ASTI Ascent Solar Technologies Inc (PK)

For the Transition Period from             to             

Commission File No. 001-32919

______________________________________________________ 

Ascent Solar Technologies, Inc.

(Exact name of registrant as specified in its charter)

 _______________________________________________________

Delaware		20-3672603
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
12300 Grant Street, Thornton, CO		80241
(Address of principal executive offices)		(Zip Code)

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Large accelerated filer		o		Accelerated filer		o
Non-accelerated filer		x		Smaller reporting company		x
				Emerging growth company		o

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•	Our limited operating history and lack of profitability;

•	Our ability to develop demand for, and sales of, our products;

•	Our ability to attract and retain qualified personnel to implement our business plan and corporate growth strategies;

•	Our ability to develop sales, marketing and distribution capabilities;

•	Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets;

•	The accuracy of our estimates and projections;

•	Our ability to secure additional financing to fund our short-term and long-term financial needs;

•	Our ability to maintain the listing of our common stock on the OTCBB Market;

•	The commencement, or outcome, of legal proceedings against us, or by us, including ongoing ligation proceedings;

•	Changes in our business plan or corporate strategies;

•	The extent to which we are able to manage the growth of our operations effectively, both domestically and abroad, whether directly owned or indirectly through licenses;

•	The supply, availability and price of equipment, components and raw materials, including the elements needed to produce our photovoltaic modules;

•	Our ability to expand and protect the intellectual property portfolio that relates to our consumer electronics, photovoltaic modules and processes;

•	Our ability to implement remediation measures to address material weaknesses in internal control;

•	General economic and business conditions, and in particular, conditions specific to consumer electronics and the solar power industry; and

•	Other risks and uncertainties discussed in greater detail in the section captioned "Risk Factors."

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

		June 30, 2019				December 31, 2018
ASSETS (substantially pledged)
Current Assets:
Cash and cash equivalents		$	440,630			$	18,159
Trade receivables, net of allowance of $46,136 and $45,644, respectively		60,974				165,160
Inventories, net		674,640				660,791
Prepaid expenses and other current assets		143,955				138,369
Total current assets		1,320,199				982,479
Property, Plant and Equipment:		32,947,148				36,621,187
Less accumulated depreciation and amortization		(28,628,288		)		(32,207,829		)
		4,318,860				4,413,358
Other Assets:
Patents, net of accumulated amortization of $396,043 and $363,533, respectively		832,640				862,429
Other non-current assets		32,187				34,061
		864,827				896,490
Total Assets		$	6,503,886			$	6,292,327
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable		$	2,007,572			$	2,318,655
Related party payables		275,131				270,740
Accrued expenses		1,657,782				1,562,435
Accrued interest		1,495,848				1,198,279
Notes payable		1,514,030				1,516,530
Current portion of long-term debt		360,773				349,093
Secured promissory notes, net of discount of $2,041,588 and $2,824,365, respectively		5,131,309				3,447,380
Promissory notes, net of discounts of $20,000 and $104,583, respectively		934,437				1,239,854
Convertible notes, net of discounts of $773,385 and $394,011, respectively		2,122,846				1,852,722
Embedded derivative liability		7,989,150				10,114,452
Total current liabilities		23,488,878				23,870,140
Long-term debt, net of current portion		4,845,614				5,028,969
Accrued Warranty Liability		26,071				29,114
Total Liabilities		28,360,563				28,928,223
Commitments and Contingencies		—				—
Stockholders’ Deficit:
Series A preferred stock, $.0001 par value; 750,000 shares authorized as of June 30, 2019 and December 31, 2018; 48,100 and 60,756 shares issued and outstanding as of June 30, 2019 and December 31, 2018 ($679,279 and $822,620 Liquidation Preference, respectively)		5				6
Common stock, $0.0001 par value, 20,000,000,000 shares authorized as of June 30, 2019 and December 31, 2018; 696,089,337 and 63,537,885 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively		69,609				6,354
Additional paid in capital		397,258,622				395,889,712
Accumulated deficit		(419,184,913		)		(418,531,968		)
Total stockholders’ deficit		(21,856,677		)		(22,635,896		)
Total Liabilities and Stockholders’ Deficit		$	6,503,886			$	6,292,327

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

		For the Three Months Ended June 30,									For the Six Months Ended June 30,
		2019				2018					2019				2018
Revenues		$	74,368			$	102,962				$	289,752			$	480,472
Costs and Expenses
Cost of revenues		117,118				230,581					208,554				503,609
Research, development and manufacturing operations		129,003				700,045					618,072				1,873,081
Selling, general and administrative		403,915				700,615					912,284				1,636,141
Depreciation and amortization		60,657				97,446					127,009				198,220
Total Costs and Expenses		710,693				1,728,687					1,865,919				4,211,051
Loss from Operations		(636,325		)		(1,625,725		)			(1,576,167		)		(3,730,579		)
Other Income/(Expense)
Other Income, net		836,500				—					836,500				—
Interest Expense		(2,006,195		)		(2,128,698		)			(4,832,443		)		(3,472,429		)
Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net		(2,087,662		)		299,595					4,919,165				(684,866		)
Total Other Income/(Expense)		(3,257,357		)		(1,829,103		)			923,222				(4,157,295		)
Net Loss		$	(3,893,682	)		$	(3,454,828	)			$	(652,945	)		$	(7,887,874	)
Net Loss Per Share (Basic and Diluted)		$	(0.008	)		$	(0.23	)			$	(0.002	)		$	(0.60	)
Weighted Average Common Shares Outstanding (Basic and Diluted)		502,683,383				16,617,799					322,858,204				13,822,617

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Three and Six Months Ended June 30, 2019

(unaudited)

		Common Stock							Series A Preferred Stock							Additional Paid-In Capital				Accumulated Deficit				Total Stockholders’ Equity (Deficit)
		Shares			Amount				Shares			Amount
Balance, December 31, 2018		63,537,885			$	6,354			60,756			$	6			$	395,889,712			$	(418,531,968	)		$	(22,635,896	)
Interest and Dividend Expense paid with Common Stock		17,938,692			1,794				—			—				83,817				—				85,611
Conversion of St.George Note into Common Shares		58,503,244			5,850				—			—				100,900				—				106,750
Conversion of Global Ichiban Note into Common Shares		9,595,327			960				—			—				114,040				—				115,000
Conversion of BayBridge Note into Common Shares		46,461,277			4,646				—			—				85,854				—				90,500
Conversion of Bellridge Note into Common Shares		36,166,781			3,617				—			—				61,999				—				65,616
Conversion of PowerUp Note into Common Shares		90,340,694			9,034				—			—				173,466				—				182,500
Conversion of Series A Preferred Stock into Common Stock		1			—				(12,656	)		(1		)		1				—				—
Loss on Extinguishment of Liabilities		—			—				—			—				382,834				—				382,834
Stock based compensation		—			—				—			—				4,346				—				4,346
Net Income		—			—				—			—				—				3,240,737				3,240,737
Balance, March 31, 2019		322,543,901			$	32,255			48,100			$	5			$	396,896,969			$	(415,291,231	)		$	(18,362,002	)
Interest and Dividend Expense paid with Common Stock		11,279,709			1,127				—			—				7,279				—				8,406
Conversion of St.George Note into Common Shares		86,636,363			8,664				—			—				50,656				—				59,320
Conversion of BayBridge Note into Common Shares		138,461,538			13,846				—			—				74,654				—				88,500
Conversion of Bellridge Note into Common Shares		62,950,121			6,295				—			—				41,089				—				47,384
Conversion of PowerUp Note into Common Shares		45,266,667			4,527				—			—				37,973				—				42,500
Conversion of GS Capital Note into Common Shares		16,483,516			1,648				—			—				13,352				—				15,000
Stock issued for fees		12,467,522			1,247				—			—				6,813				—				8,060
Loss on Extinguishment of Liabilities		—			—				—			—				113,433				—				113,433
Stock based compensation		—			—				—			—				16,404				—				16,404
Net Loss		—			—				—			—				—				(3,893,682		)		(3,893,682		)
Balance at June 30, 2019		696,089,337			$	69,609			48,100			$	5			$	397,258,622			$	(419,184,913	)		$	(21,856,677	)

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Three and Six Months Ended June 30, 2018

(unaudited)

		Common Stock							Series A Preferred Stock							Additional Paid-In Capital				Accumulated Deficit				Total Stockholders’ Equity (Deficit)
		Shares			Amount				Shares			Amount
Balance, December 31, 2017		9,606,677			$	961			60,756			$	6			$	387,292,174			$	(402,495,476	)		$	(15,202,335	)
Interest and Dividend Expense paid with Common Stock		81,242			8				—			—				20,709				—				20,717
Conversion of St.George Note into Common Shares		187,500			19				—			—				74,981				—				75,000
Conversion of Global Ichiban Note into Common Shares		2,450,980			245				—			—				1,249,755				—				1,250,000
Conversion of BayBridge Note into Common Shares		411,765			41				—			—				104,959				—				105,000
Loss on Extinguishment of Liabilities		—			—				—			—				433,375				—				433,375
Stock based compensation		—			—				—			—				14,324				—				14,324
Net Loss		—			—				—			—				—				(4,433,046		)		(4,433,046		)
Balance at March 31, 2018		12,738,164			$	1,274			60,756			$	6			$	389,190,277			$	(406,928,522	)		$	(17,736,965	)
Interest and Dividend Expense paid with Common Stock		35,823			4				—			—				6,086				—				6,090
Conversion of St.George Note into Common Shares		2,082,778			208				—			—				316,392				—				316,600
Conversion of Global Ichiban Note into Common Shares		1,035,294			104				—			—				175,896				—				176,000
Conversion of BayBridge Note into Common Shares		2,400,002			240				—			—				407,760				—				408,000
Conversion of Series K Preferred Stock into Common Shares		702,500			70				—			—				2,809,930				—				2,810,000
Loss on Extinguishment of Liabilities		—			—				—			—				925,155				—				925,155
Stock based compensation		—			—				—			—				7,022				—				7,022
Net Loss		—			—				—			—				—				(3,454,828		)		(3,454,828		)
Balance at June 30, 2018		18,994,561			$	1,900			60,756			$	6			$	393,838,518			$	(410,383,350	)		$	(16,542,926	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

