NOTE 10. CONVERTIBLE NOTES
The note bears interest of 5% per annum and matures on February 28, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of September 30, 2017, the Company had not made any payments on these notes and the accrued interest was $3,151.
On September 30, 2017, the Company entered intofollowing table provides 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 matures on September 30, 2018. Monthly payments of $18,426 commence on October 30, 2017.
NOTE 9. PROMISSORY NOTES
Tertius Financial Group Notes and Exchange
On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000summary of the Company’s original issue discount notes with an original maturity date of November 26, 2016. The notes bear interest of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company.
On December 6, 2016, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000 as of December 31, 2016.
On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”).
Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of approximately $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG.
TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns less than 4%activity of the Company's
outstanding shares at September 30, 2017.secured, convertible, promissory notes:
| | | | | | | | | | | | | | | |
| Principal
Balance
12/31/2022 | | Notes converted | | Principal
Balance
3/31/2023 | | Less:
Discount
Balance | | Net Principal
Balance
3/31/2023 | |
Sabby Volatility Warrant Master Fund, LTD | $ | 7,392,899 | | $ | (1,786,212 | ) | $ | 5,606,687 | | $ | (1,860,185 | ) | $ | 3,746,502 | |
L1 Capital Global Opportunities Master Fund, Ltd | | 7,500,000 | | | (960,000 | ) | | 6,540,000 | | | (2,169,839 | ) | | 4,370,161 | |
| $ | 14,892,899 | | $ | (2,746,212 | ) | $ | 12,146,687 | | $ | (4,030,024 | ) | $ | 8,116,663 | |
Offering of Unsecured Promissory
Sabby / L1 Convertible Notes
BetweenOn December 2016 and April 2017, the Company initiated eleven non-convertible, unsecured promissory notes with a private investor with varying principal amounts aggregating to $3,400,000. The promissory notes bear interest of 12% per annum and mature six months from the respective dates of issuance, ranging from June 2, 2017 to October 21, 2017. Unless paid in advance, the principal and interest of these promissory notes are payable upon maturity. The notes are not convertible into equity shares of the Company and are unsecured.
Between June and August, 2017, eight of the promissory notes described above matured. The Company and the private investor agreed to pay the interest accrued on these notes, as of the maturity dates, and extend the notes another three months without the Company being in default. Through August 30, 2017, $143,148 interest was paid.
On September 13, 2017, the Company and the investor entered into a Promissory Note Exchange Agreement. Pursuant to the agreement, the Investor exchanged and canceled the eleven outstanding promissory notes (with an aggregate principal and accrued interest of $3,504,199) for one new promissory note having a principal amount of $3,504,199.
The new note has a term of 36 months, bears interest at a rate of 12% per annum, and calls for monthly installment payments of $116,390 commencing on October 13, 2017. The Company has the option to pay monthly installment 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 lowest of (i) 85% of the average VWAP for the shares over the prior five trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.004 per share. The Company may not make payments in the form of shares of Common Stock if, after giving effect to the issuance, the holder together with its affiliates would beneficially own in excess of 9.9% of the outstanding shares of Common Stock.
As of September 30, 2017 and December 31, 2016 the outstanding principal balance on the promissory notes was $3,504,199 and $1,010,000, respectively. The accrued interest outstanding on these notes was $19,585 as of September 30, 2017.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the new promissory note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. On September 13, 2017, the derivative liability associated with the promissory note was $2,702,601.
The derivative liability associated with the promissory note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the promissory note. As a result of the fair value assessment, the Company recorded a $887,037 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the three months ended September 30, 2017, to properly reflect the fair value of the embedded derivative of $1,815,564 as of September 30, 2017.
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 Series E Preferred Stock approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 63%, present value discount rate of 12% and dividend yield of 0%.
Offering of Unsecured, Non-Convertible Notes
During October 2016, the Company received $420,000 from a separate private investor. 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 will be 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 are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured.
On June 30, 2017, the Company and the private investor 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.
As of September 30, 2017, $143,759 of principal and $43,544 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of September 30, 2017 were $556,241 and $13,695, respectively.
During April 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $103,000 in exchange for proceeds of $100,000. The discount of $3,000 will be charged to interest expense ratably over the term of the note. The promissory note bears interest of 10% per annum and matures on October 6, 2017. As of September 30, 2017, the principal and accrued interest outstanding on the promissory note was $103,000 and $5,064, respectively. Subsequent to September 30, 2017, this note was exchanged for common shares. See Note 25 for more information.
During May 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $125,000 . The promissory note bears interest of 12% per annum and matures on September 8, 2017. On September 8, 2017, the Company redeemed this note in full, for cash.
NOTE 10. SERIES A PREFERRED STOCK
In June 2013,19, 2022, the Company entered into a Securities Purchase
Contract (the “Securities Purchase Contract”) with two institutional investors (each, an “Investor” and collectively, the “Investors”) for the issuance to the Investors of $12,500,000 in aggregate principal amount of Senior Secured Original Issue 10% Discount Convertible Advance Notes10
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pursuant to a direct registered offering (the “Registered Advance Notes”) and $2,500,000 in aggregate principal amount of Senior Secured Original Issue 10% Discount Convertible Advance Notes in a concurrent private placement (the “Private Placement Advance Notes” and, together with the Registered Advance Notes, the “Advance Notes”).
On March 29, 2023, the Company and each of the Investors entered into a Waiver and Amendment Agreement (the “Amendment”) relating to the Securities Purchase Contract and the Advance Notes to waive any event of default arising under Section 2.1 of the Advance Notes relating to the Company’s receipt of notice from the Listing Qualifications Department of Nasdaq indicating that the Company is not in compliance with the $1.00 Minimum Bid Price Requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market (the “Specified Default”).
Pursuant to the Amendment, the Company and each of the Investors agreed to waive the Specified Default and further agreed to the amend the Advance Notes to provide that (i) the new “Floor Price” for all purposes of the Advance Notes is $0.20 per share of the Company’s common stock, (ii) until the Company regains compliance with the $1.00 Minimum Bid Price Requirement, “Conversion Price” under the Advance Notes will mean the “Alternative Conversion Price” (as defined in the Advance Notes) and (iii) the Company will make certain prepayments of the Advance Notes held by the Investors on the following dates and in the following aggregate cash amounts, at a price equal to 100% of the principal amount of the Advance Notes to be repaid plus accrued and unpaid interest thereon (if any). The Company's failure to comply with the terms of the Amendment would constitute an Event of Default under the Advance Notes.
On April 12, 2023, the Company and each of the Investors entered in a further amendment to the Amendment (the “Revised Amendment”), to provide for a consistent prepayment schedule for the Advance Notes held by each of the Investors. After giving effect to the Revised Amendment, the Advance Notes will be prepaid by the Company in cash on the following dates and in the following aggregate amounts, at a price equal to 100% of the principal amount of the Advance Notes to be prepaid plus accrued and unpaid interest thereon (if any). The Company’s failure to comply with the terms of the Revised Amendment would constitute an “Event of Default” under the Advance Notes.
| | | |
Prepayment Date | Aggregate | |
April 3, 2023 | $ | 333,333 | |
April 13, 2023 | | 333,333 | |
May 18, 2023 | | 666,667 | |
June 19, 2023 | | 666,667 | |
| $ | 2,000,000 | |
The Advance Notes are convertible to Common Stock. The fixed conversion price of the Advance Notes is subject to certain adjustments in accordance with the terms thereof, including certain anti-dilution adjustments in the event that the Company issues shares of Common Stock, securities convertible into, exercisable for or exchangeable for the Company’s Common Stock, rights or options to acquire Common Stock or convertible securities or any combination thereof, including as units with other securities or property in an integrated transaction, at a purchase or conversion, exercise or exchange price of less than the fixed conversion price then in effect with respect to the Advance Notes.
The Securities Purchase Contract also included certain warrants to purchase up to 2,513,406 shares of common stock (the "Warrants"). The Warrants were issued with an investorexercise price equal to sell$3.93 per share, subject to certain adjustments in certain events, including the future issuance by the Company of securities with a purchase or conversion, exercise or exchange price that is less than the exercise price of the Warrants then in effect at any time.
On April 14, 2023 the Company entered a securities purchase agreement (“SPA”) with Lucro Investments VCC-ESG Opportunities Fund (“Lucro”) for an approximate $9 million private placement (the “Private Placement”) of an aggregate of 750,0007,499,997 shares of the Company’s Common Stock. The per share purchase price for the Shares is $1.20 per share. The terms of the SPA with Lucro triggered certain adjustments to the Advance Notes and the Warrants in accordance with the existing terms of the outstanding Advance Notes and the outstanding Warrants. Following these adjustments:
1.The fixed conversion price of the approximately $10.1 million principal amount currently outstanding Advance Notes has been lowered to $0.3661 per share of Common Stock;
2.The exercise price of the outstanding Warrants has been lowered to $0.3661 per share of Common Stock; and
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3.The number of shares that the Warrants are exercisable for has been increased from 2,513,406 to 26,980,840 shares of Common Stock.
During the three months ended March 31, 2023, Sabby converted $1.79 million of principal for 2,051,053 shares of common stock. During the three months ended March 31, 2023, L1 converted $0.96 million of principal for 1,440,090 shares of common stock. During the three months ended March 31, 2023, the Company had interest expense of $1,052,928 of which, $901,649 was due to accretion of discount on the note. Interest payable was $173,400 as of March 31, 2023.
NOTE 11. SERIES A PREFERRED STOCK
As of January 1, 2023, there were 48,100 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6,000,000. This purchase agreement included warrants to purchase up to 13,125 shares of common stock of the Company. The transfer of cash and securities took place incrementally, the first closing occurring on June 17, 2013 with the transfer of 125,000 shares of Series A Preferred Stock and a warrant to purchase 2,187 shares of common stock for $1,000,000. The final closings took place in August 2013, with the transfer of 625,000 shares of Series A Preferred Stock and a warrant to purchase 10,938 shares of common stock for $5,000,000.
outstanding. Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8%8% per annum when and if declared by the Board of Directors inat its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10%10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. In addition, the Series A Preferred Stock contains a make-whole provision whereby, conversion or redemption of the preferred stock within 4 years of issuance will require dividends for the full four year period to be paid by the Company in cash or common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period).
The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $232, as$1,160,000, adjusted for 20reverse stock splits, for twenty consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00$8.00 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At September 30, 2017,March 31, 2023, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time, at no cost, at a ratio of 1time. After making adjustment for the Company’s prior reverse stock splits, all 48,100 outstanding Series A preferred shareshares are convertible into 1less than one common share (subject to standard ratable anti-dilution adjustments).share. Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends and also any make-whole amount (if applicable). See Note 19. Make-Whole Dividend Liability.
On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 17) for outstanding shares of Series A Preferred Stock from the Series A Holder.
As of September 30, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of September 30, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 shares of common stock.
dividends.Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to $8.00 per share of Series A Preferred Stock plus any accrued and unpaid dividends.
As of September 30, 2017,March 31, 2023, there were 60,75648,100 shares of Series A Preferred Stock outstanding.
NOTE 11. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE
Series E Preferred Stock
On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000.
Shares of the Series E Preferred Stock (including the amount of anyoutstanding and accrued and unpaid dividends thereon) are convertible, at the option of the holder, into common stock at a variable conversion price equal to 80% of the average of the two lowest VWAPs of the Company's common stock for the ten consecutive trading day period prior to the conversion date. If certain defined default events occur, the conversion price would thereafter be reduced (and only reduced), to equal 70% of the average of the two lowest VWAPs of the Company's common stock for the twenty consecutive trading day period prior to the conversion date.$477,526.
The private investor had available to them a new conversion price beginning on June 9, 2016 as a result of the Series H PreferredNOTE 12. STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock transaction further described in Note 14. Shares of the Series E Preferred Stock are now convertible, at the option of the private investor, into common stock at a variable conversion price equal to 70% of (i) the lowest VWAP of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series E Preferred Stock:
|
| | | | | | | |
| Conversion Period | Preferred Series E Shares Converted | Value of Series E Preferred Shares (inclusive of accrued dividends) | Common Shares Issued |
| Q4 2015 | 478 |
| $ | 481,500 |
| 250,000 |
|
| Q1 2016 | 1,220 |
| 1,239,436 |
| 1,132,000 |
|
| Q2 2016 | 365 |
| 381,414 |
| 7,979,568 |
|
| Q3 2016 | 523 |
| 548,896 |
| 21,973,747 |
|
| Q4 2016 | 94 |
| 101,018 |
| 13,089,675 |
|
| Q1 2017 | 15 |
| 16,248 |
| 8,289,962 |
|
| Q2 2017 | 35 |
| 38,886 |
| 134,927,207 |
|
| Q3 2017 | 70 |
| 76,814 |
| 129,314,677 |
|
| | 2,800 |
| $ | 2,884,212 |
| 316,956,836 |
|
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the nine months ended September 30, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash.
