UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________ 
FORM 10-Q
______________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from             to             
Commission File No. 001-32919
______________________________________________________ 
Ascent Solar Technologies, Inc.
(Exact name of registrant as specified in its charter)
 _______________________________________________________
Delaware
 
20-3672603
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
12300 Grant Street, Thornton, CO
 
80241
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number including area code: 720-872-5000 
_________________________________________________________

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

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


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




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




FORWARD-LOOKING STATEMENTS

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

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things, the matters discussed in this Quarterly Report in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Factors you should consider that could cause these differences are:
•
Our limited operating history and lack of profitability;
•
Our ability to develop demand for, and sales of, our products;
•
Our ability to attract and retain qualified personnel to implement our business plan and corporate growth strategies;
•
Our ability to develop sales, marketing and distribution capabilities;
•
Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets;
•
The accuracy of our estimates and projections;
•
Our ability to secure additional financing to fund our short-term and long-term financial needs;
•
Our ability to maintain the listing of our common stock on the OTCBB Market;
•
The commencement, or outcome, of legal proceedings against us, or by us, including ongoing ligation proceedings;
•
Changes in our business plan or corporate strategies;
•
The extent to which we are able to manage the growth of our operations effectively, both domestically and abroad, whether directly owned or indirectly through licenses;
•
The supply, availability and price of equipment, components and raw materials, including the elements needed to produce our photovoltaic modules;
•
Our ability to expand and protect the intellectual property portfolio that relates to our consumer electronics, photovoltaic modules and processes;
•
Our ability to implement remediation measures to address material weaknesses in internal control;
•
General economic and business conditions, and in particular, conditions specific to consumer electronics and the solar power industry; and
•
Other risks and uncertainties discussed in greater detail in the section captioned "Risk Factors."

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

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



PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

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

 
$
18,159

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

 
165,160

Inventories, net
 
684,390

 
660,791

Prepaid expenses and other current assets
 
164,325

 
138,369

Total current assets
 
895,623

 
982,479

Property, Plant and Equipment:
 
32,911,969

 
36,621,187

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

 
4,413,358

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

 
862,429

Other non-current assets
 
—

 
34,061

 
 
826,711

 
896,490

Total Assets
 
$
6,002,002

 
$
6,292,327

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

 
$
2,318,655

Related party payables
 
460,000

 
270,740

Accrued expenses
 
1,510,558

 
1,562,435

Accrued interest
 
1,775,647

 
1,198,279

Notes payable
 
1,506,530

 
1,516,530

Current portion of long-term debt
 
—

 
349,093

Mortgage
 
5,917,315

 
—

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

 
3,447,380

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

 
1,239,854

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

 
1,852,722

Embedded derivative liability
 
7,064,541

 
10,114,452

Total current liabilities
 
28,481,629

 
23,870,140

Long-term debt, net of current portion
 
—

 
5,028,969

Accrued Warranty Liability
 
24,861

 
29,114

Total Liabilities
 
28,506,490

 
28,928,223

Commitments and Contingencies
 
—

 
—

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

 
6

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

 
6,354

Additional paid in capital
 
397,674,171

 
395,889,712

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

 
$
6,292,327

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

1
ASCENT SOLAR TECHNOLOGIES, INC.


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

 
$
32,001

 
 
$
628,124

 
$
512,473

 
 
Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues
 
74,271

 
—

 
 
282,825

 
503,609

 
 
Research, development and manufacturing operations
 
460,775

 
516,782

 
 
1,078,842

 
2,389,863

 
 
Selling, general and administrative
 
633,566

 
607,784

 
 
1,545,852

 
2,243,925

 
 
Depreciation and amortization
 
58,154

 
91,104

 
 
185,163

 
289,324

 
 
Total Costs and Expenses
 
1,226,766

 
1,215,670

 
 
3,092,682

 
5,426,721

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

 
13,144

 
 
842,500

 
13,144

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

 
3,284,736

 
 
6,430,048

 
2,599,870

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

 
 
532,208

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

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

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

 
22,739,044

 
 
705,196,069

 
16,827,420

 
 


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

2
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

 
$
69,609

 
48,100

 
$
5

 
$
397,258,622

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

 
8,932

 
—

 
—

 
7,393

 
—

 
16,325

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

 
45,722

 
—

 
—

 
43,278

 
—

 
89,000

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

 
60,577

 
—

 
—

 
25,423

 
—

 
86,000

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

 
47,448

 
—

 
—

 
41,552

 
—

 
89,000

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

 
15,582

 
—

 
—

 
(982
)
 
—

 
14,600

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

 
31,117

 
—

 
—

 
26,601

 
—

 
57,718

Stock issued for fees
 
66,669,229

 
6,667

 
—

 
—

 
1,098

 
—

 
7,765

Loss on Extinguishment of Liabilities
 
—

 
—

 
—

 
—

 
271,186

 
—

 
271,186

Net Loss
 
—

 
—

 
—

 
—

 
—

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

 
$
285,654

 
48,100

 
$
5

 
$
397,674,171

 
$
(420,464,318
)
 
$
(22,504,488
)


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

 
$
1,900

 
60,756

 
$
6

 
$
393,838,518

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

 
31

 
—

 
—

 
30,398

 
—

 
30,429

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

 
314

 
—

 
—

 
102,186

 
—

 
102,500

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

 
143

 
—

 
—

 
51,857

 
—

 
52,000

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

 
366

 
—

 
—

 
137,134

 
—

 
137,500

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

 
200

 
—

 
—

 
356,542

 
—

 
356,742

Loss on Extinguishment of Liabilities
 
—

 
—

 
—

 
—

 
601,433

 
—

 
601,433

Stock based compensation
 
—

 
—

 
—

 
—

 
3,476

 
—

 
3,476

Adjustment for RSS
 
—

 
—

 
—

 
—

 
(2,625
)
 
—

 
(2,625
)
Net Income
 
—

 
—

 
—

 
—

 
—

 
383,494

 
383,494

Balance at September 30, 2018
 
29,538,241

 
$
2,954

 
60,756

 
$
6

 
$
395,118,919

 
$
(410,075,969
)
 
$
(14,954,090
)


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




3
ASCENT SOLAR TECHNOLOGIES, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(unaudited)
For the Nine Months Ended September 30, 2019
 
 
Common Stock
 
Series A Preferred Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity (Deficit)
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance, December 31, 2018
 
63,537,885

 
$
6,354

 
60,756

 
$
6

 
$
395,889,712

 
$
(418,531,968
)
 