		For the Six Months Ended
		June 30,
		2019				2018
Operating Activities:
Net Income (loss)		$	(652,945	)		$	(7,887,874	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		127,009				198,220
Stock based compensation		20,750				21,346
Realized loss (gain) on sale of assets		(836,500		)		—
Amortization of financing costs		24,639				10,833
Non-cash interest expense		1,369,304				801,610
Amortization of debt discount		2,556,409				2,450,664
Bad debt expense		472				(8,868		)
Write off Enerplex Patents		—				59,153
Warranty reserve		(3,043		)		(9,702		)
Change in fair value of derivatives and loss on extinguishment of liabilities, net		(4,919,165		)		684,866
Changes in operating assets and liabilities:
Accounts receivable		103,714				(28,458		)
Inventories		(13,849		)		37,604
Prepaid expenses and other current assets		(10,051		)		14,353
Accounts payable		(298,450		)		945,703
Related party payable		4,391				(1,266		)
Accrued interest		623,896				235,952
Accrued expenses		95,343				295,134
Net cash used in operating activities		(1,808,076		)		(2,180,730		)
Investing Activities:
Proceeds from sale of assets		836,500				—
Patent activity costs		(2,721		)		(9,705		)
Net cash used in investing activities		833,779				(9,705		)
Financing Activities:
Proceeds from debt		1,406,768				2,357,500
Repayment of debt		(2,500		)		(230,782		)
Payment of debt financing costs		(7,500		)		—
Net cash provided by financing activities		1,396,768				2,126,718
Net change in cash and cash equivalents		422,471				(63,717		)
Cash and cash equivalents at beginning of period		18,159				89,618
Cash and cash equivalents at end of period		$	440,630			$	25,901
Supplemental Cash Flow Information:
Cash paid for interest		$	25,891			$	211,166
Cash paid for income taxes		$	—			$	—
Non-Cash Transactions:
Non-cash conversions of preferred stock and convertible notes to equity		$	907,099			$	5,140,600
Non-cash financing costs		$	10,800			$	25,000
Accounts payable converted to notes payable		$	—			$	308,041
Interest converted to principal		$	171,152			$	140,355
Common shares issued for fees		$	8,060			$	—
Initial embedded derivative liabilities		$	3,105,812			$	2,013,601
Promissory notes exchanged for convertible notes		$	550,000			$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ASCENT SOLAR TECHNOLOGIES, INC.

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 June 30, 2019 and December 31, 2018 , and the results of operations for the three and six months ended June 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 six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 .

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ASCENT SOLAR TECHNOLOGIES, INC.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 . There have been no significant changes to our accounting policies as of June 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.

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 June 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 six months ended June 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 six months ended, June 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 six months ended June 30, 2019 the Company used  $1,808,076  in cash for operations. The Company's primary significant long term cash obligation consists of a note payable of  $5,206,387  to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of approximately $693,611 , including principal and interest, will come due in the remainder of 2019.

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 June 30, 2019 , the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.

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ASCENT SOLAR TECHNOLOGIES, INC.

The Company continues to accelerate sales and marketing efforts related to its consumer and military solar products and specialty PV application strategies through expansion of its sales and distribution channels. The Company has begun activities related to securing additional financing through strategic or financial investors, but there is no assurance the Company will be able to raise additional capital on acceptable terms or at all. If the Company's revenues do not increase rapidly, and/or additional financing is not obtained, the Company will be required to significantly curtail operations to reduce costs and/or sell assets. Such actions would likely have an adverse impact on the Company's future operations.

As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern. The Company has scaled down its operations, due to cash flow issues, and does not expect to ramp up until significant financing is obtained.

Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes property, plant and equipment as of June 30, 2019 and December 31, 2018 :

 

		As of June  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		26,628,767				30,302,806
Depreciable property, plant and equipment		32,947,148				36,621,187
Less: Accumulated depreciation and amortization		(28,628,288		)		(32,207,829		)
Net property, plant and equipment		$	4,318,860			$	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 second quarter of 2019, the Company disposed of certain redundant machinery and equipment. This machinery and equipment was fully depreciated and the Company realized a gain of $836,500 from these sales.

Depreciation expense for the three months ended June 30, 2019 and 2018 was $45,998 and $58,566 , respectively. Depreciation expense for the six months ended June 30, 2019 and 2018 was $94,498 and $117,302 , 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 June 30, 2019 and December 31, 2018 :

 

		As of June 30,				As of December 31,
		2019				2018
Raw materials		$	674,640			$	660,791
Work in process		—				—
Finished goods		—				—
Total		$	674,640			$	660,791

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ASCENT SOLAR TECHNOLOGIES, INC.

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 June 30, 2019 , the Company had not made any payments on these notes; the total outstanding principal and accrued interest were $1,073,825 and $129,274 , 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 June 30, 2019 , the Company had not made any payments on this note, the accrued interest was $25,000 , 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 June 30, 2019 , the company had paid principal of $25,029 and interest of $897 , and the note is due upon demand. The remaining principal and interest balances, as of June 30, 2019 , were $190,205 and $16,782 , respectively.

NOTE 8. DEBT

On February 8, 2008 , the Company acquired a manufacturing and office facility in Thornton, Colorado, for approximately $5.5 million. The purchase was financed by a promissory note, deed of trust and construction loan agreement (the “Construction Loan”) with the Colorado Housing and Finance Authority (“CHFA”), which provided the Company borrowing availability of up to $7.5 million for the building and building improvements. In 2009 , the Construction Loan was converted to a permanent loan pursuant to a Loan Modification Agreement between the Company and CHFA (the “Permanent Loan”). The Permanent Loan, collateralized by the building, has an interest rate of 6.6% and the principal will be amortized through its term to February 2028 . Further, pursuant to certain negative covenants in the Permanent Loan, the Company may not, among other things, without CHFA’s prior written consent (which by the terms of the deed of trust is subject to a reasonableness requirement): create or incur additional indebtedness (other than obligations created or incurred in the ordinary course of business); merge or consolidate with any other entity; or make loans or advances to the Company’s officers, shareholders, directors or employees.

On November 1, 2016 , the Company and the CHFA agreed to modify the original agreement described above with the addition of a forbearance period. Per the modification agreement, no payments of principal and interest shall be due under the note during the forbearance period commencing on November 1, 2016 and continuing through April 1, 2017 . The amount of interest that should have been paid by the Company during the forbearance period in the total amount of $180,043 was added to the outstanding principal balance of the note. As a result, on May 1, 2017 , the principal balance of the note was $5,704,932 . Commencing on May 1, 2017 , the monthly payments of principal and interest due under the note resumed at $57,801 , and the Company shall continue to make such monthly payments over the remaining term of the note ending in February 2028 .

On August 24, 2018 , the Company and the CHFA agreed to modify the original agreement with an additional forbearance period. Per the modification agreement, no payments of principal shall be due under the note during the forbearance period commencing on June 1, 2018 and continuing through November 30, 2018 . For each month of forbearance, partial interest of $15,000 per month was paid, and the remaining unpaid interest of the forbearance period of $84,187 was added to the outstanding principal balance of the note. As a result, on December 1, 2018 , the principal balance of the note will be $5,434,042 and monthly payments of principal and interest of $57,801 will resume, continuing through the remaining term of the note ending in February 2028 .

The outstanding principal balance of the Permanent Loan was $5,206,387 and $5,378,062 as of June 30, 2019 and December 31, 2018 , respectively.

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As of June 30, 2019 , remaining future principal payments on long-term debt are due as follows:

2019	$	177,418
2020	$	372,843
2021	$	398,209
2022	$	425,301
2023	$	454,235
Thereafter	$	3,378,381
	$	5,206,387

As of June 30, 2019 , the Company had not made its regularly monthly payments and seven months of payments were outstanding in the Company's Accounts Payable. The Accounts Payable balance was $404,606 as of June 30, 2019, representing $199,742 in loan principal and $204,864 in loan interest.

On April 12, 2019, the Company entered into an agreement for the sale of its Thornton, Colorado building at a gross sales price of $13 million .  The closing of the transaction, which is subject to customary closing conditions, was expected to close in the third quarter of 2019. On June 12, 2019, the agreement was canceled. The Company continues to market the property.

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 June 30, 2019		5,012,897				2,160,000				7,172,897
Less: remaining discount		(1,299,922		)		(741,666		)		(2,041,588		)
Secured Notes, net of discount, at June 30, 2019		$	3,712,975			$	1,418,334			$	5,131,309

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.

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Pursuant to the terms of the note purchase and exchange agreement, the Company and Global also agreed to exchange certain outstanding securities held by the Global for additional notes. As of November 30, 2017 , Global surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ( $3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ( $252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to Global $4,057,227 aggregate principal amount of additional Notes.

All principal and accrued interest on the notes are redeemable at any time, in whole or in part, at the option of Global. The redemption amount may be paid in cash or converted into shares of common stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $2.00 per share, at the option of the Company.

The notes may not be converted, and shares of common stock may not be issued pursuant to the notes, if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of common stock.