The Company has issued 18,000 shares of common stock to the private investor as a commitment fee relating to the Series E Preferred Stock. Costs associated with the Series E Preferred Stock, such as legal fees and commitment shares are capitalized and reported as deferred financing costs on the Condensed Consolidated Balance Sheets. The total gross debt issuance cost incurred by the Company related to the Series E Preferred Stock was $104,000. These debt issuance costs will be recognized as additional interest expense over the life of the Series E Preferred Stock.
As of September 30, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series E Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At DecemberMarch 31, 2016 the fair value of the derivative liability was $140,748.
At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended September 30, 2017. The net gain recorded for the nine months ended September 30, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of September 30, 2017.
The Committed Equity Line
On November 10, 2015, the Company and the private investor entered into a committed equity line purchase agreement (the "CEL"). Under the terms and subject to the conditions of the CEL purchase agreement, at its option the Company has the right to sell to the private investor, and the private investor is obligated to purchase from the Company, up to $32.2 million of the Company’s common stock, subject to certain limitations, from time to time, over the 36-month period commencing on December 18, 2015, the date that the registration statement was declared effective by the SEC.
From time to time, the Company may direct the private investor, at its sole discretion and subject to certain conditions, to purchase an amount of shares of common stock up to the lesser of (i) $1,000,000 or (ii) 300% of the average daily trading volume of the Company’s common stock over the preceding ten trading day period. The per share purchase price for shares of common stock to be sold by the Company under the CEL purchase agreement shall be equal to 80% of the average of the two lowest VWAPs of the common stock for the ten consecutive trading day period prior to the purchase date. As of September 30, 2017,2023, the Company had directed the private investor to purchase 3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock
The Company may not direct the private investor to purchase shares of common stock more frequently than once each ten business days. The Company’s sales of shares of common stock to the private investor under the CEL purchase agreement are limited to no more than the number of shares that would result in the beneficial ownership by the private investor and its affiliates, at any single point in time, of more than 9.99% of the Company’s then outstanding shares of common stock.
As consideration for entering into the CEL purchase agreement, the Company agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC.
NOTE 12. SERIES F PREFERRED STOCK
On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated Series F 7% Convertible Preferred Stock (the “Series F Preferred Stock”).
On January 20, 2016, the Company sold and issued 7,000 shares of Series F Preferred Stock to the private investor. The aggregate purchase price of the Series F Preferred shares was $7,000,000. On January 20, 2016, the private investor paid $500,000 to the Company. The remaining $6,500,000 was paid by the private investor to the Company in 14 weekly increments of $500,000 or $250,000 beginning January 25, 2016 and ending April 28, 2016.
Shares of the Series F Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible, at the option of the holder, into common stock at a fixed conversion price equal to $5.00 per share. If certain defined default events occur, the conversion price would thereafter be reduced (and only reduced), to equal 70% of the average of the two lowest VWAPs of our common stock for the twenty consecutive trading day period prior to the conversion date.
If requested by the private investor, the Company will make weekly redemptions of shares of Series F Preferred Stock (including any accrued and unpaid dividends thereon). If the redemption price is paid by the Company in cash, the number of shares to be redeemed in each weekly increment is 250 shares of Series F Preferred Stock, and the redemption price is a price per share equal to $1,250 plus any accrued but unpaid dividends thereon.
The Company has the option to make such redemption payments in shares of common stock provided certain specified equity conditions are satisfied at the time of payment. The number of shares of common stock to be issued would be calculated using a per share price equal to 80% of the one lowest VWAP of our common stock for the ten consecutive trading day period prior to the payment date. For redemption payments made in shares of common stock, the Company will redeem either (i) 250 shares of Series F Preferred Stock or (ii) such greater number of shares of Series F Preferred Stock (and also including any accrued and unpaid dividends) that would result upon redemption in the issuance of a number of shares of common stock equal to 12% of the aggregate composite trading volume for the Company’s common stock during the preceding calendar week.
The private investor had available to them a new conversion price beginning on June 9, 2016 as a result of the Series H Preferred Stock transaction further described in Note 14. Shares of the Series F Preferred Stock are now convertible, at the option of the private investor, into common stock at a variable conversion price equal to 70% of (i) the lowest VWAP of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date.
Amendment of Outstanding Series F Preferred Stock Conversion Price
On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016.
As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date. If certain “Triggering Events” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date.
The following table summarizes the conversion activity of the Series F Preferred Stock:
|
| | | | | |
| Conversion Period | Preferred Series F Shares Converted | Value of Series F Preferred Shares (inclusive of accrued dividends) | Common Shares Issued |
| Q1 2016 | 2,168 | $ | 2,188,298 |
| 2,183,992 |
| Q2 2016 | 3,234 | 3,300,931 |
| 6,649,741 |
| Q3 2016 | 1,262 | 1,315,743 |
| 81,917,364 |
| Q4 2016 | 176 | 185,118 |
| 27,276,005 |
| Q3 2017 | 20 | 20,000 |
| 18,181,818 |
| | 6,860 | $ | 7,010,090 |
| 136,208,920 |
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. During the quarter ended September 30, 2017, the Company did not pay any dividends or issue any shares in relation to accrued dividends.
The Company classified the Series F Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception. There are 140 shares of Series F Preferred Stock, representing a value of $140,000, outstanding as of September 30, 2017.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series F Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of $1,666,000 were recorded. The debt discount will be charged to interest expense ratably over the life of the Series F Preferred Stock.
The derivative liability associated with the Series F Preferred Stock is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Series F Preferred Stock. As a result of the fair value assessment, the Company recorded a $298,534 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the three months ended September 30, 2017. The net gain recorded for the nine months ended September 30, 2017 was $212,977, to properly reflect the fair value of the embedded derivative of $42,347 as of September 30, 2017.
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 Series F Preferred Stock approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 75%, present value discount rate of 12% and dividend yield of 0%.
NOTE 13. SERIES G PREFERRED STOCK
On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. At Closing, the Company issued a total of 500 shares of Series G Preferred Stock to the private investors in exchange for $500,000. The Company issued an additional 1,500 shares of Series G Preferred Stock to the private investors during the months of May and June 2016, which resulted in additional gross proceeds to the Company of $1,500,000.
Holders of the Series G Preferred Stock will be entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon.
Assignment of Series G Preferred Stock
Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). As of September 30, 2017, the Series G Sellers had sold 1,835 shares of Series G Preferred Stock, representing a value of $1,835,000, to the Series G Purchasers.
On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1.00 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price of the Company’s common stock for the ten consecutive trading day period prior to the conversion date or (iii) 70% of the lowest closing bid price of the Company’s common stock for the ten consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series G Preferred Stock:
|
| | | | | | |
| Conversion Period | Preferred Series G Shares Converted | Value of Series G Preferred Shares (inclusive of accrued dividends) | Common Shares Issued |
| Q4 2016 | 892 |
| 929,895 |
| 245,726,283 |
| Q1 2017 | 372 |
| 397,970 |
| 327,718,386 |
| Q2 2017 | 526 |
| 575,096 |
| 1,337,776,821 |
| | 1,790 |
| $ | 1,902,961 |
| 1,911,221,490 |
Holders of the Series G Preferred Stock will be entitled to dividends in the amount of 10% per annum. During the nine months ended September 30, 2017, the Company converted dividends in the amount of $49,096 on the Series G Preferred Stock, resulting in the issuance of 114,854,745 shares of common stock.
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. Due to international wire cut off times, $182,715 of that amount was not actually paid until July 3, 2017, and the resulting liability is included in accounts payable on the Condensed Consolidated Balance Sheet for the six months ended September 30, 2017.
As of September 30, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2016 the fair value of the derivative liability was $361,831 and was $219,347 prior to the redemption.
At June 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series G Preferred Stock of $219,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended September 30, 2017. The net gain recorded for the nine months ended September 30, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of September 30, 2017.
Conversion Inducement and Disposal Price Guarantee
On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,416.67 for a total conversion value of $106,416.67 into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares.
During the nine months ended September 30, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. The amount related to the disposal price guarantee was also recorded as a corresponding liability in the Condensed Consolidated Balance Sheet as of September 30, 2017.
On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability will be paid in three equal monthly installments commencing on June 30, 2017. As of September 30, 2017, the Company had repaid the liability in full.
NOTE 14. SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES
Series H Preferred Stock
On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Refer to the section below for details of the exchange.
July 2016 Convertible Notes
On July 13, 2016, the Company entered into a securities purchase agreement (the “Note SPA”) with the private investor for the private placement of up to $2,082,600 of the Company’s 4% Original Issue Discount Senior Secured Convertible Promissory Notes (the “July 2016 Convertible Notes”). On July 13, 2016, the Company sold and issued $364,000 principal amount of notes to the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016.
The Company and the private investor also entered into an Exchange Agreement dated July 13, 2016 (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the outstanding shares of Series H Preferred Stock (approximately $833,000 of capital and accrued dividends) were canceled. In exchange, the Company issued to the private investor approximately $866,000 of July 2016 Convertible Notes. There were 830 shares of Series H Preferred Stock outstanding as of the date of the Exchange Agreement.
Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 (the “Maturity Date”). The July 2016 Convertible Notes bear interest at a rate of 10% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default. Principal on the July 2016 Convertible Notes is payable on the Maturity Date. Interest on the July 2016 Convertible Notes is payable quarterly. Principal and interest are payable in cash or, if specified equity conditions are met, shares of Common Stock.
The July 2016 Convertible Notes are secured by a security interest in substantially all of the Company’s assets. The subsidiaries of the Company have guaranteed the Company’s obligations under the July 2016 Convertible Notes.
The July 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the July 2016 Convertible Notes; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016.
On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016.
Forbearance and Settlement Agreement on July 2016 Convertible Notes
On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
The Company agreed to redeem for cash all secured convertible notes of the Company held by the holder no later than September 1, 2017.
The Company affirmed that the current balance of owed principal and accrued and unpaid interest to the holder is $1,790,214 as of May 2, 2017.
The redemption price for such secured convertible notes shall be 120% (if redeemed on or prior to August 15, 2017) or 125% (if redeemed after August 15, 2017) of the then outstanding principal, plus any accrued and unpaid interest.
During the month of May 2017, the Holder agreed to limit its conversions of outstanding Company secured convertible notes to $50,000 per calendar week of principal/interest.
During the months of June, July and August 2017, the holder agreed to limit its conversions of outstanding Company secured convertible notes to $75,000 per calendar week of principal/interest.
During the months of May, June, July and August 2017, the holder agreed that all outstanding Company secured convertible notes shall bear interest at the normal stated rate of 10%, rather than default rate of 24%.
All conversions during the months of May, June, July and August 2017 will be at the “triggering event” discount conversion price as stated in the secured convertible notes, and will continue at the “triggering event” discount price until, if and when the notes are redeemed.
Should the Company fail to redeem for cash all secured convertible notes on or before September 1, 2017, default interest and normal stated interest will accrue from the date of execution of this agreement.
All principal and accrued interest on the July 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of the private investor, into shares of Common Stock at a variable conversion price equal to the lowest of (i) $0.045 (the “Fixed Conversion Price”), (ii) 70% of the lowest volume weighted average price (“VWAP”) of the Company's common stock for the ten consecutive trading day period prior to the conversion date or (iii) 70% of the lowest closing bid price of the Company's common stock for the ten consecutive trading day period prior to the conversion date. If certain defined triggering events occur, the conversion price would thereafter be reduced (and only reduced), to equal 60% of the lower of (i) the lowest closing bid price of the Company's common stock for the thirty consecutive trading day period prior to the conversion date or (ii) the lowest VWAP of the the Company's common stock for the thirty consecutive trading day period prior to the conversion date. In addition, on the 90th day and also on the 180th day from the date of the Note SPA, the private investor may reset the Fixed Conversion Price to thereafter be equal to the VWAP of the Common Stock for such day or if such 90th or 180th day is not a trading day, then the VWAP for the immediately preceding trading day. The following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
|
| | | | | |
| Conversion Period | July 2016 Convertible Notes Converted (exclusive of interest) | Common Shares Issued |
| Q4 2016 | $ | 152,460 |
| 64,000,000 |
|
| Q1 2017 | 1,017,732 |
| 959,704,543 |
|
| Q2 2017 | 682,235 |
| 1,865,043,998 |
|
| | $ | 1,852,427 |
| 2,888,748,541 |
|
In addition to the $1,852,427 in principal conversions, $3,960 of interest had been converted as of September 30, 2017. As of September 30, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was a favorable $26,966 and was credited to interest expense upon full redemption of the instrument.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2016 the fair value of the derivative liability was $3,733,348.
