NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1. BACKGROUND, BASIS OF PRESENTATION,
AND GOING CONCERN:
Background
NanoFlex Power Corporation, formerly
known as Universal Technology Systems, Corp., was incorporated in the State of Florida on January 28, 2013. On September 24, 2013,
the Company completed the acquisition of Global Photonic Energy Corporation, a Pennsylvania corporation (“GPEC”), pursuant
to a Share Exchange Agreement (the “Share Exchange Transaction”). Immediately following the closing of the Share Exchange
Transaction, the Company owned 100% of equity interests of GPEC and GPEC became a wholly-owned subsidiary of the Company. On November
25, 2013, the Company changed its name from “Universal Technology Systems, Corp.” to “NanoFlex Power Corporation”
and its trading symbol was changed to “OPVS” on December 26, 2013.
GPEC was incorporated in Pennsylvania
on February 7, 1994. The Company is organized to fund, develop, commercialize and license advanced configuration solar technologies
which enable unique thin-film solar cell implementations with industry-leading efficiencies, light weight, flexibility, and low
total system cost.
These technologies are targeted at certain
broad applications, including: (a) mobile and field power generation, (b) building applied photovoltaics ("BAPV"), (c)
building integrated photovoltaics ("BIPV"), (d) space vehicles and unmanned aerial vehicles ("UAVs"), (e) semi-transparent
solar power generating windows or glazing, and (f) ultra-thin solar films or paints for automobiles or other consumer applications.
Laboratory feasibility prototypes have been developed that successfully demonstrate key building block principles for these applications
and the Company is working with industry partners to commercialize its technologies.
Basis of Presentation
The accompanying unaudited interim
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures have been or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying
consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results
for the interim periods presented. These consolidated financial statements should be read in conjunction with our audited consolidated
financial statements and notes thereto for the fiscal year ended December 31, 2015 included in our Annual Report on Form 10-K.
The results of operations for the three months ended March 31, 2016 are not necessarily indicative of results to be expected for
the full fiscal year or any other periods.
The preparation of the consolidated
financial statements in conformity with U.S. generally accepted accounting principles requires management to make a number of
estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures. Actual results
may differ from these estimates.
Revision of Previously-Issued Financial Statements
During the three months ended June 30,
2015, the Company identified errors in its financial statements for the last quarter of the fiscal year ended December 31, 2013,
all quarters of fiscal year ended December 31, 2014, and the first quarter of fiscal year ended December 31, 2015 as included in
the Company’s 2013 annual report on Form 10-K, the Company’s 2014 interim reports on Form 10-Q, the Company’s
2014 annual report on Form 10-K, and Company’s first quarter of 2015 interim reports on Form 10-Q, respectively, related
to an unrecorded derivative liability and the related gain or loss on the change in fair value of the derivative liability. The
derivative liability is associated with certain warrants containing anti-dilution features that cause the instruments to no longer
be indexed to the Company’s own stock. The Company has made adjustments in each period related to this.
The Company assessed the effect
of the above errors in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting
Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the errors were
not material to any of the Company’s prior interim and annual financial statements.
The Company determined that the correction
of the cumulative amounts of the errors would be material to the three months ended March 31, 2015 financial statements, and as
such, the Company revised its previously-issued financial statements for each period in 2013, 2014 and 2015. The financial statements
for the three months ended March 31, 2015 included in this Form 10-Q are revised as described below for those adjustments.
All financial information contained
in the accompanying notes to these financial statements has been revised to reflect the correction of these errors.
The following tables present the effect
of the aforementioned revisions on the Company’s consolidated statements of operations for the three months ended March
31, 2015:
|
|
Three Months Ended March 31, 2015
|
|
|
|
As Reported
|
|
|
Revision
|
|
|
As Revised
|
|
Gain (loss) on change in fair value of derivative
|
|
$
|
-
|
|
|
$
|
2,455,482
|
|
|
$
|
2,455,482
|
|
Total other expense
|
|
|
(94,622
|
)
|
|
|
(2,455,482
|
)
|
|
|
2,360,860
|
|
Loss before income tax benefit
|
|
|
(1,460,567
|
)
|
|
|
(2,455,482
|
)
|
|
|
994,915
|
|
Net (loss) income
|
|
|
(1,460,567
|
)
|
|
|
(2,455,482
|
)
|
|
|
994,915
|
|
Net loss per share (basic and diluted)
|
|
|
(0.03
|
)
|
|
|
(0.05
|
)
|
|
|
0.02
|
|
The following tables present the effect
of the aforementioned revisions on the Company’s consolidated statements of cash flows for the three months ended March 31,
2015.