Of the notes issued on November 30, 2017 , $3,359,539 aggregate principal amount will mature on December 15, 2020 . Principal and interest was originally to be payable in 36 equal monthly installments of $111,585 beginning January 15, 2018 . As of June 30, 2019 , principal of $1,541,000 was converted into 13,081,603 shares of common stock, and $311,670 of interest was converted to principal. This note is due upon demand.

The following table summarizes the conversion activity of this note:

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

On July 6, 2018 , the Company issued an additional, promissory note to Global, pursuant to the note purchase and exchange agreement dated November 30, 2017 . In accordance with the agreement, the Company issued a note with a principal balance of $135,000 in exchange for gross proceeds of $120,000 . This note matures on July 6, 2019 . Principal and interest on this note are payable at maturity. The original issue discount of $15,000 will be allocated to interest expense, ratably, over the life of the note. This note is not redeemable in stock.

On October 2, 2018 , the Company issued an additional promissory note to Global, pursuant to the note purchase and exchange agreement dated November 30, 2017 . In accordance with the agreement, the Company issued a note with a principal balance of $150,000 in exchange for gross proceeds of $125,000 . This note matures on October 2, 2019 . Principal and interest on this note are payable at maturity. The original issue discount of $25,000 will be allocated to interest expense, ratably, over the life of the note. This note is redeemable in stock, at the discretion of the Company, under the same conversion terms described above.

On October 18, 2018 , Global sold one of its notes to another investor. As a result of this sale, $250,000 in principal and $26,466 of accrued interest were assigned to the new investor and is no longer considered secured debt. Please refer to Note 11 for further discussion of this assignment. This note is redeemable in stock, at the discretion of the Company, under the same conversion terms described above.

On October 22, 2018 , the Company issued an additional promissory note to Global, pursuant to the note purchase and exchange agreement dated November 30, 2017 . In accordance with the agreement, the Company issued a note with a principal balance of $150,000 in exchange for gross proceeds of $125,000 . This note matures on October 22, 2019 . Principal and interest on this note are payable at maturity. The original issue discount of $25,000 will be allocated to interest expense, ratably, over the life of the note.

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.

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As of June 30, 2019 , the aggregate principal and interest balance of the Notes were $5,012,897 and $582,229 , 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			(869,138		)
Derivative Liability Balance as of June 30, 2019			$	2,664,723

Due to the varying terms and varying issue dates, the tranches of this instrument were broken into five separate instruments for valuation purposes.

1)	The first valuation was done on the November 30, 2017 note with term of three years. The derivative value of this note was $1,764,068 as of December 31, 2018 .

2)	The second valuation was done on the group of notes dated November 30, 2017 , that had a term of one year. The derivative value of this group of notes was $418,965 as of December 31, 2018 .

3)	The third valuation was done on the note dated December 28, 2017 , which had a term of one year. The derivative value of this note was $150,126 on December 31, 2018 .

4)	The fourth valuation was done for the notes dated in the first quarter of 2018, which had a term of one year . The derivative value of this note was $900,757 on December 31, 2018 .

5)	The fifth valuation was done for the notes dated in the fourth quarter of 2018, which had a term of one year . The derivative value of this note was $299,945 on December 31, 2018 .

The derivative liability associated with the notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.

1) For the November 30, 2017 3yr note: Management conducted a fair value assessment with the following assumptions: annual volatility of  59% , present value discount rate of  12% , and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a net loss of $252,102 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  $2,016,170  as of  June 30, 2019 .

2)

For the November 30, 2017 1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of  49% present value discount rate of  12% and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a net gain of $264,025 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  $154,940  as of  June 30, 2019 .

3)

For the December 28, 2017 1yr note: Management conducted a fair value assessment with the following assumptions: annual volatility of  49% , present value discount rate of  12% , and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a net gain of $94,607 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  $55,519  as of  June 30, 2019 .

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4)

For the first quarter 2018 1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of  49% , present value discount rate of  12% , and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a net gain of $567,642 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  $333,115  as of  June 30, 2019 .

5)

For the fourth quarter 2018 1yr notes: Management conducted a fair value assessment with the following assumptions: annual volatility of  42% , present value discount rate of  12% , and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a net gain of $194,966 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  $104,979  as of  June 30, 2019 .

The total cumulative net gain for the six months ended June 30, 2019 was $869,138 to reflect a total derivative liability of $2,664,723 as of June 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. The note bears interest at a rate of 10% per annum and matures on May 9, 2019 . All unredeemed principal and accrued interest is payable upon maturity. The note contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. In the event of default the interest rate increases to 22% per annum. The note is secured by a junior security interest on the Company's headquarters building, located in Thornton, Colorado. There are no registration rights applicable to this agreement.

Beginning in early November 2018, St. George shall have the option to require the Company to redeem all or a portion of the amounts outstanding under the note. The Company may pay the requested redemption amounts in cash or in the form of shares of common stock (subject to certain specified equity conditions). Payments in the form of Common Stock shall be calculated using a variable conversion price equal to (i) 60% of the average of the two lowest closing bid prices for the shares over (ii) the prior ten day trading period immediately preceding the redemption.

On November 5, 2018 , the Company entered into a second securities purchase agreement with St. George, for the private placement of a $1,220,000 secured convertible promissory note ("Company Note"). On November 7, 2018 , the Company received $200,000 of gross proceeds from the offering of the Company Note. In addition, the Company received additional consideration for the Company Note in the form of eight separate promissory notes of St. George (the “Investor Notes”) having an aggregate principal amount of $800,000 . The Company may receive additional cash proceeds of up to an aggregate of $800,000 through cash payments made from time to time by St George of principal and interest under the eight Investor Notes. The aggregate principal amount of the Company Note is divided into nine tranches, which tranches correspond to (i) the cash funding received on November 5, 2018 and (ii) the principal amounts of the eight Investor Notes. As of June 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 June 30, 2019 , the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:

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Closing Date	Closing Amount			Proceeds
11/7/2018	$	260,000		$	200,000
11/19/2018	$	120,000		$	100,000
11/30/2018	$	120,000		$	100,000
12/7/2018	$	120,000		$	100,000
12/17/2018	$	120,000		$	100,000
1/3/2019	$	120,000		$	100,000
1/17/2019	$	120,000		$	100,000
1/30/2019	$	120,000		$	100,000
2/8/2019	$	120,000		$	100,000

The Notes bear interest at a rate of 10% per annum and matures on November 5, 2019 . All unredeemed principal and accrued interest is payable upon maturity. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. In the event of default the interest rate increases to 22% per annum. The Notes are secured by a security interest on the Company's headquarters building, located in Thornton, Colorado. There are no registration rights applicable to this agreement.

Beginning in early May 2019, St. George shall have the option to redeem all or a portion of the amounts outstanding under the Company Note. At St. George's option, redemption amounts are payable by the Company in cash or in the form of shares of the common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 60% of the average of the two lowest closing bid price for the shares over the prior ten day trading period immediately preceding the conversion.

On March 13, 2019 , the Company entered into a third securities purchase agreement with St. George, for the private placement of a $365,000 secured convertible promissory note ("Third Note"). The Company 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 June 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

The Note bears interest at a rate of 10% per annum and matures on March 13, 2020 . All unredeemed principal and accrued interest is payable upon maturity. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. In the event of default the interest rate increases to 22% per annum. The Notes are secured by a security interest on the Company's headquarters building, located in Thornton, Colorado. There are no registration rights applicable to this agreement.

Beginning in early September 2019, St. George shall have the option to redeem all or a portion of the amounts outstanding under the Company Note. At St. George's option, redemption amounts are payable by the Company in cash or in the form of shares of the common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 60% of the average of the two lowest closing bid price for the shares over the prior 10 day trading period immediately preceding the conversion.

Shares of common stock may not be issued pursuant to these notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of common stock.

As of June 30, 2019 , the aggregate principal and interest balance of the Notes were $2,040,000 and $142,351 , respectively.

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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					(2,106,461		)
Derivative Liability Balance as of June 30, 2019					$	2,938,428

Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.

1)	The first valuation was done on the May 8, 2018 note with term of one year . The derivative value of this note was $1,568,730 as of December 31, 2018 .

2)

The second valuation was done on the November 5, 2018 notes with term of one year . The derivative value of this note was $1,723,962 as of December 31, 2018 . For the tranches of this note that were received in Q1 2019, the Company conducted an initial valuation. Although the notes were entered into at various dates, we used a weighted average date of January 22, 2019 for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of  79% , present value discount rate of  12% , and a dividend yield of  0% , resulted in a fair value of the embedded derivative associated with these Notes of $0 as of January 22, 2019. The fair value of the derivative was greater than the face value at issuance and the difference of $69,686 was charged to interest expense at issuance. The remaining debt discount of $400,000 will be charged to interest expense ratably over the life of the note.

3)

The third valuation was done on the March 13, 2019 notes with a term of one year . For the Q1 2019 tranches received, the Company conducted an initial valuation. Although the notes were entered into at various dates, we used a weighted average issuance date of March 18, 2019 for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of  80% , present value discount rate of  12% , and a dividend yield of  0% , resulted in a fair value of the embedded derivative associated with these Notes of $997,511 as of March 18, 2019. The fair value of the derivative was greater than the face value at issuance and the difference of $797,511 was charged to interest expense at issuance. The remaining debt discount of $200,000 will be charged to interest expense ratably over the life of the note.

For the Q2 2019 tranche received on the March 2019 note, the Company conducted an initial valuation. Management's analysis, using the following assumptions: issue date of April 4, 2019, annual volatility of  76% , present value discount rate of  12% , and a dividend yield of  0% , resulted in a fair value of the embedded derivative associated with these Notes of $285,000 as of April 4, 2019. The fair value of the derivative was greater than the face value at issuance and the difference of $185,000 was charged to interest expense at issuance. The remaining debt discount of $100,000 will be charged to interest expense ratably over the life of the note.