On August 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the July 2016 Convertible Notes of $31,444 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended September 30, 2017. The net gain recorded for the nine months ended September 30, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative as of August 31, 2017.
NOTE 15. SERIES I PREFERRED STOCK AND EXCHANGE CONVERTIBLE NOTES
Series I Preferred Stock
On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 536 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor.
On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser.
On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange.
Series I Exchange Convertible Notes
On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the investor has the right, from time to time, to surrender to the Company for cancellation and exchange any shares of Series I Preferred Stock it acquires pursuant to the Assignment Agreement. Any surrendered shares of Series I Preferred Stock would be exchanged for newly issued Exchange Convertible Notes. The principal amount of Exchange Convertible Notes to be issued in exchange shall be equal to (i) $1,000 for each share of Series I Preferred Stock surrendered for exchange plus (ii) the amount of any dividends accrued and unpaid on such Series I Preferred Stock surrendered for exchange. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $332,633, resulting in the creation of $332,633 of Exchange Convertible Notes.
Unless earlier converted or prepaid, all of the Exchange Convertible Notes will mature one year after issuance. The Exchange Convertible Notes bear interest at a rate of 10% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and interest on the Exchange Convertible Notes is payable on the maturity date or upon any earlier conversion. Principal and interest are payable in cash or, if specified equity conditions are met, shares of common stock.
All principal and accrued interest on the Exchange Convertible Notes are 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 the lowest of (i) the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 70% of the lowest VWAP of our common stock for the ten consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of September 30, 2017:
|
| | | | |
| Conversion Period | Exchange Convertible Notes Converted | Common Shares Issued |
| Q3 2016 | $ | 15,000 |
| 1,470,588 |
| Q4 2016 | 91,563 |
| 13,346,274 |
| Q1 2017 | 70,000 |
| 50,503,662 |
| Q2 2017 | 37,535 |
| 86,987,428 |
| Q3 2017 | 118,536 |
| 282,228,524 |
| $ | 332,634 |
| 434,536,476 |
As of September 30, 2017, $10,268 of interest accumulated on the Exchange Convertible Notes had been converted and the remaining interest balance of $5,255 had been paid in cash.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2016 the fair value of the derivative liability was $196,617.
On July 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Exchange Convertible Notes of $130,656 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended September 30, 2017. The net gain recorded for the nine months ended September 30, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017.
NOTE 16. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK
Series J Preferred Stock
On September 19, 2016, the Company entered into a securities purchase agreement with one accredited investor for the private placement of $1,350,000 of the Company’s newly designated Series J Convertible Preferred Stock (“Series J Preferred Stock”). As of September 30, 2017, the Company had issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $$1,350,000.
On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). As of September 30, 2017, the Series J Seller had sold 250 shares of Series J Preferred Stock, representing a value of $250,000, to the Series J Purchaser.
Holders of the Series J Preferred Stock are entitled to dividends in the amount of 10% per annum. Shares of the Series J Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. As of September 30, 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers. (See Conversion Inducement Offers discussion below).
There are no registration rights applicable to the Series J Preferred Stock. Accordingly, any shares of Common Stock issued upon conversion of the Series J Preferred Stock are restricted and can only be sold in compliance with Rule 144 or in accordance with another exemption from registration.
One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series J Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. There were 1,075 shares of Series J Preferred Stock outstanding as of September 30, 2017, representing a value of $1,075,000 and accrued dividends were $106,299.
Conversion Inducement Offers
On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer.
On March 29, 2017, the Company offered to lower the conversion price, applicable to 120 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer.
On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer.
As a result of these inducement offers, the Company re-evaluated the classification of the Series J Preferred Stock in the financial statements. Upon original issuance, in accordance with ASC 480-10, the instrument was classified as temporary mezzanine equity in the Company's Consolidated Balance Sheets. Due to the inducement offers described above, the Company no longer believes the original classification is still applicable and has restated the Series J Preferred Stock as a liability on the Consolidated Balance Sheets.
In addition, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At March 24, 2017, the fair value of the derivative liability was $705,024 .
The derivative liability associated with the Series J Preferred Stock is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Series J Preferred Stock. As a result of the fair value assessment, the Company recorded a 489,064 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the three months ended September 30, 2017. The net gain recorded for the nine months ended September 30, 2017 was $686,699, to properly reflect the fair value of the embedded derivative of $18,325 as of September 30, 2017.
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 Series J Preferred Stock approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 21% , present value discount rate of 12% and dividend yield of 0%.
Series J-1 Preferred Stock
On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000.
Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock will be entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon.
On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,306 by issuing 500 million shares of common stock, and a warrant to purchase 250 million shares of common stock.
The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock.
NOTE 17. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK
October 2016 Convertible Notes
On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $330,000 of gross proceeds.
Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes 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 (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date.
All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, 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 October 2016 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 October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company.
Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $19,800, respectively as of September 30, 2017.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 2016 Convertible Notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,000 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746.
The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a 451,480 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended September 30, 2017. The net gain recorded for the nine months ended September 30, 2017 was $251,545, to properly reflect the fair value of the embedded derivative of $293,201 as of September 30, 2017.
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 October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 69% present value discount rate of 12% and dividend yield of 0%.
Exchange of Outstanding Series A Preferred Stock for Convertible Notes
In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had 165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016.
On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder.
As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes.
NOTE 18. SERIES K PREFERRED STOCK
On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20,000,000 of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”).
Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of September 30, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. Although actual closings have varied from the original schedule, the Company expects to receive the full funding amount outlined above in various tranches. The following summarizes the closings and proceeds received as of September 30, 2017:
|
| | | | | |
| Closing Period | Preferred Series K Shares Purchased | Closing Amount |
| Q1 2017 | 150 |
| $ | 150,000 |
|
| Q2 2017 | 4,100 |
| 4,100,000 |
|
| Q3 2017 | 4,760 |
| $ | 4,760,000 |
|
| | 9,010 |
| $ | 9,010,000 |
|
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends.
The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
|
| | | | | | | |
| Conversion Period | Preferred Series K Shares Converted | Value of Series K Preferred Shares | Common Shares Issued |
| Q2 2017 | 3,200 |
| $ | 3,200,000 |
| 800,000,000 |
|
| Q3 2017 | 3,000 |
| $ | 3,000,000 |
| 750,000,000 |
|
| | 6,200 |
| $ | 6,200,000 |
| 1,550,000,000 |
|
As of September 30, 2017, the investor owned approximately 18% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000.
The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares.
Upon our liquidation, dissolution or winding up, holders of Series K Preferred Stock will be entitled to be paid out of our assets, prior to the holders of our common stock, an amount equal to $1,000 per share plus any accrued but unpaid dividends (if any) thereon.
Upon issuance, in accordance with ASC 480-10, the Series K Preferred Stock was classified as a liability on the Consolidated Balance Sheets. Pursuant to a number of factors outlined in ASC Topic 815, the conversion option in the Series K Preferred Stock was deemed to not require bifurcation or separate accounting treatment.
NOTE 19. ST. GEORGE CONVERTIBLE NOTE
On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments LLC (“Investor”), for the private placement of $1,725,000 principal amount of the Company’s Original Issue Discount Convertible Promissory Notes.
On September 11, 2017, the Company sold and issued $1,725,000 principal amount of the convertible notes to the Investor 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 fee, will be charged to interest expense, ratably, over the life of the note.
Unless earlier converted or prepaid, the convertible notes will mature on March 11, 2019. The notes do not bear interest in the absence of an event of default.
For the first six months after the issuance of the notes, the Company will make a monthly cash repayment on the notes of approximately $96,000. Thereafter, the Investor may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If the Investor 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. But in no event can the amount requested by the Investor for any one month exceed $275,000.
Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a 15% redemption premium.
Beginning six months after the issuance of the convertible notes, 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.
All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a fixed conversion price of $0.004 per share.
The Notes 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. Upon the occurrence of an event of default, the Notes will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, the Investor has the option to increase the outstanding balance of the Notes by 25%.
In connection with the closing under the Note SPA, the Company issued 37,500,000 unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was $0.0017 resulting in an interest expense of $63,750 being recorded as of the date of close.
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 4.99% of the outstanding shares of Common Stock.
Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Convertible Promissory Notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of $468,095 was recorded.
The derivative liability associated with the Convertible Promissory Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $225,319 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017, to properly reflect the fair value of the embedded derivative of $242,776 as of September 30, 2017.
The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Convertible Promissory Notes approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 74% present value discount rate of 12% and dividend yield of 0%.
NOTE 20. MAKE-WHOLE DIVIDEND LIABILITY
In June 2013, the Company entered into a Series A Preferred Stock Purchase Agreement. Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8.0% per annum, with the dividend rate being indexed to the Company's stock price and subject to adjustment. Conversion or redemption of the Series A Preferred Stock within 4 years of issuance requires the Company pay a make-whole dividend to the holders, whereby dividends for the full four year period are to be paid in cash or common stock (valued at 10% below market price).
The Company concluded the make-whole dividends should be characterized as embedded derivatives under ASC 815. The make-whole dividends were expensed at the time of issuance and recorded as "Make-whole dividend liability" in the Condensed Consolidated Balance Sheets.
The fair value of these dividend liabilities, which are indexed to the Company's common stock, must be evaluated at each period end. 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 fair value determination required forecasting stock price volatility, expected average annual return and conversion date. During the nine months ended September 30, 2017, the fair value of the make-whole liability decreased $0.25 million from the fair value at December 31, 2016 as a result of the conversion activity described below.
As of March 31, 2017, a Preferred Series A holder had converted 104,785 shares of Series A Preferred Stock, and the related make whole dividend of $419,140, which resulted in the issuance of 173,946,250 shares of common stock.
On June 17, 2017, the make-whole dividend reached maturity. As such, the Company began accruing additional dividends on the Series A Preferred Stock.
As of September 30, 2017, there were 60,756 shares of Series A outstanding and the Company was entitled to redeem the outstanding Series A preferred shares for $486,048, plus dividends of $264,289, payable in cash or common shares.
NOTE 21. STOCKHOLDERS’ DEFICIT
Common Stock
At September 30, 2017, the Company had 20,000,000,000 shares of common stock, $0.0001$0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of September 30, 2017,March 31, 2023, the Company had 8,717,859,91737,491,954 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through September 30, 2017.
during the three month ended March 31, 2023 and 2022.During the three months ended March 31, 2023, $2.75 million of convertible debt was converted into 3,491,143 shares of common stock.
Preferred Stock
At September 30, 2017,March 31, 2023, the Company had 25,000,00025 million shares of preferred stock, $0.0001$0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors.
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The following table summarizes the designations, shares authorized, and shares outstanding for the Company'sCompany’s Preferred Stock:
| | | | | | | | |
Preferred Stock Series Designation | | Shares
Authorized | | | Shares
Outstanding | |
Series A | | | 750,000 | | | | 48,100 | |
Series 1A | | | 5,000 | | | | — | |
Series B-1 | | | 2,000 | | | | — | |
Series B-2 | | | 1,000 | | | | — | |
Series C | | | 1,000 | | | | — | |
Series D | | | 3,000 | | | | — | |
Series D-1 | | | 2,500 | | | | — | |
Series E | | | 2,800 | | | | — | |
Series F | | | 7,000 | | | | — | |
Series G | | | 2,000 | | | | — | |
Series H | | | 2,500 | | | | — | |
Series I | | | 1,000 | | | | — | |
Series J | | | 1,350 | | | | — | |
Series J-1 | | | 1,000 | | | | — | |
Series K | | | 20,000 | | | | — | |
|
| | |
Preferred Stock Series Designation | Shares Outstanding |
Series A | 60,756 |
|
Series F | 140 |
|
Series J | 1,075 |
|
Series K | 2,810 |
|
Warrants
As of March 31, 2023, there are 3,929,311 outstanding warrants with exercise prices between $3.93 and $5.30 per share.
Series A Preferred Stock
Refer to
Note 10 descriptions of11 for information on Series A Preferred Stock.
Series 1A, B-1, B-2, C, D, D-1, E, F, Preferred Stock
Refer to Note 12 descriptions of Series F Preferred Stock.
SeriesG, H, I, J, Preferred Stock
Refer to Note 16 descriptions of Series J Preferred Stock.
SeriesJ-1, and K Preferred Stock
There were no transactions involving the Series 1A, B-1, B-2, C, D, D-1, E, F, G, H, I, J, J-1, or K during the three months ended March 31, 2023.
Refer to Note 18 descriptions of Series K Preferred Stock.
Warrants
On July 24, 2017, theNOTE 13. SHARE-BASED COMPENSATION
The Company issued a warrant for 250 million shares of commongranted restricted stock in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effectunits to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%,Chief Executive Officer and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937Chief Financial Officer and recorded a corresponding expense on the Company's consolidated and condensed statement of operations.
On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations.
