x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Large accelerated filer | o | Accelerated filer | o | |||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | x |
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Item 1A. | ||
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Item 6. | ||
June 30, 2015 | December 31, 2014 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 232,304 | $ | 3,316,576 | ||||
Restricted cash - short term | 22,036,569 | 24,000,000 | ||||||
Trade receivables, net of allowance for doubtful accounts of $65,376 and $32,566, respectively | 1,956,293 | 2,782,105 | ||||||
Inventories | 4,817,454 | 2,427,212 | ||||||
Prepaid expenses and other current assets | 3,868,430 | 2,660,384 | ||||||
Total current assets | 32,911,050 | 35,186,277 | ||||||
Property, Plant and Equipment: | 37,627,646 | 37,598,452 | ||||||
Less accumulated depreciation and amortization | (25,771,754 | ) | (22,941,264 | ) | ||||
11,855,892 | 14,657,188 | |||||||
Other Assets: | ||||||||
Restricted cash - long term | — | 4,001,880 | ||||||
Patents, net of amortization of $142,414 and $122,731, respectively | 1,449,537 | 1,305,895 | ||||||
Investment in joint venture | 320,000 | 320,000 | ||||||
Other non-current assets | 439,184 | 449,142 | ||||||
2,208,721 | 6,076,917 | |||||||
Total Assets | $ | 46,975,663 | $ | 55,920,382 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,779,920 | $ | 1,569,746 | ||||
Accrued expenses | 2,201,041 | 2,934,246 | ||||||
Current portion of long-term debt | 337,432 | 302,210 | ||||||
Current portion of convertible note payable, net of discount of $9,414,320 and $7,607,492, respectively | 2,623,241 | 364,093 | ||||||
Current portion of litigation settlement | 516,948 | 493,732 | ||||||
Series D preferred stock, net of discount of $0 and $1,194,222 | — | 224,778 | ||||||
Short term embedded derivative liabilities | 12,168,745 | 4,427,011 | ||||||
Make-whole dividend liability | 849,560 | 849,560 | ||||||
Total current liabilities | 20,476,887 | 11,165,376 | ||||||
Accrued Litigation Settlement, net of current portion | 616,349 | 880,760 | ||||||
Long-Term Debt | 5,606,235 | 5,764,965 | ||||||
Long-Term Convertible Note, net of discount of $12,229,088 and $22,930,946, respectively | 3,407,558 | 1,097,469 | ||||||
Warrant Liability | 6,027,490 | 15,866,667 | ||||||
Long Term Embedded Derivative Liabilities | 15,807,052 | 13,344,155 | ||||||
Accrued Warranty Liability | 184,000 | 136,000 | ||||||
Commitments and Contingencies (Notes 4 & 13) | ||||||||
Stockholders’ (Deficit) Equity: | ||||||||
Series A preferred stock, $.0001 par value; 750,000 shares authorized and issued; 212,390 shares and 212,390 shares outstanding as of June 30, 2015 and December 31, 2014, respectively ($2,548,680 Liquidation Preference) | 21 | 21 | ||||||
Common stock, $0.0001 par value, 450,000,000 shares authorized; 36,630,326 and 18,211,104 shares issued and outstanding, respectively | 3,663 | 1,821 | ||||||
Additional paid in capital | 323,255,850 | 306,947,144 | ||||||
Accumulated deficit | (328,409,442 | ) | (299,283,996 | ) | ||||
Total stockholders’ (deficit) equity | (5,149,908 | ) | 7,664,990 | |||||
Total Liabilities and Stockholders’ (Deficit) Equity | $ | 46,975,663 | $ | 55,920,382 |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenues* | $ | 2,234,223 | $ | 1,090,380 | $ | 2,891,863 | $ | 1,843,444 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of revenues (exclusive of depreciation shown below) | 2,572,218 | — | 4,153,711 | — | ||||||||||||
Research, development and manufacturing operations (exclusive of depreciation shown below) | 1,654,674 | 4,342,351 | 3,371,061 | 8,151,666 | ||||||||||||
Selling, general and administrative (exclusive of depreciation shown below) | 3,522,694 | 3,135,739 | 6,363,493 | 6,187,659 | ||||||||||||
Depreciation and amortization | 1,411,783 | 1,505,279 | 2,852,049 | 2,975,428 | ||||||||||||
Total Costs and Expenses | 9,161,369 | 8,983,369 | 16,740,314 | 17,314,753 | ||||||||||||
Loss from Operations | (6,927,146 | ) | (7,892,989 | ) | (13,848,451 | ) | (15,471,309 | ) | ||||||||
Other Income/(Expense) | ||||||||||||||||
Other Income, net | 16,836 | (299,580 | ) | 34,689 | (299,028 | ) | ||||||||||
Loss on extinguishment of liabilities | (536,322 | ) | (631,492 | ) | (3,146,474 | ) | (983,013 | ) | ||||||||
Interest expense | (5,256,532 | ) | (142,919 | ) | (15,208,292 | ) | (248,399 | ) | ||||||||
Deemed interest expense on warrant liability | — | — | (909,092 | ) | — | |||||||||||
Change in fair value of derivative liabilities | 1,365,488 | (1,452,661 | ) | 3,952,174 | (2,188,115 | ) | ||||||||||
Total Other Income/(Expense) | (4,410,530 | ) | (2,526,652 | ) | (15,276,995 | ) | (3,718,555 | ) | ||||||||
Net Loss | $ | (11,337,676 | ) | $ | (10,419,641 | ) | $ | (29,125,446 | ) | $ | (19,189,864 | ) | ||||
Deemed dividend on Preferred Stock and accretion of warrants | — | (5,167,500 | ) | — | (8,087,500 | ) | ||||||||||
Net Loss applicable to common stockholders | $ | (11,337,676 | ) | $ | (15,587,141 | ) | $ | (29,125,446 | ) | $ | (27,277,364 | ) | ||||
Net Loss Per Share (Basic and diluted) | $ | (0.37 | ) | $ | (1.92 | ) | $ | (1.09 | ) | $ | (3.70 | ) | ||||
Weighted Average Common Shares Outstanding (Basic and diluted) | 30,993,944 | 8,103,229 | 26,763,893 | 7,372,191 |
Six Months Ended | |||||||||
June 30, | |||||||||
2015 | 2014 | ||||||||
Operating Activities: | |||||||||
Net loss | $ | (29,125,446 | ) | $ | (19,189,864 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||
Depreciation and amortization | 2,852,049 | 2,975,428 | |||||||
Share based compensation | 457,500 | 425,323 | |||||||
Amortization of financing costs to interest expense | 243,882 | — | |||||||
Non-cash interest expense | 1,065,780 | — | |||||||
Amortization of debt discount | 13,497,788 | — | |||||||
Non-cash Preferred C Penalty Shares | — | 300,000 | |||||||
Loss on extinguishment of liabilities | 3,146,474 | 983,013 | |||||||
Accrued litigation settlement | (241,195 | ) | 287,358 | ||||||
Deemed interest expense on warrant liability | 909,092 | — | |||||||
Change in fair value of derivative liabilities | (3,952,174 | ) | 2,188,115 | ||||||
Bad debt expense | 82,553 | — | |||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 743,259 | (720,530 | ) | ||||||
Related party receivables and deposits | — | (113,078 | ) | ||||||
Inventories | (2,390,242 | ) | (446,504 | ) | |||||
Prepaid expenses and other current assets | 722,155 | 4,031 | |||||||
Accounts payable | 210,174 | 127,064 | |||||||
Accrued expenses | (733,205 | ) | 808,618 | ||||||
Warranty reserve | 48,000 | 6,063 | |||||||
Net cash used in operating activities | (12,463,556 | ) | (12,364,963 | ) | |||||
Investing Activities: | |||||||||
Purchase of property, plant and equipment | (29,194 | ) | (53,511 | ) | |||||
Interest income on restricted cash | (34,689 | ) | — | ||||||
Patent activity costs | (163,325 | ) | (265,911 | ) | |||||
Net cash used in investing activities | (227,208 | ) | (319,422 | ) | |||||
Financing Activities: | |||||||||
Payment of debt financing costs | (270,000 | ) | (115,000 | ) | |||||
Repayment of debt | (123,508 | ) | (139,152 | ) | |||||
Changes in restricted cash | 6,000,000 | — | |||||||
Proceeds from issuance of stock and warrants | 4,000,000 | 10,946,638 | |||||||
Net cash provided by financing activities | 9,606,492 | 10,692,486 | |||||||
Net change in cash and cash equivalents | (3,084,272 | ) | (1,991,899 | ) | |||||
Cash and cash equivalents at beginning of period | 3,316,576 | 3,318,155 | |||||||
Cash and cash equivalents at end of period | $ | 232,304 | $ | 1,326,256 | |||||
Supplemental Cash Flow Information: | |||||||||
Cash paid for interest | $ | 224,300 | $ | 248,399 | |||||
Non-Cash Transactions: | |||||||||
Non-cash conversions of preferred stock and convertible notes to equity | $ | 7,745,950 | $ | 7,902,911 | |||||
Make-whole provision on convertible preferred stock | $ | — | $ | 8,087,500 |
As of June 30, | As of December 31, | |||||||
2015 | 2014 | |||||||
Building | $ | 5,828,960 | $ | 5,828,960 | ||||
Furniture, fixtures, computer hardware and computer software | 480,976 | 475,266 | ||||||
Manufacturing machinery and equipment | 31,247,425 | 31,227,523 | ||||||
Net depreciable property, plant and equipment | 37,557,361 | 37,531,749 | ||||||
Manufacturing machinery and equipment in progress | 70,285 | 66,703 | ||||||
Property, plant and equipment | 37,627,646 | 37,598,452 | ||||||
Less: Accumulated depreciation and amortization | (25,771,754 | ) | (22,941,264 | ) | ||||
