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 and our audited financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 which was filed with the SEC on March 10, 2023. 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. You should carefully read the “Risk Factors” section of this Quarterly Report and of our Annual Report on Form 10-K for the year ended December 31, 2022 to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Forward-Looking Statements.”
Overview
We target high-volume production and high-value specialty solar markets. These include agrivoltaics, space, aerospace and high-value niche manufacturing/construction sectors. This strategy enables us to fully leverage what we believe are the unique advantages of our technology, including flexibility, durability and attractive power to weight and power to area performance. It further enables us to offer unique, differentiated solutions in large markets with less competition, and more attractive pricing.
Specifically, we focus on commercializing our proprietary solar technology in two high-value PV verticals:
I. Aerospace: Space, Near-space and Fixed Wing UAV
II. Agrivoltaics
We believe the value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these verticals, 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 airships and fixed-wing UAVs. Ascent sees significant overlap in the needs of end users across some of these verticals and believes it can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.
The integration of Ascent's solar modules into space, near space, and aeronautic vehicles with ultra-lightweight and flexible solar modules is an important market opportunity for the Company. Customers in this market have historically required a high level of durability, high voltage and conversion efficiency from solar module suppliers, and we believe our products are well suited to compete in this premium market.
For the three months ended March 31, 2023, we generated $124,225 of total revenue. As of March 31, 2023, we had an accumulated deficit of $453,511,214.
Due to the high durability enabled by the monolithic integration employed by our technology, the capability to customize modules into different form factors and what we believe is the industry leading light weight and flexibility provided by our modules, we believe that the potential applications for our products are extensive, including integrated solutions anywhere that may need power generation such as vehicles in space or in flight, or dual-use installations on agricultural land.
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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 back-end assembly cost 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.
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.
In March, 2023, the Company redeployed its Thornton manufacturing facility to focus on industrial commercialization of the Company's patent-pending Perovskite solar technologies and has purchased manufacturing assets in Zurich, Switzerland where the Company plans to begin production of its PV modules.
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:
•The impact of the novel coronavirus (“COVID-19”) pandemic on our business, results of operations, cash flows, financial condition and liquidity;
•Our 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;
•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 Nasdaq Capital Market;
•The commencement, or outcome, of legal proceedings against us, or by us, including ongoing litigation 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 photovoltaic modules and processes;
•Our ability to maintain effective internal controls over financial reporting;
•Our ability to achieve projected operational performance and cost metrics; and
•General economic and business conditions, and in particular, conditions specific to the solar power industry.
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Basis of Presentation: The accompanying unaudited condensed financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc. as of March 31, 2023 and December 31, 2022, and the results of operations for the three months ended March 31, 2023 and 2022.
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, 2022. Except for the adoption of ASU 2020-06, there have been no significant changes to our accounting policies as of March 31, 2023.
Results of Operations
Comparison of the Three Months Ended March 31, 2023 and 2022
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Three Months Ended March 31, |
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2023 |
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2022 |
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$ Change |
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Revenues |
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Products |
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$ |
99,225 |
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$ |
54,210 |
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$ |
45,015 |
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Milestone and engineering |
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25,000 |
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512,000 |
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(487,000 |
) |
Total Revenues |
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124,225 |
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566,210 |
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(441,985 |
) |
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Costs and Expenses |
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Cost of Revenue |
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461,795 |
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532,890 |
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(71,095 |
) |
Research, development and manufacturing operations |
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1,665,694 |
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1,406,322 |
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259,372 |
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Selling, general and administrative |
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1,591,821 |
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821,266 |
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770,555 |
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Share-based compensation |
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1,404,450 |
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- |
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1,404,450 |
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Depreciation and amortization |
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25,781 |
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16,665 |
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9,116 |
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Total Costs and Expenses |
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5,149,541 |
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2,777,143 |
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2,372,398 |
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Loss From Operations |
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(5,025,316 |
) |
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(2,210,933 |
) |
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(2,814,383 |
) |
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Other Income/(Expense) |
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Other income/(expense), net |
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10,000 |
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- |
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10,000 |
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Interest Expense |
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(1,068,036 |
) |
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(2,086,314 |
) |
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1,018,278 |
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Total Other Income/(Expense) |
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(1,058,036 |
) |
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(2,086,314 |
) |
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1,028,278 |
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Income/(Loss) on Equity Method Investments |
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- |
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(2 |
) |
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2 |
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Net (Loss)/Income |
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$ |
(6,083,352 |
) |
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$ |
(4,297,249 |
) |
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$ |
(1,786,103 |
) |
Comparison of the Three Months Ended March 31, 2023 and 2022
Total Revenues. Our total revenues decreased by $441,985, or 78%, for the three months ended March 31, 2023 when compared to the same period in 2022. The decrease was primarily due to milestone and engineering revenue in 2022 from TubeSolar, a related party, of $512,000 that was not repeated in 2023.
