NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Ascent Solar Technologies, Inc. (“Ascent”) was incorporated on October 18, 2005 from the separation by ITN Energy Systems, Inc. (“ITN”) of its Advanced Photovoltaic Division and all of that division’s key personnel and core technologies. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin film, photovoltaic (“PV”), battery, fuel cell and nano technologies. Through its work on research and development contracts for private and governmental entities, ITN developed proprietary processing and manufacturing know how applicable to PV products generally, and to Copper-Indium-Gallium-diSelenide (“CIGS”) PV products in particular. ITN formed Ascent to commercialize its investment in CIGS PV technologies. In January 2006, in exchange for
102,800
shares of common stock of Ascent, ITN assigned to Ascent certain CIGS PV technologies and trade secrets and granted to Ascent a perpetual, exclusive, royalty free worldwide license to use, in connection with the manufacture, development, marketing and commercialization of CIGS PV to produce solar power, certain of ITN’s existing and future proprietary and control technologies that, although non-specific to CIGS PV, Ascent believes will be useful in its production of PV modules for its target markets. Upon receipt of the necessary government approvals and pursuant to novation in early 2007, ITN assigned government funded research and development contracts to Ascent and also transferred the key personnel working on the contracts to Ascent.
Currently, 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.
Reverse Stock Split
On May 26, 2016, the Company, a Delaware corporation, filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, par value
$0.0001
per share, at a ratio of one-for-
twenty
(the “Reverse Stock Split”). The Certificate of Amendment did not change the number of authorized shares, or the par value, of the Company’s common stock. The Certificate of Amendment provides that every twenty shares of the Company’s issued and outstanding common stock were automatically combined into one issued and outstanding share of the Company’s common stock. All shares and per share amounts in the consolidated financial statements and accompanying notes have been retroactively adjusted to give effect to the Reverse Stock Split.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of
December 31, 2017
and
December 31, 2016
, and the results of operations for the years ended
December 31, 2017
and
2016
. 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 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.
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents:
The Company classifies all short-term investments in interest bearing bank accounts and highly liquid debt securities purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances which may exceed federally insured limits. The Company does not believe this results in significant credit risk.
Foreign Currencies:
Bank account balances held in foreign currencies are translated to U.S. dollars utilizing the period end exchange rate. Gains or losses incurred in connection with the Company’s accounts held in foreign currency were not material for the years ended
December 31, 2017
and
2016
and were recorded in “Other Income/(Expense)” in the Consolidated Statements of Operations.
Receivables and Allowance for Doubtful Accounts:
Trade accounts receivable are recorded at the invoiced amount as the result of transactions with customers. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company estimates the collectability of accounts receivable using analysis of historical bad debts, customer credit-worthiness and current economic trends. Reserves are established on an account-by-account basis. Account balances are written off against the allowance in the period in which the Company determines that is it probable that the receivable will not be recovered. As of
December 31, 2017
and
2016
, the Company had an allowance for doubtful accounts of
$48,201
and
$106,205
, respectively.
Inventories:
All inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average method. Inventory balances are frequently evaluated to ensure they do not exceed net realizable value. The computation for net realizable value takes into account many factors, including expected demand, product life cycle and development plans, module efficiency, quality issues, obsolescence and others. Management's judgment is required to determine reserves for obsolete or excess inventory. As of
December 31, 2017
and
2016
, the Company had inventory reserve balances of
$562,140
and
$736,663
, respectively. If actual demand and market conditions are less favorable than those estimated by management, additional inventory write downs may be required.
Due to the sale of the EnerPlex brand and the re-purposing of our work-in-process inventory, we are unable to estimate the recoverability of all of our work-in process inventory values, resulting in a lower-cost-to-market analysis and reserve for impairment. An expense of
$363,377
was recorded to inventory impairment costs for the year ended
December 31, 2017
. There were no lower of cost or market adjustments during the year ended
December 31, 2016
.
Property, Plant and Equipment:
Property, plant and equipment are recorded at the original cost to the Company. Assets are being depreciated over estimated useful lives of three to forty years using the straight-line method, as presented in the table below, commencing when the asset is placed in service. Leasehold improvements are depreciated over the shorter of the remainder of the lease term or the life of the improvements. Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in income. Expenditures for repairs and maintenance are expensed as incurred.
|
|
|
|
|
|
Useful Lives
in Years
|
Buildings
|
|
40
|
Manufacturing machinery and equipment
|
|
5 - 10
|
Furniture, fixtures, computer hardware/software
|
|
3 - 7
|
Leasehold improvements
|
|
life of lease
|
Patents:
At such time as the Company is awarded patents, patent costs are amortized on a straight-line basis over the legal life on the patents, or over their estimated useful lives, whichever is shorter. As of
December 31, 2017
and
2016
, the Company had
$1,470,796
and
$1,647,505
of net patent costs, respectively. Of these amounts
$640,167
and
$619,241
represents costs net of amortization incurred for awarded patents, and the remaining
$830,629
and
$1,028,264
represents costs incurred for patent applications to be filed as of
December 31, 2017
and
2016
, respectively. During the years ended
December 31, 2017
and
2016
, the Company capitalized
$62,652
and
$189,455
in patent costs, respectively, as it worked to secure design rights and trademarks for newly developed products. Amortization expense was
$150,928
and
$109,517
for the years ended
December 31, 2017
and
2016
, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
As of
December 31, 2017
, future amortization of patents is expected as follows:
|
|
|
|
|
2018
|
$
|
173,439
|
|
2019
|
$
|
153,717
|
|
2020
|
$
|
130,885
|
|
2021
|
$
|
85,760
|
|
2022
|
$
|
56,099
|
|
Thereafter
|
$
|
40,267
|
|
|
$
|
640,167
|
|
Impairment of Long-lived Assets:
The Company analyzes its long-lived assets (property, plant and equipment) and definitive-lived intangible assets (patents) for impairment, both individually and as a group, whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Events that might cause impairment would include significant current period operating or cash flow losses associated with the use of a long-lived asset or group of assets combined with a history of such losses, significant changes in the manner of use of assets and significant negative industry or economic trends. An undiscounted cash flow analysis is calculated to determine if impairment exists. If impairment is determined to exist, any related loss is calculated using the difference between the fair value and the carrying value of the assets. During the years ended
December 31, 2017
and
2016
, the Company did not incur impairments of its manufacturing facilities and equipment.
Interest Capitalization
: Historically the Company has capitalized interest cost as part of the cost of acquiring or constructing certain assets during the period of time required to get the asset ready for its intended use. The Company capitalized interest to the extent that expenditures to acquire or construct an asset have occurred and interest cost has been incurred.
Convertible Notes
: The Company issues, from time to time, convertible notes. Refer to Notes 12, 13, 14, and 15 for further information.
Convertible Preferred Stock:
The Company evaluates its preferred stock instruments under FASB ASC 480,
"Distinguishing Liabilities from Equity"
to determine the classification, and thereby the accounting treatment, of the instruments. Refer to Notes 12, 16, 17, 18, 19, 20, 21, and 22 for further discussion on the classification of each instrument.
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 12, 13, 14, 15, 17, 18, 19, and 20 for further discussion on the embedded derivatives of each instrument.
Product Warranties:
The Company provides a limited warranty to the original purchaser of products against defective materials and workmanship. The Company also guarantees that standalone modules and PV integrated consumer electronics will achieve and maintain the stated conversion efficiency rating for certain products. Warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms, historical experience and analysis of peer company product returns. The Company assesses the adequacy of its liabilities and makes adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available.
Warrant Liability:
Warrants to purchase the Company's common stock with nonstandard anti-dilution provisions, regardless of the probability or likelihood that may conditionally obligate the issuer to ultimately transfer assets, are classified as liabilities and are recorded at their estimated fair value at each reporting period. Any change in fair value of these warrants is recorded at each reporting period in Other income/(expense) on the Company's statement of operations.
ASCENT SOLAR TECHNOLOGIES, INC.
Revenue Recognition:
Product revenue
- The Company generated product revenues of
$642,179
and
$1,699,802
for the years ended
December 31, 2017
and
2016
, respectively. Product revenue is generated from commercial sales of flexible PV modules and PV integrated consumer electronics, non-PV integrated power banks and associated accessories. Products are sold through the Company's own e-commerce website, online retailers, direct to retailers and indirectly to retailers through distributors. Revenue is recognized as products are shipped or delivered and title has transferred to the customer. In certain instances, the Company has agreed to refund a portion of the purchase price to customers if the Company decreases its standard retail price. The Company estimates the effect of this price protection and records the difference as a reduction of revenue at the time of sale. We also, in certain instances have provided customers with a right of return provision. In these instances, we defer the recognition of revenues until the provision period has expired. Estimated costs of returns and allowances, other than those specifically pertaining to a right of return provision, and discounts are accrued as a reduction to sales when revenue is recognized. See Marketing and Advertising Costs below for accounting treatment related to cooperative advertising programs.
Government contracts revenue
- Revenue from governmental research and development contracts is generated under terms that are cost plus fee or firm fixed price. Revenue from cost plus fee contracts is recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the fixed fee. Revenue from firm fixed price contracts is recognized under the percentage-of-completion method of accounting, with costs and estimated profits included in contract revenue as work is performed. If actual and estimated costs to complete a contract indicate a loss, provision is made currently for the loss anticipated on the contract.
Shipping and Handling Costs:
The Company classifies shipping and handling costs for products shipped to customers as a component of “Cost of revenues” on the Company’s Consolidated Statements of Operations. Customer payments of shipping and handling costs are recorded as a component of Revenues.
Research, Development and Manufacturing Operations Costs:
Research, development and manufacturing operations expenses were approximately
$4.8 million
and
$6.6 million
for the years ended
December 31, 2017
and
2016
, respectively. Research, development and manufacturing operations expenses include: 1) technology development costs, which include expenses incurred in researching new technology, improving existing technology and performing federal government research and development contracts, 2) product development costs, which include expenses incurred in developing new products and lowering product design costs, and 3) pre-production and production costs, which include engineering efforts to improve production processes, material yields and equipment utilization, and manufacturing efforts to produce saleable product. Research, development and manufacturing operations costs are expensed as incurred, with the exception of costs related to inventoried raw materials, work-in-process and finished goods, which are expensed as Cost of revenue as products are sold.
Marketing and Advertising Costs:
The Company advertises in print, television, online and through social media. The Company will also authorize customers to run advertising campaigns on its behalf through various media outlets. Marketing and advertising costs are expensed as incurred. Marketing and advertising expenses were
$189,382
and
$2,164,693
for the years ended
December 31, 2017
and
2016
, respectively.
Share-Based Compensation:
The Company measures and recognizes compensation expense for all share-based payment awards made to employees, officers, directors, and consultants based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Company’s Statements of Operations. Share-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates. For purposes of determining estimated fair value of share-based payment awards on the date of grant the Company uses the Black-Scholes option-pricing model (“Black-Scholes Model”) for option awards. The Black-Scholes Model requires the input of highly subjective assumptions. Because the Company’s employee stock options may have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of the Company’s employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which result in changes to these assumptions and methodologies, which could materially impact the Company’s fair value determination. The Company estimates the fair value of its restricted stock awards as its stock price on the grant date.
