UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________ 
FORM 10-Q
______________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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)
Registrant’s telephone number including area code: 720-872-5000 
_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of exchange on which registered
Common
ASTI
OTC

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    o  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:



Large accelerated filer
 
o
  
Accelerated filer
 
o
Non-accelerated filer
 
x
  
Smaller reporting company
 
x
 
 
 
 
Emerging growth company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
As of December 2, 2019, there were 4,187,161,650 shares of our common stock issued and outstanding.





ASCENT SOLAR TECHNOLOGIES, INC.
Quarterly Report on Form 10-Q
Quarterly Period Ended September 30, 2019
Table of Contents
 
 
 
 
Item 1.
1
 
1
 
2
 
3
 
5
 
6
Item 2.
30
Item 3.
37
Item 4.
37
 
Item 1.
39
Item 1A.
39
Item 2.
39
Item 3.
39
Item 4.
39
Item 5.
39
Item 6.
39
40





FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” that involve risks and uncertainties. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future net sales or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information and, in particular, appear under headings including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” When used in this Quarterly Report, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “foresees,” “likely,” “may,” “should,” “goal,” “target,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this Quarterly Report.

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things, the matters discussed in this Quarterly Report in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Factors you should consider that could cause these differences are:
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."

There may be other factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent events or circumstances after the date made, or to reflect the occurrence of unanticipated events, except as required by law.

References to “we,” “us,” “our,” “Ascent,” “Ascent Solar” or the “Company” in this Quarterly Report mean Ascent Solar Technologies, Inc.




PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 
 
September 30,
2019
 
December 31,
2018
ASSETS (substantially pledged)
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
24,505

 
$
18,159

Trade receivables, net of allowance of $45,362 and $45,644, respectively
 
22,403

 
165,160

Inventories, net
 
684,390

 
660,791

Prepaid expenses and other current assets
 
164,325

 
138,369

Total current assets
 
895,623

 
982,479

Property, Plant and Equipment:
 
32,911,969

 
36,621,187

Less accumulated depreciation and amortization
 
(28,632,301
)
 
(32,207,829
)
 
 
4,279,668

 
4,413,358

Other Assets:
 
 
 
 
Patents, net of accumulated amortization of $408,612 and $363,533, respectively
 
826,711

 
862,429

Other non-current assets
 

 
34,061

 
 
826,711

 
896,490

Total Assets
 
$
6,002,002

 
$
6,292,327

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
 
Current Liabilities:
 
 
 
 
Accounts payable
 
$
1,457,378

 
$
2,318,655

Related party payables
 
460,000

 
270,740

Accrued expenses
 
1,510,558

 
1,562,435

Accrued interest
 
1,775,647

 
1,198,279

Notes payable
 
1,506,530

 
1,516,530

Current portion of long-term debt
 

 
349,093

Mortgage
 
5,917,315

 

Secured promissory notes, net of discount of $1,341,915 and $2,824,365, respectively
 
5,830,982

 
3,447,380

Promissory notes, net of discounts of $30,000 and $104,583, respectively
 
954,437

 
1,239,854

Convertible notes, net of discounts of $853,672 and $394,011, respectively
 
2,004,241

 
1,852,722

Embedded derivative liability
 
7,064,541

 
10,114,452

Total current liabilities
 
28,481,629

 
23,870,140

Long-term debt, net of current portion
 

 
5,028,969

Accrued Warranty Liability
 
24,861

 
29,114

Total Liabilities
 
28,506,490

 
28,928,223

Commitments and Contingencies
 

 

Stockholders’ Deficit:
 
 
 
 
Series A preferred stock, $.0001 par value; 750,000 shares authorized as of September 30, 2019 and December 31, 2018; 48,100 and 60,756 shares issued and outstanding as of September 30, 2019 and December 31, 2018 ($691,571 and $822,620 Liquidation Preference, respectively)
 
5

 
6

Common stock, $0.0001 par value, 20,000,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 2,856,539,850 and 63,537,885 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
 
285,654

 
6,354

Additional paid in capital
 
397,674,171

 
395,889,712

Accumulated deficit
 
(420,464,318
)
 
(418,531,968
)
Total stockholders’ deficit
 
(22,504,488
)
 
(22,635,896
)
Total Liabilities and Stockholders’ Deficit
 
$
6,002,002

 
$
6,292,327

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

1

ASCENT SOLAR TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
 
 
 
 
 
 
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
 
2019
 
2018
 
 
2019
 
2018
 
 
Revenues
 
$
338,373

 
$
32,001

 
 
$
628,124

 
$
512,473

 
 
Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues
 
74,271

 

 
 
282,825

 
503,609

 
 
Research, development and manufacturing operations
 
460,775

 
516,782

 
 
1,078,842

 
2,389,863

 
 
Selling, general and administrative
 
633,566

 
607,784

 
 
1,545,852

 
2,243,925

 
 
Depreciation and amortization
 
58,154

 
91,104

 
 
185,163

 
289,324

 
 
Total Costs and Expenses
 
1,226,766

 
1,215,670

 
 
3,092,682

 
5,426,721

 
 
Loss from Operations
 
(888,393
)
 
(1,183,669
)
 
 
(2,464,558
)
 
(4,914,248
)
 
 
Other Income/(Expense)
 
 
 
 
 
 
 
 
 
 
 
Other Income, net
 
6,000

 
13,144

 
 
842,500

 
13,144

 
 
