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ASTI Ascent Solar

Filed: 5 Mar 21, 2:56pm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

 

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

or

 

 

 

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from             to             

Commission File No. 001-32919

 

 

Ascent Solar Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Delaware

 

20-3672603

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

12300 Grant Street, Thornton, CO

 

80241

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number including area code: 720-872-5000 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common

ASTI

OTC

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No    

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of March 3, 2021, there were 18,102,583,471 shares of our common stock issued and outstanding.

 

 

 


 

ASCENT SOLAR TECHNOLOGIES, INC.

Quarterly Report on Form 10-Q

Quarterly Period Ended March 31, 2020

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

1

 

Condensed Consolidated Balance Sheets - as of March 31, 2020 (unaudited) and December 31, 2019

1

 

Condensed Consolidated Statements of Operations - For the Three months ended March 31, 2020 (unaudited) and March 31, 2019

2

 

Condensed Consolidated Statements of Changes in Stockholder's Deficit - for the Three months ended March 31, 2020 (unaudited) and March 31, 2019

3

 

Condensed Consolidated Statements of Cash Flow - For the Three months ended March 31, 2020 (unaudited) and March 31, 2019

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

PART II. OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

SIGNATURES

39

 

 

 

 


Table of Contents

 

FORWARD-LOOKING STATEMENTS

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

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

 

Our limited operating history and lack of profitability;

 

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

 

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

 

Our ability to develop sales, marketing and distribution capabilities;

 

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

 

The accuracy of our estimates and projections;

 

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

 

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

 

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

 

Changes in our business plan or corporate strategies;

 

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

 

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

 

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

 

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

 

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

 

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

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

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

 

 


Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.

 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

-

 

 

$

-

 

Trade receivables, net of allowance of $45,883 and $46,023, respectively

 

 

-

 

 

 

-

 

Inventories

 

 

510,032

 

 

 

533,892

 

Prepaid and other current assets

 

 

43,541

 

 

 

51,598

 

Total current assets

 

 

553,573

 

 

 

585,490

 

Property, Plant and Equipment:

 

 

32,304,570

 

 

 

32,911,969

 

Accumulated depreciation

 

 

(28,113,801

)

 

 

(28,677,350

)

 

 

 

4,190,769

 

 

 

4,234,619

 

Other Assets:

 

 

 

 

 

 

 

 

Patents, net of accumulated amortization of $433,596 and $421,182, respectively

 

 

801,139

 

 

 

813,397

 

 

 

 

801,139

 

 

 

813,397

 

Total Assets

 

 

5,545,481

 

 

 

5,633,506

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,370,191

 

 

$

1,663,316

 

Related party payables

 

 

460,173

 

 

 

460,173

 

Accrued expenses

 

 

1,944,485

 

 

 

1,624,564

 

Accrued Interest

 

 

2,440,836

 

 

 

2,107,401

 

Notes Payable

 

 

1,501,530

 

 

 

1,506,530

 

Current portion of long-term debt

 

 

6,235,738

 

 

 

6,075,307

 

Secured promissory notes, net of discount of $535,903 and $837,242, respectively

 

 

6,636,994

 

 

 

6,335,655

 

Promissory notes, net of discount of $0 and $16,666, respectively

 

 

1,109,437

 

 

 

1,092,771

 

Convertible notes, net of discount of $451,042 and $861,567, respectively

 

 

2,539,541

 

 

 

2,129,016

 

Embedded Derivative Liability

 

 

-

 

 

 

7,717,150

 

Total current liabilities

 

 

24,238,925

 

 

 

30,711,883

 

Long-Term Debt

 

 

-

 

 

 

-

 

Accrued Warranty Liability

 

 

21,144

 

 

 

28,404

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficit:

 

 

 

 

 

 

 

 

Series A preferred stock, $.0001 par value; 750,000 shares authorized; 48,100 and 48,100 shares issued and outstanding, respectively ($716,022 and $703,863 Liquidation Preference, respectively)

 

 

5

 

 

 

5

 

Common stock, $0.0001 par value, 20,000,000,000 authorized; 4,759,161,650 and 4,759,161,650 shares issued and outstanding, respectively

 

 

475,917

 

 

 

475,917

 

Additional paid in capital

 

 

397,817,526

 

 

 

397,817,526

 

Accumulated Deficit

 

 

(417,008,036

)

 

 

(423,400,229

)

Total stockholders’ deficit

 

 

(18,714,588

)

 

 

(25,106,781

)

Total Liabilities and Stockholders’ Deficit

 

$

5,545,481

 

 

$

5,633,506

 

 

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

1


Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

Products

 

$

4,090

 

 

$

215,384

 

Total Revenues

 

 

4,090

 

 

 

215,384

 

Costs and Expenses

 

 

 

 

 

 

 

 

Costs of Revenue

 

 

72,706

 

 

 

91,436

 

Research and development

 

 

159,464

 

 

 

489,063

 

Selling, general and administrative

 

 

69,522

 

 

 

508,375

 

Depreciation and Amortization

 

 

56,263

 

 

 

66,352

 

Total Costs and Expenses

 

 

357,955

 

 

 

1,155,226

 

Loss from Operations

 

 

(353,865

)

 

 

(939,842

)

Other Income/(Expense)

 

 

 

 

 

 

 

 

Other Income/(Expense), net

 

 

259,600

 

 

 

-

 

Interest Expense

 

 

(1,230,692

)

 

 

(2,826,248

)

Change in fair value of derivatives and loss on extinguishment of liabilities, net

 

 

7,717,150

 

 

 

7,006,827

 

Total Other Income/(Expense)

 

 

6,746,058

 

 

 

4,180,579

 

Net Income

 

$

6,392,193

 

 

$

3,240,737

 

Net Income Per Share (Basic)

 

$

0.0013

 

 

$

0.020

 

Net Income Per Share (Diluted)

 

$

0.0001

 

 

$

0.001

 

Weighted Average Common Shares Outstanding (Basic)

 

 

4,759,161,650

 

 

 

139,241,521

 

Weighted Average Common Shares Outstanding (Diluted)

 

 

56,998,995,050

 

 

 

3,591,903,040

 

 

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

2


Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(unaudited)

For the Three Months Ended March 31, 2020

 

 

 

Series A Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance at December 31, 2019

 

 

48,100

 

 

$

5

 

 

 

4,759,161,650

 

 

$

475,917

 

 

$

397,817,526

 

 

$

(423,400,229

)

 

$

(25,106,781

)

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,392,193

 

 

 

6,392,193

 

Balance at March 31, 2020

 

 

48,100

 

 

$

5

 

 

 

4,759,161,650

 

 

$

475,917

 

 

$

397,817,526

 

 

$

(417,008,036

)

 

$

(18,714,588

)

 

3


Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(unaudited)

For the Three Months Ended March 31, 2019

 

 

 

Series A

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance, December 31, 2018

 

 

60,756

 

 

$

6

 

 

 

63,537,885

 

 

$

6,354

 

 

$

395,889,712

 

 

$

(418,531,968

)

 

$

(22,635,896

)

Interest and Dividend Expense paid with

   Common Stock

 

 

-

 

 

 

-

 

 

 

17,938,692

 

 

 

1,794

 

 

 

83,817

 

 

 

-

 

 

 

85,611

 

Conversion of St.George Note into

   Common Shares

 

 

-

 

 

 

-

 

 

 

58,503,244

 

 

 

5,850

 

 

 

100,900

 

 

 

-

 

 

 

106,750

 

Conversion of Global Ichiban Note into

   Common Shares

 

 

-

 

 

 

-

 

 

 

9,595,327

 

 

 

960

 

 

 

114,040

 

 

 

-

 

 

 

115,000

 

Conversion of BayBridge Note into

   Common Shares

 

 

-

 

 

 

-

 

 

 

46,461,277

 

 

 

4,646

 

 

 

85,854

 

 

 

-

 

 

 

90,500

 

Conversion of Bellridge Note into

   Common Shares

 

 

-

 

 

 

-

 

 

 

36,166,781

 

 

 

3,617

 

 

 

61,999

 

 

 

-

 

 

 

65,616

 

Conversion of Power Up Note into

   Common Shares

 

 