ASCENT SOLAR TECHNOLOGIES, INC.
The accounting guidance for share-based compensation may be subject to further interpretation and refinement over time. There are significant differences among option valuation models, and this may result in a lack of comparability with other companies that use different models, methods and assumptions. If factors change and the Company employs different assumptions in the accounting for share-based compensation in future periods, or if the Company decides to use a different valuation model, the compensation expense the Company records in the future may differ significantly from the amount recorded in the current period and could materially affect its loss from operations, net loss and net loss per share.
Income Taxes:
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates as of the date of enactment. Interest and penalties, if applicable, would be recorded in operations.
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years (2014-2017) in these jurisdictions. The Company believes its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded.
Net Loss per Common Share:
Basic loss per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect the potential securities that could share in the earnings of the Company, similar to fully diluted earnings per share. Common stock equivalents outstanding as of
December 31, 2017
and
2016
of approximately
3.0 billion
and
301.1 million
shares have been omitted from loss per share because they are anti-dilutive. Common stock equivalents consist of stock options, unvested restricted stock, warrants, preferred stock, preferred stock make-whole dividend liability amounts (assuming the make-whole dividend liability is paid in common stock in lieu of cash), and convertible notes (assuming the amortization payments are paid in common stock in lieu of cash). Net loss per common share was the same for both basic and diluted methods for the periods ended
December 31, 2017
and
2016
.
Fair Value Estimates:
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses fair value hierarchy based on three levels of inputs, of which, the first two are considered observable and the last unobservable, to measure fair value:
|
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
•
|
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
Certain long-lived assets and current liabilities have been measured at fair value on a recurring and non-recurring basis. See Note 6. Property, Plant and Equipment, Note 10. Secured Promissory Note, Note 12. July 2016 Convertible Notes and Series H Preferred Stock, Note 13. October 2016 Convertible Notes and Exchange of Series A Preferred Stock, Note 13. St. George Convertible Note, Note 15. BayBridge Convertible Note, Note 17. Series E Preferred Stock, Note 18. Series F Preferred Stock, Note 19. Series G Preferred Stock, Note 20. Series I Preferred Stock and Series I Convertible Notes, Note 21. Series J Preferred Stock and Series J-1 Preferred Stock, and Note 23. Make-whole Dividend Liability. The carrying amount of our long term debt outstanding approximates fair value because our current borrowing rate does not materially differ from market rates for similar bank borrowings. The carrying value for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and other assets and liabilities approximate their fair values due to their short maturities.
Related Party Transactions:
One of the Company's named shareholders is Tertius Financial Group Pte Ltd, of which Mr. Victor Lee, President and Chief Executive Officer of the Company, is Managing Director and
50%
shareholder. Accounting for transactions under these agreements is consistent with those defined in our Significant Accounting Policies. See Notes 11 and 27 for further information.
ASCENT SOLAR TECHNOLOGIES, INC.
Use of Estimates:
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
. The update will establish a comprehensive revenue recognition standard for virtually all industries in GAAP. ASU 2014-09 will change the amount and timing of revenue and cost recognition, implementation, disclosures and documentation. In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date.
The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for the Company in fiscal year 2018. The Company has evaluated ASU 2014-09, and it will not have a material effect on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company continues to evaluate the impact, that the adoption of this guidance will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting
, which simplifies several aspects of the accounting for share-based payment transactions, including 1) accounting for income taxes, 2) classification of excess tax benefits in the statement of cash flows, 3) forfeitures, 4) minimum statutory tax withholding requirements, 5) cash flow classification of employee taxes withheld in the form of shares, 6) the practical expedient for estimating the expected term, and 7) intrinsic value. The guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. The implementation of ASU 2016-09 did not have a material effect on the Company's consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09,
Compensation - Stock Compensation (Topic 718)
. ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for interim periods and fiscal years beginning after December 15, 2017, and early application is permitted. The Company continues to evaluate the impact, if any, that the adoption of this guidance will have on its consolidated financial statements, but does not expect the effect, if any, will be material.
In July 2017, the FASB issued ASU No. 2017-11
Part I, Earnings Per Share (Topic 260), Distinguishing Liabilities from
Equity (Topic 480), Derivatives and Hedging (Topic 815)
. ASU 2017-11 Part I changes the classification analysis of certain equity linked financial instruments with down round features. ASU 2017-11 Part I is effective, for public business entities, for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements.
NOTE 4. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN
During the years ended
December 31, 2017
and
2016
, the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 8, 10, 11, 12, 13, 14, 15, 17, 18, 19, 20, 21, and 22.
The Company has continued 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 year ended
December 31, 2017
the Company used approximately
$12.6 million
in cash for operations. The Company's primary significant long term cash obligation consists of a note payable of approximately
$5.5 million
to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of approximately
$0.7 million
, including principal and interest, will come due in the remainder of
2017
.
The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As of
December 31, 2017
, the Company has negative working capital. As such, cash liquidity sufficient for the year ending December 31, 2018 will require additional financing.
ASCENT SOLAR TECHNOLOGIES, INC.
The Company continues to accelerate sales and marketing efforts related to its consumer and military solar products and specialty PV application strategies through expansion of its sales and distribution channels. The Company has begun activities related to securing additional financing through strategic or financial investors, but there is no assurance the Company will be able to raise additional capital on acceptable terms or at all. If the Company's revenues do not increase rapidly, and/or additional financing is not obtained, the Company will be required to significantly curtail operations to reduce costs and/or sell assets. Such actions would likely have an adverse impact on the Company's future operations.
As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.
Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 5. TRADE RECEIVABLES
Trade receivables, net consist of amounts generated from product sales and government contracts. Accounts receivable totaled
$6,658
and
$549,204
as of
December 31, 2017
and
2016
, respectively.
Provisional Indirect Cost Rates - The Company bills the government under cost-based research and development contracts at provisional billing rates which permit the recovery of indirect costs. These rates are subject to audit on an annual basis by the government agencies’ cognizant audit agency. The cost audit may result in the negotiation and determination of the final indirect cost rates. In the opinion of management, re-determination of any cost-based contracts will not have a material effect on the Company’s financial position or results of operations.
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
The following table summarizes property, plant and equipment as of
December 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2017
|
|
2016
|
Building
|
|
$
|
5,828,960
|
|
|
$
|
5,828,960
|
|
Furniture, fixtures, computer hardware and computer software
|
|
489,421
|
|
|
489,421
|
|
Manufacturing machinery and equipment
|
|
30,327,481
|
|
|
30,321,079
|
|
Depreciable property, plant and equipment
|
|
36,645,862
|
|
|
36,639,460
|
|
Less: Accumulated depreciation and amortization
|
|
(32,013,686
|
)
|
|
(30,983,448
|
)
|
Net property, plant and equipment
|
|
$
|
4,632,176
|
|
|
$
|
5,656,012
|
|
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.
Depreciation expense for the years ended
December 31, 2017
and
2016
was
$1,030,237
and
$3,486,741
, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the Consolidated Statements of Operations.
NOTE 7. INVENTORIES
Inventories consisted of the following at
December 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2017
|
|
2016
|
Raw materials
|
|
$
|
689,000
|
|
|
$
|
833,000
|
|
Work in process
|
|
12,000
|
|
|
635,000
|
|
Finished goods
|
|
337,000
|
|
|
1,102,000
|
|
Total
|
|
$
|
1,038,000
|
|
|
$
|
2,570,000
|
|
NOTE 8. NOTES PAYABLE
On
February 24, 2017
, the Company entered into an agreement with a vendor to convert the balance of their account into
three
notes payable in the aggregate amount of
$765,784
. The notes bear interest of
6%
per annum and matures on
February 24, 2018
; all outstanding principal and accrued interest is due and payable upon maturity. As of
December 31, 2017
, the Company had not made any payments on these notes and the accrued interest was
$39,565
. As of the date of this filing, this note has matured and is due and payable on demand.
On
February 27, 2017
, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of
$49,500
. The note bears interest of
6%
per annum and matures on
September 27, 2017
; all outstanding principal and accrued interest is due and payable upon maturity. On
September 27, 2017
, the Company paid the note, plus
$1,725
in accrued interest, in full.
On
March 23, 2017
, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of
$356,742
. The note bears interest of
5%
per annum and matures on
October 23, 2017
; all outstanding principal and accrued interest is due and payable upon maturity. On
October 23, 2017
, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to
November 6, 2017
. Again on
December 12, 2017
, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to
March 31, 2018
. As of
December 31, 2017
, the Company had not made any payments on the note and the accrued interest was
$13,830
.
On
June 30, 2017
, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of
$250,000
. The note bears interest of
5%
per annum and matures on
February 28, 2018
; all outstanding principal and accrued interest is due and payable upon maturity. As of
December 31, 2017
, the Company had not made any payments on these notes and the accrued interest was
$6,301
. As of the date of this filing, this note has matured and is due and payable on 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 matures on
September 30, 2018
. Per the settlement agreement, monthly payments of
$18,426
were to commence on
October 30, 2017
. As of
December 31, 2017
,
one
of the monthly payments had been made and the remaining principal and interest balances were
$197,705
and
$2,540
, respectively.
NOTE 9. DEBT
On February 8, 2008, the Company acquired a manufacturing and office facility in Thornton, Colorado, for approximately
$5.5 million
. The purchase was financed by a promissory note, deed of trust and construction loan agreement (the “Construction Loan”) with the Colorado Housing and Finance Authority (“CHFA”), which provided the Company borrowing availability of up to
$7.5 million
for the building and building improvements. In 2009, the Construction Loan was converted to a permanent loan pursuant to a Loan Modification Agreement between the Company and CHFA (the “Permanent Loan”). The Permanent Loan, collateralized by the building, has an interest rate of
6.6%
and the principal will be amortized through its term to January 2028. Further, pursuant to certain covenants in the Permanent Loan, the Company may not, among other things, without CHFA’s prior written consent (which by the terms of the deed of trust is subject to a reasonableness requirement): create or incur additional indebtedness (other than obligations created or incurred in the ordinary course of business); merge or consolidate with any other entity; or make loans or advances to the Company’s officers, shareholders, directors or employees.
On November 1, 2016, the Company and the CFHA agreed to modify the original agreement described above with the addition of a forbearance period. Per the modification agreement, no payments of principal and interest shall be due under the note during the forbearance period commencing on November 1, 2016 and continuing through April 1, 2017. The amount of interest that should have been paid by the Company during the forbearance period in the total amount of
$180,043
shall be added to the outstanding principal balance of the note. As a result, on May 1, 2017, the principal balance of the note was
$5,704,932
. Commencing on May 1, 2017, the monthly payments of principal and interest due under the note resumed at
$57,801
, and the Company shall continue to make such monthly payments over the remaining term of the note ending on February 1, 2028.
ASCENT SOLAR TECHNOLOGIES, INC.