Interest Expense
 
(1,907,895
)
 
(1,730,717
)
 
 
(6,740,340
)
 
(5,279,259
)
 
 
Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net
 
1,510,883

 
3,284,736

 
 
6,430,048

 
2,599,870

 
 
Total Other Income/(Expense)
 
(391,012
)
 
1,567,163

 
 
532,208

 
(2,666,245
)
 
 
Net Loss
 
$
(1,279,405
)
 
$
383,494

 
 
$
(1,932,350
)
 
$
(7,580,493
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss Per Share (Basic and Diluted)
 
$
(0.001
)
 
$
0.20

 
 
$
(0.003
)
 
$
(0.45
)
 
 
Weighted Average Common Shares Outstanding (Basic and Diluted)
 
1,457,404,260

 
22,739,044

 
 
705,196,069

 
16,827,420

 
 


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

2

ASCENT SOLAR TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(unaudited)

For the Three Months Ended September 30, 2019
 
 
Common Stock
 
Series A Preferred Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity (Deficit)
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance, June 30, 2019
 
696,089,337

 
$
69,609

 
48,100

 
$
5

 
$
397,258,622

 
$
(419,184,913
)
 
$
(21,856,677
)
Interest and Dividend Expense paid with Common Stock
 
89,313,372

 
8,932

 

 

 
7,393

 

 
16,325

Conversion of St.George Note into Common Shares
 
457,222,223

 
45,722

 

 

 
43,278

 

 
89,000

Conversion of BayBridge Note into Common Shares
 
605,769,231

 
60,577

 

 

 
25,423

 

 
86,000

Conversion of Bellridge Note into Common Shares
 
474,484,128

 
47,448

 

 

 
41,552

 

 
89,000

Conversion of Power Up Note into Common Shares
 
155,824,176

 
15,582

 

 

 
(982
)
 

 
14,600

Conversion of GS Capital Note into Common Shares
 
311,168,154

 
31,117

 

 

 
26,601

 

 
57,718

Stock issued for fees
 
66,669,229

 
6,667

 

 

 
1,098

 

 
7,765

Loss on Extinguishment of Liabilities
 

 

 

 

 
271,186

 

 
271,186

Net Loss
 

 

 

 

 

 
(1,279,405
)
 
(1,279,405
)
Balance at September 30, 2019
 
2,856,539,850

 
$
285,654

 
48,100

 
$
5

 
$
397,674,171

 
$
(420,464,318
)
 
$
(22,504,488
)


For the Three Months Ended September 30, 2018
 
 
Common Stock
 
Series A Preferred Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity (Deficit)
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance, June 30, 2018
 
18,994,561

 
$
1,900

 
60,756

 
$
6

 
$
393,838,518

 
$
(410,459,463
)
 
$
(16,619,039
)
Interest and Dividend Expense paid with Common Stock
 
310,656

 
31

 

 

 
30,398

 

 
30,429

Conversion of St.George Note into Common Shares
 
3,142,332

 
314

 

 

 
102,186

 

 
102,500

Conversion of BayBridge Note into Common Shares
 
1,426,025

 
143

 

 

 
51,857

 

 
52,000

Conversion of Bellridge Note into Common Shares
 
3,660,498

 
366

 

 

 
137,134

 

 
137,500

Conversion of Note Payable into Common Shares
 
2,004,169

 
200

 

 

 
356,542

 

 
356,742

Loss on Extinguishment of Liabilities
 

 

 

 

 
601,433

 

 
601,433

Stock based compensation
 

 

 

 

 
3,476

 

 
3,476

Adjustment for RSS
 

 

 

 

 
(2,625
)
 

 
(2,625
)
Net Income
 

 

 

 

 

 
383,494

 
383,494

Balance at September 30, 2018
 
29,538,241

 
$
2,954

 
60,756

 
$
6

 
$
395,118,919

 
$
(410,075,969
)
 
$
(14,954,090
)


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




3

ASCENT SOLAR TECHNOLOGIES, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(unaudited)
For the Nine Months Ended September 30, 2019
 
 
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
 
118,531,773

 
11,853

 

 

 
98,489

 

 
110,342

Conversion of St.George Note into Common Shares
 
602,361,830

 
60,236

 

 

 
194,834

 

 
255,070

Conversion of Global Ichiban Note into Common Shares
 
9,595,327

 
960

 

 

 
114,040

 

 
115,000

Conversion of BayBridge Note into Common Shares
 
790,692,046

 
79,069

 

 

 
185,931

 

 
265,000

Conversion of Bellridge Note into Common Shares
 
573,601,030

 
57,360

 

 

 
144,640

 

 
202,000

Conversion of Power Up Note into Common Shares
 
291,431,537

 
29,143

 

 

 
210,457

 

 
239,600

Conversion of GS Capital Note into Common Shares
 
327,651,670

 
32,765

 

 

 
39,953

 

 
72,718

Stock issued for fees
 
79,136,751

 
7,914

 

 

 
7,911

 

 
15,825

Conversion of Series A Preferred Stock into Common Stock
 
1

 

 
(12,656
)
 
(1
)
 
1

 

 

Loss on Extinguishment of Liabilities
 

 

 

 

 
767,453

 

 
767,453

Stock based compensation
 

 

 

 

 
20,750

 

 
20,750

Net Loss
 

 

 

 

 

 
(1,932,350
)
 