$
(22,635,896
)
Interest and Dividend Expense paid with Common Stock
 
118,531,773

 
11,853

 
—

 
—

 
98,489

 
—

 
110,342

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

 
60,236

 
—

 
—

 
194,834

 
—

 
255,070

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

 
960

 
—

 
—

 
114,040

 
—

 
115,000

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

 
79,069

 
—

 
—

 
185,931

 
—

 
265,000

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

 
57,360

 
—

 
—

 
144,640

 
—

 
202,000

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

 
29,143

 
—

 
—

 
210,457

 
—

 
239,600

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

 
32,765

 
—

 
—

 
39,953

 
—

 
72,718

Stock issued for fees
 
79,136,751

 
7,914

 
—

 
—

 
7,911

 
—

 
15,825

Conversion of Series A Preferred Stock into Common Stock
 
1

 
—

 
(12,656
)
 
(1
)
 
1

 
—

 
—

Loss on Extinguishment of Liabilities
 
—

 
—

 
—

 
—

 
767,453

 
—

 
767,453

Stock based compensation
 
—

 
—

 
—

 
—

 
20,750

 
—

 
20,750

Net Loss
 
—

 
—

 
—

 
—

 
—

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

 
$
285,654

 
48,100

 
$
5

 
$
397,674,171

 
$
(420,464,318
)
 
$
(22,504,488
)

For the Nine Months Ended September 30, 2018
 
 
Common Stock
 
Series A Preferred Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity (Deficit)
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance, December 31, 2017
 
9,606,677

 
$
961

 
60,756

 
$
6

 
$
387,292,174

 
$
(402,495,476
)
 
$
(15,202,335
)
Interest and Dividend Expense paid with Common Stock
 
427,721

 
43

 
—

 
—

 
57,193

 
—

 
57,236

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

 
541

 
—

 
—

 
493,559

 
—

 
494,100

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

 
349

 
—

 
—

 
1,425,651

 
—

 
1,426,000

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

 
424

 
—

 
—

 
564,576

 
—

 
565,000

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

 
366

 
—

 
—

 
137,134

 
—

 
137,500

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

 
200

 
—

 
—

 
356,542

 
—

 
356,742

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

 
70

 
—

 
—

 
2,809,930

 
—

 
2,810,000

Loss on Extinguishment of Liabilities
 
—

 
—

 
—

 
—

 
1,959,963

 
—

 
1,959,963

Stock based compensation
 
—

 
—

 
—

 
—

 
24,822

 
—

 
24,822

Adjustment for RSS
 
—

 
—

 
—

 
—

 
(2,625
)
 
—

 
(2,625
)
Net Loss
 
—

 
—

 
—

 
—

 
—

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

 
$
2,954

 
60,756

 
$
6

 
$
395,118,919

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

4
ASCENT SOLAR TECHNOLOGIES, INC.


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

 
289,324

 
Stock based compensation
 
20,750

 
24,822

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

 
21,750

 
Non-cash interest expense
 
2,023,031

 
935,190

 
Amortization of debt discount
 
3,675,795

 
3,690,823

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

 
59,153

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

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

 
Prepaid expenses and other current assets
 
1,766

 
247,919

 
Accounts payable
 
(494,883
)
 
965,175

 
Related party payable
 
189,260

 
(2,827
)
 
Accrued interest
 
951,184

 
398,098

 
Accrued expenses
 
(51,880
)
 
487,690

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

 
Proceeds from sale of assets
 
842,500

 
14,000

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

 
4,295

 
Financing Activities:
 
 
 
 
 
Proceeds from debt
 
1,762,268

 
3,102,500

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

 
3,007,314

 
Net change in cash and cash equivalents
 
6,346

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

 
89,618

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

 
$
57,830

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

 
$
308,542

 
Cash paid for income taxes
 
$
—

 
$
—

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

 
$
5,843,954

 
Non-cash financing costs
 
$
10,800

 
$
25,000

 
Accounts payable converted to notes payable
 
$
—

 
$
308,041

 
Interest converted to principal
 
$
171,152

 
$
140,355

 
Common shares issued for fees
 
$
15,825

 
$
—

 
Initial embedded derivative liabilities
 
$
3,781,186

 
$
2,736,724

 
Promissory notes exchanged for convertible notes
 
$
850,000

 
$
511,871

 

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

5
ASCENT SOLAR TECHNOLOGIES, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION
The Company is focusing on integrating its PV products into high value markets such as aerospace, satellites, near earth orbiting vehicles, and fixed-wing unmanned aerial vehicles (UAV). The value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these industries, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent has the capability to design and develop finished products for end users in these areas as well as collaborate with strategic partners to design and develop custom integrated solutions for products like fixed-wing UAVs. Ascent sees significant overlap of the needs of end users across some of these industries and can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.

NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of September 30, 2019 and December 31, 2018, and the results of operations for the three and nine months ended September 30, 2019 and 2018. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.
The accompanying, unaudited, condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and footnotes typically found in U.S. GAAP audited annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. The Condensed Consolidated Balance Sheet at December 31, 2018 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. These condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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

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

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


6
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

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

NOTE 4. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN    

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

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

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

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

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

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

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

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










7

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

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

 
$
5,828,960

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

 
489,421

Manufacturing machinery and equipment
 
26,593,588

 
30,302,806

Depreciable property, plant and equipment
 
32,911,969

 
36,621,187

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

 
$
4,413,358


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

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

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

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

 
$
660,791

Work in process
 
—

 
—

Finished goods
 
—

 
—

Total
 
$
684,390

 
$
660,791


NOTE 7. NOTES PAYABLE

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

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

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



8
ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 8. DEBT

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

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

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

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

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

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

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


















9
ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 9. SECURED PROMISSORY NOTE

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

 
$
—

 
$
4,557,227

New notes
 
1,935,000

 
1,315,000

 
3,250,000

Note conversions
 
(1,426,000
)
 
—

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

 
—

 
140,518

Note assignments
 
(250,000
)
 
—

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

 
1,315,000

 
6,271,745

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

 
503,333

 
3,447,380

New notes
 
—

 
845,000

 
845,000

Note conversions
 
(115,000
)
 
