NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Ascent Solar Technologies, Inc. (“Ascent”) 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 and core technologies. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin film, photovoltaic (“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 to Copper-Indium-Gallium-diSelenide (“CIGS”) PV products in particular. ITN formed Ascent to commercialize its investment in CIGS PV technologies. In January 2006, in exchange for
102,800
shares of common stock of Ascent, ITN assigned to Ascent certain CIGS PV technologies and trade secrets and granted to Ascent a perpetual, exclusive, royalty free worldwide license to use, in connection with the manufacture, development, marketing and commercialization of CIGS PV to produce solar power, certain of ITN’s existing and future proprietary and control technologies that, although non-specific to CIGS PV, Ascent believes will be useful in its production of PV modules for its target markets. Upon receipt of the necessary government approvals and pursuant to novation in early 2007, ITN assigned government funded research and development contracts to Ascent and also transferred the key personnel working on the contracts to Ascent.
Currently, the Company is focusing on integrating its PV products into high value markets such as aerospace, satellites, near earth orbiting vehicles, and fixed-wing unmanned aerial vehicles (UAV). The value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these industries, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent has the capability to design and develop finished products for end users in these areas as well as collaborate with strategic partners to design and develop custom integrated solutions for products like fixed-wing UAVs. Ascent sees significant overlap of the needs of end users across some of these industries and can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
Reverse Stock Split
On July 19, 2018, the Company, filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, at a ratio of one-for-one thousand (the “Reverse Stock Split”).
The Certificate of Amendment provides that the Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on July 20, 2018 (the “Effective Time”), at which time every thousand shares of the Company’s issued and outstanding Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in the par value per share. The Certificate of Amendment provides that in the event a stockholder would otherwise be entitled to receive a fraction of a share of Common Stock, such stockholder shall receive one whole share of Common Stock in lieu of such fractional share and no fractional shares shall be issued.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of
December 31, 2018
and
December 31, 2017
, and the results of operations for the years ended
December 31, 2018
and
2017
. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Foreign Currencies:
Bank account balances held in foreign currencies are translated to U.S. dollars utilizing the period end exchange rate. Gains or losses incurred in connection with the Company’s accounts held in foreign currency were not material for the years ended
December 31, 2018
and
2017
and were recorded in “Other Income/(Expense)” in the Consolidated Statements of Operations.
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 credit-worthiness and current economic trends. Reserves are established on an account-by-account basis. Account balances 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. As of
December 31, 2018
and
2017
, the Company had an allowance for doubtful accounts of
$45,664
and
$48,201
, respectively.
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, 2018
and
2017
, the Company had inventory reserve balances of
$745,927
and
$562,140
, respectively. In response to management's estimate of current market conditions, the Company has reserved all of its work-in-process and finished goods inventory as of
December 31, 2018
. If actual demand and market conditions are less favorable than those estimated by management, additional inventory write downs may be required.
Due to the sale of the EnerPlex brand and the re-purposing of our work-in-process inventory, we are unable to estimate the recoverability of all of our work-in process inventory values, resulting in a lower-cost-to-market analysis and reserve for impairment. An expense of
$363,377
was recorded to inventory impairment costs for the year ended
December 31, 2017
. There were no lower of cost or market adjustments during the year ended
December 31, 2018
.
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
to
forty years
using the straight-line method, as presented in the table below, commencing when the asset is placed in service. Leasehold improvements are depreciated over the shorter of the remainder of the lease term or the life of the improvements. Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in income. Expenditures for repairs and maintenance are expensed as incurred.
|
|
|
|
|
|
Useful Lives
in Years
|
Buildings
|
|
40
|
Manufacturing machinery and equipment
|
|
5 - 10
|
Furniture, fixtures, computer hardware/software
|
|
3 - 7
|
Leasehold improvements
|
|
life of lease
|
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. During the year ended
December 31, 2018
, the Company wrote down the remaining international EnerPlex IP, which was not part of the 2017 sale of the EnerPlex IP. This write down consisted of
$692,032
in capitalized patent costs, reduced by
$225,027
in accumulated amortization, resulting in an expense of
$467,005
. As of
December 31, 2018
and
2017
, the Company had
$862,429
and
$1,470,796
of net patent costs, respectively. Of these amounts
$207,308
and
$640,167
represents costs net of amortization incurred for awarded patents, and the remaining
$655,121
and
$830,629
represents costs incurred for patent applications to be filed as of
December 31, 2018
and
2017
, respectively. During the years ended
December 31, 2018
and
2017
, the Company capitalized
$16,447
and
$62,652
in patent costs, respectively, as it worked to secure design rights and trademarks for newly developed products. Amortization expense was
$158,488
and
$150,928
for the years ended
December 31, 2018
and
2017
, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
As of
December 31, 2018
, future amortization of patents is expected as follows:
|
|
|
|
|
2019
|
$
|
57,649
|
|
2020
|
$
|
45,920
|
|
2021
|
$
|
37,429
|
|
2022
|
$
|
33,924
|
|
2023
|
$
|
25,154
|
|
Thereafter
|
$
|
7,232
|
|
|
$
|
207,308
|
|
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, 2018
and
2017
, the Company did not incur impairments of its manufacturing facilities and equipment.
Interest Capitalization
: Historically the Company has capitalized interest cost as part of the cost of acquiring or constructing certain assets during the period of time required to get the asset ready for its intended use. The Company capitalized interest to the extent that expenditures to acquire or construct an asset have occurred and interest cost has been incurred.
Convertible Notes
: The Company issues, from time to time, convertible notes. Refer to Notes 10 and 12 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 13 and 14 for further discussion on the classification of each instrument.
Derivatives:
The Company evaluates its financial instruments under FASB ASC 815,
"Derivatives and Hedging"
to determine whether the instruments contain an embedded derivative. When an embedded derivative is present, the instrument is evaluated for a fair value adjustment upon issuance and at the end of every reporting period. Any adjustments to fair value are treated as gains and losses in fair values of derivatives and are recorded in the Consolidated Statements of Operations.
The following table is a summary of the derivative liability activity for the years ended
December 31, 2018
:
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
6,406,833
|
|
Additional derivative liability on new notes
|
3,873,697
|
|
Derivative liability extinguished
|
(27,686
|
)
|
Change in fair value of derivative liability
|
(138,392
|
)
|
Derivative Liability Balance as of December 31, 2018
|
$
|
10,114,452
|
|
Refer to Notes 10 and 12 for further discussion on the embedded derivatives of each instrument.
Product Warranties:
The Company provides a limited warranty to the original purchaser of products against defective materials and workmanship. The Company also guarantees that standalone modules and PV integrated consumer electronics will achieve and maintain the stated conversion efficiency rating for certain products. Warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms, historical experience and analysis of peer company product returns. 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.
ASCENT SOLAR TECHNOLOGIES, INC.
Warrant Liability:
Warrants to purchase the Company's common stock with nonstandard anti-dilution provisions, regardless of the probability or likelihood that may conditionally obligate the issuer to ultimately transfer assets, are classified as liabilities and are recorded at their estimated fair value at each reporting period. Any change in fair value of these warrants is recorded at each reporting period in Other income/(expense) on the Company's statement of operations.
Revenue Recognition:
Product revenue.
We recognize revenue for module 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, in satisfaction of the corresponding performance obligations.
During the years ended
December 31, 2018
and
2017
, the company recognized product revenue of
$813,512
and
$642,179
, respectively.
Government contracts 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.
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.
During the year ended
December 31, 2018
, the company recognized government contract revenue of
$48,900
.
No
government contract revenue was recognized for the year ended
December 31, 2017
.
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 Consolidated 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
$2,794,641
and
$4,820,536
for the years ended
December 31, 2018
and
2017
, respectively. 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.
Marketing and Advertising Costs:
The Company advertises in print, television, online and through social media. The Company will also authorize customers to run advertising campaigns on its behalf through various media outlets. Marketing and advertising costs are expensed as incurred. Marketing and advertising expenses were
$23,560
and
$189,382
for the years ended
December 31, 2018
and
2017
, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
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 is recognized as expense 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. For purposes of determining estimated fair value of share-based payment awards on the date of grant the Company uses the Black-Scholes option-pricing model (“Black-Scholes Model”) for option awards. The Black-Scholes Model requires the input of highly subjective assumptions. Because the Company’s employee stock options may have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of the Company’s employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which result in changes to these assumptions and methodologies, which could materially impact the Company’s fair value determination. The Company estimates the fair value of its restricted stock awards as its stock price on the grant date.
The accounting guidance for share-based compensation may be subject to further interpretation and refinement over time. There are significant differences among option valuation models, and this may result in a lack of comparability with other companies that use different models, methods and assumptions. If factors change and the Company employs different assumptions in the accounting for share-based compensation in future periods, or if the Company decides to use a different valuation model, the compensation expense the Company records in the future may differ significantly from the amount recorded in the current period and could materially affect its loss from operations, net loss and net loss per share.
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 operations.
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 (2014-2017) 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.
Net Loss per Common Share:
Basic loss per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect the potential securities that could share in the earnings of the Company, similar to fully diluted earnings per share. Common stock equivalents outstanding as of December 31, 2018 and 2017 of approximately
834
million and
3
million shares, respectively, have been omitted from loss per share because they are anti-dilutive. Common stock equivalents consist of stock options, preferred stock, preferred stock make-whole dividend liability amounts (assuming the make-whole dividend liability is paid in common stock in lieu of cash), and convertible notes (assuming the amortization payments are paid in common stock in lieu of cash). Net loss per common share was the same for both basic and diluted methods for the periods ended
December 31, 2018
and
2017
.
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.
|
ASCENT SOLAR TECHNOLOGIES, INC.
Certain long-lived assets and current liabilities have been measured at fair value on a recurring and non-recurring basis. See Note 6. Property, Plant and Equipment, Note 10. Secured Promissory Notes and Note 12. Convertible Notes. The carrying amount of our long term debt outstanding approximates fair value because our current borrowing rate does not materially differ from market rates for similar bank borrowings. The carrying value for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and other assets and liabilities approximate their fair values due to their short maturities.
Related Party Transactions:
One of the Company's named shareholders is Tertius Financial Group Pte Ltd, of which Mr. Victor Lee, President and Chief Executive Officer of the Company, is Managing Director and
50%
shareholder. Accounting for transactions under these agreements is consistent with those defined in our Significant Accounting Policies. See Note 19 for further information.
Use of Estimates:
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, and has issued a number of clarifying ASUs subsequently, all of which outline a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The standard provides enhancements to the quality and consistency of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting standard becomes effective for the Company for reporting periods beginning after December 15, 2017, and interim reporting periods thereafter. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. The implementation of ASU 2014-09 did not have a material effect on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company has evaluated the adoption of this guidance and has determined there will not be a material impact on its consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09,
Compensation - Stock Compensation (Topic 718)
. ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for interim periods and fiscal years beginning after December 15, 2017, and early application is permitted. The implementation of ASU 2017-09 did not have a material effect on the Company's consolidated financial statements.