(1,932,350
)
Balance at September 30, 2019
 
2,856,539,850

 
$
285,654

 
48,100

 
$
5

 
$
397,674,171

 
$
(420,464,318
)
 
$
(22,504,488
)

For the Nine Months Ended September 30, 2018
 
 
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
 
427,721

 
43

 

 

 
57,193

 

 
57,236

Conversion of St.George Note into Common Shares
 
5,412,610

 
541

 

 

 
493,559

 

 
494,100

Conversion of Global Ichiban Note into Common Shares
 
3,486,274

 
349

 

 

 
1,425,651

 

 
1,426,000

Conversion of BayBridge Note into Common Shares
 
4,237,792

 
424

 

 

 
564,576

 

 
565,000

Conversion of Bellridge Note into Common Shares
 
3,660,498

 
366

 

 

 
137,134

 

 
137,500

Conversion of Note Payable into Common Shares
 
2,004,169

 
200

 

 

 
356,542

 

 
356,742

Conversion of Series K Preferred Stock into Common Shares
 
702,500

 
70

 

 

 
2,809,930

 

 
2,810,000

Loss on Extinguishment of Liabilities
 

 

 

 

 
1,959,963

 

 
1,959,963

Stock based compensation
 

 

 

 

 
24,822

 

 
24,822

Adjustment for RSS
 

 

 

 

 
(2,625
)
 

 
(2,625
)
Net Loss
 

 

 

 

 

 
(7,580,493
)
 
(7,580,493
)
Balance at September 30, 2018
 
29,538,241

 
$
2,954

 
60,756

 
$
6

 
$
395,118,919

 
$
(410,075,969
)
 
$
(14,954,090
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

ASCENT SOLAR TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 
For the Nine Months Ended
 
 
 
September 30,
 
 
 
2019
 
2018
 
Operating Activities:
 
 
 
 
 
Net Income (loss)
 
$
(1,932,350
)
 
$
(7,580,493
)
 
Adjustments to reconcile net (loss) to net cash used in operating activities:
 
 
 
 
 
Depreciation and amortization
 
185,163

 
289,324

 
Stock based compensation
 
20,750

 
24,822

 
Realized loss (gain) on sale of assets
 
(842,500
)
 
(14,000
)
 
Amortization of financing costs
 
24,639

 
21,750

 
Non-cash interest expense
 
2,023,031

 
935,190

 
Amortization of debt discount
 
3,675,795

 
3,690,823

 
Bad debt expense
 
(302
)
 
(8,868
)
 
Write off Enerplex Patents
 

 
59,153

 
Warranty reserve
 
(4,253
)
 
(9,702
)
 
Change in fair value of derivatives and loss on extinguishment of liabilities, net
 
(6,430,048
)
 
(2,599,870
)
 
Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
 
143,059

 
(16,340
)
 
Inventories
 
(23,599
)
 
68,759

 
Prepaid expenses and other current assets
 
1,766

 
247,919

 
Accounts payable
 
(494,883
)
 
965,175

 
Related party payable
 
189,260

 
(2,827
)
 
Accrued interest
 
951,184

 
398,098

 
Accrued expenses
 
(51,880
)
 
487,690

 
Net cash used in operating activities
 
(2,565,168
)
 
(3,043,397
)
 
Investing Activities:
 
 
 
 
 
Purchase of property, plant and equipment
 
(6,393
)
 

 
Proceeds from sale of assets
 
842,500

 
14,000

 
Patent activity costs
 
(9,361
)
 
(9,705
)
 
Net cash used in investing activities
 
826,746

 
4,295

 
Financing Activities:
 
 
 
 
 
Proceeds from debt
 
1,762,268

 
3,102,500

 
Repayment of debt
 
(10,000
)
 
(89,686
)
 
Payment of debt financing costs
 
(7,500
)
 
(5,500
)
 
Net cash provided by financing activities
 
1,744,768

 
3,007,314

 
Net change in cash and cash equivalents
 
6,346

 
(31,788
)
 
Cash and cash equivalents at beginning of period
 
18,159

 
89,618

 
Cash and cash equivalents at end of period
 
$
24,505

 
$
57,830

 
 
 
 
 
 
 
Supplemental Cash Flow Information:
 
 
 
 
 
Cash paid for interest
 
$
28,484

 
$
308,542

 
Cash paid for income taxes
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Cash Transactions:
 
 
 
 
 
Non-cash conversions of preferred stock and convertible notes to equity
 
$
1,259,741

 
$
5,843,954

 
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
 
$
15,825

 
$

 
Initial embedded derivative liabilities
 
$
3,781,186

 
$
2,736,724

 
Promissory notes exchanged for convertible notes
 
$
850,000

 
$
511,871

 

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

5

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 September 30, 2019 and December 31, 2018, and the results of operations for the three and nine months ended September 30, 2019 and 2018. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.
The accompanying, unaudited, condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and footnotes typically found in U.S. GAAP audited annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. The Condensed Consolidated Balance Sheet at December 31, 2018 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. These condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. There have been no significant changes to our accounting policies as of September 30, 2019.

Recently Adopted or to be Adopted Accounting Policies
    
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company has evaluated the adoption of this guidance and has determined there is no material impact on its consolidated financial statements because the Company does not have any leases at the date of the adoption.
    
In July 2017, the FASB issued ASU No. 2017-11 Part I, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). ASU 2017-11 Part I changes the classification analysis of certain equity linked financial instruments with down round features. ASU 2017-11 Part I is effective, for public business entities, for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The adoption of this guidance did not have a material impact on its consolidated financial statements because the Company did not have equity linked financial instruments where down round features were the only feature causing them to be classified as liabilities.