NOTE 22. EQUITY PLANS AND SHARE-BASED COMPENSATION
Share-Based Compensation: The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes this cost as an expense over the grant recipients’ requisite service periods for all awards made to employees, officers, directors and consultants.
The share-based compensation expense recognized in the Condensed Consolidated Statements of Operations was as follows:
|
| | | | | | | | | | | | | | | | |
| | | For the three months ended September 30, | | For the nine months ended September 30, |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| Share-based compensation cost included in: | | | | | | | | |
| Research and development | | $ | 659 |
| | $ | 29,502 |
| | $ | 17,557 |
| | $ | 154,786 |
|
| Selling, general and administrative | | 12,147 |
| | 121,294 |
| | 91,160 |
| | 553,990 |
|
| Total share-based compensation cost | | $ | 12,806 |
| | $ | 150,796 |
| | $ | 108,717 |
| | $ | 708,776 |
|
The following table presents share-based compensation expense by type:
|
| | | | | | | | | | | | | | | | |
| | | For the three months ended September 30, | | For the nine months ended September 30, |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| Type of Award: | | | | | | | | |
| Stock Options | | $ | 12,806 |
| | $ | 58,271 |
| | $ | 82,388 |
| | $ | 295,229 |
|
| Restricted Stock Units and Awards | | — |
| | 92,525 |
| | 26,329 |
| | 413,547 |
|
| Total share-based compensation cost | | $ | 12,806 |
| | $ | 150,796 |
| | $ | 108,717 |
| | $ | 708,776 |
|
Stock Options: The Company recognized share-based compensation expense for stock options of approximately $82,000 to officers, directors and employees for the nine months ended September 30, 2017 related to stock option awards ultimately expected to vest. The weighted average estimated fair value of employee stock options granted for the nine months ended September 30, 2016 was $1.20 per share, and there were no stock options granted during the nine months ended September 30, 2017. Fair value was calculated using the Black-Scholes Model with the following assumptions:
|
| | |
| | For the nine months ended September 30, |
| | 2016 |
Expected volatility | | 115% |
Risk free interest rate | | 1% |
Expected dividends | | — |
Expected life (in years) | | 5.8 |
Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate of return is based on the yield of U.S. Treasury bonds with a maturity equal to the expected term of the award. Historical data is used to estimate forfeitures within the Company’s valuation model. The Company’s expected life of stock option awards is derived from historical experience and represents the period of time that awards are expected to be outstanding.
As of September 30, 2017, total compensation cost related to non-vested stock options not yet recognized was $44,000 which is expected to be recognized over a weighted average period of approximately 1.5 years, 66,607 shares were vested or expected to vest in the future at a weighted average exercise price of $39.61, and 195,218 shares remained available for future grants under the Option Plan.
Restricted Stock: In addition to the stock options discussed above, the Company recognized share-based compensation expense related to restricted stock grants of $26,0001,404,450 for the ninethree months ended September 30, 2017. There were noMarch 31, 2023. On April 26, 2023, the Company terminated its employment contract with the Company's Chief Executive Officer resulting in the forfeiture of 2,356,394 restricted stock grants forunits. The remaining non-vested shares of 513,333 units are expected to vest in the nine months ended September 30, 2017, and the weighted average estimated fair value of restricted stock grants for the nine months ended September 30, 2016 was $2.00 per share.
As of September 30, 2017, there was nofuture. Total unrecognized share-based compensation expense from the remaining unvested restricted stock no shares wereas of March 31, 2023 was approximately $1,529,733 and is expected to vest inbe recognized over 33 months. The following table summarizes non-vested restricted stock and the future, and, 518,388 shares remained available for future grants underrelated activity as of March 31, 2023:
| | | | | | | | |
| | Shares | | | Weighted Average Grant Date Fair Value | |
Non-vested at January 1, 2023 | | | 3,152,033 | | | | 4.95 | |
Vested | | | (282,306 | ) | | | 5.04 | |
Non-vested at March 31, 2023 | | | 2,869,727 | | | | 4.94 | |
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NOTE 14. COMMITMENTS AND CONTINGENCIES
On April 26, 2023, the Restricted Stock Plan.
NOTE 23. RELATED PARTY TRANSACTIONS
On August 29, 2016,board of directors of the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000 ofterminated Jeffrey Max as the Company’s original issue discount notes with an original maturity datePresident and Chief Executive Officer. Mr. Max claims that his termination was not for cause as defined in his employment agreement which could enable him to certain benefits, including severance and vesting of November 26, 2016. The notes bear interestrestricted stock units. Management believes Mr. Max was terminated for cause and any such claims, if asserted, would be without substantial merit. Although the outcome of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company.
On December 6, 2016,any legal proceedings is uncertain, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000 as of December 31, 2016.
On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”).
Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of approximately $4,340) that was issuedwill vigorously defend any future claims made by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG.
TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns less than 4% of the Company's outstanding shares at September 30, 2017.
All related party transactions were approved by our independent board of directors.
NOTE 24. COMMITMENTS AND CONTINGENCIES
Mr. Max.The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its consolidated financial position or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company’s assessment of any claim will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated financial position or results of operations in particular quarterly or annual periods.
NOTE 15. SUBSEQUENT EVENTS
On October 21, 2011,April 14, 2023, the Company was notified that a complaint claiming $3.0entered the Private Placement with Lucro Investments VCC-ESG Opportunities Fundfor an approximate $9 million forprivate placement of an investment banking fee (the “Lawsuit”) was filedaggregate of 7,499,997 shares of the Company’s common stock, $0.0001 par value per share. The per share purchase price is $1.20 per share. The Private Placement will close in nine tranches of approximately $1 million. The first tranche is scheduled to close by Jefferies &May 8, 2023. The ninth and final tranche is scheduled to close in late December 2023. The Company Inc. (“Jefferies”) againsthas not received the Company in New York State Supreme Court infirst tranche funding pursuant to this agreement. Management continues to assess the Countystatus and viability of New York. In December 2010, Ascent and Jefferiesthis agreement.
On April 17, 2023, the Company entered into an engagement agreementAsset Purchase Agreement (the “Fee“Asset Purchase Agreement”) with Flisom AG, a leading developer and manufacturer of photovoltaic thin film solar cells (“Seller”), pursuant to which, Jefferies was hiredamong other things, the Company purchased certain assets relating to act asthin-film photovoltaic manufacture and production from Seller (collectively, the Company's financial advisor in relation“Assets”), including (i) certain manufacturing equipment located at Seller’s Niederhasli, Switzerland facility (the “Manufacturing Facility”) and (ii) related inventory and raw materials at the Manufacturing Facility (collectively, the “Transaction”). In connection with the Transaction, the Company also received a license to certain potential transactions. In addition, Jefferies claimed an award for attorney's fees and prejudgment interestintellectual property rights used in the approximate amountoperation of $1.2 million.
On April 16, 2014, the
parties settledAssets and will also acquire, by operation of Swiss law, the
lawsuit whereemployment contracts of certain employees of Seller in Switzerland who are functionally predominantly working with the Assets, subject to such employees being offered the right to remain employed by Seller after the closing of the Transaction (the “Closing”). The total consideration paid by the Company
agreed to
pay Jefferies a total of $2.0 millionSeller in
connection with the Transaction was an aggregate amount in cash equal
installments over 40 months. The Company paid $339,481 duringto $2,800,000.At the nine months ended September 30, 2017.
The Company records a liability in its financial statements for costs related to claims, including settlements and judgments, whereClosing, the Company has assessedand Seller also entered into (i) a Transition Services Agreement requiring that a loss is probable and an amount can be reasonably estimated. The Company accrued $1.7 million,Seller provide transition support for the net present valueCompany’s operation of the $2.0 million settlement, as of December 31, 2013. As of September 30, 2017, the settlement had been redeemed in full and there was no remaining accrued litigation settlement, recorded as a current liability in the Condensed Consolidated Balance Sheets.
NOTE 25. SUBSEQUENT EVENTS
Update on Series F Preferred Stock
As of November 10, 2017, an additional 30 shares of Series F Preferred Stock,Assets, with a value of $30,000, were converted into 33,333,333 shares of common stock.
Updates on Notes Payable
On October 23, 2017, the Company amended its promissory note with a vendor whose note is discussed in Note. 8. The note matured on October 23, 2017 and wasfees to be due and payable asby the Company for performance of this date. The amendment extendedsuch support services, (ii) a Sublease Agreement related to the note's maturity to November 6, 2017. AsCompany’s use of the date of this filing,premises at the Manufacturing Facility where the Assets are located (the “Sublease Agreement”), and (iii) a Technology License Agreement, pursuant to which Seller granted the Company a revocable, non-exclusive license to certain intellectual property rights of the Seller used in the operation of the Assets (the “Licensed IP”), subject to certain encumbrances on the Licensed IP in favor of Seller’s lender.On April 20, 2023, the Company entered into a letter agreement (the “Letter Agreement”) with FL1 Holding GmbH, a German company (“FL1”) that is waitingaffiliated with BD 1 Investment Holding, LLC (“BD1”), an affiliate of the Company, BD1 and BD Vermögensverwaltung GmbH (“BD”), the parent entity of FL1 (collectively, the “Affiliates”), in connection with the prospective acquisition by FL1 of substantially all shares in Seller following the Closing, subject to hear from the vendorsatisfaction of certain terms and conditions. Pursuant to the Letter Agreement, among other things, FL1 and one or more of the Affiliates agreed, on how they wishbehalf of itself and its affiliates (i) to proceedcertain noncompetition and nonsolicitation obligations with payment.
Updates on Promissory Notes
On October 6, 2017,respect to the Company and
the Assets, including certain prospective customers of the products produced using the Assets, for a period of five (5) years from the Closing, subject to certain exceptions, (ii) to cause Seller to use certain of its investorintellectual property rights for limited internal purposes until such time as a joint collaboration agreement is entered into a Promissory Note Exchange Agreementafter the Closing among Seller, the Company and certain other affiliates of FL1 related to convert a promissory note with a principal balancethe licensing and use of $103,000such intellectual property, and accrued interestotherwise not to dispose of $5,233 inor fail to common shares. Permaintain such intellectual property, (iii) to reimburse the termsCompany for certain pre-Closing liabilities of Seller to the14
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extent incurred by the Company following the closing of the agreement the promissory note was canceledTransaction; and 72,500,000 shares were issued.
On October 13, 2017,(iv) to indemnify the Company
madefor breaches of certain representations, warranties and covenants relating to the Assets.Pursuant to the Letter Agreement, each of BD and BD1 have also agreed that (1) it and its first monthly redemption onaffiliates will not offer to acquire or acquire, by merger, tender offer or otherwise, all or substantially all of the September 13, 2017 promissory note. This redemption was fulfilled inoutstanding shares of common stock. The redemption amountcapital stock of $116,390, consistingthe Company not beneficially owned by BD and its affiliates, without the approval of $81,348 principala committee comprised of disinterested and $35,042 interest, resulted inindependent members of the issuanceCompany’s Board of 93,786,866Directors and the affirmative vote of a majority of the voting power of outstanding shares of common stock.
On October 31, 2017, the Company
issued a $250,000 promissory notenot beneficially owned by BD and its affiliates; (2) BD and its affiliates will not transfer any shares of the Company’s capital stock beneficially owned by them unless the transferee agrees in writing to
an accredited investor. On November 2, 2017,be bound by the foregoing restriction; and (3) each of them will stand behind the obligations of FL1 pursuant to the Letter Agreement.The Letter Agreement also grants the Company received $250,000the option, but not the obligation, (i) to purchase certain intellectual property rights of gross proceeds.Seller relating to thin-film photovoltaic manufacture and production for $2,000,000 following the release of certain liens on such intellectual property rights in favor of Seller’s lender, and (ii) for a period of 12 months following the Closing, to resell the Assets to FL1 for an aggregate amount equal to $5,000,000, with such transaction to close within 90 days following the exercise of the Company’s resale right.
On April 19, 2023, the Company entered a securities purchase agreement (“SPA”) with BD1 for a $5 million private placement (the “BD1 Private Placement”) of subordinated promissory notes (the “Notes”). The note matures on January 31, 2018, bearsBD1 Private Placement will close in four tranches with the first tranche (for $2 million) scheduled to close by May 15, 2023. The fourth and final tranche is scheduled to close in mid-August 2023. The maturity date of all the Notes is September 30, 2026. The Notes will bear interest at a rate of 12%6% per annum from date of funding, isand are (i) unsecured, and(ii) not convertible, and (iii) are subordinated to the Company’s senior indebtedness. The Company has not received funding pursuant to this agreement.
Subsequent to March 31, 2023, Sabby and L1 converted approximately $3.1M principal into12,153,013 shares of equity. All principal and interest on the note are payable upon maturity.Common Stock.