Net property, plant and equipment | $ | 11,855,892 | $ | 14,657,188 |
As of June 30, | As of December 31, | |||||||
2015 | 2014 | |||||||
Raw materials | $ | 1,130,221 | $ | 941,912 | ||||
Work in process | 871,292 | 335,275 | ||||||
Finished goods | 2,815,941 | 1,150,025 | ||||||
Total | $ | 4,817,454 | $ | 2,427,212 |
2015 | $ | 178,702 | |
2016 | 322,771 | ||
2017 | 344,730 | ||
2018 | 368,183 | ||
2019 | 393,232 | ||
Thereafter | 4,336,049 | ||
$ | 5,943,667 |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Share-based compensation cost included in: | ||||||||||||||||
Research and development | $ | 52,896 | $ | 83,576 | $ | 154,205 | $ | 187,070 | ||||||||
Selling, general and administrative | 143,463 | 118,934 | 303,295 | 238,253 | ||||||||||||
Total share-based compensation cost | $ | 196,359 | $ | 202,510 | $ | 457,500 | $ | 425,323 |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Type of Award: | ||||||||||||||||
Stock Options | $ | 121,497 | $ | 83,247 | $ | 286,997 | $ | 215,539 | ||||||||
Restricted Stock Units and Awards | 74,862 | 119,263 | 170,503 | 209,784 | ||||||||||||
Total share-based compensation cost | $ | 196,359 | $ | 202,510 | $ | 457,500 | $ | 425,323 |
For the six months ended June 30, | ||||
2015 | 2014 | |||
Expected volatility | 93% | 95% | ||
Risk free interest rate | 2% | 2% | ||
Expected dividends | — | — | ||
Expected life (in years) | 5.9 | 5.9 |
• | 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 strategic alliance with TFG Radiant results in the design, manufacture and sale of sufficient products to achieve profitability; |
• | our ability to raise sufficient capital to enable us to reach a level of sales sufficient to achieve profitability on terms favorable to us; |
• | we are able to successfully design, manufacture, market, distribute and sell our newly introduced line of consumer oriented products; |
• | effective management of the planned ramp up of our domestic and international operations; |
• | our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets; |
• | our ability to maintain the listing of our common stock on the NASDAQ Capital Market; |
• | 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. |
1. | Materials and Equipment Related expenses decreased $1,646,000 for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. The decrease is due to the fact that materials costs are included in the Cost of revenues line item for the three months ended June 30, 2015. |
2. | Personnel related expenses decreased $549,000 as compared to the second quarter of 2014. The overall decrease in personnel related costs was primarily due to direct labor that is included in the Cost of revenues line item for the three months ended June 30, 2015. |
3. | Consulting and Contract Services decreased by $224,000 from the comparable quarter in the prior year. The decrease in expense as compared to the second quarter of 2014 was primarily attributed to product design fees during the three months ended June 30, 2014 that were non-recurring. |
4. | Facility Related Expenses decreased $280,000 during the three months ended June 30, 2015. The decrease is due to the fact that some overhead costs are included in the Cost of Revenue line item for the three months ended June 30, 2015. |
1. | Personnel related costs increased $474,000 during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. $25,000 of this increase was related to non-cash stock compensation expense. The overall increase in personnel related costs was due to additional sales and management personnel hired subsequent to June 30, 2014 in order to facilitate our expected increase in sales. |
2. | Marketing and related expenses increased $213,000 during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. The increase in Marketing and related expenses is due to additional promotions and samples expenses during the second quarter of 2015. |
3. | Consulting and contract services decreased $268,000 during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. The decrease was due to decreased staffing costs associated with our retail kiosks. Management expects this expense to be lower during 2015 as compared to 2014 due to the lower number of retail kiosks in operation during 2015. |
1. | Interest Expense increased $5,113,000 as compared the second quarter of 2014. The increase is due to non-cash interest expense and amortization of debt discounts related to the Notes. The non-cash portion of interest expense for the three months ended June 30, 2015 was $5,129,000. |
2. | Loss on Extinguishment of liabilities decreased $95,000 as compared to the second quarter of 2014. This non-cash expense is a result of the extinguishment of liabilities related to the Notes and Preferred Stock. Management expects these non-cash expenses to continue throughout 2015 due to our November 2014 financing transaction. |
3. | Change in fair value of derivative liabilities fluctuated $2,818,000 as compared to the second quarter of 2014, resulting in a net gain as of June 30, 2015. The fluctuation in this non-cash item relates to the change in fair value of our derivative liabilities associated with our warrant liabilities as well as our derivatives associated with the Notes. |
Decrease (increase) to Net Loss For the Three Months Ended June 30, 2015 Compared to the Three Months Ended June 30, 2014 | ||||
Revenues | 1,144,000 | |||
Cost of Revenue | (2,572,000 | ) | ||
Research, development and manufacturing operations | ||||
Materials and Equipment Related Expenses | 1,646,000 | |||
Personnel Related Expenses | 549,000 | |||
Consulting and Contract Services | 224,000 | |||
Facility Related Expenses | 280,000 | |||
Other Miscellaneous Costs | (12,000 | ) | ||
Selling, general and administrative expenses | ||||
Personnel Related Expenses | (474,000 | ) | ||
Marketing Related Expenses | (213,000 | ) | ||
Legal Expenses | 101,000 | |||
Public Company Costs | (65,000 | ) | ||
Consulting and Contract Services | 268,000 | |||
Other Miscellaneous Costs | (4,000 | ) | ||
Depreciation and Amortization Expense | 94,000 | |||
Other Income / (Expense) | ||||
Interest Expense | (5,113,000 | ) | ||
Other Income/Expense | 316,000 | |||
Non-Cash Loss on Extinguishment of Liabilities | 95,000 | |||
Non-Cash Change in Fair Value of Derivative Liabilities | 2,818,000 | |||
Increase to Net Loss | $ | (918,000 | ) |
1. | Materials and Equipment Related expenses decreased $2,454,000 for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. The decrease is due to the fact that materials costs are included in the Cost of revenues line item for the six months ended June 30, 2015. |
2. | Personnel related expenses decreased $1,096,000 as compared to the second half of 2014. The overall decrease in personnel related costs was primarily due to direct labor that is included in the Cost of revenues line item for the six months ended June 30, 2015. |
3. | Consulting and Contract Services decreased by $659,000 from the six months ended June 30, 2014. The decrease in expense as compared to the second half of 2014 was primarily attributed to the termination of the consulting services contract with TFGR, effective March 31, 2014 and product design fees during the six months ended June 30, 2014 that were non-recurring. |
4. | Facility Related Expenses decreased $585,000 during the six months ended June 30, 2015. The decrease is due to the fact that some overhead costs are included in the Cost of Revenue line item for the six months ended June 30, 2015. |
1. | Personnel related costs increased $973,000 during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. $65,000 of this increase was related to non-cash stock compensation expense. The overall increase in personnel related costs was due to additional sales and management personnel hired subsequent to June 30, 2014 in order to facilitate our expected increase in sales. |
2. | Marketing and related expenses decreased $395,000 during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. During the first half of 2014, the Company implemented aggressive marketing and advertising campaigns in order to build our brand, which included television advertisements, print advertisements, and trade shows. During the first half of 2015, the Company did not incur the same level of advertising and marketing related expenses as the first half of 2014. |
3. | Consulting and contract services decreased $469,000 during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. The decrease was due to decreased staffing costs associated with our retail kiosks. Management expects this expense to be lower during 2015 as compared to 2014 due to the lower number of retail kiosks in operation during 2015. |