The derivative liability associated with the notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the two valuation groups discussed above.

1)

For the May 2018 note: Management conducted a fair value assessment with the following assumptions: annual volatility of  49% , present value discount rate of  12% , and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a gain of $1,013,017 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  $555,713  as of  June 30, 2019 .

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2)

For the November 5, 2018 notes: Management conducted a fair value assessment with the following assumptions: annual volatility of  63% , present value discount rate of  12% , and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a gain of $605,933 as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of  $1,587,715  as of  June 30, 2019 .

3)

For the March 13, 2019 notes: Management conducted a fair value assessment with the following assumptions: annual volatility of  72% , present value discount rate of  12% , and a dividend yield of  0% as of June 30, 2019 . As a result of the fair value assessment, the Company recorded a gain of $487,511 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  $795,000  as of  June 30, 2019 .

The total cumulative net gain for the six months ended June 30, 2019 was $2,106,461 to reflect a total derivative liability of $2,938,428 as of June 30, 2019 .

NOTE 10. PROMISSORY NOTES

The following table provides a summary of the activity of the Company's non-convertible, unsecured, promissory notes:

	Investor 1			Investor 2			Total
Promissory Notes Principal Balance at December 31, 2017	$	494,437		$	200,000		$	694,437
New notes	—			850,000			850,000
Notes exchanged	—			(200,000		)	(200,000		)
Promissory Notes Principal Balance at December 31, 2018	494,437			850,000			1,344,437
Less: remaining discount	—			(104,583		)	(104,583		)
Promissory Notes, net of discount, at December 31, 2018	$	494,437		$	745,417		$	1,239,854
New notes	—			160,000			160,000
Notes exchanged	—			(550,000		)	(550,000		)
Promissory Notes Principal Balance at June 30, 2019	494,437			460,000			954,437
Less: remaining discount	—			(20,000		)	(20,000		)
Promissory Notes, net of discount, at June 30, 2019	$	494,437		$	440,000		$	934,437

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 all the payments according to this payment plan, and the note is payable upon demand.

As of June 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 June 30, 2019 were $494,437 and $115,881 , respectively.

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ASCENT SOLAR TECHNOLOGIES, INC.

Offering of Unsecured, Non-Convertible Notes to Investor 2

On June 6, 2018 , the Company initiated a second non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $315,000 . The promissory note was issued with an original issue discount of $55,000 , which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $260,000 , that was received in several tranches between February 2018 and April 2018. This note bears interest at 12% per annum and matures on June 6, 2019 . All principal and interest is payable upon maturity. As of June 30, 2019 , the remaining principal and interest on on this note were $0 and $2,028 , respectively.

On July 24, 2018 , the Company initiated a third non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $115,000 . The promissory note was issued with an original issue discount of $27,500 , which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $87,500 , which was received in several tranches between May 2018 and June 2018. This note bears interest at 12% per annum and matures on January 24, 2019 . Please see exchange note below.

On September 10, 2018 , the Company initiated a fourth non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $120,000 . The promissory note was issued with an original issue discount of $20,000 , which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $100,000 , which was received in several tranches between June 2018 and September 2018. This note bears interest at 12% per annum and matures on March 10, 2019 . Please see exchange note below.

On December 31, 2018 , the Company initiated a fifth non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $300,000 . The promissory note was issued with an original issue discount of $75,000 , which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $225,000 , which was received in several tranches between September 2018 and December 2018. This note bears interest at 12% per annum and matures on June 30, 2019 . All principal and interest is payable upon maturity. As of June 30, 2019 , the remaining principal and interest on on this note were $300,000 and $23,054 , respectively.

On March 11, 2019 , the Company initiated a sixth non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $60,000 . The promissory note was issued with an original issue discount of $10,000 , which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $50,000 , which was received in several tranches between January 2019 and March 2019. This note bears interest at 12% per annum and matures on September 11, 2019 . All principal and interest is payable upon maturity. As of June 30, 2019 , the remaining principal and interest on on this note were $60,000 and $2,667 , respectively.

Exchange of Promissory Notes for Convertible Notes

On March 11, 2019, the Company entered into two new securities exchange agreements with Investor 2. Pursuant to the terms of the exchange agreements, Investor 2 agreed to surrender and exchange two promissory notes in exchange for two convertible notes. The first promissory note had a principal balance of $115,000 and an accrued interest balance of $10,607 ; and the second promissory note has a principal balance of $120,000 and an accrued interest balance of $7,829 . See Note 11 for further discussion on the new convertible notes.

On May 2, 2019, the Company entered into another securities exchange agreements with Investor 2. Pursuant to the terms of the exchange agreements, Investor 2 agreed to surrender and exchange one promissory note in exchange for one convertible note. The promissory note had a principal balance of $315,000 and an accrued interest balance of $37,872 . See Note 11 for further discussion on the new convertible notes.

As of June 30, 2019 , the aggregate outstanding principal and interest for Investor 2 was $460,000 and $29,792 , respectively.

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ASCENT SOLAR TECHNOLOGIES, INC.

NOTE 11. CONVERTIBLE NOTES

The following table provides a summary of the activity of the Company's unsecured, convertible, promissory notes:

	Principal Balance 12/31/2017			New Notes			Notes assigned or exchanged			Notes converted			Principal Balance 12/31/2018			Less: Discount Balance			Net Principal Balance 12/31/18
October 2016 Notes	$	330,000		$	—		$	—		$	—		$	330,000		$	—		$	330,000
St. George Notes	1,705,833			—			—			(606,600		)	1,099,233			(96,177		)	1,003,056
BayBridge Notes	565,000			—			270,000			(772,500		)	62,500			(62,100		)	400
Bellridge Notes	—			150,000			550,000			(245,000		)	455,000			(123,360		)	331,640
Power Up Notes	—			225,000			—			—			225,000			(110,621		)	114,379
EMA Note	—			75,000			—			—			75,000			(1,753		)	73,247
	$	2,600,833		$	450,000		$	820,000		$	(1,624,100	)	$	2,246,733		$	(394,011	)	$	1,852,722

	Principal Balance 12/31/2018			New Notes			Notes assigned or exchanged			Notes converted			Principal Balance 6/30/2019			Less: Discount Balance			Net Principal Balance 6/30/2019
October 2016 Notes	$	330,000		$	—		$	—		$	—		$	330,000		$	—		$	330,000
St. George Notes	1,099,233			—			—			(166,070		)	933,163			—			933,163
BayBridge Notes	62,500			—			760,000			(179,000		)	643,500			(518,500		)	125,000
Bellridge Notes	455,000			—			—			(113,000		)	342,000			(5,358		)	336,642
Power Up Notes	225,000			149,500			—			(225,000		)	149,500			(95,960		)	53,540
EMA Note	75,000			—			(75,000		)	—			—			—			—
Widjaja Note	—			330,000			—			—			330,000			(109,817		)	220,183
GS Capital Notes	—			108,068			75,000			(15,000		)	168,068			(43,750		)	124,318
	$	2,246,733		$	587,568		$	760,000		$	(698,070	)	$	2,896,231		$	(773,385	)	$	2,122,846

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.

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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 $54,890 , respectively as of June 30, 2019 .

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the convertible notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. As of December 31, 2018 , the fair value of the derivative liability was $876,481 .

The following table summarizes the derivative liability transactions for this note:

Derivative Liability Balance as of December 31, 2018			$	876,481
Additional derivative liability on new notes			—
Change in fair value of derivative liability			(403,139		)
Derivative Liability Balance as of June 30, 2019			$	473,342

The derivative liability associated with the convertible notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the convertible notes. As a result of the fair value assessment, the Company recorded a $403,139 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the six months ended June 30, 2019 , to properly reflect the fair value of the embedded derivative of $473,342 as of June 30, 2019 .

The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible notes approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2019  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of  49% , present value discount rate of  12% , and dividend yield of  0% .

St. George Convertible Note

On September 8, 2017 , the Company entered into a securities purchase agreement with St. George Investments, LLC ("St. George") for the private placement of $1,725,000 principal amount of the Company’s original issue discount convertible notes.

On September 11, 2017 , the Company sold and issued a $1,725,000 principal convertible note to St. George in exchange for $1,500,000 of gross proceeds, and paid $20,000 in financing costs. The original issue discount of $225,000 , and the financing costs, will be charged to interest expense, ratably, over the life of the note.

This note matured on March 11, 2019 . The note does not bear interest in the absence of an event of default. The note is due upon demand and an interest rate has not been designated by St. George.

For the first six months after the issuance of the convertible note, the Company will make a monthly cash repayment on the note of approximately $96,000 . Thereafter, St. George may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If St. George does not request the full $150,000 redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts; however, in no event, can the amount requested for any one month exceed $275,000 .

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ASCENT SOLAR TECHNOLOGIES, INC.

Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible note, cash redemption payments by the Company will be subject to a 15% redemption premium. The Company recorded an estimated cash premium of $172,500 , at inception, which has been charged to interest, ratably, over the life of the note.

Beginning six months after the issuance of the convertible note, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 85% of the average VWAP for the shares over the prior five trading days or (ii) the closing bid price for the shares on the prior trading day.

On May 1, 2018 , effective as of April 3, 2018 , in lieu of making the December 2017 through March 2018 cash payments, the the Company agreed to amend the variable conversion price formula outlined in the securities purchase agreement. As amended, payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 60% of the lowest VWAP for the shares during the prior five trading days or (ii) the closing bid price for the shares on the prior trading day.

All principal and accrued interest on the convertible note is convertible at any time, in whole or in part, at the option of St. George into shares of common stock at a fixed conversion price of $4.00 per share.