—

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

 
—

 
171,152

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

 
2,160,000

 
7,172,897

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

 
$
1,813,334

 
$
5,830,982



Global Ichiban Secured Promissory Notes

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

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

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

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

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

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

10
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

2,450,981

Q2 2018
$
176,000

1,035,295

Q1 2019
$
115,000

9,595,327

 
$
1,541,000

13,081,603


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

Q2 2018
$
44,237

Q1 2019
$
171,152

 
$
311,670


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

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

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

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

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


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







11
ASCENT SOLAR TECHNOLOGIES, INC.


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


St. George Secured Convertible Notes

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

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

$
200,000

11/19/2018
$
120,000

$
100,000

11/30/2018
$
120,000

$
100,000

12/7/2018
$
120,000

$
100,000

12/17/2018
$
120,000

$
100,000

1/3/2019
$
120,000

$
100,000

1/17/2019
$
120,000

$
100,000

1/30/2019
$
120,000

$
100,000

2/8/2019
$
120,000

$
100,000


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

$
100,000

3/22/2019
$
120,000

$
100,000

4/4/2019
$
120,000

$
100,000


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

12
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

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

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

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

Additional derivative liability on new notes
1,752,197

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


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

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




















13
ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 10. PROMISSORY NOTES

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

$
200,000

$
694,437

New principal
—

850,000

850,000

Notes exchanged
—

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

850,000

1,344,437

Less: remaining discount
—

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

$
745,417

$
1,239,854

New principal
—

530,000

530,000

Notes exchanged
—

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

530,000

1,024,437

Less: remaining discount
—

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

$
460,000

$
954,437


Offering of Unsecured, Non-Convertible Notes to Investor 1

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

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

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


Offering of Unsecured, Non-Convertible Notes to Investor 2

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

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




14
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

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

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

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

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

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

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

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





15
ASCENT SOLAR TECHNOLOGIES, INC.


NOTE 11. CONVERTIBLE NOTES

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

$
—

$
—

$
—

$
330,000

$
—

$
330,000

St. George Notes
1,705,833

—

—

(606,600
)
1,099,233

(96,177
)
1,003,056

BayBridge Notes
—

—

270,000

(207,500
)
62,500

(62,100
)
400

Bellridge Notes
—

150,000

550,000

(245,000
)
455,000

(123,360
)
331,640

Power Up Notes
—

225,000

—

—

225,000

(110,621
)
114,379

EMA Note
—

75,000

—

—

75,000

(1,753
)
73,247

 
$
2,035,833

$
450,000

$
820,000

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

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


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

$
—

$
—

$
—

$
330,000

$
—

$
330,000

St. George Notes
1,099,233

(172,500
)
—

(255,070
)
671,663

—

671,663

BayBridge Notes
62,500

—

1,160,000

(265,000
)
957,500

(658,333
)
299,167

Bellridge Notes
455,000

—

—

(202,000
)
253,000

—

253,000

Power Up Notes
225,000

149,500

—

(239,600
)
134,900

(61,263
)
73,637

EMA Note
75,000

—

(75,000
)
—

—

—

—

Widjaja Note
—

330,000

—

—

330,000

(54,909
)
275,091

GS Capital Notes
—

178,568

75,000

(72,718
)
180,850

(79,167
)
101,683

 
$
2,246,733

$
485,568

$
1,160,000

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

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



October 2016 Convertible Notes

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

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





16
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

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

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

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

Additional derivative liability on new notes
—

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


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

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


St. George Convertible Note

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

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

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

17
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

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

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

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

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

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

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

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

187,500

Q2 2018
316,600

2,082,778

Q3 2018
102,500

3,142,333

Q4 2018
112,500

10,437,046

Q1 2019
106,750

58,503,244

Q2 2019
59,320

86,636,364

Q3 2019
89,000

457,222,222

 
$
861,670

618,211,487


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

18
ASCENT SOLAR TECHNOLOGIES, INC.



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

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


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

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


BayBridge Convertible Note

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

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

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

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

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

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

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

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

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

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


19
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

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

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

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

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

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

$
4,303

16,008,198

Q1 2019
90,500

3,278

47,400,806

Q2 2019
88,500

2,079

141,822,223

Q3 2019
86,000

2,261

616,247,346

 
$
472,500

$
11,921

821,478,573


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

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

Additional derivative liability on new notes
1,376,670

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






20
ASCENT SOLAR TECHNOLOGIES, INC.


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

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

The conversion option in Exchange Note 5 was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 68% present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At May 2, 2019, the derivative liability associated with Exchange Note 5 was $499,685. The fair value of the derivative was greater than the face value at issuance and the difference of $150,035 was charged to interest expense at issuance. The remaining debt discount of $349,650 will be charged to interest expense ratably over the life of the note.

The conversion option in Exchange Note 6 was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 64% present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At May 2, 2019, the derivative liability associated with Exchange Note 6 was $566,345. The fair value of the derivative was greater than the face value at issuance and the difference of $323,400 was charged to interest expense at issuance. The remaining debt discount of $242,945 will be charged to interest expense ratably over the life of the note.

The derivative liability associated with the Exchange Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 46% and 69%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $384,436 for three months ended September 30, 2019, and an aggregate net gain of $423,893 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $914,322 as of September 30, 2019.


Bellridge Convertible Notes

On July 25, 2018, the Company, entered into a securities exchange agreement (the “Exchange Agreement”) with Bellridge Capital, LP ("Bellridge"). Pursuant to the terms of the Exchange Agreement, the investor agreed to surrender and exchange a promissory note with a principal balance of $275,000 and accrued interest of $20,071. In exchange, the Company issued to the investor an unsecured convertible note with an aggregate principal amount of $300,000 (the “Exchange Note”). The original issue discount of $4,929 was charged to interest expense upon issuance. The Exchange Note is not secured, bears interest at a rate of 12% per annum, and will matured on January 25, 2019; principal and interest on the Exchange Note are due upon demand. The investor shall have the right, from and after the date of issuance of this note and then at any time until the note is fully paid, to convert any outstanding and unpaid principal into shares of the Company's common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.20, or (ii) 80% of the lowest traded price for the shares over the prior ten trading days. This Exchange Note was fully converted during the nine months ended September 30, 2019.








21
ASCENT SOLAR TECHNOLOGIES, INC.


On September 14, 2018, the “Company, issued a new $150,000 convertible note in a private placement to Bellridge. The note is not secured, contains no registration rights, bears interest at a rate of 12% per annum, will mature on September 14, 2019, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon maturity. Bellridge shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to the lesser of (i) $0.20 or (ii) 70% of the lowest closing bid price for the shares over the prior five day trading period immediately preceding the conversion.

