finder's Fees. Except as described in the Registration Statement, the Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder's, consulting or origination fee by the Company or any executive officer or director of the Company (each an, “Insider”) with respect to the sale of the Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company's knowledge, any of its stockholders that may affect the Placement Agent’s compensation, as determined by FINRA.
ii. Payments Within Twelve (12) Months. Except as described in the Registration Statement, the Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder's fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the date hereof, other than (A) the payment to the Placement Agent as provided hereunder in connection with the Offering, and (B) other payments to the Placement Agent under other engagement letters.
iii. Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
iv. FINRA Affiliation. There is no (i) officer or director of the Company, (ii) to the Company’s knowledge, beneficial owner of 5% or more of any class of the Company's securities or (iii) to the Company’s knowledge, beneficial owner of the Company's unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
v. Information. To the Company's knowledge, all information provided by the Company's officers and directors in their FINRA Questionnaires to counsel to the Placement Agent specifically for use by counsel to the Placement Agent in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
T. Foreign Corrupt Practices Act. Neither the Company nor, to the Company's knowledge, any director, officer, agent, employee or affiliate of the Company or any other person acting on behalf of the Company, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a Material Adverse Change or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
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U. Compliance with OFAC. Neither of the Company nor, to the Company's knowledge, any director, officer, agent, employee or affiliate of the Company or any other person acting on behalf of the Company, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
V. Money Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
W. Officers' Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to you or to Placement Agent Counsel shall be deemed a representation and warranty by the Company to the Placement Agent as to the matters covered thereby.
X. Related Party Transactions. There are no business relationships or related party transactions involving the Company or any other person required to be described in the Registration Statement, the Disclosure Package and the Prospectus that have not been described as required.
Y. Board of Directors. The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.
Z. Sarbanes-Oxley Compliance.
i. The Company has developed and currently maintains disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15 under the Exchange Act Regulations applicable to it, and such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company's Exchange Act filings and other public disclosure documents.
ii. The Company is, or at the Initial Sale Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure the Company's future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act.
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AA. Accounting Controls. The Company maintains systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply in all material respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, its principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses, if any, in the design or operation of internal controls over financial reporting which are known to the Company's management and that have adversely affected or are reasonably likely to adversely affect the Company' ability to record, process, summarize and report financial information; and (ii) any fraud, if any, known to the Company's management, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting.
BB. No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
CC. No Labor Disputes. No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent, except where such dispute would not be expected to have a Material Adverse Change.
DD. Intellectual Property Rights. To the Company's knowledge, the Company has, or can acquire on reasonable terms, ownership of and/or license to, or otherwise has the right to use, all inventions, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), patents and patent rights trademarks, service marks and trade names, copyrights, (collectively “Intellectual Property”) material to carrying on its business as described in the Prospectus. The Company has not received any correspondence relating to (A) infringement or misappropriation of, or conflict with, any Intellectual Property of a third party; (B) asserted rights of others with respect to any Intellectual Property of the Company; or (C) assertions that any Intellectual Property of the Company is invalid or otherwise inadequate to protect the interest of the Company, that in each case (if the subject of any unfavorable decision, ruling or finding), individually or in the aggregate, would have or would reasonably be expected to have a Material Adverse Change. There are no third parties who have been able to establish any material rights to any Intellectual Property, except for the retained rights of the owners or licensors of any Intellectual Property that is licensed to the Company. There is no pending or, to the Company's knowledge, threatened action, suit, proceeding or claim by others: (A) challenging the validity, enforceability or scope of any Intellectual Property of the Company or (B) challenging the Company's rights in or to any Intellectual Property or (C) that the Company materially infringes, misappropriates or otherwise violates or conflicts with any Intellectual Property or other proprietary rights of others. The Company has complied in all material respects with the terms of each agreement described in the Registration Statement, Disclosure Package or Prospectus pursuant to which any Intellectual Property is licensed to the Company, and all such agreements related to products currently made or sold by the Company, or to product candidates currently under development, are in full force and effect. All patents issued in the name of, or assigned to, the Company, and all patent applications made by or on behalf of the Company (collectively, the “Company Patents”) have been duly and properly filed. The Company is not aware of any material information that was required to be disclosed to the United States Patent and Trademark Office (the “PTO”) but that was not disclosed to the PTO with respect to any issued Company Patent, or that is required to be disclosed and has not yet been disclosed in any pending application in the Company Patents and that would preclude the grant of a patent on such application. To the Company's knowledge, the Company is the sole owner of the Company Patents.