-

 

 

 

-

 

 

 

90,340,694

 

 

 

9,034

 

 

 

173,466

 

 

 

-

 

 

 

182,500

 

Conversion of Series A Preferred Stock into

   Common Stock

 

 

(12,656

)

 

 

(1

)

 

 

1

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

-

 

Loss on Extinguishment of

   Liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

382,834

 

 

 

-

 

 

 

382,834

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,346

 

 

 

-

 

 

 

4,346

 

Net Income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,240,737

 

 

 

3,240,737

 

Balance at March 31, 2019

 

 

48,100

 

 

$

5

 

 

 

322,543,901

 

 

$

32,255

 

 

$

396,896,969

 

 

$

(415,291,231

)

 

$

(18,362,002

)

 

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

4


Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

6,392,193

 

 

$

3,240,737

 

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

56,265

 

 

 

66,352

 

Stock based compensation

 

 

-

 

 

 

4,346

 

Realized (gain) on sale of assets

 

 

(254,600

)

 

 

-

 

Amortization of deferred financing costs

 

 

2,692

 

 

 

14,856

 

Non-cash interest expense

 

 

117,514

 

 

 

984,829

 

Amortization of debt discount

 

 

771,447

 

 

 

1,360,322

 

Bad debt expense

 

 

(141

)

 

 

130

 

Warranty reserve

 

 

(7,260

)

 

 

(1,275

)

Change in fair value of derivatives and loss on extinguishment of liabilities, net

 

 

(7,717,150

)

 

 

(7,006,827

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

141

 

 

 

109,414

 

Inventories

 

 

23,860

 

 

 

(17,129

)

Prepaid expenses and other current assets

 

 

5,365

 

 

 

(47,171

)

Accounts payable

 

 

(293,125

)

 

 

(323,710

)

Related party payable

 

 

 

 

 

(688

)

Accrued expenses

 

 

333,435

 

 

 

301,693

 

Accrued Interest

 

 

319,921

 

 

 

152,232

 

Net cash used in operating activities

 

 

(249,443

)

 

 

(1,161,889

)

Investing Activities:

 

 

 

 

 

 

 

 

Proceeds on sale of Assets

 

 

254,600

 

 

 

-

 

Patent activity costs

 

 

(157

)

 

 

(2,131

)

Net cash provided by (used in) investing activities

 

 

254,443

 

 

 

(2,131

)

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from debt issuance

 

 

 

 

 

1,201,768

 

Repayment of debt

 

 

(5,000

)

 

 

-

 

Payment of debt financing costs

 

 

 

 

 

(5,000

)

Net cash provided by (used in) financing activities

 

 

(5,000

)

 

 

1,196,768

 

Net change in cash and cash equivalents

 

 

 

 

 

32,748

 

Cash and cash equivalents at beginning of period

 

 

-

 

 

 

18,159

 

Cash and cash equivalents at end of period

 

$

 

 

$

50,907

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

20,741

 

Non-Cash Transactions:

 

 

 

 

 

 

 

 

Non-cash conversions of preferred stock and convertible notes to equity

 

$

 

 

$

645,977

 

Non-cash financing costs

 

$

 

 

$

10,800

 

Interest converted to principal

 

$

 

 

$

171,152

 

Initial embedded derivative liabilities

 

$

 

 

$

2,229,187

 

Promissory notes exchanged for convertible notes

 

$

 

 

$

235,000

 

 

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

 

5


Table of Contents

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

The Company is focusing on integrating its PV products into high value markets such as aerospace, satellites, near earth orbiting vehicles, and fixed wing unmanned aerial vehicles (UAV). The value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these industries, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent has the capability to design and develop finished products for end users in these areas as well as collaborate with strategic partners to design and develop custom integrated solutions for products like fixed-wing UAVs. Ascent sees significant overlap of the needs of end users across some of these industries and can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.

NOTE 2. BASIS OF PRESENTATION

The accompanying, unaudited, condensed consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of March 31, 2020 and December 31, 2019, and the results of operations for the three months ended March 31, 2020 and 2019. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.

The accompanying, unaudited, condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and footnotes typically found in U.S. GAAP audited annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. The Condensed Consolidated Balance Sheet at December 31, 2019 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. These condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the three and three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes to our accounting policies as of March 31, 2020.

Derivatives: The Company evaluates its financial instruments under FASB ASC 815, "Derivatives and Hedging" to determine whether the instruments contain an embedded derivative. When an embedded derivative is present, the instrument is evaluated for a fair value adjustment upon issuance and at the end of every reporting period. Any adjustments to fair value are treated as gains and losses in fair values of derivatives and are recorded in the Consolidated Statements of Operations.

Refer to Notes 9 and 11 for further discussion on the embedded derivatives of each instrument.

Recently Adopted or to be Adopted Accounting Policies

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

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In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. This standard is effective for the Company in the first quarter of 2020, and early adoption is permitted. The implementation of ASU 2018-13 did not have a material effect on the Company's consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Management has not yet evaluated the impact that the adoption of ASU 2020-06 will have on the Company’s consolidated financial statement presentation or disclosures.

Other new pronouncements issued but not effective as of March 31, 2020 are not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 4. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN    

During the three months ended March 31, 2020 and the year ended December 31, 2019, the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 9 through 11, and Note 15 of the financial statements presented as of, and for, the three months ended, March 31, 2020, and in Notes 8, 9, 10, 11, 12, and 14 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the three months ended March 31, 2020 the Company used $249,443 in cash for operations.

Additional projected product revenues are not anticipated to result in a positive cash flow position for the next twelve months overall and, as of March 31, 2020, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.

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

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

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NOTE 5. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes property, plant and equipment as of March 31, 2020 and December 31, 2019:

 

 

 

As of

March 31,

 

 

As of

December 31,

 

 

 

2020

 

 

2019

 

Building

 

$

5,828,960

 

 

$

5,828,960

 

Furniture, fixtures, computer hardware and computer

   software

 

 

489,421

 

 

 

489,421

 

Manufacturing machinery and equipment

 

 

25,986,189

 

 

 

26,593,588

 

Depreciable property, plant and equipment

 

 

32,304,570

 

 

 

32,911,969

 

Less: Accumulated depreciation and amortization

 

 

(28,113,801

)

 

 

(28,677,350

)

Net property, plant and equipment

 

$

4,190,769

 

 

$

4,234,619

 

 

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

During the three months ended March 31, 2020, the Company disposed of certain redundant machinery and equipment. This machinery and equipment was fully depreciated and the Company realized a gain of $254,600 from these sales.

Depreciation expense for the three months ended March 31, 2020 and 2019 was $43,849 and $48,500, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the unaudited Condensed Consolidated Statements of Operations.

NOTE 6. INVENTORIES

Inventories, net of reserves, consisted of the following at March 31, 2020 and December 31, 2019:

 

 

 

As of

March 31,

 

 

As of

December 31,

 

 

 

2020

 

 

2019

 

Raw materials

 

$

510,032

 

 

$

503,832

 

Work in process

 

 

-

 

 

 

30,060

 

Finished goods

 

 

0

 

 

 

0

 

Total

 

$

510,032

 

 

$

533,892

 

 

NOTE 7. NOTES PAYABLE

On February 24, 2017, the Company entered into an agreement with a vendor (“Vendor 1”) to convert the balance of their account into 3 notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matured on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. On June 5, 2018, the Company entered into another agreement with the same Vendor 1 to convert the balance of their account into a fourth note payable with a principal amount of $308,041, this note also bears interest at a rate of 6% per annum, and matured on July 31, 2018. As of March 31, 2020, the Company had not made any payments on these notes; the total outstanding principal and accrued interest were $1,073,825 and $178,492, respectively, and the note is due upon demand. Subsequent to the date of this report, this debt was settled in full. See Note 15. Subsequent Events, for further discussion.

On June 30, 2017, the Company entered into an agreement with another vendor (“Vendor 2”) to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matured on February 28, 2018. As of March 31, 2020, the Company had not made any payments on this note, the accrued interest was $34,418, and the note is due upon demand.

