NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
The Company is focusing on integrating its PV products into high value markets such as aerospace, satellites, near earth orbiting vehicles, and fixed-wing unmanned aerial vehicles (UAV). The value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these industries, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent has the capability to design and develop finished products for end users in these areas as well as collaborate with strategic partners to design and develop custom integrated solutions for products like fixed-wing UAVs. Ascent sees significant overlap of the needs of end users across some of these industries and can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of September 30, 2019 and December 31, 2018, and the results of operations for the three and nine months ended September 30, 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 accompanying, unaudited, condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and footnotes typically found in U.S. GAAP audited annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. The Condensed Consolidated Balance Sheet at December 31, 2018 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. These condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
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 September 30, 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 because the Company did not have equity linked financial instruments where down round features were the only feature causing them to be classified as liabilities.
ASCENT SOLAR TECHNOLOGIES, INC.
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 September 30, 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 nine months ended September 30, 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 9 through 11, and Note 15 of the financial statements presented as of, and for, the nine months ended, September 30, 2019, and in Notes 8, 9, 10, 11, 12, and 14 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the nine months ended September 30, 2019 the Company used $2,565,168 in cash for operations.
The Company's primary significant long term cash obligation consists of a note payable of $5,917,315, inclusive of interest, to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. The note is currently in default and the entire outstanding balance is classified as a current liability.
The Company is currently marketing it's Thornton, Colorado property to prospective buyers.
Additional projected product revenues are not anticipated to result in a positive cash flow position for the next twelve months overall and, as of September 30, 2019, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.
The Company continues to accelerate sales and marketing efforts related to its 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 September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
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
|
|
26,593,588
|
|
|
30,302,806
|
|
Depreciable property, plant and equipment
|
|
32,911,969
|
|
|
36,621,187
|
|
Less: Accumulated depreciation and amortization
|
|
(28,632,301
|
)
|
|
(32,207,829
|
)
|
Net property, plant and equipment
|
|
$
|
4,279,668
|
|
|
$
|
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.
During the nine months ended September 30, 2019, the Company disposed of certain redundant machinery and equipment. This machinery and equipment was fully depreciated and the Company realized a gain of $842,500 from these sales.
Depreciation expense for the three months ended September 30, 2019 and 2018 was $45,585 and $52,319, respectively. Depreciation expense for the nine months ended September 30, 2019 and 2018 was $140,083 and $169,621, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the unaudited Condensed Consolidated Statements of Operations.
NOTE 6. INVENTORIES
Inventories, net of reserves, consisted of the following at September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
As of December 31,
|
|
|
2019
|
|
2018
|
Raw materials
|
|
$
|
684,390
|
|
|
$
|
660,791
|
|
Work in process
|
|
—
|
|
|
—
|
|
Finished goods
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
684,390
|
|
|
$
|
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 September 30, 2019, the Company had not made any payments on these notes; the total outstanding principal and accrued interest were $1,073,825 and $147,336, respectively, and the note is due upon demand.
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 September 30, 2019, the Company had not made any payments on this note, the accrued interest was $28,151, 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 September 30, 2019, the company had paid principal of $32,529 and interest of $897, and the note is due upon demand. The remaining principal and interest balances, as of September 30, 2019, were $182,705 and $19,376, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
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.
On August 2, 2019, CHFA entered into an agreement to assign the note to Iliad Research and Trading, L.P., a Utah limited liability partnership ("IRT"). This agreement closed on September 11, 2019, and IRT paid a total of $5,885,148 to CHFA to assume the note. The payment amount consisted of $5,405,666 principal and $479,482 interest and fees. Interest will accrue on the note at the default interest rate of 10.5%.
The outstanding principal balance of the note was $5,885,148 and $5,378,062 as of September 30, 2019 and December 31, 2018, respectively.
As of September 30, 2019, the Company had not made any payments to IRT and the accrued interest on the note was $32,167. Since the loan is in default, the entire outstanding balance is classified as a current liability on the Company's September 30, 2019 Balance Sheet.
The Company is currently marketing it's Thornton, Colorado property to prospective buyers.
ASCENT SOLAR TECHNOLOGIES, INC.