Update on St. George Convertible Note
Contents
Item 2. Management'sManagement’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.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 a company formedthe unique advantages of our technology, including flexibility, durability and attractive power to commercialize flexible photovoltaic modules usingweight 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 technology. 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 and
ninemonths ended September 30, 2017,March 31, 2023, we generated $242,055 and $547,792$124,225 of revenue from product sales, respectively.
In 2012,total revenue. As of March 31, 2023, we transitioned our business model adding a second business focused on developing PV integrated consumer electronics. In Junehad an accumulated deficit of 2012, we launched our new line of consumer products under the EnerPlex™ brand, and introduced our first product, the Surfr™ battery and a solar case for the Apple® iPhone® 4/4S smart phone featuring our ultra-light CIGS thin film technology integrated directly into the case. The case incorporates our ultra-light and thin PV module into a sleek, protective iPhone 4/4S case, along with a thin, life extending, battery. The charger adds minimal weight and bulk to the iPhone, yet provides supplemental charging when needed.
In December 2012, we launched the EnerPlex Kickr™ and EnerPlex Jumpr™ product series. The Kickr IV is an extremely portable, compact and durable solar charging device, approximately seven inches by seven inches when folded, and weighs less than half a pound. The Kickr IV provides 6.5 watts of regulated power that can help charge phones, digital cameras, and other small USB enabled devices. The Kickr IV is ideal for outdoor activities such as camping, hiking and mountain climbing as well as daily city use. To complement the Kickr IV, we also released the Jumpr™ series of portable power banks. The Jumpr™ series provides a compact power storage solution for those who need to take the power of the sun with them on the go. Throughout 2014, EnerPlex released multiple additions to the Jumpr line of products: including the Jumpr Stack 3,6 & 9, innovative batteries equipped with tethered micro-USB and Apple Lightning cables and revolutionary Stack & Charge design, enabling batteries to be charged simultaneously when they are placed on top of one another. Also released in 2014 were the Jumpr Slate series, products which push the boundaries of how thin batteries can be, the Jumpr Slate 10k, at less than 7mm thick was the thinnest lithium polymer battery available when it was released. The Jumpr Slate 5k and 5k Lightning each come with a tethered micro-USB and Lightning cable respectively; freeing consumers from worrying about toting extra cables with them while on the move.
Throughout 2013, we aggressively pursued new distribution channels for the EnerPlex™ brand; these activities have led to placement in a variety of high-traffic ecommerce venues such as www. walmart.com, www.brookstone.com, www.newegg.com as well as many others including our own e-commerce platform at www.goenerplex.com. The April 2013 placement of EnerPlex products at Fry’s Electronics, a US West Coast consumer electronics retailer, represented our first domestic retail presence. EnerPlex products are carried in all of Fry’s 34 stores across 9 states. In 2014 EnerPlex products launched in multiple online and brick-and-mortar partners; including BestBuy.com, 300 premium Verizon Wireless stores via partner The Cellular Connection (TCC) and 25 Micro Center stores across 16 states. In the third quarter of 2015, EnerPlex expanded its presence to 456 total TCC Verizon Wireless Premium retailers, adding 156 stores.
At Outdoor Retailer 2014, EnerPlex debuted the Generatr Series, the Generatr 1200 and Generatr 100 are lithium-ion based large format batteries; lighter and smaller than competitors, the Generatr Series is targeted for consumers who require high-capacity, high-output batteries which remain ultra-portable when compared to the competition. Also debuted at Outdoor Retailer was the Commandr 20, a high output solar charger designed specifically to integrate with and charge the Generatr series, allowing consumers to stay out longer without needing to charge their Generatr batteries from a traditional power source. In August 2014, the Kickr II+ and IV+ were also announced, these products represent another evolution in EnerPlex’s line of solar products; integrated with a 500mAh battery the Kickr II+ and IV+ are able to provide a constant flow of power even when there are intermittent disruptions in sunlight.
During the first quarter of 2015 we reached an agreement with EVINE Live, one of the premier home shopping networks with TV programming that reaches over 87 million US homes to begin selling EnerPlex products during their broadcasts. During the second quarter EnerPlex launched the Generatr S100 and select other products exclusively with EVINE, and in the third quarter the Generatr 1200 launched exclusively with EVINE for a limited period.
During the second quarter of 2015 EnerPlex launched its products into two world recognized retailers; including over 100 The Sports Authority stores nationwide, in addition to launching in select Cabela’s, “The World’s Foremost Outfitter”, stores and via Cabela’s online catalog. Internationally, EnerPlex products became available in the United Kingdom via the brand’s launch with 172 Maplin’s stores throughout the country. During the forth quarter of 2015, EnerPlex launched with GovX, the premier online shopping destination for Military, Law Enforcement and Government agencies.
At the end of the first quarter of 2015, we announced that six EnerPlex products were awarded accolades as Red Dot Design Award winners, recognizing both the aesthetic as well as functional design of the Jumpr Quad, Jumpr Stack 3/6/9, the Generatr 100 and the Generatr 1200. During the third quarter of 2015 the Generatr 100 won a Best of Show Award at the CTIA Super Mobility show in Las Vegas. In 2015 Ascent Solar won its second R&D 100 Award, the 2015 award was given for the development of the MilPak platform, a military-grade solar power generation and storage unit. The MilPak platform is on of the most rugged, yet lightweight, power generation and storage solutions available, both attributes enabled by the use of Ascent’s CIGS technology.
In the first quarter of 2016, EnerPlex launched the new Emergency sales vertical, partnering with Emergency Preparedness eCommerce leader, Emergency Essentials. In early 2016 Ascent announced new breakthroughs in the Company’s line of high-voltage solar products, designed specifically for high-altitude and space markets, building on the progress previously announced in Q4, 2015. Also during the first quarter of 2016, the Company announced the launch of select products on the GSA Advantage website; which allows Federal employees, including members of all branches of the US Military, to directly purchase Ascent and EnerPlex products including: the MilPak E, Commandr 20, Kickr 4 and WaveSol solar modules.
In February 2017 Ascent announced the sale of our EnerPlex brand and related intellectual properties and trademarks associated with EnerPlex to our battery product supplier, Sun Pleasure Co. Limited (“SPCL”) in an effort to better allocate its resources and to continue to focus on its core strength in the high-value specialty PV market. Following the transfer, Ascent will no longer produce or sell Enerplex-branded consumer products. Ascent will also supply solar PV products to SPCL, supporting the continuous growth of EnerPlex™ with Ascent’s proprietary and award-winning thin-film solar technologies and products.
Ascent continues to design and manufacture its own line of PV integrated consumer electronics, as well as portable power applications for commercial and military users. $453,511,214.Due to the high durability enabled by the monolithic integration employed inby 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 numerous. We also remain focusedextensive, including integrated solutions anywhere that may need power generation such as vehicles in space or in flight, or dual-use installations on specialty solar applications which can fully leverage the unique propertiesagricultural land.
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Table of our award winning CIGS technology. These include aerospace, defense, emergency management and consumer/OEM applications.
Contents
Commercialization and Manufacturing Strategy
Our proprietary manufacturing process deposits multiple layers of materials, includingWe manufacture our products by affixing a thin film of highly efficient Copper-Indium-Gallium-diSelenide (“CIGS”) semiconductor material, onCIGS layer to a flexible, lightweight plastic substrate using a large format, roll-to-roll manufacturing process and then laser patterns the layersthat permits us to create interconnected PV cells, orfabricate our flexible PV modules in a process known as monolithic integration. Ouran integrated sequential operation. We use proprietary monolithic integration techniques which enable us to form complete PV modules with less orlittle to no costly back endback-end assembly cost of intercellinter- 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 believe our technology and manufacturing process, which results in a lighter, flexible module package, provides us with unique market opportunities relative to both the crystalline silicon (“c-Si”) based PV manufacturers that currently lead the PV market, as well as other thin-film PV manufacturers that use substrate materials such as glass, stainless steel or other metals that can be heavier and more rigid than plastics.
Currently, we are producing consumer and military oriented products focusing on charging devices powered by or enhanced by our solar modules. Products in these markets are priced based on the overall value proposition rather than a commodity-style price per watt basis. We continue to develop new consumer products and we have adjusted the utilization of our equipment to meet our near term forecast sales. 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.
We plan to continue the development of our PV technology in order 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.
Related Party Activity
On February 2, 2012, we announced the appointment of Victor Lee as President and Chief Executive Officer. Mr. Lee had served on our Board of Directors since November 2011 and is currently the managing director of Tertius Financial Group Pte Ltd, the joint venture partner with Radiant Group, in TFG Radiant. In April 2012, we appointed the Chairman of TFG Radiant, Mr. Winston Xu (aka Xu Biao), as a member of our Board of Directors. TFG Radiant owned less than 1% of our outstanding common stock as of September 30, 2017.
On August 29, 2016,March, 2023, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. (“Tertius”), for the private placement of $330,000redeployed its Thornton manufacturing facility to focus on industrial commercialization of the Company’s original issue discount notes (“Discount Notes”). On August 29, 2016,Company's patent-pending Perovskite solar technologies and has purchased manufacturing assets in Zurich, Switzerland where the Company sold and issued $330,000 principal amount of Discount Notesplans to Tertius in exchange for $300,000 of gross proceeds. Tertius is an investment firm located in Singapore. Victor Lee, the Company’s president and CEO, is a managing director and 50% owner of Tertius.
On December 6, 2016, the Company issued a new $600,000 original issue discount note to Tertius in exchange for (i) $200,000 of gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The outstanding balance of the note is $602,000 (including accrued and unpaid interest) with a discount of $60,000 as of December 31, 2016.
On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to Tertius Financial Group ("TFG") pursuant to a Securities Purchase Agreement (the “SPA”).
Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellationbegin production of its $600,000 promissory note (including accrued interest of approximately $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG.
The new ownership by TFG represents less than 4% of the outstanding shares of common stock of the Company as of September 30, 2017. There are no registered rights.
Tertius is an investment firm located in Singapore. Victor Lee, the Company’s President and CEO, is a managing director and 50% owner of Tertius.
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•Our ability to generate customer acceptance of anddevelop demand for, and sales of, our products;
successful ramping up of commercial production on the equipment installed;
our products are successfully and timely certified for use in our target markets;
•successful operating of production tools to achieve the efficiencies, throughput and yield necessary to reach our cost targets;
the products we design are saleable at a price sufficient to generate profits;
ourOur ability to raise sufficient capitalattract and retain qualified personnel to enable usimplement our business plan and corporate growth strategies;
•Our ability to reach a level ofdevelop sales, sufficient to achieve profitability on terms favorable to us;marketing and distribution capabilities;
effective management of the planned ramp up of our domestic and international operations;
•ourOur ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailerspartners;
•The accuracy of our estimates and e-commerce companies, who deal directly with end users inprojections;
•Our ability to secure additional financing to fund our target markets;short-term and long-term financial needs;
our•Our ability to maintain the listing of our common stock on the OTCBBNasdaq 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 implement remediation measuresexpand and protect the intellectual property portfolio that relates to address material weaknesses in control;our photovoltaic modules and processes;
our•Our ability to maintain effective internal controls over financial reporting;
•Our ability to achieve projected operational performance and cost metrics; and
our ability•General economic and business conditions, and in particular, conditions specific to enter into commercially viable licensing, joint venture, or other commercial arrangements;the solar power industry.
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Table of Contents
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
availability December 31, 2022, and the results of raw materials.
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.
Our significant accounting policies were described in Note 3 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.
Recent Accounting Pronouncements
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, 2016. There2022. Except for the adoption of ASU 2020-06, there have been no significant changes to our accounting policies as of September 30, 2017.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The update will establish a comprehensive revenue recognition standard for virtually all industries in GAAP. ASU 2014-09 will change the amount and timing of revenue and cost recognition, implementation, disclosures and documentation. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for the Company in fiscal year 2018. The Company continues to evaluate ASU 2014-09, but does not believe it will have a material effect on the Company’s consolidated financial statements.
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 is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for interim periods and fiscal years beginning after December 15, 2017, and early application is permitted. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements.
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 Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements.