On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matured on

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December 31, 2019. The Company has not made the monthly payments of $18,426 that were to commence on October 30, 2017; as of March 31, 2020, the company had paid principal of $37,529 and interest of $897, and the note is due upon demand. The remaining principal and interest balances, as of March 31, 2020, were $177,705 and $24,456, respectively. Subsequent to the date of this report, this debt was settled in full. See Note 15. Subsequent Events, for further discussion.

NOTE 8. DEBT

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

The outstanding principal balance of the note was $6,235,737 and $6,075,306 as of March 31, 2020 and December 31, 2019, respectively.

As of March 31, 2020, the Company had 0t made any payments to IRT and the accrued interest on the note was $350,589. Since the loan is in default, the entire outstanding balance is classified as a current liability on the Company's March 31, 2020 Balance Sheet. Subsequent to the date of this report, this debt was settled in full. See Sale and Leaseback of Facility section of Note 15. Subsequent Events, for further discussion.

NOTE 9. SECURED PROMISSORY NOTES

The following table provides a summary of the activity of the Company's secured notes:

 

 

 

Global

Ichiban

 

 

St. George

 

 

Total

 

Secured Notes Principal Balance at December 31, 2018

 

$

4,956,745

 

 

$

1,315,000

 

 

$

6,271,745

 

New notes

 

 

0

 

 

 

845,000

 

 

 

845,000

 

Note conversions

 

 

(115,000

)

 

 

0

 

 

 

(115,000

)

Interest converted to principal

 

 

171,152

 

 

 

0

 

 

 

171,152

 

Note assignments

 

 

0

 

 

 

0

 

 

 

0

 

Secured Notes Principal Balance at December 31, 2019

 

 

5,012,897

 

 

 

2,160,000

 

 

 

7,172,897

 

Less: remaining discount

 

 

(765,576

)

 

 

(71,666

)

 

 

(837,242

)

Secured Notes, net of discount, at December 31, 2019

 

 

4,247,321

 

 

 

2,088,334

 

 

 

6,335,655

 

New notes

 

 

0

 

 

 

0

 

 

 

0

 

Note conversions

 

 

0

 

 

 

0

 

 

 

0

 

Interest converted to principal

 

 

0

 

 

 

0

 

 

 

0

 

Secured Notes Principal Balance at March 31, 2020

 

 

5,012,897

 

 

 

2,160,000

 

 

 

7,172,897

 

Less: remaining discount

 

 

(535,903

)

 

 

0

 

 

 

(535,903

)

Secured Notes, net of discount, at March 31, 2020

 

$

4,476,994

 

 

$

2,160,000

 

 

$

6,636,994

 

 

Global Ichiban Secured Promissory Notes

During 2018, the company issued to Global $1.9 million aggregate principal amount in notes, in exchange for additional proceeds of $1.9 million. The aggregate original issue discounts of $65,000 will be allocated to interest expense, ratably, over the life of the note. These notes matured between January 11, 2019 and October 22, 2019.

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

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The following table summarizes the conversion activity of this note:

 

Conversion Period

 

Principal

Converted

 

 

Interest

Converted

 

 

Common Shares

Issued

 

Q1 2018

 

$

1,250,000

 

 

$

-

 

 

 

2,450,981

 

Q2 2018

 

 

176,000

 

 

 

-

 

 

 

1,035,295

 

Q1 2019

 

 

115,000

 

 

 

-

 

 

 

9,595,327

 

 

 

$

1,541,000

 

 

$

-

 

 

 

13,081,603

 

 

Since conversions began in the first quarter of 2018, the interest associated with conversions has been added back into the principal of the notes. The following table summarizes the activity of adding the interest to principal:

 

Period

 

Interest converted to

Principal

 

Q1 2018

 

$

96,281

 

Q2 2018

 

 

44,237

 

Q1 2019

 

 

171,152

 

 

 

$

311,670

 

 

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

Payments on these notes have not occurred in accordance with the agreement and, as of the date of this filing, these notes are due upon demand. As of March 31, 2020, the aggregate principal and interest balance of the Notes were $5,012,897 and $733,852, respectively.

Subsequent to the period of this report, the amounts owed to Global were exchanged for a new note. Refer to the Global Exchange Agreement section of Note 15. Subsequent Events for further discussion.

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

The aggregate derivative value of the notes was $2.0 million as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $2.0 million for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

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St. George Secured Convertible Notes

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

On November 5, 2018, the Company entered into a second securities purchase agreement with St. George, for the private placement of a $1.2 million secured convertible promissory note ("Company Note"). On November 7, 2018, the Company received $200,000 of gross proceeds from the offering of the Company Note. The Company may receive additional cash proceeds of up to an aggregate of $800,000 through cash payments made from time to time by St George of principal and interest under the eight Investor Notes. The aggregate principal amount of the Company Note is divided into nine tranches, which tranches correspond to (i) the cash funding received on November 5, 2018 and (ii) the principal amounts of the eight Investor Notes. As of December 2019, the Company had received an additional $800,000 in proceeds and had recorded $1,220,000 in principal related to the Company and Investor Notes. The Company recorded original issue discounts of $200,000 and debt financing costs of $20,000, which will be recognized as interest expense, ratably, over the life of the note. As of December 31, 2019, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:

 

Closing Date

Closing Amount

 

Proceeds

 

11/7/2018

$

260,000

 

$

200,000

 

11/19/2018

$

120,000

 

$

100,000

 

11/30/2018

$

120,000

 

$

100,000

 

12/7/2018

$

120,000

 

$

100,000

 

12/17/2018

$

120,000

 

$

100,000

 

1/3/2019

$

120,000

 

$

100,000

 

1/17/2019

$

120,000

 

$

100,000

 

1/30/2019

$

120,000

 

$

100,000

 

2/8/2019

$

120,000

 

$

100,000

 

 

On March 13, 2019, the Company entered into a third securities purchase agreement with St. George, for the private placement of a $365,000 secured convertible promissory note ("Third Note"). The Company recorded original issue discounts of $60,000 and debt financing costs of $5,000, which will be recognized as interest expense, ratably, over the life of the note.  As of March 31, 2020, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:

 

Closing Date

Closing Amount

 

Proceeds

 

3/15/2019

$

125,000

 

$

100,000

 

3/22/2019

$

120,000

 

$

100,000

 

4/4/2019

$

120,000

 

$

100,000

 

 

As of March 31, 2020, no principal or interest had been paid or converted, and the aggregate principal and interest balance of the Notes were $2.2 million, and $307,000, respectively.

Subsequent to the date of this report, the debt with St. George was assigned to another investor, BD 1 Investment Holding, LLC (“BD 1”). Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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

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The aggregate derivative value of the notes was $2.5 million as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 45%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $2.5 million for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

NOTE 10. PROMISSORY NOTES

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

 

 

 

Investor 1

 

 

Investor 2

 

 

Total

 

Promissory Notes Principal Balance at December 31, 2018

 

$

494,437

 

 

$

850,000

 

 

$

1,344,437

 

New principal

 

 

0

 

 

 

615,000

 

 

 

615,000

 

Notes exchanged

 

 

0

 

 

 

(850,000

)

 

 

(850,000

)

Promissory Notes Principal Balance at December 31, 2019

 

 

494,437

 

 

 

615,000

 

 

 

1,109,437

 

Less: remaining discount

 

 

0

 

 

 

(16,666

)

 

 

(16,666

)

Promissory Notes Principal Balance at December 31, 2019

 

 

494,437

 

 

 

598,334

 

 

 

1,092,771

 

New principal

 

 

0

 

 

 

0

 

 

 

0

 

Notes exchanged

 

 

0

 

 

 

0

 

 

 

0

 

Promissory Notes Principal Balance at March 31, 2020

 

 

494,437

 

 

 

615,000

 

 

 

1,109,437

 

Less: remaining discount

 

 

0

 

 

 

0

 

 

 

0

 

Promissory Notes, net of discount, at March 31, 2020

 

$

494,437

 

 

$

615,000

 

 

$

1,109,437

 

 

Offering of Unsecured, Non-Convertible Notes to Investor 1

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

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

As of March 31, 2020, $331,000 of principal and $51,000 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of March 31, 2020 were $494,437 and $160,584, respectively.