6

ASCENT SOLAR TECHNOLOGIES, INC.


In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with specified exceptions. This standard is effective for the Company in the first quarter of 2020, and early adoption is permitted. The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. This standard is effective for the Company in the first quarter of 2020, and early adoption is permitted. The Company is currently evaluating the impact of the effect adoption of this standard will have on its consolidated financial statements.

Other new pronouncements issued but not effective as of September 30, 2019 are not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 4. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN    

During the nine months ended September 30, 2019 and the year ended December 31, 2018, the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 9 through 11, and Note 15 of the financial statements presented as of, and for, the nine months ended, September 30, 2019, and in Notes 8, 9, 10, 11, 12, and 14 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the nine months ended September 30, 2019 the Company used $2,565,168 in cash for operations.

The Company's primary significant long term cash obligation consists of a note payable of $5,917,315, inclusive of interest, to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. The note is currently in default and the entire outstanding balance is classified as a current liability.

The Company is currently marketing it's Thornton, Colorado property to prospective buyers.

Additional projected product revenues are not anticipated to result in a positive cash flow position for the next twelve months overall and, as of September 30, 2019, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.

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

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

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










7


NOTE 5. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes property, plant and equipment as of September 30, 2019 and December 31, 2018:
 
 
 
As of September  30,
 
As of December 31,
 
 
2019
 
2018
Building
 
$
5,828,960

 
$
5,828,960

Furniture, fixtures, computer hardware and computer software
 
489,421

 
489,421

Manufacturing machinery and equipment
 
26,593,588

 
30,302,806

Depreciable property, plant and equipment
 
32,911,969

 
36,621,187

Less: Accumulated depreciation and amortization
 
(28,632,301
)
 
(32,207,829
)
Net property, plant and equipment
 
$
4,279,668

 
$
4,413,358


The Company analyzes its long-lived assets for impairment, both individually and as a group, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

During the nine months ended September 30, 2019, the Company disposed of certain redundant machinery and equipment. This machinery and equipment was fully depreciated and the Company realized a gain of $842,500 from these sales.

Depreciation expense for the three months ended September 30, 2019 and 2018 was $45,585 and $52,319, respectively. Depreciation expense for the nine months ended September 30, 2019 and 2018 was $140,083 and $169,621, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the unaudited Condensed Consolidated Statements of Operations.

NOTE 6. INVENTORIES
Inventories, net of reserves, consisted of the following at September 30, 2019 and December 31, 2018:
 
 
 
As of September 30,
 
As of December 31,
 
 
2019
 
2018
Raw materials
 
$
684,390

 
$
660,791

Work in process
 

 

Finished goods
 

 

Total
 
$
684,390

 
$
660,791


NOTE 7. NOTES PAYABLE

On February 24, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matured on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. On June 5, 2018, the Company entered into another agreement with the same vendor to convert the balance of their account into a fourth note payable with a principal amount of $308,041, this note also bears interest at a rate of 6% per annum, and matured on July 31, 2018. As of September 30, 2019, the Company had not made any payments on these notes; the total outstanding principal and accrued interest were $1,073,825 and $147,336, respectively, and the note is due upon demand.

On June 30, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matured on February 28, 2018. As of September 30, 2019, the Company had not made any payments on this note, the accrued interest was $28,151, and the note is due upon demand.

On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matured on September 30, 2018. The Company has not made the monthly payments of $18,426 that were to commence on October 30, 2017; as of September 30, 2019, the company had paid principal of $32,529 and interest of $897, and the note is due upon demand. The remaining principal and interest balances, as of September 30, 2019, were $182,705 and $19,376, respectively.



8

ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 8. DEBT

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

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

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

On August 2, 2019, CHFA entered into an agreement to assign the note to Iliad Research and Trading, L.P., a Utah limited liability partnership ("IRT"). This agreement closed on September 11, 2019, and IRT paid a total of $5,885,148 to CHFA to assume the note. The payment amount consisted of $5,405,666 principal and $479,482 interest and fees. Interest will accrue on the note at the default interest rate of 10.5%.

The outstanding principal balance of the note was $5,885,148 and $5,378,062 as of September 30, 2019 and December 31, 2018, respectively.

As of September 30, 2019, the Company had not made any payments to IRT and the accrued interest on the note was $32,167. Since the loan is in default, the entire outstanding balance is classified as a current liability on the Company's September 30, 2019 Balance Sheet.

The Company is currently marketing it's Thornton, Colorado property to prospective buyers.


