As of
December 31, 2017
, future principal payments on long-term debt are due as follows:
|
|
|
|
|
|
|
2018
|
$
|
343,395
|
|
2019
|
366,757
|
|
2020
|
391,709
|
|
2021
|
418,358
|
|
2022
|
446,821
|
|
Thereafter
|
3,494,779
|
|
|
$
|
5,461,819
|
|
NOTE 10. SECURED PROMISSORY NOTE
On
November 30, 2017
, the Company, entered into a note purchase and exchange agreement (the “Note SPA”) with Global Ichiban Ltd (“Investor”), for the private placement of up to
$2,000,000
of the Company’s Secured Convertible Promissory Notes (“Notes”) in exchange for
$2,000,000
of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least
$50,000
for the
20
trading day period preceding such future tranche closing dates.
Pursuant to the terms of the Note SPA, the Company and the Investor also agreed to exchange certain outstanding securities held by the Investor for additional Notes. As of
November 30, 2017
, the Investor surrendered for cancellation (i) its outstanding promissory note dated
September 13, 2017
(
$3,359,539
principal and accrued interest), (ii) its outstanding promissory note dated
October 31, 2017
(
$252,466
principal and accrued interest), and (iii) its
400
shares of outstanding Series J Preferred Stock (
$445,222
of capital and accrued dividends). In exchange, the Company issued to the Investor
$4,057,227
aggregate principal amount of additional Notes. Please refer to Note 11 for further discussion on the canceled promissory notes and Note 21 on the canceled Series J Preferred Stock shares.
Of the Notes issued on
November 30, 2017
,
$3,359,539
aggregate principal amount will mature on
December 15, 2020
. Principal and interest will be payable in
36
equal monthly installments beginning
January 15, 2018
.
Of the Notes issued on
November 30, 2017
,
$697,688
aggregate principal amount will mature on
November 30, 2018
. Principal and interest will be payable upon maturity.
The
$2,000,000
aggregate principal amount of Notes to be issued in the future in tranches pursuant to the Note SPA will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity. As of
December 31, 2017
, the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:
|
|
|
|
|
|
Closing Date
|
Closing Amount
|
Maturity Date
|
11/30/2017
|
$
|
250,000
|
|
11/30/2018
|
12/28/2017
|
$
|
250,000
|
|
12/28/2018
|
The Notes will be 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.
All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to the lowest of (i)
85%
of the average VWAP for the shares over the prior
5
trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii)
$0.002
per share
The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of Common Stock.
As of
December 31, 2017
, the principal and interest balance of the Notes were
$4,557,227
and
$44,134
, respectively
ASCENT SOLAR TECHNOLOGIES, INC.
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.
Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.
|
|
1)
|
The first valuation was done on the
November 30, 2017
Note with term of
three
years. Management's analysis, using the following assumptions: annual volatility of
63%
present value discount rate of
12%
and a dividend yield of
0%
, resulted in a fair value of the embedded derivative associated with this Note of
$2,756,074
as of November 30, 2017. The value of the embedded derivative associated with the Note was recorded as a debt discount.
|
|
|
2)
|
The second valuation was done on the group of Notes dated
November 30, 2017
, that had a term of
one
year. Management's analysis, using the following assumptions: annual volatility of
67%
present value discount rate of
12%
and a dividend yield of
0%
, resulted in a fair value of the embedded derivative associated with these Notes of
$943,735
as of November 30, 2017. The value of the embedded derivative associated with the Note was recorded as a debt discount.
|
|
|
3)
|
The third valuation was done on the Note dated
December 28, 2017
, which had a term of
one
year. Management's analysis, using the following assumptions: annual volatility of
65%
present value discount rate of
12%
and a dividend yield of
0%
, resulted in a fair value of the embedded derivative associated with this Note of
$267,008
as of December 28, 2017. Since the value of the derivative was more than the liability, the entire liability of
$250,000
was recorded as a debt discount to be amortized with the liability. The remaining balance of
$17,008
was charged to interest expense.
|
The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2017
, the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.
|
|
1)
|
For the
November 30, 2017
3yr Note: Management conducted a fair value assessment with the following assumptions: annual volatility of
63%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2017
. As a result of the fair value assessment, the Company recorded a loss of
$985,928
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$3,742,002
as of
December 31, 2017
.
|
|
|
2)
|
For the
November 30, 2017
1yr Notes: Management conducted a fair value assessment with the following assumptions: annual volatility of
60%
present value discount rate of
12%
and a dividend yield of
0%
as of
December 31, 2017
. As a result of the fair value assessment, the Company recorded a gain of
$55,567
as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of
$888,168
as of
December 31, 2017
.
|
|
|
3)
|
There were no changes to the
December 28, 2017
1yr note, as there was only one trading day for the year following the issuance.
|
During the fourth quarter of 2017, a net loss of
$930,361
had been recorded to reflect the total derivative liability of
$4,897,178
as of
December 31, 2017
.
NOTE 11. PROMISSORY NOTES
Tertius Financial Group Notes and Exchange
On
August 29, 2016
, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of
$330,000
of the Company’s original issue discount notes with an original maturity date of
November 29, 2016
. The notes bear interest of
6%
per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company.
ASCENT SOLAR TECHNOLOGIES, INC.
On
December 6, 2016
, the Company issued a new
$600,000
original issue discount note to TFG in exchange for (i)
$200,000
of additional gross proceeds and (ii) cancellation of the existing outstanding
$330,000
note. The new TFG note bears interest at a rate of
6%
per annum and matures on
December 31, 2017
. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was
$602,000
(including accrued and unpaid interest) with a discount of
$60,000
.
On
January 19, 2017
, the Company issued
333,333,333
shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”).
Pursuant to the SPA, the Company issued the
333,333,333
shares to TFG in exchange for cancellation of its
$600,000
promissory note (including accrued interest of
$4,340
) that was issued by the Company on
December 6, 2016
. The SPA does not provide any registration rights for the shares issued to TFG.
TFG is a Singapore based entity controlled and
50%
owned by Ascent’s President & CEO, Victor Lee, and owns approximately
3%
of the Company's outstanding shares at
December 31, 2017
.
Offering of Unsecured Promissory Notes
Between December 2016 and April 2017, the Company initiated
eleven
non-convertible, unsecured promissory notes with a private investor with varying principal amounts aggregating to
$3,400,000
. The promissory notes bear interest of
12%
per annum and mature six months from the respective dates of issuance, ranging from June 2, 2017 to October 21, 2017. Unless paid in advance, the principal and interest of these promissory notes are payable upon maturity. The notes are not convertible into equity shares of the Company and are unsecured.
Between June and August, 2017,
eight
of the promissory notes described above matured. The Company and the private investor agreed to pay the interest accrued on these notes, as of the maturity dates, and extend the notes another three months without the Company being in default. Through August 30, 2017,
$143,148
interest was paid.
On
September 13, 2017
, the Company and the investor entered into a Promissory Note Exchange Agreement. Pursuant to the agreement, the Investor exchanged and canceled the
eleven
outstanding promissory notes (with an aggregate principal and accrued interest of
$3,504,199
) for
one
new promissory note having a principal amount of approximately
$3,504,199
.
The new note has a term of
three
years, bears interest at a rate of
12%
per annum, and calls for monthly installment payments of
$116,390
commencing on October 13, 2017. The Company has the option to pay monthly installment amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lowest of (i)
85%
of the average VWAP for the shares over the prior
five
trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii)
$0.004
per share. The Company may not make payments in the form of shares of Common Stock if, after giving effect to the issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of Common Stock.
On
November 30, 2017
, the terms of this note were canceled and the remaining principal and accrued interest balance of
$3,359,539
was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information.
Offering of Unsecured, Non-Convertible Notes
During October 2016, the Company received
$420,000
from a separate private investor. These funds, along with
$250,000
of additional funding, were rolled into a promissory note, executed on
January 17, 2017
, in the amount of
$700,000
issued with a discount of
$30,000
which will be charged to interest expense ratably over the term of the note. The note bears interest at
12%
per annum and matures on
July 17, 2017
. Principal and interest on this note are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured.
On
June 30, 2017
, the Company and the private investor agreed to a
twelve
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. Four monthly payments were made between July and October of 2017.
As of
December 31, 2017
,
$205,563
of principal and
$45,414
of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of
December 31, 2017
were
$494,437
and
$27,126
, respectively.
ASCENT SOLAR TECHNOLOGIES, INC.
On
April 6, 2017
, the Company initiated a non-convertible, unsecured promissory note with a private investor for
$103,000
in exchange for proceeds of
$100,000
. The discount of
$3,000
will be charged to interest expense ratably over the term of the note. The promissory note bears interest of
10%
per annum and matures on
October 6, 2017
. On
October 6, 2017
, the Company and its investor entered into a Promissory Note Exchange Agreement to convert a promissory note with a principal balance of
$103,000
and accrued interest of
$5,233
in to common shares. Per the terms of the agreement, the promissory note was canceled and
72,500,000
shares were issued.
On
May 8, 2017
, the Company initiated a non-convertible, unsecured promissory note with a private investor for
$125,000
. The promissory note bears interest of
12%
per annum and matures on
September 8, 2017
. On
September 8, 2017
, the Company redeemed this note, in full, for cash.
On
October 31, 2017
, the Company initiated a non-convertible, unsecured promissory note with a private investor for
$250,000
. The promissory note bears interest of
12%
per annum and matures on
January 31, 2018
. On
November 30, 2017
, the terms of this note were canceled and the remaining principal and accrued interest balance of
$252,466
was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information.
On
November 16, 2017
, the Company initiated a non-convertible, unsecured promissory note with a private investor for
$275,000
. The promissory note was issued with an original issue discount of
$25,000
, resulting in proceeds to the company of
$250,000
. The note does not have a stated interest rate and matures on
December 18, 2017
. As of
December 31, 2017
, no payments had been made on this note and the discount had been recorded as interest expense.
During December 2017, the Company received aggregate proceeds of
$177,500
, from a private investor. These proceeds were incorporated into a promissory note on
January 31, 2018
. Please refer to Note 30 for further information on this note.
NOTE 12. SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES
Series H Preferred Stock
On
June 9, 2016
, the Company entered into a securities purchase agreement with a private investor to issue
2,500
shares of Series H Preferred Stock for
$2,500,000
. The Company received gross proceeds of
$250,000
at Closing. Additional gross proceeds of
$580,000
were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on
July 13, 2016
. At the date of the exchange, the Company had sold and issued
830
shares of Series H Preferred Stock to the private investor in exchange for
$830,000
of gross proceeds. Please see the section below for details of the exchange.
July 2016 Convertible Notes
On
July 13, 2016
, the Company entered into a securities purchase agreement (the “Note SPA”) with the private investor for the private placement of
$2,082,600
of the Company’s
4%
Original Issue Discount Senior Secured Convertible Promissory Notes (the “July 2016 Convertible Notes”). On
July 13, 2016
, the Company sold and issued
$364,000
principal amount of notes to the investor in exchange for
$350,000
of gross proceeds. The Company sold and issued the remaining
$1,718,600
principal amount of July 2016 Convertible Notes to the investor in exchange for
$1,650,000
of gross proceeds in weekly tranches between July and September 2016.
