NOTES TO UNAUDITED CONDENSED 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.
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of
March 31, 2019
and
December 31, 2018
, and the results of operations for the three months ended
March 31, 2019
and
2018
. 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. Operating results for the three months ended
March 31, 2019
are not necessarily indicative of the results that may be expected for the year ending
December 31, 2019
.
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018
. There have been no significant changes to our accounting policies as of
March 31, 2019
.
Recently Adopted or to be Adopted Accounting Policies
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 is no material impact on its consolidated financial statements because the Company does not have any leases at the date of the adoption.
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 adoption of this guidance did not have 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.
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
March 31, 2019
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 three months ended
March 31, 2019
and the year ended
December 31, 2018
, 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 16.
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 three months ended
March 31, 2019
the Company used
$1,161,889
in cash for operations. The Company's primary significant long term cash obligation consists of a note payable of
$5,292,931
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.
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.
Additional projected product revenues are not anticipated to result in a positive cash flow position for the next twelve months overall and, as of
March 31, 2019
, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.
ASCENT SOLAR TECHNOLOGIES, INC.
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. PROPERTY, PLANT AND EQUIPMENT
The following table summarizes property, plant and equipment as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
As of December 31,
|
|
|
2019
|
|
2018
|
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
|
|
|
30,302,806
|
|
Depreciable property, plant and equipment
|
|
36,621,187
|
|
|
36,621,187
|
|
Less: Accumulated depreciation and amortization
|
|
(32,256,329
|
)
|
|
(32,207,829
|
)
|
Net property, plant and equipment
|
|
$
|
4,364,858
|
|
|
$
|
4,413,358
|
|
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 three months ended
March 31, 2019
and
2018
was
$48,500
and
$58,736
, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the Condensed Consolidated Statements of Operations.
NOTE 6. INVENTORIES
Inventories, net of reserves, consisted of the following at
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
As of December 31,
|
|
|
2019
|
|
2018
|
Raw materials
|
|
$
|
677,920
|
|
|
$
|
660,791
|
|
Work in process
|
|
—
|
|
|
—
|
|
Finished goods
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
677,920
|
|
|
$
|
660,791
|
|
NOTE 7. 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
March 31, 2019
, the Company had not made any payments on these notes; the total outstanding principal and accrued interest were
$1,073,825
and
$112,988
, respectively, and the note is due upon demand.
ASCENT SOLAR TECHNOLOGIES, INC.
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
March 31, 2019
, the Company had not made any payments on this note, the accrued interest was
$21,883
, 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
March 31, 2019
, the company had paid principal of
$22,529
and interest of
$897
, and the note is due upon demand. The remaining principal and interest balances, as of
March 31, 2019
, were
$192,705
and
$14,214
, respectively.
NOTE 8. 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
was 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 was paid, and the remaining unpaid interest of the forbearance period of
$84,187
was 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
$5,292,931
and
$5,378,062
as of
March 31, 2019
and
December 31, 2018
, respectively.
As of
March 31, 2019
, remaining future principal payments on long-term debt are due as follows:
|
|
|
|
|
2019
|
$
|
263,962
|
|
2020
|
$
|
372,843
|
|
2021
|
$
|
398,209
|
|
2022
|
$
|
425,301
|
|
2023
|
$
|
454,235
|
|
Thereafter
|
$
|
3,378,381
|
|
|
$
|
5,292,931
|
|
As of
March 31, 2019
, the Company had not made its regularly monthly payments and
five months
of payments were outstanding in the Company's Accounts Payable. The Accounts Payable balance was
$289,004
as of
March 31, 2019
, representing
$141,112
in loan principal and
$147,892
in loan interest.
ASCENT SOLAR TECHNOLOGIES, INC.
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.
NOTE 9. 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 converted to 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
|
|
New notes
|
|
—
|
|
|
725,000
|
|
|
725,000
|
|
Note conversions
|
|
(115,000
|
)
|
|
—
|
|
|
(115,000
|
)
|
Interest converted to principal
|
|
171,152
|
|
|
—
|
|
|
171,152
|
|
Secured Notes Principal Balance at March 31, 2019
|
|
5,012,897
|
|
|
2,040,000
|
|
|
7,052,897
|
|
Less: remaining discount
|
|
(1,608,345
|
)
|
|
(1,064,583
|
)
|
|
(2,672,928
|
)
|
Secured Notes, net of discount, at March 31, 2019
|
|
$
|
3,404,552
|
|
|
$
|
975,417
|
|
|
$
|
4,379,969
|
|
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
. As of
March 31, 2019
, principal of
$1,541,000
was converted into
13,081,603
shares of common stock, and
$311,670
of interest was converted to principal. The remaining note is payable in
22
equal monthly installments of
$107,990
beginning
February 15, 2019
. The Company has not made the payments as outlined in the agreement, this note is due upon demand.