1. | Interest Expense increased $14,960,000 as compared the second half of 2014. The increase is due to non-cash interest expense and amortization of debt discounts related to the Notes, Series D Preferred Stock, and Series D-1 Preferred Stock. The non-cash portion of interest expense for the six months ended June 30, 2015 was $14,949,000. |
2. | Loss on Extinguishment of liabilities increased $2,163,000 as compared to the six months ended June 30, 2014. This non-cash expense is a result of the extinguishment of liabilities related to the Notes, Series D Preferred Stock, and Series D-1 Preferred Stock. Management expects these non-cash expenses to continue throughout 2015 due to our November 2014 financing transaction. |
3. | We incurred $909,000 in non-cash interest expense as a result of the liability classified warrants associated with the Series D-1 Preferred Stock. This was a one-time non-recurring expense. |
4. | Change in fair value of derivative liabilities fluctuated $6,140,000 as compared to the second half of 2014, resulting in a net gain as of June 30, 2015. The fluctuation in this non-cash item relates to the change in fair value of our derivative liabilities associated with our warrant liabilities as well as our derivatives associated with the Notes. |
Decrease (increase) to Net Loss For the Six Months Ended June 30, 2015 Compared to the Six Months Ended June 30, 2014 | ||||
Revenues | 1,048,000 | |||
Cost of Revenue | (4,154,000 | ) | ||
Research, development and manufacturing operations | ||||
Materials and Equipment Related Expenses | 2,454,000 | |||
Personnel Related Expenses | 1,096,000 | |||
Consulting and Contract Services | 659,000 | |||
Facility Related Expenses | 585,000 | |||
Other Miscellaneous Costs | (13,000 | ) | ||
Selling, general and administrative expenses | ||||
Personnel Related Expenses | (973,000 | ) | ||
Marketing Related Expenses | 395,000 | |||
Legal Expenses | 75,000 | |||
Public Company Costs | (135,000 | ) | ||
Consulting and Contract Services | 469,000 | |||
Other Miscellaneous Costs | (6,000 | ) | ||
Depreciation and Amortization Expense | 122,000 | |||
Other Income / (Expense) | ||||
Interest Expense | (14,960,000 | ) | ||
Other Income/Expense | 334,000 | |||
Non-Cash Loss on Extinguishment of Liabilities | (2,163,000 | ) | ||
Deemed (non-cash) Interest Expense on Warrant Liability | (909,000 | ) | ||
Non-Cash Change in Fair Value of Derivative Liabilities | 6,140,000 | |||
Increase to Net Loss | $ | (9,936,000 | ) |
Payments Due by Year (in thousands) | ||||||||||||||||||||
Contractual Obligations | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||
Long-term debt obligations | $ | 10,035 | $ | 1,351 | $ | 2,037 | $ | 1,387 | $ | 5,260 | ||||||||||
Operating lease obligations | 26 | 26 | — | — | — | |||||||||||||||
Purchase obligations | 3,658 | 3,658 | — | — | — | |||||||||||||||
Total | $ | 13,719 | $ | 5,035 | $ | 2,037 | $ | 1,387 | $ | 5,260 |
ASCENT SOLAR TECHNOLOGIES, INC. | ||
By: | /S/ VICTOR LEE | |
Lee Kong Hian (aka Victor Lee) President and Chief Executive Officer (Principal Executive Officer, acting Principal Financial Officer, and Authorized Signatory) |
Exhibit No. | Description | |
10.1 | Securities Purchase Agreement, dated April 6, 2015, between the Company and TFG Radiant Investment Group Ltd. (filed as Exhibit 10.1 to our Current Report on Form 8-K April 7, 2015). | |
10.2 | Securities Purchase Agreement, dated June 10, 2015, between the Company and TFG Radiant Investment Group Ltd. (filed as Exhibit 10.1 to our Current Report on Form 8-K June 15, 2015). | |
10.3 | Amendment and Exchange Agreement dated July 22, 2015 (filed as Exhibit 10.1 to our Current Report on Form 8-K July 23, 2015). | |
10.4 | Right to Receive Common Stock dated July 22, 2015 (filed as Exhibit 10.2 to our Current Report on Form 8-K July 23, 2015). | |
10.5* | Confidential settlement agreement and general release dated as of May 13, 2015 between the Company and William M. Gregorak | |
31.1* | Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1* | Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2* | Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS** | 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. |
** | XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Exchange Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
August 14, 2015 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer and acting Principal Financial Officer) |
August 14, 2015 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer and acting Principal Financial Officer) |
1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 14, 2015 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer and acting Principal Financial Officer) |
1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 14, 2015 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer and acting Principal Financial Officer) |
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Make-Whole Dividend Liability (Details) - USD ($) |
1 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2013 |
Jun. 30, 2015 |
Dec. 31, 2014 |
|
Class of Stock [Line Items] | |||
Change in fair value of make-whole dividend liability | $ 0 | ||
Make-whole dividend liability | $ 849,560 | $ 849,560 | |
Series A Preferred Stock [Member] | |||
Class of Stock [Line Items] | |||
Preferred stock, dividend rate, percentage | 8.00% | 8.00% | |
Preferred stock, redemption, term, required make-whole dividend | 4 years | ||
Preferred stock, dividend, make-whole dividend rate to market value | 10.00% | ||
Preferred stock, shares outstanding | 212,390 | 212,390 | |
Preferred stock, redemption amount | $ 1,700,000 | ||
Preferred stock, redemption amount, additional make-whole amount | $ 800,000 | ||
Preferred Class A [Member] | |||
Class of Stock [Line Items] | |||
Preferred stock, shares outstanding | 212,390 |
Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Long-term Debt | As of June 30, 2015, future principal payments on long-term debt are due as follows:
|
Equity Plans and Share-Based Compensation (Share-based compensation fair value assumptions) (Details) - Stock Options [Member] |
6 Months Ended | |
---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 93.00% | 95.00% |
Risk free interest rate | 2.00% | 2.00% |
Expected dividends | 0.00% | 0.00% |
Expected life (in years) | 5 years 10 months 24 days | 5 years 10 months 24 days |
Summary of Significant Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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, 2014. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The update will establish a comprehensive revenue recognition standard for virtually all industries in GAAP. ASU 2014-09 will change the amount and timing of revenue and cost recognition, implementation, disclosures and documentation. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for the Company in fiscal year 2018. The Company is researching whether the adoption of ASU 2014-09 will have a material effect on the Company’s financial statements. In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915). Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders' equity; (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged; and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The standard was effective for the Company during the first quarter of 2015. Accordingly, the Company has adopted this standard and has not disclosed inception-to-date information on the statements of income and cash flows and the Company has not labeled the financial statements as those of a development stage entity. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide certain disclosures if it concludes that substantial doubt exists. ASU 2014-15 is effective for all entities for the annual period ending after December 15, 2016, and for annual and interim periods thereafter, with early adoption permitted. The Company has not early adopted ASU 2014-15. The Company is researching whether the adoption of ASU 2014-15 will have a material effect on the Company’s financial statements. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which states that inventory should be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective within annual periods beginning on or after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its financial statements. Reclassifications: Certain reclassifications have been made to the 2014 financial information to conform to the 2015 presentation. Such reclassifications had no effect on the net loss. |