The Company and the private investor also entered into an Exchange Agreement dated
July 13, 2016
(the “Exchange Agreement”). Under the terms of the Exchange Agreement, the outstanding shares of Series H Preferred Stock (approximately
$833,000
of capital and accrued dividends) were canceled. In exchange, the Company issued to the private investor approximately
$866,000
of July 2016 Convertible Notes. There were
830
shares of Series H Preferred Stock outstanding as of the date of the Exchange Agreement.
Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature
July 13, 2017
. The July 2016 Convertible Notes bear interest at a rate of
10%
per annum, subject to increase to
24%
per annum upon the occurrence and continuance of an event of default. Principal on the July 2016 Convertible Notes is payable on the Maturity Date. Interest on the July 2016 Convertible Notes is payable quarterly. Principal and interest are payable in cash or, if specified equity conditions are met, shares of Common Stock.
The July 2016 Convertible Notes are secured by a security interest in substantially all of the Company’s assets. The subsidiaries of the Company have guaranteed the Company’s obligations under the July 2016 Convertible Notes.
ASCENT SOLAR TECHNOLOGIES, INC.
The July 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the July 2016 Convertible Notes; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016.
On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to
24%
per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a
25%
premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of
24%
on October 10, 2016.
Forbearance and Settlement Agreement on July 2016 Convertible Notes
On
May 5, 2017
, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
|
|
•
|
The Company agreed to redeem for cash all secured convertible notes of the Company held by the holder no later than
September 1, 2017
.
|
|
|
•
|
The Company affirmed that the current balance of owed principal and accrued and unpaid interest to the holder is
$1,790,214
as of
May 2, 2017
.
|
|
|
•
|
The redemption price for such secured convertible notes shall be
120%
(if redeemed on or prior to
August 15, 2017
) or
125%
(if redeemed after
August 15, 2017
) of the then outstanding principal, plus any accrued and unpaid interest.
|
|
|
•
|
During the month of May 2017, the Holder agreed to limit its conversions of outstanding Company secured convertible notes to
$50,000
per calendar week of principal/interest.
|
|
|
•
|
During the months of June, July and August 2017, the holder agreed to limit its conversions of outstanding Company secured convertible notes to
$75,000
per calendar week of principal/interest.
|
|
|
•
|
During the months of May, June, July and August 2017, the holder agreed that all outstanding Company secured convertible notes shall bear interest at the normal stated rate of
10%
, rather than default rate of
24%
.
|
|
|
•
|
All conversions during the months of May, June, July and August 2017 will be at the “triggering event” discount conversion price as stated in the secured convertible notes, and will continue at the “triggering event” discount price until, if and when the notes are redeemed.
|
|
|
•
|
Should the Company fail to redeem for cash all secured convertible notes on or before
September 1, 2017
, default interest and normal stated interest will accrue from the date of execution of this agreement.
|
All principal and accrued interest on the July 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of the private investor, into shares of Common Stock at a variable conversion price equal to the lowest of (i)
$0.045
(the “Fixed Conversion Price”), (ii)
70%
of the lowest volume weighted average price (“VWAP”) of the Company's common stock for the
ten
consecutive trading day period prior to the conversion date or (iii)
70%
of the lowest closing bid price of the Company's common stock for the
ten
consecutive trading day period prior to the conversion date. If certain defined triggering events occur, the conversion price would thereafter be reduced (and only reduced), to equal
60%
of the lower of (i) the lowest closing bid price of the Company's common stock for the
thirty
consecutive trading day period prior to the conversion date or (ii) the lowest VWAP of the the Company's common stock for the
thirty
consecutive trading day period prior to the conversion date. In addition, on the 90th day and also on the 180th day from the date of the Note SPA, the private investor may reset the Fixed Conversion Price to thereafter be equal to the VWAP of the Common Stock for such day or if such 90th or 180th day is not a trading day, then the VWAP for the immediately preceding trading day.
ASCENT SOLAR TECHNOLOGIES, INC.
The following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Common Shares Issued
|
Q4 2016
|
$
|
152,460
|
|
64,000,000
|
|
Q1 2017
|
1,017,732
|
|
959,704,543
|
|
Q2 2017
|
682,235
|
|
1,865,043,998
|
|
|
$
|
1,852,427
|
|
2,888,748,541
|
|
In addition to the
$1,852,427
in principal conversions,
$3,960
of interest was converted during 2017. As of
December 31, 2017
, with
$1,096,600
of principal payments,
$400,017
of interest payments, and
$219,320
of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was
$22,661
which was credited to interest expense upon full redemption of the instrument.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the July 2016 Convertible Notes was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
December 31, 2016
the fair value of the derivative liability was
$3,733,348
.
Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended
December 31, 2017
was
$3,733,348
, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability.
NOTE 13. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK
October 2016 Convertible Notes
On
October 5, 2016
, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of
$330,000
principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued
$330,000
principal amount of October 2016 Convertible Notes to Adar Bays in exchange for
$300,000
of gross proceeds.
Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature
December 31, 2017
(the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of
6%
per annum, subject to increase to
24%
per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date.
All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to
80%
of the lowest closing bid price of the Company’s common stock for the
15
consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to
50%
of the lowest closing bid price of the Company’s common stock for the
15
consecutive trading day period prior to the conversion date.
The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company.
Outstanding principal and accrued interest on the October 2016 Convertible Notes were
$330,000
and
$24,860
, respectively as of
December 31, 2017
.
ASCENT SOLAR TECHNOLOGIES, INC.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the October 2016 Convertible Notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of
$330,000
was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of
$341,114
was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of
December 31, 2016
, the fair value of the derivative liability was
$544,746
.
The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2017
, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a
$279,442
loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended
December 31, 2017
. The net loss recorded for the year ended
December 31, 2017
was
$27,897
, to properly reflect the fair value of the embedded derivative of
$572,643
as of
December 31, 2017
.
The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2017
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
65%
present value discount rate of
12%
and dividend yield of
0%
.
Exchange of Outstanding Series A Preferred Stock for Convertible Notes
In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had
$165,541
shares of Series A Preferred Stock that remained outstanding as of
October 6, 2016
.
On
October 6, 2016
, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder.
As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held
$330,000
of the October 2016 Convertible Notes.
NOTE 14. ST. GEORGE CONVERTIBLE NOTE
On
September 8, 2017
, the Company entered into a securities purchase agreement with St. George Investments, LLC (“Investor”), for the private placement of
$1,725,000
principal amount of the Company’s Original Issue Discount Convertible Promissory Notes.
On
September 11, 2017
, the Company sold and issued
$1,725,000
principal amount of the convertible notes to the Investor in exchange for
$1,500,000
of gross proceeds, and paid
$20,000
in financing costs. The original issue discount of
$225,000
, and the financing fee, will be charged to interest expense, ratably, over the life of the note.
Unless earlier converted or prepaid, the convertible notes will mature on
March 11, 2019
. The notes do not bear interest in the absence of an event of default.
For the first six months after the issuance of the notes, the Company will make a monthly cash repayment on the notes of approximately
$96,000
. Thereafter, the Investor may request that the Company make monthly partial redemptions of the note up to
$150,000
per month. If the Investor does not request the full
$150,000
redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts. But in no event can the amount requested by the Investor for any one month exceed
$275,000
.
Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a
15%
redemption premium.
Beginning six months after the issuance of the convertible notes, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i)
85%
of the average VWAP for the shares over the prior
5
trading days or (ii) the closing bid price for the shares on the prior trading day.
All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a fixed conversion price of
$0.004
per share.
The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the Notes will begin to bear interest at the rate of
22%
per annum. In addition, upon the occurrence of an event of default, the Investor has the option to increase the outstanding balance of the Notes by
25%
.
In connection with the closing under the Note SPA, the Company issued
$37,500,000
unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was
$0.0017
resulting in an interest expense of
$63,750
being recorded as of the date of close.
The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
4.99%
of the outstanding shares of Common Stock. Per the conditions of the SPA, a reserve of
1.88 billion
shares was set up out of our authorized and unissued shares.
During the fourth quarter of 2017, we made cash payments of
$191,667
on this note, and as of
December 31, 2017
, the principal balance on this note was
$1,705,833
. In lieu of making the December 2017 payment, the share reserve was increased by
3 billion
shares.
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. At closing, a derivative liability and a corresponding debt discount in the amount of
$468,095
was recorded.
The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2017
, the Company conducted a fair value assessment of the embedded derivative associated with the Notes. As a result of the fair value assessment, the Company recorded a
$151,504
loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended
December 31, 2017
. The net gain recorded for the year ended
December 31, 2017
was
$73,815
, to properly reflect the fair value of the embedded derivative of
$394,280
as of
December 31, 2017
.
The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2017
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
62%
present value discount rate of
12%
and dividend yield of
0%
.
NOTE 15. BAYBRIDGE CONVERTIBLE NOTE
On
December 6, 2017
, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with BayBridge Capital Fund LP (“BayBridge”).
Pursuant to the terms of the Exchange Agreement, the Investor agreed to surrender and exchange
675
shares of outstanding Series J Preferred Stock (
$755,417
of capital and accrued dividends). In exchange, the Company issued to the Investor an unsecured promissory note with an aggregate principal amount of
$840,000
(the “Exchange Note”), with an original issue discount of
$84,583
. Please refer to Note 21 for further discussion on the Series J Preferred Stock.
The Exchange Note is unsecured, has no applicable registration rights, bears interest at a rate of
12%
per annum, matures on
December 6, 2018
, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.
Payments of principal and accrued interest on the Exchange Note are payable in cash or, at the option of the Company, in shares of Common Stock at a variable conversion price equal to the lowest of (i)
85%
of the average VWAP for the shares over the prior
5
trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii)
$0.003
per share. Payments in shares of Common Stock may not be issued pursuant to the Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of
9.99%
of the outstanding shares of Common Stock.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the Exchange Note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability.
December 6, 2017
, the derivative liability associated with the promissory note was
$1,048,311
. Since the value of the derivative was more than the liability and the original issue discount, the entire undiscounted liability of
$755,417
was recorded as a debt discount to be amortized over the life of the liability. The remaining
$292,894
was charged to interest expense.
The derivative liability associated with the Exchange Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At
December 31, 2017
, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note. As a result of the fair value assessment, the Company recorded a
$505,578
gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the year ended
December 31, 2017
, to properly reflect the fair value of the embedded derivative of
$542,733
as of
December 31, 2017
.
The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Exchange Note approximates management’s estimate of the fair value of the embedded derivative liability at
December 31, 2017
based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of
61%
, present value discount rate of
12%
and dividend yield of
0%
.
As of
December 31, 2017
, principal of
$275,000
had been converted into
404,411,765
shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of
December 31, 2017
were
$565,000
and
$4,825
, respectively.