March 31, 2023.Results of Operations
Comparison of the Three Months Ended September 30, 2017March 31, 2023 and 2016
2022
| | | | | | | | | | | | |
| | Three Months Ended
March 31, | | | | |
| | 2023 | | | 2022 | | | $ Change | |
Revenues | | | | | | | | | |
Products | | $ | 99,225 | | | $ | 54,210 | | | $ | 45,015 | |
Milestone and engineering | | | 25,000 | | | | 512,000 | | | | (487,000 | ) |
Total Revenues | | | 124,225 | | | | 566,210 | | | | (441,985 | ) |
| | | | | | | | | |
Costs and Expenses | | | | | | | | | |
Cost of Revenue | | | 461,795 | | | | 532,890 | | | | (71,095 | ) |
Research, development and
manufacturing operations | | | 1,665,694 | | | | 1,406,322 | | | | 259,372 | |
Selling, general and administrative | | | 1,591,821 | | | | 821,266 | | | | 770,555 | |
Share-based compensation | | | 1,404,450 | | | | - | | | | 1,404,450 | |
Depreciation and amortization | | | 25,781 | | | | 16,665 | | | | 9,116 | |
Total Costs and Expenses | | | 5,149,541 | | | | 2,777,143 | | | | 2,372,398 | |
Loss From Operations | | | (5,025,316 | ) | | | (2,210,933 | ) | | | (2,814,383 | ) |
| | | | | | | | | |
Other Income/(Expense) | | | | | | | | | |
Other income/(expense), net | | | 10,000 | | | | - | | | | 10,000 | |
Interest Expense | | | (1,068,036 | ) | | | (2,086,314 | ) | | | 1,018,278 | |
Total Other Income/(Expense) | | | (1,058,036 | ) | | | (2,086,314 | ) | | | 1,028,278 | |
Income/(Loss) on Equity Method Investments | | | - | | | | (2 | ) | | | 2 | |
Net (Loss)/Income | | $ | (6,083,352 | ) | | $ | (4,297,249 | ) | | $ | (1,786,103 | ) |
Comparison of the Three Months Ended March 31, 2023 and 2022
Total Revenues.
Our nettotal revenues were $242,000decreased by $441,985, or 78%, for the three months ended September 30, 2017March 31, 2023 when compared to $453,000the 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 September 30, 2016. A decrease of $211,000. The following factors contributed to the decrease in revenue during the three months ended September 30, 2017:
| |
1. | Net product revenues were approximately $242,000 for the three months ended September 30, 2017 compared to $437,000 for the three months ended September 30, 2016, a decrease of $195,000. The decrease in product sales is largely the result of our sale of the EnerPlex brand of products. |
| |
2. | The Company did not have any revenues attributable to government research and development contracts during the three months ended September 30, 2017, compared to $16,000 during the three months ended September 30, 2016. |
Cost of revenues. Our Cost of revenues for the three months ended September 30, 2017 was approximately $535,000 compared to $1,332,000 for the three months ended September 30, 2016, a decrease of $797,000. The decrease is primarily attributed to a decrease in materials and labor costs as a result of a decrease in production asMarch 31, 2023 when compared to the third quartersame period in 2022.This is due primarily to the prior year. CostCompany redeploying its Thornton manufacturing facility to focus on industrial commercialization of revenues for the third quarterCompany's patent-pending Perovskite solar technologies resulting in lower cost of 2017 is comprisedrevenue.18
Table of materials and freight of $75,000, direct labor of $51,000, and overhead of $409,000. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to overhead. We are currently pursuing high-value PV markets.
Contents
Research, development and manufacturing operations.
Research, development and manufacturing operations costs were approximately $1,312,000 for the three months ended September 30, 2017 compared to $1,660,000 for the three months ended September 30, 2016, a decrease of $348,000. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed to the decrease in research, development, and manufacturing operations expenses during the three months ended September 30, 2017:
| |
1. | Personnel and facility related expenses decreased approximately $363,000 as compared to the third quarter of 2016. The decrease in personnel related costs was primarily due to a reduction in headcount. |
| |
2. | Consulting and contract services decreased approximately $5,000 compared to the third quarter of 2016. The decrease in expense as compared to the third quarter of 2016 was primarily attributed to the reduced number of contractors during the quarter ended September 30, 2017. |
| |
3. | Materials and equipment related expenses, increased approximately $20,000 compared to the third quarter of 2016. The decrease in expense was primarily due to the reserve against WIP inventory as a result of our focus transition from the consumer electronics market to high-value PV markets. |
Inventory impairment costs. Due to the sale of the EnerPlex brand and the re-purposing of our work-in-process inventory, we are unable to estimate the recoverability of all of our work-in process inventory values, resulting in a lower-cost-to-market analysis and reserve for impairment. No adjustment was recorded to inventory impairment costs for the three months ended September 30, 2017.
Selling,general and administrative. Selling, general and administrative expenses were $1,342,000 for the three months ended September 30, 2017 compared to $2,576,000 for the three months ended September 30, 2016, a decrease of $1,234,000. The following factors contributed to the decrease in selling, general, and administrative expenses during the three months ended September 30, 2017:
| |
1. | Personnel and facility related costs decreased approximately $436,000 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. The overall decrease in personnel related costs was primarily due a lower headcount for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. |
| |
2. | Marketing and related expenses decreased approximately $529,000 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the third quarter of 2016 as compared to the first quarter of 2016 which is the direct result of changing our main focus from the consumer electronics market to higher-value PV markets. |
| |
3. | Consulting and contract services decreased approximately $52,000 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. The decrease was a result of decreased consulting expenses related to our financing efforts. |
| |
4. | Legal expenses decreased approximately $116,000 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. The primary reasons for the decrease is due to reductions in both legal expenses related to our patents and general legal expenses related to financing efforts as compared to the quarter ended September 30, 2016. |
| |
5. | Bad debt and settlement expenses decreased approximately $75,000 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. During the quarter we recorded payments and settlements against existing reserves which were offset by additional reserves for customers whose accounts were greater than 120 days overdue. |
| |
6. | Public company expenses decreased approximately $26,000 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. The decrease is mostly due to a decrease in public relations expense. |
Other income / expense, net. Other income / expense was a $902,000 net income for the three months ended September 30, 2017 compared to a $6,247,000 net expense for the three months ended September 30, 2016, an improvement of $7,149,000. The following factors contributed to the increase in other income/(expense) during the three months ended September 30, 2017:
| |
1. | Interest expense decreased approximately $891,000 as compared the third quarter of 2016. The decrease is primarily due to an decrease of non-cash interest expense amortization of debt discounts related to convertible debt, promissory notes, and Preferred Stock. |
| |
2. | Other expense, net increased approximately $58,000. This increase primarily results from a $15,000 loss on sale of assets in the three months ended September 30, 2016, compared to a $42,000 gain on sale of assets for the three months ended September 30, 2016. |
| |
3. | Warrant expense increased by approximately $336,000 as compared to the third quarter of 2016. This increase is due to the issuance of warrants during the three months ended September 30, 2017, related to redemption and settlement agreements. |
| |
4. | Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, net improved to a $2,151,000 gain during the third quarter of 2017 as compared to a $4,500,000 loss the third quarter of 2016. The improvement of $6,652,000 in this non-cash item is attributable to a gain of $2,593,000 on the change in fair value of our embedded derivative instruments during the three months ended September 30, 2017 and a decrease in the loss from extinguishment of liabilities of $4,059,000, related to conversions and redemptions of certain convertible notes and preferred stock, for the three months ended September 30, 2017 as compared to the the three months ended September 30, 2016 |
Net Loss. Our Net Loss was $2,356,000 for the three months ended September 30, 2017 compared to a Net Loss of $11,786,000 for the three months ended September 30, 2016, an improvement of $9,430,000.
The decrease in Net Loss for the three months ended September 30, 2017 can be summarized in variances in significant account activity as follows:
|
| | | | |
| | | Decrease (Increase) to Net Loss For the Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016 |
| Revenues | | (211,000 | ) |
| Cost of Revenue | | 797,000 |
|
| Research, development and manufacturing operations | | |
| Materials and Equipment Related Expenses | | (19,000 | ) |
| Personnel Related Expenses | | 354,000 |
|
| Consulting and Contract Services | | 5,000 |
|
| Facility Related Expenses | | 9,000 |
|
| Other Miscellaneous Costs | | (1,000 | ) |
| Selling, general and administrative expenses | | |
| Personnel, administrative, and facility Related Expenses | | 436,000 |
|
| Marketing Related Expenses | | 529,000 |
|
| Legal Expenses | | 116,000 |
|
| Public Company Costs | | 26,000 |
|
| Consulting and Contract Services | | 52,000 |
|
| Bad debt expense | | 73,000 |
|
| Settlement expense | | 2,000 |
|
| Depreciation and Amortization Expense | | 113,000 |
|
| Other Income / (Expense) | | |
| Interest Expense | | 891,000 |
|
| Other Income/Expense | | (58,000 | ) |
| Warrant Expense | | (336,000 | ) |
| Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net | | 6,652,000 |
|
| Decrease (Increase) to Net Loss | | $ | 9,430,000 |
|
Comparison of the Nine Months Ended September 30, 2017 and 2016
Revenues. Our net revenues were $548,000 for the nine months ended September 30, 2016 compared to $1,418,000 for the nine months ended September 30, 2016. A decrease of $870,000. The following factors contributed to the decrease in revenue during the three months ended September 30, 2017:
| |
1. | Net product revenues were approximately $548,000 for the nine months ended September 30, 2017 compared to $1,370,000 for the nine months ended September 30, 2016, a decrease of $822,000. The decrease in product sales is largely the result of our sale of the Enerplex brand of products. |
| |
2. | The Company did not have any revenues attributable to government research and development contracts during the nine months ended September 30, 2017, compared to $48,000 during the nine months ended September 30, 2016. |
Cost of revenues. Our Cost of revenues for the nine months ended September 30, 2017 was $2,323,000 compared to $4,769,000 for the nine months ended September 30, 2016, a decrease of $2,446,000. The decrease is primarily attributed to a decrease in materials and labor costs as a result of a decrease in production as compared to the nine months ended September 30, 2016. Cost of revenues for the nine months ended September 30, 2017 is comprised of materials and freight of $789,000, direct labor of $53,000, and overhead of $1,481,000. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to overhead. We are currently pursuing high-value PV markets.
Research, development and manufacturing operations.development. Research, development and manufacturing operations costs were $3,830,000increased by $259,372, or 18%, for the ninethree months ended September 30, 2017March 31, 2023 when compared to $5,132,000 for the nine months ended September 30, 2016, a decrease of $1,302,000. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activitiessame period in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed2022. This is due primarily to the decrease in research, development,Company redeploying the Thornton manufacturing facility as a Perovskite Center of Excellence and manufacturing operations expenses during the nine months ended September 30, 2017:
| |
1. | Personnel and facility related expenses decreased approximately $1,219,000 as compared to the nine months ended September 30, 2016. The decrease in personnel related costs was primarily due to a reduction in headcount. |
| |
2. | Consulting and contract services decreased approximately $20,000 compared to the nine months ended September 30, 2016. The decrease in expense as compared to the nine months ended was primarily attributed to the reduced number of contractors during the nine months ended September 30, 2017. |
| |
3. | Materials and equipment related expenses decreased approximately $63,000 compared to the nine months ended September 30, 2016. The decrease in expense was primarily due to the reserve against WIP inventory as a result of our focus transition from the consumer electronics market to high-value PV markets. |
Inventory impairment costs. Due to the sale of the EnerPlex brand and the re-purposing of our work-in-process inventory, we are unable to estimate the recoverability of all of our work-in process inventory values, resulting in a lower-cost-to-market analysis and reserve for impairment. An expense of approximately $364,000 was recorded to inventory impairment costs for the nine months ended September 30, 2017.
focusing on patent-pending Perovskite solar technologies.Selling,
general and administrative. Selling, general and administrative expenses were $4,512,000increased by $770,555, or 94%, for the ninethree months ended September 30, 2017March 31, 2023 when compared to $8,520,000the 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 ninethree months ended September 30, 2016,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 $4,008,000. The following factors contributed todebt discount in the decrease in selling, general, and administrative expenses during the nine months ended September 30, 2017:
| |
1. | Personnel and facility related costs decreased approximately $1,742,000 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The overall decrease in personnel related costs was primarily due a lower headcount for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. |
| |
2. | Marketing and related expenses decreased approximately $1,685,000 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the nine months ended as compared to the nine months ended September 30, 2016 which is the direct result of changing our main focus from the consumer electronics market to higher-value PV markets. |
| |
3. | Consulting and contract services increased approximately $55,000 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The increase was the result of a marketing campaign that began during the nine months ended September 30, 2017. |
| |
4. | Legal expenses decreased approximately $432,000 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The primary reasons for the decrease is due to reductions in both legal expenses related to our patents and general legal expenses related to financing efforts as compared to the nine months ended September 30, 2016. |
| |
5. | Bad debt expense decreased approximately $246,000 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. During the nine months ended September 30, 2017, we recorded payments and settlements against existing reserves which were offset by additional reserves for customers whose accounts were greater than 120 days overdue. |
| |
6. | Public company expenses decreased approximately $122,000 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The decrease is mostly due to a decrease in public relations expense. |
| |
7. | Settlement expenses for the nine months ended September 30, 2017 were approximately $164,000. These expenses consisted of a settlement of $23,000 related to an alleged Proposition 65 violation and a settlement of $141,000 with a former EnerPlex customer regarding a return of product. |
Other income / expense, net. Other income / expense was a $1,156,000 net expense for the nine months ended September 30, 2017 compared to a $13,296,000 net expense for the nine months ended September 30, 2016, an improvement of $12,140,000. The following factors contributed to the decrease in other income/expense during the nine months ended September 30, 2017:
| |
1. | Interest expense decreased $305,000 as compared the nine months ended September 30, 2016 . The decrease is primarily due to an decrease of non-cash interest expense and amortization of debt discounts related to convertible and promissory notes and Preferred Stock. |
| |
2. | Other income, net increased $489,000. This increase is comprised of an increase in gain on sale of assets of $1,125,000, primarily related to the transfer of the EnerPlex IP, offset by induced conversion costs of $636,000 on several of the financial instruments. |
| |
3. | Warrant expense increased by approximately $336,000 as compared to the nine months ended September 30, 2016. This increase is due to the issuance of warrants during the nine months ended September 30, 2017, related to redemption and settlement agreements. |
| |
4. | Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, net was a gain of $3,753,000 for the nine months ended September 30, 2017 an increase of $11,682,000 compared to the net loss of $7,929,000 for the nine months ended September 30, 2016. The change in this non-cash item is the result of an increase of $7,816,000 in the gain on change in the fair value of our embedded derivative instruments during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, and an decrease of $3,866,000 on loss on extinguishment of liabilities related to conversions of certain convertible notes and preferred stock in the same comparative periods. |
prior year.Net Loss.