On October 18, 2018, as discussed in Note 9, Global assigned one of its notes to Bellridge. The note had an outstanding principal balance of $250,000 and an accrued interest balance of $26,466. The note matures on October 18, 2019, and all principal and interest is due upon maturity. The principal and accrued interest on the note are redeemable at any time, in whole or in part, at the option of Bellridge. The redemption amount may be paid in cash or converted into shares of common stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior five trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.20 per share, at the option of the Company.
 
Shares of common stock may not be issued pursuant to any of these notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock.

As of September 30, 2019, an aggregate principal of $447,000 and interest of $24,265, on the Bellridge convertible notes had been converted into 647,170,163 shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2019 were $253,000 and $55,514, respectively.

The following table summarizes the conversion activity of these notes:
Conversion Period
Principal Converted
Interest Converted
Common Shares Issued
Q3 2018
$
137,500

$
2,104

3,715,476

Q4 2018
107,500

4,000

7,554,399

Q1 2019
65,615

4,507

38,696,339

Q2 2019
47,385

3,875

68,142,087

Q3 2019
89,000

9,779

529,061,862

 
$
447,000

$
24,265

647,170,163


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

The following table summarizes the derivative liability transactions for this note:
Derivative Liability Balance as of December 31, 2018
$
486,279

Liability extinguished
(43,521
)
Change in fair value of derivative liability
(408,132
)
Derivative Liability Balance as of September 30, 2019
$
34,626


At December 31, 2018, the derivative liability associated with these notes was $486,279. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility range between 40% and 74%, present value discount rate of 12%, and a dividend yield of 0%. During the first quarter of 2019, the exchange note was converted in full and the derivative liability balance of $43,521 was written off as a gain as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations.





22
ASCENT SOLAR TECHNOLOGIES, INC.


The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 41% and 72%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $150,833 for three months ended September 30, 2019, and an aggregate net gain of $408,132 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $34,626 as of September 30, 2019.


PowerUp Convertible Notes

During 2018, the Company entered into three securities purchase agreements with Power Up Lending Group, LTD ("Power Up"), for the private placement of three convertible notes with an aggregate principal amount of $225,000.

On February 14, 2019, the Company entered into a fourth securities purchase agreement with Power Up, for the private placement of a fourth convertible note with a principal value of $54,500.

On March 7, 2019, the Company entered into a fifth securities purchase agreement with Power Up, for the private placement of a fifth convertible note with a principal value of $52,500.

On May 3, 2019, the Company entered into a sixth securities purchase agreement with Power Up, for the private placement of a sixth convertible note with a principal value of $42,500.

These notes are unsecured, bear interest at a rate of 8% per annum, and mature on twelve months following the date of issuance; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22%.

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

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

As of September 30, 2019, the three 2018 notes had been converted in full. The aggregate principal and interest converted was $239,600 and $9,000, respectively, into 297,994,634 shares of common stock. No cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2019 were $134,900 and $7,193, respectively.

The following table summarizes the conversion activity of these notes:
Conversion Period
Principal Converted
Interest Converted
Common Shares Issued
Q1 2019
$
182,500

$
7,300

95,014,902

Q2 2019
42,500

1,700

47,155,556

Q3 2019
14,600

—

155,824,176

 
$
239,600

$
9,000

297,994,634


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.





23
ASCENT SOLAR TECHNOLOGIES, INC.


The following table summarizes the derivative liability transactions for this note:
Derivative Liability Balance as of December 31, 2018
$
511,137

Additional derivative liability on new notes
222,593

Liability extinguishment
(511,137
)
Change in fair value of derivative liability
(89,997
)
Derivative Liability Balance as of September 30, 2019
$
132,596


At December 31, 2018, the derivative liability associated with these notes was $511,137. This value is was derived from Management's fair value assessment using the the following assumptions: annual volatility range between 70% to 76%, present value discount rate of 12%, and a dividend yield of 0%. During the first half of 2019, the three December 2018 notes were converted in full and the derivative liability balance of $511,137 was written off as a gain as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations.

The conversion option in the fourth 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 based on the following assumptions: annual volatility of 65%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At February 14, 2019, the derivative liability associated with the fourth note was $43,788.

The conversion option in the fifth 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 based on the following assumptions: annual volatility of 67%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At March 7, 2019, the derivative liability associated with the fifth note was $86,865. The fair value of the derivative was greater than the face value at issuance and the difference of $34,365 was charged to interest expense at issuance. The remaining debt discount of $52,500 will be charged to interest expense ratably over the life of the note.

The conversion option in the sixth 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 based on the following assumptions: annual volatility of 69%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At May 3, 2019, the derivative liability associated with the sixth note was $91,940. The fair value of the derivative was greater than the face value at issuance and the difference of $49,440 was charged to interest expense at issuance. The remaining debt discount of $42,500 will be charged to interest expense ratably over the life of the note.

The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 46% to 71%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $41,327 for three months ended September 30, 2019, and an aggregate net gain of $89,997 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $132,596 as of September 30, 2019.


EMA Convertible Note

On August 29, 2018, the Company, entered into a securities purchase agreement with EMA Financial, LLC, for the private placement of a $75,000 convertible note. The note is unsecured, bears interest at a rate of 8% per annum, and matures on May 29, 2019; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22%.

Beginning in March 2019, EMA shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's Common Stock. Conversions into Common Stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest closing bid prices for the shares over the prior ten day trading period immediately preceding the conversion.



24
ASCENT SOLAR TECHNOLOGIES, INC.


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

On February 22, 2019, EMA assigned this note to GS Capital (see below). Per the terms of this agreement, $75,000 of principal and $2,909 of accrued interest were sold to the new investor and the Company paid $27,268 to EMA as a pre-payment penalty.

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

At December 31, 2018, the derivative liability associated with the note was $240,156. This value is was derived from Managements fair value assessment using the the following assumptions: annual volatility of 87%, present value discount rate of 12%, and a dividend yield of 0%. On February 22, 2019, this derivative value was assigned to GS Capital (see below).

The following table summarizes the derivative liability transactions for this note:
Derivative Liability Balance as of December 31, 2018
$
240,156

Liability assigned
(240,156
)
Derivative Liability Balance as of June 30, 2019
$
—



Widjaja Convertible Note

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

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

There are no registration rights applicable to the note. Shares of common stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 19.99% of the outstanding shares of the Company's common stock.

As of September 30, 2019, no principal and no interest had been converted into shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2019 were $330,000 and $28,425, respectively.