The convertible note contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Note; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the convertible note will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, St. George has the option to increase the outstanding balance of the convertible note by 25% . The default provisions have not been designated by St. George.

In connection with the closing under the securities purchase agreement, the Company issued 37,500 unregistered shares of common stock to St. George as an origination fee. The closing stock price on the date of close was $1.70 resulting in an interest expense of $63,750 being recorded as of the date of close.

The convertible note may not be converted, and shares of common stock may not be issued pursuant to the convertible note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of common stock.

As of June 30, 2019 , cash payments of $191,667 had been made on the convertible note, and $772,670 had been converted into 160,989,265 shares of the Company's common stock. The remaining balance on the note was $933,163 as of June 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
	$	772,670		160,989,265

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the convertible note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible note issuance and appropriately recorded that value as a derivative liability. As of December 31, 2018 , the derivative liability was  $1,060,000 .

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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			(570,224		)
Derivative Liability Balance as of June 30, 2019			$	489,776

The derivative liability associated with the convertible note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the convertible note. As a result of the fair value assessment, the Company recorded a $570,224 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the six months ended June 30, 2019 , to properly reflect the fair value of the embedded derivative of $489,776 as of June 30, 2019 .

The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible note approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2019  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of  52% , present value discount rate of  12% , and dividend yield of  0% .

BayBridge Convertible Note

On September 7, 2018 , the Company, entered into an securities exchange agreement (“Exchange Agreement 2”) with Baybridge.

Pursuant to the terms of Exchange Agreement 2, BayBridge agreed to surrender and exchange an outstanding promissory note with a principal balance of $200,000 , plus accrued interest of $16,800 , for a convertible note with an aggregate principal amount of $270,000 and an original issue discount of $53,200 (“Exchange Note 2”).

Exchange Note 2 is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on September 7, 2019 and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.

BayBridge shall have the right, from and after the date of issuance of Exchange Note 2, and then at any time until Exchange Note 2 is fully paid, to convert any outstanding and unpaid principal and interest into shares of common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.15 , or (ii) 70% of the lowest traded price for the shares over the prior five trading days.

As of June 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”).

Exchange Notes 3 & 4 are unsecured, have no applicable registration rights, bear interest at a rate of 12% per annum, mature on March 11, 2020 and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.

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ASCENT SOLAR TECHNOLOGIES, INC.

BayBridge shall have the right, from the date of issuance of Exchanges Note 3 & 4, and then at any time until Exchange Notes 3 & 4 are fully paid, to convert any outstanding and unpaid principal and interest into shares of common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.15 , or (ii) 70% of the lowest traded price for the shares over the prior five trading days.

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”).

Exchange Note 5 & is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on May 2, 2020 and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.

BayBridge shall have the right, from the date of issuance of Exchanges Note 5, and then at any time until Exchange Note 5 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 days trading days.

Conversion to shares of common stock may not be issued pursuant to Exchange Notes 3, 4, & 5 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 June 30, 2019 , aggregate principal of $1,226,500 and interest of $40,895 had been converted into 157,830,421 shares of common stock and no cash payments of principal or interest had been made on these exchange notes. Exchange Note 2 had been converted in full. The principal and accrued interest balances on Exchange Notes 3, 4, & 5 as of June 30, 2019 , were $643,500 and $18,623 , 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
	$	386,500		$	9,660		205,231,227

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion options in these notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability.

The following table summarizes the derivative liability transactions for these notes:

Derivative Liability Balance as of December 31, 2018			$	113,846
Additional derivative liability on new notes			810,325
Change in fair value of derivative liability			(41,457		)
Liability extinguished			(113,846		)
Derivative Liability Balance as of June 30, 2019			$	768,868

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ASCENT SOLAR TECHNOLOGIES, INC.

At December 31, 2018 , the derivative liability associated with Exchange Note 2 was $113,846 . During the six months ended June 30, 2019 , Exchange Note 2 had been fully converted and the remaining derivative liability of $113,846 was recorded as a gain to "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations.

The conversion options in Exchange Notes 3 & 4 were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At March 11, 2019 , the derivative liability associated with Exchange Notes 3 & 4 was $310,640 . The fair value of the derivative was greater than the face value at issuance and the difference of $57,204 was charged to interest expense at issuance. The remaining debt discount of $253,436 will be charged to interest expense ratably over the life of the note.

The conversion options 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 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 derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At  June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Notes 3, 4, & 5. As a result of the fair value assessment, the Company recorded a $269,183 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the six months ended June 30, 2019 to properly reflect the fair value of the embedded derivative of  $768,868  as of  June 30, 2019 .

The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with Exchange Notes 3, 4, & 5 approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2019  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of  49% for Exchange Notes 3 & 4, and 66% for Exchange Note 5, present value discount rates of  12% and dividend yields of  0% .

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 six months ended June 30, 2019 .

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.

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ASCENT SOLAR TECHNOLOGIES, INC.

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 June 30, 2019 , an aggregate principal of $358,000 and interest of $14,486 , on the Bellridge convertible notes had been converted into 118,108,301 shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of June 30, 2019 were $342,000 and $56,345 , 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
	$	358,000		$	14,486		118,108,301

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in these convertible notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2018 , the derivative liability associated with these notes was $486,279 .

The following table summarizes the derivative liability transactions for this note:

Derivative Liability Balance as of December 31, 2018			$	486,279
Liability extinguished			(43,521		)
Change in fair value of derivative liability			(257,299		)
Derivative Liability Balance as of June 30, 2019			$	185,459

As of June 30, 2019 , the Exchange Note had been fully converted and the remaining derivative liability of $43,521 was recorded as a gain to "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations.

The remaining derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At  June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the notes. As a result of the fair value assessment, the Company recorded a $257,299 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the six months ended June 30, 2019 to properly reflect the fair value of the embedded derivative of  $185,459  as of  June 30, 2019 .

The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2019  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between 41% and 49% , present value discount rate of  12% , and dividend yield of  0% .

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ASCENT SOLAR TECHNOLOGIES, INC.

PowerUp Convertible Notes

On August 1, 2018 , the Company, entered into a securities purchase agreement with Power Up Lending Group LTD, for the private placement of a $130,000 convertible note . This note is unsecured, bears interest at a rate of 8% per annum, and matures on August 1, 2019 ; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

Beginning in February 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest closing bid prices for the shares over the prior ten day trading period immediately preceding the conversion. As of June 30, 2019 , this note had been converted in full.

On September 4, 2018 , the Company entered into a second securities purchase agreement with Power Up, for the private placement of a second convertible note with a principal value of $52,500 . This note is unsecured, bears interest at a rate of 8% per annum, and matures on September 4, 2019 ; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

Beginning in March 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest trading prices for the shares over the prior ten day trading period immediately preceding the conversion. As of June 30, 2019 , this note had been converted in full.

On October 17, 2018 , the Company entered into a third securities purchase agreement with Power Up, for the private placement of a third convertible note with a principal value of $42,500 . This note is unsecured, bears interest at a rate of 8% per annum, and matures on October 16, 2019 ; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

Beginning in April 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest trading prices for the shares over the prior ten day trading period immediately preceding the conversion.

On February 14, 2019 , the Company entered into a fourth securities purchase agreement with Power Up, for the private placement of a fourth convertible note with a principal value of $54,500 . This note is unsecured, bears interest at a rate of 8% per annum, and matures on February 14, 2020 ; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

Beginning in August 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest trading prices for the shares over the prior ten day trading period immediately preceding the conversion.

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 . This note is unsecured, bears interest at a rate of 8% per annum, and matures on March 7, 2020 ; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

Beginning in September 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest trading prices for the shares over the prior ten day trading period immediately preceding the conversion.

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 . This note is unsecured, bears interest at a rate of 8% per annum, and matures on May 3, 2020 ; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

Beginning in November 2019, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a

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variable conversion price equal to 65% of the average of the three lowest trading prices for the shares over the prior ten day trading period immediately preceding the conversion.

Shares of common stock may not be issued pursuant to any of these notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock.

As of June 30, 2019 , $225,000 of principal and $9,000 of interest had been converted into 142,170,458 shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of June 30, 2019 were $149,500 and $4,271 , 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
	$	225,000		$	9,000		142,170,458

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the first note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2018 , the derivative liability associated with these notes was $511,137 .

The following table summarizes the derivative liability transactions for this note:

Derivative Liability Balance as of December 31, 2018			$	511,137
Additional derivative liability on new notes			222,593
Liability extinguishment			(511,137		)
Change in fair value of derivative liability			(48,670		)
Derivative Liability Balance as of June 30, 2019			$	173,923

During the six months ended June 30, 2019 , the first, second, and third notes had been fully converted and the remaining derivative liability of $511,137 was recorded as a gain to "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations.

The conversion option in the fourth note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At February 14, 2019 , the derivative liability associated with the fourth note was $43,788 .

The conversion option in the fifth note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At March 7, 2019 , the derivative liability associated with the 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 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.

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The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At  June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the notes. As a result of the fair value assessment, the Company recorded a $48,670 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the six months ended June 30, 2019 to properly reflect the fair value of the embedded derivative of  $173,923  as of  June 30, 2019 .

The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible notes approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2019  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between  49% and 66% , present value discount rate of  12% , and dividend yield of  0% .

EMA Convertible Note

On August 29, 2018 , the Company, entered into a securities purchase agreement with EMA Financial, LLC, for the private placement of a $75,000 convertible note. The note is unsecured, bears interest at a rate of 8% per annum, and matures on May 29, 2019 ; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

Beginning in March 2019, EMA shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's Common Stock. Conversions into Common Stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest closing bid prices for the shares over the prior ten day trading period immediately preceding the conversion.

Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of common stock.