ASCENT SOLAR TECHNOLOGIES, INC.
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
|
|
Q1 2019
|
$
|
115,000
|
|
$
|
—
|
|
9,595,327
|
|
|
$
|
1,541,000
|
|
$
|
—
|
|
13,081,603
|
|
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
March 31, 2019
, 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 11 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.
ASCENT SOLAR TECHNOLOGIES, INC.
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
March 31, 2019
, the aggregate principal and interest balance of the Notes were
$5,012,897
and
$432,254
, 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, 2018
|
$
|
3,533,861
|
|
Change in fair value of derivative liability
|
(1,858,961
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
1,674,900
|
|
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
$1,764,068
as of
December 31, 2018
.
|
|
|
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
$418,965
as of
December 31, 2018
.
|
|
|
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
$150,126
on
December 31, 2018
.
|
|
|
4)
|
The fourth valuation was done for the notes dated in the first quarter of 2018, which had a term of
one year
. The derivative value of this note was
$900,757
on
December 31, 2018
.
|
|
|
5)
|
The fifth valuation was done for the notes dated in the fourth quarter of 2018, which had a term of
one year
. The derivative value of this note was
$299,945
on
December 31, 2018
.
|
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
March 31, 2019
, 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
63%
, present value discount rate of
12%
, and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a net gain of
$522,328
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
$1,241,740
as of
March 31, 2019
.
|
|
2)
|
For the
November 30, 2017
1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
72%
present value discount rate of
12%
and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a net gain of
$296,790
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
$122,175
as of
March 31, 2019
.
|
|
|
3)
|
For the December 28, 2017 1yr note: Management conducted a fair value assessment with the following assumptions: annual volatility of
72%
, present value discount rate of
12%
, and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a net gain of
$106,347
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
$43,779
as of
March 31, 2019
.
|
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
4)
|
For the first quarter 2018 1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
72%
, present value discount rate of
12%
, and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a net gain of
$638,085
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
$262,672
as of
March 31, 2019
.
|
|
|
5)
|
For the fourth quarter 2018 1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
50%
, present value discount rate of
12%
, and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a net gain of
$295,411
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
$4,534
as of
March 31, 2019
.
|
The total cumulative net gain for the three months ended
March 31, 2019
was
$1,858,961
to reflect a total derivative liability of
$1,674,900
as of
March 31, 2019
.
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.
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
March 31, 2019
, the Company had received an additional
$400,000
in proceeds and had recorded
$1,220,000
in principal related to the Company and Investor Notes. The Company recorded original issue discounts of
$200,000
and debt financing costs of
$20,000
, which will be recognized as interest expense, ratably, over the life of the note. As of
March 31, 2019
, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
|
|
|
|
|
|
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
|
|
1/3/2019
|
$
|
120,000
|
|
$
|
100,000
|
|
1/17/2019
|
$
|
120,000
|
|
$
|
100,000
|
|
1/30/2019
|
$
|
120,000
|
|
$
|
100,000
|
|
2/8/2019
|
$
|
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.
On
March 13, 2019
, the Company entered into a third securities purchase agreement with St. George, for the private placement of a
$365,000
secured convertible promissory note ("Third Note"). The Company may receive
$300,000
in proceeds under the Third Note, and as of
March 13, 2019
, the Company had received
$200,000
and had recorded
$245,000
in principal related to the Third Note. The Company recorded original issue discounts of
$40,000
and debt financing costs of
$5,000
, which will be recognized as interest expense, ratably, over the life of the note. As of
March 31, 2019
, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:
|
|
|
|
|
|
|
|
Closing Date
|
Closing Amount
|
Proceeds
|
3/15/2019
|
$
|
125,000
|
|
$
|
100,000
|
|
3/22/2019
|
$
|
120,000
|
|
$
|
100,000
|
|
The Note bears interest at a rate of
10%
per annum and matures on
March 13, 2020
. 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 September 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
10
day trading period immediately preceding the conversion.