Subsequent to the date of this report, the debt with Investor 1 was assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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Offering of Unsecured, Non-Convertible Notes to Investor 2

On June 6, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $315,000. The promissory note was issued with an original issue discount of $55,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $260,000, that was received in several tranches between February 2018 and April 2018. This note bears interest at 12% per annum and matured on June 6, 2019. On May 2, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $315,000 and an accrued interest balance of $40,000. See Note 11 for further discussion on the new convertible notes.

On July 24, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $115,000. The promissory note was issued with an original issue discount of $28,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $87,000, which was received in several tranches between May 2018 and June 2018. This note bears interest at 12% per annum and matured on January 24, 2019. On March 11, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $115,000 and an accrued interest balance of $11,000. See Note 11 for further discussion on the new convertible notes.

On September 10, 2018, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $120,000. The promissory note was issued with an original issue discount of $20,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $100,000, which was received in several tranches between June 2018 and September 2018. This note bears interest at 12% per annum and matured on March 10, 2019. March 11, 2019, the Company entered into a securities exchange agreement with Investor 2 to surrender and exchange this promissory note in exchange for a convertible note. The promissory note had a principal balance of $120,000 and an accrued interest balance of $8,000. See Note 11 for further discussion on the new convertible notes.

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

On March 11, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $60,000. The promissory note was issued with an original issue discount of $10,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $50,000, which was received in several tranches between January 2019 and March 2019. This note bears interest at 12% per annum and matured on September 11, 2019. All principal and interest is payable upon maturity. As of March 31, 2020, the remaining principal and interest on this note were $60,000 and $8,000, respectively.

On May 14, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $100,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $75,000, which was received in several tranches between March 2019 and May 2019. This note bears interest at 12% per annum and matures on October 11, 2019. All principal and interest is payable upon maturity. As of March 31, 2020, the remaining principal and interest on this note were $100,000 and $11,000, respectively.

On July 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $125,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $100,000. This note bears interest at 12% per annum and matures on January 8, 2020. All principal and interest is payable upon maturity. As of March 31, 2020, the remaining principal and interest on this note were $125,000 and $11,000, respectively.

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On August 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $65,000. The promissory note was issued with an original issue discount of $20,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $45,000. This note bears interest at 12% per annum and matures on February 8, 2020. All principal and interest is payable upon maturity. As of March 31, 2020, the remaining principal and interest on this note were $65,000 and $5,000, respectively.

On September 9, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $150,000. The promissory note was issued with an original issue discount of $40,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $110,000, which was received in several tranches during September 2019. This note bears interest at 12% per annum and matures on March 9, 2020. All principal and interest is payable upon maturity. As of March 31, 2020, the remaining principal and interest on this note were $150,000 and $11,000, respectively.

Between August 22, 2019 and November 4, 2019, the Company received $115,000 proceeds from Investor 2, which had not yet been documented into a note. The Company is accruing interest on these funds at a rate of 12% per annum and has accrued $7,000 as of March 31, 2020. Subsequent to the date of this report, these funds were documented into a note. Refer to Note 15. Subsequent Events for further information.

As of March 31, 2020, the aggregate outstanding principal and interest for Investor 2 was $615,000 and $42,000, respectively.

Subsequent to the date of this report, the debt with Investor 2 was assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

NOTE 11. CONVERTIBLE NOTES

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

 

 

Principal

Balance

12/31/2018

 

New

Notes

 

Notes

assigned or

exchanged

 

Notes

converted

 

Principal

Balance

12/31/2019

 

Less:

Discount

Balance

 

Net

Principal

Balance

12/31/2019

 

October 2016 Notes

$

330,000

 

$

0

 

$

0

 

$

0

 

$

330,000

 

$

0

 

$

330,000

 

St. George Notes

 

1,099,233

 

 

(172,500

)

 

0

 

 

(309,070

)

 

617,663

 

 

0

 

 

617,663

 

BayBridge Notes

 

62,500

 

 

0

 

 

1,160,000

 

 

(281,900

)

 

940,600

 

 

(408,333

)

 

532,267

 

Bellridge Notes

 

455,000

 

 

510,000

 

 

(226,000

)

 

(243,000

)

 

496,000

 

 

(382,500

)

 

113,500

 

Power Up Notes

 

225,000

 

 

149,500

 

 

0

 

 

(267,680

)

 

106,820

 

 

(26,566

)

 

80,254

 

EMA Note

 

75,000

 

 

0

 

 

(75,000

)

 

0

 

 

0

 

 

0

 

 

0

 

Widjaja Note

 

0

 

 

330,000

 

 

0

 

 

-

 

 

330,000

 

 

(1

)

 

329,999

 

GS Capital Notes

 

0

 

 

178,568

 

 

75,000

 

 

(84,068

)

 

169,500

 

 

(44,167

)

 

125,333

 

 

$

2,246,733

 

$

995,568

 

$

934,000

 

$

(1,185,718

)

$

2,990,583

 

$

(861,567

)

$

2,129,016

 

 

 

Principal

Balance

12/31/2019

 

New

Notes/Adjustments

 

Notes

assigned

or

exchanged

 

Notes

converted

 

Principal

Balance

3/31/2020

 

Less:

Discount

Balance

 

Net

Principal

Balance

3/31/2020

 

October 2016 Notes

$

330,000

 

$

0

 

$

0

 

$

0

 

$

330,000

 

$

0

 

$

330,000

 

St. George Notes

 

617,663

 

 

0

 

 

0

 

 

0

 

 

617,663

 

 

0

 

 

617,663

 

BayBridge Notes

 

940,600

 

 

0

 

 

0

 

 

0

 

 

940,600

 

 

(170,833

)

 

769,767

 

Bellridge Notes

 

496,000

 

 

0

 

 

0

 

 

0

 

 

496,000

 

 

(255,000

)

 

241,000

 

Power Up Notes

 

106,820

 

 

0

 

 

0

 

 

0

 

 

106,820

 

 

(3,542

)

 

103,278

 

Widjaja Note

 

330,000

 

 

0

 

 

0

 

 

0

 

 

330,000

 

 

0

 

 

330,000

 

GS Capital Notes

 

169,500

 

 

0

 

 

0

 

 

0

 

 

169,500

 

 

(21,667

)

 

147,833

 

 

$

2,990,583

 

$

0

 

$

0

 

$

0

 

$

2,990,583

 

$

(451,042

)

$

2,539,541

 

 

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October 2016 Convertible Notes

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

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

Outstanding principal and accrued interest on the convertible notes were $330,000 and $70,000, respectively as of March 31, 2020.

Subsequent to the date of this report, the October 2016 Convertible Notes were assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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

The aggregate derivative value of the notes was $558,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations.  Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $558,000 for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

 

St. George Convertible Note

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

On September 11, 2017, the Company sold and issued a $1.7 million principal convertible note to St. George in exchange for $1.5 million of proceeds and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing costs, will be charged to interest expense, ratably, over the life of the note.

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

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

Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible note, cash redemption payments by the Company will be subject to a 15% redemption premium.

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

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

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

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

In connection with the closing under the securities purchase agreement, the Company issued 37,500 unregistered shares of common stock to St. George as an origination fee. The closing stock price on the date of close was $1.70 resulting in an interest expense of $64,000 being recorded as of the date of close.

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

As of March 31, 2020, cash payments of $192,000 had been made on the convertible note, and $916,000 had been converted into 1.2 billion shares of the Company's common stock. The remaining balance on the note was $618,000 as of March 31, 2020.The following table summarizes the conversion activity of this note:

 

Conversion Period

Principal Converted

 

Interest Converted

 

Common Shares

Issued

 

Q1 2018

$

75,000

 

$

-

 

 

187,500

 

Q2 2018

 

316,600

 

 

-

 

 

2,082,778

 

Q3 2018

 

102,500

 

 

-

 

 

3,142,333

 

Q4 2018

 

112,500

 

 

-

 

 

10,437,046

 

Q1 2019

 

106,750

 

 

-

 

 

58,503,244

 

Q2 2019

 

59,320

 

 

-

 

 

86,636,364

 

Q3 2019

 

89,000

 

 

-

 

 

457,222,222

 

Q4 2019

 

54,000

 

 

-

 

 

540,000,000

 

 

$

915,670

 

$

-

 

 

1,158,211,487

 

 

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Subsequent to the date of this report, the debt with St. George was assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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

The aggregate derivative value of the notes was $553,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 45%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $553,000 for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

 

BayBridge Convertible Note

Between September 7, 2018 and August 22, 2019, the Company, entered into several securities exchange agreements with BayBridge Capital Fund LP ("BayBridge).