9

ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 9. SECURED PROMISSORY NOTE

The following table provides a summary of the activity of the Company's secured notes:
 
 
Global Ichiban
 
St. George
 
Total
Secured Notes Principal Balance at December 31, 2017
 
$
4,557,227

 
$

 
$
4,557,227

New notes
 
1,935,000

 
1,315,000

 
3,250,000

Note conversions
 
(1,426,000
)
 

 
(1,426,000
)
Interest converted to principal
 
140,518

 

 
140,518

Note assignments
 
(250,000
)
 

 
(250,000
)
Secured Notes Principal Balance at December 31, 2018
 
4,956,745

 
1,315,000

 
6,271,745

Less: remaining discount
 
(2,012,698
)
 
(811,667
)
 
(2,824,365
)
Secured Notes, net of discount, at December 31, 2018
 
2,944,047

 
503,333

 
3,447,380

New notes
 

 
845,000

 
845,000

Note conversions
 
(115,000
)
 

 
(115,000
)
Interest converted to principal
 
171,152

 

 
171,152

Secured Notes Principal Balance at September 30, 2019
 
5,012,897

 
2,160,000

 
7,172,897

Less: remaining discount
 
(995,249
)
 
(346,666
)
 
(1,341,915
)
Secured Notes, net of discount, at September 30, 2019
 
$
4,017,648

 
$
1,813,334

 
$
5,830,982



Global Ichiban Secured Promissory Notes

On November 30, 2017, the Company, entered into a note purchase and exchange agreement with Global Ichiban Ltd. ("Global"), for the private placement of up to $2,000,000 of the Company’s secured convertible promissory notes in exchange for $2,000,000 of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least $50,000 for the 20 trading day period preceding such future tranche closing dates.

Pursuant to the terms of the note purchase and exchange agreement, the Company and Global also agreed to exchange certain outstanding securities held by the Global for additional notes. As of November 30, 2017, Global surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ($3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ($252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to Global $4,057,227 aggregate principal amount of additional Notes. During the remainder of 2017, the Company issued to Global $500,000 aggregate principal amount in additional Notes.

Of the notes issued in 2017, $3,359,539 principal amount will mature on December 15, 2020. The remaining principal matured on November 30, 2017 and December 31, 2018. Principal and interest was originally to be payable in 36 equal monthly installments of $111,585 beginning January 15, 2018. The remaining principal of $1,197,688 matured on November 30, 2017 and December 31, 2018.

During 2018, the company issued to Global $1,935,000 aggregate principal amount in additional notes, in exchange for additional proceeds of $1,870,000. The aggregate original issue discounts of $65,000 will be allocated to interest expense, ratably, over the life of the note. These notes were issued with maturity dates between January 11, 2019 and October 22, 2019.

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

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

10

ASCENT SOLAR TECHNOLOGIES, INC.


On October 22, 2018, Global sold one of its notes to another investor. As a result of this sale, $250,000 in principal and $26,466 of accrued interest were assigned to the new investor and is no longer considered secured debt. Please refer to Note 11 for further discussion of the assignment. This note is redeemable in stock, at the discretion of the Company, under the same conversion terms described above.

The following table summarizes the conversion activity of these notes:
Conversion Period
Principal Converted
Common Shares Issued
Q1 2018
$
1,250,000

2,450,981

Q2 2018
$
176,000

1,035,295

Q1 2019
$
115,000

9,595,327

 
$
1,541,000

13,081,603


Since conversions began in the first quarter of 2018, the interest associated with conversions has been added back into the principal of the notes. The following table summarizes the activity of adding the interest to principal:
Period
Interest converted to Principal
Q1 2018
$
96,281

Q2 2018
$
44,237

Q1 2019
$
171,152

 
$
311,670


All the notes issued in accordance with the note purchase and exchange agreement dated November 30, 2017 are secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the notes.

Payments on these notes have not occurred in accordance with the agreement and, as of the date of this filing, these notes are due upon demand. As of September 30, 2019, the aggregate principal and interest balance of the Notes were $5,012,897 and $733,852, respectively.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.

The following table summarizes the derivative liability transactions for these notes:
Derivative Liability Balance as of December 31, 2018
$
3,533,861

Change in fair value of derivative liability
(422,392
)
Derivative Liability Balance as of September 30, 2019
$
3,111,469


The aggregate derivative value of the notes was $3,533,861 as of December 31, 2018. This value is based was derived from Management's fair value assessment using the the following assumptions: annual volatility range between of 56% to 65%, present value discount rate of 12%, and a dividend yield of 0%.







11

ASCENT SOLAR TECHNOLOGIES, INC.


The derivative liability associated with the notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 42% to 72%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net loss of $446,746 for three months ended September 30, 2019, and an aggregate net gain of $422,392 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $3,111,469 as of September 30, 2019.


St. George Secured Convertible Notes

On May 8, 2018, the Company, entered into a note purchase agreement with St. George Investments LLC ("St. George"), for the private placement of a $575,000 secured convertible promissory note. The Company received $500,000 in aggregate proceeds for the note in two tranches and recorded and original issue discount of $50,000 and debt financing costs of $25,000. The original issue discount and the financing costs will be recognized as interest expense, ratably, over the life of the note.

On November 5, 2018, the Company entered into a second securities purchase agreement with St. George, for the private placement of a $1,220,000 secured convertible promissory note ("Company Note"). On November 7, 2018, the Company received $200,000 of gross proceeds from the offering of the Company Note. In addition, the Company received additional consideration for the Company Note in the form of eight separate promissory notes of St. George (the “Investor Notes”) having an aggregate principal amount of $800,000. The Company may receive additional cash proceeds of up to an aggregate of $800,000 through cash payments made from time to time by St George of principal and interest under the eight Investor Notes. The aggregate principal amount of the Company Note is divided into nine tranches, which tranches correspond to (i) the cash funding received on November 5, 2018 and (ii) the principal amounts of the eight Investor Notes. As of September 30, 2019, the Company had received an additional $400,000 in proceeds and had recorded $1,220,000 in principal related to the Company and Investor Notes. The Company recorded original issue discounts of $200,000 and debt financing costs of $20,000, which will be recognized as interest expense, ratably, over the life of the note. As of September 30, 2019, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:
Closing Date
Closing Amount
Proceeds
11/7/2018
$
260,000