NOTE 16. 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
per share, resulting in gross proceeds of
$6,000,000
. This purchase agreement included warrants to purchase up to
13,125
shares of common stock of the Company. The transfer of cash and securities took place incrementally, the first closing occurring on June 17, 2013 with the transfer of
125,000
shares of Series A Preferred Stock and a warrant to purchase
2,187
shares of common stock for
$1,000,000
. The final closings took place in August 2013, with the transfer of
625,000
shares of Series A Preferred Stock and a warrant to purchase
10,938
shares of common stock for
$5,000,000
.
Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of
8%
per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at
10%
below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. 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 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information.
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
20
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
per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At
December 31, 2017
, 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.
On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder.
As of
December 31, 2017
, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of
104,785
shares of Series A Preferred Stock. As of
December 31, 2017
, Adar Bays had also converted their
104,785
shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of
173,946,250
shares of common stock.
Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to
$8
per share of Series A Preferred Stock plus any accrued and unpaid dividends.
As of
December 31, 2017
, there were
60,756
shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of
$279,815
.
NOTE 17. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE
Series E Preferred Stock
On
November 4, 2015
, the Company entered into a securities purchase agreement with a private investor to issue
2,800
shares of Series E Preferred Stock in exchange for
$2,800,000
.
Shares of the Series E Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible, at the option of the holder, into common stock at a variable conversion price equal to
80%
of the average of the
two
lowest VWAPs of the Company's common stock for the
ten
consecutive trading day period prior to the conversion date. If certain defined default events occur, the conversion price would thereafter be reduced (and only reduced), to equal
70%
of the average of the
two
lowest VWAPs of the Company's common stock for the
twenty
consecutive trading day period prior to the conversion date.
The private investor had available to them a new conversion price beginning on June 9, 2016 as a result of the Series H Preferred Stock transaction further described in Note 12. Shares of the Series E Preferred Stock are now convertible, at the option of the private investor, into common stock at a variable conversion price equal to
70%
of (i) the lowest VWAP of our common stock for the
ten
consecutive trading day period prior to the conversion date or (ii) the lowest closing bid price of our common stock for the
ten
consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series E Preferred Stock:
|
|
|
|
|
|
|
|
|
Conversion Period
|
Preferred Series E Shares Converted
|
Value of Series E Preferred Shares (inclusive of accrued dividends)
|
Common Shares Issued
|
Q4 2015
|
478
|
|
$
|
481,500
|
|
250,000
|
|
Q1 2016
|
1,220
|
|
1,239,436
|
|
1,132,000
|
|
Q2 2016
|
365
|
|
381,414
|
|
7,979,568
|
|
Q3 2016
|
523
|
|
548,896
|
|
21,973,747
|
|
Q4 2016
|
94
|
|
101,018
|
|
13,089,675
|
|
Q1 2017
|
15
|
|
16,248
|
|
8,289,962
|
|
Q2 2017
|
35
|
|
38,886
|
|
134,927,207
|
|
Q3 2017
|
70
|
|
76,814
|
|
129,314,677
|
|
|
2,800
|
|
$
|
2,884,212
|
|
316,956,836
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of
7%
per annum. During the year ended
December 31, 2017
, the holder converted dividends in the amount of
$11,948
on the Series E Preferred Stock, resulting in the issuance of
25,160,171
shares of common stock. On September 30, 2017, the Company paid
$2,013
in cash for the remaining accrued dividends.
The Company has issued
18,000
shares of common stock to the private investor as a commitment fee relating to the Series E Preferred Stock. Costs associated with the Series E Preferred Stock, such as legal fees and commitment shares are capitalized and reported as deferred financing costs on the Condensed Consolidated Balance Sheets. The total gross debt issuance cost incurred by the Company related to the Series E Preferred Stock was
$104,000
. These debt issuance costs will be recognized as additional interest expense over the life of the Series E Preferred Stock.
As of
December 31, 2017
, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed.
The Company classified the Series E Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the Series E Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
December 31, 2016
the fair value of the derivative liability was
$140,748
.
At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of
$121,390
as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended
December 31, 2017
was
$140,748
, to properly reflect the elimination of the embedded derivative as of
December 31, 2017
.
The Committed Equity Line
On November 10, 2015, the Company and the private investor entered into a committed equity line purchase agreement (the "CEL"). Under the terms and subject to the conditions of the CEL purchase agreement, at its option the Company has the right to sell to the private investor, and the private investor is obligated to purchase from the Company, up to
$32.2 million
of the Company’s common stock, subject to certain limitations, from time to time, over the
36
-month period commencing on December 18, 2015, the date that the registration statement was declared effective by the SEC.
From time to time, the Company may direct the private investor, at its sole discretion and subject to certain conditions, to purchase an amount of shares of common stock up to the lesser of (i)
$1,000,000
or (ii)
300%
of the average daily trading volume of the Company’s common stock over the preceding
ten
trading day period. The per share purchase price for shares of common stock to be sold by the Company under the CEL purchase agreement shall be equal to
80%
of the average of the
two
lowest VWAPs of the common stock for the
ten
consecutive trading day period prior to the purchase date. In total, the Company directed the private investor to purchase
$3,056,147
of common stock which resulted in the issuance of
1,368,000
shares of common stock.
The Company may not direct the private investor to purchase shares of common stock more frequently than once each ten business days. The Company’s sales of shares of common stock to the private investor under the CEL purchase agreement are limited to no more than the number of shares that would result in the beneficial ownership by the private investor and its affiliates, at any single point in time, of more than
9.99%
of the Company’s then outstanding shares of common stock.
As consideration for entering into the CEL purchase agreement, the Company agreed to issue to the private investor
132,000
shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC.
While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital.
NOTE 18. SERIES F PREFERRED STOCK
On
January 19, 2016
, the Company entered into a securities purchase agreement with a private investor for the sale of
$7,000,000
of the Company’s newly designated Series F Preferred Stock.
ASCENT SOLAR TECHNOLOGIES, INC.
On
January 20, 2016
, the Company sold and issued
7,000
shares of Series F Preferred Stock to the private investor. The aggregate purchase price of the Series F Preferred shares was
$7,000,000
. On
January 20, 2016
, the private investor paid
$500,000
to the Company. The remaining
$6,500,000
was paid by the private investor to the Company in
14
weekly increments of
$500,000
or
$250,000
beginning
January 25, 2016
and ending
April 28, 2016
.
Shares of the Series F Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible, at the option of the holder, into common stock at a fixed conversion price equal to
$5
per share. If certain defined default events occur, the conversion price would thereafter be reduced (and only reduced), to equal
70%
of the average of the
two
lowest VWAPs of our common stock for the
twenty
consecutive trading day period prior to the conversion date.
If requested by the private investor, the Company will make weekly redemptions of shares of Series F Preferred Stock (including any accrued and unpaid dividends thereon). If the redemption price is paid by the Company in cash, the number of shares to be redeemed in each weekly increment is
250
shares of Series F Preferred Stock, and the redemption price is a price per share equal to
$1,250
plus any accrued but unpaid dividends thereon.
The Company has the option to make such redemption payments in shares of common stock provided certain specified equity conditions are satisfied at the time of payment. The number of shares of common stock to be issued would be calculated using a per share price equal to
80%
of the
one
lowest VWAP of our common stock for the
ten
consecutive trading day period prior to the payment date. For redemption payments made in shares of common stock, the Company will redeem either (i)
250
shares of Series F Preferred Stock or (ii) such greater number of shares of Series F Preferred Stock (and also including any accrued and unpaid dividends) that would result upon redemption in the issuance of a number of shares of common stock equal to
12%
of the aggregate composite trading volume for the Company’s common stock during the preceding calendar week.
The private investor had available to them a new conversion price beginning on
June 9, 2016
as a result of the Series H Preferred Stock transaction further described in Note 12. Shares of the Series F Preferred Stock are now convertible, at the option of the private investor, into common stock at a variable conversion price equal to
70%
of (i) the lowest VWAP of our common stock for the
ten
consecutive trading day period prior to the conversion date or (ii) the lowest closing bid price of our common stock for the
ten
consecutive trading day period prior to the conversion date.
Amendment of Outstanding Series F Preferred Stock Conversion Price
On
October 5, 2016
, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately
$336,000
of Series F Preferred Stock remaining outstanding as of
October 5, 2016
.
As amended, the conversion price will now be equal to the lowest of (i)
50%
of the lowest weighted average price (“VWAP”) of our common stock for the
ten
consecutive trading day period prior to the conversion date or (ii)
50%
of the lowest closing bid price of our common stock for the
ten
consecutive trading day period prior to the conversion date. If certain “Triggering Events” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal
50%
of the average of the lowest traded price of the common stock for the
twenty
consecutive trading day period prior to the conversion date.
The following table summarizes the conversion activity of the Series F Preferred Stock:
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Dividends Converted
|
Common Shares Issued
|
Q1 2016
|
$
|
2,168,402
|
|
$
|
19,896
|
|
2,183,991
|
|
Q2 2016
|
$
|
3,234,000
|
|
$
|
66,931
|
|
6,649,741
|
|
Q3 2016
|
$
|
1,261,648
|
|
$
|
54,096
|
|
81,917,367
|
|
Q4 2016
|
$
|
175,949
|
|
$
|
9,168
|
|
27,276,006
|
|
Q3 2017
|
$
|
20,000
|
|
$
|
—
|
|
18,181,818
|
|
Q4 2017
|
$
|
107,000
|
|
$
|
467
|
|
172,552,354
|
|
|
$
|
6,966,999
|
|
$
|
150,558
|
|
308,761,277
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
Holders of the Series F Preferred Stock are entitled to dividends in the amount of
7%
per annum. As of
December 31, 2017
, all shares and accrued dividends had been converted and no balance remained.
The Company classified the Series F Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the Series F Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of
$1,666,000
were recorded. The debt discount will be charged to interest expense ratably over the life of the Series F Preferred Stock. The derivative balance was
$255,324
, as of
December 31, 2016
.
At
December 31, 2017
, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of
$42,347
as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended
December 31, 2017
was
$255,324
, to properly reflect the elimination of the embedded derivative as of
December 31, 2017
.
NOTE 19. SERIES G PREFERRED STOCK
On
April 29, 2016
, the Company entered into a securities purchase agreement with private investors to issue
2,000
shares of Series G Preferred Stock for
$2,000,000
. The Company issued
2,000
shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of
$2,000,000
.
Holders of the Series G Preferred Stock are entitled to dividends in the amount of
10%
per annum.
One
year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to
$1,000
plus any accrued but unpaid dividends thereon.
Assignment of Series G Preferred Stock
Beginning
September 19, 2016
, the
two
private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all
2,000
outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of
$1,000
per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold
1,795
shares of Series G Preferred Stock, representing a value of
$1,795,000
, to the Series G Purchasers.