Pursuant to the terms of the exchange agreements, BayBridge agreed to surrender and exchange an several outstanding promissory notes with an aggregate principal balance of $1,050,000, and aggregate accrued interest of $97,000, for convertible notes with an aggregate principal amount of $1,430,000 and aggregate original issue discounts of $283,000.

As of March 31, 2020, aggregate principal of $489,400 and interest of $12,710 had been converted into 1 billion shares of common stock and no cash payments of principal or interest had been made on these exchange notes. The principal and accrued interest balances on the exchange notes, as of March 31, 2020, were $940,600 and $94,200, respectively.

The following table summarizes the conversion activity of these notes:

 

Conversion Period

Principal Converted

 

Interest Converted

 

Common Shares

Issued

 

Q4 2018

$

207,500

 

$

4,303

 

 

16,008,198

 

Q1 2019

 

90,500

 

 

3,278

 

 

47,400,806

 

Q2 2019

 

88,500

 

 

2,079

 

 

141,822,223

 

Q3 2019

 

86,000

 

 

2,261

 

 

616,247,346

 

Q4 2019

 

16,900

 

 

789

 

 

176,886,700

 

 

$

489,400

 

$

12,710

 

 

998,365,273

 

 

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Subsequent to the date of this report, the debt with Baybridge was assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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

At December 31, 2019, the aggregate derivative liability associated with was $932,000. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $932,000 for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

Bellridge Convertible Notes

On July 25, 2018, the Company, entered into a securities exchange agreement with Bellridge Capital, LP ("Bellridge"). Pursuant to the terms of the exchange agreement, the investor agreed to surrender and exchange a promissory note with a principal balance of $275,000 and accrued interest of $20,000. In exchange, the Company issued to the investor an unsecured convertible note with an aggregate principal amount of $300,000. The original issue discount of $5,000 was charged to interest expense upon issuance. The exchange note is not secured, has an interest rate of 12% per annum, and matured on January 25, 2019. From and after the date of issuance of this note and then at any time until the note is fully paid, the investor had the right to convert any outstanding and unpaid principal into shares of the Company's common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.20, or (ii) 80% of the lowest traded price for the shares over the prior ten trading days. This Exchange Note was fully converted during the year ended December 31, 2019.

On September 14, 2018, the “Company, issued a new $150,000 convertible note in a private placement to Bellridge. The note is not secured, contains no registration rights, has an interest rate of 12% per annum, matured on September 14, 2019, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon demand.

On October 18, 2018, as discussed in Note 9, Global assigned one of its notes to Bellridge. The note had an outstanding principal balance of $250,000 and an accrued interest balance of $26,000. The note matured on October 18, 2019, and all principal and interest is due upon demand.

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On October 22, 2019, the Company and Bellridge entered into an exchange agreement to convert the remaining principal and interest of $226,000 and $51,000, respectively, on the Bellridge notes, into a new note with a principal balance of $450,000. The note is not secured, contains no registration rights, has an interest rate of 10% per annum, matures on October 22, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon maturity. Bellridge shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to the lesser of (i) $0.0005 or (ii) 70% of the lowest traded price for the shares over the prior ten-day trading period immediately preceding the conversion. The original issue discount of $173,000 will be charged to interest, ratably, over the life of the note.

On October 22, 2019, the Company and Bellridge entered into a convertible promissory note with a principal balance of $60,000, in exchange for proceeds of $40,000. The note is not secured, contains no registration rights, has an interest rate of 10% per annum, matures on October 22, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon maturity. Bellridge shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to the lesser of (i) $0.0005 or (ii) 70% of the lowest traded price for the shares over the prior ten-day trading period immediately preceding the conversion. The original issue discount of $20,000 will be charged to interest, ratably, over the life of the note.

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

As of March 31, 2020, an aggregate principal of $488,000 and interest of $30,000, on the Bellridge convertible notes had been converted into 1.1 billion shares of common stock and 0 cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of March 31, 2020 were $496,000 and $74,000, respectively.

The following table summarizes the conversion activity of these notes:

 

Conversion Period

Principal Converted

 

Interest Converted

 

Common Shares

Issued

 

Q3 2018

$

137,500

 

$

2,104

 

 

3,716,105

 

Q4 2018

 

107,500

 

 

4,000

 

 

7,554,399

 

Q1 2019

 

65,615

 

 

4,507

 

 

38,696,339

 

Q2 2019

 

47,385

 

 

3,874

 

 

68,142,087

 

Q3 2019

 

89,000

 

 

9,779

 

 

529,061,862

 

Q4 2019

 

41,000

 

 

5,404

 

 

464,037,300

 

 

$

488,000

 

$

29,668

 

 

1,111,208,092

 

 

Subsequent to the date of this report, the debt with Bellridge was partially converted into common stock and the remainder was assigned to BD 1. Refer to the Note Conversions and Debt Assignments sections of Note 15. Subsequent Events for further discussion.

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

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At December 31, 2019, the aggregate derivative liability associated with these notes was $744,000. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 42%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $744,000 for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

PowerUp Convertible Notes

During 2018 and 2019, the Company entered into six securities purchase agreements with Power Up Lending Group, LTD ("Power Up"), for the private placement of three convertible notes with an aggregate principal amount of $376,000.

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

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

 

As of March 31, 2020, three of the notes had been converted in full. The aggregate principal and interest converted was $267,680 and $9,000, respectively, into 578.8 million shares of common stock. NaN cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of March 31, 2020 were $117,000 and $11,000, respectively.

The following table summarizes the conversion activity of these notes:

 

Conversion Period

Principal Converted

 

Interest Converted

 

Common Shares

Issued

 

Q1 2019

$

182,500

 

$

7,300

 

 

95,014,902

 

Q2 2019

 

42,500

 

 

1,700

 

 

47,155,556

 

Q3 2019

 

14,600

 

 

-

 

 

155,824,176

 

Q4 2019

 

28,080

 

 

-

 

 

280,800,000

 

 

$

267,680

 

$

9,000

 

 

578,794,634

 

 

Subsequent to the date of this report, the debt with Power Up was assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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

At December 31, 2019, the aggregate derivative liability associated with these notes was $117,000. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $117,000 for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

Widjaja Convertible Note

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

At any time after inception of the note, until fully paid, Widjaja shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 80% of the lowest closing bid price for the shares over the prior five trading days immediately preceding the conversion date.

As of March 31, 2020, 0 principal and 0 interest had been converted into shares of common stock and 0 cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of March 31, 2020 were $330,000 and $48,000, respectively.

Subsequent to the date of this report, the debt with Widjaja was assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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

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The derivative value of the notes was $167,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $167,000 for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

 GS Capital Convertible Note

On February 22, 2019, the Company sold and issued to GS Capital Partners, LLC (“GS”) a $108,000 aggregate principal amount unsecured convertible promissory note in exchange for $75,000 of gross proceeds, $6,000 in financing costs, and $27,000 of premium associated with the assignment of a note from a former investor. On August 26, 2019, the Company sold and issued to GS, an additional unsecured convertible promissory note in the amount of $70,500.

These notes are unsecured, bear interest at 8% per annum, matures twelve months from the date of issuance, and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity. There are no registration rights applicable to the note.

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

As of March 31, 2020, principal of $84,000 and interest of $6,000 had been converted into 473.4 million shares of common stock and 0 cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of March 31, 2020 were $170,000 and 12,000, respectively.

The following table summarizes the conversion activity of these notes:

 

Conversion Period

Principal Converted

 

Interest Converted

 

Common Shares

Issued

 

Q2 2019

$

15,000

 

$

763

 

 

17,321,692

 

Q3 2019

 

57,718

 

 

4,284

 

 

335,425,736

 

Q4 2019

 

11,350

 

 

719

 

 

120,697,800

 

 

$

84,068

 

$

5,766

 

 

473,445,228

 

 

Subsequent to the date of this report, the debt with GS was assigned to BD 1. Refer to the Debt Assignments section of Note 15. Subsequent Events for further discussion.