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EE. Taxes. The Company has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. The Company has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company, except for such exceptions as could not be expected, individually or in the aggregate, to have a Material Adverse Change. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Placement Agent, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company. The term “taxes” mean all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.
FF. Employee Benefit Laws. To the extent applicable, the operations of the Company and its subsidiaries are and have been conducted at all times in material compliance with the Employee Retirement Income Security Act of 1974, as amended, the rules and regulations thereunder and any applicable related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Employee Benefit Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or its subsidiaries with respect to the Employee Benefit Laws is pending or, to the knowledge of the Company, threatened.
GG. Compliance with Laws. The Company: (A) is and at all times has been in compliance with all Applicable Laws, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any correspondence from any Governmental Entity alleging or asserting noncompliance with any Applicable Laws or any Authorizations; (C) possesses all material Authorizations and such Authorizations are valid and in full force and effect and the Company is not in material violation of any term of any such Authorizations, in each case except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (D) has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Entity or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (E) has not received written notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, “dear doctor” letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Company's knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
HH. [Reserved.]
II. Industry Data. The statistical and market-related data included in each of the Registration Statement, the Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company's good faith estimates that are made on the basis of data derived from such sources.
JJ. Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
KK. Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the shares of Common Stock to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
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LL. Integration. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities under the Securities Act.
MM. Confidentiality and Non-Competition. To the Company's knowledge, no director, officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer or prior employer that could reasonably be expected to materially affect his ability to be and act in his respective capacity of the Company or be expected to result in a Material Adverse Change.
NN. Restriction on Sales of Capital Stock. The Company, on behalf of itself and any successor entity, agrees that it will not, for a period of [***] after the date of this Agreement (the “Lock-Up Period”), without the prior written consent of the Placement Agent (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, other than pursuant to a registration statement on Form S-8 for employee benefit plans;, whether any such transaction described in clause (i), (ii) or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise; or (iv) publicly announce an intention to effect any transaction specified in clause (i), (ii) or (iii). The restrictions contained in this section shall not apply to (i) the issuance by the Company of Common Stock upon the exercise of stock options, warrants or the conversion of a security, in each case, that is outstanding on the date hereof, or (ii) the grant by the Company of stock options or other stock-based awards, or the issuance of shares of capital stock of the Company under any stock compensation plan of the Company in effect on the date hereof.
OO. Lock-Up Agreements. The Company has caused each of its officers and directors to deliver to the Placement Agent an executed Lock-Up Agreement, in such form as approved by the Placement Agent (the “Lock-Up Agreement”), prior to the execution of this Agreement.
| 8. | Conditions of the Obligations of the Placement Agent. |
The obligations of the Placement Agent hereunder shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 7 hereof, in each case as of the date hereof and as of the Closing Date as though then made, to the timely performance by each of the Company of its covenants and other obligations hereunder on and as of such dates, and to each of the following additional conditions:
A. Regulatory Matters.
i. Effectiveness of Registration Statement; Rule 424 Information. The Registration Statement is effective on the date of this Agreement, and, on the Closing Date no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. All filings with the Commission required by Rule 424 under the Securities Act to have been filed by the Closing Date, shall have been made within the applicable time period prescribed for such filing by Rule 424.
ii. FINRA Clearance. On or before the Closing Date of this Agreement, the Placement Agent shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Placement Agent as described in the Registration Statement.
iii. Listing of Additional Shares. On or before the Closing Date of this Agreement, the Company shall have received clearance from The Nasdaq Stock Market, Inc. with respect to the Company’s application for the additional listing of the securities sold in the Offering.
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B. Company Counsel Matters.
i. On the Closing Date, the Placement Agent shall have received the favorable opinion of Carroll Legal LLC, outside counsel for the Company, dated the Closing Date and addressed to the Placement Agent, substantially in form and substance reasonably satisfactory to the Placement Agent.