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
|
|
—
|
|
|
845,000
|
|
|
845,000
|
|
Note conversions
|
|
(115,000
|
)
|
|
—
|
|
|
(115,000
|
)
|
Interest converted to principal
|
|
171,152
|
|
|
—
|
|
|
171,152
|
|
Secured Notes Principal Balance at September 30, 2019
|
|
5,012,897
|
|
|
2,160,000
|
|
|
7,172,897
|
|
Less: remaining discount
|
|
(995,249
|
)
|
|
(346,666
|
)
|
|
(1,341,915
|
)
|
Secured Notes, net of discount, at September 30, 2019
|
|
$
|
4,017,648
|
|
|
$
|
1,813,334
|
|
|
$
|
5,830,982
|
|
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. During the remainder of 2017, the Company issued to Global $500,000 aggregate principal amount in additional Notes.
Of the notes issued in 2017, $3,359,539 principal amount will mature on December 15, 2020. The remaining principal matured on November 30, 2017 and December 31, 2018. Principal and interest was originally to be payable in 36 equal monthly installments of $111,585 beginning January 15, 2018. The remaining principal of $1,197,688 matured on November 30, 2017 and December 31, 2018.
During 2018, the company issued to Global $1,935,000 aggregate principal amount in additional notes, in exchange for additional proceeds of $1,870,000. The aggregate original issue discounts of $65,000 will be allocated to interest expense, ratably, over the life of the note. These notes were issued with maturity dates between January 11, 2019 and October 22, 2019.
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.
ASCENT SOLAR TECHNOLOGIES, INC.
On October 22, 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 the assignment. This note is redeemable in stock, at the discretion of the Company, under the same conversion terms described above.
The following table summarizes the conversion activity of these notes:
|
|
|
|
|
|
|
Conversion Period
|
Principal 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
|
|
Since conversions began in the first quarter of 2018, the interest associated with conversions has been added back into the principal of the notes. The following table summarizes the activity of adding the interest to principal:
|
|
|
|
|
Period
|
Interest converted to Principal
|
Q1 2018
|
$
|
96,281
|
|
Q2 2018
|
$
|
44,237
|
|
Q1 2019
|
$
|
171,152
|
|
|
$
|
311,670
|
|
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.
Payments on these notes have not occurred in accordance with the agreement and, as of the date of this filing, these notes are due upon demand. As of September 30, 2019, the aggregate principal and interest balance of the Notes were $5,012,897 and $733,852, 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
|
(422,392
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
3,111,469
|
|
The aggregate derivative value of the notes was $3,533,861 as of December 31, 2018. This value is based was derived from Management's fair value assessment using the the following assumptions: annual volatility range between of 56% to 65%, present value discount rate of 12%, and a dividend yield of 0%.
ASCENT SOLAR TECHNOLOGIES, INC.
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. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 42% to 72%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net loss of $446,746 for three months ended September 30, 2019, and an aggregate net gain of $422,392 for the nine months ended September 30, 2019, 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 $3,111,469 as of September 30, 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.
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 September 30, 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 September 30, 2019, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:
|
|
|
|
|
|
|
|
Closing Date
|
Closing Amount
|
Proceeds
|
11/7/2018
|
$
|
260,000
|
|
$
|
200,000
|
|
11/19/2018
|
$
|
120,000
|
|
$
|
100,000
|
|
11/30/2018
|
$
|
120,000
|
|
$
|
100,000
|
|
12/7/2018
|
$
|
120,000
|
|
$
|
100,000
|
|
12/17/2018
|
$
|
120,000
|
|
$
|
100,000
|
|
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
|
|
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 recorded original issue discounts of $60,000 and debt financing costs of $5,000, which will be recognized as interest expense, ratably, over the life of the note. As of September 30, 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
|
|
4/4/2019
|
$
|
120,000
|
|
$
|
100,000
|
|
These Notes bear interest at a rate of 10% per annum and mature twelve months from the date of issuance. 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.
ASCENT SOLAR TECHNOLOGIES, INC.