|
|
Three Months Ended March 31, 2015
|
|
|
|
As Reported
|
|
|
Revision
|
|
|
As Revised
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,460,567
|
)
|
|
$
|
2,455,482
|
|
|
$
|
994,915
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on change in fair value of derivative
|
|
|
-
|
|
|
|
(2,455,482
|
)
|
|
|
(2,455,482
|
)
|
NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of warrants as derivative liabilities
|
|
|
-
|
|
|
|
76,369
|
|
|
|
76,369
|
|
Going Concern
The Company has not generated revenues
in the current year. The Company has a working capital deficit of $17,696,657 and an accumulated deficit of $209,495,781
as of March 31, 2016. The ability of the Company to continue as a going concern is dependent on raising capital to
fund ongoing operations and carry out its business plan and ultimately to attain profitable operations. Accordingly,
these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification
of liabilities that might be necessary in the event the Company cannot continue in existence. To date, the Company has funded
its initial operations primarily by way of the sale of equity securities, convertible note financing, short term financing from
private parties, and advances from related parties.
Fair Value
ASC 820 Fair Value Measurements and
Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value and enhances disclosures
about fair value measurements. It defines fair value 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. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three
levels of inputs that may be used to measure fair value:
Level 1: Observable inputs such
as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted
prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven
valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated
by, third-party pricing services.
Level 3: Unobservable inputs
to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using
reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without
undue cost and effort.
As of March 31, 2016 the significant
inputs to the Company’s derivative liability calculation were Level 3 inputs.
The following schedule summarizes the
valuation of financial instruments at fair value in the balance sheets as of March 31, 2016 and December 31, 2015:
|
|
Fair Value Measurements as of
March 31, 2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
None
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
6,975,432
|
|
Conversion option derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
4,619,063
|
|
Total liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
11,594,495
|
|
|
|
Fair Value Measurements as of
December 31, 2015
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
None
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
12,796,146
|
|
Conversion option derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
8,145,160
|
|
Total liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
20,941,306
|
|
The following table sets forth a reconciliation
of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy:
|
|
Significant Unobservable
|
|
|
|
Inputs
|
|
|
|
(Level 3)
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
|
20,941,306
|
|
|
|
847,791
|
|
Change in fair value
|
|
|
(9,487,133
|
)
|
|
|
2,455,482
|
|
Additions reclassified from equity
|
|
|
-
|
|
|
|
-
|
|
Additions recognized as debt discounts
|
|
|
2,041,795
|
|
|
|
76,369
|
|
Additions recognized as derivative expense
|
|
|
6,361,549
|
|
|
|
-
|
|
Resolution of derivative liabilities
|
|
|
(8,263,022
|
)
|
|
|
-
|
|
Ending balance
|
|
|
11,594,495
|
|
|
|
3,379,642
|
|
2. DEBT
Notes Payable
The Company has a note payable of $100,000
due to its former Chief Executive Officer and President. The note is due on demand and bears an interest rate at the minimum applicable
rate for loans of similar duration, which was 0.5% as of March 31, 2016.
During the year ended December 31, 2015, the
Company issued a promissory note of $50,000. The term of the note expires 120 days from the effective date. 100,000 cashless warrants
for the Company’s common shares were issued with the debt at a strike price of $0.50/share in lieu of cash interest. As of
March 31, 2016, the outstanding balance under these notes is $50,000. The relative fair value of the warrants of $45,243 was recognized
as a debt discount which is being amortized on a straight-line basis over the term of the note. The Company recognized interest
expense of $45,243 associated with the amortization of debt discount for the year ended December 31, 2015. This note is currently
past due and in default. The Company is in the process of renegotiating the terms of this agreement.
As of March 31, 2016 and December 31, 2015,
the aggregate outstanding balance of non-convertible notes payable was $150,000.