Shares of common stock may not be issued pursuant to these 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.
As of
March 31, 2019
, the aggregate principal and interest balance of the Notes were
$2,040,000
and
$87,885
, 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, 2018
|
$
|
3,292,692
|
|
Additional derivative liability on new notes
|
1,467,197
|
|
Change in fair value of derivative liability
|
(2,471,594
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
2,288,295
|
|
Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.
|
|
1)
|
The first valuation was done on the
May 8, 2018
note with term of one year. The derivative value of this note was
$1,568,730
as of
December 31, 2018
.
|
|
|
2)
|
The second valuation was done on the
November 5, 2018
notes with term of one year. The derivative value of this note was
$1,723,962
as of
December 31, 2018
. For the tranches of this note that were received in Q1 2019, the Company conducted an initial valuation. Although the notes were entered into at various dates, we used a weighted average date of January 22, 2019 for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of
79%
, 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
$469,686
as of January 22, 2019. The fair value of the derivative was greater than the face value at issuance and the difference of
$69,686
was charged to interest expense at issuance. The remaining debt discount of
$400,000
will be charged to interest expense ratably over the life of the note.
|
|
|
3)
|
The third valuation was done on the
March 13, 2019
notes with a term of one year. For the Q1 2019 tranches received, the Company conducted an initial valuation. Although the notes were entered into at various dates, we used a weighted average issuance date of March 18, 2019 for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of
80%
, 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
$997,511
as of March 18, 2019. The fair value of the derivative was greater than the face value at issuance and the difference of
$797,511
was charged to interest expense at issuance. The remaining debt discount of
$200,000
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
March 31, 2019
, 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
35%
, present value discount rate of
12%
, and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a gain of
$1,291,447
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
$277,283
as of
March 31, 2019
.
|
|
|
2)
|
For the
November 5, 2018
notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
92%
, present value discount rate of
12%
, and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a gain of
$607,408
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
$1,586,240
as of
March 31, 2019
.
|
|
|
3)
|
For the
March 13, 2019
notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
82%
, present value discount rate of
12%
, and a dividend yield of
0%
as of
March 31, 2019
. As a result of the fair value assessment, the Company recorded a gain of
$572,739
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
$424,772
as of
March 31, 2019
.
|
ASCENT SOLAR TECHNOLOGIES, INC.
The total cumulative net loss for the three months ended
March 31, 2019
was
$2,471,594
to reflect a total derivative liability of
$2,288,295
as of
March 31, 2019
.
Subsequent to the date of this report, the Company conducted additional secured transactions with St. George. Please refer to Note 15 for more information.
NOTE 10. PROMISSORY NOTES
The following table provides a summary of the activity of the Company's non-convertible, unsecured, promissory notes:
|
|
|
|
|
|
|
|
|
|
|
|
Investor 1
|
Investor 2
|
Total
|
Promissory Notes Principal Balance at December 31, 2017
|
$
|
494,437
|
|
$
|
200,000
|
|
$
|
694,437
|
|
New notes
|
—
|
|
850,000
|
|
850,000
|
|
Notes exchanged
|
—
|
|
(200,000
|
)
|
(200,000
|
)
|
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
|
|
New notes
|
—
|
|
67,500
|
|
67,500
|
|
Notes exchanged
|
—
|
|
(235,000
|
)
|
(235,000
|
)
|
Promissory Notes Principal Balance at March 31, 2019
|
494,437
|
|
682,500
|
|
1,176,937
|
|
Less: remaining discount
|
—
|
|
(55,000
|
)
|
(55,000
|
)
|
Promissory Notes, net of discount, at March 31, 2019
|
$
|
494,437
|
|
$
|
627,500
|
|
$
|
1,121,937
|
|
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
March 31, 2019
,
$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
March 31, 2019
were
$494,437
and
$101,089
, respectively.
Offering of Unsecured, Non-Convertible Notes to Investor 2
On
June 6, 2018
, the Company initiated a second non-convertible, unsecured promissory note with Investor 2 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
March 31, 2019
, the remaining principal and interest on on this note were
$315,000
and
$36,420
, respectively.
On
July 24, 2018
, the Company initiated a third non-convertible, unsecured promissory note with Investor 2 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
. Please see exchange note below.