In July 2017, the FASB issued ASU No. 2017-11
Part I, Earnings Per Share (Topic 260), Distinguishing Liabilities from
Equity (Topic 480), Derivatives and Hedging (Topic 815)
. ASU 2017-11 Part I changes the classification analysis of certain equity linked financial instruments with down round features. ASU 2017-11 Part I is effective, for public business entities, for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company has evaluated the adoption of this guidance and has determined there will not be a material impact on its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting
, which simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with specified exceptions. This standard is effective for the Company in the first quarter of 2020, and early adoption is permitted. The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements.
ASCENT SOLAR TECHNOLOGIES, INC.
In August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement
, which modifies the disclosure requirements of fair value measurements. This standard is effective for the Company in the first quarter of 2020, and early adoption is permitted. The Company is currently evaluating the impact of the effect adoption of this standard will have on its consolidated financial statements.
Other new pronouncements issued but not effective as of December 31, 2018 are not expected to have a material impact on the Company’s consolidated financial statements.
NOTE 4. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN
During the years ended
December 31, 2018
and
2017
, the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 8, 9, 10, 11, 12, and 14.
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, 2018
the Company used
$4,015,846
in cash for operations. The Company's primary significant long term cash obligation consists of a note payable of
$5,378,062
to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of approximately
$693,611
, including principal and interest, will come due in the remainder of 2019.
Additional projected product revenues are not anticipated to result in a positive cash flow position for the year 2019 overall and, as of
December 31, 2018
, the Company has negative working capital. As such, cash liquidity sufficient for the year ending December 31, 2019 will require additional financing.
The Company continues to accelerate sales and marketing efforts related to its consumer and military solar products and specialty PV application strategies through expansion of its sales and distribution channels. The Company has begun activities related to securing additional financing through strategic or financial investors, but there is no assurance the Company will be able to raise additional capital on acceptable terms or at all. If the Company's revenues do not increase rapidly, and/or additional financing is not obtained, the Company will be required to significantly curtail operations to reduce costs and/or sell assets. Such actions would likely have an adverse impact on the Company's future operations.
As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern. The Company has scaled down its operations, due to cash flow issues, and does not expect to ramp up until significant financing is obtained.
Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 5. TRADE RECEIVABLES
Trade receivables, net consist of amounts generated from product sales and government contracts. Accounts receivable totaled
$165,160
and
$6,658
as of
December 31, 2018
and
2017
, respectively.
Provisional Indirect Cost Rates - 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.
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
The following table summarizes property, plant and equipment as of
December 31, 2018
and
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2017
|
|
2017
|
Building
|
|
$
|
5,828,960
|
|
|
$
|
5,828,960
|
|
Furniture, fixtures, computer hardware and computer software
|
|
489,421
|
|
|
489,421
|
|
Manufacturing machinery and equipment
|
|
30,302,806
|
|
|
30,327,481
|
|
Depreciable property, plant and equipment
|
|
36,621,187
|
|
|
36,645,862
|
|
Less: Accumulated depreciation and amortization
|
|
(32,207,829
|
)
|
|
(32,013,686
|
)
|
Net property, plant and equipment
|
|
$
|
4,413,358
|
|
|
$
|
4,632,176
|
|
The Company analyzes its long-lived assets for impairment, both individually and as a group, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Depreciation expense for the years ended
December 31, 2018
and
2017
was
$218,818
and
$1,030,237
, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the Consolidated Statements of Operations.
NOTE 7. INVENTORIES
Inventories consisted of the following at
December 31, 2018
and
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2018
|
|
2017
|
Raw materials
|
|
$
|
660,791
|
|
|
$
|
688,904
|
|
Work in process
|
|
—
|
|
|
11,878
|
|
Finished goods
|
|
—
|
|
|
337,072
|
|
Total
|
|
$
|
660,791
|
|
|
$
|
1,037,854
|
|
NOTE 8. NOTES PAYABLE
On
February 24, 2017
, the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of
$765,784
. The notes bear interest of
6%
per annum and matured on
February 24, 2018
; all outstanding principal and accrued interest is due and payable upon maturity. On June 5, 2018, the Company entered into another agreement with the same vendor to convert the balance of their account into a fourth note payable with a principal amount of
$308,041
, this note also bears interest at a rate of
6%
per annum, and matured on
July 31, 2018
. As of
December 31, 2018
, the Company had not made any payments on these notes; the total outstanding principal and accrued interest were
$1,073,825
and
$96,881
, respectively, and the note is due upon demand.
On
March 23, 2017
, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of
$356,742
. The note bears interest of
5%
per annum and matured on
March 31, 2018
; all outstanding principal and accrued interest is due and payable upon maturity. As of
December 31, 2018
, the note had been redeemed in stock; on
July 25, 2018
, the vendor, elected to redeem the note principal balance of
$356,742
, along with
$23,897
in accrued interest, for
2,138,421
shares of common stock. The conversion rate was based on the average of the prior
five
trading days' closing price.
On
June 30, 2017
, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of
$250,000
. The note bears interest of
5%
per annum and matured on
February 28, 2018
. As of
December 31, 2018
, the Company had not made any payments on this note, the accrued interest was
$18,801
, and the note is due upon demand.
On
September 30, 2017
, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of
$215,234
. The note bears interest of
5%
per annum and matured on
September 30, 2018
. The Company has not made the monthly payments of
$18,426
that were to commence on
October 30, 2017
; as of
December 31, 2018
, the company had paid principal of
$22,529
and interest of
$897
. The remaining principal and interest balances, as of
December 31, 2018
, were
$192,705
and
$11,684
, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 9. DEBT
On
February 8, 2008
, the Company acquired a manufacturing and office facility in Thornton, Colorado, for approximately
$5.5
million. The purchase was financed by a promissory note, deed of trust and construction loan agreement (the “Construction Loan”) with the Colorado Housing and Finance Authority (“CHFA”), which provided the Company borrowing availability of up to
$7.5
million for the building and building improvements. In
2009
, the Construction Loan was converted to a permanent loan pursuant to a Loan Modification Agreement between the Company and CHFA (the “Permanent Loan”). The Permanent Loan, collateralized by the building, has an interest rate of
6.6%
and the principal will be amortized through its term to
February 2028
. Further, pursuant to certain negative covenants in the Permanent Loan, the Company may not, among other things, without CHFA’s prior written consent (which by the terms of the deed of trust is subject to a reasonableness requirement): create or incur additional indebtedness (other than obligations created or incurred in the ordinary course of business); merge or consolidate with any other entity; or make loans or advances to the Company’s officers, shareholders, directors or employees.
On
November 1, 2016
, the Company and the CHFA agreed to modify the original agreement described above with the addition of a forbearance period. Per the modification agreement, no payments of principal and interest shall be due under the note during the forbearance period commencing on
November 1, 2016
and continuing through
April 1, 2017
. The amount of interest that should have been paid by the Company during the forbearance period in the total amount of
$180,043
shall be added to the outstanding principal balance of the note. As a result, on
May 1, 2017
, the principal balance of the note was
$5,704,932
. Commencing on
May 1, 2017
, the monthly payments of principal and interest due under the note resumed at
$57,801
, and the Company shall continue to make such monthly payments over the remaining term of the note ending in
February 2028
.
On
August 24, 2018
, the Company and the CHFA agreed to modify the original agreement with an additional forbearance period. Per the modification agreement, no payments of principal shall be due under the note during the forbearance period commencing on
June 1, 2018
and continuing through
November 30, 2018
. For each month of forbearance, partial interest of
$15,000
per month must be paid, and the remaining unpaid interest of the forbearance period of
$84,187
will be added to the outstanding principal balance of the note. As a result, on
December 1, 2018
, the principal balance of the note will be
$5,434,042
and monthly payments of principal and interest of
$57,801
will resume, continuing through the remaining term of the note ending in
February 2028
.
The outstanding principal balance of the Permanent Loan was
$5,378,062
and
$5,461,819
as of
December 31, 2018
and
December 31, 2017
, respectively.
As of
December 31, 2018
, remaining future principal payments on long-term debt are due as follows:
|
|
|
|
|
2019
|
$
|
349,093
|
|
2020
|
$
|
372,843
|
|
2021
|
$
|
398,209
|
|
2022
|
$
|
425,301
|
|
2023
|
$
|
454,235
|
|
Thereafter
|
$
|
3,378,381
|
|
|
$
|
5,378,062
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 10. SECURED PROMISSORY NOTE
The following table provides a summary of the activity of the Company's secured notes:
|
|
|
|
|
|
|
|
|
|
|
|
Global Ichiban
|
St. George
|
Total
|
Secured Notes Principal Balance at December 31, 2017
|
$
|
4,557,227
|
|
$
|
—
|
|
$
|
4,557,227
|
|
New notes
|
1,935,000
|
|
1,315,000
|
|
3,250,000
|
|
Note conversions
|
(1,426,000
|
)
|
—
|
|
(1,426,000
|
)
|
Interest redocumented as principal
|
140,518
|
|
—
|
|
140,518
|
|
Note assignments
|
(250,000
|
)
|
—
|
|
(250,000
|
)
|
Secured Notes Principal Balance at December 31, 2018
|
4,956,745
|
|
1,315,000
|
|
6,271,745
|
|
Less: remaining discount
|
(2,012,698
|
)
|
(811,667
|
)
|
(2,824,365
|
)
|
Secured Notes, net of discount, at December 31, 2018
|
$
|
2,944,047
|
|
$
|
503,333
|
|
$
|
3,447,380
|
|
Global Ichiban Secured Promissory Notes
On
November 30, 2017
, the Company, entered into a note purchase and exchange agreement with Global Ichiban Ltd. ("Global"), for the private placement of up to
$2,000,000
of the Company’s secured convertible promissory notes in exchange for
$2,000,000
of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least
$50,000
for the
20
trading day period preceding such future tranche closing dates.
Pursuant to the terms of the note purchase and exchange agreement, the Company and Global also agreed to exchange certain outstanding securities held by the Global for additional notes. As of
November 30, 2017
, Global surrendered for cancellation (i) its outstanding promissory note dated
September 13, 2017
(
$3,359,539
principal and accrued interest), (ii) its outstanding promissory note dated
October 31, 2017
(
$252,466
principal and accrued interest), and (iii) its
400
shares of outstanding Series J Preferred Stock (
$445,222
of capital and accrued dividends). In exchange, the Company issued to Global
$4,057,227
aggregate principal amount of additional Notes.
All principal and accrued interest on the notes are redeemable at any time, in whole or in part, at the option of Global. The redemption amount may be paid in cash or converted into shares of common stock at a variable conversion price equal to the lowest of (i)
85%
of the average VWAP for the shares over the prior
5
trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii)
$2.00
per share, at the option of the Company.