Notes Payable – Related
Party
On February 26, 2014, the Company borrowed
$150,000 under a short term note agreement with a related party, the Chief Executive Officer’s son. Under the terms
of this agreement, the note was to be repaid within 6 months of funding. In November 2014, the note agreement was amended to extend
the due date to February 26, 2015, and in April of 2015, the note agreement was amended to extend the maturity date to February
26, 2016 and set a 4% simple interest rate on the note. This note was paid in full in January of 2016 along with $509 of accrued
interest.
In 2015, the Company issued
promissory notes to a majority shareholder in aggregate of $625,000 (“Notes #1 to #4”). The notes have a term ranging
from 120 – 150 days from the effective date. 1,250,000 cashless warrants for the Company’s common shares were issued
with the debt at a strike price of $0.50/share in lieu of cash interest. On January 6, 2016, the Company issued an additional promissory
note to the same majority shareholder in the amount of $1,375,000 in exchange for a loan in that amount (“Note #5). The Company
issued 2,750,000 warrants in connection with this Note #5, for the Company’s common stock at an exercise price of $0.50 per
share. The total relative fair value of the warrants of $996,178 was recognized as a debt discount which is being amortized on
a straight-line basis over the term of the notes. Notes #1 to #4 and Note #5 shall be collectively referred to herein as the “$2M
Notes.”
On January 22, 2016, the Company entered
into a Note Conversion Agreement (the “Conversion Agreement”) with the holder of the $2M Notes. Pursuant to the Conversion
Agreement, the investor converted the $2M Notes, which totaled $2,000,000, into an investment of $2,000,000 into the Company’s
private placement of convertible notes and warrants. This extinguishment of the $2M Notes resulted in a loss on extinguishment
of debt of $3,163,303 which included an unamortized discount of $926,382 and $2,236,921 representing the fair value of 2,000,000
warrants issued in connection with the Note Conversion Agreement.
On January 25, 2016, the investor converted
the convertible note and accrued interest into 4,320,000 shares of the Company’s common stock and a warrant to purchase
4,320,000 shares of the Company’s common stock with a ten year term and an exercise price of $.50. Of the 4,320,000 shares
of common stock, 320,000 shares represent interest paid on the convertible note pursuant to the terms of the conversion agreement
in the amount of $160,000. Upon conversion, the Company wrote-off the fair value of the derivative liability associated with the
converted notes of $8,123,109 to additional paid-in capital.
As of March 31, 2016 and December 31, 2015,
the aggregate outstanding balance of notes payable to related parties was $0 and $670,848, respectively, net of unamortized discounts
of $0 and $104,152.
Advances – Related Party
During the three months ended March
31, 2016, the Company received advances from its Chief Executive Officer totaling $310,000 and repaid advances totaling $120,000.
During the three months ended March 31, 2015, the Company received advances from its Chief Executive Officer totaling $51,850 and
repaid advances totaling $265,000. Such advances do not accrue interest and are payable upon demand.
As of March 31, 2016 and December 31,
2015, the aggregate outstanding balance of advances to related parties was $300,000 and $110,000, respectively.
Convertible Notes Payable
In addition to the $2,000,000 convertible
note described above in the notes payable-related party section, on March 7, 2016, the Company received proceeds of $80,000 in
exchange for a convertible note and the issuance of 80,000 warrants with a five year life and an exercise price of $0.50 per share.
The convertible note has a principal amount of $80,000, interest of 8% per annum, a maturity date of one year and is convertible
into 160,000 units, with each unit consisting of a share of common stock and a warrant with a five year life from the date of conversion
and an exercise price of $0.50 per share, subject to certain anti-dilution provisions. The relative fair value of the 80,000 warrants
issued with the debt was determined to be $38,205 and it was recognized as a discount to the debt. The fair value of the conversion
options in the note was determined to be $274,190 of which $41,795 was recognized as an additional discount to the debt and $232,396
was recognized as a loss on derivatives. The fair value of the convertible feature was determined based on a fair value of $146,269
and $127,921 assigned to the warrant and common stock conversion options, respectively. The total debt discount of $80,000 is being
amortized on a straight-line basis over the term of the note.