ASCENT SOLAR TECHNOLOGIES, INC.
On
September 10, 2018
, the Company initiated a fourth non-convertible, unsecured promissory note with Investor 2 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
. Please see exchange note below.
On
December 31, 2018
, the Company initiated a fifth non-convertible, unsecured promissory note with Investor 2 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
March 31, 2019
, the remaining principal and interest on on this note were
$300,000
and
$13,954
, respectively.
On
March 11, 2019
, the Company initiated a sixth non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of
$60,000
. The promissory note was issued with an original issue discount of
$10,000
, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of
$50,000
, which was received in several tranches between January 2019 and March 2019. This note bears interest at
12%
per annum and matures on
September 11, 2019
. All principal and interest is payable upon maturity. As of
March 31, 2019
, the remaining principal and interest on on this note were
$60,000
and
$847
, respectively.
Exchange of Promissory Notes for Convertible Notes
On March 11, 2019, the Company entered into two new securities exchange agreements with Investor 2. Pursuant to the terms of the exchange agreements, Investor 2 agreed to surrender and exchange two promissory notes in exchange for
two
convertible notes. The first promissory note had a principal balance of
$115,000
and an accrued interest balance of
$10,607
; and the second promissory note has a principal balance of
$120,000
and an accrued interest balance of
$7,829
. See Note 11 for further discussion on the new convertible notes.
As of
March 31, 2019
, the aggregate outstanding principal and interest for Investor 2 was
$682,500
and
$51,254
, respectively. Also, as of
March 31, 2019
, Investor 2 had provided the Company with an additional
$7,500
in proceeds which had not yet been documented into a note.
Subsequent to the date of this report, the Company conducted additional transactions with promissory notes. Please refer to Note 15 for more information.
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 11. CONVERTIBLE NOTES
The following table provides a summary of the activity of the Company's unsecured, convertible, promissory notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Balance 12/31/2017
|
New Notes
|
Notes assigned or exchanged
|
Notes converted
|
Principal Balance 12/31/2018
|
Less: Discount Balance
|
Net Principal Balance 12/31/18
|
October 2016 Notes
|
$
|
330,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
330,000
|
|
$
|
—
|
|
$
|
330,000
|
|
St. George Notes
|
1,705,833
|
|
—
|
|
—
|
|
(606,600
|
)
|
1,099,233
|
|
(96,177
|
)
|
1,003,056
|
|
BayBridge Notes
|
565,000
|
|
—
|
|
270,000
|
|
(772,500
|
)
|
62,500
|
|
(62,100
|
)
|
400
|
|
Bellridge Notes
|
—
|
|
150,000
|
|
550,000
|
|
(245,000
|
)
|
455,000
|
|
(123,360
|
)
|
331,640
|
|
Power Up Notes
|
—
|
|
225,000
|
|
—
|
|
—
|
|
225,000
|
|
(110,621
|
)
|
114,379
|
|
EMA Note
|
—
|
|
75,000
|
|
—
|
|
—
|
|
75,000
|
|
(1,753
|
)
|
73,247
|
|
|
$
|
2,600,833
|
|
$
|
450,000
|
|
$
|
820,000
|
|
$
|
(1,624,100
|
)
|
$
|
2,246,733
|
|
$
|
(394,011
|
)
|
$
|
1,852,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Balance 12/31/2018
|
New Notes
|
Notes assigned or exchanged
|
Notes converted
|
Principal Balance 3/31/2019
|
Less: Discount Balance
|
Net Principal Balance 3/31/19
|
October 2016 Notes
|
$
|
330,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
330,000
|
|
$
|
—
|
|
$
|
330,000
|
|
St. George Notes
|
1,099,233
|
|
—
|
|
—
|
|
(106,750
|
)
|
992,483
|
|
—
|
|
992,483
|
|
BayBridge Notes
|
62,500
|
|
—
|
|
310,000
|
|
(90,500
|
)
|
282,000
|
|
(269,500
|
)
|
12,500
|
|
Bellridge Notes
|
455,000
|
|
—
|
|
—
|
|
(65,615
|
)
|
389,385
|
|
(64,359
|
)
|
325,026
|
|
Power Up Notes
|
225,000
|
|
107,000
|
|
—
|
|
(182,500
|
)
|
149,500
|
|
(104,547
|
)
|
44,953
|
|
EMA Note
|
75,000
|
|
—
|
|
(75,000
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
Widjaja Note
|
—
|
|
330,000
|
|
—
|
|
—
|
|
330,000
|
|
(164,725
|
)
|
165,275
|
|
GS Capital Notes
|
—
|
|
108,068
|
|
75,000
|
|
—
|
|
183,068
|
|
(62,500
|
)
|
120,568
|
|
|
$
|
2,246,733
|
|
$
|
545,068
|
|
$
|
310,000
|
|
$
|
(445,365
|
)
|
$
|
2,656,436
|
|
$
|
(665,631
|
)
|
$
|
1,990,805
|
|
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.