C. Reserved.
D. Officers’ Certificates.
i. Officers’ Certificate. The Company shall have furnished to the Placement Agent a certificate, dated the Closing Date, of its Chief Executive Officer and its Chief Financial Officer stating that (i) such officers have carefully examined the Registration Statement, the Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Initial Sale Time and through the Closing Date did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Disclosure Package, as of the Initial Sale Time through the Closing Date, any Issuer Free Writing Prospectus as of its date and as of the Closing Date, the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the filing of the most recent Form 10-Q, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Disclosure Package or the Prospectus, (iii) to their knowledge after reasonable investigation, as of the Closing Date, the representations and warranties of the Company in this Agreement are true and correct, and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and (iv) there has not been, subsequent to the date of the most recent audited financial statements included in the Disclosure Package, any Material Adverse Change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a Material Adverse Change or a prospective Material Adverse Change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus.
ii. Secretary’s Certificate. As of the Closing Date the Placement Agent shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date, certifying: (i) that each of the Company’s Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; and (iii) the good standing of the Company and its U.S. subsidiaries. The documents referred to in such certificate shall be attached to such certificate.
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E. No Material Changes. Prior to and on the Closing Date: (i) there shall have been no Material Adverse Change or development involving a prospective Material Adverse Change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any affiliates of the Company before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
F. Reservation of Common Stock. So long as any Placement Agent Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 100% of the maximum number of shares of Common Stock issuable upon exercise of the Placement Agent Warrant.
G. Delivery of Agreements.
(i) Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Placement Agent executed copies of the Lock-Up Agreements from each of the Company’s officers and directors.
(ii) Placement Agent Warrant. On the Closing Date, the Company shall have delivered to the Placement Agent an executed copy of the Placement Agent Warrant(s) in such designations as requested by the Placement Agent.
H. Additional Documents. At the Closing Date, Placement Agent Counsel shall have been furnished with such documents and opinions as they may require in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Placement Agent and Placement Agent Counsel.
| 9. | Indemnification and Contribution; Procedures. |
A. Indemnification of the Placement Agent. The Company agrees to indemnify and hold harmless the Placement Agent, its affiliates and each person controlling such Placement Agent (within the meaning of Section 15 of the Securities Act), and the directors, officers, agents and employees of the Placement Agent, its affiliates and each such controlling person (the Placement Agent, and each such entity or person hereafter is referred to as an “Indemnified Person”) from and against any losses, claims, damages, judgments, assessments, costs and other liabilities (collectively, the “Liabilities”), and shall reimburse each Indemnified Person for all fees and expenses (including the reasonable fees and expenses of counsel for the Indemnified Persons, except as otherwise expressly provided in this Agreement) (collectively, the “Expenses”) and agrees to advance payment of such Expenses as they are incurred by an Indemnified Person in investigating, preparing, pursuing or defending any actions, whether or not any Indemnified Person is a party thereto, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Disclosure Package, the Preliminary Prospectus, the Prospectus or in any Issuer Free Writing Prospectus (as from time to time each may be amended and supplemented); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 9, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, any national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Placement Agent’s information. The Company also agrees to reimburse each Indemnified Person for all Expenses as they are incurred in connection with such Indemnified Person’s enforcement of his or its rights under this Agreement. Each Indemnified Person is an intended third party beneficiary with the same rights to enforce the indemnification that each Indemnified Person would have if he was a party to this Agreement.