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

The aggregate derivative value of these notes was $182,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%.

At March 31, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of Harper Hofer & Associates, LLC, a CPA firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $182,000 for the three months ended March 31, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of March 31, 2020.

 

 

NOTE 12. SERIES A PREFERRED STOCK

In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of $750,000 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6.0 million. 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 $1.0 million. 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 $5.0 million.

Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8% per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. 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). This make-whole provision expired in June 2017.

The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $232, as adjusted, for twenty consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At March 31, 2020, 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 1 preferred share into 1 common share (subject to standard ratable anti-dilution adjustments). Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends.

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On October 6, 2016, the Series A Holder entered into an exchange agreement with a private investor. Pursuant to the exchange agreement, beginning December 5, 2016, the investor has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 11) for outstanding shares of Series A Preferred Stock from the Series A Holder.

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.

During the year ended December 31, 2019, 12,656 shares of Series A Preferred Stock, plus $71,000 of accrued dividends, were converted into 9.8 million shares of common stock at a conversion rate of $0.0072. As of March 31, 2020, there were 48,100 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $331,222.

NOTE 13. STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

At March 31, 2020, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to 1 vote. As of March 31, 2020, the Company had 4,759,161,650 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through March 31, 2020.

Preferred Stock

At March 31, 2020, the Company had 25,000,000 shares of preferred stock, $0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. 

The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:

 

Preferred Stock Series Designation

 

Shares

Authorized

 

 

Shares

Outstanding

 

Series A

 

 

750,000

 

 

 

48,100

 

Series B-1

 

 

2,000

 

 

 

0

 

Series B-2

 

 

1,000

 

 

 

0

 

Series C

 

 

1,000

 

 

 

0

 

Series D

 

 

3,000

 

 

 

0

 

Series D-1

 

 

2,500

 

 

 

0

 

Series E

 

 

2,800

 

 

 

0

 

Series F

 

 

7,000

 

 

 

0

 

Series G

 

 

2,000

 

 

 

0

 

Series H

 

 

2,500

 

 

 

0

 

Series I

 

 

1,000

 

 

 

0

 

Series J

 

 

1,350

 

 

 

0

 

Series J-1

 

 

1,000

 

 

 

0

 

Series K

 

 

20,000

 

 

 

0

 

 

Series A Preferred Stock

Refer to Note 12 for Series A Preferred Stock activity.

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Series B-1, B-2, C, D, D-1, E, F, G, H, I, J, J-1, and K Preferred Stock

There were no transactions involving the Series B-1, B-2, C, D, D-1, H, I, J, J-1, or K during the three months ended March 31, 2020 and 2019.

NOTE 14. EQUITY PLANS AND SHARE-BASED COMPENSATION

Share-Based Compensation: The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes this cost as an expense over the grant recipients’ requisite service periods for all awards made to employees, officers, directors and consultants.

The share-based compensation expense recognized in the Consolidated Statements of Operations was as follows: 

 

 

 

For the Three Months Ended March 31,

 

 

 

 

2020

 

 

 

2019

 

Research and development

 

$

 

 

$

 

Selling, general and administrative

 

 

 

 

 

4,346

 

Total share-based compensation cost

 

$

 

 

$

4,346

 

 

Stock Options: There was 0 expense recorded for the three months ended March 31, 2020 related to stock option awards. The Company recognized share-based compensation expense for stock options of $4,346 to officers, directors and employees for the three months ended March 31, 2019 related to stock option awards, reduced for forfeitures. There were 0 option grants during the three months ended March 31, 2020 or 2019.

As of March 31, 2020, there were 0 unvested stock options. As of March 31, 2020, 97 shares were vested and 120 shares remained available for future grants under the Option Plan.

The following table summarizes stock option activity within the Stock Option Plan

 

 

 

Stock

Option

Shares

 

 

Weighted

Average

Remaining

Contractual

Life in Years

Outstanding at December 31, 2018

 

 

110

 

 

5.18

Granted

 

 

0

 

 

 

Exercised

 

 

0

 

 

 

Canceled

 

 

(13

)

 

 

Outstanding at December 31, 2019

 

 

97

 

 

4.68

Granted

 

 

0

 

 

 

Exercised

 

 

0

 

 

 

Canceled

 

 

 

 

 

Outstanding and Exercisable at March 31, 2020

 

 

97

 

 

4.43

 

Restricted Stock: The Company did 0t recognized share-based compensation expense related to restricted stock grants for the three months ended March 31, 2020 or for the year ended December 31, 2019. There were 0 restricted stock grants for the periods ended March 31, 2020 and December 31, 2019.

As of March 31, 2020, there was 0 unrecognized share-based compensation expense from unvested restricted stock, 0 shares were expected to vest in the future, and 496 shares remained available for future grants under the Restricted Stock Plan.

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NOTE 15. SUBSEQUENT EVENTS

The Company was in a dormant status for most of 2020 due to financial constraints as well as delays in reorganization and fund-raising efforts due to the impact of COVID-19. Below is the sequence of events subsequent to March 31, 2020:

Note Conversions

On April 7, 2020, Bellridge (refer to Note 12. Convertible Notes) converted $23,000 of principal and $1,000 of interest into 235.4 million shares of common stock.

On April 17, 2020, Bellridge (refer to Note 12. Convertible Notes) converted $23,000 of principal and $1,000 of interest into 236.0 million shares of common stock.

Baybridge Capital Promissory Note

On May 1, 2020, $115,000 of proceeds received between September and November of 2019 were documented into a non-convertible promissory note. The promissory note was issued with an original issue discount of $35,000, which will be recorded as interest expense ratably over the term of the note, resulting in a principal balance of $150,000. This note bears interest at 12% per annum and matures on May 1, 2021. All principal and interest is payable upon maturity. Refer to Note 11. Promissory Notes for further discussion on the funds received. This note was assigned to BD 1. Please refer to the Debt Assignments section below for further information.

Penumbra Note

On June 9, 2020, the Company issued to Penumbra Solar Technologies, Inc. (“Penumbra”) a $250,000 aggregate principal amount convertible promissory note (“Penumbra Note”). The Company has received $250,000 of gross proceeds from the offering of the Penumbra Note. The aggregate principal amount of the Penumbra Note (together with accrued interest) will mature on June 9, 2021. The Penumbra Note bears interest at a rate of 6% per annum. The interest rate increases to 18% in the event of a default under the Penumbra Note. The Penumbra Note is convertible, at the holder’s option, into shares of the Company’s Common Stock at a conversion price equal to $0.0001 per share. However, the holder of the Penumbra Note will not have the right to convert any portion of the Penumbra Note if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to its conversion.

On September 25, 2020, the Penumbra Note was assigned to Crowdex Investment, LLC (“Crowdex”).

Sale and Leaseback of Facility

On July 29, 2020, the Company’s owned facility at 12300 Grant Street, Thornton, CO 80241 (the “Building”) was foreclosed by the Building’s first lien holder (“Mortgage Holder”) and sold at public auction. The successful bidder for the Building was the Mortgage Holder, at the price of $7.193 million. As a result, the Company’s obligations to Mortgage Holder and all of the Company’s outstanding real property taxes on the Building were considered fully repaid.

On September 21, 2020, the Company entered into a lease agreement with 12300 Grant LLC (“Landlord”), an affiliated company of the Mortgage Holder, for approximately 100,000 rentable square feet of the Building (the “Lease”). The Lease term is for 88 months commencing on September 21, 2020 at a rent of $50,000 per month including taxes, insurance and common area maintenance until December 31, 2020. Beginning January 1, 2021, the rent shall adjust to $80,000 per month on a triple net basis and shall increase at an annual rate of 3% per annum until December 31, 2027.