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




25
ASCENT SOLAR TECHNOLOGIES, INC.


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

Additional derivative liability on new notes
219,634

Change in fair value of derivative liability
(77,774
)
Derivative Liability Balance as of September 30, 2019
$
141,860


The conversion option in the Widjaja 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 based on the following assumptions: annual volatility of 64%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At January 11, 2019, the derivative liability associated with the Widjaja note was $219,634.

The derivative liability associated with this note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 43% to 73%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $6,843 for three months ended September 30, 2019, and an aggregate net gain of $77,774 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $141,860 as of September 30, 2019.


GS Capital Convertible Note

On February 22, 2019, the Company sold and issued to GS Capital Partners, LLC (“GS”) a $108,068 aggregate principal amount unsecured convertible promissory note in exchange for $75,000 of gross proceeds, $5,800 in financing costs, and $27,268 of premium associated with the assignment of the EMA note (see above). On August 26, 2019, the Company sold and issued to GS, an additional unsecured convertible promissory note in the the amount of $70,500.

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

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

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

On February 22, 2019, GS purchased $75,000 in convertible notes, plus accrued interest, from EMA (see above). The terms of the note remain the same.

As of September 30, 2019, principal of $72,718 and interest of $5,047 had been converted into 352,747,428 shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2019 were $180,850 and $6,044, respectively.

The following table summarizes the conversion activity of these notes:
Conversion Period
Principal Converted
Interest Converted
Common Shares Issued
Q2 2019
$
15,000

$
763

$
17,321,692

Q3 2019
$
57,718

$
4,284

$
335,425,736

 
$
72,718

$
5,047

$
352,747,428



26
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.

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

Additional derivative liability on new notes
210,092

Derivative liability assigned
240,156

Change in fair value of derivative liability
(405,737
)
Derivative Liability Balance as of September 30, 2019
$
44,511


The conversion option in the February 2019 GS 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 based on the following assumptions: annual volatility of 66%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At January 11, 2019, the derivative liability associated with the GS note was $101,063. The fair value of the derivative was greater than the face value at issuance and the difference of $26,063 was charged to interest expense at issuance. The remaining debt discount of $75,000 will be charged to interest expense ratably over the life of the note.

The derivative liability assigned to GS from EMA, at February 22, 2019, was $240,156 (see above).

The conversion option in the August 2019 GS 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 based on the following assumptions: annual volatility of 64%, present value discount rate of 12%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At August 26, 2019, the derivative liability associated with the GS note was $109,029. The fair value of the derivative was greater than the face value at issuance and the difference of $44,029 was charged to interest expense at issuance. The remaining debt discount of $65,000 will be charged to interest expense ratably over the life of the note.

The derivative liability associated with these notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. During 2019, Management conducted quarterly fair value assessment of the embedded derivative associated with the notes using the following assumptions: annual volatility range of 35% and 70%, present value discount rate of 12%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net gain of $208,446 for three months ended September 30, 2019, and an aggregate net gain of $405,737 for the nine months ended September 30, 2019, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $44,511 as of September 30, 2019.

NOTE 12. SERIES A PREFERRED STOCK

In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of $750,000 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6,000,000. 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.


27

The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $232, as adjusted, for twenty consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At September 30, 2019, 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 12,656 preferred shares 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.
 
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.

During the nine months ended September 30, 2019, 12,656 shares Series A Preferred Stock, plus $70,527 of accrued dividends were converted into 1 share and 9,795,396 shares of the Company's common stock, respectively. As of September 30, 2019, there were 48,100 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $306,771.

NOTE 13. STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

At September 30, 2019, 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 September 30, 2019, the Company had 2,856,539,850 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through September 30, 2019.

Preferred Stock

At September 30, 2019, the Company had 25,000,000 shares of preferred stock, $0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. 

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

Preferred Stock Series Designation
Shares Authorized
Shares Outstanding
Series A
750,000

48,100

Series B-1
2,000

—

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

—




28
ASCENT SOLAR TECHNOLOGIES, INC.


Series A Preferred Stock

Refer to Note 12 for Series A Preferred Stock activity.

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

There were no transactions involving the Series B-1, B-2, C, D, D-1, H, I, J, J-1, or K during the nine months ended September 30, 2019.

NOTE 14. EQUITY PLANS AND SHARE-BASED COMPENSATION

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

The share-based compensation expense recognized in the Consolidated Statements of Operations was as follows: 
 
 
For nine months ended September 30,
 
For nine months ended September 30,
 
 
2019
 
2018
Research and development
 
$
—

 
$
642

Selling, general and administrative
 
$
20,750

 
$
24,180

Total share-based compensation cost
 
$
20,750

 
$
24,822


Stock Options: The Company recognized share-based compensation expense for stock options of $20,750 to officers, directors and employees for the nine months ended September 30, 2019 related to stock option awards, reduced for estimated forfeitures; there was no expense recorded for the three months ended September 30, 2019. There were no option grants during the nine months ended September 30, 2019 or September 30, 2018.

As of September 30, 2019, there were no unvested stock options. As of September 30, 2019, 97 shares were vested and 120 shares remained available for future grants under the Option Plan.

The following table summarizes stock option activity within the Stock Option Plan
 
 
Stock
Option
Shares
 
Weighted
Average
Remaining
Contractual
Life in Years
Outstanding at December 31, 2017
 
195

 
7.32
Granted
 
—

 
 
Exercised
 
—

 
 
Canceled
 
(85
)
 
 
Outstanding at December 31, 2018
 
110

 
5.18
Granted
 
—

 
 
Exercised
 
—

 
 
Canceled
 
(13
)
 
 
Outstanding at September 30, 2019
 
97

 
4.94
Exercisable at September 30, 2019
 
97

 
4.94

Restricted Stock: The Company did not recognized share-based compensation expense related to restricted stock grants for the nine months ended September 30, 2019 or for the year ended December 31, 2018. There were no restricted stock grants for the periods ended September 30, 2019 and December 31, 2018.

As of September 30, 2019, there was no unrecognized share-based compensation expense from unvested restricted stock, no shares were expected to vest in the future, and 496 shares remained available for future grants under the Restricted Stock Plan.

29

NOTE 15. SUBSEQUENT EVENTS

Offering of Convertible Note (Note 11)

On October 22, 2019, the Company entered into a securities exchange agreement with Bellridge Capital. Pursuant to the terms of the exchange agreement, Bellridge agreed to surrender outstanding promissory notes, with an aggregate balance of $277,342 including principal and interest. In exchange, the Company issued an unsecured convertible note to Bellridge with a principal amount of $450,000.