Cost of revenue. Cost of revenues is primarily comprised of repair and maintenance, material costs, and direct labor and overhead expenses. Our Cost of revenues decreased by $71,095, or 13%, for the three months ended March 31, 2023 when compared to the same period in 2022. This is due primarily to the Company redeploying its Thornton manufacturing facility to focus on industrial commercialization of the Company's patent-pending Perovskite solar technologies resulting in lower cost of revenue.
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Research, development and manufacturing operations. 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. Research, development and manufacturing operations costs increased by $259,372, or 18%, for the three months ended March 31, 2023 when compared to the same period in 2022. This is due primarily to the Company redeploying the Thornton manufacturing facility as a Perovskite Center of Excellence and focusing on patent-pending Perovskite solar technologies.
Selling, general and administrative. Selling, general and administrative expenses increased by $770,555, or 94%, for the three months ended March 31, 2023 when compared to the same period in 2022. The increase in costs is due primarily to increased personnel compensation and administrative costs.
Share-based compensation. Share-based compensation expense increased by $1,404,450 or 100% for the three months ended March 31, 2023 when compared to the same period in 2022. The increase is due to the employment agreement between the Company and the CEO and CFO for restricted stock units.
Other Income/Expense. Other expense was $1,058,036 for the three months ended March 31, 2023, compared to other expense of $2,086,314 for the same period in 2022, a decline of $1,028,278. The decline is due primarily to a decrease in interest expense resulting from the convertible debt conversions and the accelerated recognition of debt discount in the prior year.
Net Loss. Our Net Loss increased by $1,786,103, or 42%, for the three months ended March 31, 2023 compared to the same period in 2022 due primarily to the items mentioned above.
Liquidity and Capital Resources
The Company has redeployed its Thornton facilities from a manufacturing facility to a research and development facility. Additionally, the Company purchased manufacturing equipment in Zurich, Switzerland where the Company plans to begin production. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the three months ended March 31, 2023 the Company used $4,937,627 in cash for operations.
Additionally, projected total revenues are not anticipated to result in a positive cash flow position for the year overall and, as of March 31, 2023, although the Company has working capital of $1,481,943, Management does not believe cash liquidity is sufficient for the next twelve months and will require additional financing.
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 doubt as to the Company’s ability to continue as a going concern.
Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These condensed 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 Three Months Ended March 31, 2023 and 2022
For the three months ended March 31, 2023, our cash used in operations was $4,937,627 compared to $2,792,080 for the three months ended March 31, 2022, an increase of $2,145,547. This increase is due primarily to increased Company expenses and timing of when expenses have been paid. For the three months ended March 31, 2023, cash used in investing activities was $54,534 compared to $141,318 used in investing activities for the three months ended March 31, 2022. This change was primarily the result of a decrease purchase of equipment and contributions to Ascent Germany. During the three months ended March 31, 2023, net cash used in operations of $4,937,627 were primarily funded from 2022 financing agreements.
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Off Balance Sheet Transactions
As of March 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Smaller Reporting Company Status
We are a “smaller reporting company” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirement that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and smaller reporting companies have reduced disclosure obligations regarding executive compensation.