Beginning six months from the date of issuance, 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 September 30, 2019, no principal or interest had been paid or converted, and the aggregate principal and interest balance of the Notes were $2,040,000 and $197,551, 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
|
$
|
3,292,692
|
|
Additional derivative liability on new notes
|
1,752,197
|
|
Change in fair value of derivative liability
|
(2,897,211
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
2,147,678
|
|
The aggregate derivative value of the notes was $3,292,692 as of December 31, 2018. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility range between of 56% to 71%, present value discount rate of 12%, and a dividend yield of 0%.
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. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 35% to 82%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $790,750 for three months ended September 30, 2019, and an aggregate net gain of $2,897,211 for the nine months ended September 30, 2019, 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 $2,147,678 as of September 30, 2019.
ASCENT SOLAR TECHNOLOGIES, INC.
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 principal
|
—
|
|
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 principal
|
—
|
|
530,000
|
|
530,000
|
|
Notes exchanged
|
—
|
|
(850,000
|
)
|
(850,000
|
)
|
Promissory Notes Principal Balance at September 30, 2019
|
494,437
|
|
530,000
|
|
1,024,437
|
|
Less: remaining discount
|
—
|
|
(70,000
|
)
|
(70,000
|
)
|
Promissory Notes, net of discount, at September 30, 2019
|
$
|
494,437
|
|
$
|
460,000
|
|
$
|
954,437
|
|
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 the payments according to this payment plan, and the note is payable upon demand.
As of September 30, 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 September 30, 2019 were $494,437 and $130,836, respectively.
Offering of Unsecured, Non-Convertible Notes to Investor 2
On June 6, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $315,000. The promissory note was issued with an original issue discount of $55,000, which was 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 matured on June 6, 2019. On May 2, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $315,000 and an accrued interest balance of $39,890. See Note 11 for further discussion on the new convertible notes.
On July 24, 2018, the Company initiated a 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 was 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 matured on January 24, 2019. On March 11, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $115,000 and an accrued interest balance of $10,607. See Note 11 for further discussion on the new convertible notes.
ASCENT SOLAR TECHNOLOGIES, INC.
On September 10, 2018, the Company initiated a 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 was 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 matured on March 10, 2019. March 11, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had 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.
On December 31, 2018, the Company initiated a 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 was 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 matured on June 30, 2019. On August 22, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $300,000 and an accrued interest balance of $28,353. See Note 11 for further discussion on the new convertible notes
On March 11, 2019, the Company initiated a 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 was 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 matured on September 11, 2019. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $60,000 and $4,507, respectively.
On May 14, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $100,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $75,000, which was received in several tranches between March 2019 and May 2019. This note bears interest at 12% per annum and matures on October 11, 2019. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $100,000 and $5,109, respectively.
On July 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $125,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $100,000. This note bears interest at 12% per annum and matures on January 8, 2020. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $125,000 and $3,500, respectively.
On August 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $65,000. 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 $45,000. This note bears interest at 12% per annum and matures on February 8, 2020. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $65,000 and $1,148, respectively.
On September 9, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $150,000. The promissory note was issued with an original issue discount of $40,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $110,000, which was received in several tranches during September 2019. This note bears interest at 12% per annum and matures on March 9, 2020. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $150,000 and $1,393, respectively.
Between August 22, 2019 and September 27, 2019, the Company received $30,000 proceeds from Investor 2, which had not yet been documented into a note. The Company is accruing interest on these funds at a rate of 12% per annum and has accrued $50 as of September 30, 2019.
As of September 30, 2019, the aggregate outstanding principal and interest for Investor 2 was $530,000 and $14,314, respectively.