During the three months ended March
31, 2016, the full principal balances of certain notes totaling $30,000 were converted pursuant to the terms of the notes into
61,578 shares of the Company’s common stock and 61,578 warrants to purchase common stock. Of the 61,578 shares of common
stock issued, 1,578 shares related to the payment of interest of $790. Upon conversion, the Company wrote-off the fair value of
the derivative liability associated with the converted notes of $139,913 to additional paid-in capital.
For the remaining outstanding convertibles
notes as of March 31, 2016, the fair value of the derivative liability conversion options was $4,619,063 as of March 31, 2016.
Aggregate amortization of the discounts
on the convertible notes for the three months ended March 31, 2016 and 2015 was $191,598 and $74,013, respectively. As of March
31, 2016 and December 31, 2015, the aggregate outstanding balance of convertible notes payable was $1,196,704 and $1,051,545, respectively,
net of unamortized discounts of $362,417 and $457,576.
Derivative Liabilities - Convertible
Notes
Convertible note borrowings during the
three months ended March 31, 2016 resulted in derivative liabilities recognized of $8,403,344 for which $2,041,795 was recognized
as a discount to the debt and $6,361,549 was recognized as a loss on derivative. Due to conversion of the convertible debt to common
stock during the period, the fair value of the derivative liabilities associated with the converted notes of $8,263,022 was reclassified
to additional paid-in-capital. The Company recorded the change in fair value of the conversion option derivative liabilities recognizing
a gain of $3,666,419 for the three months ended March 31, 2016. As of March 31, 2016, the fair value of the outstanding convertible
note derivatives was determined to be $4,619,063.
The valuation of the derivative liabilities
attached to the convertible debt was arrived at through the use of Black-Scholes Option Pricing Model and the following assumptions:
|
|
Three Months Ended March 31,
|
|
|
2016
|
|
2015
|
Volatility
|
|
113.46% - 218.75%
|
|
-
|
Risk-free interest rate
|
|
0.10% - 2.07%
|
|
-
|
Expected term
|
|
0.25 – 5 years
|
|
-
|
Accounts Payable - Related Party
As of March 31, 2016 and December 31,
2015, there is $0 and $62,469, respectively, due to a related party, the Company’s Chief Financial Officer, which is non
interest bearing due on demand.
3. EQUITY
Common Stock
On February 23, 2016, the Company issued
145,878 common shares and warrants to purchase 426,741 common shares of the Company’s common stock in exchange for proceeds
of $67,536. The cash was received prior to December 31, 2015 and was recorded as an accrued liability at December 31, 2015. The
Company determined a fair value for the shares and warrants to be $537,175. This transaction resulted in a loss on extinguishment
of liability of $469,639.
During the three months ended March
31, 2016, the Company issued 372,263 common shares and warrants to purchase 1,140,662 common shares of the Company’s common
stock in exchange for proceeds of $172,342, $40,062 of which was received subsequent to the end of the quarter.
Stock Options
A summary of stock option activity
during the three months ended March 31, 2016 is as follows:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
|
Shares
|
|
|
Price
|
|
|
Life (years)
|
|
Outstanding at December 31, 2015
|
|
|
50,000
|
|
|
$
|
0.50
|
|
|
|
10.0
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
50,000
|
|
|
|
0.50
|
|
|
|
9.7
|
|
Exercisable at March 31, 2016
|
|
|
4,000
|
|
|
$
|
0.50
|
|
|
|
9.7
|
|
Stock option awards are expensed on
a straight-line basis over the requisite service period. During the three months ended March 31, 2016 and 2015, the
Company recognized expense of $4,163 and $0, respectively, associated with stock option awards. At March 31, 2016, future stock
compensation expense (net of estimated forfeitures) not yet recognized was $64,775 and will be recognized over a weighted average
remaining vesting period of 3.9 years.
The intrinsic value of the Company’s
stock options outstanding was $20,000 at March 31, 2016.
Warrants
On September
1, 2015 the Company entered into an Employment Agreement (the “Employment Agreement”) with Mark Tobin in his capacity
as the Company’s Chief Financial Officer. Pursuant to the Employment Agreement, on September 1, 2015 the Company issued
Mr. Tobin warrants to purchase 1,500,000 shares of the Company’s common stock at $1.00 per share (the “Warrant Shares”).