ASCENT SOLAR TECHNOLOGIES, INC.
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.
Outstanding principal and accrued interest on the convertible notes were
$330,000
and
$49,885
, respectively as of
March 31, 2019
.
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. As of
December 31, 2018
, the fair value of the derivative liability was
$876,481
.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
876,481
|
|
Additional derivative liability on new notes
|
—
|
|
Change in fair value of derivative liability
|
(481,408
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
395,073
|
|
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
March 31, 2019
, 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
$481,408
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the three months ended
March 31, 2019
, to properly reflect the fair value of the embedded derivative of
$395,073
as of
March 31, 2019
.
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
March 31, 2019
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
72%
, 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.
This note matured 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
.
ASCENT SOLAR TECHNOLOGIES, INC.
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.
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, 2018
, 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
March 31, 2019
, cash payments of
$191,667
had been made on the convertible note, and
$713,350
had been converted into
74,352,901
shares of the Company's common stock. The remaining balance on the note was
$992,483
as of
March 31, 2019
. 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
|
|
Q1 2019
|
$
|
106,750
|
|
58,503,244
|
|
|
$
|
713,350
|
|
74,352,901
|
|
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, 2018
, the derivative liability was
$1,060,000
.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
1,060,000
|
|
Change in fair value of derivative liability
|
(909,567
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
150,433
|
|
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
March 31, 2019
, 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
$909,567
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the three months ended
March 31, 2019
, to properly reflect the fair value of the embedded derivative of
$150,433
as of
March 31, 2019
.
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
March 31, 2019
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
September 7, 2018
, the Company, entered into an securities exchange agreement (“Exchange Agreement 2”) with Baybridge.
Pursuant to the terms of Exchange Agreement 2, BayBridge agreed to surrender and exchange 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.
As of
March 31, 2019
, Exchange Note 2 had been converted in full.
On
March 11, 2019
, as described in Note 10, the Company, entered into two additional securities exchange agreements (“Exchange Agreements 3 & 4”) with Baybridge.
Pursuant to the terms of Exchange Agreement 3, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of
$115,000
, plus accrued interest of
$10,607
, for a convertible note with an aggregate principal amount of
$150,000
and an original issue discount of
$24,393
(“Exchange Note 3”).
Pursuant to the terms of Exchange Agreement 4, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of
$120,000
, plus accrued interest of
$7,829
, for a convertible note with an aggregate principal amount of
$160,000
and an original issue discount of
$32,171
(“Exchange Note 4”).
Exchange Notes 3 & 4 are unsecured, have no applicable registration rights, bear interest at a rate of
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 Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.
BayBridge shall have the right, from the date of issuance of Exchanges Note 3 & 4, and then at any time until Exchange Notes 3 & 4 are 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 Notes 3 & 4 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.
ASCENT SOLAR TECHNOLOGIES, INC.
As of
March 31, 2019
, aggregate principal of
$298,000
and interest of
$7,581
had been converted into
63,409,004
shares of common stock and no cash payments of principal or interest had been made on these exchange notes. Exchange Note 2 had been converted in full. The principal and accrued interest balances on Exchange Notes 3 & 4, as of
March 31, 2019
, were
$282,000
and
$4,494
, respectively.