Related Party Transactions (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Dec. 31, 2014 |
|
Related Party Transaction [Line Items] | |||
Revenue from related parties | $ 8,050 | ||
TFG Radiant [Member] | |||
Related Party Transaction [Line Items] | |||
Percent of common stock outstanding | 14.70% | ||
Revenue from related parties | $ 0 | $ 8,050 | |
Related party receivables and deposits | $ 0 | $ 0 |
Inventories (Details) - USD ($) |
Jun. 30, 2015 |
Dec. 31, 2014 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 1,130,221 | $ 941,912 |
Work in process | 871,292 | 335,275 |
Finished goods | 2,815,941 | 1,150,025 |
Total | $ 4,817,454 | $ 2,427,212 |
Debt Narrative (Details) - USD ($) |
Feb. 08, 2008 |
Jun. 30, 2015 |
Dec. 31, 2009 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Long-term debt | $ 5,943,667 | ||
Construction Loan [Member] | |||
Debt Instrument [Line Items] | |||
Available borrowing capacity | $ 7,500,000 | ||
Permanent Loan [Member] | |||
Debt Instrument [Line Items] | |||
Stated interest rate | 6.60% | ||
Manufacturing and Office Facility [Member] | |||
Debt Instrument [Line Items] | |||
Cost of acquisition | $ 5,500,000 |
Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Basis Of Presentation [Abstract] | |
Basis of Presentation | BASIS OF PRESENTATION The accompanying 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 June 30, 2015 and December 31, 2014, and the results of operations for the three and six months ended June 30, 2015 and 2014. 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 condensed consolidated financial statements. The Company’s activities from inception through December 31, 2014 consisted substantially of raising capital, research and development, establishment and development of the Company's production plant, product development and establishing sales channels for its line of consumer products which is sold under the EnerPlex™ brand. Revenues from inception through December 31, 2014 had been primarily generated from the Company’s governmental research and development contracts until EnerPlex branded products began to sell in higher volumes in 2014. During this time period the Company's primary focus was not generating significant revenue, and thus cost of revenue was not considered a relevant number due to the development nature of the Company. As such, the majority of the Company's costs were considered to be research and development costs from inception through December 31, 2014. Beginning in 2015, due to the success of EnerPlex branded products, the Company's primary focus going forward is to build on the Company's past results and to significantly increase our revenues. As the Company's primary focus is increasing revenues by utilizing and expanding the sales channels established during prior years, the Company has determined that cost of revenue is a relevant number going forward. As such, the Company has included a Cost of revenues line item in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015. 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, 2014 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, 2014. 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, 2014. 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 six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. |
Debt Schedule of Maturities of Long-term Debt (Details) |
Jun. 30, 2015
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2015 | $ 178,702 |
2016 | 322,771 |
2017 | 344,730 |
2018 | 368,183 |
2019 | 393,232 |
Thereafter | 4,336,049 |
Total maturities | $ 5,943,667 |
Equity Plans and Share-Based Compensation (Share-based compensation cost by line item) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation cost | $ 196,359 | $ 202,510 | $ 457,500 | $ 425,323 |
Research and development [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation cost | 52,896 | 83,576 | 154,205 | 187,070 |
Selling, general, administrative [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation cost | $ 143,463 | $ 118,934 | $ 303,295 | $ 238,253 |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying 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 June 30, 2015 and December 31, 2014, and the results of operations for the three and six months ended June 30, 2015 and 2014. 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 condensed consolidated financial statements. The Company’s activities from inception through December 31, 2014 consisted substantially of raising capital, research and development, establishment and development of the Company's production plant, product development and establishing sales channels for its line of consumer products which is sold under the EnerPlex™ brand. Revenues from inception through December 31, 2014 had been primarily generated from the Company’s governmental research and development contracts until EnerPlex branded products began to sell in higher volumes in 2014. During this time period the Company's primary focus was not generating significant revenue, and thus cost of revenue was not considered a relevant number due to the development nature of the Company. As such, the majority of the Company's costs were considered to be research and development costs from inception through December 31, 2014. Beginning in 2015, due to the success of EnerPlex branded products, the Company's primary focus going forward is to build on the Company's past results and to significantly increase our revenues. As the Company's primary focus is increasing revenues by utilizing and expanding the sales channels established during prior years, the Company has determined that cost of revenue is a relevant number going forward. As such, the Company has included a Cost of revenues line item in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015. 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, 2014 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, 2014. 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, 2014. 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 six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. |
Recent Accounting Pronouncements | The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The update will establish a comprehensive revenue recognition standard for virtually all industries in GAAP. ASU 2014-09 will change the amount and timing of revenue and cost recognition, implementation, disclosures and documentation. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for the Company in fiscal year 2018. The Company is researching whether the adoption of ASU 2014-09 will have a material effect on the Company’s financial statements. In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915). Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders' equity; (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged; and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The standard was effective for the Company during the first quarter of 2015. Accordingly, the Company has adopted this standard and has not disclosed inception-to-date information on the statements of income and cash flows and the Company has not labeled the financial statements as those of a development stage entity. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide certain disclosures if it concludes that substantial doubt exists. ASU 2014-15 is effective for all entities for the annual period ending after December 15, 2016, and for annual and interim periods thereafter, with early adoption permitted. The Company has not early adopted ASU 2014-15. The Company is researching whether the adoption of ASU 2014-15 will have a material effect on the Company’s financial statements. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which states that inventory should be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective within annual periods beginning on or after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its financial statements. |
Inventories (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory, Current | Inventories consisted of the following at June 30, 2015 and December 31, 2014:
|