The fair value of the warrants was determined to be $2,835,061 using the Black-Scholes option pricing model. 375,000 of the Warrant
Shares vested on September 1, 2015, an additional 375,000 warrant shares will vest on the first anniversary date of the Employment
Agreement, an additional 375,000 warrant shares will vest on the second anniversary date of the Employment Agreement, and, an
additional 375,000 warrant shares will vest on the third anniversary date of the Employment Agreement. Warrant expense of $324,851
was recognized during the three months ended March 31, 2016.
The following summarizes the warrant
activity for the three months ended March 31, 2016:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Term
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
(in years)
|
|
|
Value
|
|
Outstanding as of December 31, 2015
|
|
|
40,026,431
|
|
|
$
|
1.83
|
|
|
|
4.6
|
|
|
$
|
54,932,218
|
|
Granted
|
|
|
10,789,763
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(75,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2016
|
|
|
50,741,194
|
|
|
$
|
0.91
|
|
|
|
5.4
|
|
|
$
|
45,667,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of March 31, 2016
|
|
|
48,416,194
|
|
|
$
|
0.93
|
|
|
|
5.4
|
|
|
$
|
45,667,075
|
|
Derivative Liabilities - Warrants
The anti-dilution features in the freestanding
warrants issued in the three months ended March 31, 2016 cause the instruments to no longer be indexed to the Company’s own
stock and requires that they be accounted for as derivative liabilities based on guidance in FASB ASC 815, Derivatives and Hedging.
The valuation of the derivative liability
of the warrants was determined through the use of a Black Scholes options model, which the Company believes approximates fair
value. Using this model, the Company had a balance of $12,796,146 at December 31, 2015. The Company recorded the change
in the fair value of the warrant liabilities recognizing a gain of $5,820,714 for the three months ended March 31, 2016, to reflect
the value of the warrant derivative liability of $6,975,432 as of March 31, 2016.
On November 4, 2015, the Company entered into
an amendment to the Independent Contractor Agreement (the “Amendment”) with a service provider pursuant to which the
service provider is to be issued warrants to purchase 2,400,000 shares of the Company’s common stock at $1.00 per share
(the “Warrant Shares”). 1,200,000 of the Warrant Shares vested on November 4, 2015, an additional 600,000 Warrant
Shares will vest on the first anniversary date of the Amendment, an additional 600,000 warrant shares will vest on the second
anniversary date of the Amendment. The fair value of the first 1,200,000 warrants shares was determined to be $1,115,964 using
the Black-Scholes option pricing model and was recognized as expense during the year ended December 31, 2015. The fair value of
the two tranches of 600,000 warrant shares was determined to total $1,050,679 as of March 31, 2016 using the Black-Scholes option
pricing model of which $110,285 was recognized as expense during the three months ended March 31, 2016.
The warrants were valued
using the Black-Scholes pricing model with the following assumptions:
|
|
Three Months Ended March 31,
|
|
|
2016
|
|
2015
|
Volatility
|
|
129-.70 % - 142.97%
|
|
108.72%
|
Risk-free interest rate
|
|
0.87% - 1.78%
|
|
0.73%
|
Expected term
|
|
3 - 10 years
|
|
3.25 - 5 years
|
4. COMMITMENTS AND CONTINGENCIES
Lease Commitments
In November 2013, the Company entered
into a 60-month lease agreement for its corporation facility in Arizona. Total rent expense for the three months ended March
31, 2016 and 2015 was $21,832 and $24,157, respectively.
Future minimum lease payments are as
follows:
2016
|
|
$
|
61,540
|
|
2017
|
|
|
84,233
|
|
2018
|
|
|
71,797
|
|
2019
|
|
|
-
|
|
2020
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Total
|
|
$
|
217,570
|
|
Concentrations
All of the Company’s revenue and
accounts receivable are currently earned from one customer.
Legal Matters
On March 18, 2015, the Company received
correspondence from the counsel of Mr. John Kuhns, the Company’s former Co-CEO and Executive Chairman alleging that Mr. Kuhns
has “Good Reason” to terminate his Employment Agreement for an alleged failure to pay his salary in full. On March
30, 2015, Mr. Kuhns advised that if the alleged breaches of the Employment Agreement were not cured there was a possibility that
he would pursue litigation.