The following table summarizes the conversion activity of these notes:
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Interest Converted
|
Common Shares Issued
|
Q4 2018
|
$
|
207,500
|
|
$
|
4,303
|
|
16,008,198
|
|
Q1 2019
|
$
|
90,500
|
|
$
|
3,278
|
|
47,400,806
|
|
|
$
|
298,000
|
|
$
|
7,581
|
|
63,409,004
|
|
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, 2018
|
$
|
113,846
|
|
Additional derivative liability on new notes
|
310,640
|
|
Change in fair value of derivative liability
|
(134,553
|
)
|
Liability extinguished
|
(113,846
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
176,087
|
|
At
December 31, 2018
, the derivative liability associated with Exchange Note 2 was
$113,846
. During the three months ended
March 31, 2019
, Exchange Note 2 had been fully converted and the remaining derivative liability of
$113,846
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 options in Exchange Notes 3 & 4 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
March 11, 2019
, the derivative liability associated with Exchange Notes 3 & 4 was
$310,640
. The fair value of the derivative was greater than the face value at issuance and the difference of
$57,204
was charged to interest expense at issuance. The remaining debt discount of
$253,436
will be charged to interest expense ratably over the life of the note.
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
March 31, 2019
, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Notes 3 & 4. As a result of the fair value assessment, the Company recorded a
$134,553
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the three months ended
March 31, 2019
to properly reflect the fair value of the embedded derivative of
$176,087
as of
March 31, 2019
.
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 Notes 3 & 4 approximates management’s estimate of the fair value of the embedded derivative liability at
March 31, 2019
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
69%
, 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 matured on
January 25, 2019
; principal and interest on the Exchange Note are due upon demand. 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 9, 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
March 31, 2019
, an aggregate principal of
$310,615
and interest of
$10,611
, on the Bellridge convertible notes had been converted into
49,966,214
shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of
March 31, 2019
were
$389,385
and
$49,155
, 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
|
|
Q1 2019
|
$
|
65,615
|
|
$
|
4,507
|
|
38,696,339
|
|
|
$
|
310,615
|
|
$
|
10,611
|
|
49,966,214
|
|
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. At
December 31, 2018
, the derivative liability associated with these notes was
$486,279
.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
486,279
|
|
Liability extinguished
|
(43,521
|
)
|
Change in fair value of derivative liability
|
(376,119
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
66,639
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
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
March 31, 2019
, 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
$376,119
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the three months ended
March 31, 2019
to properly reflect the fair value of the embedded derivative of
$66,639
as of
March 31, 2019
.
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
March 31, 2019
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between
72%
and
49%
, 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. As of
March 31, 2019
, this note had been converted in full.
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. As of
March 31, 2019
, this note had been converted in full.
On
October 17, 2018
, the Company entered into a third 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%
.
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.
On
February 14, 2019
, the Company entered into a fourth securities purchase agreement with Power Up, for the private placement of a third convertible note with a principal value of
$54,500
. This note is unsecured, bears interest at a rate of
8%
per annum, and matures on
February 14, 2020
; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to
22%
.
Beginning in August 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.
ASCENT SOLAR TECHNOLOGIES, INC.
On
March 7, 2019
, the Company entered into a fifth securities purchase agreement with Power Up, for the private placement of a third 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
March 7, 2020
; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to
22%
.
Beginning in September 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
March 31, 2019
,
$182,500
of principal and
$7,300
of interest had been converted into
95,014,902
shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of
March 31, 2019
were
$149,500
and
$3,103
, respectively. The following table summarizes the conversion activity of these notes:
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Interest Converted
|
Common Shares Issued
|
Q1 2019
|
$
|
182,500
|
|
$
|
7,300
|
|
95,014,902
|
|
|
$
|
182,500
|
|
$
|
7,300
|
|
95,014,902
|
|
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
December 31, 2018
, the derivative liability associated with these notes was
$511,137
.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
511,137
|
|
Additional derivative liability on new notes
|
130,653
|
|
Liability extinguishment
|
(417,591
|
)
|
Change in fair value of derivative liability
|
(31,240
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
192,959
|
|
During the three months ended
March 31, 2019
, the first and second notes had been fully converted and the remaining derivative liability of
$417,591
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 the fourth 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
February 14, 2019
, the derivative liability associated with the fourth note was
$43,788
.
The conversion option in the fifth 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
March 7, 2019
, the derivative liability associated with the second note was
$86,865
. The fair value of the derivative was greater than the face value at issuance and the difference of
$34,365
was charged to interest expense at issuance. The remaining debt discount of
$52,500
will be charged to interest expense ratably over the life of the note.
ASCENT SOLAR TECHNOLOGIES, INC.