Organization |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | ORGANIZATION Ascent Solar Technologies, Inc. (“Ascent”) was incorporated on October 18, 2005 from the separation by ITN Energy Systems, Inc. (“ITN”) of its Advanced Photovoltaic Division and all of that division’s key personnel and core technologies. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin-film, photovoltaic (“PV”), battery, fuel cell and nano technologies. Through its work on research and development contracts for private and governmental entities, ITN developed proprietary processing and manufacturing know-how applicable to PV products generally, and to Copper-Indium-Gallium-diSelenide (“CIGS”) PV products in particular. ITN formed Ascent to commercialize its investment in CIGS PV technologies. In January 2006, in exchange for 102,800 shares of common stock of Ascent, ITN assigned to Ascent certain CIGS PV technologies and trade secrets and granted to Ascent a perpetual, exclusive, royalty-free worldwide license to use, in connection with the manufacture, development, marketing and commercialization of CIGS PV to produce solar power, certain of ITN’s existing and future proprietary and control technologies that, although non-specific to CIGS PV, Ascent believes will be useful in its production of PV modules for its target markets. Upon receipt of the necessary government approvals and pursuant to novation in early 2007, ITN assigned government-funded research and development contracts to Ascent and also transferred the key personnel working on the contracts to Ascent. Currently, the Company is producing consumer oriented products focusing on charging mobile devices powered by or enhanced by the Company's solar modules. Products in these markets are priced based on the overall product value proposition rather than a commodity-style price per watt basis. The Company continues to develop new consumer products and has adjusted utilization of its equipment to meet near term sales forecasts. |
Equity Plans and Share-Based Compensation |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Plans and Share-Based Compensation | EQUITY PLANS AND SHARE-BASED COMPENSATION Share-Based Compensation: The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes this cost as an expense over the grant recipients’ requisite service periods for all awards made to employees, officers, directors and consultants. The share-based compensation expense recognized in the Condensed Consolidated Statements of Operations was as follows:
The following table presents share-based compensation expense by type:
Stock Options: The Company recognized share-based compensation expense for stock options of $287,000 to officers, directors and employees for the six months ended June 30, 2015 related to stock option awards ultimately expected to vest. The weighted average estimated fair value of employee stock options granted for the six months ended June 30, 2015 and 2014 was $0.73 and $5.00 per share, respectively. Fair value was calculated using the Black-Scholes Model with the following assumptions:
Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate of return is based on the yield of U.S. Treasury bonds with a maturity equal to the expected term of the award. Historical data is used to estimate forfeitures within the Company’s valuation model. The Company’s expected life of stock option awards is derived from historical experience and represents the period of time that awards are expected to be outstanding. As of June 30, 2015, total compensation cost related to non-vested stock options not yet recognized was $632,000 which is expected to be recognized over a weighted average period of approximately 2.0 years. As of June 30, 2015, 1,059,703 shares were vested or expected to vest in the future at a weighted average exercise price of $3.57. As of June 30, 2015, 3,719,492 shares remained available for future grants under the Option Plan. Restricted Stock: In addition to the stock options discussed above, the Company recognized share-based compensation expense related to restricted stock grants of $171,000 for the six months ended June 30, 2015. The weighted average estimated fair value of restricted stock grants for the six months ended June 30, 2015 and 2014 was $1.11 and $7.10 per share, respectively. Total unrecognized share-based compensation expense from unvested restricted stock as of June 30, 2015 was $160,000 which is expected to be recognized over a weighted average period of approximately 0.6 years. As of June 30, 2015, 157,502 shares were expected to vest in the future. As of June 30, 2015, 1,964,893 shares remained available for future grants under the Restricted Stock Plan. |
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2015 |
Aug. 10, 2015 |
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Document And Entity Information [Abstract] | ||
Entity Registrant Name | Ascent Solar Technologies, Inc. | |
Entity Central Index Key | 0001350102 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 54,913,029 |
Related Party Transactions |
6 Months Ended |
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Jun. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS TFG Radiant owns approximately 14.7% of the Company's outstanding common stock as of June 30, 2015. In February 2012, the Company announced the appointment of Victor Lee as President and Chief Executive Officer. Mr. Lee had served on the Company's Board of Directors since November 2011 and is currently the managing director of Tertius Financial Group Pte Ltd, the joint venture partner with Radiant Group in TFG Radiant. In April 2012, the Company appointed the Chairman of TFG Radiant, Mr. Winston Xu (aka Xu Biao), as a member of its Board of Directors. In June 2012, the Company entered into a supply agreement and a contract manufacturing agreement with TFG Radiant. Under the terms of the contract manufacturing agreement TFG Radiant was to oversee certain aspects of the contract manufacturing process related to the Company's EnerPlex™ line of consumer products. The Company compensated TFG Radiant for acting as general contractor in the contract manufacturing process. Under the supply agreement TFG Radiant was to distribute the Company's consumer products in Asia. In December 2012, the Company entered into a consulting agreement with TFG Radiant for product design, product development and manufacturing coordination activities provided by TFG Radiant to the Company in connection with the Company's line of consumer electronics products. This consulting agreement was terminated effective March 31, 2014. During six months ended June 30, 2015, the Company made no disbursements to TFG Radiant. During the six months ended June 30, 2015 and June 30, 2014, the Company recognized revenue in the amount of $0 and $8,050, respectively, for products sold to TFG Radiant under the supply agreement. As of June 30, 2015 and December 31, 2014, the Company had $0 and $0, respectively, in receivables and deposits with TFG Radiant. |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | |||||
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Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
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Income Statement [Abstract] | |||||||
Revenues | $ 2,234,223 | $ 1,090,380 | $ 2,891,863 | $ 1,843,444 | [1] | ||
Costs and Expenses | |||||||
Cost of revenues (exclusive of depreciation shown below) | 2,572,218 | 0 | 4,153,711 | 0 | |||
Research, development and manufacturing operations (exclusive of depreciation shown below) | 1,654,674 | 4,342,351 | 3,371,061 | 8,151,666 | |||
Selling, general and administrative (exclusive of depreciation shown below) | 3,522,694 | 3,135,739 | 6,363,493 | 6,187,659 | |||
Depreciation and amortization | 1,411,783 | 1,505,279 | 2,852,049 | 2,975,428 | |||
Total Costs and Expenses | 9,161,369 | 8,983,369 | 16,740,314 | 17,314,753 | |||
Loss from Operations | (6,927,146) | (7,892,989) | (13,848,451) | (15,471,309) | |||
Other Income, net | 16,836 | (299,580) | 34,689 | (299,028) | |||
Loss on extinguishment of liabilities | (536,322) | (631,492) | (3,146,474) | (983,013) | |||
Interest expense | (5,256,532) | (142,919) | (15,208,292) | (248,399) | |||
Deemed interest expense on warrant liability | 0 | 0 | (909,092) | 0 | |||
Change in fair value of derivative liabilities | 1,365,488 | (1,452,661) | 3,952,174 | (2,188,115) | |||
Total Other Income/(Expense) | (4,410,530) | (2,526,652) | (15,276,995) | (3,718,555) | |||
Net Loss | (11,337,676) | (10,419,641) | (29,125,446) | (19,189,864) | |||
Deemed dividend on Preferred Stock and accretion of warrants | 0 | (5,167,500) | 0 | (8,087,500) | |||
Net Loss applicable to common stockholders | $ (11,337,676) | $ (15,587,141) | $ (29,125,446) | $ (27,277,364) | |||
Net Loss Per Share (Basic and diluted) (in dollars per share) | $ (0.37) | $ (1.92) | $ (1.09) | $ (3.70) | |||
Weighted Average Common Shares Outstanding (Basic and diluted) (in shares) | 30,993,944 | 8,103,229 | 26,763,893 | 7,372,191 | |||