This note bears interest at a rate of 10% per annum, matures on October 22, 2020, and contains standard and customary events of default. In the event of default, the interest rate increased to 18% per annum. All principal and interest is due upon maturity.

At any time following the issuance of this note, Bellridge has the right, until the note is paid in full, to convert any outstanding and unpaid principal and interest into shares of the Company's common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.0005, or (ii) 70% of the lowest closing bid price for shares over the prior five trading days.


Conversions of Convertible Notes (Note 11)

Subsequent to the date of this report, an additional $24,000 in principal for St. George was converted into 240,000,000 shares of common stock.

Subsequent to the date of this report, an additional $16,900 in principal, plus accrued interest and deposit fees, for BayBridge was converted into 175,047,423 shares of common stock.

Subsequent to the date of this report, an additional $267,000 in principal, plus accrued interest, for Bellridge was converted into 464,037,300 shares of common stock.

Subsequent to the date of this report, an additional $10,400 in principal, plus accrued interest and deposit fees, for Power Up was converted into 160,000,000 shares of common stock.

Subsequent to the date of this report, $11,350 in principal, plus accrued interest, for GS Capital was converted into 120,697,800 shares of common stock.

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

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

Overview

We are a company formed to commercialize flexible PV modules using our proprietary technology. For the nine months ended September 30, 2019, we generated $628,124 of revenue. Our revenue of $628,124 from product sales accounted for 100% of total revenue, we did not have any revenue generated from government research and development contracts during the three months ended September 30, 2019. As of September 30, 2019, we had an accumulated deficit of approximately $420 million.
 
In January 2017, Ascent was awarded a contract to supply high-voltage SuperLight thin-film CIGS PV blankets. These 50W, fully laminated, flexible blankets were manufactured using a new process that was optimized for high performance in near-space conditions at elevated temperatures, and are custom designed for easy modular integration into series and parallel configurations to achieve the desired voltage and current required for such application.



30

During the third quarter of 2017, Ascent Solar was selected by Energizer to develop and supply solar panels for their PowerKeep line of solar products, and in November 2017, Ascent introduced the next generation of our USB-based portable power systems with the XD™ series. The first product introduced was the XD-12 which, like previous products, is a folding, lightweight, easily stowable, PV system with USB power regulation. Unique to this generation of PV portable power is more PV power (12 Watts) and a 2.0 Amp smart USB output to enable the XD-12 to charge most smartphones, tablets, and USB-enabled devices as fast as a wall outlet. The enhanced smart USB circuit works with the device to be charged so that the device can determine the maximum power it is able to receive from the XD-12, and ensures the best possible charging performance directly from the sun.

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

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

In March 2018, Ascent successfully shipped to a European based customer for a lighter-than-air, helium-filled airship project based on our newly developed ultra-light modules with substrate material than half of the thickness of our standard modules.

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

Commercialization and Manufacturing Strategy

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

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

Significant Trends, Uncertainties and Challenges

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

•
Our ability to generate customer acceptance of and demand for our products;
•
Successful ramping up of commercial production on the equipment installed;
•
Our products are successfully and timely certified for use in our target markets;
•
Successful operating of production tools to achieve the efficiencies, throughput and yield necessary to reach our cost targets;
•
The products we design are saleable at a price sufficient to generate profits;
•
Our ability to raise sufficient capital to enable us to reach a level of sales sufficient to achieve profitability on terms favorable to us;
•
Effective management of the planned ramp up of our domestic and international operations;

31

•
Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets;
•
Our ability to maintain the listing of our common stock on the OTCBB Market;
•
Our ability to implement remediation measures to address material weaknesses in internal control;
•
Our ability to achieve projected operational performance and cost metrics;
•
Our ability to enter into commercially viable licensing, joint venture, or other commercial arrangements; and
•
Availability of raw materials.

Basis of Presentation: The accompanying condensed consolidated financial statements (unaudited) have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of September 30, 2019 and September 30, 2018, and the results of operations for the three and nine months ended September 30, 2019 and 2018. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.

Critical Accounting Policies and Estimates
Critical accounting policies used in reporting our financial results are reviewed by management on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Processes used to develop these estimates are evaluated on an ongoing basis. Estimates are based on historical experience and various other assumptions that are believed to be reasonable for making judgments about the carrying value of assets and liabilities. Actual results may differ as outcomes from assumptions may change.
The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. There have been no significant changes to our accounting policies as of September 30, 2019.

Results of Operations

Comparison of the Three Months Ended September 30, 2019 and 2018

Revenues. Our revenues were $338,373 for the three months ended September 30, 2019 compared to $32,001 for the three months ended September 30, 2018, an increase of $306,372, due to a larger product order during the third quarter of 2019.
 
Cost of revenues. Our Cost of revenues for the three months ended September 30, 2019 was $74,271 compared to zero for the three months ended September 30, 2018, an increase of $74,271. The increase in cost of revenues is mainly due to not having any production for the three months ended September 30, 2018 compared to 2019. Cost of revenues for the three months ended September 30, 2019 is comprised materials and freight of $1,899, direct labor of $927, and overhead of $114,002, offset by inventory reserves of $42,557. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.
Research, development and manufacturing operations. Research, development and manufacturing operations costs were $460,775 for the three months ended September 30, 2019, compared to $516,782 for the three months ended September 30, 2018, a decrease of $56,007. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed to the decrease in research, development, and manufacturing operations expenses during the three months ended September 30, 2019:

1.
Personnel and facility related expenses decreased $39,246, as compared to the same time period of 2018. The decrease in personnel and facility related costs was primarily due to a reduction in headcount and the use of contractors.
2.
Materials and equipment related expenses, decreased $16,761, as compared to the same time period of 2018. The decrease was due to a decrease in production of research and development products.