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
|
—
|
|
—
|
|
270,000
|
|
(207,500
|
)
|
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
|
|
|
$
|
2,035,833
|
|
$
|
450,000
|
|
$
|
820,000
|
|
$
|
(1,059,100
|
)
|
$
|
2,246,733
|
|
$
|
(394,011
|
)
|
$
|
1,852,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Balance 12/31/2018
|
New Notes/Adjustments
|
Notes assigned or exchanged
|
Notes converted
|
Principal Balance 9/30/2019
|
Less: Discount Balance
|
Net Principal Balance 9/30/2019
|
October 2016 Notes
|
$
|
330,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
330,000
|
|
$
|
—
|
|
$
|
330,000
|
|
St. George Notes
|
1,099,233
|
|
(172,500
|
)
|
—
|
|
(255,070
|
)
|
671,663
|
|
—
|
|
671,663
|
|
BayBridge Notes
|
62,500
|
|
—
|
|
1,160,000
|
|
(265,000
|
)
|
957,500
|
|
(658,333
|
)
|
299,167
|
|
Bellridge Notes
|
455,000
|
|
—
|
|
—
|
|
(202,000
|
)
|
253,000
|
|
—
|
|
253,000
|
|
Power Up Notes
|
225,000
|
|
149,500
|
|
—
|
|
(239,600
|
)
|
134,900
|
|
(61,263
|
)
|
73,637
|
|
EMA Note
|
75,000
|
|
—
|
|
(75,000
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
Widjaja Note
|
—
|
|
330,000
|
|
—
|
|
—
|
|
330,000
|
|
(54,909
|
)
|
275,091
|
|
GS Capital Notes
|
—
|
|
178,568
|
|
75,000
|
|
(72,718
|
)
|
180,850
|
|
(79,167
|
)
|
101,683
|
|
|
$
|
2,246,733
|
|
$
|
485,568
|
|
$
|
1,160,000
|
|
$
|
(1,034,388
|
)
|
$
|
2,857,913
|
|
$
|
(853,672
|
)
|
$
|
2,004,241
|
|
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 $59,950, respectively as of September 30, 2019.
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 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
|
(423,744
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
452,737
|
|
As of December 31, 2018, the fair value of the derivative liability was $876,481. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility of 63%, present value discount rate of 12%, and a dividend yield of 0%.
The derivative liability associated with the note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 44% to 72%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net loss of $20,605 for three months ended September 30, 2019, and an aggregate net loss of $423,744 for the nine months ended September 30, 2019, 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 $452,737 as of September 30, 2019.
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. During the three months ended September 30 ,2019, the Company reversed the estimated cash payment premium of $172,500, due to the possibility of payment in cash being extremely unlikely.
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 September 30, 2019, cash payments of $191,667 had been made on the convertible note, and $861,670 had been converted into 531,575,123 shares of the Company's common stock. The remaining balance on the note was $671,663 as of September 30, 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
|
|
Q2 2019
|
59,320
|
|
86,636,364
|
|
Q3 2019
|
89,000
|
|
457,222,222
|
|
|
$
|
861,670
|
|
618,211,487
|
|
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.
ASCENT SOLAR TECHNOLOGIES, INC.
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
|
(975,258
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
84,742
|
|
As of December 31, 2018, the derivative liability was $1,060,000. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility of 52%, present value discount rate of 12%, and a dividend yield of 0%.
The derivative liability associated with the note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 44% to 52%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $405,034 for three months ended September 30, 2019, and an aggregate net gain of $975,258for the nine months ended September 30, 2019, 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 $84,742 as of September 30, 2019.
BayBridge Convertible Note
On September 7, 2018, the Company, entered into an securities exchange agreement (“Exchange Agreement 2”) BayBridge Capital Fund LP ("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 September 30, 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”).
On May 2, 2019, as described in Note 10, the Company, entered into an additional securities exchange agreements (“Exchange Agreement 5”) with Baybridge.
Pursuant to the terms of Exchange Agreement 5, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of $315,000, plus accrued interest of $37,872, for a convertible note with an aggregate principal amount of $450,000 and an original issue discount of $97,128 (“Exchange Note 5”).
ASCENT SOLAR TECHNOLOGIES, INC.
On August 22, 2019, as described in Note 10, the Company, entered into an additional securities exchange agreements (“Exchange Agreement 6”) with Baybridge.
Pursuant to the terms of Exchange Agreement 6, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of $300,000, plus accrued interest of $23,400, for a convertible note with an aggregate principal amount of $400,000 and an original issue discount of $76,600 (“Exchange Note 6”).