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B. Procedure. Upon receipt by an Indemnified Person of actual notice of an action against such Indemnified Person with respect to which indemnity may reasonably be expected to be sought under this Agreement, such Indemnified Person shall promptly notify the Company in writing; provided that failure by any Indemnified Person so to notify the Company shall not relieve the Company from any obligation or liability which the Company may have on account of this Section 9 or otherwise to such Indemnified Person, except to the extent (and only to the extent) that its ability to assume the defense is actually impaired by such failure or delay. The Company shall, if requested by the Placement Agent, assume the defense of any such action (including the employment of counsel and reasonably satisfactory to the Placement Agent). Any Indemnified Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company has failed promptly to assume the defense and employ counsel for the benefit of the Placement Agent and the other Indemnified Persons or (ii) such Indemnified Person shall have been advised that in the opinion of counsel that there is an actual or potential conflict of interest that prevents (or makes it imprudent for) the counsel engaged by the Company for the purpose of representing the Indemnified Person, to represent both such Indemnified Person and any other person represented or proposed to be represented by such counsel, it being understood, however, that the Company shall not be liable for the expenses of more than one separate counsel (together with local counsel), representing the Placement Agent and all Indemnified persons who are parties to such action. The Company shall not be liable for any settlement of any action effected without its written consent (which shall not be unreasonably withheld). In addition, the Company shall not, without the prior written consent of the Placement Agent, settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action in respect of which advancement, reimbursement, indemnification or contribution may be sought hereunder (whether or not such Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination (i) includes an unconditional release of each Indemnified Person, acceptable to such Indemnified Party, from all Liabilities arising out of such action for which indemnification or contribution may be sought hereunder and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Person. The advancement, reimbursement, indemnification and contribution obligations of the Company required hereby shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as every Liability and Expense is incurred and is due and payable, and in such amounts as fully satisfy each and every Liability and Expense as it is incurred (and in no event later than 30 days following the date of any invoice therefor).
C. Indemnification of the Company. The Placement Agent agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all Liabilities, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Disclosure Package or Prospectus or any amendment or supplement thereto, in reliance upon, and in strict conformity with, the Placement Agent’s Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Disclosure Package or Prospectus or any amendment or supplement thereto, and in respect of which indemnity may be sought against the Placement Agent, the Placement Agent shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the Placement Agent by the provisions of Section 9.B. The Company agrees promptly to notify the Placement Agent of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Securities or in connection with the Registration Statement, the Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, provided, that failure by the Company so to notify the Placement Agent shall not relieve the Placement Agent from any obligation or liability which the Placement Agent may have on account of this Section 9.C. or otherwise to the Company, except to the extent the Placement Agent is materially prejudiced as a proximate result of such failure..
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D. Contribution. In the event that a court of competent jurisdiction makes a finding that indemnity is unavailable to any indemnified person, then each indemnifying party shall contribute to the Liabilities and Expenses paid or payable by such indemnified person in such proportion as is appropriate to reflect (i) the relative benefits to the Company, on the one hand, and to the Placement Agent and any other Indemnified Person, on the other hand, of the matters contemplated by this Agreement or (ii) if the allocation provided by the immediately preceding clause is not permitted by applicable law, not only such relative benefits but also the relative fault of the Company, on the one hand, and the Placement Agent and any other Indemnified Person, on the other hand, in connection with the matters as to which such Liabilities or Expenses relate, as well as any other relevant equitable considerations; provided that in no event shall the Company contribute less than the amount necessary to ensure that all Indemnified Persons, in the aggregate, are not liable for any Liabilities and Expenses in excess of the amount of commissions actually received by the Placement Agent pursuant to this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Placement Agent on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Placement Agent agree that it would not be just and equitable if contributions pursuant to this subsection (D) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (D). For purposes of this paragraph, the relative benefits to the Company, on the one hand, and to the Placement Agent on the other hand, of the matters contemplated by this Agreement shall be deemed to be in the same proportion as: (a) the total value received by the Company in the Offering, whether or not such Offering is consummated, bears to (b) the commissions paid to the Placement Agent under this Agreement. Notwithstanding the above, no person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from a party who was not guilty of fraudulent misrepresentation.
E. Limitation. The Company also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant to this Agreement, the transactions contemplated thereby or any Indemnified Person’s actions or inactions in connection with any such advice, services or transactions, except to the extent that a court of competent jurisdiction has made a finding that Liabilities (and related Expenses) of the Company have resulted primarily from such Indemnified Person’s gross negligence or willful misconduct in connection with any such advice, actions, inactions or services.