$
200,000

11/19/2018
$
120,000

$
100,000

11/30/2018
$
120,000

$
100,000

12/7/2018
$
120,000

$
100,000

12/17/2018
$
120,000

$
100,000

1/3/2019
$
120,000

$
100,000

1/17/2019
$
120,000

$
100,000

1/30/2019
$
120,000

$
100,000

2/8/2019
$
120,000

$
100,000


On March 13, 2019, the Company entered into a third securities purchase agreement with St. George, for the private placement of a $365,000 secured convertible promissory note ("Third Note"). The Company recorded original issue discounts of $60,000 and debt financing costs of $5,000, which will be recognized as interest expense, ratably, over the life of the note. As of September 30, 2019, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:
Closing Date
Closing Amount
Proceeds
3/15/2019
$
125,000

$
100,000

3/22/2019
$
120,000

$
100,000

4/4/2019
$
120,000

$
100,000


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

12

ASCENT SOLAR TECHNOLOGIES, INC.


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

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

As of September 30, 2019, no principal or interest had been paid or converted, and the aggregate principal and interest balance of the Notes were $2,040,000 and $197,551, respectively.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.

The following table summarizes the derivative liability transactions for these notes:
Derivative Liability Balance as of December 31, 2018
$
3,292,692

Additional derivative liability on new notes
1,752,197

Change in fair value of derivative liability
(2,897,211
)
Derivative Liability Balance as of September 30, 2019
$
2,147,678


The aggregate derivative value of the notes was $3,292,692 as of December 31, 2018. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility range between of 56% to 71%, present value discount rate of 12%, and a dividend yield of 0%.

The derivative liability associated with the notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 35% to 82%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $790,750 for three months ended September 30, 2019, and an aggregate net gain of $2,897,211 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $2,147,678 as of September 30, 2019.




















13

ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 10. PROMISSORY NOTES

The following table provides a summary of the activity of the Company's non-convertible, unsecured, promissory notes:
 
Investor 1
Investor 2
Total
Promissory Notes Principal Balance at December 31, 2017
$
494,437

$
200,000

$
694,437

New principal

850,000

850,000

Notes exchanged

(200,000
)
(200,000
)
Promissory Notes Principal Balance at December 31, 2018
494,437

850,000

1,344,437

Less: remaining discount

(104,583
)
(104,583
)
Promissory Notes, net of discount, at December 31, 2018
$
494,437

$
745,417

$
1,239,854

New principal

530,000

530,000

Notes exchanged

(850,000
)
(850,000
)
Promissory Notes Principal Balance at September 30, 2019
494,437

530,000

1,024,437

Less: remaining discount

(70,000
)
(70,000
)
Promissory Notes, net of discount, at September 30, 2019
$
494,437

$
460,000

$
954,437


Offering of Unsecured, Non-Convertible Notes to Investor 1

During October 2016, the Company received $420,000 from a private investor "Investor 1". These funds, along with $250,000 of additional funding, were rolled into a promissory note, executed on January 17, 2017, in the amount of $700,000 issued with a discount of $30,000 which was charged to interest expense ratably over the term of the note. The note bears interest at 12% per annum and matures on July 17, 2017. Principal and interest on this note were payable at maturity. This note is not convertible into equity shares of the Company and is unsecured.

On June 30, 2017, the Company and Investor 1 agreed to a 12 month payment plan on the balance of this promissory note. Interest will continue to accrue on this note at 12% per annum and payments of approximately $62,000 will be made monthly beginning in July 2017. The Company has not made the payments according to this payment plan, and the note is payable upon demand.

As of September 30, 2019, $205,563 of principal and $45,414 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of September 30, 2019 were $494,437 and $130,836, respectively.


Offering of Unsecured, Non-Convertible Notes to Investor 2

On June 6, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $315,000. The promissory note was issued with an original issue discount of $55,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $260,000, that was received in several tranches between February 2018 and April 2018. This note bears interest at 12% per annum and matured on June 6, 2019. On May 2, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $315,000 and an accrued interest balance of $39,890. See Note 11 for further discussion on the new convertible notes.

On July 24, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $115,000. The promissory note was issued with an original issue discount of $27,500, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $87,500, which was received in several tranches between May 2018 and June 2018. This note bears interest at 12% per annum and matured on January 24, 2019. On March 11, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $115,000 and an accrued interest balance of $10,607. See Note 11 for further discussion on the new convertible notes.




14

ASCENT SOLAR TECHNOLOGIES, INC.


On September 10, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $120,000. The promissory note was issued with an original issue discount of $20,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $100,000, which was received in several tranches between June 2018 and September 2018. This note bears interest at 12% per annum and matured on March 10, 2019. March 11, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $120,000 and an accrued interest balance of $7,829. See Note 11 for further discussion on the new convertible notes.

On December 31, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $300,000. The promissory note was issued with an original issue discount of $75,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $225,000, which was received in several tranches between September 2018 and December 2018. This note bears interest at 12% per annum and matured on June 30, 2019. On August 22, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $300,000 and an accrued interest balance of $28,353. See Note 11 for further discussion on the new convertible notes

On March 11, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $60,000. The promissory note was issued with an original issue discount of $10,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $50,000, which was received in several tranches between January 2019 and March 2019. This note bears interest at 12% per annum and matured on September 11, 2019. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $60,000 and $4,507, respectively.