The Exchange Notes are unsecured, have no applicable registration rights, bear interest at a rate of 12% per annum, mature twelve months from the date of issuance, 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 the date of issuance of the Exchange Notes, and then at any time until the Exchange Notes 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 $0.0005, or (ii) 65% 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 the Exchange 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 September 30, 2019, aggregate principal of $472,500 and interest of $11,921 had been converted into 821,478,573 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 through 6, as of September 30, 2019, were $957,500 and $40,062, 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
|
|
Q2 2019
|
88,500
|
|
2,079
|
|
141,822,223
|
|
Q3 2019
|
86,000
|
|
2,261
|
|
616,247,346
|
|
|
$
|
472,500
|
|
$
|
11,921
|
|
821,478,573
|
|
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
|
$
|
113,846
|
|
Additional derivative liability on new notes
|
1,376,670
|
|
Change in fair value of derivative liability
|
(423,893
|
)
|
Liability extinguished
|
(152,301
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
914,322
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
At December 31, 2018, the derivative liability associated with Exchange Note 2 was $113,846. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility of 74%, present value discount rate of 12%, and a dividend yield of 0%. During the first quarter of 2019, Exchange Note 2 was converted in full and the derivative liability balance of $113,846 was written off as a gain as "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 based on the following assumptions: annual volatility of 67%, present value discount rate of 12%, and a dividend yield of 0%, 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 conversion option in Exchange Note 5 was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 68% present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At May 2, 2019, the derivative liability associated with Exchange Note 5 was $499,685. The fair value of the derivative was greater than the face value at issuance and the difference of $150,035 was charged to interest expense at issuance. The remaining debt discount of $349,650 will be charged to interest expense ratably over the life of the note.
The conversion option in Exchange Note 6 was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 64% present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At May 2, 2019, the derivative liability associated with Exchange Note 6 was $566,345. The fair value of the derivative was greater than the face value at issuance and the difference of $323,400 was charged to interest expense at issuance. The remaining debt discount of $242,945 will be charged to interest expense ratably over the life of the note.
The derivative liability associated with the Exchange Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 46% and 69%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $384,436 for three months ended September 30, 2019, and an aggregate net gain of $423,893 for the nine months ended September 30, 2019, 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 $914,322 as of September 30, 2019.
Bellridge Convertible Notes
On July 25, 2018, 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. This Exchange Note was fully converted during the nine months ended September 30, 2019.
ASCENT SOLAR TECHNOLOGIES, INC.
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 September 30, 2019, an aggregate principal of $447,000 and interest of $24,265, on the Bellridge convertible notes had been converted into 647,170,163 shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2019 were $253,000 and $55,514, 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
|
|
Q2 2019
|
47,385
|
|
3,875
|
|
68,142,087
|
|
Q3 2019
|
89,000
|
|
9,779
|
|
529,061,862
|
|
|
$
|
447,000
|
|
$
|
24,265
|
|
647,170,163
|
|
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 this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
486,279
|
|
Liability extinguished
|
(43,521
|
)
|
Change in fair value of derivative liability
|
(408,132
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
34,626
|
|
At December 31, 2018, the derivative liability associated with these notes was $486,279. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility range between 40% and 74%, present value discount rate of 12%, and a dividend yield of 0%. During the first quarter of 2019, the exchange note was converted in full and the derivative liability balance of $43,521 was written off as a gain as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations.
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. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 41% and 72%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $150,833 for three months ended September 30, 2019, and an aggregate net gain of $408,132 for the nine months ended September 30, 2019, 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 $34,626 as of September 30, 2019.
PowerUp Convertible Notes
During 2018, the Company entered into three securities purchase agreements with Power Up Lending Group, LTD ("Power Up"), for the private placement of three convertible notes with an aggregate principal amount of $225,000.
On February 14, 2019, the Company entered into a fourth securities purchase agreement with Power Up, for the private placement of a fourth convertible note with a principal value of $54,500.
On March 7, 2019, the Company entered into a fifth securities purchase agreement with Power Up, for the private placement of a fifth convertible note with a principal value of $52,500.
On May 3, 2019, the Company entered into a sixth securities purchase agreement with Power Up, for the private placement of a sixth convertible note with a principal value of $42,500.
These notes are unsecured, bear interest at a rate of 8% per annum, and mature on twelve months following the date of issuance; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22%.