F. Survival. The advancement, reimbursement, indemnity and contribution obligations set forth in this Section 9 shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Person’s services under or in connection with, this Agreement. Each Indemnified Person is an intended third-party beneficiary of this Section 9, and has the right to enforce the provisions of Section 9 as if he/she/it was a party to this Agreement.
| 10. | Limitation of Dawson’s Liability to the Company. |
Dawson and the Company further agree that neither Dawson nor any of its affiliates or any of their respective officers, directors, controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), employees or agents shall have any liability to the Company, its security holders or creditors, or any person asserting claims on behalf of or in the right of the Company (whether direct or indirect, in contract or tort, for an act of negligence or otherwise) for any losses, fees, damages, liabilities, costs, expenses or equitable relief arising out of or relating to this Agreement or the Services rendered hereunder, except for losses, fees, damages, liabilities, costs or expenses that arise out of or are based on any action of or failure to act by Dawson and that are finally judicially determined to have resulted solely from the gross negligence or willful misconduct of Dawson.
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| 11. | Limitation of Engagement to the Company. |
The Company acknowledges that Dawson has been retained only by the Company, that Dawson is providing services hereunder as an independent contractor (and not in any fiduciary or agency capacity) and that the Company’s engagement of Dawson is not deemed to be on behalf of, and is not intended to confer rights upon, any shareholder, owner or partner of the Company or any other person not a party hereto as against Dawson or any of its affiliates, or any of its or their respective officers, directors, controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), employees or agents. Unless otherwise expressly agreed in writing by Dawson, no one other than the Company is authorized to rely upon any statement or conduct of Dawson in connection with this Agreement. The Company acknowledges that any recommendation or advice, written or oral, given by Dawson to the Company in connection with Dawson’s engagement is intended solely for the benefit and use of the Company’s management and directors in considering a possible Offering, and any such recommendation or advice is not on behalf of, and shall not confer any rights or remedies upon, any other person or be used or relied upon for any other purpose. Dawson shall not have the authority to make any commitment binding on the Company. The Company, in its sole discretion, shall have the right to reject any investor introduced to it by Dawson. If any purchase agreement and/or related transaction documents are entered into between the Company and the investors in the Offering, Dawson will be entitled to rely on the representations, warranties, agreements and covenants of the Company contained in any such purchase agreement and related transaction documents as if such representations, warranties, agreements and covenants were made directly to Dawson by the Company.
| 12. | Amendments and Waivers. |
No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. The failure of a party to exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in the future. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver be deemed or constitute a continuing waiver unless otherwise expressly provided.
| 13. | Confidentiality. |
In the event of the consummation or public announcement of any Offering, Dawson shall have the right to disclose its participation in such Offering, including, without limitation, the placement at its cost of “tombstone” advertisements in financial and other newspapers and journals. Dawson agrees not to use any confidential information concerning the Company provided to Dawson by the Company for any purposes other than those contemplated under this Agreement.
| 14. | Headings. |
The headings of the various sections of this Agreement have been inserted for convenience of reference only and will not be deemed to be part of this Agreement.
| 15. | Counterparts. |
This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original and all such counterparts shall together constitute one and the same instrument.
| 16. | Severability. |
In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby.
| 17. | Use of Information. |
The Company will furnish Dawson such written information as Dawson reasonably requests in connection with the performance of its services hereunder. The Company understands, acknowledges and agrees that, in performing its services hereunder, Dawson will use and rely entirely upon such information as well as publicly available information regarding the Company and other potential parties to an Offering and that Dawson does not assume responsibility for independent verification of the accuracy or completeness of any information, whether publicly available or otherwise furnished to it, concerning the Company or otherwise relevant to an Offering, including, without limitation, any financial information, forecasts or projections considered by Dawson in connection with the provision of its services.
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| 18. | Absence of Fiduciary Relationship. |
The Company acknowledges and agrees that: (a) the Placement Agent has been retained solely to act as Placement Agent in connection with the sale of the Securities and that no fiduciary, advisory or agency relationship between the Company and the Placement Agent has been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether the Placement Agent has advised or is advising the Company on other matters; (b) the Purchase Price and other terms of the Securities set forth in this Agreement were established by the Company following discussions and arms-length negotiations with the Placement Agent and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (c) it has been advised that the Placement Agent and its affiliates are engaged in a broad range of transactions that may involve interests that differ from those of the Company and that the Placement Agent has no obligation to disclose such interest and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and (d) it has been advised that the Placement Agent is acting, in respect of the transactions contemplated by this Agreement, solely for the benefit of the Placement Agent, and not on behalf of the Company and that the Placement Agents may have interests that differ from those of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the Placement Agent arising from an alleged breach of fiduciary duty in connection with the Offering.