On
September 21, 2016
, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of
$1
per share. As amended, the conversion price is equal to the lowest of (i)
$0.045
, (ii)
70%
of the lowest volume weighted average price of the Company’s common stock for the
ten
consecutive trading day period prior to the conversion date or (iii)
70%
of the lowest closing bid price of the Company’s common stock for the
ten
consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series G Preferred Stock:
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Dividends Converted
|
Common Shares Issued
|
Q4 2016
|
$
|
892,000
|
|
$
|
37,895
|
|
245,726,283
|
|
Q1 2017
|
$
|
372,000
|
|
$
|
25,970
|
|
327,718,386
|
|
Q2 2017
|
$
|
526,000
|
|
$
|
49,096
|
|
1,337,776,821
|
|
|
$
|
1,790,000
|
|
$
|
112,961
|
|
1,911,221,490
|
|
On June 29, and June 30, 2017, the Company redeemed the remaining
210
outstanding shares, and the related accrued dividends for cash payments in the amount of
$232,440
. As of
December 31, 2017
, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed.
ASCENT SOLAR TECHNOLOGIES, INC.
The Company classified the Series F Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the Series G Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
December 31, 2016
, the fair value of the derivative liability was
$361,831
.
The net gain recorded for the year ended
December 31, 2017
was
$361,831
, to properly reflect the elimination of the embedded derivative as of
December 31, 2017
.
Conversion Inducement and Disposal Price Guarantee
On
January 17, 2017
, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of
100
shares of Series G Preferred Stock,
$100,000
face value, including accrued dividends of
$6,147
, into common stock of the Company at a conversion price of
$0.00112
which would have resulted in the issuance of
95,014,884
shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of
$0.00112
and issue the
95,014,884
shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on
March 17, 2017
which would have been a conversion price of
$0.00168
. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of
$0.003
on the tranche of
95,014,884
shares. If Holder A fails to dispose of these shares at
$0.003
or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of
$0.003
and the price that Holder A disposed of the shares.
During the year ended
December 31, 2017
, in accordance with ASC 470-20-40-16, the Company recorded expense of
$79,179
related to the conversion inducement and expense of
$134,566
related to the disposal price guarantee.
On
June 29, 2017
, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in
three
equal monthly installments commencing on June 30, 2017. As of
December 31, 2017
, the Company had repaid the liability in full.
NOTE 20. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES
Series I Preferred Stock
On
July 26, 2016
, the Company entered into a securities purchase agreement with a private investor for the placement of approximately
1,000
of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of
536
shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding
$536,000
promissory note (including accrued interest) of the Company held by the private investor.
On
September 13, 2016
, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all
326
outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of
$1,000
per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all
326
shares of Series I Preferred Stock, representing a value of
$332,633
, to the Series I Purchaser.
On
September 13, 2016
, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of
December 31, 2016
the Series I Purchaser had exchanged all
326
shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange.
Series I Exchange Convertible Notes
On
September 13, 2016
, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the investor has the right, from time to time, to surrender to the Company for cancellation and exchange any shares of Series I Preferred Stock it acquires pursuant to the Assignment Agreement. Any surrendered shares of Series I Preferred Stock would be exchanged for newly issued Exchange Convertible Notes. The principal amount of Exchange Convertible Notes to be issued in exchange shall be equal to (i)
$1,000
for each share of Series I Preferred Stock surrendered for exchange plus (ii) the amount of any dividends accrued and unpaid on such Series I Preferred Stock surrendered for exchange. During the year ended
December 31, 2016
, the investor exercised their option to exchange
326
Series I Preferred Shares, representing a value of
$326,000
, and accrued dividends of
$6,633
, resulting in the creation of
$332,633
of Exchange Convertible Notes.
Unless earlier converted or prepaid, all of the Exchange Convertible Notes will mature
one
year after issuance. The Exchange Convertible Notes bear interest at a rate of
10%
per annum, subject to increase to
24%
per annum upon the occurrence and continuance of an event of default (as described below). Principal and interest on the Exchange Convertible Notes is payable on the maturity date or upon any earlier conversion. Principal and interest are payable in cash or, if specified equity conditions are met, shares of common stock.
All principal and accrued interest on the Exchange Convertible Notes are convertible at any time, in whole or in part, at the option of the investor, into shares of common stock at a variable conversion price equal to the lowest of (i) the lowest closing bid price of our common stock for the
ten
consecutive trading day period prior to the conversion date or (ii)
70%
of the lowest VWAP of our common stock for the
ten
consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
Conversion Period
|
Principal Converted
|
Interest Converted
|
Common Shares Issued
|
Q3 2016
|
$
|
15,000
|
|
$
|
—
|
|
1,470,588
|
|
Q4 2016
|
$
|
91,563
|
|
$
|
—
|
|
13,346,274
|
|
Q1 2017
|
$
|
70,000
|
|
$
|
—
|
|
50,503,662
|
|
Q2 2017
|
$
|
37,535
|
|
$
|
—
|
|
86,987,428
|
|
Q3 2017
|
$
|
118,535
|
|
$
|
10,268
|
|
306,675,548
|
|
|
$
|
332,633
|
|
$
|
10,268
|
|
458,983,500
|
|
On
July 31, 2017
, the remaining interest balance of
$5,255
was paid in cash.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the Exchange Convertible Notes was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
December 31, 2016
the fair value of the derivative liability was
$196,617
.
The net gain recorded for the year ended
December 31, 2017
was
$196,617
, to properly reflect the elimination of the embedded derivative as of July 31, 2017.
NOTE 21. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK
Series J Preferred Stock
On
September 19, 2016
, the Company entered into a securities purchase agreement with one accredited investor for the private placement of
$1,350,000
of the Company’s newly designated Series J Convertible Preferred Stock (“Series J Preferred Stock”). During September and October 2016, the Company issued
1,350
shares of Series J Preferred Stock in exchange for proceeds of
$1,350,000
.
ASCENT SOLAR TECHNOLOGIES, INC.
On
March 29, 2017
, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell
250
outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of
$1,000
per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on
April 4, 2017
, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional
600
shares of the Series J Preferred Stock at a purchase price of
$1,000
per share, plus the amount of any accrued and unpaid dividends. During the year ended
December 31, 2017
, the Series J Seller sold an aggregate of
850
shares to the Series J Seller for an aggregate proceeds of
$850,000
.
Holders of the Series J Preferred Stock are entitled to dividends in the amount of
10%
per annum. Shares of the Series J Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible at the option of the holder into common stock at a fixed conversion price of
$0.015
per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price;
275
shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below).
One
year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series J Preferred Stock at a price per share equal to
$1,000
plus any accrued but unpaid dividends thereon.
There are no registration rights applicable to the Series J Preferred Stock. Accordingly, any shares of Common Stock issued upon conversion of the Series J Preferred Stock are restricted and can only be sold in compliance with Rule 144 or in accordance with another exemption from registration.
Conversion Inducement Offers
On
March 24, 2017
, the Company offered to lower the conversion price, applicable to
100
shares of Series J Preferred Stock. The reduced conversion rate was
$0.00147
calculated by giving a
30%
discount on the day’s closing bid price resulting in the issuance of
71,636,432
shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of
$142,155
related to the inducement offer.
On
March 29, 2017
, the Company offered to lower the conversion price, applicable to
125
shares of Series J Preferred Stock. The reduced conversion rate was
$0.00105
calculated by giving a
30%
discount to the lowest closing bid price in a
ten
day look back period resulting in the issuance of
125,429,895
shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of
$186,640
related to the inducement offer.
On
May 8, 2017
, the Company offered to lower the conversion price, applicable to
50
shares of Series J Preferred Stock. The reduced conversion rate was
$0.00028
calculated by giving a
30%
discount to the lowest closing bid price in a
ten
day look back period resulting in the issuance of
189,484,143
. In accordance with ASC 470-20, the Company recorded a conversion expense of
$92,974
related to the inducement offer.
As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated.
Pursuant to a number of factors outlined in ASC Topic 815,
Derivatives and Hedging
, the conversion option in the Series J Preferred Stock, post inducement offers, was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At
March 24, 2017
, the fair value of the derivative liability was
$705,024
.
The net gain recorded for the year ended
December 31, 2017
was
$705,024
, to properly reflect the elimination of the embedded derivative as of
December 31, 2017
.
Exchange Agreements
On
November 30, 2017
, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their
400
outstanding shares of Series J Preferred Stock, with a value of
$400,000
, and
$45,222
in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note.
ASCENT SOLAR TECHNOLOGIES, INC.
On
December 6, 2017
, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their
675
outstanding shares of Series J Preferred Stock, with a value of
$675,000
, and
$80,417
in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note.
As of
December 31, 2017
, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest.
Series J-1 Preferred Stock
On
October 14, 2016
, the Company entered into a securities purchase agreement with a private investor to issue
1,000
shares of Series J-1 Preferred Stock for
$1,000,000
. The Company issued a total of
700
shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of
$700,000
.
Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of
$0.0125
per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of
10%
per annum.
One
year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to
$1,000
plus any accrued but unpaid dividends thereon.
On
August 10, 2017
, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem
$700,000
face value of Series J-1 Preferred Stock plus accrued dividends of
$55,305
by issuing
500 million
shares of common stock and a warrant to purchase
250 million
shares of common stock.
The warrant is exerciseable, at a fixed exercise price of
$0.003
, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of
9.99%
of the outstanding shares of common stock.
NOTE 22. SERIES K PREFERRED STOCK
On
February 8, 2017
, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to
$20 million
of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”).
Per the terms of the Series K SPA, the Company was scheduled to sell
1,000
shares of Series K Preferred Stock to Investor in exchange for
$1,000,000
of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell
15,000
shares of Series K Preferred Stock to the Investor in exchange for
$15,000,000
of gross proceeds on or before July 27, 2017. As of
December 31, 2017
, the Company had sold
9,010
shares of Series K Preferred Stock in exchange for
$9,010,000
in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of
December 31, 2017
. The following summarizes the closings and proceeds received as of
December 31, 2017
:
|
|
|
|
|
|
|
Closing Period
|
Preferred Series K Shares Purchased
|
Closing Amount
|
Q1 2017
|
150
|
|
$
|
150,000
|
|
Q2 2017
|
4,100
|
|
$
|
4,100,000
|
|
Q3 2017
|
4,760
|
|
$
|
4,760,000
|
|
|
9,010
|
|
$
|
9,010,000
|
|
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends.
The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to
$0.004
. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than
19.99%
of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
|
|
|
|
|
|
|
Conversion Period
|
Preferred Series K Shares Converted
|
Value of Series K Preferred Shares
|
Common Shares Issued
|
Q2 2017
|
3,200
|
|
$
|
3,200,000
|
|
800,000,000
|
|
Q3 2017
|
3,000
|
|
$
|
3,000,000
|
|
750,000,000
|
|
|
6,200
|
|
$
|
6,200,000
|
|
1,550,000,000
|
|
As of
December 31, 2017
, the investor owned approximately
16%
of the Company's outstanding common stock and there are
2,810
shares of Series K Preferred Stock Outstanding, representing a value of
$2,810,000
.
The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to
$1,000
plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares.