The notes may not be converted, and shares of common stock may not be issued pursuant to the notes, if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of common stock.
Of the notes issued on
November 30, 2017
,
$3,359,539
aggregate principal amount will mature on
December 15, 2020
. Principal and interest was originally to be payable in
36
equal monthly installments of
$111,585
beginning
January 15, 2018
. During the year ended
December 31, 2018
, principal of
$(1,426,000)
was converted into
3,486,276
shares of common stock, and
$140,518
of interest was converted to principal. The remaining note is payable in
30
equal monthly installments of
$80,360
beginning
July 15, 2018
. The Company has not made the payments as outlined in the agreement, this note is due upon demand.
The following table summarizes the conversion activity of this note:
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Interest Converted
|
Common Shares Issued
|
Q1 2018
|
$
|
1,250,000
|
|
$
|
—
|
|
2,450,981
|
|
Q2 2018
|
$
|
176,000
|
|
$
|
—
|
|
1,035,295
|
|
|
$
|
1,426,000
|
|
$
|
—
|
|
3,486,276
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
Of the notes issued on
November 30, 2017
,
$697,688
aggregate principal amount matured on
November 30, 2018
. Principal and interest on these notes are due upon demand.
The
$2,000,000
aggregate principal amount of notes, issued in eight tranches, will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity; for the maturity dates that have passed, the note is due upon demand. As of
December 31, 2018
, the closing dates, closing amounts, and maturity dates on completed note tranches are as follows:
|
|
|
|
|
|
Closing Date
|
Closing Amount
|
Maturity Date
|
11/30/2017
|
$
|
250,000
|
|
11/30/2018
|
12/28/2017
|
$
|
250,000
|
|
12/28/2018
|
1/11/2018
|
$
|
250,000
|
|
1/11/2019
|
1/25/2018
|
$
|
250,000
|
|
1/25/2019
|
2/8/2018
|
$
|
250,000
|
|
2/8/2019
|
2/21/2018
|
$
|
250,000
|
|
2/21/2019
|
3/7/2018
|
$
|
250,000
|
|
3/7/2019
|
3/21/2018
|
$
|
250,000
|
|
3/21/2019
|
On
July 6, 2018
, the Company issued an additional, promissory note to Global, pursuant to the note purchase and exchange agreement dated
November 30, 2017
. In accordance with the agreement, the Company issued a note with a principal balance of
$135,000
in exchange for gross proceeds of
$120,000
. This note matures on
July 6, 2019
. Principal and interest on this note are payable at maturity. The original issue discount of
$15,000
will be allocated to interest expense, ratably, over the life of the note. This note is not redeemable in stock.
On
October 2, 2018
, the Company issued an additional promissory note to Global, pursuant to the note purchase and exchange agreement dated
November 30, 2017
. In accordance with the agreement, the Company issued a note with a principal balance of
$150,000
in exchange for gross proceeds of
$125,000
. This note matures on
October 2, 2019
. Principal and interest on this note are payable at maturity. The original issue discount of
$25,000
will be allocated to interest expense, ratably, over the life of the note. This note is redeemable in stock, at the discretion of the Company, under the same conversion terms described above.
On
October 18, 2018
, Global sold one of its notes to another investor. As a result of this sale,
$250,000
in principal and
$26,466
of accrued interest were assigned to the new investor and is no longer considered secured debt. Please refer to Note 12 for further discussion of this assignment. This note is redeemable in stock, at the discretion of the Company, under the same conversion terms described above.
On
October 22, 2018
, the Company issued an additional promissory note to Global, pursuant to the note purchase and exchange agreement dated
November 30, 2017
. In accordance with the agreement, the Company issued a note with a principal balance of
$150,000
in exchange for gross proceeds of
$125,000
. This note matures on
October 22, 2019
. Principal and interest on this note are payable at maturity. The original issue discount of
$25,000
will be allocated to interest expense, ratably, over the life of the note.
All the notes issued in accordance with the note purchase and exchange agreement dated
November 30, 2017
are secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of
12%
per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the notes.
As of
December 31, 2018
, the aggregate principal and interest balance of the Notes were
$4,956,745
and
$455,356
, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
The following table summarizes the derivative liability transactions for these notes:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
4,897,178
|
|
Additional derivative liability on new notes
|
1,446,156
|
|
Derivative Liability assigned to another investor
|
(119,039
|
)
|
Change in fair value of derivative liability
|
(2,690,434
|
)
|
Derivative Liability Balance as of December 31, 2018
|
$
|
3,533,861
|
|
Due to the varying terms and varying issue dates, the tranches of this instrument were broken into five separate instruments for valuation purposes.
|
|
1)
|
The first valuation was done on the
November 30, 2017
note with term of
three
years. The derivative value of this note was
$3,742,002
as of
December 31, 2017
.
|
|
|
2)
|
The second valuation was done on the group of notes dated
November 30, 2017
, that had a term of
one
year. The derivative value of this group of notes was
$888,168
as of
December 31, 2017
.
|
|
|
3)
|
The third valuation was done on the note dated
December 28, 2017
, which had a term of
one
year. The derivative value of this note was
$267,008
on
December 31, 2017
.
|
|
|
4)
|
For the notes dated in the first quarter of 2018, we did a fourth valuation. Although the notes were entered into at various dates, we used a weighted average issuance date of
February 15, 2018
for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of
54%
present value discount rate of
12%
and a dividend yield of
0%
, resulted in a fair value of the embedded derivative associated with these Notes of
$1,151,162
as of
February 15, 2018
. The value of the embedded derivative associated with these Notes was recorded as a debt discount and will be charged to interest expense, ratably, over the life of the notes.
|
|
|
5)
|
For the notes dated in the fourth quarter of 2018, we did a fifth valuation. Although the notes were entered into at various dates, we used a weighted average issuance date of
October 12, 2018
for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of
60%
present value discount rate of
12%
and a dividend yield of
0%
, resulted in a fair value of the embedded derivative associated with these Notes of
$294,994
as of
October 12, 2018
. The fair value of the derivative was greater than the face value at issuance and the difference of
$44,994
was charged to interest expense at issuance. The remaining debt discount of
$250,000
will be charged to interest expense ratably over the life of the notes.
|
The derivative liability associated with the notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.
|
|
1)
|
For the
November 30, 2017
3yr note: Management conducted a fair value assessment with the following assumptions: annual volatility of
65%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2018
. As a result of the fair value assessment, the Company recorded a net gain of
$1,977,934
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$1,764,068
as of
December 31, 2018
.
|
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
2)
|
For the
November 30, 2017
1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
56%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2018
. As a result of the fair value assessment, the Company recorded a net gain of
$350,164
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$418,965
as of
December 31, 2018
.
|
In addition to the fair value assessment,
$119,039
of the pre-adjusted derivative liability was assigned to the other investor described above. Please refer to Note 22 for further information.
|
|
3)
|
For the December 28, 2017 1yr note: Management conducted a fair value assessment with the following assumptions: annual volatility of
56%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2018
. As a result of the fair value assessment, the Company recorded a net gain of
$116,882
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$150,126
as of
December 31, 2018
.
|
|
|
4)
|
For the first quarter 2018 1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
56%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2018
. As a result of the fair value assessment, the Company recorded a net gain of
$250,405
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$900,757
as of
December 31, 2018
.
|
|
|
5)
|
For the fourth quarter 2018 1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
71%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2018
. As a result of the fair value assessment, the Company recorded a net loss of
$4,951
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$299,945
as of
December 31, 2018
.
|
The total cumulative net gain for the year ended
December 31, 2018
was
$2,690,434
to reflect a total derivative liability of
$3,533,861
as of
December 31, 2018
.
Subsequent to the date of this report, the Company conducted additional transactions under this security agreement. Please refer to Note 21 for more information.
St. George Secured Convertible Notes
On
May 8, 2018
, the Company, entered into a note purchase agreement with St. George Investments LLC ("St. George"), for the private placement of a
$575,000
secured convertible promissory note. The Company received
$500,000
in aggregate proceeds for the note in two tranches and recorded and original issue discount of
$50,000
and debt financing costs of
$25,000
. The original issue discount and the financing costs will be recognized as interest expense, ratably, over the life of the note. The note bears interest at a rate of
10%
per annum and matures on
May 9, 2019
. All unredeemed principal and accrued interest is payable upon maturity. The note contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. In the event of default the interest rate increases to
22%
per annum. The note is secured by a junior security interest on the Company's headquarters building, located in Thornton, Colorado. There are no registration rights applicable to this agreement.
Beginning in early November 2018, St. George shall have the option to require the Company to redeem all or a portion of the amounts outstanding under the note. The Company may pay the requested redemption amounts in cash or in the form of shares of common stock (subject to certain specified equity conditions). Payments in the form of Common Stock shall be calculated using a variable conversion price equal to (i)
60%
of the average of the two lowest closing bid prices for the shares over (ii) the prior
ten
day trading period immediately preceding the redemption.
ASCENT SOLAR TECHNOLOGIES, INC.
On
November 5, 2018
, the Company entered into a second securities purchase agreement with St. George, for the private placement of a
$1,220,000
secured convertible promissory note ("Company Note"). On
November 7, 2018
, the Company received
$200,000
of gross proceeds from the offering of the Company Note. In addition, the Company received additional consideration for the Company Note in the form of eight separate promissory notes of St. George (the “Investor Notes”) having an aggregate principal amount of
$800,000
. The Company may receive additional cash proceeds of up to an aggregate of
$800,000
through cash payments made from time to time by St George of principal and interest under the eight Investor Notes. The aggregate principal amount of the Company Note is divided into nine tranches, which tranches correspond to (i) the cash funding received on
November 5, 2018
and (ii) the principal amounts of the eight Investor Notes. As of
December 31, 2018
, the Company had received an additional
$400,000
in proceeds and had recorded
$740,000
in principal related to the Company and Investor Notes. The Company recorded and original issue discounts of
$80,000
and debt financing costs of
$20,000
, which will be recognized as interest expense, ratably, over the life of the note. As of
December 31, 2018
, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:
|
|
|
|
|
|
|
Closing Date
|
Closing Amount
|
Proceeds
|
11/7/2018
|
$
|
260,000
|
|
200,000
|
|
11/19/2018
|
$
|
120,000
|
|
100,000
|
|
11/30/2018
|
$
|
120,000
|
|
100,000
|
|
12/7/2018
|
$
|
120,000
|
|
100,000
|
|
12/17/2018
|
$
|
120,000
|
|
100,000
|
|
The Notes bear interest at a rate of
10%
per annum and matures on
November 5, 2019
. All unredeemed principal and accrued interest is payable upon maturity. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. In the event of default the interest rate increases to
22%
per annum. The Notes are secured by a security interest on the Company's headquarters building, located in Thornton, Colorado. There are no registration rights applicable to this agreement.