| 19. | Survival Of Indemnities, Representations, Warranties, Etc. |
The respective indemnities, covenants, agreements, representations, warranties and other statements of the Company and Placement Agent, as set forth in this Agreement or made by them respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation made by or on behalf of the Placement Agent, the Company, the Purchasers or any person controlling any of them and shall survive delivery of and payment for the Securities. Notwithstanding any termination of this Agreement, including without limitation any termination pursuant to Section 5, the payment, reimbursement, indemnity, contribution and advancement agreements contained in Sections 2, 9, 10, and 11, respectively, and the Company’s covenants, representations, and warranties set forth in this Agreement shall not terminate and shall remain in full force and effect at all times. The indemnity and contribution provisions contained in Section 9 and the covenants, warranties and representations of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Placement Agent, any person who controls any Placement Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or any affiliate of any Placement Agent, or by or on behalf of the Company, its directors or officers or any person who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and (iii) the issuance and delivery of the Securities.
| 20. | Governing Law. |
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be fully performed therein. Any disputes that arise under this Agreement, even after the termination of this Agreement, will be heard only in the state or federal courts located in the City of New York, State of New York. The parties hereto expressly agree to submit themselves to the jurisdiction of the foregoing courts in the City of New York, State of New York. The parties hereto expressly waive any rights they may have to contest the jurisdiction, venue or authority of any court sitting in the City and State of New York.
| 21. | Notices. |
All communications hereunder shall be in writing and shall be mailed or hand delivered and confirmed to the parties hereto as follows:
If to the Company:
Ascent Solar Technologies, Inc.
12300 Grant Street
Thornton, CO 80241
Attention: Chief Executive Officer
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If to the Placement Agent:
Dawson James Securities, Inc.
101 North Federal Highway, Suite 600
Boca Raton, FL 33432
Attention: Chief Executive Officer
Any party hereto may change the address for receipt of communications by giving written notice to the others.
| 22. | Miscellaneous. |
This Agreement shall not be modified or amended except in writing signed by Dawson and the Company. This Agreement constitutes the entire agreement of Dawson and the Company, and supersedes any prior agreements, with respect to the subject matter hereof. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect, and the remainder of this Agreement shall remain in full force and effect. This Agreement may be executed in counterparts (including facsimile or .pdf counterparts), each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
| 23. | Successors. |
This Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 9 hereof, and to their respective successors, and personal representative, and, except as set forth in Section 9 of this Agreement, no other person will have any right or obligation hereunder.
| 24. | Partial Unenforceability. |
The invalidity or unenforceability of any section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
[SIGNATURE PAGE TO FOLLOW]
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In acknowledgment that the foregoing correctly sets forth the understanding reached by Dawson and the Company, and intending to be legally bound, please sign in the space provided below, whereupon this letter shall constitute a binding Agreement as of the date executed.
Very truly yours,
ASCENT SOLAR TECHNOLOGIES, INC.
By:__________________________
Name:
Title:
Confirmed as of the date first written above:
DAWSON JAMES SECURITIES, INC.
By:___________________________
Name: Robert D. Keyser, Jr.
Title: Chief Executive Officer
Exhibit A
Braedon David
Stump Capital
MBD Capital Holdings
L1
Sabby
SCHEDULE I
Issuer General Use Free Writing Prospectuses
None.
Exhibit 4.4
THE REGISTERED HOLDER OF THIS COMMON STOCK PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING [●], 2024, WHICH IS THE DATE OF COMMENCEMENT OF SALES IN THE OFFERING (THE ”EFFECTIVE DATE”) TO ANYONE OTHER THAN (I) DAWSON JAMES SECURITIES, INC. OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING FOR WHICH THIS PURCHASE WARRANT WAS ISSUED TO THE PLACEMENT AGENT AS CONSIDERATION (THE ”OFFERING”), OR (II) A BONA FIDE OFFICER OR PARTNER OF DAWSON JAMES SECURITIES, INC., OR ANY REGISTERED PERSONS OF AFFILIATES OF DAWSON JAMES SECURITIES, INC.