On February 22, 2019, EMA assigned this note to GS Capital (see below). Per the terms of this agreement, $75,000 of principal and $2,909 of accrued interest were sold to the new investor and the Company paid $27,268 to EMA as a pre-payment penalty.

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2018 , the derivative liability associated with the note was $240,156 .

The following table summarizes the derivative liability transactions for this note:

Derivative Liability Balance as of December 31, 2018			$	240,156
Liability extinguishment			(240,156		)
Derivative Liability Balance as of June 30, 2019			$	—

During the six months ended June 30, 2019 , the note had been fully converted and the remaining derivative liability of $240,156 was recorded as a gain to "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations.

Widjaja Convertible Note

On January 11, 2019 , the Company entered into a note purchase with Jason Widjaja (“Widjaja”), for the private placement of a $330,000 convertible promissory note, in exchange for $330,000 of gross proceeds. The note is unsecured, bears interest at 12% per annum, matures on January 11, 2020 , and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity.

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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 June 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 June 30, 2019 were $330,000 and $18,444 , respectively.

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the first note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability.

The following table summarizes the derivative liability transactions for this note:

Derivative Liability Balance as of December 31, 2018			$	—
Additional derivative liability on new notes			219,634
Change in fair value of derivative liability			(70,931		)
Derivative Liability Balance as of June 30, 2019			$	148,703

The conversion option in the Widjaja note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At January 11, 2019 , the derivative liability associated with the Widjaja note was $219,634 .

The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At  June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the notes. As a result of the fair value assessment, the Company recorded a $70,931 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the six months ended June 30, 2019 to properly reflect the fair value of the embedded derivative of  $148,703  as of  June 30, 2019 .

The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible notes approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2019  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 50% , present value discount rate of  12% , and dividend yield of  0% .

GS Capital Convertible Note

On February 22, 2019 , the Company sold and issued to GS Capital Partners, LLC (“GS”) a $108,068 aggregate principal amount unsecured convertible promissory note in exchange for $75,000 of gross proceeds, $5,800 in financing costs, and $27,268 of premium associated with the assignment of the EMA note (see above). The note is unsecured, bears interest at 8% per annum, matures on February 22, 2020 , and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity.

At any time after inception of the note until fully paid, GS shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest closing bid price for the shares over the prior ten day trading period immediately preceding the conversion.

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There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company's common stock.

On February 22, 2019, GS purchased $75,000 in convertible notes, plus accrued interest, from EMA. The terms of the note remain the same.

As of June 30, 2019 , principal of $15,000 and interest of $763 had been converted into 17,321,692 shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of June 30, 2019 were $168,068 and $7,062 , 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
	$	15,000		$	763		$	17,321,692

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the first note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability.

The following table summarizes the derivative liability transactions for this note:

Derivative Liability Balance as of December 31, 2018			$	—
Additional derivative liability on new notes			101,063
Derivative liability assigned			240,156
Change in fair value of derivative liability			(197,291		)
Derivative Liability Balance as of June 30, 2019			$	143,928

The conversion option in the GS note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At January 11, 2019 , the derivative liability associated with the GS note was $101,063 . The fair value of the derivative was greater than the face value at issuance and the difference of $26,063 was charged to interest expense at issuance. The remaining debt discount of $75,000 will be charged to interest expense ratably over the life of the note.

The derivative liability assigned to GS from EMA, at February 22, 2019, was $240,156 .

The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At  June 30, 2019 , the Company conducted a fair value assessment of the embedded derivative associated with the notes. As a result of the fair value assessment, the Company recorded a $197,291 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations for the six months ended June 30, 2019 to properly reflect the fair value of the embedded derivative of  $143,928  as of  June 30, 2019 .

The fair value measurements rely primarily on company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the convertible notes approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2019  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility between 49% and 50% , present value discount rate of  12% , and dividend yield of  0% .

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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 June 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 six months ended June 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 June 30, 2019 , there were 48,100 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $294,479 .

NOTE 13. STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

Reverse Stock Split

On July 19, 2018, the Company, filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, at a ratio of one-for-one thousand (the “Reverse Stock Split”).

The Certificate of Amendment provides that the Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on July 20, 2018 (the “Effective Time”), at which time every thousand shares of the Company’s issued and outstanding Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in the par value per share. The Certificate of Amendment provides that in the event a stockholder would otherwise be entitled to receive a fraction of a share of Common Stock, such stockholder shall receive one whole share of Common Stock in lieu of such fractional share and no fractional shares shall be issued.

Immediately following the Reverse Stock Split, the Company had approximately 19 million shares of Common Stock issued and outstanding. The number of authorized shares of the Company’s Common Stock remains at 20 billion . The number of shares of the Company’s Series A preferred stock outstanding was not affected by the Reverse Stock Split. However, the number of shares of Common Stock into which each outstanding share of Series A preferred stock is convertible will be adjusted proportionately as a result of the Reverse Stock Split. All outstanding RSUs, stock options, warrants and rights to purchase shares of Common Stock was adjusted proportionately.

Trading of the Company’s Common Stock continued on the OTC Marketplace on a split-adjusted basis on July 23, 2018.

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At June 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 June 30, 2019 , the Company had 696,089,337 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through June 30, 2019 .

Preferred Stock

At June 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		—

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 six months ended June 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 six months ended June 30,				For six months ended June 30,
		2019				2018
Research and development		$	—			$	642
Selling, general and administrative		$	20,750			$	20,704
Total share-based compensation cost		$	20,750			$	21,346

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The following table presents share-based compensation expense by type:

		For six months ended June 30,				For six months ended June 30,
		2019				2018
Type of Award:
Stock Options		$	20,750			$	21,346
Restricted Stock Units and Awards		$	—			$	—
Total share-based compensation cost		$	20,750			$	21,346

Stock Options: The Company recognized share-based compensation expense for stock options of $20,750 to officers, directors and employees for the three months ended June 30, 2019 related to stock option awards, reduced for estimated forfeitures. There were no option grants during the six months ended June 30, 2019 or June 30, 2018 .

As of June 30, 2019 , there were no unvested stock options. As of June 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 June 30, 2019		97			4.94
Exercisable at June 30, 2019		97			4.94

Restricted Stock: The Company did not recognized share-based compensation expense related to restricted stock grants for the six months ended June 30, 2019 or for the year ended December 31, 2018 . There were no restricted stock grants for the periods ended June 30, 2019 and December 31, 2018 .

As of June 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 Promissory Note (Note 10)

On July 8, 2019, the Company issued, to Investor 2, a additional promissory note with a principal balance of $125,000 in exchange for $100,000 in gross proceeds. The note is unsecured, bears interest at 12% per annum, matures on January 8, 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.

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Conversions of Convertible Notes (Note 11)

Subsequent to the date of this report, an additional $54,000 in principal for St. George was converted into 135,555,556 shares of common stock.

Subsequent to the date of this report, an additional $43,500 in principal, plus accrued interest and a deposit fee, for BayBridge was converted into 175,047,423 shares of common stock. In addition, $2,590 in deposit fees were paid by issuance of 9,961,538 shares of common stock.

Subsequent to the date of this report, an additional $52,850 in principal, plus accrued interest, for Bellridge was converted into 178,947,790 shares of common stock.

Subsequent to the date of this report, $33,000 in principal, plus accrued interest, for GS Capital was converted into 105,006,523 shares of common stock.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes to those financial statements appearing elsewhere in this Form 10-Q. This discussion and analysis contains statements of a forward-looking nature relating to future events or our future financial performance. As a result of many factors, our actual results may differ materially from those anticipated in these forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Overview

We are a company formed to commercialize flexible PV modules using our proprietary technology. For the three months ended June 30, 2019 , we generated $289,752 of revenue. Our revenue of $289,752 from product sales accounted for 100% of total revenue, we did not have any revenue generated from government research and development contracts during the three months ended June 30, 2019 . As of June 30, 2019 , we had an accumulated deficit of approximately $419 million.

 

In January 2017, Ascent was awarded a contract to supply high-voltage SuperLight thin-film CIGS PV blankets. These 50W, fully laminated, flexible blankets were manufactured using a new process that was optimized for high performance in near-space conditions at elevated temperatures, and are custom designed for easy modular integration into series and parallel configurations to achieve the desired voltage and current required for such application.

During the third quarter of 2017, Ascent Solar was selected by Energizer to develop and supply solar panels for their PowerKeep line of solar products, and in November 2017, Ascent introduced the next generation of our USB-based portable power systems with the XD™ series. The first product introduced was the XD-12 which, like previous products, is a folding, lightweight, easily stowable, PV system with USB power regulation. Unique to this generation of PV portable power is more PV power (12 Watts) and a 2.0 Amp smart USB output to enable the XD-12 to charge most smartphones, tablets, and USB-enabled devices as fast as a wall outlet. The enhanced smart USB circuit works with the device to be charged so that the device can determine the maximum power it is able to receive from the XD-12, and ensures the best possible charging performance directly from the sun.

Also in 2017, for a space customer, Ascent manufactured a new micro-module, approximately 12.8mm x 50mm (0.5in x 2.0in) in size that is ideal for both laboratory-scale environmental testing, and for subsequent integration into flight experiments.

In February 2018, the Company introduced the second product in our XD series. Delivering up to 48 Watts of solar power, the durable and compact Ascent XD-48 Solar Charger is the ideal solution for charging many portable electronics and off-grid power systems. The XD-48’s versatility allows it to charge both military and consumer electronics directly from the sun wherever needed. Like the XD-12, the XD-48 has a compact and portable design, and its rugged, weather-resistant construction withstands shocks, drops, damage and even minor punctures to power through the harshest conditions.