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Inventories |
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Jun. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | INVENTORIES Inventories consisted of the following at June 30, 2015 and December 31, 2014:
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Property, Plant and Equipment |
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Jun. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | PROPERTY, PLANT AND EQUIPMENT The following table summarizes property, plant and equipment as of June 30, 2015 and December 31, 2014:
The Company analyzes its long-lived assets for impairment, both individually and as a group, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Depreciation expense for the three months ended June 30, 2015 and 2014 was $1,401,003 and $1,493,944, respectively. Depreciation expense for the six months ended June 30, 2015 and 2014 was $2,830,490 and $2,961,690, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the Condensed Consolidated Statements of Operations. |
Property, Plant and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | The following table summarizes property, plant and equipment as of June 30, 2015 and December 31, 2014:
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES On October 21, 2011, the Company was notified that a complaint claiming $3.0 million for an investment banking fee (the “Lawsuit”) was filed by Jefferies & Company, Inc. (“Jefferies”) against the Company in New York State Supreme Court in the County of New York. In December 2010, Ascent and Jefferies entered into an engagement agreement (the “Fee Agreement”) pursuant to which Jefferies was hired to act as the Company's financial advisor in relation to certain potential transactions. In addition, Jefferies claimed an award for attorney's fees and prejudgment interest in the approximate amount of $1.2 million. On April 16, 2014, the parties settled the lawsuit where the Company agreed to pay Jefferies a total of $2.0 million in equal installments over 40 months. The Company has paid $300,000 during the six months ended June 30, 2015. The Company records a liability in its financial statements for costs related to claims, including settlements and judgments, where the Company has assessed that a loss is probable and an amount can be reasonably estimated. The Company accrued $1.7 million, the net present value of the $2.0 million settlement, as of December 31, 2013. As of June 30, 2015, $616,000 was accrued for the long-term portion of this settlement and $517,000 was recorded as Accrued litigation settlement, current portion, in the Condensed Consolidated Balance Sheets. On June 30, 2014, the Company entered into a Service Agreement with Swyft, Inc. Swyft will sell consumer products through automated retail stores (kiosks), provide online and mobile retail channels through a website and mobile application, and provide visual and text based advertising through both physical and digital channels. Under the terms of the original agreement, the Company will provide financing to Swyft in the form of a three year 8% convertible note to purchase seventy five (75) automated retail stores at $4,500 per store, or a total of $337,500, from ZoomSystems, the manufacturer of automated retail machines. On June 3, 2015, the Company and Swyft entered into an amendment to the agreement which modified the total number of automated retail stores to 38 stores, and modified the convertible note to $171,000. The convertible loan financing for the thirty eight (38) automated retail stores of $171,000 was provided by the Company during the third quarter of 2014. The Service Agreement also required that the Company pay a one-time project set-up fee of $125,000 which was paid during the third quarter of 2014. |
Convertible Note, Series D Preferred Stock, And Series D-1 Preferred Stock |
6 Months Ended |
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Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Note, Series D Preferred Stock, And Series D-1 Preferred Stock | CONVERTIBLE NOTE, SERIES D PREFERRED STOCK, AND SERIES D-1 PREFERRED STOCK Convertible Note and Series D Preferred Stock Financing Transaction On November 14, 2014, the Company entered into the November 2014 Purchase Agreement with the Investor. Pursuant to the terms of the November 2014 Purchase Agreement, the Company sold to the Investor (i) $3,000,000 (3,000 shares) of Series D Convertible Preferred Stock, (ii) $32,000,000 original principal amount of senior secured convertible notes, and (iii) Warrants to purchase up to 7,777,778 shares of the Company’s common stock, par value $0.0001 per share. At the closing of the sale of the Financing, the Company entered into (i) a registration rights agreement with the Investor, (ii) a security and pledge agreement in favor of the collateral agent for the Investor, and (iii) certain account control agreements with several banks with respect to restricted control accounts described in the November 2014 Purchase Agreement. The Financing closed on November 19, 2014. Proceeds Received and Restricted Cash The Company received gross proceeds of approximately $4.5 million at closing. The remaining $30.5 million of gross proceeds from the Financing was deposited on the closing date by the Investor into restricted control accounts. $2.5 million of these restricted proceeds were released on December 22, 2014 to the Company. Thereafter, additional funds from the control accounts shall be released to the Company (i) in connection with certain conversions of the Notes and redemptions of the Series D Preferred Stock, and (ii) up to $6 million in any 90 day period, provided that the Company meets certain equity conditions. During the six months ended June 30, 2015, $6 million has been released to the Company. The balance in the restricted bank account totals approximately $22 million at June 30, 2015, $12 million of which is expected to be released to the Company during the remainder of fiscal year 2015. Description of the Notes and Series D Preferred Stock The Notes will rank senior to the Company’s outstanding and future indebtedness, except for certain existing permitted indebtedness of the Company. The Notes are secured by a first priority perfected security interest in all of the Company’s and its subsidiaries’ current and future assets (including a pledge of the stock of the Company’s subsidiaries), other than those assets which already secure the Company’s existing permitted indebtedness. So long as any Notes remain outstanding, the Company and its subsidiaries will not incur any new indebtedness, except for permitted indebtedness under the Notes, or create any new encumbrances on the Company’s or its subsidiaries’ assets, except for permitted liens under the Notes. Under certain circumstances, subsidiaries of the Company will be required to guarantee the Company’s obligations under the Notes. The Series D Preferred Stock ranks pari passu with the Company’s existing Series A Preferred Stock with respect to dividends and rights upon liquidation. The Series D Preferred Stock ranks senior to the Company’s Common Stock with respect to dividends and rights upon liquidation. The Series D Preferred Stock ranks junior to all existing and future indebtedness. The Series D Preferred Stock is unsecured. Unless earlier converted or redeemed, the Notes will mature 42 months after the closing date (the “Maturity Date"), subject to the right of the Investors to extend the date under certain circumstances. The Series D Preferred Stock has no fixed maturity date or mandatory redemption date. All amounts due under the Notes and the Series D Preferred Stock are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a fixed conversion price, which is subject to adjustment for stock splits, stock dividends, combinations or similar events. The Notes and the Series D Preferred Stock are convertible into shares of Common Stock at the initial price of $2.25 per share (the "Conversion Price"). If and whenever on or after the closing date, the Company issues or sells any shares of Common Stock for a consideration per share (the "New Issuance Price"), less than a price equal to the Conversion Price in effect immediately prior to such issuance or sale (a "Dilutive Issuance"), then, immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. The Company may redeem all, but not less than all, of the Notes or the Series D Preferred Stock at any time after 30 calendar days after the