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [●], 2024. VOID AFTER 5:00 P.M., EASTERN TIME, [●], 2029.
COMMON STOCK PURCHASE WARRANT
ASCENT SOLAR TECHNOLOGIES, INC.
| Warrant Shares: | Initial Exercise Date: [____], 2024 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Dawson James Securities, Inc. or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof, to the extent permitted by the applicable SEC and FINRA rules (the “Initial Exercise Date”), and on or prior to 5:00 p.m. (New York City time) on [____], 2029 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Ascent Solar Technologies, Inc., a Delaware corporation (the “Company”), up to [___] shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
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“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the shares of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day” means a day on which the Common Stock is traded on a Trading Market.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the NYSE American, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“Transfer Agent” means ComputerShare Investor Services, the current transfer agent of the Company, with a mailing address of [_____], and a facsimile number of (___) [____], and any successor transfer agent of the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
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“Warrants” means this Warrant.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $[___]1, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
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1 NTD 125% of the offering price of shares of Common Stock in the Offering.
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(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
Notwithstanding anything herein to the contrary, if on the Termination Date there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
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ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Reserved.
c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company's control, including not approved by the Company's Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Ordinary Shares of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Ordinary Shares are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common equity (or ordinary shares) of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable contemplated Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the highest VWAP during the period beginning on the Trading Day immediately preceding the public announcement of the applicable contemplated Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 3(e) and (D) a remaining option time equal to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction and the Termination Date, and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds (or such other consideration) within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(e) pursuant to written agreements prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein. For the avoidance of doubt, the Holder shall be entitled to the benefits of the provisions of this Section 3(e) regardless of (i) whether the Company has sufficient authorized Common Stock for the issuance of Warrant Shares and/or (ii) whether a Fundamental Transaction occurs prior to the Initial Exercise Date.
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f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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Section 4. Transfer of Warrant.
a) Transferability. Subject to Section 4(d) below, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Sections 4(a) and 4(d), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) General Restrictions. The registered Holder of this Warrant agrees by such Holder’s acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one hundred eighty (180) days following the Effective Date to anyone other than: (i) Dawson James Securities, Inc. or an underwriter, placement agent, or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of Dawson James Securities, Inc., or of any such underwriter, placement agent or selected dealer, or any registered person or affiliate of Dawson James Securities, Inc., or of any such underwriter, placement agent or selected dealer, in each case in accordance with FINRA Rule 5110(e), or (b) for a period of one hundred eighty (180) days following the Effective Date cause this Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(e)(2). After 180 days after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws.
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Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at Ascent Solar Technologies, Inc., 12300 Grant Street, Thornton, C0 80241, Attention: CEO, or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
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i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company, on the one hand, and the Holder or the beneficial owner of this Warrant, on the other hand.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
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ASCENT SOLAR TECHNOLOGIES, INC.
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By:__________________________________________ Name: Title:
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NOTICE OF EXERCISE
TO: ASCENT SOLAR TECHNOLOGIES, INC.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________________
Signature of Authorized Signatory of Investing Entity: _______________________________________
Name of Authorized Signatory: __________________________________________________________
Title of Authorized Signatory: ___________________________________________________________
Date: ________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | |
| (Please Print) | |
| Address: | |
|
Phone Number:
Email Address: |
(Please Print) ______________________________________
______________________________________ |
| Dated: _______________ __, ______ | |
| Holder’s Signature: | |
| Holder’s Address: |
Exhibit 5.1
Carroll Legal LLC
1449 Wynkoop Street
Suite 507
Denver, CO 80202
April 5, 2024
Ascent Solar Technologies, Inc.
12300 Grant Street
Thornton, CO 80241
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as special counsel to Ascent Solar Technologies, Inc., a Delaware corporation (the “Company”), in connection with the filing of the Registration Statement (as amended, the “Registration Statement”) on Form S-1 (File No. 333-277070) with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act”).