In March 2018, Ascent successfully shipped to a European based customer for a lighter-than-air, helium-filled airship project based on our newly developed ultra-light modules with substrate material than half of the thickness of our standard modules.

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We continue to design and manufacture PV integrated consumer electronics as well as portable power applications for commercial and military users. Due to the high durability enabled by the monolithic integration employed by our technology, the capability to customize modules into different form factors and the industry leading light weight and flexibility provided by our modules, we believe that the potential applications for our products are numerous.

Commercialization and Manufacturing Strategy

We manufacture our products by affixing a thin CIGS layer to a flexible, plastic substrate using a large format, roll-to-roll process that permits us to fabricate our flexible PV modules in an integrated sequential operation. We use proprietary monolithic integration techniques which enable us to form complete PV modules with little to no costly back end assembly of inter cell connections. Traditional PV manufacturers assemble PV modules by bonding or soldering discrete PV cells together. This manufacturing step typically increases manufacturing costs and at times proves detrimental to the overall yield and reliability of the finished product. By reducing or eliminating this added step using our proprietary monolithic integration techniques, we believe we can achieve cost savings in, and increase the reliability of, our PV modules. All tooling necessary for us to meet our near term production requirements is installed in our Thornton, Colorado plant. In 2012, we further revised our strategy to focus on applications for emerging and high-value specialty PV markets, including off grid, aerospace, military and defense and consumer oriented products.

We plan to continue the development of our current PV technology to increase module efficiency, improve our manufacturing tooling and process capabilities and reduce manufacturing costs. We also plan to continue to take advantage of research and development contracts to fund a portion of this development.

Significant Trends, Uncertainties and Challenges

We believe the significant trends, uncertainties and challenges that directly or indirectly affect our financial performance and results of operations include:

•	Our ability to generate customer acceptance of and demand for our products;

•	Successful ramping up of commercial production on the equipment installed;

•	Our products are successfully and timely certified for use in our target markets;

•	Successful operating of production tools to achieve the efficiencies, throughput and yield necessary to reach our cost targets;

•	The products we design are saleable at a price sufficient to generate profits;

•	Our ability to raise sufficient capital to enable us to reach a level of sales sufficient to achieve profitability on terms favorable to us;

•	Effective management of the planned ramp up of our domestic and international operations;

•	Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets;

•	Our ability to maintain the listing of our common stock on the OTCBB Market;

•	Our ability to implement remediation measures to address material weaknesses in internal control;

•	Our ability to achieve projected operational performance and cost metrics;

•	Our ability to enter into commercially viable licensing, joint venture, or other commercial arrangements; and

•	Availability of raw materials.

Basis of Presentation: The accompanying consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of June 30, 2019 and June 30, 2018 , and the results of operations for the three months ended June 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.

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Critical Accounting Policies and Estimates

Critical accounting policies used in reporting our financial results are reviewed by management on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Processes used to develop these estimates are evaluated on an ongoing basis. Estimates are based on historical experience and various other assumptions that are believed to be reasonable for making judgments about the carrying value of assets and liabilities. Actual results may differ as outcomes from assumptions may change.

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 June 30, 2019 .

Results of Operations

Comparison of the Three Months Ended March 31, 2019 and 2018

Revenues. Our revenues were $74,368 for the three months ended June 30, 2019 compared to $102,962 for the three months ended June 30, 2018 , a decrease of $28,594 , due to fewer product sales.

 

Cost of revenues. Our Cost of revenues for the three months ended June 30, 2019 was $117,118 compared to $230,581 for the three months ended June 30, 2018 , a decrease of $113,463 . The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the three months ended June 30, 2019 compared to 2018 . Cost of revenues for the three months ended June 30, 2019 is comprised materials and freight of $39,815 , direct labor of $572 , and overhead of $76,731 . Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.

Research, development and manufacturing operations. Research, development and manufacturing operations costs were $129,003 for the three months ended June 30, 2019 , compared to $700,045 for the three months ended June 30, 2018 , a decrease of $571,042 . Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed to the decrease in research, development, and manufacturing operations expenses during the three months ended June 30, 2019 :

1.	Personnel and facility related expenses decreased $527,947 , as compared to the same time period of 2018 . The decrease in personnel and facility related costs was primarily due to a reduction in headcount and the use of contractors.

2.	Materials and equipment related expenses, decreased $43,095 , as compared to the same time period of 2018 . The decrease was due to a decrease in production of research and development products.

Selling, general and administrative. Selling, general and administrative expenses were $403,915 for the three months ended June 30, 2019 , compared to $700,615 for the three months ended June 30, 2018 , a decrease of $296,700 . The following factors contributed to the decrease in selling, general, and administrative expenses during the three months ended June 30, 2019 :

1.

Personnel and facility related costs decreased $219,288 during the three months ended June 30, 2019 , as compared to the the three months ended June 30, 2018 . The overall decrease in personnel related costs was primarily due a lower headcount for the the three months ended June 30, 2019 , as compared to the the three months ended June 30, 2018 as well as the decreased use of consultants and contractors during the same period.

2.

Marketing and related expenses decreased $19,084 during the three months ended June 30, 2019 , as compared to the the three months ended June 30, 2018 . The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the the three months ended June 30, 2019 , compared to the same time period of 2018, which is the direct result of reducing our marketing budget to focus more on the development of our PV.

3.

Legal expenses decreased $14,844 during the three months ended June 30, 2019 , as compared to the the three months ended June 30, 2018 . The primary reasons for the decrease is due to decreased general legal expenses related to financing efforts as compared to the three months ended June 30, 2018 and decreases in legal expenses related to our patent activity as compared to the same period of 2018 .

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4.	Public company expenses decreased $39,744 during the three months ended June 30, 2019 , as compared to the the three months ended June 30, 2018 . This increase is primarily due to the timing of the annual meeting which occurred during the first half of 2018 as compared to the anticipated second half of 2019 .

5.	Bad debt and settlement expenses decreased approximately $3,740 during the three months ended June 30, 2019 , as compared to the three months ended June 30, 2018 .

Other Expense, net. Other net expense was $3,257,357 for the three months ended June 30, 2019 , compared to $1,829,103 for the the three months ended June 30, 2018 , an increase of approximately $1,428,254 . The following factors contributed to the increase in other income, net during the three months ended June 30, 2019 :

1.	During the three months ended June 30, 2019 , the Company disposed of certain manufacturing assets and recognized a gain of $836,500 in Other income. There was no corresponding income in 2018 .

2.	Interest expense decreased approximately $122,503 , as compared to the three months ended June 30, 2018 . The decrease is primarily due to a decrease of non-cash interest expense related to convertible debt and promissory notes.

3.

Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, was a net loss of $2,087,662 for the three months ended June 30, 2019 , as compared to a net gain of $299,595 for the three months ended June 30, 2018 . The change of $2,387,257 in this non-cash item is attributable to a net loss of $2,131,464 on the change in fair value of our embedded derivative instruments during the three months ended June 30, 2019 , compared to $1,224,750 in 2018 , offset by a net gain from extinguishment of liabilities of $43,802 , related to conversions and redemptions of certain convertible notes and preferred stock, for the three months ended June 30, 2019 , as compared to a net loss of $925,155 for three months ended June 30, 2018 .

Net Loss.  Our Net Loss was $3,893,682 for the three months ended June 30, 2019 , compared to a Net Loss of $3,454,828 for the three months ended June 30, 2018 .

The increase in Net Loss of $438,854 for the three months ended June 30, 2019 can be summarized in variances in significant account activity as follows:

 

	Decrease (Increase) in Net Loss For the Three Months Ended June 30, 2019 Compared to the Three Months Ended June 30, 2018
Revenues	$	(28,594	)
Cost of Revenue	113,463
Research, development and manufacturing operations
Materials and Equipment Related Expenses	43,095
Personnel and Facility Related Expenses	527,947
Selling, general and administrative expenses
Personnel, Administrative, and Facility Related Expenses	219,288
Marketing Related Expenses	19,084
Legal Expenses	14,844
Public Company Costs	39,744
Bad Debt Expense	3,740
Depreciation and Amortization Expense	36,789
Other Income/Expense
Interest Expense	836,500
Other Income/Expense	122,503
Non-Cash Change in Fair Value of Derivative Liabilities and Gain/Loss on Extinguishment of Liabilities, net	(2,387,257		)
Increase to Net Loss	$	(438,854	)

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Comparison of the Six Months Ended June 30, 2019 and 2018

Revenues. Our revenues were $289,752 for the six months ended June 30, 2019 compared to $480,472 for the six months ended June 30, 2018 , a decrease of $190,720 , due to fewer product sales.

 

Cost of revenues. Our Cost of revenues for the six months ended June 30, 2019 was $208,554 compared to $503,609 for the six months ended June 30, 2018 , a decrease of $295,055 . The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the six months ended June 30, 2019 compared to 2018 . Cost of revenues for the six months ended June 30, 2019 is comprised of materials and freight of $19,937 , direct labor of $1,002 , and overhead of $187,615 . Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.

Research, development and manufacturing operations. Research, development and manufacturing operations costs were $618,072 for the six months ended June 30, 2019 , compared to $1,873,081 for the six months ended June 30, 2018 , a decrease of $1,255,009 . Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed to the decrease in research, development, and manufacturing operations expenses during the six months ended June 30, 2019 :

1.	Personnel and facility related expenses decreased $1,198,379 , as compared to the same time period of 2018 . The decrease in personnel and facility related costs was primarily due to a reduction in headcount and the use of contractors.

2.	Materials and equipment related expenses, decreased $56,630 , as compared to the same time period of 2018 . The decrease was due to a decrease in production of research and development products.