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
March 31, 2019
, 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
$31,240
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the three months ended
March 31, 2019
to properly reflect the fair value of the embedded derivative of
$192,959
as of
March 31, 2019
.
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
March 31, 2019
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between
69%
and
71%
, 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%
.
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.
On February 22, 2019, EMA assigned this note to GS Capital (see below). Per the terms of this agreement,
$75,000
of principal and
$2,909
of accrued interest were sold to the new investor and the Company paid
$27,268
to EMA as a pre-payment penalty.
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
December 31, 2018
, the derivative liability associated with the note was
$240,156
.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
240,156
|
|
Liability extinguishment
|
(240,156
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
—
|
|
During the three months ended
March 31, 2019
, the note had been fully converted and the remaining derivative liability of
$240,156
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.
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.
ASCENT SOLAR TECHNOLOGIES, INC.
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.
As of
March 31, 2019
, no principal and no 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
March 31, 2019
were
$330,000
and
$8,571
, respectively.
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.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
—
|
|
Additional derivative liability on new notes
|
219,634
|
|
Change in fair value of derivative liability
|
(93,463
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
126,171
|
|
The conversion option in the Widjaja 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
January 11, 2019
, the derivative liability associated with the Widjaja note was
$219,634
.
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
March 31, 2019
, 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
$93,463
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the three months ended
March 31, 2019
to properly reflect the fair value of the embedded derivative of
$126,171
as of
March 31, 2019
.
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
March 31, 2019
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
73%
, present value discount rate of
12%
, and dividend yield of
0%
.
GS Capital Convertible Note
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,
$5,800
in financing costs, and
$27,268
of premium associated with the assignment of the EMA note (see above). 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.
ASCENT SOLAR TECHNOLOGIES, INC.
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.
As of
March 31, 2019
, no principal and no 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
March 31, 2019
were
$183,068
and
$4,394
, respectively.
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.
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
—
|
|
Additional derivative liability on new notes
|
101,063
|
|
Derivative liability assigned
|
240,156
|
|
Change in fair value of derivative liability
|
(293,647
|
)
|
Derivative Liability Balance as of March 31, 2019
|
$
|
47,572
|
|
The conversion option in the GS 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
January 11, 2019
, the derivative liability associated with the GS note was
$101,063
. The fair value of the derivative was greater than the face value at issuance and the difference of
$26,063
was charged to interest expense at issuance. The remaining debt discount of
$75,000
will be charged to interest expense ratably over the life of the note.
The derivative liability assigned to GS from EMA, at February 22, 2019, was
$240,156
.
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
March 31, 2019
, 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
$293,647
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the three months ended
March 31, 2019
to properly reflect the fair value of the embedded derivative of
$47,572
as of
March 31, 2019
.
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
March 31, 2019
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between
35%
and
70%
, 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 15 for more information.
NOTE 12. SERIES A PREFERRED STOCK
In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of
$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
March 31, 2019
, 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
12,656
preferred shares 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.
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 three months ended
March 31, 2019
,
12,656
shares Series A Preferred Stock, plus
$70,527
of accrued dividends were converted into
1
share and
9,795,396
shares of the Company's common stock, respectively. As of
March 31, 2019
, there were
48,100
shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of
$283,131
.
NOTE 13. 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.
ASCENT SOLAR TECHNOLOGIES, INC.
Trading of the Company’s Common Stock continued on the OTC Marketplace on a split-adjusted basis on July 23, 2018.
At
March 31, 2019
, 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
March 31, 2019
, the Company had
322,543,901
shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through
March 31, 2019
.
Preferred Stock
At
March 31, 2019
, 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:
|
|
|
|
|
|
Preferred Stock Series Designation
|
Shares Authorized
|
Shares Outstanding
|
Series A
|
750,000
|
|
48,100
|
|
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 12 for Series A Preferred Stock activity.
Series B-1, B-2, C, D, D-1, E, F, G, H, I, J, J-1, and K Preferred Stock
There were no transactions involving the Series B-1, B-2, C, D, D-1, H, I, J, J-1, or K during the three months ended
March 31, 2019
.
NOTE 14. EQUITY PLANS AND SHARE-BASED COMPENSATION
Share-Based Compensation:
The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes this cost as an expense over the grant recipients’ requisite service periods for all awards made to employees, officers, directors and consultants.