Beginning in early May 2019, St. George shall have the option to redeem all or a portion of the amounts outstanding under the Company Note. At St. George's option, redemption amounts are payable by the Company in cash or in the form of shares of the common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
60%
of the average of the two lowest closing bid price for the shares over the prior
ten
day trading period immediately preceding the conversion.
Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of common stock.
As of
December 31, 2018
, the aggregate principal and interest balance of the Notes were
$1,315,000
and
$45,121
, respectively.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
The following table summarizes the derivative liability transactions for these notes:
|
|
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
—
|
|
Additional derivative liability on new notes
|
1,664,553
|
|
Change in fair value of derivative liability
|
1,628,139
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
3,292,692
|
|
Due to the varying terms and varying issue dates, the tranches of this instrument were broken into two separate instruments for valuation purposes.
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
1)
|
For the May 2018 note, the Company conducted an initial valuation. Management's analysis, using the following assumptions: annual volatility of
50%
present value discount rate of
12%
and a dividend yield of
0%
, resulted in a fair value of the embedded derivative associated with these Notes of
$862,439
as of
May 8, 2018
. The fair value of the derivative was greater than the face value at issuance and the difference of
$337,439
was charged to interest expense at issuance. The remaining debt discount of
$525,000
will be charged to interest expense ratably over the life of the note.
|
|
|
2)
|
For the Company and Investor Notes, the Company conducted an initial valuation. Although the notes were entered into at various dates, we used a weighted average issuance date of
November 26, 2018
for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of
62%
present value discount rate of
12%
and a dividend yield of
0%
, resulted in a fair value of the embedded derivative associated with these Notes of
$802,114
as of
November 26, 2018
. The fair value of the derivative was greater than the face value at issuance and the difference of
$182,114
was charged to interest expense at issuance. The remaining debt discount of
$620,000
will be charged to interest expense ratably over the life of the note.
|
The derivative liability associated with the notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the two valuation groups discussed above.
|
|
1)
|
For the May 2018 note: Management conducted a fair value assessment with the following assumptions: annual volatility of
85%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2018
. As a result of the fair value assessment, the Company recorded a loss of
$706,291
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$1,568,730
as of
December 31, 2018
.
|
|
|
2)
|
For the Company and Investor Notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
66%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2018
. As a result of the fair value assessment, the Company recorded a loss of
$921,848
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$1,723,962
as of
December 31, 2018
.
|
The total cumulative net loss for the year ended
December 31, 2018
was
$1,628,139
to reflect a total derivative liability of
$3,292,692
as of
December 31, 2018
.
Subsequent to the date of this report, the Company conducted additional secured transactions with St. George. Please refer to Note 21 for more information.
NOTE 11. PROMISSORY NOTES
The following table provides a summary of the activity of the Company's non-convertible, unsecured, promissory notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor 1
|
Investor 2
|
Investor 3
|
Total
|
Promissory Notes Principal Balance at December 31, 2017
|
$
|
494,437
|
|
$
|
275,000
|
|
$
|
200,000
|
|
$
|
969,437
|
|
New notes
|
—
|
|
—
|
|
850,000
|
|
850,000
|
|
Notes redocumented
|
—
|
|
(275,000
|
)
|
(200,000
|
)
|
(475,000
|
)
|
Promissory Notes Principal Balance at December 31, 2018
|
494,437
|
|
—
|
|
850,000
|
|
1,344,437
|
|
Less: remaining discount
|
—
|
|
—
|
|
(104,583
|
)
|
(104,583
|
)
|
Promissory Notes, net of discount, at December 31, 2018
|
$
|
494,437
|
|
$
|
—
|
|
$
|
745,417
|
|
$
|
1,239,854
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
Offering of Unsecured, Non-Convertible Notes to Investor 1
During October 2016, the Company received
$420,000
from a private investor "Investor 1". These funds, along with
$250,000
of additional funding, were rolled into a promissory note, executed on
January 17, 2017
, in the amount of
$700,000
issued with a discount of
$30,000
which was charged to interest expense ratably over the term of the note. The note bears interest at
12%
per annum and matures on
July 17, 2017
. Principal and interest on this note were payable at maturity. This note is not convertible into equity shares of the Company and is unsecured.
On June 30, 2017, the Company and Investor 1 agreed to a
12
month payment plan on the balance of this promissory note. Interest will continue to accrue on this note at
12%
per annum and payments of approximately
$62,000
will be made monthly beginning in July 2017. The Company has not made all the payments according to this payment plan, and the note is payable upon demand.
As of
December 31, 2018
,
$205,563
of principal and
$45,414
of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of
December 31, 2018
were
$494,437
and
$86,459
, respectively.
Offering of Unsecured, Non-Convertible Notes to Investor 2
On
November 16, 2017
, the Company initiated a non-convertible, unsecured promissory note with another private investor ("Investor 2") for
$275,000
. The promissory note was issued with an original issue discount of
$25,000
, resulting in proceeds to the company of
$250,000
. The note does not have a stated interest rate and matured on
December 18, 2017
.
On
July 25, 2018
, the Company, entered into a new securities exchange agreement with Investor 2. Pursuant to the terms of the Exchange Agreement, Investor 2 agreed to surrender and exchange the promissory note with a principal balance of
$275,000
in exchange for a convertible note. See Note 12 for further discussion on the new convertible note.
Offering of Unsecured, Non-Convertible Notes to Investor 3
On
January 31, 2018
, the Company initiated a non-convertible, unsecured promissory note with another private investor ("Investor 3") for an aggregate principal amount of
$200,000
. The promissory note was issued with an original issue discount of
$22,500
, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of
$177,500
, which was received in December 2017. The note bears interest at
12%
per annum and matures on
December 29, 2018
. All principal and interest is payable upon maturity.
On
September 7, 2018
, the Company, entered into a new securities exchange agreement with Investor 3. Pursuant to the terms of the Exchange Agreement, Investor 3 agreed to surrender and exchange promissory note with a principal balance of
$200,000
, plus accrued interest of
$16,800
, in exchange for a convertible note. See Note 12 for further discussion on the new convertible note.
On
June 6, 2018
, the Company initiated a second non-convertible, unsecured promissory note with Investor 3 for an aggregate principal amount of
$315,000
. The promissory note was issued with an original issue discount of
$55,000
, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of
$260,000
, that was received in several tranches between February 2018 and April 2018. This note bears interest at
12%
per annum and matures on
June 6, 2019
. All principal and interest is payable upon maturity. As of
December 31, 2018
, the remaining principal and interest on on this note were
$315,000
and
$27,090
, respectively.
On
July 24, 2018
, the Company initiated a third non-convertible, unsecured promissory note with Investor 3 for an aggregate principal amount of
$115,000
. The promissory note was issued with an original issue discount of
$27,500
, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of
$87,500
, which was received in several tranches between May 2018 and June 2018. This note bears interest at
12%
per annum and matures on
January 24, 2019
. All principal and interest is payable upon maturity. As of
December 31, 2018
, the remaining principal and interest on on this note were
$115,000
and
$7,923
, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
On
September 10, 2018
, the Company initiated a fourth non-convertible, unsecured promissory note with Investor 3 for an aggregate principal amount of
$120,000
. The promissory note was issued with an original issue discount of
$20,000
, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of
$100,000
, which was received in several tranches between June 2018 and September 2018. This note bears interest at
12%
per annum and matures on
March 10, 2019
. All principal and interest is payable upon maturity. As of
December 31, 2018
, the remaining principal and interest on on this note were
$120,000
and
$5,029
, respectively.
On
December 31, 2018
, the Company initiated a fifth non-convertible, unsecured promissory note with Investor 3 for an aggregate principal amount of
$300,000
. The promissory note was issued with an original issue discount of
$75,000
, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of
$225,000
, which was received in several tranches between September 2018 and December 2018. This note bears interest at
12%
per annum and matures on
June 30, 2019
. All principal and interest is payable upon maturity. As of
December 31, 2018
, the remaining principal and interest on on this note were
$300,000
and
$4,954
, respectively.
As of
December 31, 2018
, the aggregate outstanding principal and interest for Investor 3 was
$850,000
and
$44,996
, respectively.
Subsequent to the date of this report, the Company conducted additional transactions with promissory notes. Please refer to Note 21 for more information.
NOTE 12. CONVERTIBLE NOTES
The following table provides a summary of the activity of the Company's unsecured, convertible, promissory notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct 2016 Notes
|
St. George Note
|
BayBridge Notes
|
Bellridge Notes
|
Power Up Notes
|
EMA Note
|
Total
|
Promissory Notes Principal Balance at December 31, 2017
|
$
|
330,000
|
|
$
|
1,705,833
|
|
$
|
565,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,600,833
|
|
New notes
|
—
|
|
—
|
|
—
|
|
150,000
|
|
225,000
|
|
75,000
|
|
450,000
|
|
Notes redocumented or assigned
|
—
|
|
—
|
|
270,000
|
|
550,000
|
|
—
|
|
—
|
|
820,000
|
|
Notes converted to common stock
|
—
|
|
(606,600
|
)
|
(772,500
|
)
|
(245,000
|
)
|
—
|
|
—
|
|
(1,624,100
|
)
|
Promissory Notes Principal Balance at December 31, 2018
|
330,000
|
|
1,099,233
|
|
62,500
|
|
455,000
|
|
225,000
|
|
75,000
|
|
2,246,733
|
|
Less: remaining discount
|
—
|
|
(96,177
|
)
|
(62,100
|
)
|
(123,360
|
)
|
(110,621
|
)
|
(1,753
|
)
|
(394,011
|
)
|
Promissory Notes, net of discount, at December 31, 2018
|
$
|
330,000
|
|
$
|
1,003,056
|
|
$
|
400
|
|
$
|
331,640
|
|
$
|
114,379
|
|
$
|
73,247
|
|
$
|
1,852,722
|
|
October 2016 Convertible Notes
On
October 5, 2016
, the Company entered into a securities purchase agreement with a private investor for the private placement of
$330,000
principal amount of convertible notes. At Closing, the Company sold and issued
$330,000
principal amount of convertible notes in exchange for
$330,000
of gross proceeds.
The convertible notes matured on
December 31, 2017
and bear interest at a rate of
6%
per annum, subject to increase to
24%
per annum upon the occurrence and continuance of an event of default. Principal and accrued interest on the convertible notes is payable upon demand, the default interest rate has not been designated by the investor.
All principal and accrued interest on the convertible notes is convertible at any time, in whole or in part, at the option of the investor, into shares of common stock at a variable conversion price equal to
80%
of the lowest closing bid price of the Company’s common stock for the fifteen consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any convertible note, the conversion price for such note shall thereafter be equal to
50%
of the lowest closing bid price of the Company’s common stock for the fifteen consecutive trading day period prior to the conversion date.
The convertible notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the convertible notes; and (ii) bankruptcy or insolvency of the Company.