earlier of (A) the date that a resale registration statement for the resale of a portion of the Common Stock underlying the Notes and Warrants becomes effective or (B) the date that the shares of Common Stock underlying the Notes and Warrants are eligible for resale under Rule 144, provided that the Company meets certain equity conditions. In the case of an optional redemption of Notes or Series D Preferred Stock by the Company, the Notes shall be redeemed in cash at a price with a redemption premium of 120% calculated by the formula specified in the Notes and the Series D Preferred Stock. The Company is required to provide holders of the Notes or Series D Preferred Stock with at least 90 trading days prior notice of its election to redeem the Notes or the Series D Preferred Stock. The Investor has the option to convert a portion of the Notes or the Series D Preferred Stock into shares of Common Stock at an “Alternate Conversion Price” equal to the lowest of (i) the Conversion Price then in effect and (ii) 85% of the quotient of (A) the sum of the volume-weighted average price of the Common Stock for each of the three lowest trading days during the ten consecutive trading day period ending and including the trading day immediately prior to the date of the applicable conversion date, divided by three. During the six months ended June 30, 2015, the Investor exercised their option to convert $1,805,000 of Notes value at an Alternate Conversion Price resulting in the issuance of 2,860,175 Common Shares. The Company has agreed to make amortization payments with respect to the principal amount of the Notes and the liquidation value of the Series D Preferred Stock in shares of its Common Stock, subject to the satisfaction of certain equity conditions, or at the Company’s option, in cash or a combination of shares of Common Stock and cash, in equal installments payable once every month. Per the terms of the Financing, the Company is required to make pre-payments on the monthly amortization payments twenty trading days prior to the installment due date. The Company has $2,647,317 in pre-payments included in Prepaids and other current assets on the Balance Sheets as of June 30, 2015. During the six months ended June 30, 2015, the Company made installment payments towards the Series D Preferred Stock totaling $565,341, resulting in the issuance of 1,465,972 shares of common stock. Amortization payments shall first be applied to the redemption of shares of Series D Preferred Stock until all shares of the Series D Preferred Stock have been redeemed. Thereafter, amortization payments shall be applied to pay principal and interest on the Notes. During the six months ended June 30, 2015, the Company made installment payments towards the Notes totaling $2,849,634, resulting in the issuance of 4,707,801 shares of common stock. For amortization payments paid in shares of Common Stock, the number of shares of Common Stock that shall be issued as an installment conversion amount shall be determined based on an installment conversion price (the “Installment Conversion Price") of the lowest of (i) the Conversion Price then in effect and (ii) 85% of the quotient of (A) the sum of the volume-weighted average price of the Common Stock for each of the five lowest trading days during the 20 consecutive trading day period ending and including the trading day immediately prior to the applicable installment date, divided by five. The Company classified the Series D Preferred Stock as a liability pursuant to ASC 480 at December 31, 2014 due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception. There are 0 shares of Series D Preferred Stock outstanding as of June 30, 2015. The Investor may elect to defer the payment of the installment amount due on any installment dates, in whole or in part, to another installment date, in which case the amount deferred will become part of such subsequent installment date and will continue to accrue interest and dividends as applicable. During an installment period, the Investor may elect to accelerate the amortization of the Notes or the Series D Preferred Stock at the Installment Conversion Price of the current installment date if, in the aggregate, all such accelerations in such period do not exceed five times the installment amount. Such accelerated amounts shall be payable in the Company’s common stock. During the six months ended June 30, 2015, the Investor elected to defer $1,707,317 of amortization payments to a later installment date. As a result of the deferral, $351,899 of interest expense was added to the principal balance of the Notes. During the six months ended June 30, 2015, the Investor elected to accelerate $2,670,375 of the Notes, resulting in the issuance of 4,091,448 shares of common stock. The Notes bear interest at a rate of 7% per annum, subject to increase to 15% per annum upon the occurrence and continuance of an event of default. Holders of the Series D Preferred Stock will be entitled to receive dividends in the amount of 7% per annum, subject to increase to 15% per annum upon the occurrence and continuance of certain events of default. Interest on the Notes and dividends on the Series D Preferred Stock are payable monthly in shares of Common Stock or cash, at the Company’s option. Interest on the Notes and dividends on the Series D Preferred Stock is computed on the basis of a 360-day year and twelve 30-day months and is payable in arrears monthly and is compounded monthly. During the six months ended June 30, 2015, the Company paid dividends in the amount of $3,572 on the Series D Preferred Stock, resulting in the issuance of 11,241 shares of common stock, and interest in the amount of $703,367 on the Note, resulting in the issuance of 1,242,250 shares of common stock. The Notes and the Series D Preferred Stock contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes and the Series D Preferred Stock; (ii) bankruptcy or insolvency of the Company; and (iii) certain failures (in the case of the Notes) to comply with the requirements under the registration rights agreement. If there is an event of default, a holder of the Notes or the Series D Preferred Stock may require the Company to redeem all or any portion of the Notes or the Series D Preferred Stock (including all accrued and unpaid interest and dividends and all interest and dividends that would have accrued through the Maturity Date), in cash, at a price equal to the greater of: (i) up to 125% of the amount being redeemed, depending on the nature of the default, and (ii) the product of (A) the conversion rate in effect at such time multiplied by (B) the product of (1) up to 125%, depending on the nature of the default, multiplied by (2) the highest closing sale price of the Common Stock on any trading day during the period beginning on the date immediately before the event of default and ending on the date of redemption. Additionally, if there is an event of default, a holder of the Notes or the Series D Preferred Stock may convert all or any portion of the Notes or the Series D Preferred Stock into shares of Common Stock. In such event, the conversion price would be the lowest of (i) the Conversion Price then in effect and (ii) 85% of the quotient of (A) the sum of the volume-weighted average price of the Common Stock for each of the three lowest trading days during the 10 consecutive trading day period ending and including the trading day immediately prior to the date of the applicable conversion date, divided by three. Description of Series D-1 Preferred Stock On February 19, 2015, the Company entered into a securities purchase agreement to issue 2,500 shares of Series D-1 Preferred Stock to an investor in exchange for $2,500,000. The proceeds were received on the closing date, February 25, 2015. All amounts due under the Series D-1 Preferred Stock are convertible at any time, in whole or in part, at the option of the investor into shares of Common Stock at a fixed conversion price, which is subject to adjustment for stock splits, stock dividends, combinations or similar events. The Series D-1 Preferred Stock are convertible into shares of Common Stock at the initial price of $2.31 per share. If and whenever on or after the closing date, the Company issues or sells any shares of Common Stock for a consideration per share, less than a price equal to the conversion price in effect immediately prior to such issuance or sale, then, immediately after such dilutive issuance, the conversion price then in effect shall be reduced to an amount equal to the new