Beginning in six months after issuance, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 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 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 September 30, 2019, the three 2018 notes had been converted in full. The aggregate principal and interest converted was $239,600 and $9,000, respectively, into 297,994,634 shares of common stock. No cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2019 were $134,900 and $7,193, 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
|
|
Q2 2019
|
42,500
|
|
1,700
|
|
47,155,556
|
|
Q3 2019
|
14,600
|
|
—
|
|
155,824,176
|
|
|
$
|
239,600
|
|
$
|
9,000
|
|
297,994,634
|
|
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.
ASCENT SOLAR TECHNOLOGIES, INC.
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
|
222,593
|
|
Liability extinguishment
|
(511,137
|
)
|
Change in fair value of derivative liability
|
(89,997
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
132,596
|
|
At December 31, 2018, the derivative liability associated with these notes was $511,137. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility range between 70% to 76%, present value discount rate of 12%, and a dividend yield of 0%. During the first half of 2019, the three December 2018 notes were converted in full and the derivative liability balance of $511,137 was written off as a gain as "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 based on the following assumptions: annual volatility of 65%, present value discount rate of 12%, and a dividend yield of 0%, 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 based on the following assumptions: annual volatility of 67%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At March 7, 2019, the derivative liability associated with the fifth 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.
The conversion option in the sixth note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 69%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At May 3, 2019, the derivative liability associated with the sixth note was $91,940. The fair value of the derivative was greater than the face value at issuance and the difference of $49,440 was charged to interest expense at issuance. The remaining debt discount of $42,500 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. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 46% to 71%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $41,327 for three months ended September 30, 2019, and an aggregate net gain of $89,997 for the nine months ended September 30, 2019, 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 $132,596 as of September 30, 2019.
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.
ASCENT SOLAR TECHNOLOGIES, INC.
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 notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.
At December 31, 2018, the derivative liability associated with the note was $240,156. This value is was derived from Managements fair value assessment using the the following assumptions: annual volatility of 87%, present value discount rate of 12%, and a dividend yield of 0%. On February 22, 2019, this derivative value was assigned to GS Capital (see below).
The following table summarizes the derivative liability transactions for this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
240,156
|
|
Liability assigned
|
(240,156
|
)
|
Derivative Liability Balance as of June 30, 2019
|
$
|
—
|
|
Widjaja Convertible Note
On January 11, 2019, the Company entered into a note purchase with Jason Widjaja (“Widjaja”), for the private placement of a $330,000 convertible promissory note, in exchange for $330,000 of gross proceeds. The note is unsecured, bears interest at 12% per annum, matures on January 11, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity.
At any time after inception of the note, until fully paid, Widjaja shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 80% of the lowest closing bid price for the shares over the prior five trading days immediately preceding the conversion date.
There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 19.99% of the outstanding shares of the Company's common stock.
As of September 30, 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 September 30, 2019 were $330,000 and $28,425, 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.
ASCENT SOLAR TECHNOLOGIES, INC.
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
|
(77,774
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
141,860
|
|
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 based on the following assumptions: annual volatility of 64%, present value discount rate of 12%, and a dividend yield of 0%, 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 this note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 43% to 73%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $6,843 for three months ended September 30, 2019, and an aggregate net gain of $77,774 for the nine months ended September 30, 2019, 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 $141,860 as of September 30, 2019.
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). On August 26, 2019, the Company sold and issued to GS, an additional unsecured convertible promissory note in the the amount of $70,500.
These notes are unsecured, bear interest at 8% per annum, matures twelve months from the date of issuance, and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity. There are no registration rights applicable to the note.
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.
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 (see above). The terms of the note remain the same.
As of September 30, 2019, principal of $72,718 and interest of $5,047 had been converted into 352,747,428 shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2019 were $180,850 and $6,044, respectively.