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Debt Assignments

During September 2020, a number of the Company’s investors entered into assignment agreements to sell their existing debt to BD 1. Please refer to Notes 9, 10, and 11, for more information. The assignments transferred ownership of the following debts:

 

The outstanding principal and interest of $2.16 million and $417,000, respectively, related to the St. George Secured Promissory Notes discussed in Note 9 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal and interest of $495,000 and $187,000, respectively, related to the Investor 1 Promissory Notes discussed in Note 10 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal and interest of $650,000 and $86,000, respectively, related to the Investor 2 Promissory Notes discussed in Note 10 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal and interest of $330,000 and $79,000, respectively, related to the October 2016 Convertible Notes discussed in Note 11 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal of $618,000, related to the St. George Convertible Note discussed in Note 11 was assigned to BD 1. The terms of the note remained the same.

 

The outstanding principal and interest of $941,000 and $152,000, respectively, related to the Baybridge Convertible Notes discussed in Note 11 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal and interest of $677,000 and $121,000, respectively, related to the Bellridge Convertible Notes discussed in Note 11 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal and interest of $107,000 and $16,000, respectively, related to the Power Up Convertible Notes discussed in Note 11 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal and interest of $330,000 and $68,000, respectively, related to the Widjaja Convertible Notes discussed in Note 11 was assigned to BD 1. The terms of the notes remained the same.

 

The outstanding principal and interest of $170,000 and $19,000, respectively, related to the GS Capital Convertible Notes discussed in Note 11 was assigned to BD 1. The terms of the notes remained the same.

On December 18, 2020, the notes assigned to BD 1 were exchanged into new notes. Refer to the BD 1 Exchange Agreement section below for further information.

GI Exchange Agreement

On September 9, 2020, the Company entered into a securities exchange agreement (“GI Exchange Agreement”) with Global Ichiban Limited (“GI”). Pursuant to the terms of the GI Exchange Agreement, GI agreed to surrender and exchange all of its existing outstanding promissory notes with an aggregate principal balance of $6,313,387 (including accrued interest). In exchange, the Company issued to GI a secured convertible promissory note with a principal amount of $6,400,000.00 (“GI Exchange Note”).

The GI Exchange Note will mature on September 30, 2022. Principal on the GI Exchange Note, if not converted, will be payable in a lump sum on September 30, 2022. The GI Exchange Note will not bear any accrued interest but bears a default interest rate of 18% in the event of a default under the GI Exchange Note.

GI shall have the right, after 6 months from the date of issuance of the GI Exchange Note and then at any time until the GI Exchange Note is fully paid, to convert any outstanding and unpaid principal and interest into shares of Common Stock at a variable conversion price equal to 80% of the average closing bid price for the shares over the prior five trading days.

Conversion into shares of Common Stock may not be issued pursuant to the GI Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding shares of Common Stock.

The GI Exchange Note is secured by a lien on substantially all of the Company’s assets pursuant to the Security Agreement dated November 30, 2017 (the “Security Agreement”) entered into between the Company and GI.

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Settlement Agreements

On September 11, 2020, the Company entered into a settlement agreement (the “Settlement Agreement A”) with Vendor 1, discussed further in Note 7. Notes Payable. Pursuant to Settlement Agreement A, the Company paid $120,000 on September 23, 2020 as the full and final settlement of all amounts owed between the parties. Following such payment, a satisfaction of an existing judgment in favor of such law firm was filed in Adams County Colorado. The Company will book a gain of approximately $1.1 million relating to Settlement Agreement A.

On September 11, 2020, the Company entered into a settlement agreement (the “Settlement Agreement B”) with a creditor holding a Note Payable, discussed further in Note 7. Notes Payable. Pursuant to Settlement Agreement B, the Company paid $20,000 on September 18, 2020 as the full and final settlement of all amounts owed between the parties. The Company will book a gain of approximately $200,000 relating to Settlement Agreement B.

Series 1A Preferred Stock – Tranche 1 Closing

On September 22, 2020, the Company entered into a securities purchase agreement (“Series 1A SPA”) with Crowdex, for the private placement of up to $5,000,000 of the Company’s newly designated Series 1A Convertible Preferred Stock (“Series 1A Preferred Stock”).

The Company sold 2,000 shares of Series 1A Preferred Stock to Crowdex in exchange for $2,000,000 of gross proceeds at an initial closing under the Series 1A SPA on September 22, 2020.

In November 2020, Crowdex converted 1,200 shares of outstanding Series 1A Preferred Stock into 12,000,000,000 shares of Common Stock.

Crowdex Note

On November 27, 2020, the Company issued to Crowdex a $500,000 unsecured convertible promissory note (“Crowdex Note”) and received $500,000 of gross proceeds from the offering of the Crowdex Note. On December 31, 2020, this note was cancelled in exchange for 500 shares of Series 1A Preferred Stock. Refer to the Series 1A Preferred Stock – Tranche 2 Closing section below for further information.

BD 1 Exchange Agreement

On December 18, 2020, the Company entered into a securities exchange agreement (“BD1 Exchange Agreement”) with BD 1. BD 1 had previously acquired all of the Company’s existing outstanding unsecured notes (other than notes held by GI and Crowdex) from the original note holders.

Pursuant to the terms of the BD1 Exchange Agreement, BD 1 agreed to surrender and exchange all of its outstanding promissory notes with principal balances of approximately $10.4 million (including accrued interest and default penalties). In exchange, the Company issued to BD 1 2 unsecured convertible notes with an aggregate principal amount of $10,500,000 (“BD1 Exchange Notes”). The BD1 Exchange Notes will mature on December 18, 2025. BD 1 has the right, at any time until the BD1 Exchange Notes are fully paid, to convert any outstanding and unpaid principal and interest into shares of Common Stock at a fixed conversion price equal to $0.0001 per share. Accordingly, the Company would issue 105,000,000,000 shares of Common Stock upon a full conversion of the BD 1 Exchange Notes.

Series 1A Preferred Stock – Tranche 2 Closing

On December 31, 2020 the Company sold 500 shares of Series 1A Preferred Stock to Crowdex in exchange for the cancellation of the above-mentioned Crowdex Note issued on November 27, 2020. There were no additional cash proceeds from this closing.

On January 4, 2021, the Company entered into a securities purchase agreement (“Series 1ATranche 2 SPA”) with TubeSolar AG, a developer of photovoltaic thin-film tubes to enable additional application opportunities in solar power generation compared to conventional solar modules (“TubeSolar”). Pursuant to the Series 1A Tranche 2 SPA, the Company sold 2,500 shares of Series 1A Preferred Stock to TubeSolar and received $2,500,000 of gross proceeds on January 5, 2021. There are no registration rights applicable to the Series 1A Preferred Stock.

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

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

Overview

We are a company formed to commercialize flexible PV modules using our proprietary technology. For the three months ended March 31, 2020, we generated $4,090 of revenue. Product sales accounted for 100% of total revenue. As of March 31, 2020, we had an accumulated deficit of $417,008,036.

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

In February 2017 Ascent announced the discontinuation of our EnerPlex consumer business by disposing of the EnerPlex brand, and related intellectual properties and trademarks, to our battery product supplier, Sun Pleasure Co. Limited (“SPCL”). This transaction was completed in an effort to better allocate our resources and to continue to focus on our core strength in the high-value specialty PV market. Following the transfer, Ascent no longer produces or sells Enerplex-branded consumer products. In November 2017, Ascent introduced the next generation of our USB-based portable power systems with the XD™ series. The first product introduced was the XD-12 which, like previous products, is a folding, lightweight, easily stowable, PV system with USB power regulation. Unique to this generation of PV portable power is more PV power (12 Watts) and a 2.0 Amp smart USB output to enable the XD-12 to charge most smartphones, tablets, and USB-enabled devices as fast as a wall outlet. The enhanced smart USB circuit works with the device to be charged so that the device can determine the maximum power it is able to receive from the XD-12 and ensures the best possible charging performance directly from the sun.

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

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

In March 2018, Ascent successfully shipped to a European based customer for a lighter-than-air, helium-filled airship project based on our newly developed ultra-light modules with substrate material than half of the thickness of our standard modules. In 2019, Ascent completed a repeat order from the same customer who had since established its airship development operation in the US. In 2020, Ascent received a third and enlarged order from the same customer and is scheduled to complete the order in March 2021.