ASCENT SOLAR TECHNOLOGIES, INC.
Outstanding principal and accrued interest on the convertible notes were
$330,000
and
$44,935
, respectively as of
December 31, 2018
.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the convertible notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of
$330,000
was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of
$341,114
was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of
December 31, 2017
, the fair value of the derivative liability was
$572,643
.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
572,643
|
|
Additional derivative liability on new notes
|
—
|
|
Change in fair value of derivative liability
|
303,838
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
876,481
|
|
The derivative liability associated with the convertible notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the convertible notes. As a result of the fair value assessment, the Company recorded a
$303,838
loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the year ended
December 31, 2018
, to properly reflect the fair value of the embedded derivative of
$876,481
as of
December 31, 2018
.
The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible notes approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2018
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
63%
present value discount rate of
12%
and dividend yield of
0%
.
St. George Convertible Note
On
September 8, 2017
, the Company entered into a securities purchase agreement with St. George Investments, LLC ("St. George") for the private placement of
$1,725,000
principal amount of the Company’s original issue discount convertible notes.
On
September 11, 2017
, the Company sold and issued a
$1,725,000
principal convertible note to St. George in exchange for
$1,500,000
of gross proceeds, and paid
$20,000
in financing costs. The original issue discount of
$225,000
, and the financing costs, will be charged to interest expense, ratably, over the life of the note.
Unless earlier converted or prepaid, the convertible notes will mature on
March 11, 2019
. The note does not bear interest in the absence of an event of default. The note is due upon demand and an interest rate has not been designated by St. George.
For the first six months after the issuance of the convertible note, the Company will make a monthly cash repayment on the note of approximately
$96,000
. Thereafter, St. George may request that the Company make monthly partial redemptions of the note up to
$150,000
per month. If St. George does not request the full
$150,000
redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts; however, in no event, can the amount requested for any one month exceed
$275,000
.
Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible note, cash redemption payments by the Company will be subject to a
15%
redemption premium. The Company recorded an estimated cash premium of
$172,500
, at inception, which has been charged to interest, ratably, over the life of the note.
ASCENT SOLAR TECHNOLOGIES, INC.
Beginning six months after the issuance of the convertible note, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i)
85%
of the average VWAP for the shares over the prior
five
trading days or (ii) the closing bid price for the shares on the prior trading day.
On
May 1, 2018
, effective as of
April 3, 2108
, in lieu of making the December 2017 through March 2018 cash payments, the the Company agreed to amend the variable conversion price formula outlined in the securities purchase agreement. As amended, payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i)
60%
of the lowest VWAP for the shares during the prior
five
trading days or (ii) the closing bid price for the shares on the prior trading day.
All principal and accrued interest on the convertible note is convertible at any time, in whole or in part, at the option of St. George into shares of common stock at a fixed conversion price of
$4.00
per share.
The convertible note contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Note; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the convertible note will begin to bear interest at the rate of
22%
per annum. In addition, upon the occurrence of an event of default, St. George has the option to increase the outstanding balance of the convertible note by
25%
. The default provisions have not been designated by St. George.
In connection with the closing under the securities purchase agreement, the Company issued
37,500
unregistered shares of common stock to St. George as an origination fee. The closing stock price on the date of close was
$1.70
resulting in an interest expense of
$63,750
being recorded as of the date of close.
The convertible note may not be converted, and shares of common stock may not be issued pursuant to the convertible note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of common stock.
As of
December 31, 2018
, cash payments of
$191,667
had been made on the convertible note, and
$606,600
had been converted into
15,849,657
shares of the Company's common stock. The remaining balance on the note was
$926,733
as of
December 31, 2018
. The following table summarizes the conversion activity of this note:
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Common Shares Issued
|
Q1 2018
|
$
|
75,000
|
|
187,500
|
|
Q2 2018
|
$
|
316,600
|
|
2,082,778
|
|
Q3 2018
|
$
|
102,500
|
|
3,142,333
|
|
Q4 2018
|
$
|
112,500
|
|
10,437,046
|
|
|
$
|
606,600
|
|
15,849,657
|
|
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the convertible note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible note issuance and appropriately recorded that value as a derivative liability. As of
December 31, 2017
, the derivative liability was
$394,280
.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
394,280
|
|
Additional derivative liability on new notes
|
—
|
|
Change in fair value of derivative liability
|
665,720
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
1,060,000
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
The derivative liability associated with the convertible note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the convertible note. As a result of the fair value assessment, the Company recorded a
$665,720
net loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the year ended
December 31, 2018
, to properly reflect the fair value of the embedded derivative of
$1,060,000
as of
December 31, 2018
.
The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible note approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2018
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
52%
present value discount rate of
12%
and dividend yield of
0%
.
BayBridge Convertible Note
On
December 6, 2017
, the Company entered into a securities exchange agreement (“Exchange Agreement 1”) with BayBridge Capital Fund LP ("BayBridge).
Pursuant to the terms of the Exchange Agreement 1, BayBridge agreed to surrender and exchange
675
shares of outstanding Series J Preferred Stock (
$755,417
of capital and accrued dividends) for a convertible note with an aggregate principal amount of
$840,000
and an original issue discount of
$84,583
("Exchange Note 1").
Exchange Note 1 is unsecured, has no applicable registration rights, bears interest at a rate of
12%
per annum, matures on
December 6, 2018
, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the convertible note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.
Payments of principal and accrued interest on Exchange Note 1 are payable in cash or, at the option of the Company, in shares of common stock at a variable conversion price equal to the lowest of (i)
85%
of the average VWAP for the shares over the prior
five
trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii)
$3.00
per share. Payments in shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of Common Stock.
On
September 7, 2018
, as described in Note 11, the Company, entered into an additional securities exchange agreement (“Exchange Agreement 2”) with Baybridge.
Pursuant to the terms of Exchange Agreement 2, BayBridge agreed to surrender and exchanged an outstanding promissory note with a principal balance of
$200,000
, plus accrued interest of
$16,800
, for a convertible note with an aggregate principal amount of
$270,000
and an original issue discount of
$53,200
(“Exchange Note 2”).
Exchange Note 2 is unsecured, has no applicable registration rights, bears interest at a rate of
12%
per annum, matures on
September 7, 2019
and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.
BayBridge shall have the right, from and after the date of issuance of Exchange Note 2, and then at any time until Exchange Note 2 is fully paid, to convert any outstanding and unpaid principal and interest into shares of common stock at a variable conversion price equal to the lesser of (i) a price equal to
$0.15
, or (ii)
70%
of the lowest traded price for the shares over the prior
five
trading days.
Conversion to shares of common stock may not be issued pursuant to Exchange Note 2 if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of common stock.
As of
December 31, 2018
, aggregate principal of
$1,047,500
and interest of
$35,538
had been converted into
20,888,892
shares of common stock and no cash payments of principal or interest had been made on these exchange notes. Exchange Note 1 had been converted in full. The principal and accrued interest balances on Exchange note 2, as of
December 31, 2018
were
$62,500
and
$220
, respectively. The following table summarizes the conversion activity of these notes:
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Interest Converted
|
Common Shares Issued
|
Q4 2017
|
$
|
275,000
|
|
$
|
—
|
|
404,412
|
|
Q1 2018
|
$
|
105,000
|
|
$
|
20,717
|
|
493,007
|
|
Q2 2018
|
$
|
408,000
|
|
$
|
6,090
|
|
2,435,823
|
|
Q3 2018
|
$
|
52,000
|
|
$
|
4,428
|
|
1,547,452
|
|
Q4 2018
|
$
|
207,500
|
|
$
|
4,303
|
|
16,008,198
|
|
|
$
|
1,047,500
|
|
$
|
35,538
|
|
20,888,892
|
|
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion options in these notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability.
The following table summarizes the derivative liability transactions for these notes:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
542,733
|
|
Additional derivative liability on new notes
|
276,179
|
|
Change in fair value of derivative liability
|
(677,380
|
)
|
Liability extinguished
|
(27,686
|
)
|
Derivative Liability Balance as of December 31, 2018
|
$
|
113,846
|
|
At
December 31, 2017
, the derivative liability associated with Exchange Note 1 was
$542,733
. During the year ended
December 31, 2018
, the Company recorded a gain of
$515,047
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations. As of
December 31, 2018
, Exchange Note 1 had been fully converted and the remaining derivative liability of
$27,686
was recorded as a gain to "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations.
The conversion option in Exchange Note 2 was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
September 7, 2018
, the derivative liability associated with Exchange Note 2 was
$276,179
.
The derivative liability associated with this note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note 2. As a result of the fair value assessment, the Company recorded a
$162,333
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the year ended
December 31, 2018
to properly reflect the fair value of the embedded derivative of
$113,846
as of
December 31, 2018
.
The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with Exchange Note 2 approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2018
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
74%
, present value discount rate of
12%
and dividend yield of
0%
.
ASCENT SOLAR TECHNOLOGIES, INC.
Bellridge Convertible Notes
On
July 25, 2018
, as described in Note 11, the Company, entered into a securities exchange agreement (the “Exchange Agreement”) with Bellridge Capital, LP ("Bellridge"). Pursuant to the terms of the Exchange Agreement, the investor agreed to surrender and exchange a promissory note with a principal balance of
$275,000
and accrued interest of
$20,071
. In exchange, the Company issued to the investor an unsecured convertible note with an aggregate principal amount of
$300,000
(the “Exchange Note”). The original issue discount of
$4,929
was charged to interest expense upon issuance. The Exchange Note is not secured, bears interest at a rate of
12%
per annum, and will mature on
January 25, 2019
; principal and interest on the Exchange Note are due upon maturity. The investor shall have the right, from and after the date of issuance of this note and then at any time until the note is fully paid, to convert any outstanding and unpaid principal into shares of the Company's common stock at a variable conversion price equal to the lesser of (i) a price equal to
$0.20
, or (ii)
80%
of the lowest traded price for the shares over the prior
ten
trading days.
On
September 14, 2018
, the “Company, issued a new
$150,000
convertible note in a private placement to Bellridge. The note is not secured, contains no registration rights, bears interest at a rate of
12%
per annum, will mature on
September 14, 2019
, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon maturity. Bellridge shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to the lesser of (i)
$0.20
or (ii)
70%
of the lowest closing bid price for the shares over the prior
five
day trading period immediately preceding the conversion.
On
October 18, 2018
, as discussed in Note 10, Global assigned one of its notes to Bellridge. The note had an outstanding principal balance of
$250,000
and an accrued interest balance of
$26,466
. The note matures on
October 18, 2019
, and all principal and interest is due upon maturity. The principal and accrued interest on the note are redeemable at any time, in whole or in part, at the option of Bellridge. The redemption amount may be paid in cash or converted into shares of common stock at a variable conversion price equal to the lowest of (i)
85%
of the average VWAP for the shares over the prior
five
trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii)
$0.20
per share, at the option of the Company.