The share-based compensation expense recognized in the Consolidated Statements of Operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For three months ended March 31,
|
|
For three months ended March 31,
|
|
|
2019
|
|
2018
|
Research and development
|
|
$
|
—
|
|
|
$
|
454
|
|
Selling, general and administrative
|
|
$
|
4,346
|
|
|
$
|
13,870
|
|
Total share-based compensation cost
|
|
$
|
4,346
|
|
|
$
|
14,324
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
The following table presents share-based compensation expense by type:
|
|
|
|
|
|
|
|
|
|
|
|
For three months ended March 31,
|
|
For three months ended March 31,
|
|
|
2019
|
|
2018
|
Type of Award:
|
|
|
|
|
Stock Options
|
|
$
|
4,346
|
|
|
$
|
14,324
|
|
Restricted Stock Units and Awards
|
|
$
|
—
|
|
|
$
|
—
|
|
Total share-based compensation cost
|
|
$
|
4,346
|
|
|
$
|
14,324
|
|
Stock Options:
The Company recognized share-based compensation expense for stock options of
$4,346
to officers, directors and employees for the three months ended
March 31, 2019
related to stock option awards, reduced for estimated forfeitures. There were no option grants during the three months ended
March 31, 2019
or
March 31, 2018
.
As of
March 31, 2019
, total compensation cost related to non-vested stock options not yet recognized was
$3,767
which is expected to be recognized over a weighted average period of approximately
0.21 years
. As of
March 31, 2019
,
96
shares were vested or expected to vest in the future and
120
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, 2017
|
|
195
|
|
|
7.32
|
Granted
|
|
—
|
|
|
|
Exercised
|
|
—
|
|
|
|
Canceled
|
|
(85
|
)
|
|
|
Outstanding at December 31, 2018
|
|
110
|
|
|
5.18
|
Granted
|
|
—
|
|
|
|
Exercised
|
|
—
|
|
|
|
Canceled
|
|
(13
|
)
|
|
|
Outstanding at March 31, 2019
|
|
97
|
|
|
5.18
|
Exercisable at March 31, 2019
|
|
92
|
|
|
5.13
|
Restricted Stock:
The Company did not recognized share-based compensation expense related to restricted stock grants for the three months ended
March 31, 2019
or for the year ended
December 31, 2018
. There were no restricted stock grants for the periods ended
March 31, 2019
and
December 31, 2018
.
As of
March 31, 2019
, 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 15. SUBSEQUENT EVENTS
Offering of Promissory Note (Note 10)
On May 14, 2019, the Company issued, to Investor 2, a additional promissory note with a principal balance of
$100,000
in exchange for
$75,000
in gross proceeds. The note is unsecured, bears interest at
12%
per annum, matures on November 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. Principal and interest on the note will be payable upon maturity.
Exchange of Outstanding Promissory Notes for Unsecured Convertible Note
On May 2, 2019, the Company, entered into two securities exchange agreements (the “Exchange Agreements”) with BayBridge (Note 11).
Pursuant to the terms of the Exchange Agreements, BayBridge agreed to surrender and exchange
one
outstanding promissory note (Note 10) with a principal balance of
$349,650
, plus accrued interest, for an additional unsecured convertible note with a principal amount of
$450,000
. The note is unsecured, bears interest at
12%
per annum, matures on May 2, 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, 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
$0.002
, 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 11)
On May 2, 2019, the Company entered into an additional note purchase with Power Up, for the private placement of a
$42,500
convertible promissory note in exchange for
$42,500
of gross proceeds. The note is unsecured, bears interest at
8%
per annum, matures on May 2, 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 November 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.
Conversions of Convertible Notes (Note 11)
Subsequent to the date of this report, an additional
$39,320
in principal for St. George was converted into
53,303,030
shares of common stock.
Subsequent to the date of this report, an additional
$58,500
in principal, plus accrued interest and a deposit fee, for BayBridge was converted into
100,486,326
shares of common stock.
Subsequent to the date of this report, an additional
$29,385
in principal, plus accrued interest, for Bellridge was converted into
40,079,230
shares of common stock.
Subsequent to the date of this report, an additional
$42,500
in principal, plus accrued interest, for Power Up was converted into
47,155,556
shares of common stock.
Subsequent to the date of this report,
$15,000
in principal, plus accrued interest, for GS Capital was converted into
17,321,692
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.