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

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Commercialization and Manufacturing Strategy

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

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

Significant Trends, Uncertainties and Challenges

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

 

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

 

Successful ramping up of commercial production on the equipment installed;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Our ability to achieve projected operational performance and cost metrics;

 

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

 

Availability of raw materials.

Basis of Presentation: The accompanying condensed consolidated financial statements (unaudited) have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of March 31, 2020 and December 31, 2019, and the results of operations for the three and three months ended March 31, 2020 and 2019. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.

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Critical Accounting Policies and Estimates

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

The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes to our accounting policies as of March 31, 2020.

Results of Operations

Comparison of the Three months ended March 31, 2020 and 2019

Revenues. Our revenues were $4,090 for the three months ended March 31, 2020 compared to $215,384 for the three months ended March 31, 2019, a decrease of $211,294, due primarily to reduced operations in the current period.

Cost of revenues. Our Cost of revenues for the three months ended March 31, 2020 was $72,706 compared to $91,436 for the three months ended March 31, 2019, a decrease of $18,730. The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the three months ended March 31, 2020 compared to 2019. Cost of revenues for the three months ended March 31, 2020 is comprised primarily of direct labor and overhead. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.

Research, development and manufacturing operations. Research, development and manufacturing operations costs were $159,464 for the three months ended March 31, 2020, compared to $489,063 for the three months ended March 31, 2019, a decrease of $329,599. The decrease in costs is due primarily to reduced operations in the current period. 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.

Selling, general and administrative. Selling, general and administrative expenses were $69,522 for the three months ended March 31, 2020, compared to $508,375 for the three months ended March 31, 2019, a decrease of $438,853. The decrease in costs is due primarily to reduced operations in the current period.

Other Income/Expense, net. Other net income was $6,746,058 for the three months ended March 31, 2020, compared to a other net income of $4,180,579 for the three months ended March 31, 2019, an improvement of $2,565,479. The improvement is due primarily to the change in fair value of derivative liabilities.

Net Income. Our Net Income was $6,392,193 for the three months ended March 31, 2020, compared to a Net Income of $3,240,737 for the three months ended March 31, 2019, an improvement of $3,151,456. The improvement is due primarily to the change in fair value of the derivative liabilities.

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The increase of $3,151,447 in Net Income for the three months ended March 31, 2020 can be summarized in variances in significant account activity as follows:

 

 

 

Increase (Decrease)

in Net Income For

the Three Months Ended March 31, 2020

Compared to the

Three Months Ended March 31, 2019

 

Revenues

 

 

(211,294

)

Cost of Revenue

 

 

18,730

 

Research, development and manufacturing operations

 

 

329,599

 

Selling, general and administrative expenses

 

 

438,853

 

Depreciation and Amortization Expense

 

 

10,089

 

Other Income / Expense

 

 

 

 

Other income

 

 

259,600

 

Interest Expense

 

 

1,595,556

 

Non-Cash Change in Fair Value of Derivatives

   and Gain/Loss on Extinguishment of

   Liabilities, net

 

 

710,323

 

Increase (Decrease) in Net Income

 

 

3,151,456

 

 

Liquidity and Capital Resources

The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the three months ended March 31, 2020 the Company used $249,443 in cash for operations.

Additional projected product revenues are not anticipated to result in a positive cash flow position for the years 2020 and 2021 overall and, as of March 31, 2020, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.

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

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

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

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Statements of Cash Flows Comparison of the Three months ended March 31, 2020 and 2019

For the three months ended March 31, 2020, our cash used in operations was $249,443 compared to $1,161,889 for the three months ended March 31, 2020, a decrease of $912,446. The decrease is primarily the result of reduced operations during the current period. For the three months ended March 31, 2020, cash provided by investing activities was $254,443 compared to cash used in investing activities of $2,131 for the three months ended March 31, 2019. This change was primarily the result of an increase in proceeds from the sale of assets. During the three months ended March 31, 2020, negative operating cash flows of $249,443 were funded through $254,600 in asset sales.

Off Balance Sheet Transactions

As of March 31, 2020, we did not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

We hold no significant funds and have no future obligations denominated in foreign currencies as of March 31, 2020.

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

Interest Rate Risk

Our exposure to market risks for changes in interest rates relates primarily to our cash equivalents and investment portfolio. As of March 31, 2020, our cash equivalents consisted only of operating accounts held with financial institutions. From time to time, we hold restricted funds, money market funds, investments in U.S. government securities and high quality corporate securities. The primary objective of our investment activities is to preserve principal and provide liquidity on demand, while at the same time maximizing the income we receive from our investments without significantly increasing risk. The direct risk to us associated with fluctuating interest rates is limited to our investment portfolio, and we do not believe a change in interest rates will have a significant impact on our financial position, results of operations, or cash flows.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. Our management conducted an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act as of March 31, 2020. Based on this evaluation, our management concluded the design and operation of our disclosure controls and procedures were not effective as of March 31, 2020.

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Management’s Report on Internal Control over Financial Reporting

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

 

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

 

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

 

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

Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our management concluded our internal controls over financial reporting were not effective as of March 31, 2020. Our management reviewed the results of its assessment with the Audit Committee.

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

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

Material Weakness

Based on our assessment and the criteria used, management concluded that our internal control over financial reporting as of March 31, 2020 was not effective due to the material weaknesses described as follows:

 

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

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

 

Accounting for the Company's inventory and cost of revenue was lacking for the preparation of the March 31, 2020 financial statements. Miscalculations in these areas could impact the Company's current assets, revenues, operating results, and cash flows.

 

Accounting for the Company’s debt and equity securities was lacking for preparation of the March 31, 2020 financial statements. Miscalculations in this area could impact the Company’s liability, equity, and other expenses.

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.

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Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

The Company’s financial challenges continued during the three months ended March 31, 2020, however, as discussed in Note 15. Subsequent Events, the Company received funding during the second half of 2020 and began to bring the Company back into operating status. The Company plans to execute the following steps, going forward, to remediate the aforementioned material weaknesses in its internal control over financial reporting:

 

During the fourth quarter of 2020, the Company hired a new Chief Financial Officer

 

The company significantly reduced the complexity of the debt structure through consolidation and simplifying of terms thereby lowering the associated administration and cost burden.

 

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

 

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

Changes in Internal Control Over Financial Reporting

Except for the identification and mitigation of the material weaknesses noted above, there were no other changes in internal control over financial reporting during the three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

In May 2019, the Company’s former law firm filed suit against the Company in District Court in Adams County Colorado in an effort to collect approximately $1.2 million of unpaid fees (and related interest charges). On September 11, 2020, the Company entered into a settlement agreement (the “Settlement Agreement”) with its former law firm. Pursuant to the Settlement Agreement, the Company paid $120,000 on September 23, 2020 as the full and final settlement of all amounts owed between the parties. Following such payment, a satisfaction of an existing judgment in favor of such law firm was filed in Adams County Colorado.

On July 29, 2020, the Company’s owned facility at 12300 Grant Street, Thornton, CO 80241 (the “Building”) was foreclosed by the Building’s first lien holder (“Mortgage Holder”) and sold at public auction. The successful bidder for the Building was the Mortgage Holder, at the price of $7.193 million. As a result, the Company’s obligations to Mortgage Holder and all of the Company’s outstanding real property taxes on the Building were considered fully repaid.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the updated risk factors in our 2019 Annual Report on Form 10-K filed on January 29, 2021, which could materially affect our business, financial condition or future results. The risks described in our 2019 Annual Report on Form 10-K filed on January 29, 2021 are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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

Not required.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

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

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

    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 Designations of Preferences, Rights, and Limitations of Series 1A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed September 30, 2020)

 

 

 

    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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  31.1*

 

Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  31.2*

 

Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.1*

 

Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.2*

 

Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS

 

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.

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

*

 

Filed herewith

 

 

 

 

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ASCENT SOLAR TECHNOLOGIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 5th day of March, 2021.

 

 

ASCENT SOLAR TECHNOLOGIES, INC.

 

 

 

March 5, 2021

By:

/s/ VICTOR LEE

 

 

Lee Kong Hian (aka Victor Lee)

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

March 5, 2021

By:

/s/ MICHAEL J. GILBRETH

 

 

Michael J. Gilbreth

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

39