Shares of common stock may not be issued pursuant to any of these notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of Common Stock.
As of
December 31, 2018
, an aggregate principal of
$245,000
and interest of
$6,104
, on the Bellridge convertible notes had been converted into
11,269,875
shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of
December 31, 2018
were
$455,000
and
$40,997
, respectively. The following table summarizes the conversion activity of these notes:
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Interest Converted
|
Common Shares Issued
|
Q3 2018
|
$
|
137,500
|
|
$
|
2,104
|
|
3,715,476
|
|
Q4 2018
|
$
|
107,500
|
|
$
|
4,000
|
|
7,554,399
|
|
|
$
|
245,000
|
|
$
|
6,104
|
|
11,269,875
|
|
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in these convertible notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
—
|
|
Additional derivative liability on new notes
|
236,004
|
|
Derivative liability assigned
|
119,039
|
|
Change in fair value of derivative liability
|
131,236
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
486,279
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
The conversion option in the Exchange Note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
July 25, 2018
, the derivative liability associated with the Exchange Note note was
$203,859
.
The conversion option in the new convertible note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
September 14, 2018
, the derivative liability associated with the convertible note was
$32,145
.
The conversion option in the assigned convertible note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
October 18, 2018
, the derivative liability associated with the convertible note was
$119,039
.
The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the notes. As a result of the fair value assessment, the Company recorded a
$131,236
loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the year ended
December 31, 2018
to properly reflect the fair value of the embedded derivative of
$486,279
as of
December 31, 2018
.
The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2018
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between
40%
and
74%
, present value discount rate of
12%
and dividend yield of
0%
.
PowerUp Convertible Notes
On
August 1, 2018
, the Company, entered into a securities purchase agreement with Power Up Lending Group LTD, for the private placement of a
$130,000
convertible note . This note is unsecured, bears interest at a rate of
8%
per annum, and matures on
August 1, 2019
; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to
22%
.
Beginning in February 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
65%
of the average of the three lowest closing bid prices for the shares over the prior
ten
day trading period immediately preceding the conversion.
On
September 4, 2018
, the Company entered into a second securities purchase agreement with Power Up, for the private placement of a second convertible note with a principal value of
$52,500
. This note is unsecured, bears interest at a rate of
8%
per annum, and matures on
September 4, 2019
; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to
22%
.
Beginning in March 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
65%
of the average of the three lowest trading prices for the shares over the prior
ten
day trading period immediately preceding the conversion.
On
October 17, 2018
, the Company entered into a second securities purchase agreement with Power Up, for the private placement of a third convertible note with a principal value of
$42,500
. This note is unsecured, bears interest at a rate of
8%
per annum, and matures on
October 16, 2019
; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to
22%
.
ASCENT SOLAR TECHNOLOGIES, INC.
Beginning in April 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
65%
of the average of the three lowest trading prices for the shares over the prior
ten
day trading period immediately preceding the conversion.
Shares of common stock may not be issued pursuant to any of these notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of Common Stock.
As of
December 31, 2018
, no principal or interest had been converted into shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of
December 31, 2018
were
$225,000
and
$6,388
, respectively.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
—
|
|
Additional derivative liability on new notes
|
246,860
|
|
Change in fair value of derivative liability
|
264,277
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
511,137
|
|
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the first note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
August 1, 2018
, the derivative liability associated with the first note was
$78,382
.
The conversion option in the second note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
September 4, 2018
, the derivative liability associated with the second note was
$128,613
.
The conversion option in the third note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
October 17, 2018
, the derivative liability associated with the second note was
$39,865
.
The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the notes. As a result of the fair value assessment, the Company recorded a
$264,277
loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the year ended
December 31, 2018
to properly reflect the fair value of the embedded derivative of
$511,137
as of
December 31, 2018
.
The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible notes approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2018
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between
70%
and
76%
, present value discount rate of
12%
and dividend yield of
0%
.
EMA Convertible Note
On
August 29, 2018
, the Company, entered into a securities purchase agreement with EMA Financial, LLC, for the private placement of a
$75,000
convertible note. The note is unsecured, bears interest at a rate of
8%
per annum, and matures on
May 29, 2019
; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to
22%
.
ASCENT SOLAR TECHNOLOGIES, INC.
Beginning in March 2019, EMA shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's Common Stock. Conversions into Common Stock shall be calculated using a variable conversion price equal to
65%
of the average of the three lowest closing bid prices for the shares over the prior
ten
day trading period immediately preceding the conversion.
Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of common stock.
As of
December 31, 2018
, no principal or interest had been converted into shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of
December 31, 2018
were
$75,000
and
$2,038
, respectively.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2017
|
$
|
—
|
|
Additional derivative liability on new notes
|
3,945
|
|
Change in fair value of derivative liability
|
236,211
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
240,156
|
|
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
August 29, 2018
, the derivative liability associated with the note was
$3,945
.
The derivative liability associated with the note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2018
, the Company conducted a fair value assessment of the embedded derivative associated with the note. As a result of the fair value assessment, the Company recorded a
$236,211
loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the year ended
December 31, 2018
to properly reflect the fair value of the embedded derivative of
$240,156
as of
December 31, 2018
.
The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2018
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
87%
, present value discount rate of
12%
and dividend yield of
0%
.
Subsequent to the date of this report, the Company conducted additional transactions with convertible notes. Please refer to Note 21 for more information.
NOTE 13. SERIES A PREFERRED STOCK
In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of
$750,000
shares of Series A Preferred Stock at a price of
$8.00
per share, resulting in gross proceeds of
$6,000,000
. This purchase agreement included warrants to purchase up to
13,125
shares of common stock of the Company. The transfer of cash and securities took place incrementally, the first closing occurring on June 17, 2013 with the transfer of
125,000
shares of Series A Preferred Stock and a warrant to purchase
2,187
shares of common stock for
$1,000,000
. The final closings took place in August 2013, with the transfer of
625,000
shares of Series A Preferred Stock and a warrant to purchase
10,938
shares of common stock for
$5,000,000
.
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 in 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. In addition, the Series A Preferred Stock contains a make-whole provision whereby, conversion or redemption of the preferred stock within
4 years
of issuance will require dividends for the full
four
year period to be paid by the Company in cash or common stock (valued at
10%
below market price, but not to exceed the lowest closing price during the applicable measurement period). This make-whole provision expired in June 2017.
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
, 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, plus the make-whole amount (if applicable). At
December 31, 2018
, 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, at no cost, at a ratio of
1
preferred share into 1 common share (subject to standard ratable anti-dilution adjustments). Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends.
On October 6, 2016, the Series A Holder entered into an exchange agreement with a private investor. Pursuant to the exchange agreement, beginning December 5, 2016, the investor has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 12) for outstanding shares of Series A Preferred Stock from the Series A Holder.
As of March 31, 2017, the investor had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of
104,785
shares of Series A Preferred Stock. As of March 31, 2017, the investor had also converted their
104,785
shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of
173,947
shares of common stock.
Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to
$8
per share of Series A Preferred Stock plus any accrued and unpaid dividends.
During the year ended
December 31, 2018
, there was no activity for the Series A Preferred Stock. As of
December 31, 2018
, there were
60,756
shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of
$341,415
.
Subsequent to the date of this report, the Company conducted additional transactions with Series A Preferred Stock. Please refer to Note 21 for more information.
NOTE 14. SERIES K PREFERRED STOCK
On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor, for the private placement of up to
20,000,000
of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”).
Per the terms of the Series K SPA, the Company was scheduled to sell
1,000
shares of Series K Preferred Stock to the investor in exchange for
$1,000,000
of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell
15,000
shares of Series K Preferred Stock to the investor in exchange for
$15,000,000
of gross proceeds on or before July 27, 2017. As of
December 31, 2018
, the Company had sold
9,010
shares of Series K Preferred Stock in exchange for
$9,010,000
in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor. The following summarizes the closings and proceeds received as of December 31, 2018:
|
|
|
|
|
|
|
Closing Period
|
Preferred Series K Shares Purchased
|
Closing Amount
|
Q1 2017
|
150
|
|
$
|
150,000
|
|
Q2 2017
|
4,100
|
|
$
|
4,100,000
|
|
Q3 2017
|
4,760
|
|
$
|
4,760,000
|
|
|
9,010
|
|
$
|
9,010,000
|
|
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends.
ASCENT SOLAR TECHNOLOGIES, INC.
The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to
$4.00
. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than
19.99%
of all common stock then outstanding. As of
December 31, 2018
, the investor had converted all of the Series K Preferred Stock into shares of common stock. The following table summarizes the conversion activity of Series K Preferred Stock:
|
|
|
|
|
|
|
|
|
Conversion Period
|
Preferred Series K Shares Converted
|
Value of Series K Preferred Shares
|
Common Shares Issued
|
Q2 2017
|
3,200
|
|
$
|
3,200,000
|
|
800,000
|
|
Q3 2017
|
3,000
|
|
$
|
3,000,000
|
|
750,000
|
|
Q2 2018
|
2,810
|
|
$
|
2,810,000
|
|
702,500
|
|
|
9,010
|
|
$
|
9,010,000
|
|
2,252,500
|
|
As of
December 31, 2018
, the investor owned approximately
4%
of the Company's outstanding common stock.
Upon issuance, in accordance with ASC 480-10, the Series K Preferred Stock was classified as a liability on the 2017 Consolidated Balance Sheet. Pursuant to a number of factors outlined in ASC Topic 815, the conversion option in the Series K Preferred Stock was deemed to not require bifurcation or separate accounting treatment.
NOTE 15. STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock
Reverse Stock Split
On July 19, 2018, the Company, filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, at a ratio of one-for-one thousand (the “Reverse Stock Split”).
The Certificate of Amendment provides that the Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on July 20, 2018 (the “Effective Time”), at which time every thousand shares of the Company’s issued and outstanding Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in the par value per share. The Certificate of Amendment provides that in the event a stockholder would otherwise be entitled to receive a fraction of a share of Common Stock, such stockholder shall receive one whole share of Common Stock in lieu of such fractional share and no fractional shares shall be issued.
Immediately following the Reverse Stock Split, the Company had approximately
19 million
shares of Common Stock issued and outstanding. The number of authorized shares of the Company’s Common Stock remains at
20 billion
. The number of shares of the Company’s Series A preferred stock outstanding was not affected by the Reverse Stock Split. However, the number of shares of Common Stock into which each outstanding share of Series A preferred stock is convertible will be adjusted proportionately as a result of the Reverse Stock Split. All outstanding RSUs, stock options, warrants and rights to purchase shares of Common Stock was adjusted proportionately.
Trading of the Company’s Common Stock continued on the OTC Marketplace on a split-adjusted basis on July 23, 2018.