Our Net Loss was $12,649,000increased by $1,786,103, or 42%, for the ninethree months ended September 30, 2017March 31, 2023 compared to a Net Loss of $33,479,000 for the nine months ended September 30, 2016, an improvement of $20,830,000. The decreasesame period in Net Loss for2022 due primarily to the nine months ended September 30, 2017 can be summarized in variances in significant account activity as follows:
|
| | | | |
| | | Decrease (Increase) to Net Loss For the Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016 |
| Revenues | | (870,000 | ) |
| Cost of Revenue | | 2,446,000 |
|
| Research, development and manufacturing operations | | |
| Materials and Equipment Related Expenses | | 62,000 |
|
| Personnel Related Expenses | | 1,164,000 |
|
| Consulting and Contract Services | | 20,000 |
|
| Facility Related Expenses | | 55,000 |
|
| Other Miscellaneous Costs | | 1,000 |
|
| Inventory impairment costs | | (364,000 | ) |
| Selling, general and administrative expenses | | |
| Personnel, Administrative, and Facility Related Expenses | | 1,742,000 |
|
| Marketing Related Expenses | | 1,685,000 |
|
| Legal Expenses | | 432,000 |
|
| Public Company Costs | | 122,000 |
|
| Bad Debt Expense | | 246,000 |
|
| Consulting and Contract Services | | (55,000 | ) |
| Settlement Expenses | | (164,000 | ) |
| Depreciation and Amortization Expense | | 2,168,000 |
|
| Other Income / (Expense) | | |
| Interest Expense | | 305,000 |
|
| Other Income/Expense | | 489,000 |
|
| Warrant Expense | | (336,000 | ) |
| Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net | | 11,682,000 |
|
| Decrease (Increase) to Net Loss | | $ | 20,830,000 |
|
items mentioned above.
Liquidity and Capital Resources
As of September 30, 2017, we had approximately $1,083 thousandThe Company has redeployed its Thornton facilities from a manufacturing facility to a research and development facility. Additionally, the Company purchased manufacturing equipment in cash and cash equivalents.
DuringZurich, Switzerland where the nine months ended September 30, 2017 and the year ended December 31, 2016, we entered into multiple financing agreementsCompany plans to fund operations. Further discussion of these transactions can be found in Notes 8 through 19 of the financial statements presented as of, and for the nine months ended, September 30, 2017, and in notes 9 through 20 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
We have continued PV production at our manufacturing facility. We dobegin 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 new specialty PVproduct strategy. During the ninethree months ended September 30, 2017, weMarch 31, 2023 the Company used $10.7 million$4,937,627 in cash for operations. Our primary significant long term cash obligation consists of a note payable of $5.5 million to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of $0.2 million, including principal and interest, will come due in the remainder of 2017.
AdditionalAdditionally, projected producttotal revenues are not anticipated to result in a positive cash flow position for the year 2017 overall and, as of September 30, 2017, we have negativeMarch 31, 2023, although the Company has working capital. As such,capital of $1,481,943, Management does not believe cash liquidity is sufficient for the year ending December 31, 2017next twelve months and will require additional financing.
We continue to accelerate sales and marketing efforts related to its certain consumer products, military solar products and specialty PV application strategies through expansion of our sales and distribution channels. We haveThe Company has begun activities related to securing additional financing through strategic or financial investors, but there is no assurance wethe Company will be able to raise additional capital on acceptable terms or at all. If ourthe Company’s revenues do not increase rapidly, and/or additional financing is not obtained, wethe Company will be required to significantly curtail operations to reduce costs and/or sell assets. Such actions would likely have an adverse impact on ourthe Company's future operations.
As a result of ourthe Company’s recurring losses from operations, and the need for additional financing to fund ourits operating and capital requirements, there is uncertainty regarding ourthe Company’s ability to maintain liquidity sufficient to operate ourits business effectively, which raises substantial doubt as to ourthe 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 NineThree Months Ended September 30, 2017 March 31, 2023and 2016
2022For the ninethree months ended September 30, 2017,March 31, 2023, our cash used in operations was $10.7 million$4,937,627 compared to $13.6 million$2,792,080 for the ninethree months ended September 30, 2016, a decreaseMarch 31, 2022, an increase of $2.8 million. The decrease$2,145,547. This increase is due primarily due to the reductionincreased Company expenses and timing of headcount and production, coupled with the transition out of certain consumer electronics markets and the sale of the EnerPlex brand.when expenses have been paid. For the ninethree months ended September 30, 2017, ourMarch 31, 2023, cash provided byused in investing activities was $92.7 thousand as$54,534 compared to our$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 $192.3 thousand, an increase$4,937,627 were primarily funded from 2022 financing agreements.
19
Table of $285.0 thousand. This increase is the result of investing in intellectual property ("IP") during the first quarter of 2016 and the sales of the EnerPlex brand IP during the first quarter of 2017. During the nine months ended September 30, 2017, negative operating cash flows of $10.7 million were funded through $11.6 million of funding received from promissory notes, and the use of cash customer receivables.
Contractual Obligations
The following table presents our contractual obligations as of September 30, 2017. Our long-term debt obligation is related to our building loan reflecting both principal and interest. Our purchase obligations include orders for equipment, inventory and operating expenses.
|
| | | | | | | | | | | | | | | | | |
|
|
|
| Payments by Year |
| Contractual Obligation |
| Total |
| Less than 1 year | 1-3 Years | 3-5 Years | More than 5 Years |
| Long Term Debt |
| $ | 7,874,857 |
|
| $ | 693,611 |
| $ | 2,080,832 |
| $ | 2,080,832 |
| $ | 3,019,582 |
|
| Purchase Obligations |
| $ | 368,697 |
|
| 368,697 |
|
|
|
|
|
| $ | 8,243,554 |
|
| $ | 1,062,308 |
| $ | 2,080,832 |
| $ | 2,080,832 |
| $ | 3,019,582 |
|
Contents
Off Balance Sheet Transactions
As of September 30, 2017 and DecemberMarch 31, 2016,2023, we did not have any off balanceoff-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk
Historically, weWe hold no significant funds and have purchased manufacturing equipment internationally, which exposes us tono significant future obligations denominated in foreign currency risk.
From time to time we enter into foreign currency fair value hedges utilizing forward contracts designed to match scheduled contractual payments to equipment suppliers. Our objective is to fix the dollar amount of our foreign currency denominated manufacturing equipment purchases at the time of order. Although our hedging activity is designed to fix the dollar amount to be expended, the asset purchased is recorded at the spot foreign currency rate in effectcurrencies as of the date of the payment to the supplier. The difference between the spot rate and the forward rate has been reported as gain or loss on forward contract. We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition. All forward contracts entered into by us have been settled on the contract settlement dates, the last of which was settled in December 2009.
March 31, 2023.Although our reporting currency is the U.S. Dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials. As a result, we are subject to currency translation risk. Further, changes in exchange rates between foreign currencies and the U.S. Dollar could affect our future net sales and cost of sales and could result in exchange losses.
Our exposure to market risks for changes in interest rates relates primarily to our cash equivalents.equivalents and investment portfolio. As of September 30, 2017,March 31, 2023, our cash equivalents consisted only of federally insured operating and savings accounts held with financial institutions. From time to time, we may hold restricted funds, money market funds, investments in U.S. government securities and high qualityhigh-quality corporate securities. The primary objective of our investment activities is to preserve principal and provide liquidity on demand, while at the same time maximizing the income we receive from our investments without significantly increasing risk. The direct risk to us associated with fluctuating interest rates is limited to our investment portfolio, and we do not believe that a change in interest rates will have a significant impact on our financial position, results of operations, or cash flows.
Credit Risk
From time to time we hold certain financial and derivative instruments that potentially subject us to credit risk. These consist primarily of cash, cash equivalents, restricted cash, investments and foreign currency option contracts. We are exposed to credit losses in the event of nonperformance by the counter parties to our financial and derivative instruments. We place cash, cash equivalents, investments and forward foreign currency option contracts with various high-quality financial institutions, and exposure is limited at any one institution. We continuously evaluate the credit standing of our counter party financial institutions.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (SEC) rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management including our Chief Executive Officer and interim Principal Financial Officer,as appropriate to allow timely decisions regarding required disclosures. Our management conducted an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act as of September 30, 2017.March 31, 2023. Based on this evaluation, our Chief Executive Officermanagement concluded the design and interim Principal Financial Officer concluded that asoperation of September 30, 2017, our disclosure controls and procedures were not effective.
Description of Material Weakness identified in 2016 and 2017
Based on our assessment and the criteria used, management concluded that our internal control over financial reporting,effective as of DecemberMarch 31, 2016 and September 30, 2017, was not effective due to the material weaknesses described as follows:
The Company was understaffed and did not have sufficiently trained resources with the technical expertise to research and account for the Company's complex capitalization and multiple complex capital raising and equity transactions. This deficiency arose primarily from staff turnover including the Company’s failure to more quickly replace its Director of Financial Planning and Reporting, who left the Company for a new position in November, 2016.
As a consequence, the Company did not have effective process level control activities over the following:
Accounting for the Company's convertible debt and preferred stock transactions was lacking for the preparation of the December 31, 2016 financial statements. Many of the special accounting issues specific to debt and equity financing have become increasingly complex and time-consuming, and require extensive expertise to ensure that the accounting and reporting are accurate and in accordance with applicable standards. Given the numerous complex convertible equity financing transactions engaged in by the Company during 2016, the relevant accounting standards require the calculation, monitoring, recalculation and “marking to market” of a wide variety of derivative securities instruments that are deemed to arise from such financing transactions. These complex derivatives calculations are used in order to calculate the intrinsic value of the financial instruments and affect the short term embedded derivative liabilities line item on the Company’s balance sheet and in the change in fair value of derivatives and gain/loss on extinguishment of liabilities line item on the Company’s consolidated statement of operations. As the calculations in question relate to non-cash transactions, there was no impact on the Company's cash, current assets, revenues, operating results, or cash flows. The control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.
The control deficiencies described above resulted in material misstatements in the preliminary consolidated financial statements that were corrected prior to the issuance of the consolidated financial statements as of and for the fiscal year ended December 31, 2016 and management does not believe enough time has passed to determine the effectiveness of our remediation plan.
Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting
The Company has executed the following steps in 2017 to remediate the aforementioned material weaknesses in its internal control over financial reporting:
In March 2017, the Company hired a Director of Financial Planning and Reporting with the technical expertise to research and account for the Company's complex capital raising and financial transactions. In addition, the Company will be evaluating its personnel needs and other resources to ensure appropriate staffing and enhance its research and technical accounting knowledge base.
The Company will design and implement additional procedures in order to assure that the Director, Financial Planning and Reporting and other audit/accounting personnel are more involved with the Company’s financing activities to monitor and earlier identify accounting issues that may be raised by the Company’s ongoing financing activities.
2023.Changes in Internal Control Over Financial Reporting
Except for the identification of the material weaknesses noted above, thereThere were no other changes in internal control over financial reporting during the ninethree months ended September 30, 2017March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 1. Legal Proceedings
On October 21, 2011,From time to time, we were notified that a complaint (the “Lawsuit”) was filed by Jefferies & Company, Inc. ("Jefferies") against usmay become involved in state court locatedlegal proceedings arising in the County and Stateordinary course of New York.