The following table summarizes the conversion activity of these notes:
|
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Interest Converted
|
Common Shares Issued
|
Q2 2019
|
$
|
15,000
|
|
$
|
763
|
|
$
|
17,321,692
|
|
Q3 2019
|
$
|
57,718
|
|
$
|
4,284
|
|
$
|
335,425,736
|
|
|
$
|
72,718
|
|
$
|
5,047
|
|
$
|
352,747,428
|
|
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 this note:
|
|
|
|
|
|
|
Derivative Liability Balance as of December 31, 2018
|
$
|
—
|
|
Additional derivative liability on new notes
|
210,092
|
|
Derivative liability assigned
|
240,156
|
|
Change in fair value of derivative liability
|
(405,737
|
)
|
Derivative Liability Balance as of September 30, 2019
|
$
|
44,511
|
|
The conversion option in the February 2019 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 based on the following assumptions: annual volatility of 66%, present value discount rate of 12%, and a dividend yield of 0%, 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 (see above).
The conversion option in the August 2019 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 based on the following assumptions: annual volatility of 64%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At August 26, 2019, the derivative liability associated with the GS note was $109,029. The fair value of the derivative was greater than the face value at issuance and the difference of $44,029 was charged to interest expense at issuance. The remaining debt discount of $65,000 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. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 35% and 70%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $208,446 for three months ended September 30, 2019, and an aggregate net gain of $405,737 for the nine months ended September 30, 2019, 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 $44,511 as of September 30, 2019.
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.
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 September 30, 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 nine months ended September 30, 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 September 30, 2019, there were 48,100 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $306,771.
NOTE 13. STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock
At September 30, 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 September 30, 2019, the Company had 2,856,539,850 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through September 30, 2019.
Preferred Stock
At September 30, 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
|
|
—
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
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 nine months ended September 30, 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 nine months ended September 30,
|
|
For nine months ended September 30,
|
|
|
2019
|
|
2018
|
Research and development
|
|
$
|
—
|
|
|
$
|
642
|
|
Selling, general and administrative
|
|
$
|
20,750
|
|
|
$
|
24,180
|
|
Total share-based compensation cost
|
|
$
|
20,750
|
|
|
$
|
24,822
|
|
Stock Options: The Company recognized share-based compensation expense for stock options of $20,750 to officers, directors and employees for the nine months ended September 30, 2019 related to stock option awards, reduced for estimated forfeitures; there was no expense recorded for the three months ended September 30, 2019. There were no option grants during the nine months ended September 30, 2019 or September 30, 2018.
As of September 30, 2019, there were no unvested stock options. As of September 30, 2019, 97 shares were vested 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 September 30, 2019
|
|
97
|
|
|
4.94
|
Exercisable at September 30, 2019
|
|
97
|
|
|
4.94
|
Restricted Stock: The Company did not recognized share-based compensation expense related to restricted stock grants for the nine months ended September 30, 2019 or for the year ended December 31, 2018. There were no restricted stock grants for the periods ended September 30, 2019 and December 31, 2018.
As of September 30, 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 Convertible Note (Note 11)
On October 22, 2019, the Company entered into a securities exchange agreement with Bellridge Capital. Pursuant to the terms of the exchange agreement, Bellridge agreed to surrender outstanding promissory notes, with an aggregate balance of $277,342 including principal and interest. In exchange, the Company issued an unsecured convertible note to Bellridge with a principal amount of $450,000.
This note bears interest at a rate of 10% per annum, matures on October 22, 2020, and contains standard and customary events of default. In the event of default, the interest rate increased to 18% per annum. All principal and interest is due upon maturity.
At any time following the issuance of this note, Bellridge has the right, until the note is paid in full, to convert any outstanding and unpaid principal and interest into shares of the Company's common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.0005, or (ii) 70% of the lowest closing bid price for shares over the prior five trading days.
Conversions of Convertible Notes (Note 11)
Subsequent to the date of this report, an additional $24,000 in principal for St. George was converted into 240,000,000 shares of common stock.
Subsequent to the date of this report, an additional $16,900 in principal, plus accrued interest and deposit fees, for BayBridge was converted into 175,047,423 shares of common stock.
Subsequent to the date of this report, an additional $267,000 in principal, plus accrued interest, for Bellridge was converted into 464,037,300 shares of common stock.
Subsequent to the date of this report, an additional $10,400 in principal, plus accrued interest and deposit fees, for Power Up was converted into 160,000,000 shares of common stock.
Subsequent to the date of this report, $11,350 in principal, plus accrued interest, for GS Capital was converted into 120,697,800 shares of common stock.