At
December 31, 2018
, the Company had
20
billion shares of common stock,
$0.0001
par value, authorized for issuance. Each share of common stock has the right to
one
vote. As of
December 31, 2018
, the Company had
63,537,885
shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through
December 31, 2018
.
Preferred Stock
At
December 31, 2018
, the Company had
25,000,000
shares of preferred stock,
$0.0001
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:
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
|
|
|
|
Preferred Stock Series Designation
|
Shares Authorized
|
Shares Outstanding
|
Series A
|
750,000
|
|
60,756
|
|
Series B-1
|
2,000
|
|
—
|
|
Series B-2
|
1,000
|
|
—
|
|
Series C
|
1,000
|
|
—
|
|
Series D
|
3,000
|
|
—
|
|
Series D-1
|
2,500
|
|
—
|
|
Series E
|
2,800
|
|
—
|
|
Series F
|
7,000
|
|
—
|
|
Series G
|
2,000
|
|
—
|
|
Series H
|
2,500
|
|
—
|
|
Series I
|
1,000
|
|
—
|
|
Series J
|
1,350
|
|
—
|
|
Series J-1
|
1,000
|
|
—
|
|
Series K
|
20,000
|
|
—
|
|
Series A Preferred Stock
Refer to Note 13 for Series A Preferred Stock activity.
Series B-1, B-2, C, D, D-1, H, and I Preferred Stock
There were no transactions involving the Series B-1, B-2, C, D, D-1, H, or I during the years ended
December 31, 2017
and
December 31, 2018
.
Series E Preferred Stock
During the year ended
December 31, 2017
, the Company converted
120
shares of Series E Preferred Stock, a capital value of
$120,000
, and dividends of
$11,948
, for
272,532
shares of common stock. There was no Series E Preferred Stock activity during the year ended
December 31, 2018
.
Series F Preferred Stock
During the year ended
December 31, 2017
, the Company converted
160
shares of Series F Preferred Stock, a capital value of
$160,000
, and dividends of
$467
, for
190,735
shares of common stock. There was no Series F Preferred Stock activity during the year ended
December 31, 2018
.
Series G Preferred Stock
During the year ended
December 31, 2017
, the Company converted
898
shares of Series G Preferred Stock, a capital value of
$898,000
, and dividends of
$75,066
, for
1,665,496
shares of common stock. There was no Series G Preferred Stock activity during the year ended
December 31, 2018
.
Series J Preferred Stock
During the year ended
December 31, 2017
, the Company converted
275
shares of Series J Preferred Stock, a capital value of
$275,000
, and dividends of
$15,063
, for
386,551
shares of common stock. Also, during the year ended
December 31, 2017
, the Company redocumented
1,075
shares of Series J Preferred Stock, a capital value of
$1,075,000
, and dividends of
$125,639
as convertible notes. Please refer to Notes 10 and 12 for further information. There was no Series J Preferred Stock activity during the year ended
December 31, 2018
.
ASCENT SOLAR TECHNOLOGIES, INC.
Series J-1 Preferred Stock
During the year ended
December 31, 2017
, the Company converted
700
shares of Series J-1 Preferred Stock, a capital value of
$700,000
, and dividends of
$55,305
, for
500,000
shares of common stock. There was no Series J-1 Preferred Stock activity during the year ended
December 31, 2018
.
Series K Preferred Stock
Refer to Note 14 for Series K Preferred Stock activity.
Warrants
On
July 24, 2017
, the Company issued a warrant for
250,000
shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of
$4
, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of
9.99%
of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of
$0.70
, stock volatility of
234%
, and a risk free rate of
1.23%
. Using these parameters, the Company calculated a fair value of
$88,937
and recorded a corresponding expense on the Company's consolidated and statement of operations. As of
December 31, 2018
, these warrants have expired.
On
August 10, 2017
, the Company issued a warrant for
250,000
shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of
$3
, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of
9.99%
of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of
$1.50
, stock volatility of
230%
, and a risk free rate of
1.22%
. Using these parameters, the Company calculated a fair value of
$246,803
and recorded a corresponding expense on the Company's consolidated and statement of operations. As of
December 31, 2018
, these warrants have expired.
On
December 15, 2017
, the Company issued a warrant for
200,000
shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of
$1.8
, on the issuance date through the
June 30, 2018
. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of
9.99%
of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of
$0.80
, stock volatility of
99%
, and a risk free rate of
1.48%
. Using these parameters, the Company calculated a fair value of
$10,035
and recorded a corresponding expense on the Company's consolidated statement of operations. As of
December 31, 2018
, these warrants have expired.
ASCENT SOLAR TECHNOLOGIES, INC.
The following table summarizes warrant activity:
|
|
|
|
|
|
|
|
|
Warrant
Shares
|
Warrant
Weighted
Average
Exercise Price
|
Outstanding at December 31, 2016
|
—
|
|
$
|
—
|
|
Granted
|
700,000
|
|
$
|
3.01
|
|
Exercised
|
—
|
|
$
|
—
|
|
Canceled/Expired
|
—
|
|
$
|
—
|
|
Outstanding at December 31, 2017
|
700,000
|
|
$
|
3.01
|
|
Granted
|
—
|
|
$
|
—
|
|
Exercised
|
$
|
—
|
|
$
|
—
|
|
Canceled/Expired
|
(700,000
|
)
|
$
|
3.01
|
|
Outstanding at December 31, 2018
|
—
|
|
$
|
—
|
|
Exercisable at December 31, 2018
|
—
|
|
$
|
—
|
|
NOTE 16. EQUITY PLANS AND SHARE-BASED COMPENSATION
Stock Option Plan: The Company’s 2005 Stock Option Plan, as amended (the “Stock Option Plan”) provides for the grant of incentive or non-statutory stock options to the Company’s employees, directors and consultants. The stock Option Plan initially reserved
170,000
shares of the Company's common stock for option awards to eligible employees. Upon recommendation of the Board of Directors, the stockholders approved an increase in the total shares of common stock reserved for issuance under the Stock Option Plan to
270,000
during 2015. There were no changes to the plan in 2017 or 2018.
Restricted Stock Plan: The Company’s 2008 Restricted Stock Plan, as amended (the “Restricted Stock Plan”) was adopted by the Board of Directors and was approved by the stockholders on July 1, 2008. The Restricted Stock Plan initially reserved up to
75,000
shares of the Company’s common stock for restricted stock awards and restricted stock units to eligible employees, directors and consultants of the Company. Upon recommendation of the Board of Directors, the stockholders approved an increase in the total shares of common stock reserved for issuance under the Restricted Stock Plan to
125,000
and
750,000
shares during 2015 and 2016, respectively. There were no changes to the plan in 2017 or 2018.
The Stock Option Plan and the Restricted Stock Plan are administered by the Compensation Committee of the Board of Directors, which determines the terms of the option and share awards, including the exercise price, expiration date, vesting schedule and number of shares. The term of any incentive stock option granted under the Stock Option Plan may not exceed
ten
years, or
five
years for options granted to an optionee owning more than
10%
of the Company’s voting stock. The exercise price of an incentive stock option granted under the Option Plan must be equal to or greater than the fair market value of the shares of the Company’s common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than
10%
of the Company’s voting stock must have an exercise price equal to or greater than
110%
of the fair market value of the Company’s common stock on the date the option is granted. The exercise price of a non-statutory option granted under the Option Plan must be equal to or greater than
85%
of the fair market value of the shares of the Company’s common stock on the date the option is granted.
Share-Based Compensation:
The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes this cost as an expense over the grant recipients’ requisite service periods for all awards made to employees, officers, directors and consultants.
The share-based compensation expense recognized in the Consolidated Statements of Operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For year ended December 31,
|
|
|
2018
|
|
2017
|
Research and development
|
|
$
|
642
|
|
|
$
|
18,231
|
|
Selling, general and administrative
|
|
$
|
28,623
|
|
|
$
|
105,037
|
|
Total share-based compensation cost
|
|
$
|
29,265
|
|
|
$
|
123,268
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
The following table presents share-based compensation expense by type:
|
|
|
|
|
|
|
|
|
|
|
|
For year ended December 31,
|
|
|
2018
|
|
2017
|
Type of Award:
|
|
|
|
|
Stock Options
|
|
$
|
29,265
|
|
|
$
|
96,938
|
|
Restricted Stock Units and Awards
|
|
$
|
—
|
|
|
$
|
26,330
|
|
Total share-based compensation cost
|
|
$
|
29,265
|
|
|
$
|
123,268
|
|
Stock Options:
The Company recognized share-based compensation expense for stock options of
$29,265
to officers, directors and employees for the year ended
December 31, 2018
related to stock option awards, reduced for estimated forfeitures. There were no option grants during the years ended
December 31, 2018
or
December 31, 2017
.
As of
December 31, 2018
, total compensation cost related to non-vested stock options not yet recognized was
$9,578
which is expected to be recognized over a weighted average period of approximately
0.46 years
. As of
December 31, 2018
,
109
shares were vested or expected to vest in the future and
107
shares remained available for future grants under the Option Plan.
The following table summarizes stock option activity within the Stock Option Plan:
|
|
|
|
|
|
|
|
|
Stock
Option
Shares
|
|
Weighted
Average
Remaining
Contractual
Life in Years
|
Outstanding at December 31, 2016
|
|
250
|
|
|
8.28
|
Granted
|
|
—
|
|
|
|
Exercised
|
|
—
|
|
|
|
Canceled
|
|
(55
|
)
|
|
|
Outstanding at December 31, 2017
|
|
195
|
|
|
7.32
|
Granted
|
|
—
|
|
|
|
Exercised
|
|
—
|
|
|
|
Canceled
|
|
(85
|
)
|
|
|
Outstanding at December 31, 2018
|
|
110
|
|
|
5.18
|
Exercisable at December 31, 2018
|
|
105
|
|
|
5.13
|
Restricted Stock:
The Company did not recognized share-based compensation expense related to restricted stock grants for the year ended
December 31, 2018
. During the year ended
December 31, 2017
, the Company recognized approximately
$26,000
in share-based compensation related to restricted stock grants. There were no restricted stock grants for the years ended
December 31, 2018
and
December 31, 2017
.
As of
December 31, 2018
, there was no unrecognized share-based compensation expense from unvested restricted stock, no shares were expected to vest in the future, and
496
shares remained available for future grants under the Restricted Stock Plan.
NOTE 17. INCOME TAXES
The company record 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.
ASCENT SOLAR TECHNOLOGIES, INC.
At
December 31, 2018
, the Company had
$255,470,676
of cumulative net operating loss carryforwards for federal income tax purposes that were available to offset future taxable income through the year
2308
. Under the Internal Revenue Code, the future utilization of net operating losses may be limited in certain circumstances where there is a significant ownership change. The Company prepared and analysis for the year ended
December 31, 2012
and determined that a significant change in ownership had occurred as a result of the cumulative effect of the sales of common stock through its offerings. Such change limited the Company's utilizable net operating loss carryforwards to
$255,470,676
for the year ended
December 31, 2018
. Available net operating loss carryforwards may be further limited in the event of another significant ownership change.