In December 2010,our business. We are not currently aware of any such proceedings or claims that we and Jefferies entered into an engagement agreement (the “Fee Agreement”) pursuant to which Jefferies was hired to act as our financial advisor in relation to certain potential transactions. In the Lawsuit, Jefferies claims it is entitled to receive an investment banking fee of $3.0 million (plus expense reimbursement of approximately $49,000) under the Fee Agreement in connection with the August 2011 investment and strategic alliance transaction (the “Financing”) between us and TFG Radiant. In addition, should it prevail at trial, Jefferies would be able to claim an award for attorney's fees and prejudgment interestbelieve will have, individually or in the approximate amountaggregate, a material adverse effect on our business, financial condition or results of $1.2 million.
On April 16, 2014, the parties settled the lawsuit where the Company agreed to pay Jefferies a total of $2.0 million in equal installments over 40 months. The Company has paid $339,000 during the nine months ended September 30, 2017.
The Company records a liability in its financial statements for costs related to claims, including settlements and judgments, where the Company has assessed that a loss is probable and an amount can be reasonably estimated. The Company accrued $1.7 million, the net present value of the $2.0 million settlement, as of December 31, 2013. As of September 30, 2017, the settlement had been redeemed in full and there was no remaining accrued litigation settlement, recorded as a current liability in the Condensed Consolidated Balance Sheets.
operations.Item 1A. Risk Factors
In addition to the other information set forth in this report,Form 10-Q, you should carefully consider the factors discussed in the updated risk factors disclosed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022. Except as set forth below, there have been no material changes to our risk factors from those included in our Annual Report on Form 10-K filedfor the year ended December 31, 2022.
We may not be able to maintain our current listing for our common stock on April 17, 2017, whichthe Nasdaq Capital Market. Our inability to maintain our current listing on Nasdaq may limit the liquidity of our stock, increase its volatility, and hinder our ability to raise capital. If our common stock is delisted by Nasdaq, our common stock may be eligible for quotation on an over-the-counter quotation system or on the pink sheets. Upon any such delisting, our common stock would become subject to the regulations of the SEC relating to the market for penny stocks. A penny stock is any equity security not traded on a national securities exchange that has a market price of less than $5.00 per share. The regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could materially affectlimit the ability of shareholders to sell securities in the secondary market. In such a case, an investor may find it more difficult to dispose of or obtain accurate quotations as to the market value of our business, financial conditioncommon stock, and there can be no assurance that our common stock will be eligible for trading or future results. The risks described in our Annual Reportquotation on Form 10-K filed on April 17, 2017 are not the only risks facing our company. Additional risks and uncertainties not currently known to usany alternative exchanges or that we currently deem to be immaterial also may materiallymarkets.
Delisting from Nasdaq could adversely affect our ability to raise additional financing through public or private sales of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business financial conditiondevelopment opportunities.
Nasdaq Bid Price Notice
Our common stock was listed on Nasdaq on August 24, 2022. The Nasdaq listing rules require listed securities to maintain a minimum bid price of $1.00 per share. On March 23, 2023, the Company received a written notice from Nasdaq indicating that the Company was not in compliance with the $1.00 minimum bid price requirement. The notice did not result in the immediate delisting of the Company’s common stock from Nasdaq and the Company was provided 180 calendar days in which to regain compliance. If at any time during this 180 calendar day period the bid price of the Company’s common stock closes at or future results.
above $1.00 per share for a minimum of ten consecutive business days, the Nasdaq staff (the “Staff”) will provide the Company with a written confirmation of compliance and the matter will be closed.Alternatively, if the Company fails to regain compliance with the bid price rule prior to the expiration of the initial 180 calendar day period, the Company may be eligible for an additional 180 calendar day compliance period, provided (i) it meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq (except for the bid price requirement) and (ii) it provides written notice to Nasdaq of its intention to cure this deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event the Company does not regain compliance with the bid price rule prior to the expiration of the initial 180 calendar day period, and if it appears to the Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is not otherwise eligible, the Nasdaq staff will provide the Company with written notification that its securities are subject to delisting from Nasdaq. At that time, the Company may appeal the delisting determination to a Nasdaq hearings panel.
Nasdaq Stockholder Equity Requirement
Nasdaq Listing Rule 5550(b)(1) requires companies listed on Nasdaq to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing. In our quarterly report on Form 10-Q for the period ended March 31, 2023, the Company reported stockholders’ equity of $(2,180,440). The Company, therefore, may shortly receive a written notice from Nasdaq indicating that we are not in compliance with minimum stockholders’ equity requirement.
21
Table of Contents
Typically, such a notice would have no immediate on the listing of the Company’s common stock. Nasdaq would typically provides the Company with 45 calendar days to submit a plan to regain compliance. If the plan is accepted, the Company would typically be granted up to 180 calendar days from notice date to evidence compliance. There can be no assurance that the Company would be able to regain compliance with all applicable continued listing requirements or that its plan would be accepted by the Nasdaq staff. In the event the plan would not be accepted by the Nasdaq staff, or in the event the plan would be accepted and the extension granted but the Company fails to regain compliance within the plan period, the Company would have the right to a hearing before an independent panel. The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
applicable.Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the three months ended March 31, 2023.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Not applicable.
A listThe exhibits listed on the accompanying Index to Exhibits on this Form 10-Q are filed or incorporated into this Form 10-Q by reference.
EXHIBIT INDEX
| | |
Exhibit No. |
| Description |
|
|
|
3.1 |
| Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form SB-2 filed on January 23, 2006 (Reg. No. 333-131216)) |
|
|
|
3.2 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011) |
|
|
|
3.3 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed February 11, 2014) |
|
|
|
3.4 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated August 26, 2014. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed September 2, 2014) |
|
|
|
3.5 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated October 27, 2014 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated October 28, 2014) |
|
|
|
3.6 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated December 22, 2014. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated December 23, 2014) |
|
|
|
3.7 |
| Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on February 17, 2009) |
|
|
|
3.8 |
| First Amendment to Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009) |
|
|
|
3.9 |
| Second Amendment to Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed January 25, 2013) |
|
|
|
3.10 |
| Third Amendment to Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed December 18, 2015) |
|
|
|
3.11 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated May 26, 2016 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed June 2, 2016) |
|
|
|
3.12 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated September 15, 2016 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed September 16, 2016) |
|
|
|
3.13 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated March 16, 2017 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed March 17, 2017) |
|
|
|
3.14 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated July 19, 2018 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed July 23, 2018) |
|
|
|
3.15 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated September 23, 2021 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed September 24, 2021) |
|
|
|
3.16 |
| Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated January 27, 2022 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed February 2, 2022) |
|
|
|
23
Table of exhibits is found on page 47Contents
| | |
4.1 |
| Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form SB-2/A filed on June 6, 2006 (Reg. No. 333-131216)) |
|
|
|
4.2 |
| Certificate of Designations of Series A Preferred Stock (filed as Exhibit 4.2 to our Registration Statement on Form S-3 filed July 1, 2013 (Reg. No. 333-189739)) |
|
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|
4.3 |
| Description of Securities (incorporated by reference to Exhibit 4.3 to our Annual Report on Form 10-K filed May 13, 2021) |
|
|
|
10.1CTR |
| Securities Purchase Agreement, dated January 17, 2006, between the Company and ITN Energy Systems, Inc. (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form SB-2 filed on January 23, 2006 (Reg. No. 333-131216)) |
|
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10.2 CTR |
| Invention and Trade Secret Assignment Agreement, dated January 17, 2006, between the Company and ITN Energy Systems, Inc. (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form SB-2 filed on January 23, 2006 (Reg. No. 333-131216)) |
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10.3 |
| Patent Application Assignment Agreement, dated January 17, 2006, between the Company and ITN Energy Systems, Inc. (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form SB-2 filed on January 23, 2006 (Reg. No. 333-131216)) |
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10.4 CTR |
| License Agreement, dated January 17, 2006, between the Company and ITN Energy Systems, Inc. (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form SB-2 filed on January 23, 2006 (Reg. No. 333-131216)) |
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10.5 |
| Letter Agreement, dated November 23, 2005, among the Company, ITN Energy Systems, Inc. and the University of Delaware (incorporated by reference to Exhibit 10.16 to our Registration Statement on Form SB-2/A filed on May 26, 2006 (Reg. No. 333-131216)) |
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10.6 CTR |
| License Agreement, dated November 21, 2006, between the Company and UD Technology Corporation (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 29, 2006) |
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10.7 |
| Novation Agreement, dated January 1, 2007, among the Company, ITN Energy Systems, Inc. and the United States Government (incorporated by reference to Exhibit 10.23 to our Annual Report on Form 10-KSB for the year ended December 31, 2006) |
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10.8† |
| Seventh Amended and Restated 2005 Stock Option Plan (incorporated by reference to Annex B of our definitive proxy statement dated April 22, 2016) |
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10.9† |
| Seventh Amended and Restated 2008 Restricted Stock Plan Stock Option Plan Plan (incorporated by reference to Annex A of our definitive proxy statement dated April 22, 2016) |
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10.10+ |
| Industrial Lease for 12300 Grant Street, Thornton, Colorado dated September 21, 2020 (incorporated by reference to Exhibit 10.50 to our Annual Report on Form 10-K filed January 29, 2021) |
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10.11+ |
| Long-Term Supply and Joint Development Agreement dated September 15, 2021 (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021) |
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10.12 |
| Form of Common Stock Warrant Related to Securities Purchase Agreement dated August 8, 2022 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on August 8, 2022) |
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10.13 |
| Common Stock Warrant dated August 19, 2022 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on August 19, 2022) |
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10.14†CTR |
| Employment Agreement between the Company and Jeffrey Max dated September 21, 2022 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 27, 2022) |
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10.15† |
| Employment Agreement between the Company and Paul Warley dated December 12, 2022 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on December 12, 2022) |
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10.16 |
| Securities Purchase Contract, dated as of December 19, 2022 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 20, 2022) |
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10.17 |
| Form of Security Agreement, dated as of December 19, 2022 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on December 20, 2022) |
24
Table of this report.
Contents
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10.18 |
| Form of Registered Advance Note 2022 (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on December 20, 2022) |
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10.19 |
| Form of Private Placement Advance Note (incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on December 20, 2022) |
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10.20 |
| Form of Warrant Note (incorporated by reference to Exhibit 4.3 to our Current Report on Form 8-K filed on December 20, 2022) |
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10.21 |
| Waiver and Amendment Agreement, dated as of March 29, 2023 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 29, 2023) |
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10.22 |
| Amendment to Waiver and Amendment Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 13, 2023) |
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10.23 |
| Common Stock Securities Purchase Agreement dated April 14, 2023 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 20, 2023) |
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10.24 |
| Asset Purchase Agreement, dated as of April 17, 2023 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on April 21, 2023) |
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10.25 |
| Transition Services Agreement, dated as of April 17, 2023 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 21, 2023) |
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10.26 |
| Sublease Agreement, dated as of April 17, 2023 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on April 21, 2023) |
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10.27 |
| Technology License Agreement, dated as of April 17, 2023 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on April 21, 2023) |
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10.28 |
| Letter Agreement, dated as of April 20, 2023 (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on April 21, 2023) |
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10.29 |
| Subordinated Debt Securities Purchase Agreement dated April 19, 2023 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 25, 2023) |
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10.30 |
| Form of Subordinated Note under Subordinated Debt Securities Purchase Agreement dated April 19, 2023 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on April 25, 2023) |
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10.31† |
| CEO Employment Agreement between the Company and Paul Warley dated as of May 1, 2023 |
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31.1* |
| Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2* |
| Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1* |
| Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2* |
| Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
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101.INS |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* |
| Filed herewith |
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CTR |
| Portions of this exhibit have been omitted pursuant to a request for confidential treatment. |
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25
Table of Contents
| | |
† |
| Denotes management contract or compensatory plan or arrangement. |
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+ |
| Certain portions of the exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. |
26
Table of Contents
ASCENT SOLAR TECHNOLOGIES, INC.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the
13th15th day of November, 2017.May, 2023.
|
| | |
| ASCENT SOLAR TECHNOLOGIES, INC.
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|
May 15, 2023 | By: | s/ PAUL WARLEY |
|
| Lee Kong Hian (aka Victor Lee)
President and Paul Warley Chief Executive Officer (Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory)
|
ASCENT SOLAR TECHNOLOGIES, INC.
EXHIBIT INDEX
| Officer) |
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|
|
10.1May 15, 2023 | By: | /s/ JIN H. JO |
10.2
|
| |
10.3 | | |
10.4 | | |
10.5 | | |
10.6 | | |
10.7 | | |
31.1* | | |
31.2* | | |
32.1* | | |
32.2* | | |
101.INS | | XBRL Instance Document |
101.SCH | | XBRL Taxonomy Extension Schema Document |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Documentand Accounting Officer) |
27