32

Selling, general and administrative. Selling, general and administrative expenses were $633,566 for the three months ended September 30, 2019, compared to $607,784 for the three months ended September 30, 2018, a decrease of $25,782. The following factors contributed to the decrease in selling, general, and administrative expenses during the three months ended September 30, 2019:

1.
Personnel and facility related costs increased $38,270 during the three months ended September 30, 2019, as compared to the the three months ended September 30, 2018. The overall increase in personnel related costs was primarily due to the increased use of consultants and contractors for the the three months ended September 30, 2019, as compared to the the three months ended September 30, 2018, offset by a reduction in headcount during the same period.
2.
Marketing and related expenses decreased $1,768 during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the the three months ended September 30, 2019, compared to the same time period of 2018, which is the direct result of reducing our marketing budget to focus more on the development of our PV.
3.
Legal expenses decreased $8,797 during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. The primary reasons for the decrease is due to decreased general legal expenses related to financing efforts as compared to the three months ended September 30, 2018 and decreases in legal expenses related to our patent activity as compared to the same period of 2018.
4.
Public company expenses increased $4,878 during the three months ended September 30, 2019, as compared to the the three months ended September 30, 2018. This increase is primarily due to accrued fees for the Company's board of directors, offset by the costs related to the reverse split which occurred during the three months ended September 30, 2018.
5.
Bad debt expenses decreased approximately $6,801 during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018.

Other Income/Expense, net. Other net expense was $391,012 for the three months ended September 30, 2019, compared to other net income of $1,567,163 for the the three months ended September 30, 2018, a decrease of approximately $1,958,175. The following factors contributed to the increase in other expense, net, during the three months ended September 30, 2019:

1.
During the three months ended September 30, 2019, the Company disposed of certain manufacturing assets and recognized a gain of $6,000 in Other income compared to a gain of $13,144 for the three months ended September 30, 2018, a reduction of $7,144.
2.
Interest expense increased approximately $177,178, as compared to the three months ended September 30, 2018. The increase is primarily due to a increase of non-cash interest expense related to convertible debt and promissory notes.
3.
Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, was a net gain of $1,510,883 for the three months ended September 30, 2019, as compared to a net gain of $3,284,736 for the three months ended September 30, 2018. The change of $1,773,853 in this non-cash item is attributable to a net gain of $1,518,008 on the change in fair value of our embedded derivative instruments during the three months ended September 30, 2019, compared to $3,858,483 in 2018, offset by a net loss from extinguishment of liabilities of $7,125, related to conversions and redemptions of certain convertible notes and preferred stock, for the three months ended September 30, 2019, as compared to a net loss of $573,747 for three months ended September 30, 2018.

Net Loss. Our Net Loss was $1,279,405 for the three months ended September 30, 2019, compared to a Net Income of $383,494 for the three months ended September 30, 2018.
The increase in Net Loss of $1,662,899 for the three months ended September 30, 2019 can be summarized in variances in significant account activity as follows:
 

33

 
Decrease (Increase) in Net Loss
For the Three Months Ended
September 30, 2019
Compared to the Three Months Ended
September 30, 2018
Revenues
$
306,372

Cost of Revenue
(74,271
)
Research, development and manufacturing operations
 
Materials and Equipment Related Expenses
16,761

Personnel and Facility Related Expenses
39,246

Selling, general and administrative expenses
 
Personnel, Administrative, and Facility Related Expenses
(38,270
)
Marketing Related Expenses
1,768

Legal Expenses
8,797

Public Company Costs
(4,878
)
Bad Debt Expense
6,801

Depreciation and Amortization Expense
32,950

Other Income/Expense
 
Interest Expense
(7,144
)
Other Income/Expense
(177,178
)
Non-Cash Change in Fair Value of Derivative Liabilities and Gain/Loss on Extinguishment of Liabilities, net
(1,773,853
)
Increase to Net Loss
$
(1,662,899
)


Comparison of the Nine Months Ended September 30, 2019 and 2018

Revenues. Our revenues were $628,124 for the nine months ended September 30, 2019 compared to $512,473 for the nine months ended September 30, 2018, an increase of $115,651, due to a larger product order during the third quarter of 2019.
 
Cost of revenues. Our Cost of revenues for the nine months ended September 30, 2019 was $282,825 compared to $503,609 for the nine months ended September 30, 2018, a decrease of $220,784. The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the nine months ended September 30, 2019 compared to 2018. Cost of revenues for the nine months ended September 30, 2019 is comprised of materials and freight of $41,715, direct labor of $1,929, and overhead of $301,617, offset by inventory reserves of $62,436. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.
Research, development and manufacturing operations. Research, development and manufacturing operations costs were $1,078,842 for the nine months ended September 30, 2019, compared to $2,389,863 for the nine months ended September 30, 2018, a decrease of $1,311,021. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed to the decrease in research, development, and manufacturing operations expenses during the nine months ended September 30, 2019:

1.
Personnel and facility related expenses decreased $1,237,527, as compared to the same time period of 2018. The decrease in personnel and facility related costs was primarily due to a reduction in headcount and the use of contractors.
2.
Materials and equipment related expenses, decreased $73,494, as compared to the same time period of 2018. The decrease was due to a decrease in production of research and development products.

34

Selling, general and administrative. Selling, general and administrative expenses were $1,545,852 for the nine months ended September 30, 2019, compared to $2,243,925 for the nine months ended September 30, 2018, a decrease of $698,073. The following factors contributed to the decrease in selling, general, and administrative expenses during the nine months ended September 30, 2019:

1.
Personnel and facility related costs decreased $604,397 during the nine months ended September 30, 2019, as compared to the the nine months ended September 30, 2018. The overall decrease in personnel related costs was primarily due a lower headcount for the the nine months ended September 30, 2019, as compared to the the nine months ended September 30, 2018 as well as the decreased use of consultants and contractors during the same period.
2.
Marketing and related expenses decreased $22,145 during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the the nine months ended September 30, 2019, compared to the same time period of 2018, which is the direct result of reducing our marketing budget to focus more on the development of our PV.
3.
Legal expenses decreased $165,483 during the nine months ended September 30, 2019, as compared to the the nine months ended September 30, 2018. The primary reasons for the decrease is due to decreased general legal expenses related to financing efforts as compared to the the nine months ended September 30, 2018 and decreases in legal expenses related to our patent activity as compared to the same period of 2018.
4.
Public company expenses increased $63,832 during the nine months ended September 30, 2019, as compared to the the nine months ended September 30, 2018. This increase is primarily due to accrued fees for the Company's board of directors, offset by the timing of the annual meeting in 2019, and the costs of the reverse stock split in 2018.
5.
Bad debt and settlement expenses increased $30,120 during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. During 2018 we recorded payments and settlements against existing reserves. We did not have settlement expenses during 2019.