NOTE 23. MAKE-WHOLE DIVIDEND LIABILITY
In June 2013, the Company entered into a Series A Preferred Stock Purchase Agreement. Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of
8%
per annum, with the dividend rate being indexed to the Company's stock price and subject to adjustment. Conversion or redemption of the Series A Preferred Stock within
four
years of issuance requires the Company pay a make-whole dividend to the holders, whereby dividends for the full
four
year period are to be paid in cash or common stock (valued at
10%
below market price).
The Company concluded the make-whole dividends should be characterized as embedded derivatives under ASC 815. The make-whole dividends were expensed at the time of issuance and recorded as "Make-whole dividend liability" in the Condensed Consolidated Balance Sheets.
The fair value of these dividend liabilities, which are indexed to the Company's common stock, must be evaluated at each period end. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The fair value determination required forecasting stock price volatility, expected average annual return and conversion date.
Between December 2016 and March 2017, a Preferred Series A holder converted
104,785
shares of Series A Preferred Stock, and the related make whole dividend of
$419,140
, which resulted in the issuance of
173,946,250
shares of common stock.
On
June 17, 2017
, the make-whole dividend reached maturity. As such, the Company eliminated the Make-Whole derivative liability, moving the remaining balance of
$274,583
to accrued interest and dividends, and began accruing additional dividends on the Series A Preferred Stock as they occur. Please refer to Note 16 for further information on the Series A Preferred Stock and the associated accrued and unpaid dividends.
NOTE 24. STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock
At
December 31, 2017
, the Company had
20 billion
shares of common stock,
$0.0001
par value, authorized for issuance. Each share of common stock has the right to
one
vote. As of
December 31, 2017
, the Company had
9,606,597,777
shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through
December 31, 2017
.
Preferred Stock
At
December 31, 2017
, 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:
ASCENT SOLAR TECHNOLOGIES, INC.
|
|
|
|
|
|
Preferred Stock Series Designation
|
Shares Authorized
|
Shares Outstanding
|
Series A
|
750,000
|
|
60,756
|
|
Series B-1
|
2,000
|
|
—
|
|
Series B-2
|
1,000
|
|
—
|
|
Series C
|
1,000
|
|
—
|
|
Series D
|
3,000
|
|
—
|
|
Series D-1
|
2,500
|
|
—
|
|
Series E
|
2,800
|
|
—
|
|
Series F
|
7,000
|
|
—
|
|
Series G
|
2,000
|
|
—
|
|
Series H
|
2,500
|
|
—
|
|
Series I
|
1,000
|
|
—
|
|
Series J
|
1,350
|
|
—
|
|
Series J-1
|
1,000
|
|
—
|
|
Series K
|
20,000
|
|
2,810
|
|
Series A Preferred Stock
Refer to Note 16 descriptions of Series A Preferred Stock.
Series B-1, B-2, C, D, and D-1 Preferred Stock
There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended
December 31, 2016
and
December 31, 2017
.
Series E Preferred Stock
Refer to Note 17 descriptions of Series E Preferred Stock.
Series F Preferred Stock
Refer to Note 18 descriptions of Series F Preferred Stock.
Series G Preferred Stock
Refer to Note 19 descriptions of Series G Preferred Stock.
Series H Preferred Stock
Refer to Note 12 descriptions of Series H Preferred Stock.
Series I Preferred Stock
Refer to Note 20 descriptions of Series I Preferred Stock.
Series J Preferred Stock
Refer to Note 21 descriptions of Series J Preferred Stock.
Series J-1 Preferred Stock
Refer to Note 21 descriptions of Series J-1 Preferred Stock.
Series K Preferred Stock
Refer to Note 22 descriptions of Series K Preferred Stock.
ASCENT SOLAR TECHNOLOGIES, INC.
Warrants
On
July 24, 2017
, the Company issued a warrant for
250 million
shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of
$0.004
, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of
9.99%
of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of
$0.0007
, stock volatility of
234%
, and a risk free rate of
1.23%
. Using these parameters, the Company calculated a fair value of
$88,937
and recorded a corresponding expense on the Company's consolidated and condensed statement of operations.
On
August 10, 2017
, the Company issued a warrant for
250 million
shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of
$0.003
, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of
9.99%
of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of
$0.0015
, stock volatility of
230%
, and a risk free rate of
1.22%
. Using these parameters, the Company calculated a fair value of
$246,803
and recorded a corresponding expense on the Company's consolidated and condensed statement of operations.
On
December 15, 2017
, the Company issued a warrant for
200 million
shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of
$0.0018
, on the issuance date through the
June 30, 2018
. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of
9.99%
of the Company's outstanding shares of common stock.
The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of
$0.0008
, stock volatility of
99%
, and a risk free rate of
1.48%
. Using these parameters, the Company calculated a fair value of
$10,035
and recorded a corresponding expense on the Company's consolidated and condensed statement of operations.
The following table summarizes warrant activity:
|
|
|
|
|
|
|
|
Warrant
Shares
|
Warrant
Weighted
Average
Exercise Price
|
Outstanding at December 31, 2016
|
—
|
|
$
|
—
|
|
Granted
|
700,000,000
|
|
$
|
0.003
|
|
Exercised
|
—
|
|
$
|
—
|
|
Canceled
|
—
|
|
$
|
—
|
|
Outstanding at December 31, 2017
|
700,000,000
|
|
$
|
0.003
|
|
Exercisable at December 31, 2017
|
700,000,000
|
|
$
|
0.003
|
|
NOTE 25. EQUITY PLANS AND SHARE-BASED COMPENSATION
Stock Option Plan: The Company’s 2005 Stock Option Plan, as amended (the “Stock Option Plan”) provides for the grant of incentive or non-statutory stock options to the Company’s employees, directors and consultants. The stock Option Plan initially reserved
170,000
shares (as adjusted for the Reverse Stock Split) of the Company's common stock for option awards to eligible employees. Upon recommendation of the Board of Directors, the stockholders approved an increase in the total shares of common stock reserved for issuance under the Stock Option Plan to
270,000
during 2015.
ASCENT SOLAR TECHNOLOGIES, INC.
Restricted Stock Plan: The Company’s 2008 Restricted Stock Plan, as amended (the “Restricted Stock Plan”) was adopted by the Board of Directors and was approved by the stockholders on July 1, 2008. The Restricted Stock Plan initially reserved up to
75,000
shares (as adjusted for the Reverse Stock Split) of the Company’s common stock for restricted stock awards and restricted stock units to eligible employees, directors and consultants of the Company. Upon recommendation of the Board of Directors, the stockholders approved an increase in the total shares of common stock reserved for issuance under the Restricted Stock Plan to
125,000
and
750,000
shares during 2015 and 2016, respectively. There were no changes to the plan in 2017.
The Stock Option Plan and the Restricted Stock Plan are administered by the Compensation Committee of the Board of Directors, which determines the terms of the option and share awards, including the exercise price, expiration date, vesting schedule and number of shares. The term of any incentive stock option granted under the Stock Option Plan may not exceed
ten
years, or
five
years for options granted to an optionee owning more than
10%
of the Company’s voting stock. The exercise price of an incentive stock option granted under the Option Plan must be equal to or greater than the fair market value of the shares of the Company’s common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than
10%
of the Company’s voting stock must have an exercise price equal to or greater than
110%
of the fair market value of the Company’s common stock on the date the option is granted. The exercise price of a non-statutory option granted under the Option Plan must be equal to or greater than
85%
of the fair market value of the shares of the Company’s common stock on the date the option is granted.
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 years ended December 31,
|
|
|
2017
|
|
2016
|
Share-based compensation cost included in:
|
|
|
|
|
Research and development
|
|
$
|
18,231
|
|
|
$
|
181,985
|
|
Selling, general and administrative
|
|
105,037
|
|
|
706,363
|
|
Total share-based compensation cost
|
|
$
|
123,268
|
|
|
$
|
888,348
|
|
The following table presents share-based compensation expense by type:
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31,
|
|
|
2017
|
|
2016
|
Type of Award:
|
|
|
|
|
Stock Options
|
|
$
|
96,939
|
|
|
$
|
377,653
|
|
Restricted Stock Units and Awards
|
|
26,329
|
|
|
510,695
|
|
Total share-based compensation cost
|
|
$
|
123,268
|
|
|
$
|
888,348
|
|
Stock Options:
The Company recognized share-based compensation expense for stock options of
$97,000
to officers, directors and employees for the year ended
December 31, 2017
related to stock option awards, reduced for estimated forfeitures. There were no option grants during the year ended
December 31, 2017
, and the weighted average estimated fair value of employee stock options granted for the years ended
December 31, 2016
was
$1.35
per share. Fair value was calculated using the Black-Scholes Option Pricing Model with the following assumptions:
|
|
|
|
|
|
|
|
|
|
For the years ended December 31,
|
|
|
2017
|
|
2016
|
Expected volatility
|
|
—
|
%
|
|
114.6
|
%
|
Risk free interest rate
|
|
—
|
%
|
|
1.5
|
%
|
Expected dividends
|
|
—
|
|
|
—
|
|
Expected life (in years)
|
|
0
|
|
|
5.8 years
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate of return is based on the yield of U.S. Treasury bonds with a maturity equal to the expected term of the award. Historical data is used to estimate forfeitures within the Company’s valuation model. The Company’s expected life of stock option awards is derived from historical experience and represents the period of time that awards are expected to be outstanding.
As of
December 31, 2017
, total compensation cost related to non-vested stock options not yet recognized was
$36,000
which is expected to be recognized over a weighted average period of approximately
1.2 years
. As of
December 31, 2017
,
67,000
shares were vested or expected to vest in the future at a weighted average exercise price of
$30.71
. As of
December 31, 2017
,
189,475
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
|
|
Stock Options
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Life in Years
|
Aggregate
Intrinsic
Value
|
Outstanding at December 31, 2015
|
|
73,870
|
|
|
$
|
56.43
|
|
|
8.84
|
|
Granted
|
|
33,250
|
|
|
$
|
1.35
|
|
|
|
$
|
1,540
|
|
Exercised
|
|
—
|
|
|
—
|
|
|
|
|
Canceled
|
|
(30,206
|
)
|
|
41.15
|
|
|
|
|
Outstanding at December 31, 2016
|
|
76,914
|
|
|
$
|
37.67
|
|
|
8.28
|
|
Granted
|
|
—
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
Exercised
|
|
—
|
|
|
—
|
|
|
|
|
Canceled
|
|
(6,283
|
)
|
|
31.23
|
|
|
|
|
Outstanding at December 31, 2017
|
|
70,631
|
|
|
$
|
29.61
|
|
|
7.32
|
|
Exercisable at December 31, 2017
|
|
52,364
|
|
|
$
|
37.75
|
|
|
|
|
Restricted Stock:
The Company recognized share-based compensation expense related to restricted stock grants of approximately
$26,000
for the year ended
December 31, 2017
. There were no restricted stock grants during the year ended
December 31, 2017
, and the weighted average estimated fair value of restricted stock grants for the year ended
December 31, 2016
was
$1.97
.