On May 14, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $100,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $75,000, which was received in several tranches between March 2019 and May 2019. This note bears interest at 12% per annum and matures on October 11, 2019. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $100,000 and $5,109, respectively.

On July 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $125,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $100,000. This note bears interest at 12% per annum and matures on January 8, 2020. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $125,000 and $3,500, respectively.

On August 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $65,000. The promissory note was issued with an original issue discount of $20,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $45,000. This note bears interest at 12% per annum and matures on February 8, 2020. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $65,000 and $1,148, respectively.

On September 9, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $150,000. The promissory note was issued with an original issue discount of $40,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $110,000, which was received in several tranches during September 2019. This note bears interest at 12% per annum and matures on March 9, 2020. All principal and interest is payable upon maturity. As of September 30, 2019, the remaining principal and interest on on this note were $150,000 and $1,393, respectively.

Between August 22, 2019 and September 27, 2019, the Company received $30,000 proceeds from Investor 2, which had not yet been documented into a note. The Company is accruing interest on these funds at a rate of 12% per annum and has accrued $50 as of September 30, 2019.

As of September 30, 2019, the aggregate outstanding principal and interest for Investor 2 was $530,000 and $14,314, respectively.





15

ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 11. CONVERTIBLE NOTES

The following table provides a summary of the activity of the Company's unsecured, convertible, promissory notes:
 
Principal Balance 12/31/2017
New Notes
Notes assigned or exchanged
Notes converted
Principal Balance 12/31/2018
Less: Discount Balance
Net Principal Balance 12/31/18
October 2016 Notes
$
330,000

$

$

$

$
330,000

$

$
330,000

St. George Notes
1,705,833



(606,600
)
1,099,233

(96,177
)
1,003,056

BayBridge Notes


270,000

(207,500
)
62,500

(62,100
)
400

Bellridge Notes

150,000

550,000

(245,000
)
455,000

(123,360
)
331,640

Power Up Notes

225,000



225,000

(110,621
)
114,379

EMA Note

75,000



75,000

(1,753
)
73,247

 
$
2,035,833

$
450,000

$
820,000

$
(1,059,100
)
$
2,246,733

$
(394,011
)
$
1,852,722


 
Principal Balance 12/31/2018
New Notes/Adjustments
Notes assigned or exchanged
Notes converted
Principal Balance 9/30/2019
Less: Discount Balance
Net Principal Balance 9/30/2019
October 2016 Notes
$
330,000

$

$

$

$
330,000

$

$
330,000

St. George Notes
1,099,233

(172,500
)

(255,070
)
671,663


671,663

BayBridge Notes
62,500


1,160,000

(265,000
)
957,500

(658,333
)
299,167

Bellridge Notes
455,000



(202,000
)
253,000


253,000

Power Up Notes
225,000

149,500


(239,600
)
134,900

(61,263
)
73,637

EMA Note
75,000


(75,000
)




Widjaja Note

330,000



330,000

(54,909
)
275,091

GS Capital Notes

178,568

75,000

(72,718
)
180,850

(79,167
)
101,683

 
$
2,246,733

$
485,568

$
1,160,000

$
(1,034,388
)
$
2,857,913

$
(853,672
)
$
2,004,241



October 2016 Convertible Notes

On October 5, 2016, the Company entered into a securities purchase agreement with a private investor for the private placement of $330,000 principal amount of convertible notes. At Closing, the Company sold and issued $330,000 principal amount of convertible notes in exchange for $330,000 of gross proceeds.

The convertible notes matured on December 31, 2017 and bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default. Principal and accrued interest on the convertible notes is payable upon demand, the default interest rate has not been designated by the investor.





16

ASCENT SOLAR TECHNOLOGIES, INC.


All principal and accrued interest on the convertible notes is convertible at any time, in whole or in part, at the option of the investor, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the fifteen consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any convertible note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen consecutive trading day period prior to the conversion date.

The convertible notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the convertible notes; and (ii) bankruptcy or insolvency of the Company.

Outstanding principal and accrued interest on the convertible notes were $330,000 and $59,950, respectively as of September 30, 2019.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.

The following table summarizes the derivative liability transactions for this note:
Derivative Liability Balance as of December 31, 2018
$
876,481

Additional derivative liability on new notes

Change in fair value of derivative liability
(423,744
)
Derivative Liability Balance as of September 30, 2019
$
452,737


As of December 31, 2018, the fair value of the derivative liability was $876,481. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility of 63%, present value discount rate of 12%, and a dividend yield of 0%.

The derivative liability associated with the note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 44% to 72%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net loss of $20,605 for three months ended September 30, 2019, and an aggregate net loss of $423,744 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $452,737 as of September 30, 2019.


St. George Convertible Note

On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments, LLC ("St. George") for the private placement of $1,725,000 principal amount of the Company’s original issue discount convertible notes.
On September 11, 2017, the Company sold and issued a $1,725,000 principal convertible note to St. George in exchange for $1,500,000 of gross proceeds, and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing costs, will be charged to interest expense, ratably, over the life of the note.

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

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

17

ASCENT SOLAR TECHNOLOGIES, INC.


Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible note, cash redemption payments by the Company will be subject to a 15% redemption premium. The Company recorded an estimated cash premium of $172,500, at inception, which has been charged to interest, ratably, over the life of the note. During the three months ended September 30 ,2019, the Company reversed the estimated cash payment premium of $172,500, due to the possibility of payment in cash being extremely unlikely.