Other Income/Expense, net. Other net income was $532,208 for the nine months ended September 30, 2019, compared to a other net expense of $2,666,245 for the the nine months ended September 30, 2018, an improvement of $3,198,453. The following factors contributed to the increase in other income, net during the nine months ended September 30, 2019:

1.
During the nine months ended September 30, 2019, the Company disposed of certain manufacturing assets and recognized a gain of $842,500 in Other income, compared to a gain of $13,144 in 2018, an increase of $829,356.
2.
Interest expense increased $1,461,081, as compared to the nine months ended September 30, 2018. The increase is primarily due to an increase of non-cash interest expense related to convertible debt and promissory notes.
3.
Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, was a net gain of $6,430,048 for the nine months ended September 30, 2019, as compared to a net gain of $2,599,870 for the nine months ended September 30, 2018. The change of $3,830,178 in this non-cash item is attributable to a net gain of $6,124,139 on the change in fair value of our embedded derivative instruments during the nine months ended September 30, 2019, compared to a net gain $4,532,147 in 2018, and by an increase in the gain from extinguishment of liabilities of $2,238,186, related to conversions and redemptions of certain convertible notes and preferred stock, for the nine months ended September 30, 2019, as compared to the the nine months ended September 30, 2018.

Net Loss. Our Net Loss was $1,932,350 for the nine months ended September 30, 2019, compared to a Net Loss of $7,580,493 for the nine months ended September 30, 2018.
The decrease of $5,648,143 in Net Loss for the nine months ended September 30, 2019 can be summarized in variances in significant account activity as follows:
 

35

 
 
Decrease (Increase) in Net Loss
For the Nine Months Ended
September 30, 2019
Compared to the Nine Months Ended
September 30, 2018
Revenues
$
115,651

Cost of Revenue
220,784

Research, development and manufacturing operations
 
Materials and Equipment Related Expenses
73,494

Personnel and Facility Related Expenses
1,237,527

Selling, general and administrative expenses
 
Personnel, Administrative, and Facility Related Expenses
604,397

Marketing Related Expenses
22,145

Legal Expenses
165,483

Public Company Costs
(63,832
)
Bad Debt Expense
(30,120
)
Depreciation and Amortization Expense
104,161

Other Income/Expense
 
Interest Expense
(1,461,081
)
Other Income/Expense
829,356

Non-Cash Change in Fair Value of Derivative Liabilities and (Gain)/Loss on Extinguishment of Liabilities, net
3,830,178

Decrease in Net Loss
$
5,648,143


Liquidity and Capital Resources

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

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

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

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

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

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


36

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.

Statements of Cash Flows Comparison of the Nine Months Ended September 30, 2019 and 2018

For the nine months ended September 30, 2019, our cash used in operations was $2,565,168 compared to $3,043,397 for the nine months ended September 30, 2018, a decrease of $478,229. The decrease is primarily the result of reduced operations during the current year. For the nine months ended September 30, 2019, cash used in investing activities was $826,746 compared to $4,295 for the nine months ended September 30, 2018. This decrease was the result of reduced spending on patents. During the nine months ended September 30, 2019, negative operating cash flows of $2,565,168 million were funded through $1,762,268 million in new debt issuances, offset by payment of financing costs of $7,500.

Off Balance Sheet Transactions

As of September 30, 2019, we did not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

We hold no significant funds and have no future obligations denominated in foreign currencies as of September 30, 2019.

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

Interest Rate Risk

Our exposure to market risks for changes in interest rates relates primarily to our cash equivalents and investment portfolio. As of September 30, 2019, our cash equivalents consisted only of operating accounts held with financial institutions. From time to time, we hold restricted funds, money market funds, investments in U.S. government securities and high quality corporate securities. The primary objective of our investment activities is to preserve principal and provide liquidity on demand, while at the same time maximizing the income we receive from our investments without significantly increasing risk. The direct risk to us associated with fluctuating interest rates is limited to our investment portfolio, and we do not believe a change in interest rates will have a significant impact on our financial position, results of operations, or cash flows.

Credit Risk

From time to time, we hold certain financial and derivative instruments that potentially subject us to credit risk. These consist primarily of cash, cash equivalents, restricted cash, investments, and forward foreign currency option contracts. We are exposed to credit losses in the event of nonperformance by the counter parties to our financial and derivative instruments. We place cash, cash equivalents, investments and forward foreign currency option contracts with various high quality financial institutions, and exposure is limited at any one institution. We continuously evaluate the credit standing of our counter party financial institutions.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. Our management conducted an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the

37

Exchange Act as of September 30, 2019. Based on this evaluation, our management concluded the design and operation of our disclosure controls and procedures were not effective as of September 30, 2019.

Management’s Report on Internal Control over Financial Reporting

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

•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
•
provide reasonable assurance transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on this evaluation, our management concluded our internal controls over financial reporting were not effective as of September 30, 2019. Our management reviewed the results of its assessment with the Audit Committee.

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

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

Material Weakness

Based on our assessment and the criteria used, management concluded that our internal control over financial reporting as of September 30, 2019 was not effective due to the material weaknesses described as follows:

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

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

•
Accounting for the Company's inventory and cost of revenue was lacking for the preparation of the September 30, 2019 financial statements.  Miscalculations in these areas could impact the Company's current assets, revenues, operating results, and cash flows.

The control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

The Company plans to executed the following steps in 2019 to remediate the aforementioned material weaknesses in its internal control over financial reporting:


38

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

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

Changes in Internal Control Over Financial Reporting

Except for the identification and mitigation of the material weaknesses noted above, there were no other changes in internal control over financial reporting during the year ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In May 2019, a vendor filed suit against the Company in District Court in Adams County Colorado in an effort to collect approximately $1.2 million of unpaid fees (and related interest charges).  The matter is currently pending.  The unpaid amounts are reflected in the Company's financial statements.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the updated risk factors in our Annual Report on Form 10-K filed on April 19, 2019, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K filed on April 19, 2019 are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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

Not required.

Item 3. Defaults Upon Senior Securities
Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.















39

Item 6. Exhibits

The exhibits listed on the accompanying Index to Exhibits on this Form 10-Q are filed or incorporated into this Form 10-Q by reference.
EXHIBIT INDEX
Exhibit No.
 
Description
10.1
 
10.2
 
10.3
 
10.4
 
10.5
 
10.6
 
10.7
 
10.8
 
10.9
 
31.1*
 
31.2*
 
32.1*
 
32.2*
 
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema Document
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
*
 
Filed herewith



40

ASCENT SOLAR TECHNOLOGIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 9th day of December, 2019.
 
 
ASCENT SOLAR TECHNOLOGIES, INC.
 
 
 
 
By:
/S/ VICTOR LEE
 
 
Lee Kong Hian (aka Victor Lee)
President and Chief Executive Officer
(Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory)



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