As of March 30, 2015, shareholders holding
approximately 67.26% of the total shares of common stock of NanoFlex Power Corporation (the “Company,” “we,”
“our” or “us”) that are entitled to vote on all Company matters approved by written consent the removal
of John D. Kuhns from his position as a member of the Company’s Board of Directors. Mr. Kuhns’ removal was for “Cause”
as defined under his Employment Agreement as amended and dated as of October 1, 2013 (the “Employment Agreement”).
The removal arose as a result of his documented conduct and statements, which breached his fiduciary duties to the Company in order
to advance personal monetary and other interests, and thereby threatened serious financial injury to the Company, its shareholders
and its debtholders.
On March 31, 2015, the Board of Directors
terminated the Employment Agreement with Mr. Kuhns for Cause and removed him from his positions as Co-CEO, and from all other officer
positions he held with the Company and its subsidiaries and affiliates, and all director positions with the Company’s subsidiaries
and affiliates.
On April 24, 2015, the Company received
a letter from Mr. Kuhns’ counsel (the “Response Letter”) stating that Mr. Kuhns disagreed with statements in
the Initial Filing regarding the circumstances of his removal as a director and officer.
The Response Letter was accompanied
by a copy of a complaint (the “Complaint”) filed by John D, Kuhns (the “Plaintiff”) in the United States
District Court Southern District of New York against the Company, Mr. Dean L. Ledger, our current CEO and member of our Board
of Directors, Mr. Robert J. Fasnacht, our former Executive Vice President and former member of our Board of Directors and Mr.
Ronald B. Foster, a shareholder of the Company (each, a “Defendant,” collectively, the “Defendants”).
The Complaint alleges, among other things, that the Plaintiff was terminated by the Company in violation of Section 922 of the
Dodd-Frank Act, that the Company wrongfully terminated the Employment Agreement, that the Defendants made false statements to
shareholders regarding the Plaintiff, that the Defendants (other than the Company) tortuously interfered with the Plaintiff’s
Employment Agreement, and that Mr. Ledger and Mr. Fasnacht breached their fiduciary duties to the Company and its shareholders.
The Plaintiff seeks monetary damages,
including (i) two (2) times of the alleged owed compensation to him, together with interest as well as litigation costs, expert
witness fees and reasonable attorneys’ fees; (ii) damages for the alleged breach of the Employment Agreement by the Company,
estimated to be at least $2 million, plus interest and attorney’s fees; (iii) an unspecified amount for his alleged libel
claim; and (iv) damages for the alleged tortious interference with contract, including punitive damages of at least $2 million.
The Plaintiff is also seeking a declaratory judgment, claiming that he was not terminated as a director and should continue to
hold a seat on the Company’s Board of Directors.
On September 3, 2015 the Company filed
a Motion to Dismiss portions of the Complaint in the United States District Court Southern District of New York. The motion to
Dismiss is currently still pending and the Company believes that the allegations in the Complaint to be without any merit and
will vigorously defend against the claims.
5. SUBSEQUENT EVENTS
Subsequent
to March 31, 2016, the Company issued 714,597 common shares and warrants to purchase 1,508,117 common shares of the Company’s
common stock in exchange for proceeds of $529,213. The warrants have a 5 year term and a $.50 exercise price.
On April 18, 2016 the Company issued
a convertible promissory note to an investors in the amount of $75,000 together with a warrant to purchase 75,000 shares of the
Company’s Common Stock, with a 5 year term and $,50 exercise price.
On April 28, 2016, the investor converted this note and upon conversion was issued
162,000 shares of the Company’s Common Stock and a warrant to purchase 162,000 shares of the Company’s Common Stock,
with a 5 year term and $.50 exercise price.
On May 6, 2016, the Company issued 100,000 shares of its Common Stock to an investor
pursuant to a subscription agreement and amendment thereto.
On
May 9, 2016, an
investor converted a promissory note issued
to him by the Company on September 11, 2015, and upon conversion was issued 27,000 shares of the Company’s Common Stock
and a warrant to purchase 27,000 shares of the Company’s Common Stock, with a 5 year term and $.50 exercise price.