Selling, general and administrative. Selling, general and administrative expenses were $912,284 for the six months ended June 30, 2019 , compared to $1,636,141 for the six months ended June 30, 2018 , a decrease of $723,857 . The following factors contributed to the decrease in selling, general, and administrative expenses during the six months ended June 30, 2019 :

1.

Personnel and facility related costs decreased $617,104 during the six months ended June 30, 2019 , as compared to the the six months ended June 30, 2018 . The overall decrease in personnel related costs was primarily due a lower headcount for the the six months ended June 30, 2019 , as compared to the the six months ended June 30, 2018 as well as the decreased use of consultants and contractors during the same period.

2.

Marketing and related expenses decreased $20,377 during the six months ended June 30, 2019 , as compared to the six months ended June 30, 2018 . The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the the six months ended June 30, 2019 , compared to the same time period of 2018 , which is the direct result of reducing our marketing budget to focus more on the development of our PV.

3.

Legal expenses decreased $156,688 during the six months ended June 30, 2019 , as compared to the the six months ended June 30, 2018 . The primary reasons for the decrease is due to decreased general legal expenses related to financing efforts as compared to the the six months ended June 30, 2018 and decreases in legal expenses related to our patent activity as compared to the same period of 2018 .

4.	Public company expenses increased $33,391 during the six months ended June 30, 2019 , as compared to the the six months ended June 30, 2018 . This increase is primarily due to increased filing fees related to financing agreements in 2019 , as compared to 2018 .

5.	Bad debt and settlement expenses increased $36,921 during the six months ended June 30, 2019 , as compared to the six months ended June 30, 2018 . During 2018 we recorded payments and settlements against existing reserves. We did not have settlement expenses during 2019 .

Other Income/Expense, net. Other net income was $923,222 for the six months ended June 30, 2019 , compared to a other net expense of $4,157,295 for the the six months ended June 30, 2018 , an improvement of $5,080,517 . The following factors contributed to the increase in other income, net during the six months ended June 30, 2019 :

1.	During the six months ended June 30, 2019 , the Company disposed of certain manufacturing assets and recognized a gain of $836,500 in Other income. There was no corresponding income in 2018 .

2.	Interest expense increased approximately $1,360,014 , as compared to the six months ended June 30, 2018 . The increase is primarily due to an increase of non-cash interest expense related to convertible debt and promissory notes.

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3.

Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, was a net gain of $4,919,165 for the six months ended June 30, 2019 , as compared to a net loss of $684,866 for the six months ended June 30, 2018 . The change of $5,604,031 in this non-cash item is attributable to a net gain of $4,562,610 on the change in fair value of our embedded derivative instruments during the six months ended June 30, 2019 , compared to a net gain $673,664 in 2018 , offset by a reduction in the loss from extinguishment of liabilities of $1,715,085 , related to conversions and redemptions of certain convertible notes and preferred stock, for the six months ended June 30, 2019 , as compared to the the six months ended June 30, 2018 .

Net Loss.  Our Net Loss was $652,945 for the six months ended June 30, 2019 , compared to a Net Loss of $7,887,874 for the six months ended June 30, 2018 .

The decrease of $7,234,929 in Net Loss for the six months ended June 30, 2019 can be summarized in variances in significant account activity as follows:

 

 

	Decrease (Increase) in Net Loss For the Six Months Ended June 30, 2019 Compared to the Six Months Ended June, 2018
Revenues	$	(190,720	)
Cost of Revenue	295,055
Research, development and manufacturing operations
Materials and Equipment Related Expenses	56,630
Personnel and Facility Related Expenses	1,198,379
Selling, general and administrative expenses
Personnel, Administrative, and Facility Related Expenses	617,104
Marketing Related Expenses	20,377
Legal Expenses	156,688
Public Company Costs	(33,391		)
Bad Debt Expense	(36,921		)
Depreciation and Amortization Expense	71,211
Other Income/Expense
Interest Expense	(1,360,014		)
Other Income/Expense	836,500
Non-Cash Change in Fair Value of Derivative Liabilities and (Gain)/Loss on Extinguishment of Liabilities, net	5,604,031
Decrease in Net Loss	$	7,234,929

Liquidity and Capital Resources

The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the six months ended June 30, 2019 the Company used  $1,808,076  in cash for operations. The Company's primary significant long term cash obligation consists of a note payable of  $5,206,387  to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of approximately $693,611 , including principal and interest, will come due in the remainder of 2019.

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 year 2019 overall and, as of June 30, 2019 , the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.

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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.

Statements of Cash Flows Comparison of the Six Months Ended June 30, 2019 and 2018

For the six months ended   June 30, 2019 , our cash used in operations was  $1,808,076  compared to  $2,180,730  for the six months ended June 30, 2018 , a decrease of $372,654 . The decrease is primarily the result of reduced operations during the current year. For the six months ended June 30, 2019 , cash used in investing activities was $833,779 compared to $9,705 for the six months ended June 30, 2018 . This decrease was the result of reduced spending on patents. During the six months ended June 30, 2019 , negative operating cash flows of  $1,808,076 million were funded through $1,406,768 million in new debt issuances, offset by payment of financing costs of $7,500 .

Off Balance Sheet Transactions

As of June 30, 2019 , we did not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

We hold no significant funds and have no future obligations denominated in foreign currencies as of June 30, 2019 .

Although our reporting currency is the U.S. Dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials. As a result, we are subject to currency translation risk. Further, changes in exchange rates between foreign currencies and the U.S. Dollar could affect our future net sales and cost of sales and could result in exchange losses.

Interest Rate Risk

Our exposure to market risks for changes in interest rates relates primarily to our cash equivalents and investment portfolio. As of June 30, 2019 , our cash equivalents consisted only of operating accounts held with financial institutions. From time to time, we hold restricted funds, money market funds, investments in U.S. government securities and high quality corporate securities. The primary objective of our investment activities is to preserve principal and provide liquidity on demand, while at the same time maximizing the income we receive from our investments without significantly increasing risk. The direct risk to us associated with fluctuating interest rates is limited to our investment portfolio, and we do not believe a change in interest rates will have a significant impact on our financial position, results of operations, or cash flows.

Credit Risk

From time to time, we hold certain financial and derivative instruments that potentially subject us to credit risk. These consist primarily of cash, cash equivalents, restricted cash, investments, and forward foreign currency option contracts. We are exposed to credit losses in the event of nonperformance by the counter parties to our financial and derivative instruments. We place cash, cash equivalents, investments and forward foreign currency option contracts with various high quality financial institutions, and exposure is limited at any one institution. We continuously evaluate the credit standing of our counter party financial institutions.

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Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. Our management conducted an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act as of June 30, 2019 . Based on this evaluation, our management concluded the design and operation of our disclosure controls and procedures were not effective as of June 30, 2019 .

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles ("GAAP") in the United States of America and includes those policies and procedures that:

•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

•	provide reasonable assurance transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on this evaluation, our management concluded our internal controls over financial reporting were not effective as of June 30, 2019 . Our management reviewed the results of its assessment with the Audit Committee.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material Weakness

Based on our assessment and the criteria used, management concluded that our internal control over financial reporting as of June 30, 2019 was not effective due to the material weaknesses described as follows:

•	The Company was understaffed and did not have sufficiently trained resources with the technical expertise to ensure that all company transactions were accounted for in accordance with GAAP. This deficiency arose primarily from staff turnover and the inability of the Company to devote sufficient replacement resources in a timely manner, as a result of the Company's financial situation

As a consequence, the Company did not have effective process level control activities over the following:

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•	Accounting for the Company's inventory and cost of revenue was lacking for the preparation of the June 30, 2019 financial statements.  Miscalculations in these areas could impact the Company's current assets, revenues, operating results, and cash flows.

The control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

The Company plans to executed the following steps in 2019 to remediate the aforementioned material weaknesses in its internal control over financial reporting:

•	The Company plans to engage a resource, either as internal staff or an external contractor, with the technical expertise to track and report on inventory transactions and cost of revenue calculations.

•	The Company will design and implement additional procedures in order to assure that the resource mentioned above and other audit/accounting personnel are more involved with the Company’s inventory activities and cost of revenue allocations to monitor and earlier identify accounting issues that may be raised by the Company’s ongoing activities.

Changes in Internal Control Over Financial Reporting

Except for the identification and mitigation of the material weaknesses noted above, there were no other changes in internal control over financial reporting during the year ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In May 2019, a vendor filed suit against the Company in District Court in Adams County Colorado in an effort to collect approximately $1.2 million of unpaid fees (and related interest charges).  The matter is currently pending.  The unpaid amounts are reflected in the Company's financial statements.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the updated risk factors in our Annual Report on Form 10-K filed on April 19, 2019, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K filed on April 19, 2019 are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not required.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

The exhibits listed on the accompanying Index to Exhibits on this Form 10-Q are filed or incorporated into this Form 10-Q by reference.

EXHIBIT INDEX

Exhibit No.		Description
10.1		Purchase and Sale Agreement Dated April 12, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 18, 2019
10.2		Securities Purchase Agreement Dated May 2, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 8, 2019)
10.3		Convertible Promissory Note Dated May 2, 2019 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 8, 2019)
10.4		Exchange Agreement Dated May 2, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 8, 2019)
10.5		Convertible Promissory Note Dated May 2, 2019 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 8, 2019)
10.6		Non-Convertible Promissory Note Dated May 14, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed May 17, 2019)
10.7		Non-Convertible Promissory Note Dated July 8, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed July 12, 2019)
31.1*		Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
*		Filed herewith

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ASCENT SOLAR TECHNOLOGIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 19th day of August, 2019 .

 

	ASCENT SOLAR TECHNOLOGIES, INC.
	By:	/ S / VICTOR LEE
		Lee Kong Hian (aka Victor Lee) President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory)

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