There are no unvested shares of restricted stock as of
December 31, 2017
, and there is no unrecognized share-based compensation expense from restricted stock. As of
December 31, 2017
, approximately
496,000
shares remained available for future grants under the Restricted Stock Plan.
The following table summarizes stock option activity within the Restricted Stock Plan:
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
Non-vested at December 31, 2015
|
|
20,487
|
|
|
5.59
|
|
Granted
|
|
245,414
|
|
|
1.97
|
|
Vested
|
|
(176,693
|
)
|
|
|
Forfeited
|
|
(28,618
|
)
|
|
|
Non-vested at December 31, 2016
|
|
60,590
|
|
|
1.84
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested
|
|
(59,390
|
)
|
|
|
Forfeited
|
|
(1,200
|
)
|
|
|
Non-vested at December 31, 2017
|
|
—
|
|
|
—
|
|
ASCENT SOLAR TECHNOLOGIES, INC.
NOTE 26. INCOME TAXES
The Company records income taxes using the liability method. Under this method, deferred tax assets and liabilities are computed for the expected future impact of temporary differences between the financial statement and income tax bases of assets and liabilities using current income tax rates and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold before a benefit is recognized in the financial statements.
At
December 31, 2017
, the Company had
$321,066,413
of cumulative net operating loss carryforwards for federal income tax purposes that were available to offset future taxable income through the year
2037
. Under the Internal Revenue Code, the future utilization of net operating losses may be limited in certain circumstances where there is a significant ownership change. The Company prepared an analysis for the year ended December 31, 2012 and determined that a significant change in ownership has occurred as a result of the cumulative effect of the sales of common stock through its offerings. Such change limited the Company's utilizable net operating loss carryforwards to
$234,024,680
for the year ended
December 31, 2017
. Available net operating loss carryforwards may be further limited in the event of another significant ownership change.
Deferred income taxes reflect an estimate of the cumulative temporary differences recognized for financial reporting purposes from that recognized for income tax reporting purposes. At
December 31, 2017
and
2016
, the components of these temporary differences and the deferred tax asset were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
|
2017
|
|
2016
|
Deferred Tax Asset
|
|
|
|
|
Current:
|
|
|
|
|
Accrued Expenses
|
|
$
|
—
|
|
|
$
|
192,000
|
|
Inventory Allowance
|
|
141,000
|
|
|
234,000
|
|
Other
|
|
13,000
|
|
|
43,000
|
|
Total Current
|
|
154,000
|
|
|
469,000
|
|
Non-current:
|
|
|
|
|
Stock Based Compensation-Stock Options and Restricted Stock
|
|
1,058,000
|
|
|
1,919,000
|
|
Tax effect of NOL carryforward
|
|
67,852,000
|
|
|
79,384,000
|
|
Depreciation
|
|
8,748,000
|
|
|
17,406,000
|
|
Amortization
|
|
(368,000
|
)
|
|
(637,000
|
)
|
Warranty reserve
|
|
14,000
|
|
|
68,000
|
|
Total Non-current
|
|
77,304,000
|
|
|
98,140,000
|
|
Net deferred tax asset
|
|
77,458,000
|
|
|
98,609,000
|
|
Less valuation allowance
|
|
(77,458,000
|
)
|
|
(98,609,000
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical losses and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is not "more-likely-than-not" that the Company will realize the benefits of these deductible differences at
December 31, 2017
. The Company’s deferred tax valuation allowance of
$77,458,000
reflected above is a decrease of
$21,151,000
from the valuation allowance reflected as of
December 31, 2016
of
$98,609,000
.
As of
December 31, 2017
, the Company has not recorded a liability for uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in income tax (benefit)/expense. No interest and penalties related to uncertain tax positions were accrued at
December 31, 2017
.
ASCENT SOLAR TECHNOLOGIES, INC.
The Company’s effective tax rate for the years ended
December 31, 2017
and
2016
differs from the statutory rate due to the following (expressed as a percentage of pre-tax income):
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
Federal statutory rate
|
|
35.0
|
%
|
|
35.0
|
%
|
State statutory rate
|
|
2.8
|
%
|
|
2.6
|
%
|
Change in rate
|
|
—
|
%
|
|
(0.4
|
)%
|
Permanent tax differences
|
|
(2.3
|
)%
|
|
(0.1
|
)%
|
Change in fair value of derivatives
|
|
8.4
|
%
|
|
0.9
|
%
|
Deemed interest expense on debt discount
|
|
(5.5
|
)%
|
|
(5.1
|
)%
|
Loss on extinguishment of liabilities
|
|
(4.9
|
)%
|
|
(5.9
|
)%
|
Other
|
|
(0.9
|
)%
|
|
(1.8
|
)%
|
Increase in valuation allowance
|
|
(32.6
|
)%
|
|
(25.6
|
)%
|
|
|
—
|
%
|
|
—
|
%
|
NOTE 27. RELATED PARTY TRANSACTIONS
On
August 29, 2016
, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of
$330,000
of the Company’s original issue discount notes with an original maturity date of
November 29, 2016
. The notes bear interest of
6%
per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company.
On
December 6, 2016
, the Company issued a new
$600,000
original issue discount note to TFG in exchange for (i)
$200,000
of additional gross proceeds and (ii) cancellation of the existing outstanding
$330,000
note. The new TFG note bears interest at a rate of
6%
per annum and matures on
December 31, 2017
. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was
$602,000
(including accrued and unpaid interest) with a discount of
$60,000
.
On
January 19, 2017
, the Company issued
333,333,333
shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”).
Pursuant to the SPA, the Company issued the
333,333,333
shares to TFG in exchange for cancellation of its
$600,000
promissory note (including accrued interest of approximately
$4,340
) that was issued by the Company on
December 6, 2016
. The SPA does not provide any registration rights for the shares issued to TFG.
TFG is a Singapore based entity controlled and
50%
owned by Ascent’s President & CEO, Victor Lee, and owns approximately
3%
of the Company's outstanding shares at
December 31, 2017
.
All related party transactions were approved by our independent board of directors.
NOTE 28. COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its consolidated financial position or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company’s assessment of any claim will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated financial position or results of operations in particular quarterly or annual periods.
On October 21, 2011, the Company was notified that a complaint claiming
$3.0 million
for an investment banking fee (the “Lawsuit”) was filed by Jefferies & Company, Inc. (“Jefferies”) against the Company in New York State Supreme Court in the County of New York. In December 2010, Ascent and Jefferies entered into an engagement agreement (the “Fee Agreement”) pursuant to which Jefferies was hired to act as the Company's financial advisor in relation to certain potential transactions. In addition, Jefferies claimed an award for attorney's fees and prejudgment interest in the approximate amount of
$1.2 million
.
On April 16, 2014, the parties settled the lawsuit where the Company agreed to pay Jefferies a total of
$2.0 million
in equal installments over
40
months. The Company paid
$339,481
during the year ended
December 31, 2017
.
The Company records a liability in its financial statements for costs related to claims, including settlements and judgments, where the Company has assessed that a loss is probable and an amount can be reasonably estimated. The Company accrued
$1.7 million
, the net present value of the
$2.0 million
settlement, as of December 31, 2013. As of
December 31, 2017
, the settlement had been redeemed in full and there was no remaining accrued litigation settlement, recorded as a current liability on the Consolidated Balance Sheets.
NOTE 29. RETIREMENT PLAN
On July 1, 2006, the Company adopted a qualified 401(k) plan which provides retirement benefits for all of its eligible employees. Under the plan, employees become eligible to participate at the first entry date, provided they are at least
21
years of age. The participants may elect through salary reduction to contribute up to ceilings established in the Internal Revenue Code. The Company will match
100%
of the first
six percent
of employee contributions. In addition, the Company may make discretionary contributions to the Plan as determined by the Board of Directors. Employees are immediately vested in all salary reduction contributions. Rights to benefits provided by the Company’s discretionary and matching contributions vest
100%
after the first year of service for all employees hired before January 1, 2010. For employees hired after December 31, 2009, matching contributions vest over a
three
-year period, one-third per year. Payments for 401(k) matching totaled
$199,669
and
$338,230
for the years ended
December 31, 2017
and
2016
, respectively. Payments for 401(k) matching are recorded under “Research, development and manufacturing operations" expense and “Selling, general and administrative" expense in the Consolidated Statements of Operations.
NOTE 30. SUBSEQUENT EVENTS
Secured Promissory Notes
Between
January 11, 2018
and
March 21, 2018
, the Company received the remaining
$1,500,000
in proceeds per the Securities Purchase Agreement dated November 30, 2017 (Note 10). The funding occurred in six tranches as follows:
|
|
|
|
|
|
Date Received
|
Amount Received
|
Maturity Date
|
1/11/2018
|
$
|
250,000
|
|
1/11/2019
|
1/25/2018
|
$
|
250,000
|
|
1/25/2019
|
2/8/2018
|
$
|
250,000
|
|
2/8/2019
|
2/22/2018
|
$
|
250,000
|
|
2/22/2019
|
3/7/2018
|
$
|
250,000
|
|
3/7/2019
|
3/21/2018
|
$
|
250,000
|
|
3/21/2019
|
Between
January 4, 2018
and
March 26, 2018
, the Company made
five
payments of
$250,000
in stock. The aggregate payments of
$1,250,000
resulted in the issuance of
2,450,980,392
shares of the Company's common stock.
As of the date of this report, the total principal balance of the notes under the aforementioned Securities Purchase Agreement was
$4,665,675
.
Promissory Notes
On
January 31, 2018
, the Company and a private investor entered into a promissory note agreement for the
$177,500
of
aggregate proceeds received in December 2017 (Note11). This
$200,000
original issue discount note is unsecured, was issued with a discount of
$22,500
, bears interest at
12%
per annum, and matures on
December 29, 2018
. As of the date of this filing, the principal balance on this note is
$200,000
.
On
February 16, 2018
, the Company received
$30,000
in proceeds from a private investor. As of the date of this filing, the Company is expecting more funding from this investor and has not yet finalized the note.
St. George Convertible Note
In lieu of the cash payments for January and February 2018, we increased the reserve for the St. George Convertible Note by
2 billion
shares, to a total of
6.88 billion
shares.
On
March 12, 2018
, the investor, pursuant to the terms of the Convertible Promissory Note dated September 11, 2017 (Note 14), elected to redeem a portion of the note in conversion shares. On this date, the investor redeemed
$75,000
of the note, resulting n the issuance of
187,500,000
shares of the Company's common stock. These shares were drawn out of the reserve created for this note the remaining reserves are
6.69 billion
. As of the date of this report, the remaining principal balance on the St. George Convertible Note is
$1,630,833
.
BayBridge Convertible Note
On March 26, 2018, pursuant to the terms of the Convertible Promissory Note dated November 30, 2017, the investor converted
$105,000
in principal and
$20,717
in interest into shares of the Company's common stock, resulting in the issuance of
493,006,549
shares. As of the date of this report, the remaining principal balance on the BayBridge Convertible Note is
$460,000
.