The Registration Statement relates to the proposed offering and sale up to $6.0 million of (i) shares of the Company’s common stock (the “Common Stock”), $0.0001 par value per share (the “Common Shares”); (ii) prefunded warrants to purchase shares of Common Stock (the “Prefunded Warrants”); (iii) shares of Common Stock issuable upon exercise of the Prefunded Warrants (the “Prefunded Warrant Shares”); (iv) Placement Agent Warrants to purchase Common Stock (the “Placement Agent Warrants”), and (v) shares of Common Stock issuable upon exercise of the Placement Agent’s Warrants (the “Placement Agent Warrant Shares”).
The Prefunded Warrants and the Placement Agent Warrants are collectively referred to herein as the “Warrants.” The Prefunded Warrant Shares and the Placement Agent Warrant Shares are collectively referred to herein as the “Warrant Shares.”
The Common Shares and the Warrants are to be sold by the Company in accordance with a Placement Agent Agreement to be entered into by the Company and Dawson James Securities, Inc. (the “Placement Agent Agreement”), the form of which has been filed as Exhibit 1.1 to the Registration Statement. The securities are to be offered and sold in the manner described in the Registration Statement and the related prospectus included therein (the “Prospectus”).
In connection herewith, we have examined the Registration Statement and the Prospectus. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of the Company’s Certificate of Incorporation and Bylaws (both as amended to date), and such other records, agreements and instruments of the Company, certificates of public officials and officers of the Company, and such other documents, records and instruments, and we have made such legal and factual inquiries, as we have deemed necessary or appropriate as a basis for us to render the opinions hereinafter expressed.
In our examination of the foregoing, we have assumed the genuineness of all signatures, the legal competence and capacity of natural persons, the authenticity of documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies or by facsimile or other means of electronic transmission, or which we obtained from the Commission’s Electronic Data Gathering, Analysis and Retrieval system (“Edgar”) or other sites maintained by a court or governmental authority or regulatory body and the authenticity of the originals of such latter documents. If any documents we examined in printed, word processed or similar form has been filed with the Commission on Edgar or such court or governmental authority or regulatory body, we have assumed that the document so filed is identical to the document we examined except for formatting changes. When relevant facts were not independently established, we have relied without independent investigation as to matters of fact upon statements of governmental officials and certificates and statements of appropriate representatives of the Company.
Based upon the foregoing and in reliance thereon, and subject to the assumptions, comments, qualifications, limitations and exceptions set forth herein, we are of the opinion, that:
(i) the Common Shares, when issued against payment therefor as set forth in the Registration Statement, will be validly issued, fully paid and non-assessable;
(ii) the Warrants, when issued as set forth in the Registration Statement, will be legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms; and
(iii) the Warrant Shares, when issued upon exercise of the Warrants against payment therefor as set forth in the Registration Statement, will be validly issued, fully paid and non-assessable.
Our opinions herein reflect only the application of the General Corporation Law of the State of Delaware. The opinions set forth herein are made as of the date hereof and are subject to, and may be limited by, future changes in factual matters, and we undertake no duty to advise you of the same. The opinions expressed herein are based upon the law in effect (and published or otherwise generally available) on the date hereof, and we assume no obligation to revise or supplement these opinions should such law be changed by legislative action, judicial decision or otherwise. In rendering our opinions, we have not considered, and hereby disclaim any opinion as to, the application or impact of any laws, cases, decisions, rules or regulations of any other jurisdiction, court or administrative agency.
We do not render any opinions except as set forth above. We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the use of our name under the caption “Legal Matters” in the prospectus filed as a part thereof. We also consent to your filing copies of this opinion letter as an exhibit to the Registration Statement with agencies of such states as you deem necessary in the course of complying with the laws of such states regarding the offering and sale of the Shares. In giving such consent, we do not thereby concede that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.
| CARROLL LEGAL LLC | ||
| By: | /s/ James H. Carroll | |
| James H. Carroll | ||
| Managing Member | ||
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-1/A2 of Ascent Solar Technologies Inc. of our report dated February 21,
2024, relating to our audit of the December 31, 2023 and 2022 financial statements of Ascent Solar Technologies Inc.
We also consent to the reference to our firm under the caption "Experts" in such Registration Statement.
Haynie & Company
Salt Lake City, Utah
April 5, 2024