issuance price. The investor has the option to convert a portion of the Series D-1 Preferred Stock into shares of Common Stock at a “D-1 Alternate Conversion Price” equal to the lowest of (i) $2.31 per share and (ii) 85% of the lowest volume-weighted average price of the Common Stock on any trading day during the five consecutive trading day period ending and including the trading day immediately prior to the date of the applicable conversion date. During the six months ended June 30, 2015, the investor exercised their option to convert 2,500 Preferred Shares, representing a value of $2,500,000, at a D-1 Alternate Conversion Price resulting in the issuance of 2,305,824 Common Shares. Holders of the Series D-1 Preferred Stock were entitled to receive dividends in the amount of 7% per annum, subject to increase to 15% per annum upon the occurrence and continuance of certain events of default. Dividends on the Series D-1 Preferred Stock are payable monthly in shares of Common Stock or cash, at the Company’s option. Dividends on the Series D-1 Preferred Stock is computed on the basis of a 360-day year and 12 30-day months and is payable in arrears monthly and is compounded monthly. During the six months ended June 30, 2015, the Company paid dividends in the amount of $6,944 on the Series D-1 Preferred Stock, resulting in the issuance of 3,896 shares of common stock. The Company classified the Series D-1 Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception. There are 0 shares of Series D-1 Preferred Stock outstanding as of June 30, 2015. Embedded derivative associated with the Notes Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion options in the Notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2014, the derivative liability value associated with the Notes was $17.4 million. The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2015, the Company conducted a fair value assessment of the embedded derivative associated with the Notes. As a result of the fair value assessment, the Company recorded a $10.6 million loss as "Change in fair value of derivative liabilities" in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2015 to properly reflect the fair value of the embedded derivative of $28.0 million as of June 30, 2015. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at June 30, 2015 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 33%, present value discount rate of 12%, dividend yield of 0%, and remaining life of 2.9 years. Embedded derivative associated with the Series D Preferred Stock Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion options in the Series D Preferred Stock were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2014, the derivative liability value associated with the Series D Preferred Stock was $0.4 million. As of June 30, 2015, the value of the derivative liability associated with the Series D Preferred Stock is $0 as the Series D Preferred Stock was fully converted as of June 30, 2015. A gain of $0.4 million was recorded to "Change in fair value of derivative liabilities" in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2015. Embedded derivative associated with the Series D-1 Preferred Stock Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion options in the Series D-1 Preferred Stock were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of $3.4 million was recorded. The debt discount of $3.4 million was charged to interest expense. As of June 30, 2015, the value of the derivative liability associated with the Series D-1 Preferred Stock is $0 as the Series D-1 Preferred Stock was fully converted as of June 30, 2015. A gain of $3.4 million was recorded to "Change in fair value of derivative liabilities" in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2015. The derivative associated with the Series D-1 Preferred Stock approximates management’s estimate of the fair value of the embedded derivative liability at the closing date based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 45%, present value discount rate of 12%, dividend yield of 0%, and a life of 0.2 years. Description of the Warrants Associated with the Notes and Series D Preferred Stock The Warrants associated with the Notes and Series D Preferred Stock entitle the Investor to purchase, in the aggregate, up to 7,777,778 shares of Common Stock. The Warrants will be exercisable at any time on or after the six month anniversary of the closing date through the fifth anniversary of such date. The Warrants will be exercisable at an initial exercise price equal to $2.25 per share. The exercise price of the Warrants is subject to adjustment for stock splits, stock dividends, combinations or similar events. In addition, the exercise price is also subject to a “full ratchet” anti-dilution adjustment, subject to customary exceptions, in the event that the Company issues securities at a price lower than the then applicable exercise price. Pursuant to ASC 815, the Company is required to report the value of the Warrants as a liability at fair value and record the changes in the fair value of the warrant liability as a gain or loss in its statement of operations due to the price-based anti-dilution provisions. The Company utilizes the Monte Carlo simulation valuation method to value the liability classified warrants. At December 31, 2014, the value of the warrant liability associated with the Notes was calculated to be $15.9 million. At June 30, 2015, the Company conducted a fair value assessment of the Warrants. As a result of the fair value assessment, the Company recorded a $10.3 million gain as "Change in fair value of derivative liabilities" in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2015 to properly reflect the fair value of the warrant liability associated with the Notes of $5.6 million at June 30, 2015. The fair value of these Warrants is determined using Level 3 inputs. Inherent in the Monte Carlo valuation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock to be 67% based on the expected remaining life of the Warrants of 4.89 years. The risk-free interest rate of 1.63% is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the Warrants. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. Description of the Warrants Associated with the Series D-1 Preferred Stock The warrants associated with the Series D-1 Preferred Stock (the "D-1 Warrants") entitle the Investor to purchase, in the aggregate, up to 541,126 shares of Common Stock. The D-1 Warrants will be exercisable at any time on or after the six month anniversary of the closing date through the fifth anniversary of such date. The D-1 Warrants will be exercisable at an initial exercise price equal to $2.31 per share. The exercise price of the D-1 Warrants is subject to adjustment for stock splits, stock dividends, combinations or similar events. In addition, the exercise price is also subject to a “full ratchet” anti-dilution adjustment, subject to customary exceptions, in the event that the Company issues securities at a price lower than the then applicable exercise price. Pursuant to ASC 815, the Company is required to report the value of the D-1 Warrants as a liability at fair value and record the changes in the fair value of the D-1 warrant liability as a gain or loss in its statement of operations due to the price-based anti-dilution provisions. The Company utilizes the Monte Carlo simulation valuation method to value the liability classified warrants. At closing, the value of the D-1 warrant liability was calculated to be $0.9 million. The entire D-1 warrant liability was immediately recorded as an expense as "Deemed interest expense on warrant liability" in the Condensed Consolidated Statements of Operations. At June 30, 2015, the Company conducted a fair value assessment of the D-1 Warrants. As a result of the fair value assessment, the Company recorded a $0.5 million gain as "Change in fair value of derivative liabilities" in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2015 to properly reflect the fair value of the D-1 warrant liability of $0.4 million at June 30, 2015. The fair value of these D-1 Warrants is determined using Level 3 inputs. Inherent in the Monte Carlo valuation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock to be 67% based on the expected remaining life of the D-1 Warrants of 5.15 years. The risk-free interest rate of 1.63% is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the D-1 Warrants. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. |
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