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, 2018
and
2017
, the components of these temporary differences and the deferred tax asset were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
|
2018
|
|
2017
|
Deferred Tax Asset
|
|
|
|
|
Accrued Expenses
|
|
$
|
30,000
|
|
|
$
|
—
|
|
Inventory Allowance
|
|
$
|
184,000
|
|
|
$
|
141,000
|
|
Other
|
|
$
|
11,000
|
|
|
$
|
13,000
|
|
Stock Based Compensation-Stock Options and Restricted Stock
|
|
$
|
1,021,000
|
|
|
$
|
1,058,000
|
|
Tax effect of NOL carryforward
|
|
$
|
64,519,000
|
|
|
$
|
67,852,000
|
|
Depreciation
|
|
$
|
5,957,000
|
|
|
$
|
8,748,000
|
|
Amortization
|
|
$
|
(213,000
|
)
|
|
$
|
(368,000
|
)
|
Disallowed interest expense
|
|
$
|
452,000
|
|
|
$
|
—
|
|
Warranty reserve
|
|
$
|
7,000
|
|
|
$
|
14,000
|
|
Net deferred tax asset
|
|
$
|
71,968,000
|
|
|
$
|
77,458,000
|
|
Less valuation allowance
|
|
$
|
(71,968,000
|
)
|
|
$
|
(77,458,000
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
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, 2018
. The Company's deferred tax valuation allowance of
$71,968,000
reflected above is a decrease of
$5,490,000
from the valuation allowance reflected as of
December 31, 2017
of
$77,458,000
.
As of
December 31, 2018
, the Company has not recorded a liability for uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in income tax (benefit)/expense. No interest and penalties related to uncertain tax positions were accrued at
December 31, 2018
.
ASCENT SOLAR TECHNOLOGIES, INC.
The Company's effective tax rate for the years ended
December 31, 2018
and
2017
differs from the statutory rate due to the following (expressed as a percentage of pre-tax income):
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Federal statutory rate
|
|
21.0
|
%
|
|
35.0
|
%
|
State statutory rate
|
|
3.6
|
%
|
|
2.8
|
%
|
Change in rate
|
|
(0.8
|
)%
|
|
—
|
%
|
Permanent tax differences
|
|
(0.1
|
)%
|
|
(2.3
|
)%
|
Derivative/Warrant Revaluation
|
|
—
|
%
|
|
8.4
|
%
|
Debt Discount
|
|
—
|
%
|
|
(5.5
|
)%
|
Loss on Extinguishment of Liabilities
|
|
(3.5
|
)%
|
|
(4.9
|
)%
|
Deferred true-ups
|
|
(54.2
|
)%
|
|
—
|
%
|
Other
|
|
—
|
%
|
|
(0.9
|
)%
|
Change in valuation allowance
|
|
34.0
|
%
|
|
(32.6
|
)%
|
|
|
—
|
%
|
|
—
|
%
|
NOTE 18. RELATED PARTY TRANSACTIONS
On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of
$330,000
of the Company’s original issue discount notes with an original maturity date of November 29, 2016. The notes bear interest of
6%
per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company.
On December 6, 2016, the Company issued a new
$600,000
original issue discount note to TFG in exchange for (i)
$200,000
of additional gross proceeds and (ii) cancellation of the existing outstanding
$330,000
note. The new TFG note bears interest at a rate of
6%
per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was
$602,000
(including accrued and unpaid interest) with a discount of
$60,000
.
On January 19, 2017, the Company issued
333,334
shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”).
Pursuant to the SPA, the Company issued the
333,334
shares to TFG in exchange for cancellation of its
$600,000
promissory note (including accrued interest of approximately
$4,340
) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG.
TFG is a Singapore based entity controlled and
50%
owned by Ascent’s President & CEO, Victor Lee, and owns approximately
1%
of the Company's outstanding shares at
December 31, 2018
.
All related party transactions were approved by our independent board of directors.
NOTE 19. COMMITMENTS AND CONTINGENCIES
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 consolidated 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 consolidated financial position or results of operations in particular quarterly or annual periods.
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 20. RETIREMENT PLAN
On July 1, 2006, the Company adopted 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
21
years of age. The participants may elect through salary reduction to contribute up to ceilings established in the Internal Revenue Code. The Company will match
100%
of the first
six percent
of employee contributions. In addition, the Company may make discretionary contributions to the Plan as determined by the Board of Directors. Employees are immediately vested in all salary reduction contributions. Rights to benefits provided by the Company’s discretionary and matching contributions vest
100%
after the first year of service for all employees hired before January 1, 2010. For employees hired after December 31, 2009, matching contributions vest over a
three
-year period, one-third per year. Payments for 401(k) matching totaled
$108,776
and
$199,669
for the years ended
December 31, 2018
and
2017
, respectively. Payments for 401(k) matching are recorded under “Research, development and manufacturing operations" expense and “Selling, general and administrative" expense in the Consolidated Statements of Operations.
NOTE 21. SUBSEQUENT EVENTS
Offering of Secured Promissory Note
Between January 3, 2019 and February 8, 2019, in
four
tranches, the Company received the remaining
$400,000
proceeds related to the securities purchase agreement, dated November 5, 2018, with St. George (Note 10). As a result the principal balance of this secured convertible note is
$1,220,000
as of the filing date of this report.
On March 13, 2019, the Company entered into a securities purchase agreement with St. George (Note 10), for the private placement of an additional
$365,000
secured convertible promissory note.
The note, bears interest at
10%
per annum, matures on March 15, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity. The interest rate increases to
22%
in the event of a default under the note.
Beginning six months after the date of issue, St. George shall have the option to redeem all or a portion of the amounts outstanding under the note. At St. George’s option, redemption amounts are payable by the Company in the form of (x) cash or (y) conversion of such amounts into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
60%
of the average of the two lowest closing bid price for the shares over the prior
ten
day trading period immediately preceding the conversion.
There are no registration rights applicable to the note or its underlying conversion shares. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of the Company’s common stock.
The note will be secured by a security interest on the Company’s headquarters building in Thornton, Colorado.
Conversions of Secured Promissory Notes (Note 10)
Subsequent to the date of this report, an additional
$115,000
in principal for Global was converted into
9,595,327
shares of common stock.
Offering of Promissory Note (Note 11)
On March 11, 2019, the Company issued, to Investor 3, a additional promissory note with a principal balance of
$60,000
in exchange for
$50,000
in gross proceeds. The note is unsecured, bears interest at
12%
per annum, matures on September 11, 2019, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity.
Exchange of Outstanding Promissory Notes for Unsecured Convertible Notes
On March 11, 2019, the Company, entered into two securities exchange agreements (the “Exchange Agreements”) with BayBridge (Note 12).
Pursuant to the terms of the Exchange Agreements, BayBridge agreed to surrender and exchange
two
outstanding promissory notes (Note 11) with principal balances of (i)
$123,817
(including accrued interest), and (ii)
$127,280
(including accrued interest), for two additional unsecured convertible notes with principal amounts of (i)
$160,000
and (ii)
$150,000
. The notes are unsecured, bear interest at
12%
per annum, mature on March 11, 2020, and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity.
At any time after inception of the note until fully paid, BayBridge shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to the lesser of (i) a price equal to
$0.003
, or (ii)
65%
of the lowest closing bid price for the shares over the prior
five
trading days.
There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of the Company's common stock.
Offering of Convertible Notes (Note 12)
Widjaja Convertible Note
On January 11, 2019, the Company entered into a note purchase with Jason Widjaja (“Widjaja”), for the private placement of a
$330,000
convertible promissory note, in exchange for
$330,000
of gross proceeds. The note is unsecured, bears interest at
12%
per annum, matures on January 11, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity.
At any time after inception of the note until fully paid, Widjaja shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
80%
of the lowest closing bid price for the shares over the prior
five
trading days immediately preceding the conversion date.
There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
19.99%
of the outstanding shares of the Company's common stock.
Power Up Convertible Notes
On February 14, 2019, the Company entered into an additional note purchase with Power Up, for the private placement of a
$54,500
convertible promissory note in exchange for
$54,500
of gross proceeds. The note is unsecured, bears interest at
8%
per annum, matures on February 14, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity. The interest rate increases to
22%
in the event of a default under the note.
Beginning in August 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
65%
of the average of the three lowest closing bid prices for the shares over the prior
ten
day trading period immediately preceding the conversion.
There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of the Company's common stock.
On March 7, 2019, the Company entered into an additional note purchase with Power Up, for the private placement of a
$54,500
convertible promissory note in exchange for
$54,500
of gross proceeds. The note is unsecured, bears interest at
8%
per annum, matures on March 7, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity. The interest rate increases to
22%
in the event of a default under the note.
Beginning in September 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
65%
of the average of the three lowest closing bid prices for the shares over the prior
ten
day trading period immediately preceding the conversion.
There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of the Company's common stock.
GS & EMA Convertible Notes
On February 22, 2019, the Company sold and issued to GS Capital Partners, LLC (“GS”) a
$108,068
aggregate principal amount unsecured convertible promissory note in exchange for
$75,000
of gross proceeds and approximately
$27,000
of premium associated with the assignment of the EMA note (see below). The note is unsecured, bears interest at
8%
per annum, matures on February 22, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity.
At any time after inception of the note until fully paid, GS shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to
65%
of the average of the three lowest closing bid price for the shares over the prior
ten
day trading period immediately preceding the conversion.
There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of the Company's common stock.
On February 22, 2019, GS purchased
$75,000
in convertible notes, plus accrued interest, from EMA. The terms of the note remain the same. There was a pre-payment penalty associated with this assignment of approximately
$27,000
, which was included in a new note issued to GS (see above).
Conversions of Convertible Notes (Note 12)
Subsequent to the date of this report, an additional
$106,750
in principal for St. George was converted into
58,503,244
shares of common stock.
Subsequent to the date of this report, an additional
$222,500
in principal, plus accrued interest, for BayBridge was converted into
61,611,485
shares of common stock.
Subsequent to the date of this report, an additional
$65,615
in principal, plus accrued interest, for Bellridge was converted into
47,400,806
shares of common stock.
Subsequent to the date of this report, an additional
$182,500
in principal, plus accrued interest, for Power Up was converted into
38,696,339
shares of common stock.
Conversion of Series A Preferred Stock (Note 13)
On January 11, 2019, the holder of Series A Preferred Stock converted
12,656
shares of Series A Preferred Stock, plus
$70,527
in accrued dividends, for
9,795,398
shares of common stock.
Sale of Building
On April 12, 2019, the Company entered into an agreement for the sale of its Thornton, Colorado building at a gross sales price of
$13 million
. The closing of the transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2019.