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

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

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

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

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

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

As of September 30, 2019, cash payments of $191,667 had been made on the convertible note, and $861,670 had been converted into 531,575,123 shares of the Company's common stock. The remaining balance on the note was $671,663 as of September 30, 2019.

The following table summarizes the conversion activity of this note:
Conversion Period
Principal Converted
Common Shares Issued
Q1 2018
$
75,000

187,500

Q2 2018
316,600

2,082,778

Q3 2018
102,500

3,142,333

Q4 2018
112,500

10,437,046

Q1 2019
106,750

58,503,244

Q2 2019
59,320

86,636,364

Q3 2019
89,000

457,222,222

 
$
861,670

618,211,487


Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.

18

ASCENT SOLAR TECHNOLOGIES, INC.



The following table summarizes the derivative liability transactions for this note:
Derivative Liability Balance as of December 31, 2018
$
1,060,000

Change in fair value of derivative liability
(975,258
)
Derivative Liability Balance as of September 30, 2019
$
84,742


As of December 31, 2018, the derivative liability was $1,060,000. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility of 52%, present value discount rate of 12%, and a dividend yield of 0%.

The derivative liability associated with the note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 44% to 52%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $405,034 for three months ended September 30, 2019, and an aggregate net gain of $975,258for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $84,742 as of September 30, 2019.


BayBridge Convertible Note

On September 7, 2018, the Company, entered into an securities exchange agreement (“Exchange Agreement 2”) BayBridge Capital Fund LP ("BayBridge).

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

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

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

As of September 30, 2019, Exchange Note 2 had been converted in full.

On March 11, 2019, as described in Note 10, the Company, entered into two additional securities exchange agreements (“Exchange Agreements 3 & 4”) with Baybridge.

Pursuant to the terms of Exchange Agreement 3, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of $115,000, plus accrued interest of $10,607, for a convertible note with an aggregate principal amount of $150,000 and an original issue discount of $24,393 (“Exchange Note 3”).

Pursuant to the terms of Exchange Agreement 4, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of $120,000, plus accrued interest of $7,829, for a convertible note with an aggregate principal amount of $160,000 and an original issue discount of $32,171 (“Exchange Note 4”).

On May 2, 2019, as described in Note 10, the Company, entered into an additional securities exchange agreements (“Exchange Agreement 5”) with Baybridge.

Pursuant to the terms of Exchange Agreement 5, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of $315,000, plus accrued interest of $37,872, for a convertible note with an aggregate principal amount of $450,000 and an original issue discount of $97,128 (“Exchange Note 5”).


19

ASCENT SOLAR TECHNOLOGIES, INC.


On August 22, 2019, as described in Note 10, the Company, entered into an additional securities exchange agreements (“Exchange Agreement 6”) with Baybridge.

Pursuant to the terms of Exchange Agreement 6, BayBridge agreed to surrender and exchange an outstanding promissory notes with a principal balance of $300,000, plus accrued interest of $23,400, for a convertible note with an aggregate principal amount of $400,000 and an original issue discount of $76,600 (“Exchange Note 6”).

The Exchange Notes are unsecured, have no applicable registration rights, bear interest at a rate of 12% per annum, mature twelve months from the date of issuance, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.

BayBridge shall have the right, from the date of issuance of the Exchange Notes, and then at any time until the Exchange Notes are fully paid, to convert any outstanding and unpaid principal and interest into shares of common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.0005, or (ii) 65% of the lowest traded price for the shares over the prior five trading days.

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

As of September 30, 2019, aggregate principal of $472,500 and interest of $11,921 had been converted into 821,478,573 shares of common stock and no cash payments of principal or interest had been made on these exchange notes. Exchange Note 2 had been converted in full. The principal and accrued interest balances on Exchange Notes 3 through 6, as of September 30, 2019, were $957,500 and $40,062, respectively.

The following table summarizes the conversion activity of these notes:
Conversion Period
Principal Converted
Interest Converted
Common Shares Issued
Q4 2018
$
207,500

$
4,303

16,008,198

Q1 2019
90,500

3,278

47,400,806

Q2 2019
88,500

2,079

141,822,223

Q3 2019
86,000

2,261

616,247,346

 
$
472,500

$
11,921

821,478,573


Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below.

The following table summarizes the derivative liability transactions for these notes:
Derivative Liability Balance as of December 31, 2018
$
113,846

Additional derivative liability on new notes
1,376,670

Change in fair value of derivative liability
(423,893
)
Liability extinguished
(152,301
)
Derivative Liability Balance as of September 30, 2019
$
914,322






20

ASCENT SOLAR TECHNOLOGIES, INC.


At December 31, 2018, the derivative liability associated with Exchange Note 2 was $113,846. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility of 74%, present value discount rate of 12%, and a dividend yield of 0%. During the first quarter of 2019, Exchange Note 2 was converted in full and the derivative liability balance of $113,846 was written off as a gain as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations.

The conversion options in Exchange Notes 3 & 4 were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 67%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At March 11, 2019, the derivative liability associated with Exchange Notes 3 & 4 was $310,640. The fair value of the derivative was greater than the face value at issuance and the difference of $57,204 was charged to interest expense at issuance. The remaining debt discount of $253,436 will be charged to interest expense ratably over the life of the note.

The conversion option in Exchange Note 5 was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 68% present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At May 2, 2019, the derivative liability associated with Exchange Note 5 was