SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2022. Except for the adoption of FASB ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) as disclosed below, there have been no significant changes to our accounting policies as of June 30, 2023.

Revenue Recognition:

Product revenue. The Company recognizes revenue for the sale of PV modules and other equipment sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For module and other equipment sales contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognizes the related revenue as control of each individual product is transferred to the customer.

During the three months ended June 30, 2023 and 2022, the Company recognized product revenue of $86,385 and $627,571, respectively. During the six months ended June 30, 2023 and 2022, the Company recognized product revenue of $185,610 and $681,781, respectively.

Milestone and engineering revenue. Each milestone and engineering arrangement is a separate performance obligation. The transaction price is estimated using the most likely amount method and revenue is recognized as the performance obligation is satisfied through achieving manufacturing, cost, or engineering targets. During the three months ended June 30, 2023 and 2022, the Company recognized total milestone and engineering revenue of $14,916 and $10,000, respectively. During the six months ended June 30, 2023 and 2022, the Company recognized total milestone and engineering revenue of $39,916 and $522,000, respectively. $512,000 of the $522,000 earned in the prior period was earned from TubeSolar AG (“TubeSolar”), a related party.

Government contracts revenue. Revenue from government research and development contracts is generated under terms that are cost plus fee or firm fixed price. The Company generally recognizes this revenue over time using cost-based input methods, which recognizes revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract. In applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred relative to the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.

Cost based input methods of revenue recognition are considered a faithful depiction of the Company’s efforts to satisfy long-term government research and development contracts and therefore reflect the performance obligations under such contracts. Costs incurred that do not contribute to satisfying the Company’s performance obligations are excluded from the input methods of revenue recognition as the amounts are not reflective of transferring control under the contract. Costs incurred towards contract completion may include direct costs plus allowable indirect costs and an allocable portion of the fixed fee. If actual and estimated costs to complete a contract indicate a loss, provision is made currently for the loss anticipated on the contract.

No government contract revenue was recognized during the three and six months ended June 30, 2023 and 2022.

Accounts Receivable. As of June 30, 2023 and December 31, 2022, the Company had an accounts receivable, net balance of $14,916 and $1,769, respectively. As of June 30, 2023 and December 31, 2022, the Company had an allowance for doubtful accounts of $0 and $26,000, respectively.

Deferred revenue for the six months ended June 30, 2023 was as follows:


Balance as of January 1, 2023	$	13,000
Additions		29,350
Recognized as revenue		(29,350	)
Balance as of June 30, 2023	$	13,000

Earnings per Share: Earnings per share (“EPS”) are the amount of earnings attributable to each share of common stock. Basic EPS has been computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Income available to common stockholders has been computed by deducting dividends accumulated for the period on cumulative preferred stock (whether or not earned) and deemed dividends due to down round financings from net income. For the three and six months ended June 30, 2023, income available to common stockholders was adjusted for deemed dividends due to down round financings of $11,653,986 (Note 11). Diluted earnings per share has been computed by dividing income available to common stockholders adjusted on an if-converted basis for the period by the weighted average number of common shares and potentially dilutive common share outstanding (which consist of warrants, options, restricted stock units and convertible securities using the if-converted or treasury stock method to the extent they are dilutive). Approximately 55.3 million and 2.4 million shares of dilutive shares were excluded from the three months period ended June 30, 2023 and 2022, respectively, EPS calculation as their impact is antidilutive. Approximately 56.0 million and 2.4 million shares of dilutive shares were excluded from the six months period ended June 30, 2023 and 2022, respectively, EPS calculation as their impact is antidilutive.

Net loss attributable to common shareholders for the three and six months ended June 30, 2023 was as follows:


	Three months ended			Six months ended
	June 30, 2023			June 30, 2023
Net Loss	$	(3,913,472	)	$	(9,996,824	)
Down round deemed dividend		(11,653,986	)		(11,653,986	)
Net Loss attributable to common shareholders		(15,567,458	)		(21,650,810	)
Earnings Per Share (Basic and Diluted)		(0.33	)		(0.53	)

Recently Adopted or to be Adopted Accounting Policies

On January 1, 2023, the Company adopted ASU 2020-06. The adoption resulted in the elimination of the beneficial conversion feature recognized on the Company’s convertible debt. The Company elected to apply the modified retrospective method to all open contracts as of January 1, 2023, and the cumulative effect of initially applying ASU 2020-06 was recognized as an adjustment to the Company’s retained earnings balance as of January 1, 2023. Comparative periods have not been restated and continue to be reported under the accounting standard in effect for those periods.

The cumulative effect of the changes made to the Company’s January 1, 2023, condensed balance sheet for the adoption of ASU 2020-06 is as follows:


	Balance at December 31, 2022			Adjustments Due to Adoption			Balance at January 1, 2023
Liabilities
Non-current convertible notes, net	$	5,268,399		$	3,686,243		$	8,954,642
Shareholders' equity
Additional paid in capital		452,135,653			(3,795,874	)		448,339,779
Accumulated deficit		(447,537,493	)		109,631			(447,427,862	)

The impact due to the change in accounting principle on net income and earnings per share for the three and six months ended June 30, 2023 is as follows:


	Post ASU 2020-06			Pre ASU 2020-06			Difference
Three months ended June 30, 2023
Net Loss	$	(3,913,472	)	$	(6,687,795	)	$	2,774,323
Net Loss attributable to common shareholders		(15,567,458	)		(18,341,781	)		2,774,323
Earnings Per Share (Basic and Diluted)		(0.33	)		(0.39	)		(0.06	)

Six months ended June 30, 2023
Net Loss	$	(9,996,824	)	$	(14,971,111	)	$	4,974,287
Net Loss attributable to common shareholders		(21,650,810	)		(26,625,097	)		4,974,287
Earnings Per Share (Basic and Diluted)		(0.53	)		(0.65	)		(0.12	)

Other new pronouncements issued but not effective as of June 30, 2023 are not expected to have a material impact on the Company’s condensed financial statements.